PACCAR 2011 Annual Report Download - page 61

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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011, 2010 and 2009 (currencies in millions)
Impaired Loans: The Company’s impaired loans are segregated by portfolio class. A portfolio class of receivables is a
subdivision of a portfolio segment with similar measurement attributes, risk characteristics and common methods
to monitor and assess credit risk. The Company’s retail segment is subdivided into the fleet and owner/operator
classes. Fleet consists of retail accounts with customers operating more than five trucks. All others are owner/
operator. All impaired loans have a specific reserve and are summarized as follows:
2011
OWNER/
At December 31, 2011 WHOLESALE FLEET OPERATOR TOTAL
Impaired loans with specific reserve $ 18.4 $ 27.9 $ 11.5 $ 57.8
Associated allowance (2.2) (6.0) (2.6) (10.8)
Net carrying amount of impaired loans $ 16.2 $ 21.9 $ 8.9 $ 47.0
Unpaid principal balance 18.4 27.9 11.5 57.8
Average recorded investment 14.4 28.7 13.6 56.7
Interest income recognized .4 2.7 2.0 5.1
2010
OWNER/
At December 31, 2010 WHOLESALE FLEET OPERATOR TOTAL
Impaired loans with specific reserve $ 3.4 $ 21.5 $ 17.8 $ 42.7
Associated allowance (1.3) (4.4) (3.8) (9.5)
Net carrying amount of impaired loans $ 2.1 $ 17.1 $ 14.0 $ 33.2
Unpaid principal balance 3.4 21.5 17.8 42.7
Average recorded investment 7.8 31.7 18.8 58.3
Interest income recognized .1 1.7 .2 2.0
Credit Quality: The Company’s customers are principally concentrated in the transportation industry in North
America, Europe and Australia. On a geographic basis, there is a proportionate concentration of credit risk in each
area. The Company retains as collateral a security interest in the related equipment.
At the inception of each contract, the Company considers the credit risk based on a variety of criteria, including
prior payment experience, customer financial information, credit-rating agency ratings, loan-to-value ratios and
other internal metrics. On an ongoing basis, the Company monitors the credit exposure based on past-due status and
collection experience as the Company has found a meaningful correlation between the past-due status of customers
and the risk of loss.
The Company has three credit quality indicators: performing, watch and at-risk. Performing accounts pay in
accordance with the contractual terms and are not considered high risk. Watch accounts include past-due and large
high-risk accounts that are not impaired. At-risk accounts are accounts that are impaired including TDRs, accounts