UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________
FORM 10-Q
(Mark One)
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☒ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022March 31, 2023
OR
| | | | | | | | |
☐ | | 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 1-10667
______________________________________________
General Motors Financial Company, Inc.
(Exact name of registrant as specified in its charter)
| | | | | | | | |
Texas | | 75-2291093 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
801 Cherry Street, Suite 3500, Fort Worth, Texas 76102
(Address of principal executive offices, including Zip Code)
(817) 302-7000
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
5.250% Senior Notes due 2026 | GM/26 | New York Stock Exchange |
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. Yes ☒ 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). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 | ☒ | 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 ☐ No ☒
As of OctoberApril 24, 2022,2023, there were 5,050,000 shares of the registrant’s common stock, par value $0.0001 per share, outstanding. All shares of the registrant’s common stock are owned by General Motors Holdings LLC, a wholly-owned subsidiary of General Motors Company.
The registrant is a wholly-owned subsidiary of General Motors Company and meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Quarterly Report on Form 10-Q with a reduced disclosure format as permitted by Instruction H(2).
INDEX
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PART I |
Item 1. | Condensed Consolidated Financial Statements | |
| Condensed Consolidated Balance Sheets (Unaudited) | |
| Condensed Consolidated Statements of Income (Unaudited) | |
| Condensed Consolidated Statements of Comprehensive Income (Unaudited) | |
| Condensed Consolidated Statements of Shareholders' Equity (Unaudited) | |
| Condensed Consolidated Statements of Cash Flows (Unaudited) | |
| Notes to Condensed Consolidated Financial Statements | |
| Note 1. Summary of Significant Accounting Policies | |
| Note 2. Related Party Transactions | |
| Note 3. Finance Receivables | |
| Note 4. Leased Vehicles | |
| Note 5. Equity in Net Assets of Nonconsolidated Affiliates | |
| Note 6. Debt | |
| Note 7. Variable Interest Entities and Other Transfers of Finance Receivables | |
| Note 8. Derivative Financial Instruments and Hedging Activities | |
| Note 9. Commitments and Contingencies | |
| Note 10. Shareholders' Equity | |
| Note 11. Income Taxes | |
| Note 12. Segment Reporting | |
| Note 13. Regulatory Capital and Other Regulatory Matters | |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. | Controls and Procedures | |
PART II |
Item 1. | Legal Proceedings | |
Item 1A. | Risk Factors | |
Item 6. | Exhibits | |
| Signature | |
GENERAL MOTORS FINANCIAL COMPANY, INC.
PART I
Item 1. Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts) (Unaudited)
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
ASSETS | ASSETS | | | | ASSETS | | | |
Cash and cash equivalents | Cash and cash equivalents | $ | 4,079 | | | $ | 3,948 | | Cash and cash equivalents | $ | 4,352 | | | $ | 4,005 | |
Finance receivables, net of allowance for loan losses $2,086 and $1,886 (Note 3; | 70,845 | | | 62,979 | | |
| 33,778 | | | 37,929 | | |
Goodwill | 1,168 | | | 1,169 | | |
Finance receivables, net of allowance for loan losses $2,152 and $2,096 | | Finance receivables, net of allowance for loan losses $2,152 and $2,096 | 76,178 | | | 74,514 | |
| | | 31,848 | | | 32,701 | |
Goodwill and intangible assets | | Goodwill and intangible assets | 1,180 | | | 1,171 | |
Equity in net assets of nonconsolidated affiliates (Note 5) | Equity in net assets of nonconsolidated affiliates (Note 5) | 1,705 | | | 1,717 | | Equity in net assets of nonconsolidated affiliates (Note 5) | 1,725 | | | 1,665 | |
Related party receivables (Note 2) | Related party receivables (Note 2) | 506 | | | 301 | | Related party receivables (Note 2) | 639 | | | 495 | |
| 7,730 | | | 5,743 | | |
| | | 7,643 | | | 7,995 | |
Total assets | Total assets | $ | 119,811 | | | $ | 113,786 | | Total assets | $ | 123,565 | | | $ | 122,545 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
Liabilities | Liabilities | | Liabilities | |
| $ | 40,733 | | | $ | 39,338 | | |
| | | $ | 41,253 | | | $ | 42,131 | |
| | 53,090 | | | 53,223 | | | 56,814 | | | 54,723 | |
Deferred income | Deferred income | 2,299 | | | 2,551 | | Deferred income | 2,250 | | | 2,248 | |
Related party payables (Note 2) | Related party payables (Note 2) | 213 | | | 313 | | Related party payables (Note 2) | 457 | | | 115 | |
Other liabilities | Other liabilities | 8,384 | | | 4,567 | | Other liabilities | 7,590 | | | 8,318 | |
Total liabilities | Total liabilities | 104,720 | | | 99,992 | | Total liabilities | 108,364 | | | 107,535 | |
Commitments and contingencies (Note 9) | Commitments and contingencies (Note 9) | | | | Commitments and contingencies (Note 9) | | | |
| | | | |
Common stock, $0.0001 par value per share | Common stock, $0.0001 par value per share | — | | | — | | Common stock, $0.0001 par value per share | — | | | — | |
Preferred stock, $0.01 par value per share | Preferred stock, $0.01 par value per share | — | | | — | | Preferred stock, $0.01 par value per share | — | | | — | |
Additional paid-in capital | Additional paid-in capital | 8,723 | | | 8,692 | | Additional paid-in capital | 8,749 | | | 8,742 | |
Accumulated other comprehensive income (loss) | Accumulated other comprehensive income (loss) | (1,402) | | | (1,273) | | Accumulated other comprehensive income (loss) | (1,323) | | | (1,373) | |
Retained earnings | Retained earnings | 7,770 | | | 6,375 | | Retained earnings | 7,775 | | | 7,641 | |
Total shareholders' equity | Total shareholders' equity | 15,091 | | | 13,794 | | Total shareholders' equity | 15,201 | | | 15,010 | |
Total liabilities and shareholders' equity | Total liabilities and shareholders' equity | $ | 119,811 | | | $ | 113,786 | | Total liabilities and shareholders' equity | $ | 123,565 | | | $ | 122,545 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Amounts may not add due to rounding.
GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions) (Unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
Revenue | Revenue | | | | | | | | Revenue | | | | |
Finance charge income | Finance charge income | $ | 1,158 | | | $ | 1,035 | | | $ | 3,230 | | | $ | 3,087 | | Finance charge income | | $ | 1,368 | | | $ | 1,010 | |
Leased vehicle income | Leased vehicle income | 1,912 | | | 2,246 | | | 5,967 | | | 6,871 | | Leased vehicle income | | 1,818 | | | 2,066 | |
Other income | Other income | 118 | | | 73 | | | 292 | | | 229 | | Other income | | 156 | | | 80 | |
Total revenue | Total revenue | 3,187 | | | 3,354 | | | 9,489 | | | 10,187 | | Total revenue | | 3,343 | | | 3,156 | |
Costs and expenses | Costs and expenses | | | | | | | | Costs and expenses | | | | |
Operating expenses | Operating expenses | 436 | | | 381 | | | 1,202 | | | 1,170 | | Operating expenses | | 442 | | | 372 | |
Leased vehicle expenses | Leased vehicle expenses | 939 | | | 1,088 | | | 2,650 | | | 3,157 | | Leased vehicle expenses | | 1,039 | | | 855 | |
Provision for loan losses (Note 3) | Provision for loan losses (Note 3) | 180 | | | 141 | | | 500 | | | 174 | | Provision for loan losses (Note 3) | | 131 | | | 122 | |
Interest expense | Interest expense | 764 | | | 704 | | | 1,984 | | | 1,987 | | Interest expense | | 1,000 | | | 577 | |
Total costs and expenses | Total costs and expenses | 2,320 | | | 2,314 | | | 6,336 | | | 6,488 | | Total costs and expenses | | 2,613 | | | 1,926 | |
| | 44 | | | 53 | | | 148 | | | 157 | | | | 41 | | | 54 | |
Income before income taxes | Income before income taxes | 911 | | | 1,093 | | | 3,301 | | | 3,856 | | Income before income taxes | | 771 | | | 1,284 | |
| | 223 | | | 271 | | | 822 | | | 976 | | | | 186 | | | 322 | |
Net income (loss) | Net income (loss) | 688 | | | 822 | | | 2,479 | | | 2,880 | | Net income (loss) | | 584 | | | 962 | |
Less: cumulative dividends on preferred stock | Less: cumulative dividends on preferred stock | 30 | | | 30 | | | 89 | | | 89 | | Less: cumulative dividends on preferred stock | | 30 | | | 30 | |
Net income (loss) attributable to common shareholder | Net income (loss) attributable to common shareholder | $ | 659 | | | $ | 792 | | | $ | 2,390 | | | $ | 2,791 | | Net income (loss) attributable to common shareholder | | $ | 555 | | | $ | 932 | |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions) (Unaudited)
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
Net income (loss) | Net income (loss) | $ | 688 | | | $ | 822 | | | $ | 2,479 | | | $ | 2,880 | | Net income (loss) | | $ | 584 | | | $ | 962 | |
Other comprehensive income (loss), net of tax (Note 10) | Other comprehensive income (loss), net of tax (Note 10) | | Other comprehensive income (loss), net of tax (Note 10) | | |
Unrealized gain (loss) on hedges, net of income tax (expense) benefit of $—, $(3),$(37),$(18) | (1) | | | 8 | | | 114 | | | 50 | | |
Unrealized gain (loss) on hedges, net of income tax (expense) benefit of $17, $(31) | | Unrealized gain (loss) on hedges, net of income tax (expense) benefit of $17, $(31) | | (52) | | | 95 | |
Foreign currency translation adjustment | Foreign currency translation adjustment | (175) | | | (105) | | | (244) | | | (44) | | Foreign currency translation adjustment | | 102 | | | 144 | |
Other comprehensive income (loss), net of tax | Other comprehensive income (loss), net of tax | (176) | | | (97) | | | (130) | | | 6 | | Other comprehensive income (loss), net of tax | | 49 | | | 238 | |
Comprehensive income (loss) | Comprehensive income (loss) | $ | 512 | | | $ | 725 | | | $ | 2,349 | | | $ | 2,886 | | Comprehensive income (loss) | | $ | 633 | | | $ | 1,200 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Amounts may not add due to rounding.
GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In millions) (Unaudited)
| | Common Stock | | Preferred Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Total Shareholders' Equity | |
Balance at January 1, 2021 | $ | — | | | $ | — | | | $ | 8,642 | | | $ | (1,309) | | | $ | 6,265 | | | $ | 13,598 | | |
Net income (loss) | — | | | — | | | — | | | — | | | 878 | | | 878 | | |
Other comprehensive income (loss) | — | | | — | | | — | | | (23) | | | — | | | (23) | | |
Stock-based compensation | — | | | — | | | 8 | | | — | | | — | | | 8 | | |
| — | | | — | | | — | | | — | | | (661) | | | (661) | | |
Balance at March 31, 2021 | — | | | — | | | 8,650 | | | (1,332) | | | 6,482 | | | 13,800 | | |
Net income (loss) | — | | | — | | | — | | | — | | | 1,180 | | | 1,180 | | |
Other comprehensive income (loss) | — | | | — | | | — | | | 126 | | | — | | | 126 | | |
Stock-based compensation | — | | | — | | | 18 | | | — | | | — | | | 18 | | |
| — | | | — | | | — | | | — | | | (600) | | | (600) | | |
Dividends declared on preferred stock (Note 10) | — | | | — | | | — | | | — | | | (59) | | | (59) | | |
Balance at June 30, 2021 | — | | | — | | | 8,668 | | | (1,206) | | | 7,003 | | | 14,465 | | |
Net income (loss) | — | | | — | | | — | | | — | | | 822 | | | 822 | | |
Other comprehensive income (loss) | — | | | — | | | — | | | (97) | | | — | | | (97) | | |
Stock based compensation | — | | | — | | | 10 | | | — | | | — | | | 10 | | |
| — | | | — | | | — | | | — | | | (600) | | | (600) | | |
Balance at September 30, 2021 | $ | — | | | $ | — | | | $ | 8,678 | | | $ | (1,303) | | | $ | 7,225 | | | $ | 14,600 | | |
| | | | | | | | | | | | | | Common Stock | | Preferred Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Retained Earnings | | Total Shareholders' Equity |
Balance at January 1, 2022 | Balance at January 1, 2022 | $ | — | | | $ | — | | | $ | 8,692 | | | $ | (1,273) | | | $ | 6,375 | | | $ | 13,794 | | Balance at January 1, 2022 | $ | — | | | $ | — | | | $ | 8,692 | | | $ | (1,273) | | | $ | 6,375 | | | $ | 13,794 | |
Net income (loss) | Net income (loss) | — | | | — | | | — | | | — | | | 962 | | | 962 | | Net income (loss) | — | | | — | | | — | | | — | | | 962 | | | 962 | |
Other comprehensive income (loss) | Other comprehensive income (loss) | — | | | — | | | — | | | 238 | | | — | | | 238 | | Other comprehensive income (loss) | — | | | — | | | — | | | 238 | | | — | | | 238 | |
Stock-based compensation | Stock-based compensation | — | | | — | | | 10 | | | — | | | — | | | 10 | | Stock-based compensation | — | | | — | | | 10 | | | — | | | — | | | 10 | |
Balance at March 31, 2022 | Balance at March 31, 2022 | — | | | — | | | 8,701 | | | (1,034) | | | 7,337 | | | 15,004 | | Balance at March 31, 2022 | $ | — | | | $ | — | | | $ | 8,701 | | | $ | (1,034) | | | $ | 7,337 | | | $ | 15,004 | |
| | Balance at January 1, 2023 | | Balance at January 1, 2023 | $ | — | | | $ | — | | | $ | 8,742 | | | $ | (1,373) | | | $ | 7,641 | | | $ | 15,010 | |
Net income (loss) | Net income (loss) | — | | | — | | | — | | | — | | | 829 | | | 829 | | Net income (loss) | — | | | — | | | — | | | — | | | 584 | | | 584 | |
