E-Z-GO 2008 Annual Report Download - page 40

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27
Textron Inc.
Finance Portfolio Quality
The following table presents information about the Finance segment’s credit performance related to finance receivables held for investment.
Finance receivables held for sale are reflected at fair value in 2008, and are not included in the credit performance statistics below. In 2007 and
2006, all of our finance receivables were held for investment and are reflected in the performance statistics provided below.
(In millions, except for ratios) 2008 2007 2006
Finance receivables $ 6,915 $ 8,603 $ 8,310
Allowance for losses on finance receivables $ 191 $ 89 $ 93
Nonperforming assets $ 361 $ 123 $ 113
Provision for loan losses $ 234 $ 33 $ 26
Net charge-offs $ 86 $ 37 $ 29
Ratio of nonperforming assets to total finance assets 4.72% 1.34% 1.28%
Ratio of allowance for losses on receivables to nonaccrual finance receivables 68.9% 111.7% 123.1%
60+ days contractual delinquency as a percentage of finance receivables 2.59% 0.43% 0.77%
Nonperforming assets include nonaccrual finance receivables and repossessed assets that are not guaranteed by our Manufacturing group.
Nonperforming assets by business, and as a percentage of the owned finance assets held for investment for each business, are as follows:
(Dollars in millions) 2008 2007 2006
Golf finance $ 145 9.35% $ 21 1.24% $ 29 1.89%
Resort finance 83 4.97% 9 0.57% 16 1.22%
Distribution finance 64 9.29% 23 1.20% 7 0.28%
Aviation finance 35 1.14% 20 0.89% 12 0.70%
Asset-based lending — — 23 2.31% 16 1.81%
Other portfolios 34 35.43% 27 24.73% 33 19.74%
Total nonperforming assets $ 361 4.72% $ 123 1.34% $ 113 1.28%
We believe that nonperforming assets generally will continue to increase as we execute our liquidation plan under the current economic
conditions. This plan is also likely to result in a slower rate of liquidation for nonperforming assets. The increase in nonperforming assets is
primarily attributable to $110 million in the golf mortgage portfolio, with one golf mortgage account financing 14 golf courses representing 64%
of this amount, and $74 million in the resort portfolio, largely due to one resort account financing eight resorts and the associated timeshare notes
receivable, which represented 92% of the balance. In addition, nonperforming assets and net charge-offs increased substantially in the
distribution finance portfolio reflecting continued weakening U.S. economic conditions.
In 2007, the increases in nonperforming assets as a percentage of owned finance assets for asset-based lending and distribution finance,
compared with 2006, relate to weakening U.S. economic conditions, which began to have a negative impact on borrowers in certain industries.