UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, ~~2021~~2022


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
			For the transition period from ____________________ to ____________________

Commission file number 1-6368

Ford Motor Credit Company LLC

(Exact name of registrant as specified in its charter)

Delaware

38-1612444

(State of organization)

(I.R.S. employer identification no.)

One American Road

Dearborn,

Michigan

48126

(Address of principal executive offices)

(Zip Code)

(313) 322-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

0.623% Notes due June 28, 2023*

F/23E

New York Stock Exchange

1.355% Notes due February 7, 2025*

F/25I

New York Stock Exchange

4.125% Notes due on June 20, 2024*

F/24O

New York Stock Exchange

3.021% Notes due March 6, 2024*

F/24M

New York Stock Exchange

4.535% Notes due March 6, 2025*

F/25K

New York Stock Exchange

3.350% Notes due Nine Months or More from the Date of Issue due August 20, 2026

F/26N

New York Stock Exchange

1.514% Notes due February 17, 2023*

F/23G

New York Stock Exchange

2.386% Notes due February 17, 2026*

F/26AB

New York Stock Exchange

1.744% Notes due July 19, 2024*

F/24R

New York Stock Exchange

2.330% Notes due on November 25, 2025*

F/25L

New York Stock Exchange

3.683% Notes due on December 3, 2024*

F/24Q

New York Stock Exchange

3.250% Notes due September 15, 2025*

F/25M

New York Stock Exchange

2.748% Notes due on June 14, 2024*

F/24S

~~New York Stock Exchange~~

Floating Rate Notes due December 1, 2021*

~~F/21AQ~~

New York Stock Exchange

Floating Rate Notes due December 7, 2022*

F/22T

New York Stock Exchange

Floating Rate Notes due November 15, 2023*

F/23D

New York Stock Exchange

Floating Rate Notes due December 1, 2024*

F/24L

New York Stock Exchange

*Issued under Euro Medium Term Notes due Nine Months or More from The Date of Issue Program

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer þ Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐

Yes

☑

All of the limited liability company interests in the registrant (“Shares”) are held by an affiliate of the registrant. None of the Shares are publicly traded.

REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.


Exhibit Index begins on page 4038

FORD MOTOR CREDIT COMPANY LLC

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended June 30, ~~2021~~2022



	Table of Contents	Page

	Part I. Financial Information
Item 1	Financial Statements	1
	Consolidated Income Statements	1
	Consolidated Statements of Comprehensive Income	1
	Consolidated Balance Sheets	2
	Consolidated Statements of Shareholder’s Interest	3
	Consolidated Statements of Cash Flows	4
	Notes to the Financial Statements	5
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2523
	Recent Developments	2523
	Definitions and Information Regarding Causal Factors	2624
	Results of Operations	2826
	Financing Shares and Contract Placement Volume	3028
	Financial Condition	3129
	Credit Risk	3230
	Residual Risk	3432
	Credit Ratings	3533
	Funding and Liquidity	3634
	Leverage	3735
	Outlook	3735
	Cautionary Note on Forward-Looking Statements	3836
	Accounting Standards Issued But Not Yet Adopted	3937
Item 3	Quantitative and Qualitative Disclosures About Market Risk	3937
Item 4	Controls and Procedures	3937
	Part II. Other Information
Item 1	Legal Proceedings	4038
Item 5	Other Information	4038
Item 6	Exhibits	4038
	Signature	4139

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements.

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

(in millions)


		For the periods ended June 30,										For the periods ended June 30,
		2020		2021		2020		2021									2021			2022		2021		2022
		Second Quarter				First Half								Second Quarter						First Half
		(unaudited)										(unaudited)
Financing revenue	Financing revenue														Financing revenue
Operating leases	Operating leases	$	1,401	$	1,367	$	2,860	$	2,747						Operating leases		$	1,367		$	1,166	$	2,747	$	2,377
Retail financing	Retail financing	941		1,004		1,917		1,994							Retail financing		1,004			874		1,994		1,780
Dealer financing	Dealer financing	341		187		826		473							Dealer financing		187			221		473		385
Other financing	Other financing	27		13		49		27							Other financing		13			15		27		22
Total financing revenue	Total financing revenue	2,710		2,571		5,652		5,241							Total financing revenue		2,571			2,276		5,241		4,564
Depreciation on vehicles subject to operating leases	Depreciation on vehicles subject to operating leases	(990)		(191)		(2,042)		(759)							Depreciation on vehicles subject to operating leases		(191)			(549)		(759)		(1,064)
Interest expense	Interest expense	(839)		(680)		(1,823)		(1,484)							Interest expense		(680)			(657)		(1,484)		(1,268)
Net financing margin	Net financing margin	881		1,700		1,787		2,998							Net financing margin		1,700			1,070		2,998		2,232
Other revenue	Other revenue														Other revenue
Insurance premiums earned	Insurance premiums earned	34		17		81		44							Insurance premiums earned		17			17		44		32
Fee based revenue and other	Fee based revenue and other	49		53		92		73							Fee based revenue and other		53			55		73		78
Total financing margin and other revenue	Total financing margin and other revenue	964		1,770		1,960		3,115							Total financing margin and other revenue		1,770			1,142		3,115		2,342
Expenses	Expenses														Expenses
Operating expenses	Operating expenses	305		322		667		665							Operating expenses		322			307		665		655
Provision for credit losses (Note 4)		93		(166)		679		(206)
Provision for/(benefit from) credit losses (Note 4)										Provision for/(benefit from) credit losses (Note 4)	(166)		(56)			(206)			(120)
Insurance expenses	Insurance expenses	60		4		66		9							Insurance expenses		4			9		9		2
Total expenses	Total expenses	458		160		1,412		468							Total expenses		160			260		468		537

Other income / (loss), net (Note 11)		37		13		25		(62)
Other income/(loss), net (Note 11)										Other income/(loss), net (Note 11)	13		21			(62)			(148)

Income before income taxes	Income before income taxes	543		1,623		573		2,585							Income before income taxes		1,623			903		2,585		1,657
Provision for / (Benefit from) income taxes		67		(28)		103		89
Provision for/(benefit from) income taxes										Provision for/(benefit from) income taxes	(28)		99			89			184
Net income	Net income	$	476	$	1,651	$	470	$	2,496						Net income		$	1,651		$	804	$	2,496	$	1,473

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)


		For the periods ended June 30,								For the periods ended June 30,
		2020		2021		2020		2021					2021		2022		2021		2022
		Second Quarter				First Half					Second Quarter				First Half
		(unaudited)								(unaudited)
Net income	Net income	$	476	$	1,651	$	470	$	2,496			Net income	$	1,651	$	804	$	2,496	$	1,473
Other comprehensive income / (loss), net of tax
Foreign currency translation		87		108		(261)		7
Other comprehensive income/(loss), net of tax												Other comprehensive income/(loss), net of tax
Foreign currency translation gains/(losses)												Foreign currency translation gains/(losses)	108		(403)		7		(446)
Reclassification of accumulated foreign currency translation (gains)/losses to net income												Reclassification of accumulated foreign currency translation (gains)/losses to net income	—		36		—		231
Comprehensive income	Comprehensive income	$	563	$	1,759	$	209	$	2,503			Comprehensive income	$	1,759	$	437	$	2,503	$	1,258

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in millions)


		December 31, 2020		June 30, 2021			December 31, 2021		June 30, 2022
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents (Note 3)	Cash and cash equivalents (Note 3)	$	14,349	$	13,938	Cash and cash equivalents (Note 3)	$	10,963	$	6,298
Marketable securities (Note 3)	Marketable securities (Note 3)	4,860		2,055		Marketable securities (Note 3)	2,173		2,186
Finance receivables, net	Finance receivables, net					Finance receivables, net
Retail installment contracts, dealer financing, and other financing	Retail installment contracts, dealer financing, and other financing	97,043		83,775		Retail installment contracts, dealer financing, and other financing	85,347		85,873
Finance leases	Finance leases	8,027		7,748		Finance leases	7,003		6,346
Total finance receivables, net of allowance for credit losses of $1,305 and $1,061 (Note 4)		105,070		91,523
Total finance receivables, net of allowance for credit losses of $925 and $763 (Note 4)						Total finance receivables, net of allowance for credit losses of $925 and $763 (Note 4)	92,350		92,219
Net investment in operating leases (Note 5)	Net investment in operating leases (Note 5)	26,655		26,237		Net investment in operating leases (Note 5)	25,167		23,408
Notes and accounts receivable from affiliated companies	Notes and accounts receivable from affiliated companies	853		433		Notes and accounts receivable from affiliated companies	703		907
Derivative financial instruments (Note 7)	Derivative financial instruments (Note 7)	2,601		1,786		Derivative financial instruments (Note 7)	1,065		748
Assets held-for-sale		36		9

Other assets (Note 8)	Other assets (Note 8)	3,705		2,830		Other assets (Note 8)	2,524		2,484
Total assets	Total assets	$	158,129	$	138,811	Total assets	$	134,945	$	128,250

LIABILITIES	LIABILITIES					LIABILITIES
Accounts payable	Accounts payable					Accounts payable
Customer deposits, dealer reserves, and other	Customer deposits, dealer reserves, and other	$	1,087	$	1,026	Customer deposits, dealer reserves, and other	$	1,051	$	1,135
Affiliated companies	Affiliated companies	490		591		Affiliated companies	425		601
Total accounts payable	Total accounts payable	1,577		1,617		Total accounts payable	1,476		1,736
Debt (Note 9)	Debt (Note 9)	137,677		121,005		Debt (Note 9)	117,717		109,461
Deferred income taxes	Deferred income taxes	504		500		Deferred income taxes	676		885
Derivative financial instruments (Note 7)	Derivative financial instruments (Note 7)	524		449		Derivative financial instruments (Note 7)	512		2,208
Other liabilities and deferred revenue (Note 8)	Other liabilities and deferred revenue (Note 8)	2,280		2,170		Other liabilities and deferred revenue (Note 8)	2,166		1,987
Total liabilities	Total liabilities	142,562		125,741		Total liabilities	122,547		116,277

SHAREHOLDER’S INTEREST	SHAREHOLDER’S INTEREST					SHAREHOLDER’S INTEREST
Shareholder’s interest	Shareholder’s interest	5,227		5,227		Shareholder’s interest	5,227		5,166
Accumulated other comprehensive income / (loss)		(478)		(471)
Accumulated other comprehensive income/(loss)						Accumulated other comprehensive income/(loss)	(690)		(905)
Retained earnings	Retained earnings	10,818		8,314		Retained earnings	7,839		7,712
Shareholder’s interest attributable to Ford Motor Credit Company						Shareholder’s interest attributable to Ford Motor Credit Company	12,376		11,973
Shareholder’s interest attributable to noncontrolling interests						Shareholder’s interest attributable to noncontrolling interests	22		—
Total shareholder’s interest	Total shareholder’s interest	15,567		13,070		Total shareholder’s interest	12,398		11,973
Total liabilities and shareholder’s interest	Total liabilities and shareholder’s interest	$	158,129	$	138,811	Total liabilities and shareholder’s interest	$	134,945	$	128,250

The following table includes assets to be used to settle the liabilities of the consolidated variable interest entities (“VIEs”). These assets and liabilities are included in the consolidated balance sheets above.


		December 31, 2020		June 30, 2021			December 31, 2021		June 30, 2022
		(unaudited)					(unaudited)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	2,822	$	7,555	Cash and cash equivalents	$	3,407	$	2,284
Finance receivables, net	Finance receivables, net	51,472		44,157		Finance receivables, net	43,001		43,162
Net investment in operating leases	Net investment in operating leases	12,794		8,426		Net investment in operating leases	7,540		10,494
Derivative financial instruments	Derivative financial instruments	0		5		Derivative financial instruments	39		199
LIABILITIES	LIABILITIES					LIABILITIES
Debt	Debt	$	46,770	$	39,861	Debt	$	38,274	$	41,072
Derivative financial instruments	Derivative financial instruments	56		19		Derivative financial instruments	6		—

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S INTEREST

(in millions, unaudited)

Shareholder’s Interest Accumulated Other Comprehensive Income / (Loss) Retained Earnings Total Shareholder’s Interest
Balance at December 31, 2019 $ 5,227 $ (850) $ 12,012 $ 16,389
Adoption of accounting standards (Note 2) 0 0 (242) (242)
Net income / (loss) 0 0 (6) (6)
Other comprehensive income / (loss), net of tax 0 (348) 0 (348)
Distributions declared 0 0 (343) (343)
Balance at March 31, 2020 $ 5,227 $ (1,198) $ 11,421 $ 15,450
Net income / (loss) 0 0 476 476
Other comprehensive income / (loss), net of tax 0 87 0 87
Distributions declared 0 0 (826) (826)
Balance at June 30, 2020 $ 5,227 $ (1,111) $ 11,071 $ 15,187
Balance at December 31, 2020 $ 5,227 $ (478) $ 10,818 $ 15,567
Net income / (loss) 0 0 845 845
Other comprehensive income / (loss), net of tax 0 (101) 0 (101)
Distributions declared 0 0 (1,000) (1,000)
Balance at March 31, 2021 $ 5,227 $ (579) $ 10,663 $ 15,311
Net income / (loss) 0 0 1,651 1,651
Other comprehensive income / (loss), net of tax 0 108 0 108
Distributions declared 0 0 (4,000) (4,000)
Balance at June 30, 2021 $ 5,227 $ (471) $ 8,314 $ 13,070


	Shareholder’s Interest		Accumulated Other Comprehensive Income/(Loss)		Retained Earnings		Total Shareholder’s Interest		Shareholder’s Interest Attributable to Non-controlling Interests		Total Shareholder’s Interest
Balance at December 31, 2020	$	5,227	$	(478)	$	10,818	$	15,567	$	—	$	15,567
Net income/(loss)	—		—		845		845		—		845
Other comprehensive income/(loss), net of tax	—		(101)		—		(101)		—		(101)
Distributions declared	—		—		(1,000)		(1,000)		—		(1,000)
Balance at March 31, 2021	$	5,227	$	(579)	$	10,663	$	15,311	$	—	$	15,311

Net income/(loss)	—		—		1,651		1,651		—		1,651
Other comprehensive income/(loss), net of tax	—		108		—		108		—		108
Distributions declared	—		—		(4,000)		(4,000)		—		(4,000)
Balance at June 30, 2021	$	5,227	$	(471)	$	8,314	$	13,070	$	—	$	13,070

Balance at December 31, 2021	$	5,227	$	(690)	$	7,839	$	12,376	$	22	$	12,398
Net income/(loss)	—		—		669		669		—		669
Other comprehensive income/(loss), net of tax	—		152		—		152		—		152
Distributions declared	—		—		(1,000)		(1,000)		—		(1,000)
Other (Note 10)	(61)		—		—		(61)		(22)		(83)
Balance at March 31, 2022	$	5,166	$	(538)	$	7,508	$	12,136	$	—	$	12,136

Net income/(loss)	—		—		804		804		—		804
Other comprehensive income/(loss), net of tax	—		(367)		—		(367)		—		(367)
Distributions declared	—		—		(600)		(600)		—		(600)
Balance at June 30, 2022	$	5,166	$	(905)	$	7,712	$	11,973	$	—	$	11,973

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)


		For the periods ended June 30,					For the periods ended June 30,
		2020		2021			2021		2022
		First Half					First Half
		(unaudited)					(unaudited)
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income	Net income	$	470	$	2,496	Net income	$	2,496	$	1,473
Adjustments to reconcile net income to net cash provided in operations
Provision for credit losses		679		(206)
Provision for/(benefit from) credit losses						Provision for/(benefit from) credit losses	(206)		(120)
Depreciation and amortization	Depreciation and amortization	2,436		1,116		Depreciation and amortization	1,116		1,395
Amortization of upfront interest supplements	Amortization of upfront interest supplements	(1,048)		(1,166)		Amortization of upfront interest supplements	(1,166)		(987)
Net change in finance and wholesale receivables held-for-sale		(74)		0
Net change in deferred income taxes	Net change in deferred income taxes	65		(81)		Net change in deferred income taxes	(81)		192
Net change in other assets	Net change in other assets	(27)		548		Net change in other assets	548		(521)
Net change in other liabilities	Net change in other liabilities	(383)		(69)		Net change in other liabilities	(69)		369
All other operating activities	All other operating activities	(9)		76		All other operating activities	76		126
Net cash provided by / (used in) operating activities		2,109		2,714
Net cash provided by/(used in) operating activities						Net cash provided by/(used in) operating activities	2,714		1,927

Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Purchases of finance receivables	Purchases of finance receivables	(20,424)		(17,194)		Purchases of finance receivables	(17,194)		(15,513)
Principal collections of finance receivables	Principal collections of finance receivables	19,377		21,320		Principal collections of finance receivables	21,320		19,135
Purchases of operating lease vehicles	Purchases of operating lease vehicles	(5,063)		(5,943)		Purchases of operating lease vehicles	(5,943)		(4,515)
Proceeds from termination of operating lease vehicles	Proceeds from termination of operating lease vehicles	4,022		5,998		Proceeds from termination of operating lease vehicles	5,998		5,207
Net change in wholesale receivables and other short-duration receivables	Net change in wholesale receivables and other short-duration receivables	9,953		10,565		Net change in wholesale receivables and other short-duration receivables	10,565		(4,613)
Proceeds from sale of business		1,340		0
Purchases of marketable securities	Purchases of marketable securities	(4,139)		(5,998)		Purchases of marketable securities	(5,998)		(2,683)
Proceeds from sales and maturities of marketable securities	Proceeds from sales and maturities of marketable securities	2,425		8,792		Proceeds from sales and maturities of marketable securities	8,792		2,606
Settlements of derivatives	Settlements of derivatives	37		(47)		Settlements of derivatives	(47)		128
All other investing activities	All other investing activities	(31)		(39)		All other investing activities	(39)		(85)
Net cash provided by / (used in) investing activities		7,497		17,454
Net cash provided by/(used in) investing activities						Net cash provided by/(used in) investing activities	17,454		(333)

Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Proceeds from issuances of long-term debt	Proceeds from issuances of long-term debt	20,146		9,388		Proceeds from issuances of long-term debt	9,388		17,924
Principal payments on long-term debt		(22,965)		(26,525)
Change in short-term debt, net		(1,668)		1,065
Payments of long-term debt						Payments of long-term debt	(26,525)		(22,089)
Net change in short-term debt						Net change in short-term debt	1,065		(237)
Cash distributions to parent	Cash distributions to parent	(1,169)		(5,000)		Cash distributions to parent	(5,000)		(1,600)
All other financing activities	All other financing activities	(41)		(29)		All other financing activities	(29)		(48)
Net cash provided by / (used in) financing activities		(5,697)		(21,101)
Net cash provided by/(used in) financing activities						Net cash provided by/(used in) financing activities	(21,101)		(6,050)

Effect of exchange rate changes on cash, cash equivalents and restricted cash		(174)		18
Effect of exchange rate changes on cash, cash equivalents, and restricted cash						Effect of exchange rate changes on cash, cash equivalents, and restricted cash	18		(229)

Net increase / (decrease) in cash, cash equivalents and restricted cash		$	3,735	$	(915)
Net increase/(decrease) in cash, cash equivalents and restricted cash						Net increase/(decrease) in cash, cash equivalents and restricted cash	$	(915)	$	(4,685)

Cash, cash equivalents and restricted cash at beginning of period (Note 3)		$	9,268	$	14,996
Net increase / (decrease) in cash, cash equivalents and restricted cash		3,735		(915)
Cash, cash equivalents and restricted cash at end of period (Note 3)		$	13,003	$	14,081
Cash, cash equivalents, and restricted cash at beginning of period (Note 3)						Cash, cash equivalents, and restricted cash at beginning of period (Note 3)	$	14,996	$	11,091
Net increase/(decrease) in cash, cash equivalents, and restricted cash						Net increase/(decrease) in cash, cash equivalents, and restricted cash	(915)		(4,685)
Cash, cash equivalents, and restricted cash at end of period (Note 3)						Cash, cash equivalents, and restricted cash at end of period (Note 3)	$	14,081	$	6,406

The accompanying notes are part of the consolidated financial statements.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

Table of Contents


Footnote		Page
Note 1	Presentation	6
Note 2	Accounting Policies	6
Note 3	Cash, Cash Equivalents, and Marketable Securities	87
Note 4	Finance Receivables and Allowance for Credit Losses	97
Note 5	Net Investment in Operating Leases	1311
Note 6	Transfers of Receivables and Variable Interest Entities	1412
Note 7	Derivative Financial Instruments and Hedging Activities	1715
Note 8	Other Assets and Other Liabilities and Deferred Revenue	1917
Note 9	Debt	2018


Note 10	~~Employee Separation and~~ Restructuring Actions	2019
Note 11	Other ~~Income /~~ Income/(Loss), Net	2119

Note 12	Segment Information	2220

Note 13	Commitments and Contingencies	2321

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 1. PRESENTATION

Principles of Consolidation

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) for interim financial information, and instructions to the Quarterly Report on Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, these unaudited financial statements include all adjustments considered necessary for a fair statement of the results of operations and financial condition for interim periods for Ford Motor Credit Company LLC, its consolidated subsidiaries, and its consolidated VIEs in which Ford Motor Credit Company LLC is the primary beneficiary (collectively referred to herein as “Ford Credit,” “we,” “our,” or “us”). Results for interim periods should not be considered indicative of results for any other interim period or for the full year. Reference should be made to the financial statements contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (“~~2020~~2021 Form 10-K Report”). We are an indirect, wholly owned subsidiary of Ford Motor Company (“Ford”). We reclassify certain prior period amounts in our consolidated financial statements to conform to current year presentation.