Other comprehensive income (loss) | Other comprehensive income (loss) | — | | | — | | | — | | | (192) | | | — | | | (192) | | Other comprehensive income (loss) | — | | | — | | | — | | | 49 | | | — | | | 49 | |
Stock-based compensation | Stock-based compensation | — | | | — | | | 11 | | | — | | | — | | | 11 | | Stock-based compensation | — | | | — | | | 7 | | | — | | | — | | | 7 | |
| | — | | | — | | | — | | | — | | | (750) | | | (750) | | | — | | | — | | | — | | | — | | | (450) | | | (450) | |
Dividends declared on preferred stock (Note 10) | — | | | — | | | — | | | — | | | (59) | | | (59) | | |
Balance at June 30, 2022 | — | | | — | | | 8,713 | | | (1,226) | | | 7,357 | | | 14,844 | | |
Net income (loss) | — | | | — | | | — | | | — | | | 688 | | | 688 | | |
Other comprehensive income (loss) | — | | | — | | | — | | | (176) | | | — | | | (176) | | |
Stock based compensation | — | | | — | | | 10 | | | — | | | — | | | 10 | | |
| — | | | — | | | — | | | — | | | (275) | | | (275) | | |
Balance at September 30, 2022 | $ | — | | | $ | — | | | $ | 8,723 | | | $ | (1,402) | | | $ | 7,770 | | | $ | 15,091 | | |
Balance at March 31, 2023 | | Balance at March 31, 2023 | $ | — | | | $ | — | | | $ | 8,749 | | | $ | (1,323) | | | $ | 7,775 | | | $ | 15,201 | |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
Amounts may not add due to rounding.
GENERAL MOTORS FINANCIAL COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions) (Unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2022 | | 2021 |
Cash flows from operating activities | | | |
Net income (loss) | $ | 2,479 | | | $ | 2,880 | |
Depreciation and amortization | 3,801 | | | 4,934 | |
Accretion and amortization of loan and leasing fees | (950) | | | (1,144) | |
Undistributed earnings of nonconsolidated affiliates, net | (122) | | | (157) | |
Provision for loan losses | 500 | | | 174 | |
Deferred income taxes | 353 | | | 137 | |
Stock-based compensation expense | 32 | | | 37 | |
Gain on termination of leased vehicles | (990) | | | (1,616) | |
Loss on extinguishment of debt | — | | | 105 | |
Other operating activities | (116) | | | 120 | |
Changes in assets and liabilities: | | | |
Other assets | (1,298) | | | 207 | |
Other liabilities | 259 | | | (256) | |
Related party payables | (118) | | | 208 | |
Net cash provided by (used in) operating activities | 3,829 | | | 5,629 | |
Cash flows from investing activities | | | |
Purchases of retail finance receivables, net | (26,557) | | | (25,471) | |
Principal collections and recoveries on retail finance receivables | 20,604 | | | 18,788 | |
Net collections (funding) of commercial finance receivables | (2,655) | | | 4,658 | |
Purchases of leased vehicles, net | (9,062) | | | (16,698) | |
Proceeds from termination of leased vehicles | 11,052 | | | 15,513 | |
Capital contribution to nonconsolidated affiliates | (26) | | | — | |
Other investing activities | (83) | | | (33) | |
Net cash provided by (used in) investing activities | (6,726) | | | (3,243) | |
Cash flows from financing activities | | | |
Net change in debt (original maturities less than three months) | 1,189 | | | 3,205 | |
Borrowings and issuances of secured debt | 23,385 | | | 21,745 | |
Payments on secured debt | (21,927) | | | (23,635) | |
Borrowings and issuances of unsecured debt | 10,420 | | | 12,731 | |
Payments on unsecured debt | (9,409) | | | (11,956) | |
Extinguishment of debt | — | | | (1,605) | |
Debt issuance costs | (106) | | | (133) | |
Dividends paid | (1,144) | | | (1,920) | |
Net cash provided by (used in) financing activities | 2,408 | | | (1,568) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | (488) | | | 818 | |
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | (11) | | | (43) | |
Cash, cash equivalents and restricted cash at beginning of period | 7,183 | | | 8,126 | |
Cash, cash equivalents and restricted cash at end of period | $ | 6,684 | | | $ | 8,901 | |
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2023 | | 2022 |
Cash flows from operating activities | | | |
Net income (loss) | $ | 584 | | | $ | 962 | |
Depreciation and amortization | 1,316 | | | 1,275 | |
Accretion and amortization of loan and leasing fees | (315) | | | (292) | |
Undistributed earnings of nonconsolidated affiliates, net | (41) | | | (54) | |
Provision for loan losses | 131 | | | 122 | |
Deferred income taxes | (233) | | | 306 | |
Gain on termination of leased vehicles | (206) | | | (369) | |
Other operating activities | (67) | | | (92) | |
Changes in assets and liabilities: | | | |
Other assets | 141 | | | (381) | |
Other liabilities | 38 | | | (144) | |
Related party payables | 375 | | | (85) | |
Net cash provided by (used in) operating activities | 1,724 | | | 1,248 | |
Cash flows from investing activities | | | |
Purchases and funding of finance receivables, net | (9,105) | | | (8,144) | |
Principal collections and recoveries on finance receivables | 6,774 | | | 6,904 | |
Net change in floorplan and other short-duration receivables | 734 | | | (541) | |
Purchases of leased vehicles, net | (3,154) | | | (2,990) | |
Proceeds from termination of leased vehicles | 3,264 | | | 3,732 | |
Other investing activities | (6) | | | (10) | |
Net cash provided by (used in) investing activities | (1,493) | | | (1,048) | |
Cash flows from financing activities | | | |
Net change in debt (original maturities less than three months) | (143) | | | 712 | |
Borrowings and issuances of secured debt | 6,960 | | | 6,332 | |
Payments on secured debt | (7,920) | | | (8,367) | |
Borrowings and issuances of unsecured debt | 4,526 | | | 4,352 | |
Payments on unsecured debt | (2,670) | | | (2,416) | |
Debt issuance costs | (31) | | | (37) | |
Dividends paid | (509) | | | (59) | |
Net cash provided by (used in) financing activities | 213 | | | 517 | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 443 | | | 717 | |
Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash | 29 | | | 53 | |
Cash, cash equivalents and restricted cash at beginning of period | 6,676 | | | 7,183 | |
Cash, cash equivalents and restricted cash at end of period | $ | 7,148 | | | $ | 7,953 | |
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet:
| | | | | |
| September 30, 2022March 31, 2023 |
Cash and cash equivalents | $ | 4,0794,352 | |
Restricted cash included in other assets | 2,6052,796 | |
Total | $ | 6,6847,148 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Amounts may not add due to rounding.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Basis of Presentation The consolidated financial statements include our accounts and the accounts of our consolidated subsidiaries, including certain special purpose entities (SPEs) utilized in secured financing transactions, which are considered variable interest entities (VIEs). All intercompany transactions and accounts have been eliminated in consolidation.
