The Company provides retail financial services to customers of its dealers in the U.S. and Canada. The origination of retail loans is a separate and distinct transaction between the Company and the retail customer, unrelated to the Company’s sale of product to its dealers. Retail finance receivables consist of secured promissory notes and secured installment sales contracts and are primarily related to dealer sales of motorcycles to retail customers. The Company holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts.

The Company offers wholesale financing to its dealers in the U.S. and Canada. Wholesale finance receivables are related primarily to the Company's sale of motorcycles and related parts and accessories to dealers. Wholesale loans to dealers are generally secured by financed inventory or property.

Finance receivables, net were as follows (in thousands):


	March 27, 2022		December 31, 2021		March 28, 2021
Retail finance receivables	$	6,511,845	$	6,493,519	$	6,310,982
Wholesale finance receivables	650,181		417,781		792,028
	7,162,026		6,911,300		7,103,010
Allowance for credit losses	(340,473)		(339,379)		(346,233)
	$	6,821,553	$	6,571,921	$	6,756,777

The Company’s finance receivables are reported at amortized cost, net of the allowance for credit losses. Amortized cost includes the principal outstanding, accrued interest, and deferred loan fees and costs. The Company's allowance for credit losses reflects expected lifetime credit losses on its finance receivables. Based on differences in the nature of the finance receivables and the underlying methodology for calculating the allowance for credit losses, the Company segments its finance receivables into the retail and wholesale portfolios. The Company further disaggregates each portfolio by credit quality indicators. As the credit risk varies between the retail and wholesale portfolios, the Company utilizes different credit quality indicators for each portfolio.

The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilizes a vintage-based loss forecast methodology that includes decompositions for probability of default, exposure at default, attrition rate, and recovery balance rate. Reasonable and supportable economic forecasts for a two-year period are incorporated into the methodology to reflect the estimated impact of changes in future economic conditions, such as unemployment rates, household obligations or other relevant factors, over the two-year reasonable and supportable period. For periods beyond the Company’s reasonable and supportable forecasts, the Company reverts to its average historical loss experience using a mean-reversion process over a three-year period. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or term as well as other relevant factors.

The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s evaluation for the wholesale allowance for credit losses is first based on a loan-by-loan review to determine whether the loans share similar risk characteristics. The Company individually evaluates loans that do not share risk characteristics. Loans identified as those for which foreclosure is probable are classified as Non-Performing, and a specific allowance for credit losses is established when appropriate. The specific allowance is determined based on the amortized cost of the related finance receivable and the estimated fair value of the collateral, less selling costs and the cash that the Company expects to receive. Finance receivables in the wholesale portfolio not individually assessed are aggregated, based on similar risk characteristics, according to the Company’s internal risk rating system and measured collectively. The related allowance for credit losses is based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past credit loss experience, reasonable and supportable economic forecasts, and the value of the underlying collateral and expected recoveries.

The Company considers various third-party economic forecast scenarios as part of estimating the allowance for expected credit losses and applies a probability-weighting to those economic forecast scenarios. Changes in the Company’s outlook on economic conditions impacted the Company's retail and wholesale estimates for expected credit losses at March 27, 2022. During the first quarter of 2022, the U.S. economy and the Company’s outlook on economic conditions remained largely unchanged from the end of 2021. The pace of economic recovery remained uncertain as demonstrated by rising inflation, muted consumer confidence, continued global supply chain disruptions, and the conflict in Ukraine, among other factors. As such, at the end of the first quarter of 2022, the Company’s outlook on economic conditions included slow economic improvement in its economic scenario weighting.

Additionally, the historical experience incorporated into the portfolio-specific models does not fully reflect the Company's comprehensive expectations regarding the future. As such, the Company incorporated qualitative factors to establish an appropriate allowance for credit losses balance. These factors include motorcycle recovery value considerations, delinquency adjustments, specific problem loan trends, and others, as appropriate.

Due to the use of projections and assumptions in estimating the losses, the amount of losses actually incurred by the Company in either portfolio could differ from the amounts estimated. Further, the Company’s allowance for credit losses incorporates known conditions at the balance sheet date and the Company’s expectations surrounding the economic forecasts. The Company will continue to monitor future economic trends and conditions. Expectations surrounding the Company's economic forecasts may change in future periods as additional information becomes available.