NOTE 2. ACCOUNTING POLICIES

Adoption of New Accounting Standards

~~ASU 2019-12 - Simplifying the Accounting for Income Taxes~~. Effective January 1, 2021, we adopted the amendments in this ASU to simplify the accounting for income taxes. The only amendment that had a material effect on our financial statements clarified that an entity may elect, but is not required, to reflect an allocation of consolidated current and deferred tax expense for non-taxable legal entities that are treated as disregarded by taxing authorities in their separately issued financial statements.

With the adoption of the amendments, our financial statements no longer reflect an allocation of the Ford Motor Company consolidated United States current and deferred tax expense to us and certain of our United States subsidiaries that are treated as disregarded entities for United States tax purposes. These amendments reduce complexity in accounting for income taxes and better reflect our external obligations to tax authorities. Following the adoption, in April 2021, we entered into a Second Amended and Restated Tax Sharing Agreement with Ford.

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 2. ACCOUNTING POLICIES (Continued)~~

~~The effect of the retrospective adoption of this amendment on our consolidated income statement, balance sheet, and statement of cash flows was as follows (in millions):~~

For the Period Ended June 30, 2020
Second Quarter First Half
Previously Reported Adjustments
due to
ASU 2019-12 As Revised Previously Reported Adjustments
due to
ASU 2019-12 As Revised
Income Statement
Provision for income taxes $ 136 $ (69) $ 67 $ 145 $ (42) $ 103
Net income 407 69 476 428 42 470

As of December 31, 2020
Previously Reported Adjustments due to ASU 2019-12 As Revised
Balance Sheet
Other assets $ 4,593 $ (888) $ 3,705
Deferred income taxes (a) 2,907 (2,403) 504
Other liabilities and deferred income 2,306 (26) 2,280
Accumulated other comprehensive income / (loss) (413) (65) (478)
Retained earnings 9,212 1,606 10,818
For the Period Ended June 30, 2020
First Half
Previously Reported Adjustments due to ASU 2019-12 As Revised
Statement of Cash Flows
Cash flows from operating activities
Net income $ 428 $ 42 $ 470
Net change in deferred income taxes (692) 757 65
Net change in other liabilities (243) (140) (383)
All other operating activities 31 (40) (9)
Cash flows from financing activities
Cash distributions to parent (550) (619) (1,169)
~~_________~~

~~(a)~~Change reflects a reduction in U.S. deferred tax liabilities of $3.4 billion (primarily leasing transactions of $2.8 billion) and a reduction of U.S. deferred tax assets of $1.0 billion (primarily associated with foreign tax credit carryforwards of $0.7 billion).

Adoption of ASU 2019-12 also resulted in a revised impact of the cumulative effect of initially applying ASU 2016-13, Credit Losses – Measurement of Credit Losses on Financial Instruments. The adjustment to the January 1, 2020 opening balance of ~~Retained earnings~~ ~~for the adoption of ASU 2016-13 was previously reported as $202 million, and adjustments due to ASU 2019-12 were $40 million. Accordingly, the revised amount is $242 million.~~

We ~~also~~ adopted the following ~~ASUs~~Accounting Standards Updates (“ASUs”) during ~~2021,~~2022, none of which had a material impact to our consolidated financial statements or financial statement disclosures:


ASU		Effective Date
~~2020-06~~2021-05	~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity~~Lessors - Certain Leases with Variable Lease Payments	January 1, ~~2021~~2022
~~2021-01~~2021-08	~~Reference Rate Reform~~Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers	January 1, ~~2021~~2022
2021-10	Government Assistance: Disclosures by Business Entities about Government Assistance	January 1, 2022

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 2. ACCOUNTING POLICIES (Continued)~~

Accounting Standards Issued But Not Yet Adopted

ASU 2022-02, Financial Instruments - Credit Losses, Troubled Debt Restructurings and Vintage Disclosures. In March 2022, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard that eliminates the troubled debt recognition and measurement guidance. The new standard requires that an entity apply the loan refinancing and restructuring guidance in ASC 310 to all loan modifications and/or receivable modifications. It also enhances disclosure requirements for certain refinancings and restructurings by creditors when a borrower is experiencing financial difficulty and requires disclosure of current-period gross charge-offs by year of origination in the vintage disclosure. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. We are assessing the effect of the new standard on our financial statements and disclosures.

The Company considers the applicability and impacts of all ASUs. All other ASUs were assessed and determined to be either not applicable or are not expected to have ~~minimal~~a material impact on our consolidated financial ~~statements.~~statements or financial statement disclosures.

Provision for Income Taxes

For interim tax reporting, we estimate one single effective tax rate for subsidiaries that are subject to tax, which is applied to the year-to-date ordinary ~~income /~~ income/(loss). Tax effects of significant unusual or infrequently occurring items are excluded from the estimated annual effective tax rate calculation and recognized in the interim period in which they occur.

~~With the adoption of ASU 2019-12, the effective tax rate at December 31, 2020 has changed retrospectively from 26.2% to 9.7% reflecting income tax no longer allocated to disregarded entities.~~

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The fair values of cash, cash equivalents, and marketable securities measured at fair value on a recurring basis were as follows (in millions):

Fair Value Level December 31,
2020 June 30,
2021
Cash and cash equivalents
United States government 1 $ 3,255 $ 416
United States government agencies 2 640 50
Non-United States government and agencies 2 717 242
Corporate debt 2 970 795
Total marketable securities classified as cash equivalents 5,582 1,503
Cash, time deposits, and money market funds 8,767 12,435
Total cash and cash equivalents $ 14,349 $ 13,938
Marketable securities
United States government 1 $ 1,082 $ 550
United States government agencies 2 485 225
Non-United States government and agencies 2 2,693 718
Corporate debt 2 308 293
Other marketable securities 2 292 269
Total marketable securities $ 4,860 $ 2,055


	Fair Value Level	December 31, 2021		June 30, 2022
Cash and cash equivalents
United States government	1	$	711	$	40
United States government agencies	2	240		—
Non-United States government and agencies	2	152		382
Corporate debt	2	940		630
Total marketable securities classified as cash equivalents		2,043		1,052
Cash, time deposits, and money market funds		8,920		5,246
Total cash and cash equivalents		$	10,963	$	6,298

Marketable securities
United States government	1	$	864	$	325
United States government agencies	2	75		223
Non-United States government and agencies	2	697		1,184
Corporate debt	2	304		274
Other marketable securities	2	233		180
Total marketable securities		$	2,173	$	2,186

Cash, Cash Equivalents, and Restricted Cash

Cash, cash equivalents, and restricted cash, as reported in the consolidated statements of cash flows, were as follows (in millions):


		December 31, 2020		June 30, 2021			December 31, 2021		June 30, 2022
Cash and cash equivalents	Cash and cash equivalents	$	14,349	$	13,938	Cash and cash equivalents	$	10,963	$	6,298
Restricted cash (a)	Restricted cash (a)	647		143		Restricted cash (a)	128		108
Total cash, cash equivalents, and restricted cash	Total cash, cash equivalents, and restricted cash	$	14,996	$	14,081	Total cash, cash equivalents, and restricted cash	$	11,091	$	6,406

__________

(a)Restricted cash is included in Other assets on our consolidated balance sheets and is primarily held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements. Restricted cash does not include required minimum balances or cash securing debt issued through securitization transactions.

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

We manage finance receivables as “consumer” and “non-consumer” portfolios. The receivables are generally secured by the vehicles, inventory, or other property being financed.

Finance receivables are recorded at the time of origination or purchase at fair value and are subsequently reported at amortized cost, net of any allowance for credit losses.

For all finance receivables, we define “past due” as any payment, including principal and interest, that is at least 31 days past the contractual due date.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Total Finance Receivables, Net

Total finance receivables, net were as follows (in millions):


		December 31, 2020		June 30, 2021			December 31, 2021		June 30, 2022
Consumer	Consumer					Consumer
Retail installment contracts, gross	Retail installment contracts, gross	$	73,726	$	70,533	Retail installment contracts, gross	$	69,247	$	65,219
Finance leases, gross	Finance leases, gross	8,431		8,132		Finance leases, gross	7,318		6,647
Retail financing, gross	Retail financing, gross	82,157		78,665		Retail financing, gross	76,565		71,866
Unearned interest supplements from Ford and affiliated companies	Unearned interest supplements from Ford and affiliated companies	(3,987)		(3,358)		Unearned interest supplements from Ford and affiliated companies	(3,020)		(2,535)
Consumer finance receivables	Consumer finance receivables	78,170		75,307		Consumer finance receivables	73,545		69,331

Non-Consumer	Non-Consumer					Non-Consumer
Dealer financing	Dealer financing	26,517		15,700		Dealer financing	18,197		21,995
Other financing	Other financing	1,688		1,577		Other financing	1,533		1,656
Non-Consumer finance receivables	Non-Consumer finance receivables	28,205		17,277		Non-Consumer finance receivables	19,730		23,651
Total recorded investment	Total recorded investment	$	106,375	$	92,584	Total recorded investment	$	93,275	$	92,982

Recorded investment in finance receivables	Recorded investment in finance receivables	$	106,375	$	92,584	Recorded investment in finance receivables	$	93,275	$	92,982
Allowance for credit losses	Allowance for credit losses	(1,305)		(1,061)		Allowance for credit losses	(925)		(763)
Total finance receivables, net	Total finance receivables, net	$	105,070	$	91,523	Total finance receivables, net	$	92,350	$	92,219

Net finance receivables subject to fair value (a)	Net finance receivables subject to fair value (a)	$	97,043	$	83,775	Net finance receivables subject to fair value (a)	$	85,347	$	85,873
Fair value (b)	Fair value (b)	98,630		85,335		Fair value (b)	86,199		84,220

__________

(a)Net finance receivables subject to fair value exclude finance leases.

(b)The fair value of finance receivables is categorized within Level 3 of the fair value hierarchy.

Finance leases are comprised of sales-type and direct financing leases. Financing revenue from finance leases for the second quarter of ~~2020~~2021 and ~~2021~~2022 was ~~$77~~$88 million and ~~$88~~$73 million, respectively, and for the first half of ~~2020~~2021 and ~~2021~~2022 was ~~$172~~$178 million and ~~$178~~$150 million, respectively, and is included in Retail financing on ~~the~~our consolidated income statements.

At December 31, ~~2020~~2021 and June 30, ~~2021,~~2022, accrued interest was ~~$181~~$125 million and ~~$134~~$119 million, respectively, which we report in Other assets on ~~the~~our consolidated balance sheets.

Included in the recorded investment in finance receivables were consumer and non-consumer receivables that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. See Note 6 for additional information.

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES~~ ~~(Continued)~~

Credit Quality

Consumer Portfolio. Credit quality ratings for consumer receivables are based on our aging analysis. Consumer receivables credit quality ratings are as follows:

•Pass – current to 60 days past due;

•Special Mention – 61 to 120 days past due and in intensified collection status; and

•Substandard – greater than 120 days past due and for which the uncollectible portion of the receivables has already been charged off, as measured using the fair value of collateral less costs to sell.

~~The credit quality analysis of consumer receivables at December 31, 2020 was as follows (in millions):~~

Amortized Cost Basis by Origination Year
Prior to 2016 2016 2017 2018 2019 2020 Total Percent
Consumer
31-60 days past due $ 45 $ 62 $ 103 $ 162 $ 166 $ 143 $ 681 0.9 %
61-120 days past due 7 12 24 44 45 31 163 0.2
Greater than 120 days past due 11 6 7 8 7 2 41 0
Total past due 63 80 134 214 218 176 885 1.1
Current 782 2,519 6,656 13,725 20,856 32,747 77,285 98.9
Total $ 845 $ 2,599 $ 6,790 $ 13,939 $ 21,074 $ 32,923 $ 78,170 100.0 %

~~The credit quality analysis of consumer receivables at June 30, 2021 was as follows (in millions):~~

Amortized Cost Basis by Origination Year
Prior to 2017 2017 2018 2019 2020 2021 Total Percent
Consumer
31-60 days past due $ 52 $ 60 $ 98 $ 114 $ 134 $ 24 $ 482 0.6 %
61-120 days past due 9 13 23 29 31 7 112 0.2
Greater than 120 days past due 13 7 9 10 8 0 47 0.1
Total past due 74 80 130 153 173 31 641 0.9
Current 1,747 4,423 9,967 16,798 28,259 13,472 74,666 99.1
Total $ 1,821 $ 4,503 $ 10,097 $ 16,951 $ 28,432 $ 13,503 $ 75,307 100.0 %

108

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The credit quality analysis of consumer receivables at December 31, 2021 was as follows (in millions):

~~(Continued)~~


	Amortized Cost Basis by Origination Year
	Prior to 2017		2017		2018		2019		2020		2021		Total		Percent
Consumer
31-60 days past due	$	39	$	52	$	98	$	120	$	186	$	91	$	586	0.8	%
61-120 days past due	7		10		20		29		40		21		127		0.2
Greater than 120 days past due	10		6		6		9		11		1		43		—
Total past due	56		68		124		158		237		113		756		1.0
Current	812		2,608		6,568		12,717		22,730		27,354		72,789		99.0
Total	$	868	$	2,676	$	6,692	$	12,875	$	22,967	$	27,467	$	73,545	100.0	%

The credit quality analysis of consumer receivables at June 30, 2022 was as follows (in millions):


	Amortized Cost Basis by Origination Year
	Prior to 2018		2018		2019		2020		2021		2022		Total		Percent
Consumer
31-60 days past due	$	57	$	68	$	91	$	170	$	113	$	30	$	529	0.8	%
61-120 days past due	11		15		23		36		31		7		123		0.2
Greater than 120 days past due	13		5		8		7		6		1		40		—
Total past due	81		88		122		213		150		38		692		1.0
Current	1,838		4,249		8,916		17,720		22,552		13,364		68,639		99.0
Total	$	1,919	$	4,337	$	9,038	$	17,933	$	22,702	$	13,402	$	69,331	100.0	%

Non-Consumer Portfolio. The credit quality of dealer financing receivables is evaluated based on our internal dealer risk rating analysis. We use a proprietary model to assign each dealer a risk rating. This model uses historical dealer performance data to identify key factors about a dealer that we consider most significant in predicting a dealer’s ability to meet its financial obligations. We also consider numerous other financial and qualitative factors of the dealer’s operations, including capitalization and leverage, liquidity and cash flow, profitability, and credit history with ourselves and other creditors.

Dealers are assigned to one of four groups according to risk ratings as follows:

•Group I – strong to superior financial metrics;

•Group II – fair to favorable financial metrics;

•Group III – marginal to weak financial metrics; and

•Group IV – poor financial metrics, including dealers classified as uncollectible.

The credit quality analysis of dealer financing receivables at December 31, ~~2020~~2021 was as follows (in millions):


		Amortized Cost Basis by Origination Year																					Amortized Cost Basis by Origination Year
		Dealer Loans																					Dealer Loans
		Prior to 2016		2016		2017		2018		2019		2020		Total		Wholesale Loans		Total		Percent			Prior to 2017		2017		2018		2019		2020		2021		Total		Wholesale Loans		Total		Percent
Group I	Group I	$	503	$	129	$	110	$	188	$	70	$	248	$	1,248	$	18,769	$	20,017	75.5	%	Group I	$	391	$	68	$	151	$	45	$	109	$	345	$	1,109	$	13,670	$	14,779	81.2	%
Group II	Group II	38		20		11		35		3		87		194		4,680		4,874		18.4		Group II	11		7		26		2		4		54		104		2,689		2,793		15.3
Group III	Group III	9		0		3		19		3		35		69		1,464		1,533		5.8		Group III	8		—		1		—		1		20		30		529		559		3.1
Group IV	Group IV	2		0		0		0		2		6		10		83		93		0.3		Group IV	—		—		4		—		—		6		10		56		66		0.4
Total (a)	Total (a)	$	552	$	149	$	124	$	242	$	78	$	376	$	1,521	$	24,996	$	26,517	100.0	%	Total (a)	$	410	$	75	$	182	$	47	$	114	$	425	$	1,253	$	16,944	$	18,197	100.0	%

__________

(a)Total past due dealer financing receivables at December 31, ~~2020~~2021 were ~~$99~~$62 million.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The credit quality analysis of dealer financing receivables at June 30, ~~2021~~2022 was as follows (in millions):


		Amortized Cost Basis by Origination Year																					Amortized Cost Basis by Origination Year
		Dealer Loans																					Dealer Loans
		Prior to 2017		2017		2018		2019		2020		2021		Total		Wholesale Loans		Total		Percent			Prior to 2018		2018		2019		2020		2021		2022		Total		Wholesale Loans		Total		Percent
Group I	Group I	$	530	$	87	$	178	$	52	$	115	$	175	$	1,137	$	10,665	$	11,802	75.2	%	Group I	$	452	$	155	$	40	$	65	$	225	$	144	$	1,081	$	18,089	$	19,170	87.2	%
Group II	Group II	15		7		33		3		15		96		169		2,806		2,975		18.9		Group II	7		22		1		5		10		43		88		2,353		2,441		11.1
Group III	Group III	17		1		5		2		3		35		63		797		860		5.5		Group III	—		—		—		—		4		10		14		331		345		1.6
Group IV	Group IV	0		0		0		4		1		5		10		53		63		0.4		Group IV	—		2		—		1		2		2		7		32		39		0.1
Total (a)	Total (a)	$	562	$	95	$	216	$	61	$	134	$	311	$	1,379	$	14,321	$	15,700	100.0	%	Total (a)	$	459	$	179	$	41	$	71	$	241	$	199	$	1,190	$	20,805	$	21,995	100.0	%

__________

(a)Total past due dealer financing receivables at June 30, ~~2021~~2022 were ~~$56~~$8 million.