The consolidated financial statements, including the notes thereto, are condensed and do not include all disclosures required by generally accepted accounting principles (GAAP) in the U.S. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021,2022, as filed with the Securities and Exchange Commission on February 2, 2022 (2021January 31, 2023 (2022 Form 10-K). Except as otherwise specified, dollar amounts presented within tables are stated in millions. Certain columns and rows may not add due to rounding.
The condensed consolidated financial statements at September 30, 2022,March 31, 2023, and for the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, are unaudited and, in management’s opinion, include all adjustments, which consist of normal recurring adjustments and transactions or events discretely impacting the interim periods, considered necessary by management to fairly state our results of operations. The results for interim periods are not necessarily indicative of results for a full year. The condensed consolidated balance sheet at December 31, 20212022 was derived from audited annual financial statements.
Segment Information We are the wholly-owned captive finance subsidiary of General Motors Company (GM). We offer substantially similar products and services throughout many different regions, subject to local regulations and market conditions. We evaluate our business in two operating segments: North America (the North(North America Segment) and International (the International(International Segment). Our North America Segment includes operations in the U.S. and Canada. Our International Segment includes operations in Brazil, Chile, Colombia, Mexico and Peru, as well as our equity investments in joint ventures in China.
Recently Adopted Accounting Standards Not Yet Adopted In March 2022, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2022-02 "Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures" (ASU 2022-02), which eliminates the accounting guidance for troubled debt restructurings (TDRs) by creditors that have adopted ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments."and enhances certain disclosure requirements. We adopted ASU 2016-132022-02 on a modified retrospective basis on January 1, 2020. ASU 2022-02 enhances disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. In addition, ASU 2022-02 amends2023. The impact of the guidance on vintage disclosures to require entities to disclose current-period gross write-offs by year of origination.
For entities that have adopted ASU 2016-13, ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted if an entity has adopted ASU 2016-13.
The adoption of ASU 2022-02
is not expectedwas insignificant. Refer to
have a material impact on our consolidated financial statements.Note 3 for additional information.Note 2. Related Party Transactions
We offer loan and lease finance products through GM-franchised dealers to customers purchasing new vehicles manufactured by GM and certain used vehicles and make commercial loans directly to GM-franchised dealers and their affiliates. We also offer commercial loans to dealers that are consolidated by GM and those balances are included in finance receivables, net.
Under subvention programs, GM makes cash payments to us for offering incentivized rates and structures on retail loan and lease finance products. In addition, GM makes cash payments to us to cover interest payments on certain commercial loans we make to GM-franchised dealers. We received subvention payments from GM of $732$749 million and $828$439 million for the three months ended September 30, 2022March 31, 2023 and 2021, and $1.7 billion and $2.9 billion for the nine months ended September 30, 2022 and 2021.2022. Subvention due from GM is recorded as a related party receivables.receivable.
Amounts due to GM for commercial finance receivables originated but not yet funded are recorded as a related party payable.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Cruise is the GM global segment responsible for the development and commercialization of autonomous vehicle technology. We have a multi-year credit agreement with Cruise whereby we may provide advances to Cruise, up to an aggregate of $5.0 billion, over time, through 2024, to fund the purchase of autonomous vehicles from GM. At March 31, 2023 and December 31, 2022, Cruise had $151 million and $113 million of borrowings outstanding and access to an additional $4.5 billion in advances under the credit agreement. Amounts due from Cruise are included in finance receivables, net.
We are included in GM's consolidated U.S. federal income tax returns and certain U.S. state returns, and we are obligated to pay GM for our share of tax liabilities. During the ninethree months ended September 30,March 31, 2023, no payments were made to GM for state and federal income taxes. During the three months ended March 31, 2022, we made payments of $508$89 million to GM for state and federal income taxes related to the years 2020 through 2022.2021 and 2020. Amounts owed to GM for income taxes are recorded as a related party payable.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following tables present related party transactions:
| Balance Sheet Data | Balance Sheet Data | September 30, 2022 | | December 31, 2021 | Balance Sheet Data | March 31, 2023 | | December 31, 2022 |
Commercial finance receivables, net due from dealers consolidated by GM | Commercial finance receivables, net due from dealers consolidated by GM | $ | 177 | | | $ | 163 | | Commercial finance receivables, net due from dealers consolidated by GM | $ | 163 | | | $ | 187 | |
Cruise receivables | Cruise receivables | $ | 68 | | | $ | — | | Cruise receivables | $ | 151 | | | $ | 113 | |
Subvention receivable | Subvention receivable | $ | 480 | | | $ | 282 | | Subvention receivable | $ | 594 | | | $ | 469 | |
Commercial loan funding payable | Commercial loan funding payable | $ | 45 | | | $ | 26 | | Commercial loan funding payable | $ | 72 | | | $ | 105 | |
Taxes payable | Taxes payable | $ | 166 | | | $ | 282 | | Taxes payable | $ | 374 | | | $ | 8 | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
Income Statement Data | Income Statement Data | 2022 | | 2021 | | 2022 | | 2021 | Income Statement Data | | 2023 | | 2022 |
Interest subvention earned on retail finance receivables(a) | Interest subvention earned on retail finance receivables(a) | $ | 242 | | | $ | 205 | | | $ | 674 | | | $ | 588 | | Interest subvention earned on retail finance receivables(a) | | $ | 257 | | | $ | 210 | |
Interest subvention earned on commercial finance receivables(a) | Interest subvention earned on commercial finance receivables(a) | $ | 17 | | | $ | 6 | | | $ | 41 | | | $ | 22 | | Interest subvention earned on commercial finance receivables(a) | | $ | 22 | | | $ | 10 | |
Leased vehicle subvention earned(b) | Leased vehicle subvention earned(b) | $ | 456 | | | $ | 670 | | | $ | 1,503 | | | $ | 2,095 | | Leased vehicle subvention earned(b) | | $ | 393 | | | $ | 547 | |
_________________
(a)Included in finance charge income.
