NOTE 4: RECEIVABLES

A summary of receivables included in the consolidated balance sheets as of June 30, 2025 and December 31, 2024 is as follows:

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Included in the receivables balance at June 30, 2025 and December 31, 2024 is unearned finance income and unamortized deferred fees and costs of $503,973 and $496,976, respectively.

Restricted Receivables and Securitization

As part of its overall funding strategy, the Company periodically transfers certain receivables into bankruptcy-remote special purpose entities (“SPEs”) as part of its asset-backed securitization programs.

SPEs utilized in the securitization programs differ from other entities included in the Company’s consolidated financial statements because the assets they hold are legally isolated from the Company’s assets. Upon transfer of the receivables to the SPEs, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the SPEs’ creditors. The SPEs are consolidated since the Company has both the power to direct the activities that most significantly impact the SPEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the SPEs. Therefore, the SPEs do not meet the accounting criteria for deconsolidation. As a result, they are accounted for as a secured borrowing.

The secured borrowings related to the restricted receivables are obligations that are payable as the receivables are collected. The following table summarizes the carrying value of restricted receivables as of June 30, 2025 and December 31, 2024:

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Within the U.S. retail notes securitization programs, qualifying retail notes are sold to bankruptcy-remote SPEs. In turn, these SPEs establish separate trusts, which are VIEs, to either transfer receivables in exchange for proceeds from asset-backed securities issued by the trusts, or pledge the receivables as collateral in exchange for proceeds from a committed asset-backed facility. In Canada, qualifying retail notes are transferred directly to trusts, which are also VIEs. The VIEs are consolidated since the Company has both the power to direct the activities that most significantly impact the VIEs’ economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIEs.

With regard to the wholesale receivable securitization programs, the Company sells eligible receivables on a revolving basis to structured master trust facilities, which are bankruptcy-remote SPEs. These trusts were determined to be VIEs. In its role as servicer, CNH Capital has the power to direct the trusts’ activities. Through its retained interests, the Company provides security to investors in the event that cash collections from the receivables are not sufficient to make principal and interest payments on the securities. Consequently, CNH Capital has consolidated these wholesale trusts.

Allowance for Credit Losses

The allowance for credit losses is the Company’s estimate of the lifetime expected credit losses inherent in the receivables. Retail customer receivables primarily include retail notes and finance leases to end-use customers. Revolving charge accounts represent financing for customers to purchase parts, service, rentals, implements and attachments from CNH North America dealers. Wholesale receivables include dealer floorplan financing, and to a lesser extent, the financing of dealer operations. Typically, the Company’s receivables within a geographic area have similar risk profiles and methods for assessing and monitoring risk.

Retail customer receivables that share the same risk characteristics, such as collateralization levels, geography, product type and other relevant factors, are reviewed on a collective basis using measurement models and management judgment. The allowance for credit losses on retail customer receivables is based on loss forecast models that consider a variety of factors that include, but are not limited to, historical loss experience, collateral value, portfolio balance and delinquency. The loss forecast models are updated on a quarterly basis. The calculation is adjusted for forward-looking macroeconomic factors, such as GDP and Net Farm Income. The forward-looking macroeconomic factors are updated quarterly. In addition, qualitative factors that are not fully captured in the loss forecast models are considered in the evaluation of the adequacy of the allowance for credit losses. These qualitative factors are subjective and require a degree of management judgment.

Wholesale receivables that share the same risk characteristics, such as collateralization levels, term, geography and other relevant factors, are reviewed on a collective basis using measurement models and management judgment. The allowance for wholesale credit losses is based on loss forecast models that consider a variety of factors that include, but are not limited to, historical loss experience, collateral value, portfolio balance and delinquency. The loss forecast models are updated on a quarterly basis. The calculation is adjusted for forward-looking macroeconomic factors, such as industry sales volumes. The forward-looking macroeconomic factors are updated quarterly. In addition, qualitative factors that are not fully captured in the loss forecast models are considered in the evaluation of the adequacy of the allowance for credit losses. These qualitative factors are subjective and require a degree of management judgment.

Retail customer receivables and wholesale receivables that do not have similar risk characteristics are individually reviewed based on, among other items, amounts outstanding, days past due and prior collection history. Expected credit losses are measured by considering: the probability-weighted estimates of cash flows and collateral value; the time value of money; current conditions and forecasts of future economic conditions. Expected credit losses are measured as the probability-weighted present value of all cash shortfalls (including the value of the collateral, if appropriate) over the expected life of each financial asset.

Charge-offs of principal amounts of retail customer receivables and wholesale receivables outstanding are deducted from the allowance at the point when it is estimated that amounts due are deemed uncollectible. Revolving charge accounts are generally deemed to be uncollectible and charged off to the allowance for credit losses when delinquency reaches 120 days.

Allowance for credit losses activity for the three months ended June 30, 2025 is as follows:

Allowance for credit losses activity for the six months ended June 30, 2025 is as follows:

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The allowance for credit losses increased during the first six months of 2025, primarily due to a rise in delinquency rates, which necessitated higher specific reserve needs.

Allowance for credit losses activity for the three months ended June 30, 2024 is as follows:

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Allowance for credit losses activity for the six months ended June 30, 2024 is as follows:

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The Company assesses and monitors the credit quality of its receivables based on delinquency status. Receivables are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Delinquency is reported on receivables greater than 30 days past due. As the terms for the retail customer receivables are greater than one year, the past due information is presented by year of origination.

The aging of receivables by vintage as of June 30, 2025 are as follows:

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The aging of receivables by vintage as of December 31, 2024 is as follows:

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Included in the receivables balance at June 30, 2025 and December 31, 2024 is accrued interest of $98,710 and $100,325, respectively. The Company does not include accrued interest in its allowance for credit losses.

Recognition of income is generally suspended when management determines that collection of future finance income is not probable or when an account becomes 90 days past due, whichever occurs first. Accrued interest is charged-off to interest income. Interest income charged-off was not material for the three and six months ended June 30, 2025 and 2024. Interest accrual is resumed if the receivable becomes contractually current and collection becomes probable. Previously suspended income is recognized at that time.

The retail customer receivables on nonaccrual status as of June 30, 2025 and December 31, 2024 are as follows:

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As of June 30, 2025 and December 31, 2024, total revolving charge account receivables on nonaccrual status were immaterial. As of June 30, 2025 and December 31, 2024, wholesale receivables on nonaccrual status in the United States were $14,818 and $25,916, respectively. There were no wholesale receivables on nonaccrual status in Canada as of June 30, 2025 and December 31, 2024.

As of June 30, 2025 and December 31, 2024, the Company’s receivables on non-accrual status without an allowance were immaterial. Interest income recognized for receivables on non-accrual status for the three and six months ended June 30, 2025 and 2024 was immaterial.

Modifications

CNH Capital periodically modifies the terms of its receivable agreements with customers experiencing financial difficulties. Typically, the types of modifications granted are payment deferrals, extended contract maturities, modification of a contractual interest rate or waiving of interest and principal. As a collateral-based lender, CNH Capital has recourse to the financed assets on default. The Company continues to monitor the credit quality of these modified receivables. CNH Capital’s allowance for credit losses incorporates historical loss information, including the effects of the modified receivables. Therefore, additional adjustments to the allowance are generally not recorded upon modification of the receivable.

As of June 30, 2025 and 2024, modifications of CNH Capital’s retail customer receivables and wholesale receivables for customers experiencing financial difficulties were immaterial. Defaults and subsequent write-offs of receivables modified were not significant during the previous twelve months ended June 30, 2025 and 2024.