Non-Accrual of Revenue. The accrual of financing revenue is discontinued at the time a receivable is determined to be uncollectible or when it is 90 days past due. Accounts may be restored to accrual status only when a customer settles all past-due deficiency balances and future payments are reasonably assured. For receivables in non-accrual status, subsequent financing revenue is recognized only to the extent a payment is received. Payments are generally applied first to outstanding interest and then to the unpaid principal balance.

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES~~ ~~(Continued)~~

Troubled Debt Restructuring (“TDR”). A restructuring of debt constitutes a TDR if we grant a concession ~~is granted~~ to a debtor for economic or legal reasons related to the debtor’s financial difficulties that we otherwise would not consider. Consumer and non-consumer receivables that have a modified interest rate below market rate or that were modified in reorganization proceedings pursuant to the U.S. Bankruptcy Code, except non-consumer receivables that are current with minimal risk of loss, are considered to be TDRs. We do not grant concessions on the principal balance of the receivables. If a receivable is modified in a reorganization proceeding, all payment requirements of the reorganization plan need to be met before remaining balances are forgiven.

Allowance for Credit Losses

The allowance for credit losses represents our estimate of the lifetime expected credit losses inherent in finance receivables as of the balance sheet date. The adequacy of the allowance for credit losses is assessed quarterly.

Adjustments to the allowance for credit losses are made by recording charges to the Provision ~~for~~for/(benefit from) credit losses on our consolidated income statements. The uncollectible portion of a finance receivable is charged to the allowance for credit losses at the earlier of when an account is deemed to be uncollectible or when an account is 120 days delinquent, taking into consideration the financial condition of the customer or borrower, the value of the collateral, recourse to guarantors, and other factors.

Charge-offs on finance receivables include uncollected amounts related to principal, interest, late fees, and other allowable charges. Recoveries on finance receivables previously charged off as uncollectible are credited to the allowance for credit losses. In the event we repossess the collateral, the receivable is charged off and the collateral is recorded at its estimated fair value less costs to sell and reported in Other assets on our consolidated balance sheets.

~~An analysis of the allowance for credit losses related to finance receivables for the periods ended June 30 was as follows (in millions):~~

Second Quarter 2020 First Half 2020
Consumer Non-Consumer Total Consumer Non-Consumer Total
Allowance for credit losses
Beginning balance $ 1,157 $ 74 $ 1,231 $ 496 $ 17 $ 513
Adoption of ASU 2016-13 (a) 0 0 0 247 5 252
Charge-offs (80) 0 (80) (225) (1) (226)
Recoveries 33 1 34 76 3 79
Provision for credit losses 94 (1) 93 628 51 679
Other (b) 7 0 7 (11) (1) (12)
Ending balance $ 1,211 $ 74 $ 1,285 $ 1,211 $ 74 $ 1,285

Second Quarter 2021 First Half 2021
Consumer Non-Consumer Total Consumer Non-Consumer Total
Allowance for credit losses
Beginning balance $ 1,170 $ 53 $ 1,223 $ 1,245 $ 60 $ 1,305
Charge-offs (55) (3) (58) (152) (3) (155)
Recoveries 55 2 57 108 5 113
Provision for credit losses (154) (12) (166) (184) (22) (206)
Other (b) 6 (1) 5 5 (1) 4
Ending balance $ 1,022 $ 39 $ 1,061 $ 1,022 $ 39 $ 1,061

~~__________~~

~~(a)Cumulative pre-tax adjustments related to the adoption of ASU 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments, were recorded in retained earnings as of January 1, 2020.~~

~~(b)Primarily represents amounts related to translation adjustments.~~

1210

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 4. FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (Continued)

~~The~~An analysis of the allowance for credit losses ~~considers~~related to finance receivables for the ~~economic conditions attributable~~periods ended June 30 was as follows (in millions):


	Second Quarter 2021						First Half 2021
	Consumer		Non-Consumer		Total		Consumer		Non-Consumer		Total
Allowance for credit losses
Beginning balance	$	1,170	$	53	$	1,223	$	1,245	$	60	$	1,305
Charge-offs	(55)		(3)		(58)		(152)		(3)		(155)
Recoveries	55		2		57		108		5		113
Provision for/(benefit from) credit losses	(154)		(12)		(166)		(184)		(22)		(206)
Other (a)	6		(1)		5		5		(1)		4
Ending balance	$	1,022	$	39	$	1,061	$	1,022	$	39	$	1,061


	Second Quarter 2022						First Half 2022
	Consumer		Non-Consumer		Total		Consumer		Non-Consumer		Total
Allowance for credit losses
Beginning balance	$	826	$	19	$	845	$	903	$	22	$	925
Charge-offs	(61)		(1)		(62)		(123)		(1)		(124)
Recoveries	44		1		45		87		2		89
Provision for/(benefit from) credit losses	(48)		(8)		(56)		(107)		(13)		(120)
Other (a)	(7)		(2)		(9)		(6)		(1)		(7)
Ending balance	$	754	$	9	$	763	$	754	$	9	$	763

__________

(a)Primarily represents amounts related to the COVID-19 pandemic. The allowance reflects economic uncertainty and an expectation of continued higher unemployment, which increases the probability of default and loss given default rates used in our estimate of the lifetime expected credit losses for our consumer portfolio, especially in the United States.translation adjustments.

During the second quarter and first half of ~~2021,~~2022, the allowance for credit losses decreased ~~$162~~$82 million and ~~$244~~$162 million, respectively, primarily ~~reflecting improvement in the economic outlook~~due to our current expectation that ~~caused us to lower our expectation of lifetime~~COVID-related losses ~~attributable to macroeconomic assumptions driven by COVID-19.~~have been avoided. Although net charge-offs remained low in the second quarter and first half ~~ended June 30, 2021,~~of 2022, due in part to ~~government stimulus, changes in consumer spending behavior, and~~ high vehicle ~~collateral~~auction values, the impact of ~~COVID-19~~rising inflation, high energy prices, and higher interest rates on future credit losses remains uncertain. We will continue to monitor economic trends and conditions and portfolio performance and will adjust the reserve accordingly.

NOTE 5. NET INVESTMENT IN OPERATING LEASES

Net investment in operating leases consists primarily of lease contracts for vehicles with individuals, daily rental companies, and fleet customers with terms of 60 months or less. Included in Net investment in operating leases are net investment in operating leases that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. See Note 6 for additional information.

Net investment in operating leases was as follows (in millions):


		December 31, 2020		June 30, 2021			December 31, 2021		June 30, 2022
Vehicles, at cost (a)	Vehicles, at cost (a)	$	32,495	$	31,469	Vehicles, at cost (a)	$	29,982	$	27,883
Accumulated depreciation	Accumulated depreciation	(5,840)		(5,232)		Accumulated depreciation	(4,815)		(4,475)
Net investment in operating leases	Net investment in operating leases	$	26,655	$	26,237	Net investment in operating leases	$	25,167	$	23,408

__________

(a)Includes interest supplements and residual support payments we receive on certain leasing transactions under agreements with Ford and affiliated companies, and other vehicle acquisition costs.

1311

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. TRANSFERS OF RECEIVABLES AND VARIABLE INTEREST ENTITIES

We securitize finance receivables and net investment in operating leases through a variety of programs using amortizing, variable funding, and revolving structures. We also sell finance receivables, or pledge them as collateral in certain transactions outside of the United States, in other types of structured financing transactions. Due to the similarities between securitization and structured financing, we refer to structured financings as securitization transactions. Our securitization programs are targeted to institutional investors in both public and private transactions in capital markets primarily in the United States, Canada, the United Kingdom, Germany, and China.

The finance receivables sold for legal purposes and net investment in operating leases included in securitization transactions are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions. They are not available to pay our other obligations or the claims of our other creditors. The debt is the obligation of our consolidated securitization entities and not the obligation of Ford Credit or our other subsidiaries.

We use special purpose entities (“SPEs”) to issue asset-backed securities in our securitization transactions. We have deemed most of these ~~special purpose entities~~SPEs to be VIEs of which we are the primary beneficiary, and therefore, are consolidated. The SPEs are established for the sole purpose of financing the securitized financial assets. The SPEs are generally financed through the issuance of notes or commercial paper into the public or private markets or directly with conduits.

We continue to recognize our financial assets related to our sales of receivables when the financial assets are sold to a consolidated VIE or a consolidated voting interest entity. We derecognize our financial assets when the financial assets are sold to a non-consolidated entity and we do not maintain control over the financial assets.

We have the power to direct significant activities of our ~~special purpose entities~~SPEs when we have the ability to exercise discretion in the servicing of financial assets, issue additional debt, exercise a unilateral call option, add assets to revolving structures, or control investment decisions. We generally retain a portion of the economic interests in the asset-backed securitization transactions, which ~~are~~could be retained in the form of a portion of the senior orinterests, the subordinated interests, cash reserve accounts, residual interests, and servicing rights. ~~For accounting purposes, we are precluded from recording the~~The transfers of assets in our securitization transactions do not qualify for accounting sale treatment.

From time to time in Europe, we may retain all of the economic interests in some of our public asset-backed securitization transactions. The most senior retained notes are held as, ~~sales.~~or with the intent to become, eligible collateral to access central bank liquidity facilities in Europe. In addition, we regularly pledge receivables that are not securitized as eligible collateral for these facilities. In accordance with applicable regulatory guidance, the underlying assets in these transactions are considered unencumbered if they are not being used as security for a central bank funding. At December 31, 2021 and June 30, 2022, the value of unencumbered assets related to these transactions was $0.9 billion and $0.5 billion, respectively.

We have no obligation to repurchase or replace any securitized asset that subsequently becomes delinquent in payment or otherwise is in default, except when representations and warranties about the eligibility of the securitized assets are breached, or when certain changes are made to the underlying asset contracts. Securitization investors have no recourse to us or our other assets and have no right to require us to repurchase the investments. We generally have no obligation to provide liquidity or contribute cash or additional assets to the VIEs and do not guarantee any asset-backed securities. We may be required to support the performance of certain securitization transactions, however, by increasing cash reserves.

Certain of our securitization entities may enter into derivative transactions to mitigate interest rate exposure, primarily resulting from fixed-rate assets securing floating-rate debt. In certain instances, the counterparty enters into offsetting derivative transactions with us to mitigate its interest rate risk resulting from derivatives with our securitization entities. These related derivatives are not the obligations of our securitization entities. See Note 7 for additional information regarding the accounting for derivatives.

1412

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. TRANSFERS OF RECEIVABLES AND VARIABLE INTEREST ENTITIES (Continued)

Most of these securitization transactions utilize VIEs. The following tables show the assets and debt related to our securitization transactions that were included in our ~~consolidated~~ financial statements (in billions):


		December 31, 2020											December 31, 2021
		Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)			Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)
				Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses							Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses
VIE (b)	VIE (b)											VIE (b)
Retail financing	Retail financing	$	2.0	$	35.8	$	0.4	$	35.4	$	28.4	Retail financing	$	1.7	$	31.6	$	0.3	$	31.3	$	24.5
Wholesale financing	Wholesale financing	0.2		16.1		0		16.1		10.7		Wholesale financing	1.3		11.7		—		11.7		8.7
Finance receivables	Finance receivables	2.2		51.9		0.4		51.5		39.1		Finance receivables	3.0		43.3		0.3		43.0		33.2
Net investment in operating leases	Net investment in operating leases	0.6		12.8		0		12.8		7.7		Net investment in operating leases	0.4		7.5		—		7.5		5.1
Total VIE	Total VIE	$	2.8	$	64.7	$	0.4	$	64.3	$	46.8	Total VIE	$	3.4	$	50.8	$	0.3	$	50.5	$	38.3

Non-VIE	Non-VIE											Non-VIE
Retail financing	Retail financing	$	0.4	$	7.9	$	0.1	$	7.8	$	7.6	Retail financing	$	0.4	$	7.4	$	0.1	$	7.3	$	6.9
Wholesale financing	Wholesale financing	0		0.3		0		0.3		0.2		Wholesale financing	—		0.3		—		0.3		0.2
Finance receivables	Finance receivables	0.4		8.2		0.1		8.1		7.8		Finance receivables	0.4		7.7		0.1		7.6		7.1
Net investment in operating leases	Net investment in operating leases	0		0		0		0		0		Net investment in operating leases	—		—		—		—		—
Total Non-VIE	Total Non-VIE	$	0.4	$	8.2	$	0.1	$	8.1	$	7.8	Total Non-VIE	$	0.4	$	7.7	$	0.1	$	7.6	$	7.1

Total securitization transactions	Total securitization transactions											Total securitization transactions
Retail financing	Retail financing	$	2.4	$	43.7	$	0.5	$	43.2	$	36.0	Retail financing	$	2.1	$	39.0	$	0.4	$	38.6	$	31.4
Wholesale financing (d)		0.2		16.4		0		16.4		10.9
Wholesale financing												Wholesale financing	1.3		12.0		—		12.0		8.9
Finance receivables	Finance receivables	2.6		60.1		0.5		59.6		46.9		Finance receivables	3.4		51.0		0.4		50.6		40.3
Net investment in operating leases	Net investment in operating leases	0.6		12.8		0		12.8		7.7		Net investment in operating leases	0.4		7.5		—		7.5		5.1
Total securitization transactions	Total securitization transactions	$	3.2	$	72.9	$	0.5	$	72.4	$	54.6	Total securitization transactions	$	3.8	$	58.5	$	0.4	$	58.1	$	45.4

__________

(a)Unearned interest supplements and residual support are excluded from securitization transactions.

(b)Includes assets to be used to settle the liabilities of the consolidated VIEs.

(c)Includes unamortized discount and debt issuance costs.

~~(d)~~The global adjusted pool balance of the wholesale finance receivables included in the securitization trusts was $16.4 billion and the required pool balance was $14.1 billion. The global adjusted pool balance includes funds on deposit in the trust accounts. As of December 31, 2020, the adjusted pool balance was $2.3 billion higher than the required pool balance.

1513

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 6. TRANSFERS OF RECEIVABLES AND VARIABLE INTEREST ENTITIES (Continued)


		June 30, 2021											June 30, 2022
		Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)			Cash and Cash Equivalents		Finance Receivables and Net Investment in Operating Leases (a)						Related Debt (c)
				Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses							Before Allowance for Credit Losses		Allowance for Credit Losses		After Allowance for Credit Losses
VIE (b)	VIE (b)											VIE (b)
Retail financing	Retail financing	$	2.0	$	32.8	$	0.3	$	32.5	$	25.2	Retail financing	$	1.6	$	30.1	$	0.2	$	29.9	$	25.4
Wholesale financing	Wholesale financing	5.0		11.7		0		11.7		9.6		Wholesale financing	0.1		13.3		—		13.3		8.6
Finance receivables	Finance receivables	7.0		44.5		0.3		44.2		34.8		Finance receivables	1.7		43.4		0.2		43.2		34.0
Net investment in operating leases	Net investment in operating leases	0.6		8.4		0		8.4		5.1		Net investment in operating leases	0.6		10.5		—		10.5		7.1
Total VIE	Total VIE	$	7.6	$	52.9	$	0.3	$	52.6	$	39.9	Total VIE	$	2.3	$	53.9	$	0.2	$	53.7	$	41.1

Non-VIE	Non-VIE											Non-VIE
Retail financing	Retail financing	$	0.3	$	5.9	$	0.1	$	5.8	$	5.8	Retail financing	$	0.3	$	6.4	$	0.1	$	6.3	$	5.8
Wholesale financing	Wholesale financing	0		0.3		0		0.3		0.2		Wholesale financing	—		0.3		—		0.3		0.2
Finance receivables	Finance receivables	0.3		6.2		0.1		6.1		6.0		Finance receivables	0.3		6.7		0.1		6.6		6.0
Net investment in operating leases	Net investment in operating leases	0		0		0		0		0		Net investment in operating leases	—		—		—		—		—
Total Non-VIE	Total Non-VIE	$	0.3	$	6.2	$	0.1	$	6.1	$	6.0	Total Non-VIE	$	0.3	$	6.7	$	0.1	$	6.6	$	6.0

Total securitization transactions	Total securitization transactions											Total securitization transactions
Retail financing	Retail financing	$	2.3	$	38.7	$	0.4	$	38.3	$	31.0	Retail financing	$	1.9	$	36.5	$	0.3	$	36.2	$	31.2
Wholesale financing (d)		5.0		12.0		0		12.0		9.8
Wholesale financing												Wholesale financing	0.1		13.6		—		13.6		8.8
Finance receivables	Finance receivables	7.3		50.7		0.4		50.3		40.8		Finance receivables	2.0		50.1		0.3		49.8		40.0
Net investment in operating leases	Net investment in operating leases	0.6		8.4		0		8.4		5.1		Net investment in operating leases	0.6		10.5		—		10.5		7.1
Total securitization transactions	Total securitization transactions	$	7.9	$	59.1	$	0.4	$	58.7	$	45.9	Total securitization transactions	$	2.6	$	60.6	$	0.3	$	60.3	$	47.1

__________

(a)Unearned interest supplements and residual support are excluded from securitization transactions.

(b)Includes assets to be used to settle the liabilities of the consolidated VIEs.

(c)Includes unamortized discount and debt issuance cost.

~~(d)~~The global adjusted pool balance of the wholesale finance receivables included in the securitization trusts was $12.0 billion and the required pool balance was $12.0 billion. The global adjusted pool balance includes funds on deposit in the trust accounts.

1614

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

In the normal course of business, our operations are exposed to global market risks, including the effect of changes in interest rates and foreign currency exchange rates. To manage these risks, we enter into highly effective derivative contracts. We have elected to apply hedge accounting to certain derivatives. Derivatives that are designated in hedging relationships are evaluated for effectiveness using regression analysis at the time they are designated and throughout the hedge period. Some derivatives do not qualify for hedge accounting; for others, we elect not to apply hedge accounting.