(b)Included as a reduction to leased vehicle expenses.
Under the support agreement with GM (the Support Agreement), if our earning assets leverage ratio at the end of any calendar quarter exceeds the applicable threshold set in the Support Agreement, we may require GM to provide funding sufficient to bring our earning assets leverage ratio within the applicable threshold. In determining our earning assets leverage ratio (net earning assets divided by adjusted equity) under the Support Agreement, net earning assets means our finance receivables, net, plus leased vehicles, net, and adjusted equity means our equity, net of goodwill and inclusive of outstanding junior subordinated debt, as each may be adjusted for derivative accounting from time to time.
Additionally, the Support Agreement provides that GM will own all of our outstanding voting shares as long as we have any unsecured debt securities outstanding. GM also agrees to certain provisions in the Support Agreement intended to ensure we maintain adequate access to liquidity. Pursuant to these provisions, GM provides us with a $1.0 billion junior subordinated unsecured intercompany revolving credit facility, and GM will use commercially reasonable efforts to ensure that we will continue to be designated as a subsidiary borrower under GM's corporate revolving credit facilities. We have access, subject to available capacity, to $15.5$14.1 billion of GM's unsecured revolving credit facilities consisting of a three-year, $4.3five-year, $10.0 billion facility and a five-year, $11.2three-year, $4.1 billion facility. We also have exclusive access to GM's $2.0 billion 364-day revolving credit facility (GM Revolving 364-day Credit Facility). We had no borrowings outstanding under any of the GM revolving credit facilities at September 30, 2022March 31, 2023 and December 31, 2021. 2022.
In April 2022,March 2023, GM renewed and reduced the total borrowing capacity of the five-year, $11.2 billion facility to $10.0 billion, which now matures on March 31, 2028. GM also renewed and reduced the total borrowing capacity of the three-year, $4.3 billion facility to $4.1 billion, which now matures on March 31, 2026, and renewed the GM Revolving 364-Day364-day Credit Facility, which now matures on April 4, 2023.
March 30, 2024.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 3. Finance Receivables
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Retail finance receivables | Retail finance receivables | | | | Retail finance receivables | | | |
Retail finance receivables, net of fees(a) | Retail finance receivables, net of fees(a) | $ | 63,461 | | | $ | 58,093 | | Retail finance receivables, net of fees(a) | $ | 67,704 | | | $ | 65,322 | |
Less: allowance for loan losses | Less: allowance for loan losses | (2,044) | | | (1,839) | | Less: allowance for loan losses | (2,123) | | | (2,062) | |
Total retail finance receivables, net | Total retail finance receivables, net | 61,416 | | | 56,254 | | Total retail finance receivables, net | 65,581 | | | 63,260 | |
Commercial finance receivables | Commercial finance receivables | | | | Commercial finance receivables | | | |
Commercial finance receivables, net of fees(b) | Commercial finance receivables, net of fees(b) | 9,471 | | | 6,772 | | Commercial finance receivables, net of fees(b) | 10,627 | | | 11,288 | |
Less: allowance for loan losses | Less: allowance for loan losses | (42) | | | (47) | | Less: allowance for loan losses | (29) | | | (34) | |
Total commercial finance receivables, net | Total commercial finance receivables, net | 9,429 | | | 6,725 | | Total commercial finance receivables, net | 10,597 | | | 11,254 | |
Total finance receivables, net | Total finance receivables, net | $ | 70,845 | | | $ | 62,979 | | Total finance receivables, net | $ | 76,178 | | | $ | 74,514 | |
Fair value utilizing Level 2 inputs | Fair value utilizing Level 2 inputs | $ | 9,429 | | | $ | 6,725 | | Fair value utilizing Level 2 inputs | $ | 10,597 | | | $ | 11,254 | |
Fair value utilizing Level 3 inputs | Fair value utilizing Level 3 inputs | $ | 59,890 | | | $ | 57,613 | | Fair value utilizing Level 3 inputs | $ | 65,165 | | | $ | 62,150 | |
________________
(a) Net of unearned income, unamortized premiums and discounts, and deferred fees and costs.
(b) Net of dealer cash management balances of $1.5$2.2 billion and $1.0$1.9 billion at September 30, 2022March 31, 2023 and December 31, 2021.2022.
Rollforward of Allowance for Retail Loan Losses A summary of the activity in the allowance for retail loan losses is as follows:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | | 2023 | | 2022 |
Allowance for retail loan losses beginning balance | Allowance for retail loan losses beginning balance | $ | 1,987 | | | $ | 1,805 | | | $ | 1,839 | | | $ | 1,915 | | Allowance for retail loan losses beginning balance | | | $ | 2,062 | | | $ | 1,839 | |
Provision for loan losses | Provision for loan losses | 179 | | | 146 | | | 506 | | | 200 | | Provision for loan losses | | | 137 | | | 126 | |
Charge-offs | Charge-offs | (289) | | | (207) | | | (811) | | | (664) | | Charge-offs | | | (322) | | | (275) | |
Recoveries | Recoveries | 171 | | | 133 | | | 510 | | | 426 | | Recoveries | | | 186 | | | 177 | |
Foreign currency translation | (4) | | | (14) | | | — | | | (14) | | |
Foreign currency translation and other | | Foreign currency translation and other | | | 60 | | | 18 | |
Allowance for retail loan losses ending balance | Allowance for retail loan losses ending balance | $ | 2,044 | | | $ | 1,863 | | | $ | 2,044 | | | $ | 1,863 | | Allowance for retail loan losses ending balance | | | $ | 2,123 | | | $ | 1,884 | |
The allowance for retail loan losses as of percentage of retail finance receivables, net was 3.1% at March 31, 2023 and 3.2% at December 31, 2022.