Changes in the Company's allowance for credit losses on its finance receivables by portfolio were as follows (in thousands):


	Three months ended March 27, 2022
		Retail		Wholesale		Total
Balance, beginning of period		$	326,320	$	13,059	$	339,379
Provision for credit losses		28,614		208		28,822
Charge-offs		(41,804)		—		(41,804)
Recoveries		14,076		—		14,076
Balance, end of period		$	327,206	$	13,267	$	340,473
	Three months ended March 28, 2021
		Retail		Wholesale		Total
Balance, beginning of period		$	371,738	$	19,198	$	390,936
Provision for credit losses		(22,449)		(25)		(22,474)
Charge-offs		(34,589)		—		(34,589)
Recoveries		12,360		—		12,360
Balance, end of period		$	327,060	$	19,173	$	346,233

The Company manages retail credit risk through its credit approval process and ongoing collection efforts. The Company uses FICO scores, a standard credit rating measurement, to differentiate the expected default rates of retail credit applicants, enabling the Company to better evaluate credit applicants for approval and to tailor pricing according to this assessment. For the Company’s U.S. and Canadian retail finance receivables, the Company determines the credit quality indicator for each loan at origination and does not update the credit quality indicator subsequent to the loan origination date.

As loan performance by credit quality indicator differs between the U.S. and Canadian retail loans, the Company’s credit quality indicators vary for the two portfolios. For U.S. retail finance receivables, those with a FICO score of 740 or above at origination are generally considered super prime, loans with a FICO score between 640 and 740 are generally categorized as prime, and loans with FICO score below 640 are generally considered sub-prime. For Canadian retail finance receivables, those with a FICO score of 700 or above at origination are generally considered super prime, loans with a FICO score between 620 and 700 are generally categorized as prime, and loans with FICO score below 620 are generally considered sub-prime.

The amortized cost of the Company's U.S. and Canadian retail finance receivables by vintage and credit quality indicator was as follows (in thousands):


	March 27, 2022
	2022		2021		2020		2019		2018		2017 & Prior		Total
U.S. Retail:
Super prime	$	311,114	$	890,413	$	422,454	$	268,692	$	139,540	$	68,682	$	2,100,895
Prime	394,793		1,247,764		627,102		407,242		233,630		176,018		3,086,549
Sub-prime	125,280		427,813		240,999		159,968		91,444		91,610		1,137,114
	831,187		2,565,990		1,290,555		835,902		464,614		336,310		6,324,558
Canadian Retail:
Super prime	14,015		47,025		29,382		23,367		11,524		4,515		129,828
Prime	4,228		15,842		11,513		8,349		5,454		4,391		49,777
Sub-prime	506		2,180		1,961		1,401		861		773		7,682
	18,749		65,047		42,856		33,117		17,839		9,679		187,287
	$	849,936	$	2,631,037	$	1,333,411	$	869,019	$	482,453	$	345,989	$	6,511,845


	December 31, 2021
	2021		2020		2019		2018		2017		2016 & Prior		Total
U.S. Retail:
Super prime	$	1,010,636	$	484,479	$	316,390	$	171,763	$	65,753	$	27,424	$	2,076,445
Prime	1,391,385		712,858		470,177		277,206		142,288		82,169		3,076,083
Sub-prime	476,688		273,787		182,002		105,330		61,923		51,035		1,150,765
	2,878,709		1,471,124		968,569		554,299		269,964		160,628		6,303,293
Canadian Retail:
Super prime	51,779		32,724		27,073		13,984		4,619		1,614		131,793
Prime	16,882		12,675		9,244		6,230		3,628		1,779		50,438
Sub-prime	2,356		2,134		1,571		947		606		381		7,995
	71,017		47,533		37,888		21,161		8,853		3,774		190,226
	$	2,949,726	$	1,518,657	$	1,006,457	$	575,460	$	278,817	$	164,402	$	6,493,519


	March 28, 2021
	2021		2020		2019		2018		2017		2016 & Prior		Total
U.S. Retail:
Super prime	$	260,359	$	725,383	$	502,847	$	301,839	$	134,213	$	74,086	$	1,998,727
Prime	349,662		1,026,080		706,940		445,201		249,327		183,217		2,960,427
Sub-prime	130,389		395,495		263,203		156,368		96,998		100,827		1,143,280
	740,410		2,146,958		1,472,990		903,408		480,538		358,130		6,102,434
Canadian Retail:
Super prime	13,938		48,309		42,993		24,549		11,116		4,831		145,736
Prime	4,245		17,350		13,055		9,263		5,808		4,178		53,899
Sub-prime	601		2,949		2,227		1,407		951		778		8,913
	18,784		68,608		58,275		35,219		17,875		9,787		208,548
	$	759,194	$	2,215,566	$	1,531,265	$	938,627	$	498,413	$	367,917	$	6,310,982

The Company's credit risk on the wholesale portfolio is different from that of the retail portfolio. Whereas the retail portfolio represents a relatively homogeneous pool of retail finance receivables that exhibit more consistent loss patterns, the wholesale portfolio exposures are less consistent. The Company utilizes an internal credit risk rating system to manage credit risk exposure consistently across wholesale borrowers and individually evaluates credit risk factors for each borrower. The Company uses the following internal credit quality indicators, based on an internal risk rating system, listed from highest level of risk to lowest level of risk for the wholesale portfolio: Doubtful, Substandard, Special Mention, Medium Risk and Low Risk. Based upon the Company’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. Additionally, the Company classifies dealers identified as those in which foreclosure is probable as Non-Performing. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated by the Company on a quarterly basis.