Income Effect of Derivative Financial Instruments

The ~~gains /~~ gains/(losses), by hedge designation, reported in income for the periods ended June 30 were as follows (in millions):


		Second Quarter				First Half				Second Quarter				First Half
		2020		2021		2020		2021				2021		2022		2021		2022
Fair value hedges	Fair value hedges										Fair value hedges
Interest rate contracts	Interest rate contracts										Interest rate contracts
Net interest settlements and accruals on hedging instruments	Net interest settlements and accruals on hedging instruments	$	68	$	100	$	96	$	201		Net interest settlements and accruals on hedging instruments	$	100	$	25	$	201	$	101
Fair value changes on hedging instruments	Fair value changes on hedging instruments	112		103		1,222		(538)			Fair value changes on hedging instruments	103		(336)		(538)		(1,322)
Fair value changes on hedged debt	Fair value changes on hedged debt	(98)		(87)		(1,191)		503			Fair value changes on hedged debt	(87)		385		503		1,376
Cross-currency interest rate swap contracts	Cross-currency interest rate swap contracts										Cross-currency interest rate swap contracts
Net interest settlements and accruals on hedging instruments	Net interest settlements and accruals on hedging instruments	0		(1)		0		(4)			Net interest settlements and accruals on hedging instruments	(1)		(6)		(4)		(9)
Fair value changes on hedging instruments	Fair value changes on hedging instruments	0		11		0		(39)			Fair value changes on hedging instruments	11		(61)		(39)		(98)
Fair value changes on hedged debt	Fair value changes on hedged debt	0		(11)		0		33			Fair value changes on hedged debt	(11)		65		33		106
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments										Derivatives not designated as hedging instruments
Interest rate contracts	Interest rate contracts	(12)		6		(86)		(25)			Interest rate contracts	6		89		(25)		212
Foreign currency exchange contracts (a)	Foreign currency exchange contracts (a)	(41)		(44)		166		8			Foreign currency exchange contracts (a)	(44)		27		8		25
Cross-currency interest rate swap contracts	Cross-currency interest rate swap contracts	154		49		3		(196)			Cross-currency interest rate swap contracts	49		(443)		(196)		(670)
Total	Total	$	183	$	126	$	210	$	(57)		Total	$	126	$	(255)	$	(57)	$	(279)

__________

(a)Reflects forward contracts between us and an affiliated company.

1715

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Balance Sheet Effect of Derivative Financial Instruments

Derivative assets and liabilities are reported on the balance sheets at fair value and are presented on a gross basis. The notional amounts of the derivative instruments do not necessarily represent amounts exchanged by the parties and are not a direct measure of our financial exposure. We also enter into master agreements with counterparties that may allow for netting of exposures in the event of default or breach of the counterparty agreement. Collateral represents cash received or paid under reciprocal arrangements that we have entered into with our derivative counterparties, which we do not use to offset our derivative assets and liabilities.

The fair value of our derivative instruments and the associated notional amounts were as follows (in millions):


		December 31, 2020						June 30, 2021							December 31, 2021						June 30, 2022
		Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities			Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities
Fair value hedges	Fair value hedges													Fair value hedges
Interest rate contracts	Interest rate contracts	$	26,924	$	1,331	$	4	$	26,296	$	998	$	152	Interest rate contracts	$	23,893	$	544	$	274	$	19,711	$	—	$	1,100
Cross-currency interest rate swap contracts	Cross-currency interest rate swap contracts	885		46		0		885		20		0		Cross-currency interest rate swap contracts	885		—		49		884		—		135
Derivatives not designated as hedging instruments	Derivatives not designated as hedging instruments													Derivatives not designated as hedging instruments
Interest rate contracts	Interest rate contracts	70,318		663		439		56,754		381		249		Interest rate contracts	50,060		338		126		44,788		651		259
Foreign currency exchange contracts	Foreign currency exchange contracts	4,378		4		80		5,910		70		31		Foreign currency exchange contracts	4,407		66		2		4,454		66		24
Cross-currency interest rate swap contracts	Cross-currency interest rate swap contracts	6,849		557		1		6,565		317		17		Cross-currency interest rate swap contracts	6,533		117		61		6,633		31		690
Total derivative financial instruments, gross (a) (b)	Total derivative financial instruments, gross (a) (b)	$	109,354	$	2,601	$	524	$	96,410	$	1,786	$	449	Total derivative financial instruments, gross (a) (b)	$	85,778	$	1,065	$	512	$	76,470	$	748	$	2,208

__________

(a)At December 31, ~~2020~~2021 and June 30, ~~2021,~~2022, we held collateral of $9$26 million and $5$147 million, respectively, and we posted collateral of ~~$96~~$71 million and ~~$64~~$115 million, respectively.

(b)At December 31, ~~2020~~2021 and June 30, ~~2021,~~2022, the fair value of assets and liabilities available for counterparty netting was ~~$204~~$415 million and ~~$332~~$161 million, respectively. All derivatives are categorized within Level 2 of the fair value hierarchy.

1816

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. OTHER ASSETS AND OTHER LIABILITIES AND DEFERRED REVENUE

Other assets and other liabilities and deferred revenue consist of various balance sheet items that are combined for financial statement presentation due to their respective materiality compared with other individual asset and liability items.

Other assets were as follows (in millions):


		December 31, 2020		June 30, 2021			December 31, 2021		June 30, 2022
Accrued interest and other non-finance receivables (a)		$	837	$	737
Prepaid reinsurance premiums and other reinsurance recoverables	Prepaid reinsurance premiums and other reinsurance recoverables	708		733		Prepaid reinsurance premiums and other reinsurance recoverables	$	743	$	761
Accrued interest and other non-finance receivables						Accrued interest and other non-finance receivables	584		563
Property and equipment, net of accumulated depreciation (a)						Property and equipment, net of accumulated depreciation (a)	224		220
Deferred charges - income taxes						Deferred charges - income taxes	190		216
Collateral held for resale, at net realizable value	Collateral held for resale, at net realizable value	675		362		Collateral held for resale, at net realizable value	258		186
Investment in non-consolidated affiliates						Investment in non-consolidated affiliates	133		152
Restricted cash	Restricted cash	647		143		Restricted cash	128		108
Property and equipment, net of accumulated depreciation (b)		219		219
Deferred charges - income taxes (a)		166		228
Investment in non-consolidated affiliates		132		143
Operating lease assets	Operating lease assets	98		85		Operating lease assets	76		67
Other	Other	223		180		Other	188		211
Total other assets ~~(a)~~	Total other assets ~~(a)~~	$	3,705	$	2,830	Total other assets ~~(a)~~	$	2,524	$	2,484

__________

(a)~~Prior period amounts have been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 for additional information.~~

~~(b)~~Accumulated depreciation was ~~$365~~$397 million and ~~$382~~$404 million at December 31, ~~2020~~2021 and June 30, ~~2021,~~2022, respectively.

Other liabilities and deferred revenue were as follows (in millions):


		December 31, 2020		June 30, 2021			December 31, 2021		June 30, 2022
Unearned insurance premiums and fees	Unearned insurance premiums and fees	$	822	$	848	Unearned insurance premiums and fees	$	857	$	874
Interest payable	Interest payable	857		654		Interest payable	667		544
Income tax and related interest (a) (b)		121		261
Income tax and related interest (a)						Income tax and related interest (a)	229		262
Operating lease liabilities	Operating lease liabilities	100		89		Operating lease liabilities	78		69
Deferred revenue	Deferred revenue	87		75		Deferred revenue	62		24
Other	Other	293		243		Other	273		214
Total other liabilities and deferred revenue ~~(a)~~	Total other liabilities and deferred revenue ~~(a)~~	$	2,280	$	2,170	Total other liabilities and deferred revenue ~~(a)~~	$	2,166	$	1,987

__________

(a)~~Prior period amounts have been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 for additional information.~~

~~(b)~~Includes income tax and interest payable to affiliated companies of ~~$16~~$101 million and ~~$136~~$155 million at December 31, ~~2020~~2021 and June 30, ~~2021,~~2022, respectively.

1917

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 9. DEBT

Debt outstanding and interest rates were as follows (in millions):


						Interest Rates													Interest Rates
		Debt				Average Contractual				Average Effective					Debt				Average Contractual				Average Effective
		December 31, 2020		June 30, 2021		2020		2021		2020		2021			December 31, 2021		June 30, 2022		2021		2022		2021		2022
Short-term debt	Short-term debt													Short-term debt
Unsecured debt	Unsecured debt													Unsecured debt
Floating rate demand notes	Floating rate demand notes	$	6,458	$	8,007									Floating rate demand notes	$	9,400	$	9,386
Other short-term debt	Other short-term debt	3,940		3,848										Other short-term debt	4,701		3,781
Asset-backed debt (a)	Asset-backed debt (a)	1,031		703										Asset-backed debt (a)	709		762
Total short-term debt	Total short-term debt	11,429		12,558		1.5	%	1.2	%	1.6	%	1.2	%	Total short-term debt	14,810		13,929		1.2	%	1.8	%	1.3	%	1.8	%
Long-term debt	Long-term debt													Long-term debt
Unsecured debt	Unsecured debt													Unsecured debt
Notes payable within one year	Notes payable within one year	17,185		14,100										Notes payable within one year	13,660		10,471
Notes payable after one year	Notes payable after one year	54,197		48,402										Notes payable after one year	44,337		39,999
Asset-backed debt (a)	Asset-backed debt (a)													Asset-backed debt (a)
Notes payable within one year	Notes payable within one year	21,345		17,220										Notes payable within one year	18,049		17,884
Notes payable after one year	Notes payable after one year	32,276		28,019										Notes payable after one year	26,654		28,472
Unamortized (discount) / premium		30		33
Unamortized (discount)/premium														Unamortized (discount)/premium	29		25
Unamortized issuance costs	Unamortized issuance costs	(252)		(232)										Unamortized issuance costs	(212)		(210)
Fair value adjustments (b)	Fair value adjustments (b)	1,467		905										Fair value adjustments (b)	390		(1,109)
Total long-term debt	Total long-term debt	126,248		108,447		2.7	%	2.7	%	2.7	%	2.7	%	Total long-term debt	102,907		95,532		2.6	%	2.7	%	2.6	%	2.7	%
Total debt	Total debt	$	137,677	$	121,005	2.6	%	2.5	%	2.6	%	2.5	%	Total debt	$	117,717	$	109,461	2.4	%	2.6	%	2.4	%	2.6	%

Fair value of debt (c)	Fair value of debt (c)	$	139,796	$	123,838									Fair value of debt (c)	$	120,204	$	106,884

__________

(a)Asset-backed debt issued in securitizations is the obligation of the consolidated securitization entity that issued the debt and is payable only out of collections on the underlying securitized assets and related enhancements. This asset-backed debt is not the obligation of Ford Credit or our other subsidiaries.

(b)These adjustments are related to hedging activity and include discontinued hedging relationship adjustments of ~~$299~~$257 million and ~~$246~~$179 million at December 31, ~~2020~~2021 and June 30, ~~2021,~~2022, respectively. The carrying value of hedged debt was ~~$45.5~~$37.5 billion and ~~$40.6~~$33.4 billion at December 31, ~~2020~~2021 and June 30, ~~2021,~~2022, respectively.

(c)At December 31, ~~2020~~2021 and June 30, ~~2021,~~2022, the fair value of debt includes ~~$10.4~~$14.1 billion and ~~$11.9~~$13.2 billion of short-term debt, respectively, carried at cost, which approximates fair value. All other debt is categorized within Level 2 of the fair value hierarchy.

~~NOTE 10. EMPLOYEE SEPARATION AND RESTRUCTURING ACTIONS~~

We record costs associated with voluntary separations at the time of employee acceptance, unless the acceptance requires explicit approval by Ford Credit. We record costs associated with involuntary separation programs when management has approved the plan for separation, the affected employees are identified, and it is unlikely that actions required to complete the separation plan will change significantly. Costs associated with benefits that are contingent on the employee continuing to provide service are accrued over the required service period.2022 Debt Extinguishment

~~South America~~Pursuant to our June 2022 cash tender offer, we repurchased approximately $3 billion principal amount of our public unsecured debt securities for an aggregate cost of approximately $3 billion (including transaction costs and accrued and unpaid interest payments for such tendered securities). As a result of these transactions, we recorded a pre-tax gain of $16.6 million (net of unamortized discounts, premiums, fees, and fair value adjustments) in . In June 2021, we announced that our subsidiaries in Brazil and Argentina had committed to a plan to cease originating receivables by the end of 2021 and would begin the process of selling or otherwise winding down operations in those markets. We recorded approximately $10 millionOther income/(loss), net in the ~~first half~~second quarter of ~~2021 related to employee separation costs in~~ ~~Operating expenses, the majority of which will be paid in 2021.~~2022.

~~Accumulated foreign currency translation losses associated with our investments in Brazil and Argentina included in~~

~~Accumulated other comprehensive income / (loss)~~

at June 30, 2021 were $435 million. We expect to reclassify these losses to income upon sale, transfer, or substantially complete liquidation of our investments, which may occur over multiple reporting periods.

2018

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. RESTRUCTURING ACTIONS

In June 2021, we announced that our subsidiaries in Brazil and Argentina would cease originating receivables and wind down operations. During the fourth quarter of 2021, we completed the sale of our wholesale and dealer receivables portfolio in Brazil and ceased originations of wholesale and dealer receivables in Argentina. In the second quarter and first half of 2022, we reclassified accumulated foreign currency translation losses of $36 million and $155 million, respectively, to Other income/(loss), net upon the liquidation of three of our investments in Brazil.

In December 2021, we received a capital contribution from a subsidiary of Ford in exchange for a minority interest share in one of our Argentina-based subsidiaries. As a result, we recorded $22 million in Shareholder’s interest attributable to noncontrolling interests on our consolidated balance sheets. During the first quarter of 2022, we reacquired Ford’s minority interest share and, in exchange, transferred assets associated with an Argentina-based subsidiary to Ford. In addition, during the first quarter of 2022, we sold our shares in a second Argentina-based subsidiary to Ford. The difference between the carrying value of the net assets transferred and sold to Ford and the consideration received from Ford was $61 million, reported as a reduction to Shareholder’s interest. As a result of the transfer and sale, Ford Credit reclassified $75 million of accumulated foreign currency translation losses to net income, included in Other income/(loss), net.

Accumulated foreign currency translation losses associated with our remaining investments in Brazil and Argentina included in Accumulated other comprehensive income/(loss) at June 30, 2022 were $223 million. We expect to reclassify these losses to income upon substantially complete liquidation of our investments, which may occur over multiple reporting periods. Although the timing for the completion of these actions is uncertain, we expect the majority of losses to be recognized in 2024 or later.

NOTE 11. OTHER ~~INCOME /~~ INCOME/(LOSS)

Other ~~income /~~ income/(loss) consists of various line items that are combined on the consolidated income statements due to their respective materiality compared with other individual income and expense items.

The amounts included in Other ~~income /~~ income/(loss), net for the periods ended June 30 were as follows (in millions):

Second Quarter First Half
2020 2021 2020 2021
Gains / (Losses) on derivatives $ 101 $ 24 $ 83 $ (241)
Currency revaluation gains / (losses) (108) (30) (169) 153
Interest and investment income 27 15 90 13
Other 17 4 21 13
Total other income / (loss), net $ 37 $ 13 $ 25 $ (62)


	Second Quarter				First Half
	2021		2022		2021		2022
Gains/(Losses) on derivatives	$	24	$	(383)	$	(241)	$	(506)
Currency revaluation gains/(losses)	(30)		417		153		569
Interest and investment income (a)	15		1		13		(4)
Gains/(Losses) on changes in investments in affiliates (b)	—		(36)		1		(231)
Other	4		22		12		24
Total other income/(loss), net	$	13	$	21	$	(62)	$	(148)

__________

(a)Includes a $20 million unrealized gain for an observable price event on a non-consolidated investment in the first quarter of 2022.

(b)Includes losses related to our restructuring in South America described in Note 10.

2119

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 12. SEGMENT INFORMATION

We conduct our financing operations directly and indirectly through our subsidiaries and affiliates. We offer substantially similar products and services throughout many different regions, subject to local legal restrictions and market conditions. In our consolidated financial statements, we have three reportable segments based on geographic regions: the United States and Canada, Europe, and All Other. Our All Other segment includes China, India, Mexico, Brazil, Argentina, and our joint venture in South Africa. Items excluded in assessing segment performance because they are managed at the corporate level, including market valuation adjustments to derivatives and exchange-rate fluctuations on foreign currency-denominated transactions, are reflected in Unallocated Other. Effective for the first quarter of 2022, we have eliminated the use of non-GAAP measures and now present receivables on a net basis.

Key financial information for our business segments for the periods ended or at June 30 was as follows (in millions):


		United States and Canada		Europe		All Other		Total Segments		Unallocated Other (a)		Total

Second Quarter 2020
Total revenue		$	2,448	$	244	$	101	$	2,793	$	0	$	2,793
Income before income taxes		445		65		17		527		16		543
Depreciation on vehicles subject to operating leases		990		0		0		990		0		990
Interest expense		726		82		55		863		(24)		839
Provision for credit losses		76		14		3		93		0		93
															United States and Canada		Europe		All Other		Total Segments		Unallocated Other (a)		Total
Second Quarter 2021	Second Quarter 2021													Second Quarter 2021
Total revenue	Total revenue	$	2,295	$	238	$	108	$	2,641	$	0	$	2,641	Total revenue	$	2,295	$	238	$	108	$	2,641	$	—	$	2,641
Income before income taxes	Income before income taxes	1,466		81		22		1,569		54		1,623		Income before income taxes	1,466		81		22		1,569		54		1,623
Depreciation on vehicles subject to operating leases	Depreciation on vehicles subject to operating leases	184		7		0		191		0		191		Depreciation on vehicles subject to operating leases	184		7		—		191		—		191
Interest expense	Interest expense	600		72		51		723		(43)		680		Interest expense	600		72		51		723		(43)		680
Provision for credit losses	Provision for credit losses	(165)		(6)		5		(166)		0		(166)		Provision for credit losses	(165)		(6)		5		(166)		—		(166)

First Half 2020
Second Quarter 2022														Second Quarter 2022
Total revenue	Total revenue	$	5,079	$	525	$	221	$	5,825	$	0	$	5,825	Total revenue	$	2,029	$	221	$	98	$	2,348	$	—	$	2,348
Income before income taxes	Income before income taxes	467		82		24		573		0		573		Income before income taxes	698		97		(17)		778		125		903
Depreciation on vehicles subject to operating leases	Depreciation on vehicles subject to operating leases	2,029		13		0		2,042		0		2,042		Depreciation on vehicles subject to operating leases	559		(10)		—		549		—		549
Interest expense	Interest expense	1,571		172		120		1,863		(40)		1,823		Interest expense	632		57		53		742		(85)		657
Provision for credit losses	Provision for credit losses	596		67		16		679		0		679		Provision for credit losses	(57)		(2)		3		(56)		—		(56)
Net finance receivables and net investment in operating leases (b)		111,775		23,659		3,949		139,383		(9,080)		130,303
Total assets (c)		124,352		26,091		4,810		155,253		0		155,253

First Half 2021	First Half 2021													First Half 2021
Total revenue	Total revenue	$	4,679	$	479	$	200	$	5,358	$	0	$	5,358	Total revenue	$	4,679	$	479	$	200	$	5,358	$	—	$	5,358
Income before income taxes	Income before income taxes	2,462		147		7		2,616		(31)		2,585		Income before income taxes	2,462		147		7		2,616		(31)		2,585
Depreciation on vehicles subject to operating leases	Depreciation on vehicles subject to operating leases	746		13		0		759		0		759		Depreciation on vehicles subject to operating leases	746		13		—		759		—		759
Interest expense	Interest expense	1,238		152		107		1,497		(13)		1,484		Interest expense	1,238		152		107		1,497		(13)		1,484
Provision for credit losses	Provision for credit losses	(217)		(7)		18		(206)		0		(206)		Provision for credit losses	(217)		(7)		18		(206)		—		(206)
Net finance receivables and net investment in operating leases (b)		100,066		19,920		4,863		124,849		(7,089)		117,760
Net finance receivables and net investment in operating leases (a) (b)														Net finance receivables and net investment in operating leases (a) (b)	93,783		19,305		4,672		117,760		—		117,760
Total assets	Total assets	111,149		22,226		5,436		138,811		0		138,811		Total assets	111,149		22,226		5,436		138,811		—		138,811

First Half 2022														First Half 2022
Total revenue														Total revenue	$	4,058	$	416	$	200	$	4,674	$	—	$	4,674
Income before income taxes														Income before income taxes	1,481		166		(191)		1,456		201		1,657
Depreciation on vehicles subject to operating leases														Depreciation on vehicles subject to operating leases	1,085		(21)		—		1,064		—		1,064
Interest expense														Interest expense	1,174		112		111		1,397		(129)		1,268
Provision for credit losses														Provision for credit losses	(124)		(5)		9		(120)		—		(120)
Net finance receivables and net investment in operating leases (a) (b)														Net finance receivables and net investment in operating leases (a) (b)	94,291		16,212		5,124		115,627		—		115,627
Total assets														Total assets	103,289		19,158		5,803		128,250		—		128,250

__________

(a)~~Finance receivables, net~~ ~~and~~ ~~Net investment in operating leases~~ ~~includes unearned interest supplements and residual support, allowance for credit losses, and other (primarily accumulated supplemental depreciation).~~

~~(b)~~Excludes held-for-sale finance receivables.