Retail Credit Quality Our retail finance receivables portfolio includes loans made to consumers and businesses to finance the purchase of vehicles for personal and commercial use. The following tables are consolidated summaries of the amortized cost of the retail finance receivables by FICO score or its equivalent, determined at origination, for each vintage of the portfolio at September 30, 2022March 31, 2023 and December 31, 2021:2022:
| | | Year of Origination | | September 30, 2022 | | Year of Origination | | March 31, 2023 |
| | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total | | Percent | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Total | | Percent |
Prime - FICO Score 680 and greater | Prime - FICO Score 680 and greater | $ | 17,901 | | | $ | 14,587 | | | $ | 8,858 | | | $ | 2,614 | | | $ | 1,272 | | | $ | 311 | | | $ | 45,543 | | | 71.8 | % | Prime - FICO Score 680 and greater | $ | 6,996 | | | $ | 20,633 | | | $ | 12,223 | | | $ | 7,149 | | | $ | 1,915 | | | $ | 914 | | | $ | 49,829 | | | 73.6 | % |
Near-prime - FICO Score 620 to 679 | Near-prime - FICO Score 620 to 679 | 2,521 | | | 2,843 | | | 1,653 | | | 792 | | | 375 | | | 147 | | | 8,331 | | | 13.1 | | Near-prime - FICO Score 620 to 679 | 832 | | | 3,012 | | | 2,389 | | | 1,345 | | | 599 | | | 322 | | | 8,498 | | | 12.6 | |
Sub-prime - FICO Score less than 620 | Sub-prime - FICO Score less than 620 | 2,615 | | | 3,019 | | | 1,785 | | | 1,195 | | | 591 | | | 382 | | | 9,587 | | | 15.1 | | Sub-prime - FICO Score less than 620 | 835 | | | 3,054 | | | 2,525 | | | 1,443 | | | 916 | | | 603 | | | 9,377 | | | 13.8 | |
Retail finance receivables, net of fees | Retail finance receivables, net of fees | $ | 23,037 | | | $ | 20,449 | | | $ | 12,296 | | | $ | 4,601 | | | $ | 2,238 | | | $ | 840 | | | $ | 63,461 | | | 100.0 | % | Retail finance receivables, net of fees | $ | 8,663 | | | $ | 26,699 | | | $ | 17,138 | | | $ | 9,936 | | | $ | 3,429 | | | $ | 1,839 | | | $ | 67,704 | | | 100.0 | % |
| | | Year of Origination | | | December 31, 2021 | | Year of Origination | | December 31, 2022 |
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | | Total | | Percent | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total | | Percent |
Prime - FICO Score 680 and greater | Prime - FICO Score 680 and greater | $ | 19,729 | | | $ | 12,408 | | | $ | 4,078 | | | $ | 2,298 | | | $ | 763 | | | $ | 143 | | | | $ | 39,419 | | | 67.9 | % | Prime - FICO Score 680 and greater | $ | 22,677 | | | $ | 13,399 | | | $ | 7,991 | | | $ | 2,254 | | | $ | 1,019 | | | $ | 205 | | | $ | 47,543 | | | 72.8 | % |
Near-prime - FICO Score 620 to 679 | Near-prime - FICO Score 620 to 679 | 3,856 | | | 2,388 | | | 1,229 | | | 648 | | | 274 | | | 84 | | | | 8,479 | | | 14.6 | | Near-prime - FICO Score 620 to 679 | 3,202 | | | 2,601 | | | 1,487 | | | 688 | | | 310 | | | 104 | | | 8,392 | | | 12.8 | |
Sub-prime - FICO Score less than 620 | Sub-prime - FICO Score less than 620 | 4,053 | | | 2,528 | | | 1,777 | | | 972 | | | 570 | | | 295 | | | | 10,195 | | | 17.5 | | Sub-prime - FICO Score less than 620 | 3,211 | | | 2,746 | | | 1,604 | | | 1,051 | | | 496 | | | 280 | | | 9,388 | | | 14.4 | |
Retail finance receivables, net of fees | Retail finance receivables, net of fees | $ | 27,638 | | | $ | 17,324 | | | $ | 7,084 | | | $ | 3,918 | | | $ | 1,607 | | | $ | 522 | | | | $ | 58,093 | | | 100.0 | % | Retail finance receivables, net of fees | $ | 29,090 | | | $ | 18,745 | | | $ | 11,081 | | | $ | 3,992 | | | $ | 1,824 | | | $ | 589 | | | $ | 65,322 | | | 100.0 | % |
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
We review the ongoing credit quality of our retail finance receivables based on customer payment activity. A retail account is considered delinquent if a substantial portion of a scheduled payment has not been received by the date the payment was contractually due. Retail finance receivables are collateralized by vehicle titles and, subject to local laws, we generally have the right to repossess the vehicle in the event the customer defaults on the payment terms of the contract. The following tables are consolidated summaries of the delinquency status of the outstanding amortized cost of retail finance receivables by delinquency status, for each vintage of the portfolio at September 30, 2022March 31, 2023 and December 31, 2021,2022, as well as summary totals for September 30, 2021:March 31, 2022. The first table also presents our current period charge-offs by vintage:
| | | Year of Origination | | September 30, 2022 | | September 30, 2021 | | Year of Origination | | March 31, 2023 | | March 31, 2022 |
| | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total | | Percent | | Total | | Percent | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Total | | Percent | | Total | | Percent |