The amortized cost of the Company's wholesale financial receivables, by vintage and credit quality indicator, was as follows (in thousands):


	March 27, 2022
	2022		2021		2020		2019		2018		2017 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Special Mention	—		—		—		—		—		—		—
Medium Risk	—		—		—		—		—		—		—
Low Risk	489,283		127,797		9,108		11,147		9,893		2,953		650,181
	$	489,283	$	127,797	$	9,108	$	11,147	$	9,893	$	2,953	$	650,181


	December 31, 2021
	2021		2020		2019		2018		2017		2016 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Special Mention	—		—		—		—		—		—		—
Medium Risk	—		—		—		—		—		—		—
Low Risk	380,211		11,379		11,047		10,565		3,662		917		417,781
	$	380,211	$	11,379	$	11,047	$	10,565	$	3,662	$	917	$	417,781


	March 28, 2021
	2021		2020		2019		2018		2017		2016 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Special Mention	567		530		262		17		—		—		1,376
Medium Risk	—		728		417		—		—		—		1,145
Low Risk	600,144		122,970		44,614		12,568		6,392		2,819		789,507
	$	600,711	$	124,228	$	45,293	$	12,585	$	6,392	$	2,819	$	792,028

Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables at amortized cost, excluding accrued interest, are generally charged-off when the receivable is 120 days or more delinquent, the related asset is repossessed, or the receivable is otherwise deemed uncollectible. The Company reverses accrued interest related to charged-off accounts against Financial Services interest income when the account is charged-off. The Company reversed $4.9 million and $5.2 million of accrued interest against Financial Services interest income during the three months ended March 27, 2022 and March 28, 2021, respectively. All retail finance receivables accrue interest until either collected or charged-off. Due to the timely write-off of accrued interest, the Company made the election provided under Accounting Standards Codification (ASC) Topic 326, Financial Instruments - Credit Losses to exclude accrued interest from its allowance for credit losses. Accordingly, as of March 27, 2022, December 31, 2021 and March 28, 2021, all retail finance receivables were accounted for as interest-earning receivables.

Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once the Company determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the Company determines that foreclosure is probable, and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate. Once an account is charged-off, the Company will reverse the associated accrued interest against interest income. As the Company follows a non-accrual policy for interest, the allowance for credit losses excludes accrued interest for the wholesale portfolio. There were no charged-off accounts during the three months ended March 27, 2022 and March 28, 2021. As such, the Company did not reverse any accrued interest in those periods. There were no dealers on non-accrual status at March 27, 2022, December 31, 2021, and March 28, 2021.

The aging analysis of the Company's finance receivables was as follows (in thousands):


	March 27, 2022
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,343,673	$	99,705	$	32,521	$	35,946	$	168,172	$	6,511,845
Wholesale finance receivables	649,948		178		27		28		233		650,181
	$	6,993,621	$	99,883	$	32,548	$	35,974	$	168,405	$	7,162,026

	December 31, 2021
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,298,485	$	115,942	$	44,326	$	34,766	$	195,034	$	6,493,519
Wholesale finance receivables	417,720		9		1		51		61		417,781
	$	6,716,205	$	115,951	$	44,327	$	34,817	$	195,095	$	6,911,300

	March 28, 2021
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,196,345	$	69,032	$	23,420	$	22,185	$	114,637	$	6,310,982
Wholesale finance receivables	791,826		128		22		52		202		792,028
	$	6,988,171	$	69,160	$	23,442	$	22,237	$	114,839	$	7,103,010

Generally, it is the Company’s policy not to change the terms and conditions of finance receivables. However, to minimize economic loss, the Company may modify certain finance receivables in troubled debt restructurings. Total finance receivables in troubled debt restructurings were not significant as of March 27, 2022, December 31, 2021 and March 28, 2021. Additionally, in certain situations, the Company may offer short-term adjustments to customer payment due dates without affecting the associated interest rate or loan term. From the second quarter of 2020 through the second quarter of 2021, in response to the impact of the COVID-19 pandemic, the Company granted an increased amount of short-term payment due date extensions on eligible retail loans to help retail customers get through financial difficulties associated with the COVID-19 pandemic. The Company continues to grant standard payment extensions to customers in accordance with its policies.