~~(c)~~(b)~~Amounts~~Prior periods have been ~~updated as a result~~restated to display net receivables in lieu of ~~our adoption~~the non-GAAP measure of ~~ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 for additional information.~~managed receivables.

2220

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13. COMMITMENTS AND CONTINGENCIES

Commitments and contingencies primarily consist of guarantees and indemnifications as well as litigation and claims.

Guarantees and Indemnifications

Guarantees and indemnifications are recorded at fair value at their inception. For financial guarantees, subsequent to initial recognition, the guarantee liability is adjusted at each reporting period to reflect the current estimate of expected payments resulting from possible default events over the remaining life of the guarantee. The probability of default is applied to the expected exposure at the time of default less recoveries to determine the expected payments. Factors to consider when estimating the probability of default include the obligor’s financial position, forecasted economic environment, historical loss rates, and other communications. For non-financial guarantees, we regularly review our performance risk under these arrangements, and in the event it becomes probable we will be required to perform under a guarantee or indemnity, the amount of probable payment is recorded.

The maximum potential payments under these guarantees and limited indemnities totaled ~~$153~~$102 million and ~~$114~~$92 million at December 31, ~~2020~~2021 and June 30, ~~2021,~~2022, respectively. Of these values, ~~$62~~$19 million and ~~$27~~$17 million at December 31, ~~2020~~2021 and June 30, ~~2021,~~2022, respectively, were counter-guaranteed by Ford to us. There were no recorded liabilities related to guarantees and limited indemnities at December 31, ~~2020~~2021 or June 30, ~~2021.~~2022.

In some cases, we have guaranteed debt and other financial obligations of outside third parties and unconsolidated affiliates, including Ford. Expiration dates vary, and guarantees will terminate on payment ~~and /~~ and/or cancellation of the underlying obligation. A payment by us would be triggered by the failure of the third party to fulfill its obligation covered by the guarantee. In some circumstances, we are entitled to recover from a third party amounts paid by us under the guarantee. However, our ability to enforce these rights is sometimes stayed until the guaranteed party is paid in full and may be limited in the event of insolvency of the third party or other circumstances.

In the ordinary course of business, we execute contracts involving indemnifications standard in the industry and indemnifications specific to a transaction. These indemnifications might include and are not limited to claims relating to any of the following: environmental, tax, and shareholder matters; intellectual property rights; governmental regulations and employment-related matters; dealer and other commercial contractual relationships; and financial matters, such as securitizations. Performance under these indemnities generally would be triggered by a breach of the contract brought by a counterparty or a third-party claim. While some of these indemnifications are limited in nature, many of them do not limit potential payment. Therefore, we are unable to estimate a maximum amount of future payments that could result from claims made under these unlimited indemnities.

~~Item 1. Financial Statements (Continued)~~

~~FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES~~

~~NOTES TO THE FINANCIAL STATEMENTS~~

~~NOTE 13. COMMITMENTS AND CONTINGENCIES~~ ~~(Continued)~~

Litigation and Claims

Various legal actions, proceedings, and claims (generally, “matters”) are pending or may be instituted or asserted against us. These include, but are not limited to, matters arising out of governmental regulations; tax matters; alleged illegal acts resulting in fines or penalties; financial services; employment-related matters; dealer and other contractual relationships; personal injury matters; investor matters; and financial reporting matters. Certain of the pending legal actions are, or purport to be, class actions. Some of the matters involve or may involve claims for compensatory, punitive, or antitrust or other treble damages in very large amounts, sanctions, assessments, or other relief, which, if granted, would require very large expenditures.

The extent of our financial exposure to these matters is difficult to estimate. Many matters do not specify a dollar amount for damages, and many others specify only a jurisdictional minimum. To the extent an amount is asserted, our historical experience suggests that in most instances the amount asserted is not a reliable indicator of the ultimate outcome.

We accrue for matters when losses are deemed probable and reasonably estimable. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood that we will prevail, and the severity of any potential loss. We reevaluate and update our accruals as matters progress over time.

Item 1. Financial Statements (Continued)

FORD MOTOR CREDIT COMPANY LLC AND SUBSIDIARIES

NOTES TO THE FINANCIAL STATEMENTS

NOTE 13. COMMITMENTS AND CONTINGENCIES (Continued)

For nearly all matters where our historical experience with similar matters is of limited value (i.e., “non-pattern matters”), we evaluate the matters primarily based on the individual facts and circumstances. For non-pattern matters, we evaluate whether there is a reasonable possibility of a material loss in excess of any accrual that can be estimated. It is reasonably possible that some of the matters for which accruals have not been established could be decided unfavorably and could require us to pay damages or make other expenditures. ~~On January 9, 2019, FCE received~~We do not reasonably expect, based on our analysis, that such matters would have a ~~decision from the Italian Competition Authority (“ICA”), which included~~material effect on future financial statements for a particular year, although such an assessment of a fine against FCE in the amount of €42 million (equivalent to $49 million at June 30, 2021). On March 8, 2019, FCE appealed the decision and the fine to the Italian administrative court, and on November 24, 2020, the Italian administrative court ruled in favor of FCE. On December 23, 2020, the ICA filed an appeal of the Italian administrative court’s decision to the Italian Council of State. While we have determined that an adverse outcome is ~~not probable, the reasonably possible loss could be up to the fine amount.~~possible.

As noted, the litigation process is subject to many uncertainties, and the outcome of individual matters is not predictable with assurance. Our assessments are based on our knowledge and experience, but the ultimate outcome of any matter could require payment substantially in excess of the amount that we have accrued ~~and /~~ and/or disclosed.

2422

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Recent Developments

~~Semiconductor Chip Shortage~~COVID-19 and Supplier Disruptions

The ~~automotive industry~~impact of COVID-19, including changes in consumer behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy. Recent outbreaks in certain regions continue to cause intermittent COVID-19-related disruptions in Ford’s supply chain and local manufacturing operations. Ford also continues to face ~~a significant shortage of semiconductors, which has presented challenges~~supplier disruptions due to the semiconductor shortage. Further, actions taken by Russia in Ukraine have impacted and ~~production disruptions globally, including at~~could further impact Ford’s ~~assembly plants. This shortage has led to~~suppliers, particularly its lower ~~dealer inventories of both new and used vehicles, resulting~~tier suppliers, as well as Ford’s operations in lower non-consumer receivables and higher residual values, as discussed in more detail in the Financial Condition and Residual Risk sections in Item 2 of this Report. Based on the overall recovery rate we are seeing for the industry, we continue to believe the automotive semiconductor shortage may not be fully resolved until 2022.Europe. For additional information regarding the ~~semiconductor shortage,~~impact of supplier disruptions, see the ~~“Recent Developments”~~“Key Trends and Economic Factors Affecting Ford and the Automotive Industry” section in Item 7 of Ford Motor Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as supplemented by Item 2 of Ford Motor Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2021.~~

~~Adoption of New Accounting Standards~~2022.

~~Effective January 1, 2021, we adopted~~Inflation ~~Accounting Standards Update ("ASU") 2019-12~~

~~, which allows~~

We are seeing a near-term impact on our business due to inflationary pressure, and inflation has continued to accelerate in the wake of Russia’s invasion of Ukraine. Inflation in the United States rose by 9.1% on an annual basis in June, and U.K. inflation rose 9.4% over the same period, both representing 40-year highs. Surging energy prices drove the inflation rate for the ~~simplification~~euro zone 8.6% higher on an annual basis in June. Interest rates, notably mature market government bond yields, remain low by historical standards but are rising as central banks around the world tighten monetary policy in response to inflation pressures, while government deficits and debt remain at high levels in many major markets.The eventual implications of ~~accounting~~higher government deficits and debt, tighter monetary policy, and potentially higher long-term interest rates may drive a higher cost of capital during our plan period.

Reporting Changes

Effective with the first quarter of 2022, we no longer review our business performance on a managed basis. Accordingly, we will no longer include managed receivables or managed leverage in our periodic reports.

Industrial Bank Application

On July 22, 2022, we filed an application with the Federal Deposit Insurance Corporation (“FDIC”) and Utah Department of Financial Institutions for ~~income taxes. As a result, ROE, net income, distributions, leverage,~~an FDIC-insured Utah state chartered industrial bank, Ford Credit Bank (the “Bank”). The Bank’s business plan proposes offering automotive financing products with an emphasis on electric vehicles and ~~equity have been updated in the prior comparator periods to reflect the update. This amendment~~non-vehicle assets including charging stations. The Bank’s deposit products will ~~reduce our U.S. tax allocation~~include competitive, consumer-centered savings accounts and certificates of deposit. The Bank will operate as a ~~result we expect our net income and ROE to increase allowing us to support additional distributions to Ford. For additional information on the tax accounting change, see Note 2~~wholly owned subsidiary of ~~our Notes to the Financial Statements.~~Ford Credit.

2523

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Definitions and Information Regarding Causal Factors

In general, we measure year-over-year changes in EBT using the causal factors listed below:

•Volume and Mix – Volume and Mix are primarily reflected within Net financing margin on the consolidated income statements.

◦Volume primarily measures changes in net financing margin driven by changes in average ~~managed~~net receivables excluding the allowance for credit losses at prior period financing margin yield (defined below in financing margin) at prior period exchange rates. Volume changes are primarily driven by the volume of new and used vehicles sold and leased, the extent to which we purchase retail financing and operating lease contracts, the extent to which we provide wholesale financing, the sales price of the vehicles financed, the level of dealer inventories, Ford-sponsored special financing programs available exclusively through us, and the availability of cost-effective funding.

◦Mix primarily measures changes in net financing margin driven by period-over-period changes in the composition of our average ~~managed~~net receivables excluding the allowance for credit losses by product within each region.

•Financing Margin – Financing Margin is reflected within Net financing margin on the consolidated income statements.

◦Financing margin variance is the period-to-period change in financing margin yield multiplied by the present period average ~~managed~~net receivables excluding the allowance for credit losses at prior period exchange rates. This calculation is performed at the product and country level and then aggregated. Financing margin yield equals revenue, less interest expense and scheduled depreciation for the period, divided by average ~~managed~~net receivables excluding the allowance for credit losses for the same period.

◦Financing margin changes are driven by changes in revenue and interest expense. Changes in revenue are primarily driven by the level of market interest rates, cost assumptions in pricing, mix of business, and competitive environment. Changes in interest expense are primarily driven by the level of market interest rates, borrowing spreads, and asset-liability management.

•Credit Loss – Credit Loss is reflected within Provision ~~for~~for/(benefit from) credit losses on the consolidated income statements.

◦Credit loss is the change in the provision for credit losses at prior period exchange rates. For analysis purposes, management splits the provision for credit losses into net charge-offs and the change in the allowance for credit losses.

◦Net charge-off changes are primarily driven by the number of repossessions, severity per repossession, and recoveries. Changes in the allowance for credit losses are primarily driven by changes in historical trends in credit losses and recoveries, changes in the composition and size of our present portfolio, changes in trends in historical used vehicle values, and changes in forward looking macroeconomic conditions. For additional information, refer to the “Critical Accounting Estimates - Allowance for Credit Losses” section of Item 7 of Part II of our ~~2020~~2021 Form 10-K Report.

•Lease Residual – Lease Residual is reflected within Depreciation on vehicles subject to operating leases on the consolidated income statements.

◦Lease residual measures changes to residual performance at prior period exchange rates. For analysis purposes, management splits residual performance primarily into residual gains and losses, and the change in accumulated supplemental depreciation.

◦Residual gain and loss changes are primarily driven by the number of vehicles returned to us and sold, and the difference between the auction value and the depreciated value (which includes both base and accumulated supplemental depreciation) of the vehicles sold. Changes in accumulated supplemental depreciation are primarily driven by changes in our estimate of the expected auction value at the end of the lease term and changes in our estimate of the number of vehicles that will be returned to us and sold. Depreciation on vehicles subject to operating leases reflects early termination losses on operating leases due to customer default events. For additional information, refer to the “Critical Accounting Estimates – Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our ~~2020~~2021 Form 10-K Report.

•Exchange – Reflects changes in EBT driven by the effects of converting functional currency income to U.S. dollars.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

•Other – Primarily includes Operating expenses, Other revenue, Insurance expenses, and Other ~~income /~~ income/(Loss), net on the consolidated income statements at prior period exchange rates.

◦Changes in operating expenses are primarily driven by salaried personnel costs, facilities costs, and costs associated with the origination and servicing of customer contracts.

◦In general, other ~~income /~~ income/(loss) changes are primarily driven by changes in earnings related to market valuation adjustments to derivatives (primarily related to movements in interest rates), which are included in unallocated risk management, and other miscellaneous items.

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)~~

~~In addition, the following definitions and calculations apply to the tables contained in Item 2 of this report:~~

• Cash (as shown in the Funding and Liquidity ~~and Leverage sections)~~section) – Cash and cash equivalents and Marketable securities reported on Ford Credit’s balance sheets, excluding amounts related to insurance activities.

• Debt (as shown in the Key Metrics and Leverage tables) – Debt on Ford Credit’s balance sheets. Includes debt issued in securitizations and payable only out of collections on the underlying securitized assets and related enhancements. Ford Credit holds the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions.

• Earnings Before Taxes (“EBT”) – Reflects Income before income taxes as reported on our consolidated income statements.

• Loss-to-Receivables (“LTR”) Ratio (as shown in Credit Loss tables) – LTR ratio is calculated using net charge-offs divided by average finance receivables, excluding unearned interest supplements and the allowance for credit losses.

• Reserve as a % of EOP Receivables Ratio (as shown in the Credit Loss tables) – The reserve as a percentage of EOP receivables ratio is calculated as the credit loss reserve amount, divided by end of period finance receivables, excluding unearned interest supplements and the allowance for credit losses.

• Return on Equity (“ROE”) (as shown in the Key Metrics table) – Reflects return on equity calculated by annualizing net income for the period and dividing by monthly average equity for the period.

•Securitization and Restricted Cash (as shown in the Liquidity table) – Securitization cash is held for the benefit of the securitization investors (for example, a reserve fund). Restricted cash is primarily includes cash held to meet certain local governmental and regulatory reserve requirements and cash held under the terms of certain contractual agreements.

• Securitizations (as shown in the Public Term Funding Plan table) – Public securitization transactions, Rule 144A offerings sponsored by Ford Credit, and widely distributed offerings by Ford Credit Canada.

• Term Asset-Backed Securities (as shown in the Funding Structure table) – Obligations issued in securitization transactions that are payable only out of collections on the underlying securitized assets and related enhancements.

•Total Net Receivables (as shown in the Key Metrics and Financial Condition tables) – Includes finance receivables (retail financing and wholesale) sold for legal purposes and net investment in operating leases included in securitization transactions that do not satisfy the requirements for accounting sale treatment. These receivables and operating leases are reported on Ford Credit’s balance sheets and are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations of Ford Credit or the claims of Ford Credit’s other creditors.

• Unallocated Other (as shown in the Segment Results table) – Items excluded in assessing segment performance because they are managed at the corporate level, including market valuation adjustments to derivatives and exchange-rate fluctuations on foreign currency-denominated transactions.

2725

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Results of Operations

Key Metrics


		Second Quarter									First Half									Second Quarter					First Half
GAAP Financial Measures	GAAP Financial Measures	2020			2021			H / (L)			2020			2021			H / (L)				GAAP Financial Measures	2021			2022			H / (L)			2021			2022			H / (L)
Total Net Receivables ($B)	Total Net Receivables ($B)	$	130.3		$	117.7		(10)		%	$	130.3		$	117.7		(10)		%		Total Net Receivables ($B)	$	117.7		$	115.6		(2)		%	$	117.7		$	115.6		(2)		%
Loss-to-Receivables (bps) (a)	Loss-to-Receivables (bps) (a)	15			(7)			(22)			37			7			(30)				Loss-to-Receivables (bps) (a)	(7)			5			12			7			7			—
Auction values (b)	Auction values (b)	$	20,110		$	28,030		39		%	$	19,810		$	24,525		24		%		Auction values (b)	$	29,040		$	31,445		8		%	$	25,580		$	30,780		20		%
EBT ($M)	EBT ($M)	$	543		$	1,623		$	1,080		$	573		$	2,585		$	2,012			EBT ($M)	$	1,623		$	903		$	(720)		$	2,585		$	1,657		$	(928)
ROE (%) ~~(c)~~	ROE (%) ~~(c)~~	12.3		%	46.9		%	34.6 ppts			6.0		%	33.7		%	27.7 ppts				ROE (%) ~~(c)~~	46.9		%	26.4		%	(20.5) ppts			33.7		%	24.0		%	(9.7) ppts

Other Balance Sheet Metrics	Other Balance Sheet Metrics																				Other Balance Sheet Metrics
Debt ($B)	Debt ($B)										$	135.3		$	121.0		(11)		%		Debt ($B)										$	121.0		$	109.5		(10)		%
Net liquidity ($B)	Net liquidity ($B)										$	32.3		$	33.0		(2)		%		Net liquidity ($B)										$	33.0		$	25.0		(24)		%
Financial statement leverage (to 1) ~~(c)~~	Financial statement leverage (to 1) ~~(c)~~										8.9			9.3			0.4				Financial statement leverage (to 1) ~~(c)~~										9.3			9.1			(0.2)

__________

(a)United States retail financing only.

(b)United States 36-month off-lease second quarter auction values at Q2 ~~2021~~2022 mix and YTD amounts at ~~2021~~2022 YTD mix.

~~(c)~~Prior period amounts have been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 of our Notes to the Financial Statements for additional information.

Non-GAAP Financial Measures June 30,
2020 June 30,
2021 H / (L)
Managed Receivables ($B) (a) $ 139.4 $ 124.8 (10) %
Managed Leverage (to 1) (b) (c) 7.7 8.0 0.3

~~__________~~

~~(a)See “Financial Condition” section for reconciliation to GAAP.~~

~~(b)See “Leverage” section for reconciliation to GAAP.~~

~~(c)~~Prior period amount has been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 of our Notes to the Financial Statements for additional information.