0 - 30 days | 0 - 30 days | $ | 22,792 | | | $ | 19,917 | | | $ | 11,944 | | | $ | 4,359 | | | $ | 2,096 | | | $ | 729 | | | $ | 61,836 | | | 97.4 | % | | $ | 56,086 | | | 97.7 | % | 0 - 30 days | $ | 8,646 | | | $ | 26,262 | | | $ | 16,648 | | | $ | 9,640 | | | $ | 3,236 | | | $ | 1,676 | | | $ | 66,109 | | | 97.6 | % | | $ | 58,179 | | | 97.8 | % |
| 31 - 60 days | 31 - 60 days | 183 | | | 381 | | | 256 | | | 179 | | | 106 | | | 81 | | | 1,185 | | | 1.9 | | | 989 | | | 1.7 | | 31 - 60 days | 17 | | | 316 | | | 363 | | | 222 | | | 146 | | | 124 | | | 1,188 | | | 1.8 | | | 983 | | | 1.7 | |
Greater than 60 days | Greater than 60 days | 54 | | | 133 | | | 87 | | | 58 | | | 33 | | | 29 | | | 394 | | | 0.6 | | | 315 | | | 0.5 | | Greater than 60 days | 1 | | | 104 | | | 112 | | | 68 | | | 43 | | | 36 | | | 363 | | | 0.5 | | | 302 | | | 0.5 | |
Finance receivables more than 30 days delinquent | Finance receivables more than 30 days delinquent | 236 | | | 514 | | | 343 | | | 237 | | | 139 | | | 109 | | | 1,579 | | | 2.5 | | | 1,304 | | | 2.2 | | Finance receivables more than 30 days delinquent | 17 | | | 420 | | | 475 | | | 290 | | | 190 | | | 160 | | | 1,551 | | | 2.3 | | | 1,285 | | | 2.2 | |
In repossession | In repossession | 9 | | | 18 | | | 9 | | | 5 | | | 3 | | | 2 | | | 46 | | | 0.1 | | | 34 | | | 0.1 | | In repossession | — | | | 17 | | | 15 | | | 6 | | | 3 | | | 2 | | | 44 | | | 0.1 | | | 39 | | | 0.1 | |
Finance receivables more than 30 days delinquent or in repossession | Finance receivables more than 30 days delinquent or in repossession | 245 | | | 532 | | | 352 | | | 242 | | | 142 | | | 111 | | | 1,625 | | | 2.6 | | | 1,338 | | | 2.3 | | Finance receivables more than 30 days delinquent or in repossession | 17 | | | 437 | | | 489 | | | 296 | | | 193 | | | 162 | | | 1,595 | | | 2.4 | | | 1,324 | | | 2.2 | |
Retail finance receivables, net of fees | Retail finance receivables, net of fees | $ | 23,037 | | | $ | 20,449 | | | $ | 12,296 | | | $ | 4,601 | | | $ | 2,238 | | | $ | 840 | | | $ | 63,461 | | | 100.0 | % | | $ | 57,424 | | | 100.0 | % | Retail finance receivables, net of fees | $ | 8,663 | | | $ | 26,699 | | | $ | 17,138 | | | $ | 9,936 | | | $ | 3,429 | | | $ | 1,839 | | | $ | 67,704 | | | 100.0 | % | | $ | 59,503 | | | 100.0 | % |
Charge-offs for the three months ended March 31, 2023 | | Charge-offs for the three months ended March 31, 2023 | $ | — | | | $ | 102 | | | $ | 108 | | | $ | 52 | | | $ | 32 | | | $ | 28 | | | $ | 322 | | | | | | | |
| | | Year of Origination | | | December 31, 2021 | | Year of Origination | | | December 31, 2022 |
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | | Total | | Percent | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | | Total | | Percent |
0 - 30 days | 0 - 30 days | $ | 27,270 | | | $ | 16,945 | | | $ | 6,772 | | | $ | 3,721 | | | $ | 1,478 | | | $ | 440 | | | | $ | 56,626 | | | 97.5 | % | 0 - 30 days | $ | 28,676 | | | $ | 18,128 | | | $ | 10,702 | | | $ | 3,743 | | | $ | 1,685 | | | $ | 493 | | | | $ | 63,426 | | | 97.1 | % |
| 31 - 60 days | 31 - 60 days | 273 | | | 276 | | | 230 | | | 147 | | | 97 | | | 60 | | | | 1,083 | | | 1.8 | | 31 - 60 days | 310 | | | 452 | | | 275 | | | 184 | | | 103 | | | 69 | | | | 1,393 | | | 2.1 | |
Greater than 60 days | Greater than 60 days | 83 | | | 93 | | | 76 | | | 46 | | | 30 | | | 21 | | | | 349 | | | 0.6 | | Greater than 60 days | 93 | | | 150 | | | 98 | | | 62 | | | 35 | | | 26 | | | | 465 | | | 0.7 | |
Finance receivables more than 30 days delinquent | Finance receivables more than 30 days delinquent | 356 | | | 369 | | | 306 | | | 193 | | | 127 | | | 81 | | | | 1,432 | | | 2.4 | | Finance receivables more than 30 days delinquent | 403 | | | 603 | | | 373 | | | 246 | | | 138 | | | 95 | | | | 1,857 | | | 2.8 | |
In repossession | In repossession | 12 | | | 10 | | | 6 | | | 4 | | | 2 | | | 1 | | | | 35 | | | 0.1 | | In repossession | 11 | | | 14 | | | 6 | | | 4 | | | 2 | | | 1 | | | | 39 | | | 0.1 | |
Finance receivables more than 30 days delinquent or in repossession | Finance receivables more than 30 days delinquent or in repossession | 368 | | | 379 | | | 312 | | | 197 | | | 129 | | | 82 | | | | 1,467 | | | 2.5 | | Finance receivables more than 30 days delinquent or in repossession | 414 | | | 617 | | | 380 | | | 249 | | | 140 | | | 96 | | | | 1,896 | | | 2.9 | |
Retail finance receivables, net of fees | Retail finance receivables, net of fees | $ | 27,638 | | | $ | 17,324 | | | $ | 7,084 | | | $ | 3,918 | | | $ | 1,607 | | | $ | 522 | | | | $ | 58,093 | | | 100.0 | % | Retail finance receivables, net of fees | $ | 29,090 | | | $ | 18,745 | | | $ | 11,081 | | | $ | 3,992 | | | $ | 1,824 | | | $ | 589 | | | | $ | 65,322 | | | 100.0 | % |
The accrual of finance charge income had been suspended on retail finance receivables with contractual amounts due of $618$585 million and $602$685 million at September 30, 2022March 31, 2023 and December 31, 2021.2022. Accrual of finance charge income on retail finance receivables is generally suspended on accounts that are more than 60 days delinquent, accounts in bankruptcy and accounts in repossession.
