Allowance for Credit Losses

6 Months Ended

Sep. 30, 2021

Loans And Leases Receivable Disclosure [Abstract]

Allowance for Credit Losses

Note 4 – Allowance for Credit Losses

The following tables provide information related to our allowance for credit losses for finance receivables and certain off-balance sheet lending commitments by portfolio segment:

	Three months ended September 30, 2021
	Retail loan			Dealer products			Total
Beginning balance, July 1, 2021	$	1,052		$	144		$	1,196
Charge-offs		(55	)		-			(55	)
Recoveries		15			-			15
Provision for credit losses		123			(55	)		68
Ending balance, September 30, 2021 1	$	1,135		$	89		$	1,224
	Six months ended September 30, 2021
	Retail loan			Dealer products			Total
Beginning balance, April 1, 2021	$	1,075		$	140		$	1,215
Charge-offs		(88	)		-			(88	)
Recoveries		32			-			32
Provision for credit losses		116			(51	)		65
Ending balance, September 30, 2021 1	$	1,135		$	89		$	1,224

^{1 Ending balance includes $34 million of allowance for credit losses related to off-balance sheet commitments in the dealer products portfolio which is included in Other liabilities on the Consolidated Balance Sheet.}

	Three months ended September 30, 2020
Allowance for Credit Losses for Finance Receivables:	Retail loan			Dealer products			Total
Beginning balance, July 1, 2020	$	933		$	210		$	1,143
Charge-offs		(46	)		-			(46	)
Recoveries		12			-			12
Provision for credit losses		121			(56	)		65
Ending balance, September 30, 2020 2	$	1,020		$	154		$	1,174
	Six months ended September 30, 2020
Allowance for Credit Losses for Finance Receivables:	Retail loan			Dealer products			Total
Beginning balance, April 1, 2020	$	486		$	241		$	727
Adoption of ASU 2016-13 1		281			11			292
Charge-offs		(115	)		-			(115	)
Recoveries		21			1			22
Provision for credit losses		347			(99	)		248
Ending balance, September 30, 2020 2	$	1,020		$	154		$	1,174

^{1 Cumulative pre-tax adjustments recorded to retained earnings as of April 1, 2020.  See Note 1 – Basis of Presentation and Significant Accounting Policies in our fiscal 2021 Form 10-K.}

² Ending balance includes $37 million of allowance for credit losses related to off-balance sheet commitments in the dealer products portfolio which is included in Other liabilities on the Consolidated Balance Sheet.

Note 4 – Allowance for Credit Losses (Continued)

We have elected to exclude accrued interest from the measurement of expected credit losses as we apply policies and procedures that result in the timely write-offs of accrued interest. Accrued interest is written off within allowance for credit losses at the earlier of when an account is deemed to be uncollectible or when an account is greater than 120 days past due.

Finance receivables for the dealer products portfolio segment as of September 30, 2021 includes $1,016 million in finance receivables that are guaranteed by Toyota Motor North America, Inc. (“TMNA”), and $178 million in finance receivables that are guaranteed by third-party private Toyota distributors.  Finance receivables for the dealer products portfolio segment as of September 30, 2020 includes $995 million in finance receivables that are guaranteed by TMNA, and $145 million in finance receivables that are guaranteed by third-party private Toyota distributors.  These finance receivables are related to certain Toyota and Lexus dealers and other third parties to whom we provided financing at the request of TMNA and third-party private Toyota distributors.

During the first half of fiscal 2022, the allowance for credit losses increased $9 million as the growth of our retail loan portfolio was largely offset by improvement in the financial performance of our dealers.  In contrast, during the first half of fiscal 2021, the allowance for credit losses increased $447 million reflecting an increase to the allowance for credit losses of $292 million related to the adoption of ASU 2016-13, and an increase of $155 million primarily due to the increase in expected credit losses driven by economic conditions caused by the COVID-19 pandemic and the restrictions designed to slow the spread of COVID-19, including stay-at-home orders, increased unemployment, and decreased consumer spending.  In addition, the increase in the provision of credit losses was due to the adoption of ASU 2016-13 in fiscal 2021, which replaced the incurred loss impairment model with a model that reflects expected credit losses over the expected life of the finance receivables and certain off-balance sheet lending commitment.