Second Quarter ~~2021~~2022 Compared with Second Quarter ~~2020~~2021

The following table shows the factors that contributed to the second quarter ~~2021~~2022 EBT (in millions):

Change in EBT by Causal Factor

Second quarter ~~2020~~2021 EBT

~~543~~1,623

Volume / Mix

~~(30)~~(77)

Financing margin

~~(22)~~(113)

Credit loss

~~256~~ (109)

Lease residual

~~784~~ (428)

Exchange

21 (17)

Other

7124

Second quarter ~~2021~~2022 EBT

~~1,623~~903

Our second quarter ~~2021~~2022 EBT was ~~$1,623~~$903 million, ~~$1,080~~$720 million ~~higher~~lower than a year ago, primarily reflecting ~~favorable operating~~lower lease residual ~~performance as well as the release of retail COVID-19~~gains driven by lower lease return volume, unfavorable changes in net financing margin, lower volume due to supply constraints on new vehicle production, and lower credit loss ~~reserves.~~reserve releases, partially offset by positive market valuation adjustments to derivatives (which is included in Other). ROE was ~~46.9%~~26.4%, ~~34.6~~20.5 percentage points ~~higher~~lower than a year ago ~~as a result of higher EBT.~~driven by lower net income. Total net receivables were ~~$12.6~~$2.1 billion lower than a year ago, a ~~10% decline.~~2% decline, primarily reflecting lower volume due to supply constraints and lower Ford Credit share, and exchange, partially offset by an increase in wholesale receivables. The ~~loss-to-receivables~~LTR ratio remained at a low level in the second quarter of 2022, at ~~negative 7~~five basis points, 2212 basis points ~~lower~~higher than a year ago. ~~The negative LTR reflects historically low losses and strong net recoveries during the second quarter.~~ Second quarter ~~2021 United States~~2022 auction values were ~~39%~~8% higher than a year ago.

Our balance sheet is strong and inherently liquid, reflecting cumulative debt maturities having a longer tenor than asset maturities. This means that we generate liquidity as our balance sheet size declines because of lower Ford volume. ~~Managed receivables of $124.8 billion at quarter end were $14.6 billion lower year-over-year.~~ At the end of the second quarter, we had ~~$33.0~~$25.0 billion in net liquidity.

2826

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Segment Results

Results of operations by segment and Unallocated Other for the periods ended June 30 are shown below (in millions):

Second Quarter First Half
2020 2021 H / (L) 2020 2021 H / (L)
Results
United States and Canada segment $ 445 $ 1,466 $ 1,021 $ 467 $ 2,462 $ 1,995
Europe segment 65 81 16 82 147 65
All Other segment 17 22 5 24 7 (17)
   Total segments earnings before taxes $ 527 $ 1,569 $ 1,042 $ 573 $ 2,616 $ 2,043
Unallocated other 16 54 38 — (31) (31)
   Earnings before taxes $ 543 $ 1,623 $ 1,080 $ 573 $ 2,585 $ 2,012
Taxes (a) (67) 28 95 (103) (89) 14
     Net Income (a) $ 476 $ 1,651 $ 1,175 $ 470 $ 2,496 $ 2,026

~~(a)~~Prior period amounts have been updated as a result of our adoption of ASU 2019-12, Simplifying the Accounting for Income Taxes. See Note 2 of our Notes to the Financial Statements for additional information.


	Second Quarter						First Half
	2021		2022		H / (L)		2021		2022		H / (L)
Results
United States and Canada segment	$	1,466	$	698	$	(768)	$	2,462	$	1,481	$	(981)
Europe segment	81		97		16		147		166		19
All Other segment	22		(17)		(39)		7		(191)		(198)
Total segments earnings before taxes	$	1,569	$	778	$	(791)	$	2,616	$	1,456	$	(1,160)
Unallocated other	54		125		71		(31)		201		232
Earnings before taxes	$	1,623	$	903	$	(720)	$	2,585	$	1,657	$	(928)
Provision for/(benefit from) income taxes	(28)		99		127		89		184		95
Net Income	$	1,651	$	804	$	(847)	$	2,496	$	1,473	$	(1,023)

For additional information, see Note 12 of our Notes to the Financial Statements.

United States and Canada Segment

The United States and Canada segment second quarter ~~2021~~2022 EBT of ~~$1,466~~$698 million was ~~$1,021~~$768 million ~~higher~~lower than second quarter ~~2020,~~2021, explained primarily by ~~favorable operating~~lower lease residual ~~performance and a reduction~~gains driven by lower lease return volume, unfavorable changes in ~~the~~net financing margin, lower credit loss reserve ~~in the second quarter of 2021.~~releases, and lower volume driven by supply constraints and lower Ford Credit share. United States and Canada ~~segment~~Segment first half 2022 EBT of $1,481 million was $981 million lower than first half 2021, ~~EBT of $2,462 million was $1,995 million higher than first half 2020,~~ explained primarily by ~~favorable operating~~lower lease residual ~~performance, the non-recurrence of the first quarter 2020 increase to the~~gains driven by lower lease return volume, unfavorable changes in net financing margin, lower credit loss reserve ~~due to deterioration in macroeconomic conditions related to COVID-19,~~releases, and ~~reductions in the credit loss reserve in the first half of 2021.~~lower volume driven by supply constraints and lower Ford Credit share.

Europe Segment

The Europe segment second quarter ~~2021~~2022 EBT of ~~$81~~$97 million was $16 million higher than second quarter ~~2020,~~2021, explained primarily by ~~lower credit losses and reserves and non-recurrence of 2020 restructuring costs,~~favorable used vehicle values, offset partially ~~offset~~ by lower volume reflecting ~~the impact of the global semiconductor shortage~~supply constraints on new vehicle ~~production and dealer inventory.~~production. The Europe segment first half ~~2021~~2022 EBT of ~~$147~~$166 million was ~~$65~~$19 million higher compared with first half ~~2020,~~2021, explained primarily by ~~the non-recurrence of a credit loss reserve increase due to COVID-19 and 2020 restructuring costs,~~favorable used vehicle values, offset partially ~~offset~~ by lower volume driven by ~~the impact of COVID-19 and global semiconductor shortage on receivables.~~supply constraints.

All Other Segment

The All Other segment second quarter ~~2021~~2022 EBT loss of ~~$22~~$17 million was $5$39 million ~~higher~~lower than second quarter ~~2020.~~2021, explained primarily by our exit from Brazil, which resulted in losses of $36 million being recognized in the second quarter of 2022. The All Other segment first half 2022 EBT loss of $7$191 million was ~~$17~~$198 million lower than first half ~~2020,~~2021, explained primarily by our exit from Brazil and Argentina, which resulted in losses of $230 million being recognized in the first half of 2022. For additional information on our restructuring ~~costs.~~in South America, refer to Note 10 of our Notes to the Financial Statements.

Unallocated Other

Unallocated Other was a ~~$54~~$125 million gain for second quarter ~~2021,~~2022, a ~~$38~~$71 million ~~higher gain than~~improvement from second quarter ~~2020,~~2021, reflecting ~~favorable performance in~~positive market valuation adjustments toon derivatives. Unallocated Other first half EBT of $201 million was ~~a $31~~$232 million ~~loss and $31 million lower compared to the~~higher than first half ~~of 2020, explained by unfavorable performance in~~2021, reflecting positive market valuation adjustments ~~to derivatives due to rising interest rates.~~on derivatives.

2927

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Financing Shares and Contract Placement Volume

Our focus is on supporting Ford and Lincoln dealers and customers. This includes going to market with Ford and our dealers to support vehicle sales with financing products and marketing programs. Ford’s marketing programs may encourage or require Ford Credit financing and influence the financing choices customers make. As a result, our financing share, volume, and contract characteristics vary from period to period as Ford’s marketing programs change.

The following table shows our retail financing and operating lease share of new Ford and Lincoln brand sales, wholesale financing share of new Ford and Lincoln brand vehicles acquired by dealers (in percent), and contract placement volume for new and used vehicles (in thousands) in several key markets:


		Second Quarter				First Half				Second Quarter				First Half
		2020		2021		2020		2021				2021		2022		2021		2022
Share of Ford and Lincoln Sales (a)	Share of Ford and Lincoln Sales (a)										Share of Ford and Lincoln Sales (a)
United States	United States	77	%	47	%	67	%	47	%		United States	47	%	37	%	47	%	40	%
Canada	Canada	63		74		63		68			Canada	74		68		68		65
United Kingdom	United Kingdom	44		37		44		36			United Kingdom	37		35		36		35
Germany	Germany	34		41		39		39			Germany	41		38		39		35
China	China	37		45		36		43			China	45		45		43		44

Wholesale Share	Wholesale Share										Wholesale Share
United States	United States	73	%	71	%	74	%	72	%		United States	71	%	73	%	72	%	73	%
Canada	Canada	42		9		45		11			Canada	9		7		11		8
United Kingdom	United Kingdom	100		100		100		100			United Kingdom	100		100		100		100
Germany	Germany	93		91		93		91			Germany	91		87		91		90
China	China	61		68		58		67			China	68		70		67		67

Contract Placement Volume - New and Used (000)	Contract Placement Volume - New and Used (000)										Contract Placement Volume - New and Used (000)
United States	United States	297		187		502		383			United States	187		150		383		312
Canada	Canada	25		37		48		62			Canada	37		38		62		58
United Kingdom	United Kingdom	13		25		43		50			United Kingdom	25		24		50		46
Germany	Germany	19		20		48		38			Germany	20		15		38		29
China	China	28		32		44		64			China	32		30		64		60

__________

(a)United States and Canada exclude Fleet sales, other markets include Fleet sales.

~~United States~~In the second quarter of 2022, contract placement volumes in ~~the second quarter~~all of ~~2021~~our key markets other than Canada were lower than a year ago, reflecting decreased share. Canada contract placement volumes in the second quarter of 2021 were higher than a year ago, reflecting higher Ford sales and higher share. United Kingdom contract placement volume in the second quarter of 2021 was higher than a year ago, reflecting higher Ford sales. China contract placement volume in the second quarter of 2021 was higher than a year ago, primarily reflecting ~~higher~~lower Ford Credit financing share.

3028

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Financial Condition

Our receivables, including finance receivables and operating leases, were as follows (in billions):


		June 30, 2020		December 31, 2020		June 30, 2021			June 30, 2021		December 31, 2021		June 30, 2022
Net Receivables	Net Receivables							Net Receivables
United States and Canada Segment	United States and Canada Segment							United States and Canada Segment
Consumer financing	Consumer financing	$	57.0	$	58.4	$	56.4	Consumer financing	$	56.4	$	55.6	$	53.5
Non-Consumer financing	Non-Consumer financing	20.3		19.5		11.4		Non-Consumer financing	11.4		13.7		17.5
Net investment in operating leases	Net investment in operating leases	26.2		26.4		25.9		Net investment in operating leases	25.9		25.0		23.3
Total United States and Canada Segment	Total United States and Canada Segment	$	103.5	$	104.3	$	93.7	Total United States and Canada Segment	$	93.7	$	94.3	$	94.3

Europe Segment	Europe Segment							Europe Segment
Consumer financing	Consumer financing	$	13.9	$	15.1	$	14.2	Consumer financing	$	14.2	$	12.7	$	11.1
Non-Consumer financing	Non-Consumer financing	8.9		7.4		4.8		Non-Consumer financing	4.8		4.7		5.0
Net investment in operating leases	Net investment in operating leases	0.2		0.3		0.3		Net investment in operating leases	0.3		0.2		0.1
Total Europe Segment	Total Europe Segment	$	23.0	$	22.8	$	19.3	Total Europe Segment	$	19.3	$	17.6	$	16.2

All Other Segment	All Other Segment							All Other Segment
Consumer financing	Consumer financing	$	2.8	$	3.4	$	3.7	Consumer financing	$	3.7	$	4.3	$	4.0
Non-Consumer financing	Non-Consumer financing	1.0		1.2		1.0		Non-Consumer financing	1.0		1.3		1.1
Net investment in operating leases	Net investment in operating leases	—		—		—		Net investment in operating leases	—		—		—
Total Other Segment	Total Other Segment	$	3.8	$	4.6	$	4.7	Total Other Segment	$	4.7	$	5.6	$	5.1

Total net receivables	Total net receivables	$	130.3	$	131.7	$	117.7	Total net receivables	$	117.7	$	117.5	$	115.6

Managed Receivables
Total net receivables (GAAP)		$	130.3	$	131.7	$	117.7
Unearned interest supplements and residual support		6.5		6.5		5.4
Allowance for credit losses		1.3		1.3		1.1
Other, primarily accumulated supplemental depreciation		1.3		1.0		0.6
Total managed receivables (Non-GAAP)		$	139.4	$	140.5	$	124.8

At June 30, ~~2020,~~2021, December 31, ~~2020,~~2021, and June 30, ~~2021,~~2022, total net receivables includes consumer receivables before allowance for credit losses of ~~$42.1~~$38.7 billion, ~~$43.7~~$39.0 billion, and ~~$38.7~~$36.5 billion, respectively, and non-consumer receivables before allowance for credit losses of ~~$17.8~~$12.0 billion, ~~$16.4~~$12.0 billion, and ~~$12.0~~$13.6 billion, respectively, that have been sold for legal purposes in securitization transactions but continue to be reported in our consolidated financial statements. In addition, at June 30, ~~2020,~~2021, December 31, ~~2020,~~2021, and June 30, ~~2021,~~2022, total net receivables includes net investment in operating leases of ~~$14.5~~$8.4 billion, ~~$12.8~~$7.5 billion, and ~~$8.4~~$10.5 billion, respectively, that have been included in securitization transactions but continue to be reported in our consolidated financial statements. The receivables and net investment in operating leases are available only for payment of the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions; they are not available to pay the other obligations or the claims of our other creditors. We hold the right to receive the excess cash flows not needed to pay the debt issued by, and other obligations of, the securitization entities that are parties to those securitization transactions. For additional information on our securitization transactions, refer to the “Securitization Transactions” and “On-Balance Sheet Arrangements” sections of Item 7 of Part II of our ~~2020~~2021 Form 10-K Report and Note 6 of our Notes to the Financial Statements ~~for the period ended June 30, 2021.~~herein.

Total net receivables at June 30, ~~2021~~2022 were ~~$12.6~~$2.1 billion lower compared with June 30, ~~2020~~2021 and ~~$14.0~~$1.9 billion lower compared with December 31, ~~2020,~~2021, primarily reflecting lower ~~wholesale receivables as a result of lower dealer inventories~~volume due to ~~the semiconductor shortage.~~supply constraints and lower Ford Credit share, and exchange, partially offset by an increase in wholesale receivables.

Our operating lease portfolio was ~~22%~~20% of total net receivables at June 30, ~~2021.~~2022. Leasing is an important product, and our leasing strategy balances sales, share, residuals, and long-term profitability. Operating leases in the United States and Canada represent over 99% of our total operating lease portfolio.

3129

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Risk

Credit risk is the possibility of loss from a customer’s or dealer’s failure to make payments according to contract terms. Credit losses are a normal part of a lending business, and credit risk has a significant impact on our business. We manage the credit risk of our consumer (retail financing) and non-consumer (dealer financing) receivables to balance our level of risk and return using our consistent underwriting standards, effective proprietary scoring system (discussed below), and world-class servicing. The allowance for credit losses (also referred to as the credit loss reserve) represents our estimate of the expected credit losses inherent in our finance receivables for the lifetime of those receivables as of the balance sheet date. The allowance for credit losses is estimated using a combination of models and management judgment and is based on such factors as historical loss performance, portfolio quality, receivable levels, and forward-looking macroeconomic scenarios. The adequacy of our allowance for credit losses is assessed quarterly and the assumptions and models used in establishing the allowance are evaluated regularly.

Most of our charge-offs are related to retail financing. Net charge-offs are affected by the number of vehicle repossessions, the unpaid balance outstanding at the time of repossession, the auction price of repossessed vehicles, and other amounts owed. We also incur credit losses on our dealer financing, but default rates for these receivables historically have been substantially lower than those for retail financing.

In purchasing retail financing contracts, we use a proprietary scoring system that measures credit quality using information infrom sources including the credit application, proposed contract terms, credit bureau data, and other information. After a proprietary risk score is generated, we decide whether to purchase a contract using a decision process based on a judgmental evaluation of the applicant, the credit application, the proposed contract terms, credit bureau information (e.g., FICO score), proprietary risk score, and other information. Our evaluation emphasizes the applicant’s ability to pay and the applicant’s creditworthiness ~~focusing~~with a focus on payment, affordability, applicant credit history, and stability as key considerations. While FICO is a part of our scoring system, our models enable us to more effectively determine the probability that a customer will pay than using credit scores alone. When we originate business, our models project expected losses and we price accordingly. We ensure the business fits our risk appetite.

For additional information on our allowance for credit losses and the quality of our receivables, see Note 4 of our Notes to the Financial Statements.

United States Origination Metrics

The following table shows United States retail financing and operating lease average placement FICO and higher risk portfolio mix metrics. Also shown are extended term mix and United States retail financing average placement terms.


		Second Quarter				First Half				Second Quarter				First Half
		2020		2021		2020		2021				2021		2022		2021		2022
Origination Metrics	Origination Metrics										Origination Metrics
Average placement FICO	Average placement FICO	743		747		741		748			Average placement FICO	747		748		748		749
Higher risk portfolio mix	Higher risk portfolio mix	6	%	5	%	6	%	6	%		Higher risk portfolio mix	5	%	5	%	6	%	5	%
Greater than or equal to 84 months placement mix	Greater than or equal to 84 months placement mix	15	%	6	%	12	%	4	%		Greater than or equal to 84 months placement mix	6	%	6	%	4	%	5	%
Average placement term (months)	Average placement term (months)	71		63		70		64			Average placement term (months)	63		62		64		62

Our second quarter ~~2021~~2022 average placement FICO score increased compared with the same period a year ago, and remained strong. We support customers across the credit spectrum. Our higher risk business, as classified at contract inception, represents 5% of our portfolio and has been stable for over 15 years.

During the second quarter of ~~2021,~~2022, our average retail financing placement term decreased by ~~eight months~~one month from a year ago. Retail financing contracts of 84 months and longer ~~decreased from~~remained flat compared to a year ago, ~~and have returned to normal levels~~ and continue to be a small part of our business. We remain focused on managing the trade cycle—building customer relationships and loyalty while offering financing products and terms that customers want. Our origination and risk management processes deliver robust portfolio performance.

3230

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

United States Retail Financing Credit Losses

The following table shows the primary drivers of credit losses in the United States retail financing business, which comprised ~~64%~~66% of our worldwide consumer finance receivables at June 30, ~~2021.~~2022.


		Second Quarter						First Half						Second Quarter					First Half
		2020			2021			2020			2021					2021			2022			2021			2022
Credit Loss Drivers	Credit Loss Drivers														Credit Loss Drivers
Over-60-Day delinquencies (excl. bankruptcies)	Over-60-Day delinquencies (excl. bankruptcies)	0.15		%	0.08		%	0.16		%	0.10		%		Over-60-Day delinquencies (excl. bankruptcies)	0.08		%	0.14		%	0.10		%	0.14		%
Repossessions (000)	Repossessions (000)	3			3			10			8				Repossessions (000)	3			3			8			7
Repossession ratio	Repossession ratio	0.52		%	0.63		%	0.88		%	0.78		%		Repossession ratio	0.63		%	0.69		%	0.78		%	0.71		%
Loss severity (000) (a)	Loss severity (000) (a)	$	10.9		$	7.9		$	11.1		$	9.2			Loss severity (000) (a)	$	7.9		$	7.9		$	9.2		$	8.0
Net charge-offs ($M)	Net charge-offs ($M)	$	19		$	(9)		$	92		$	19			Net charge-offs ($M)	$	(9)		$	6		$	19		$	16
LTR ratio (%) (b)	LTR ratio (%) (b)	0.15		%	(0.07)		%	0.37		%	0.07		%		LTR ratio (%) (b)	(0.07)		%	0.05		%	0.07		%	0.07		%

__________

(a)The expected difference between the amount a customer owes when the finance contract is charged off and the amount received, net of expenses, from selling the repossessed vehicle.

(b) ~~Loss-to-Receivables (“LTR”) ratios are net charge-offs divided by average managed receivables.~~See Definitions and Information Regarding Causal Factors section for calculation.

Delinquencies and net charge-offs remained at low levels during the second quarter. ~~The~~During the second quarter ~~2021~~of 2022, repossessions and loss severity were flat compared to a year ago. Second quarter 2022 delinquencies and repossession ratio ~~were about the same as~~increased from a year ago ~~when involuntary repossessions were temporarily suspended due~~and are gradually beginning to ~~COVID-19.~~normalize from historically low levels. Our ~~favorable~~ LTR ratio and net charge-offs infor the second quarter of ~~2021 reflect government stimulus, changes in consumer spending behavior, and~~2022 continue to be low, reflecting high used vehicle ~~collateral~~auction values that contributed to ~~historically~~the low losses. The ~~impact~~macroeconomic outlook has improved since the onset of the COVID-19 pandemic, and credit performance has ~~created significant volatility in the economy~~remained strong. However, rising inflation and interest rates have caused further economic uncertainty, and the future impact on our retail credit losses remains uncertain.

Worldwide Credit Losses

The following table shows key metrics related to worldwide credit losses:


		Second Quarter						First Half						Second Quarter					First Half
		2020			2021			2020			2021					2021			2022			2021			2022
Net charge-offs ($M)	Net charge-offs ($M)	$	45		$	1		$	146		$	42			Net charge-offs ($M)	$	1		$	17		$	42		$	35
LTR ratio (%)(a)	LTR ratio (%)(a)	0.17		%	—		%	0.27		%	0.08		%		LTR ratio (%)(a)	—		%	0.07		%	0.08		%	0.07		%
Credit loss reserve ($M)	Credit loss reserve ($M)	$	1,285		$	1,061		$	1,285		$	1,061			Credit loss reserve ($M)	$	1,061		$	763		$	1,061		$	763
Reserve as percent of EOP Managed Receivables		1.18		%	1.10		%	1.18		%	1.10		%
Reserve as percent of EOP Receivables (a)															Reserve as percent of EOP Receivables (a)	1.10		%	0.80		%	1.10		%	0.80		%

__________

(a)See Definitions and Information Regarding Causal Factors section for calculation.

Our worldwide credit loss metrics remain strong.Net charge-offs and the worldwide LTR ratio in the second quarter of ~~2021 improved from a year ago~~2022 continue to be low, reflecting ~~government stimulus in response to~~ the ~~COVID-19 pandemic and~~impact of high used vehicle ~~collateral~~auction values.

Our credit loss reserve is based on such factors as historical loss performance, portfolio quality, receivables level, and forward-looking macroeconomic scenarios. The credit loss reserve ~~was~~and reserve as a percent of end of period receivables were both lower than a year ~~ago. The credit loss reserve at June 30, 2021 considers the economic conditions attributable to COVID-19~~ago, reflecting low net charge-offs and ~~assumes~~our current expectation that higher levels of retail delinquencies and charge-offs will occur in future periods as economic stimulus ends and rent and mortgage forbearance programs expire. The full impact of COVID-19 on our worldwide creditCOVID-related losses depends on future developments, such as the containment of the outbreak (including the success of vaccination programs and efficacy against new variants), resolution of macroeconomic uncertainty, and the extent to which our customers are able to utilize government relief and payment deferral programs.have been avoided. Our credit loss reserve reflects lifetime expected losses as of the balance sheet date and is adjusted accordingly based on our assessment of the portfolio and economic trends and conditions. ~~During the second quarter~~The credit loss reserve at June 30, 2022 considers a range of ~~2021 we reduced our reserve primarily due to improvements in~~potential scenarios that include the economic ~~outlook that caused us to lower our expectation~~impact of ~~lifetime losses attributable to COVID-19.~~rising inflation, high energy prices, and higher interest rates. See Note 4 of our Notes to the Financial Statements for more information.

3331

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Residual Risk

Leasing is an important product that many customers want and value, and operating lease customers also are more likely to buy or lease another Ford or Lincoln vehicle. We manage our lease share with an enterprise view to support sales, protect residual values, and manage the trade cycle. Ford Credit and Ford work together under a leasing strategy that considers share, term, model mix, geography, and other factors.

We are exposed to residual risk on operating leases and similar balloon payment products where the customer may return the financed vehicle to us. Residual risk is the possibility that the amount we obtain from returned vehicles will be less than our estimate of the expected residual value for the vehicle. We estimate the expected residual value by evaluating recent auction values, return volumes for our leased vehicles, industry wide used vehicle prices, marketing incentive plans, and vehicle quality data. For operating leases, changes in expected residual values impact depreciation expense, which is recognized on a straight-line basis over the life of the lease.

For additional information on our residual risk on operating leases, refer to the “Critical Accounting Estimates – Accumulated Depreciation on Vehicles Subject to Operating Leases” section of Item 7 of Part II of our ~~2020~~2021 Form 10-K Report.

United States Ford and Lincoln Brand Operating Leases

The following table shows share of Ford and Lincoln brand retail financing and operating lease sales, placement volume, and residual performance metrics for our United States operating lease portfolio, which represents ~~84%~~81% of our total net investment in operating leases at June 30, ~~2021.~~2022.


		Second Quarter						First Half						Second Quarter					First Half
		2020			2021			2020			2021					2021			2022			2021			2022
Lease Share of Retail Sales	Lease Share of Retail Sales														Lease Share of Retail Sales
Ford Credit	Ford Credit	15		%	16		%	18		%	16		%		Ford Credit	16		%	13		%	16		%	13		%
Industry (a)	Industry (a)	25		%	25		%	28		%	26		%		Industry (a)	25		%	17		%	26		%	18		%

Placement Volume (000)	Placement Volume (000)														Placement Volume (000)
24-Month	24-Month	9			11			20			21				24-Month	11			13			21			25
36-Month	36-Month	36			37			74			78				36-Month	37			25			78			49
39-Month / Other	39-Month / Other	7			9			28			20				39-Month / Other	9			8			20			16
Total	Total	52			57			122			119				Total	57			46			119			90

Residual Performance	Residual Performance														Residual Performance
Return rates	Return rates	76		%	34		%	76		%	46		%		Return rates	34		%	9		%	46		%	10		%
Return volume (000)	Return volume (000)	58			36			125			87				Return volume (000)	36			9			87			18
Off-lease auction values (b)	Off-lease auction values (b)	$	20,110		$	28,030		$	19,810		$	24,525			Off-lease auction values (b)	$	29,040		$	31,445		$	25,580		$	30,780

__________

(a)Source: J.D. Power PIN.

(b)36-month off-lease auction values; quarterly amounts at Q2 ~~2021 mix and YTD~~2022 mix; first half amounts at ~~2021 YTD~~first half 2022 mix.

Our United States operating lease share of retail sales in the second quarter of ~~2021~~2022 was ~~higher~~lower compared with a year ago and remains ~~well~~ below the industry average, reflecting the Ford sales mix. Our second quarter ~~2021~~2022 total lease placement volume was updown compared with a year ago, ~~primarily~~ reflecting ~~higher lease share and higher~~lower total industry volume, ~~partially offset by~~lower Ford retail deliveries, and lower Ford Credit share of ~~total~~ Ford retail sales.

Lease return volume and return rate in the second quarter of ~~2021~~2022 were down from a year ago, reflecting improved auction ~~values, as a result of lower dealer inventories due to the semiconductor shortage.~~values. Our second quarter ~~2021~~2022 36-month off-lease auction values were up ~~39%~~8% year-over-year, ~~and up 26% compared with first quarter 2021,~~ reflecting continued strong demand for used vehicles, including the impact of lower new vehicle production due to ~~the semiconductor shortage.~~supply constraints.

3432

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Credit Ratings

Our short-term and long-term debt is rated by four credit rating agencies designated as nationally recognized statistical rating organizations (“NRSROs”) by the United States Securities and Exchange ~~Commission:~~Commission (“SEC”): DBRS, Fitch, Moody’s, and S&P.

In several markets, locally recognized rating agencies also rate us. A credit rating reflects an assessment by the rating agency of the credit risk associated with a corporate entity or particular securities issued by that entity. Rating agencies’ ratings of us are based on information provided by us and other sources. Credit ratings assigned to us from all of the NRSROs are closely associated with their opinions on Ford. Credit ratings are not recommendations to buy, sell, or hold securities and are subject to revision or withdrawal at any time by the assigning rating agency. Each rating agency may have different criteria for evaluating company risk and, therefore, ratings should be evaluated independently for each rating agency.

The following rating actions were taken by these NRSROs since the filing of our Quarterly Report on Form 10-Q Report for the quarter ended March 31, ~~2021:~~2022:

•On May ~~5, 2021,~~2, 2022, Fitch affirmed the credit ~~rating~~ratings for Ford Credit at BB+ and revised the outlook to ~~stable,~~

positive, from ~~negative.~~stable.

•On May 17, ~~2021,~~2022, DBRS affirmed the credit ~~rating~~ratings for Ford Credit at BB (high) and revised the outlook to ~~stable,~~

positive, from ~~negative.~~stable.

The following table summarizes certain of the credit ratings and outlook presently assigned by these four NRSROs:

NRSRO RATINGS

Ford Credit

NRSROs

Long-Term Senior Unsecured

Short -Term Unsecured

Outlook/Trend

Minimum
Long-Term Investment Grade Rating

DBRS

BB (high)

R-4

~~Stable~~Positive

BBB (low)

Fitch

BB+

~~Stable~~Positive

BBB-

Moody’s

Ba2

Stable

Baa3

S&P

BB+

~~Negative~~Positive

BBB-

3533

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Funding and Liquidity

We ended the second quarter of ~~2021~~2022 with ~~$33.0~~$25 billion of liquidity. During the quarter, we completed $2$4.4 billion of public term funding.

Key elements of our funding strategy include:

•Maintain strong liquidity; ~~continue to renew and expand committed ABS capacity~~

•Prudently access public ~~markets~~markets;

•Continue growth of retail deposits in Europe;

•Flexibility to increase ABS mix as needed; preserving assets and committed ~~capacity~~capacity;

•Target ~~managed~~financial statement leverage of 8:9:1 to ~~9:1~~10:1; and

•Maintain self-liquidating balance ~~sheet~~sheet.

Our liquidity profile continues to be diverse, robust, and focused on maintaining liquidity levels that meet our business and funding requirements. We regularly stress test our balance sheet and liquidity to ensure that we can continue to meet our financial obligations through economic cycles.

The following table shows funding for our ~~managed~~net receivables (in billions):

Funding Structure June 30,
2020 December 31,
2020 June 30,
2021
Term unsecured debt $ 74.8 $ 76.6 $ 67.1
Term asset-backed securities 54.5 54.6 45.9
Ford Interest Advantage / Deposits 5.9 6.5 8.0
Other (a) 6.1 5.7 6.0
Equity (a) 15.2 15.6 13.1
Adjustments for cash (17.1) (18.5) (15.3)
Total Managed Receivables (b) $ 139.4 $ 140.5 $ 124.8
Securitized Funding as a percent of Managed Receivables 39.1 % 38.8 % 36.8 %

~~__________~~

~~(b)Reconciliation to GAAP provided in the Financial Condition section.~~


Funding Structure	June 30, 2021			December 31, 2021			June 30, 2022
Term unsecured debt	$	63.8		$	59.4		$	49.9
Term asset-backed securities	45.9			45.4			47.1
Ford Interest Advantage / Retail Deposits	11.3			12.9			12.5
Other	(1.1)			(0.2)			1.9
Equity	13.1			12.4			12.0
Adjustments for cash	(15.3)			(12.4)			(7.8)
Total Net Receivables	$	117.7		$	117.5		$	115.6

Securitized Funding as a percent of Total Debt	37.9		%	38.5		%	43.0		%

~~Managed~~Net receivables of ~~$124.8~~$115.6 billion as of June 30, ~~2021,~~2022, were funded primarily with term unsecured debt and term asset-backed securities. Securitized funding as a percent of ~~managed receivables~~total debt was ~~36.8%~~43.0% at the end of the second ~~quarter. The calendarization~~quarter of ~~the funding plan will result in quarterly fluctuations of the securitized funding percentage.~~2022.

Public Term Funding Plan

The following table shows our issuances for full year ~~2019~~2020 and ~~2020,~~2021, planned issuances for full year ~~2021,~~2022, and our global public term funding issuances through July ~~27, 2021,~~26, 2022, excluding short-term funding programs (in billions):


		2019 Actual		2020 Actual		2021 Forecast	Through July 27			2020 Actual		2021 Actual		2022 Forecast	Through July 26
Unsecured	Unsecured	$	17	$	14	$ 5 - 8	$	2	Unsecured	$	14	$	5	4-7	$	4
Securitizations	Securitizations	14		13		8 - 10	5		Securitizations	13		9		8-10	6
Total public	Total public	$	31	$	27	$ 13 - 18	$	7	Total public	$	27	$	14	12-17	$	10

For ~~2021,~~2022, we now project full year public term funding in the range of ~~$13~~$12 billion to ~~$18~~$17 billion. ~~Public funding is significantly reduced, reflecting our smaller balance sheet.~~ Through July ~~27, 2021,~~26, 2022, we have completed $7$10 billion of public term issuances.

Liquidity

We define gross liquidity as cash, cash equivalents, and marketable securities (excluding amounts related to insurance activities) and committed capacity (which includes our asset-backed facilities and unsecured credit facilities), less utilization of liquidity. Utilization of liquidity is the amount funded under our liquidity sources and also includes the cash required to support securitization transactions and restricted cash. Net liquidity available for use is defined as gross liquidity less certain adjustments as described below. While not included in available liquidity, these adjustments represent additional funding sources for future originations.

The following table shows our liquidity sources and utilization (in billions):


		June 30, 2020		December 31, 2020		June 30, 2021			June 30, 2021		December 31, 2021		June 30, 2022
Liquidity Sources	Liquidity Sources							Liquidity Sources
Cash	Cash	$	17.1	$	18.5	$	15.3	Cash	$	15.3	$	12.4	$	7.8
Committed asset-backed facilities	Committed asset-backed facilities	37.1		38.1		38.4		Committed asset-backed facilities	38.4		37.1		34.3
Other unsecured credit facilities	Other unsecured credit facilities	2.5		2.5		2.6		Other unsecured credit facilities	2.6		2.7		2.5
Total liquidity sources	Total liquidity sources	$	56.7	$	59.1	$	56.3	Total liquidity sources	$	56.3	$	52.2	$	44.6

Utilization of Liquidity	Utilization of Liquidity							Utilization of Liquidity
Securitization and restricted cash	Securitization and restricted cash	$	(3.7)	$	(3.9)	$	(8.1)	Securitization and restricted cash	$	(8.1)	$	(3.9)	$	(2.7)
Committed asset-backed facilities	Committed asset-backed facilities	(17.7)		(16.7)		(11.3)		Committed asset-backed facilities	(11.3)		(12.5)		(15.3)
Other unsecured credit facilities	Other unsecured credit facilities	(0.6)		(0.5)		(0.5)		Other unsecured credit facilities	(0.5)		(1.0)		(0.5)
Total utilization of liquidity	Total utilization of liquidity	$	(22.0)	$	(21.1)	$	(19.9)	Total utilization of liquidity	$	(19.9)	$	(17.4)	$	(18.5)

Gross liquidity	Gross liquidity	$	34.7	$	38.0	$	36.4	Gross liquidity	$	36.4	$	34.8	$	26.1
Asset-backed capacity in excess of eligible receivables and other adjustments	Asset-backed capacity in excess of eligible receivables and other adjustments	(2.4)		(2.6)		(3.4)		Asset-backed capacity in excess of eligible receivables and other adjustments	(3.4)		(2.8)		(1.1)
Net liquidity available for use	Net liquidity available for use	$	32.3	$	35.4	$	33.0	Net liquidity available for use	$	33.0	$	32.0	$	25.0

Our net liquidity available for use will fluctuate quarterly based on factors including near-term debt maturities, receivable growth and decline, and timing of funding transactions. In June 2022, we used excess liquidity to repurchase approximately $3 billion of our public unsecured debt securities maturing in 2023, reducing interest expense and near-term maturities. At June 30, ~~2021,~~2022, our net liquidity available for use was ~~$33.0~~$25.0 billion, ~~$2.4~~$7.0 billion lower than year-end ~~2020.~~2021. At June 30, ~~2021,~~2022, our liquidity sources ~~including cash, committed asset-backed facilities, and unsecured credit facilities~~ totaled ~~$56.3~~$44.6 billion, down ~~$2.8~~$7.6 billion from year-end ~~2020.~~2021.

Cash. At June 30, ~~2021,~~2022, our Cash totaled ~~$15.3~~$7.8 billion, compared with ~~$18.5~~$12.4 billion at year-end ~~2020.~~2021. In the normal course of our funding activities, we may generate more proceeds than are required for our immediate funding needs. These excess amounts are held primarily in highly liquid investments, which provide liquidity for our anticipated and unanticipated cash needs and give us flexibility in the use of our other funding programs. Our Cash primarily includes United States Department of Treasury obligations, federal agency securities, bank time deposits with investment-grade institutions, investment-grade commercial paper, debt obligations of a select group of non-U.S. governments, non-U.S. governmental agencies, supranational institutions, non-U.S. central banks, and money market funds that carry the highest possible ratings.

The average maturity of these investments ranges from approximately three to six months and is adjusted based on market conditions and liquidity needs. We monitor our cash levels and average maturity on a daily basis. Cash includes restricted cash and amounts to be used only to support our securitization transactions of $3.9 billion and ~~$8.1~~$2.7 billion at December 31, ~~2020~~2021 and June 30, ~~2021,~~2022, respectively. ~~The increase is primarily due to cash required to support our United States wholesale trust as a result of the decline in the receivable balance.~~

Material Cash Requirements. Our material cash requirements include: (1) the purchase of retail financing and operating lease contracts from dealers and providing wholesale financing for dealers to finance new and used vehicles; and (2) debt repayments (for additional information on debt, see the ~~‘Balance~~“Balance Sheet Liquidity Profile” section below and the “Aggregate Contractual Obligations” ~~section~~table in Item 7 and Note 9 of the Notes to the Financial Statements in our ~~2020~~2021 Form 10-K Report). In addition, subject to approval by our Board of Directors, shareholder distributions may require the expenditure of a material amount of cash. Moreover, we may be subject to additional material cash requirements that are contingent upon the occurrence of certain events, e.g., legal contingencies, uncertain tax positions, and other matters.

We plan to utilize our liquidity (as described above) and our cash flows from business operations to fund our material cash requirements.

Committed Capacity. At June 30, ~~2021,~~2022, our committed capacity totaled ~~$41.0~~$36.8 billion, compared with ~~$40.6~~$39.8 billion at December 31, ~~2020.~~2021. Our committed capacity is primarily comprised of committed ABS facilities from bank-sponsored commercial paper conduits and other financial institutions and committed unsecured credit facilities with financial institutions.

Committed Asset-Backed Facilities. We and our subsidiaries have entered into agreements with a number of bank-sponsored asset-backed commercial paper conduits and other financial institutions. Such counterparties are contractually committed, at our option, to purchase from us eligible retail financing receivables or to purchase or make advances under asset-backed securities backed by retail financing or wholesale finance receivables or operating leases for proceeds of up to ~~$38.4~~$34.3 billion ($~~21.2~~19.2 billion of retail financing, ~~$4.8~~$3.2 billion of wholesale financing, and ~~$12.4~~$11.9 billion of operating leases) at June 30, ~~2021.~~2022. In the United States, we are able to obtain funding within two days of our unutilized capacity in some of our committed asset-backed facilities. These committed facilities have varying maturity dates, with ~~$15.0~~$13.2 billion having maturities within the next twelve months and the remaining balance having maturities through ~~first~~third quarter of 2024. We plan capacity renewals to protect our global funding needs and to optimize capacity utilization.

Our ability to obtain funding under these facilities is subject to having a sufficient amount of eligible assets as well as our ability to obtain interest rate hedging arrangements for certain facilities. At June 30, ~~2021, $11.3~~2022, $15.3 billion of these commitments were in use and we had ~~$4.0~~$1.6 billion of asset-backed capacity that was in excess of eligible receivables primarily due to the decline in ~~wholesale~~lease asset balances. These ~~facilities~~programs are free of material adverse change clauses, restrictive financial covenants (for example, debt-to-equity limitations and minimum net worth requirements), and generally, credit rating triggers that could limit our ability to obtain funding. However, the unused portion of these commitments may be terminated if the performance of the underlying assets deteriorates beyond specified levels. Based on our experience and knowledge as servicer of the related assets, we do not expect any of these ~~commitments~~programs to be terminated due to such events.

As of June 30, ~~2021,~~2022, Ford Bank GmbH (“Ford Bank”) had liquidity of €306 million (equivalent to $318 million) and FCE Bank plc (“FCE”) had liquidity in the form of ~~€78~~£77 million (equivalent to $93 million) of ~~senior ABS notes~~ eligible collateral available for ~~collateral~~use in the monetary policy programs of the European Central ~~Bank’s monetary policy programs.~~Bank and Bank of England, respectively.

Unsecured Credit Facilities. At June 30, ~~2021,~~2022, we and our majority-owned subsidiaries had ~~$2.6~~$2.5 billion of contractually committed unsecured credit facilities with financial institutions, including the FCE Credit Agreement and the Ford Bank Credit Agreement. At June 30, ~~2021, $2.1~~2022, $2.0 billion was available for use.

~~FCE’s £780~~At June 30, 2022, £440 million (equivalent to ~~$1,082~~$533 million) was available for use under FCE’s £690 million ~~at June 30, 2021)~~(equivalent to $836 million) syndicated credit facility (the “FCE Credit Agreement”) and ~~Ford Bank’s~~all €240 million (equivalent to ~~$285 million at June 30, 2021)~~$250 million) was available for use under Ford Bank’s syndicated credit facility (the “Ford Bank Credit Agreement”) ~~both mature in 2023, except for £95 million~~. Effective July 22, 2022, FCE and Ford Bank extended the maturity dates of the FCE Credit Agreement ~~that matures in 2022. At June 30, 2021, all £780 million under the FCE Credit Agreement~~ and ~~all €240 million under the~~ Ford Bank Credit Agreement ~~were available for use.~~to 2025 with total commitments under each agreement of £685 million and €210 million, respectively.

Both the FCE Credit Agreement and Ford Bank Credit Agreement contain certain covenants, including an obligation for FCE and Ford Bank to maintain their ratio of regulatory capital to risk-weighted assets at no less than the applicable regulatory minimum. The FCE Credit Agreement requires the support agreement between FCE and Ford Credit to remain in effect (and enforced by FCE to ensure that its net worth is maintained at no less than $500 million). The Ford Bank Credit Agreement requires a guarantee of Ford Bank’s obligations under the agreement, provided by Ford Credit, to remain in effect.

In addition, both the FCE Credit Agreement and the Ford Bank Credit Agreement include certain sustainability-linked targets, pursuant to which the applicable margin may be adjusted if Ford Motor Company achieves, or fails to achieve, the specified targets related to global manufacturing facility greenhouse gas emissions, renewable electricity consumption, and Ford Europe CO
2 tailpipe emissions.

Balance Sheet Liquidity Profile

We define our balance sheet liquidity profile as the cumulative maturities, including the impact of expected prepayments and allowance for credit losses, of our finance receivables, investment in operating leases, and cash, less the cumulative debt maturities over upcoming annual periods. Our balance sheet is inherently liquid because of the short-term nature of our finance receivables, investment in operating leases, and cash. We ensure our cumulative debt maturities have a longer tenor than our cumulative asset maturities. This positive maturity profile is intended to provide additional liquidity after all of our assets have been funded and is in addition to liquidity available to protect for stress scenarios.

The following table shows our cumulative maturities for assets and total debt for the periods presented and unsecured long-term debt maturities in the individual periods presented (in billions):


		July - December 2021		2022		2023		2024 & Beyond			July - December 2022		2023		2024		2025 & Beyond
Balance Sheet Liquidity Profile	Balance Sheet Liquidity Profile									Balance Sheet Liquidity Profile
Assets (a)	Assets (a)	$	47	$	81	$	107	$	138	Assets (a)	$	46	$	75	$	98	$	127
Total debt (b)	Total debt (b)	36		65		84		120		Total debt (b)	36		61		79		111
Memo: Unsecured long-term debt maturities	Memo: Unsecured long-term debt maturities	6		14		11		31		Memo: Unsecured long-term debt maturities	6		8		11		26

__________

(a)Includes gross finance receivables less the allowance for credit losses, investment in operating leases net of accumulated depreciation, and cash. Amounts shown include the impact of expected prepayments.

(b)Excludes unamortized debt (discount)/premium, unamortized issuance costs, and fair value adjustments.

Maturities of investment in operating leases consist primarily of the portion of rental payments attributable to depreciation over the remaining life of the lease and the expected residual value at lease termination. Maturities of finance receivables and investment in operating leases in the table above include expected prepayments for our retail installment sale contracts and investment in operating leases. The table above also reflects adjustments to debt maturities to match the asset-backed debt maturities with the underlying asset maturities.

All wholesale securitization transactions and wholesale receivables are shown maturing in the next 12 months, even if the maturities extend beyond second quarter ~~2022.~~2023. The retail securitization transactions under certain committed asset-backed facilities are assumed to amortize immediately rather than amortizing after the expiration of the commitment period. As of June 30, ~~2021,~~2022, we had ~~$138~~$127 billion of assets, ~~$72~~$65 billion of which were unencumbered. For additional information on finance receivables, investment in operating leases, and debt, see Notes 4, 5, and 9 of our Notes to the Financial Statements.

Funding and Liquidity Risks

Our funding plan is subject to risks and uncertainties, many of which are beyond our control, including disruption in the capital markets, that could impact both unsecured debt and asset-backed securities issuance and the effects of regulatory changes on the financial markets. Refer to the “Funding and Liquidity Risks” section of Item 7 of Part II of our ~~2020~~2021 Form 10-K Report for more information.

3634

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Leverage

We use leverage, or the debt-to-equity ratio, to make various business decisions, including evaluating and establishing pricing for finance receivable and operating lease financing, and assessing our capital structure. We refer to our shareholder’s interest as equity.

The following table shows the calculation of our financial statement leverage ~~and managed leverage~~ (in billions):

June 30,
2020 December 31,
2020 June 30,
2021
Leverage Calculation
Debt $ 135.3 $ 137.7 $ 121.0
Adjustments for cash (17.1) (18.5) (15.3)
Adjustments for derivative accounting (1.8) (1.5) (0.9)
Total adjusted debt $ 116.4 $ 117.7 $ 104.8
Equity (a) $ 15.2 $ 15.6 $ 13.1
Adjustments for derivative accounting — 0.1 0.1
Total adjusted equity (a) $ 15.2 $ 15.7 $ 13.2
Financial statement leverage (to 1) (GAAP) (a) 8.9 8.8 9.3
Managed leverage (to 1) (Non-GAAP) (a) 7.7 7.5 8.0

~~__________~~

~~Note: Numbers may not sum due to rounding.~~


	June 30, 2021		December 31, 2021		June 30, 2022
Leverage Calculation
Debt	$	121.0	$	117.7	$	109.5
Equity	$	13.1	$	12.4	$	12.0
Financial statement leverage (to 1)	9.3		9.5		9.1

We plan our ~~managed~~ leverage by considering market conditions and the risk characteristics of our business. At June 30, ~~2021,~~2022, our financial statement leverage was ~~9.3:~~9.1:1, ~~and managed leverage was 8.0:1. We target managed leverage in~~at the ~~range~~lower end of 8:our 9:1 to ~~9:1.~~10:1 target range.

Outlook

For the full year, we expect EBT of about ~~$4.2 billion. This amount excludes any impact from the potential reclassification of accumulated foreign currency translation losses to income~~$3 billion before charges related to our exit of South ~~America restructuring actions.~~America. Our guidance reflects primarily lower credit loss reserve releases, fewer returned off-lease vehicles, and more normalized credit losses. We also expect auction values to remain strong but to decline in the second half of the year as the supply of new vehicles improves.

3735

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Cautionary Note on Forward-Looking Statements

Statements included or incorporated by reference herein may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on expectations, forecasts, and assumptions by our management and involve a number of risks, uncertainties, and other factors that could cause actual results to differ materially from those stated, including, without limitation:

•Ford and Ford Credit’s financial condition and results of operations have been and may continue to be adversely affected by public health issues, including epidemics or pandemics such as COVID-19;

•Ford is highly dependent on its suppliers to deliver components in accordance with Ford’s production schedule, and a shortage of key components, such as semiconductors, or raw materials can disrupt Ford’s production of vehicles;

•Ford’s long-term competitiveness depends on the successful execution of ~~its Plan;~~Ford+;

•Ford’s vehicles could be affected by defects that result in delays in new model launches, recall campaigns, or increased warranty costs;

•Ford may not realize the anticipated benefits of existing or pending strategic alliances, joint ventures, acquisitions, divestitures, or new business strategies;

•Operational systems, security systems, vehicles, and ~~vehicles~~services could be affected by cyber incidents, ransomware attacks, and other disruptions;

•Ford’s production, as well as Ford’s suppliers’ production, could be disrupted by labor issues, natural or man-made disasters, financial distress, production difficulties, capacity limitations, or other factors;

•Ford’s ability to maintain a competitive cost structure could be affected by labor or other constraints;

•Ford’s ability to attract and retain talented, diverse, and highly skilled employees is critical to its success and competitiveness;

•Ford’s new and existing products, digital and physical services, and mobility services are subject to market acceptance and face significant competition from existing and new entrants in the automotive, mobility, and ~~mobility~~digital services industries;

•Ford’s near-term results are dependent on sales of larger, more profitable vehicles, particularly in the United States;

•With a global footprint, Ford’s results could be adversely affected by economic, geopolitical, protectionist trade policies, or other events, including tariffs;

•Industry sales volume in any of Ford’s key markets can be volatile and could decline if there is a financial crisis, recession, or significant geopolitical event;

•Ford may face increased price competition or a reduction in demand for its products resulting from industry excess capacity, currency fluctuations, competitive actions, or other factors;

•~~Fluctuations~~Inflationary pressure and fluctuations in commodity prices, foreign currency exchange rates, interest rates, and market value of Ford or Ford Credit’s investments, including marketable securities, can have a significant effect on results;

•Ford and Ford Credit’s access to debt, securitization, or derivative markets around the world at competitive rates or in sufficient amounts could be affected by credit rating downgrades, market volatility, market disruption, regulatory requirements, or other factors;

•Ford’s receipt of government incentives could be subject to reduction, termination, or clawback;

•Ford Credit could experience higher-than-expected credit losses, lower-than-anticipated residual values, or higher-than-expected return volumes for leased vehicles;

•Economic and demographic experience for pension and other postretirement benefit plans (e.g., discount rates or investment returns) could be worse than Ford has assumed;

•Pension and other postretirement liabilities could adversely affect Ford’s liquidity and financial condition;

•Ford and Ford Credit could experience unusual or significant litigation, governmental investigations, or adverse publicity arising out of alleged defects in products, services, perceived environmental impacts, or otherwise;

•Ford may need to substantially modify its product plans to comply with safety, emissions, fuel economy, autonomous vehicle, and other regulations;

•Ford and Ford Credit could be affected by the continued development of more stringent privacy, data use, and data protection laws and regulations as well as consumers’ heightened expectations to safeguard their personal information; and

•Ford Credit could be subject to new or increased credit regulations, consumer protection regulations, or other regulations.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

We cannot be certain that any expectation, forecast, or assumption made in preparing forward-looking statements will prove accurate, or that any projection will be realized. It is to be expected that there may be differences between projected and actual results. Our forward-looking statements speak only as of the date of their initial issuance, and we do not undertake any obligation to update or revise publicly any forward-looking statement, whether as a result of new information, future events, or otherwise. For additional discussion, see “Item 1A. Risk Factors” in our ~~2020~~2021 Form 10-K Report, as updated by our subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

~~Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)~~

Accounting Standards Issued But Not Yet Adopted

~~None.~~ASUs 2022-01 and 2022-03 were assessed and are not expected to have a material impact to our financial statements and disclosures. We are presently assessing the impact of ASU 2022-02. For additional information, see Note 2 of our Notes to the Financial Statements.


ASU		Effective Date (a)
2022-01	Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method	January 1, 2023
2022-02	Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures	January 1, 2023
2022-03	Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions	January 1, 2024

__________

(a)Early adoption for each of the standards is permitted.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

In our ~~Annual Report on~~2021 Form 10-K ~~for the year ended December 31, 2020,~~Report, we discuss in greater detail our market risk, counterparty risk, credit risk, residual risk, liquidity risk, and operating risk.

To provide a quantitative measure of the sensitivity of our pre-tax cash flow to changes in interest rates, we use interest rate scenarios that assume a hypothetical, instantaneous increase or decrease of one percentage point in all interest rates across all maturities (a “parallel shift”), as well as a base case that assumes that all interest rates remain constant at existing levels. The differences in pre-tax cash flow between these scenarios and the base case over a 12 month period represent an estimate of the sensitivity of our pre-tax cash flow. Under this model, we estimate that at June 30, ~~2021,~~2022, all else constant, such an increase in interest rates would decrease our pre-tax cash flow by ~~$60~~$27 million over the next 12 months, compared with a decrease of $3$76 million at December 31, ~~2020.~~2021. In reality, interest rate changes are rarely instantaneous or parallel and rates could move more or less than the one percentage point assumed in our analysis. As a result, the actual impact to pre-tax cash flow could be higher or lower than the results detailed above.

~~Transition from LIBOR to Alternative Reference Rates~~

We have been working to transition from the London Interbank Offered Rate (“LIBOR”) to alternative reference rates. We have developed a total company inventory of affected financial instruments and contracts, have been working to transition legacy contracts linked to LIBOR to alternative reference rates, and intend to rely primarily on alternative reference rates for new contracts after 2021.

ITEM 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Marion B. Harris, our President and Chief Executive Officer (“CEO”), and Brian E. Schaaf, our Executive Vice President, Chief Financial Officer (“CFO”), Treasurer and ~~Treasurer,~~Strategy, have performed an evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of June 30, ~~2021,~~2022, and each has concluded that such disclosure controls and procedures are effective to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified by SEC rules and forms, and that such information is accumulated and communicated to the CEO and CFO to allow timely decisions regarding required disclosures.

Changes in Internal Control Over Financial Reporting. ~~During~~There were no changes in internal control over financial reporting during the ~~second~~ quarter of 2021, we began a multi-year implementation of a new global integrated enterprise resource planning (“I-ERP”) system, which will replace many of our existing core financial systems. Implementation of I-ERP began with the launch of our Canada market in May 2021 and is expectedended June 30, 2022 that have materially affected, or are reasonably likely to ~~progress in phased launches across remaining markets over the next several years. As the phased implementation of the I-ERP system advances,~~materially affect, our internal ~~processes, procedures, and controls will be refined as appropriate.~~ control over financial reporting.

3937

PART II. OTHER INFORMATION

ITEM 1. Legal ~~Proceedings~~.Proceedings.

We have no legal proceedings arising under any federal, state, or local provisions that have been enacted or adopted regulating the discharge of materials into the environment or primarily for the purpose of protecting the environment, in which (i) a governmental authority is a party, and (ii) we believe there is the possibility of monetary sanctions (exclusive of interest and costs) in excess of $1 million.

ITEM 5. Other Information.

None.

ITEM 6. Exhibits.

Designation

Description

Method of Filing

Exhibit 31.1

Rule 15d-14(a) Certification of CEO.

Filed with this Report.

Exhibit 31.2

Rule 15d-14(a) Certification of CFO.

Filed with this Report.

Exhibit 32.1

Section 1350 Certification of CEO.

Furnished with this Report.

Exhibit 32.2

Section 1350 Certification of CFO.

Furnished with this Report.

Exhibit 101.INS

Interactive Data Files pursuant to Rule 405 of Regulation S-T formatted in Inline Extensible Business Reporting Language (“Inline XBRL”).

Exhibit 101.SCH

XBRL Taxonomy Extension Schema Document.

Exhibit 101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

Exhibit 101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

Exhibit 101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

Exhibit 101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

Exhibit 104

Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).

__________

*Submitted electronically with this Report in accordance with the provisions of Regulation S-T.

Instruments defining the rights of holders of certain issues of long-term debt of Ford Credit have not been filed as exhibits to this Report because the authorized principal amount of any one of such issues does not exceed 10% of the total assets of Ford Credit. Ford Credit will furnish a copy of each such instrument to the SEC upon request.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, Ford Motor Credit Company LLC has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

FORD MOTOR CREDIT COMPANY LLC


By:			/s/ Brian E. Schaaf
			Brian E. Schaaf
			Executive Vice President, Chief Financial Officer, ~~and Treasurer~~
			Treasurer, and Strategy

Date:			July ~~28, 2021~~27, 2022

4139


	For the Period Ended June 30, 2020
	Second Quarter						First Half
	Previously Reported		Adjustments due to ASU 2019-12		As Revised		Previously Reported		Adjustments due to ASU 2019-12		As Revised
Income Statement
Provision for income taxes	$	136	$	(69)	$	67	$	145	$	(42)	$	103
Net income	407		69		476		428		42		470


	As of December 31, 2020
	Previously Reported		Adjustments due to ASU 2019-12		As Revised
Balance Sheet
Other assets	$	4,593	$	(888)	$	3,705
Deferred income taxes (a)	2,907		(2,403)		504
Other liabilities and deferred income	2,306		(26)		2,280
Accumulated other comprehensive income / (loss)	(413)		(65)		(478)
Retained earnings	9,212		1,606		10,818

	For the Period Ended June 30, 2020
	First Half
	Previously Reported		Adjustments due to ASU 2019-12		As Revised
Statement of Cash Flows
Cash flows from operating activities
Net income	$	428	$	42	$	470
Net change in deferred income taxes	(692)		757		65
Net change in other liabilities	(243)		(140)		(383)
All other operating activities	31		(40)		(9)
Cash flows from financing activities
Cash distributions to parent	(550)		(619)		(1,169)


Non-GAAP Financial Measures	June 30, 2020		June 30, 2021		H / (L)
Managed Receivables ($B) (a)	$	139.4	$	124.8	(10)	%
Managed Leverage (to 1) (b) (c)	7.7		8.0		0.3