Impaired Retail Finance Receivables - TDRsLoan Modifications The outstanding amortized costUnder certain circumstances, we may agree to modify the terms of retail finance receivablesan existing loan with a borrower for various reasons, including financial difficulties. For those borrowers experiencing financial difficulties, we may provide payment deferments, term extensions or a combination thereof. A loan that areis deferred greater than six months in the preceding twelve months would be considered TDRs were $2.0 billion at September 30, 2022to be other-than-insignificantly delayed. In such circumstances, we must determine whether the modification should be accounted for as an extinguishment of the original loan and $1.9 billion at December 31, 2021, including nonaccrual loansa creation of $217 million at September 30, 2022 and $219 million at December 31, 2021. For definition and additional information on TDRs, see Note 1 in our 2021 Form 10-K. Additional TDR activity is presented below:a new loan, or the continuation of the original loan with modifications.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Number of loans classified as TDRs during the period | 16,745 | | | 12,807 | | | 41,871 | | | 33,227 | |
Outstanding amortized cost of loans classified as TDRs during the period | $ | 354 | | | $ | 250 | | | $ | 870 | | | $ | 667 | |
The unpaid principal balances, neteffect of recoveries, of loans charged off duringthese modifications is already included in the reporting period and were within 12 months of being modified as a TDR were insignificantallowance for credit losses because our estimated allowance represents currently expected credit losses. A change to the three and nine months ended September 30, 2022 and 2021.allowance for credit losses is generally not recorded upon modification.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The amortized cost at March 31, 2023 of the loans modified during the three months ended March 31, 2023 was insignificant. The unpaid principal balances, net of recoveries, of loans charged off during the reporting period that were modified within 12 months preceding default were insignificant for the three months ended March 31, 2023.
Commercial Credit Quality Our commercial finance receivables consist of dealer financings, primarily for dealer inventory purchases. Proprietary models are used to assign a risk rating to each dealer. We perform periodic credit reviews of each dealership and adjust the dealership's risk rating, if necessary.
Our commercial risk model and risk rating categories are as follows:
| | | | | | | | |
Dealer Risk Rating | | Description |
I | | Performing accounts with strong to acceptable financial metrics with at least satisfactory capacity to meet financial commitments. |
II | | Performing accounts experiencing potential weakness in financial metrics and repayment prospects resulting in increased monitoring. |
III | | Non-Performing accounts with inadequate paying capacity for current obligations and that have the distinct possibility of creating a loss if deficiencies are not corrected. |
IV | | Non-Performing accounts with inadequate paying capacity for current obligations and inherent weaknesses that make collection or liquidation in full highly questionable or improbable. |
Dealers with III and IV risk ratings are subject to additional monitoring and restrictions on funding, including suspension of lines of credit and liquidation of assets. The following tables summarize the credit risk profile by dealer risk rating of commercial finance receivables at September 30, 2022March 31, 2023 and December 31, 2021:2022:
| | | Year of Origination | | September 30, 2022 | | Year of Origination | | March 31, 2023 |
Dealer Risk Rating | Dealer Risk Rating | | Revolving | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total | | Percent | Dealer Risk Rating | | Revolving | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Total | | Percent |
I | I | | $ | 7,790 | | | $ | 470 | | | $ | 373 | | | $ | 378 | | | $ | 104 | | | $ | 47 | | | $ | 26 | | | $ | 9,189 | | | 97.0 | % | I | | $ | 8,936 | | | $ | 116 | | | $ | 562 | | | $ | 341 | | | $ | 345 | | | $ | 98 | | | $ | 49 | | | $ | 10,446 | | | 98.3 | % |
II | II | | 199 | | | 15 | | | 4 | | | — | | | 7 | | | — | | | — | | | 226 | | | 2.4 | | II | | 94 | | | — | | | — | | | 1 | | | — | | | — | | | — | | | 96 | | | 0.9 | |
III | III | | 50 | | | — | | | — | | | — | | | 5 | | | — | | | — | | | 55 | | | 0.6 | | III | | 59 | | | — | | | 15 | | | — | | | — | | | 10 | | | — | | | 84 | | | 0.8 | |
IV | IV | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | IV | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Balance at end of period | Balance at end of period | | $ | 8,039 | | | $ | 485 | | | $ | 378 | | | $ | 378 | | | $ | 116 | | | $ | 48 | | | $ | 27 | | | $ | 9,471 | | | 100.0 | % | Balance at end of period | | $ | 9,089 | | | $ | 116 | | | $ | 578 | | | $ | 343 | | | $ | 345 | | | $ | 108 | | | $ | 49 | | | $ | 10,627 | | | 100.0 | % |
| | | Year of Origination | | | December 31, 2021 | | Year of Origination | | | December 31, 2022 |
Dealer Risk Rating | Dealer Risk Rating | | Revolving | | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | | Total | | Percent | Dealer Risk Rating | | Revolving | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | | Total | | Percent |
I | I | | $ | 5,296 | | | $ | 433 | | | $ | 426 | | | $ | 131 | | | $ | 57 | | | $ | 50 | | | $ | 10 | | | | $ | 6,403 | | | 94.6 | % | I | | $ | 9,624 | | | $ | 566 | | | $ | 361 | | | $ | 372 | | | $ | 102 | | | $ | 45 | | | $ | 24 | | | | $ | 11,094 | | | 98.3 | % |
II | II | | 213 | | | 5 | | | 16 | | | 12 | | | 1 | | | 10 | | | — | | | | 257 | | | 3.8 | | II | | 89 | | | — | | | 1 | | | — | | | — | | | — | | | — | | | | 91 | | | 0.8 | |
III | III | | 81 | | | 8 | | | 15 | | | 2 | | | — | | | 2 | | | 4 | | | | 112 | | | 1.6 | | III | | 78 | | | 15 | | | — | | | — | | | 10 | | | — | | | — | | | | 104 | | | 0.9 | |
IV | IV | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | — | | | — | | IV | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | — | | | — | |
Balance at end of period | Balance at end of period | | $ | 5,590 | | | $ | 446 | | | $ | 457 | | | $ | 145 | | | $ | 58 | | | $ | 62 | | | $ | 14 | | | | $ | 6,772 | | | 100.0 | % | Balance at end of period | | $ | 9,791 | | | $ | 581 | | | $ | 363 | | | $ | 372 | | | $ | 112 | | | $ | 45 | | | $ | 25 | | | | $ | 11,288 | | | 100.0 | % |
Floorplan advances comprise 94%96% and 97% of the total revolving balances at September 30, 2022March 31, 2023 and December 31, 2021.2022. Dealer term loans are presented by year of origination.
At September 30, 2022March 31, 2023 and December 31, 2021,2022, substantially all of our commercial finance receivables were current with respect to payment status, and activity in the allowance for commercial loan losses was insignificant for the three and nine months ended September 30, 2022March 31, 2023 and 2021.2022. There were no commercial finance receivables on nonaccrual status and none were classified as TDRs at September 30, 2022March 31, 2023 and December 31, 2021.2022. There were no charge-offs, and no loan modifications were extended to borrowers experiencing financial difficulty for the three months ended March 31, 2023.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 4. Leased Vehicles
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Leased vehicles | Leased vehicles | $ | 47,637 | | | $ | 54,821 | | Leased vehicles | $ | 44,867 | | | $ | 46,069 | |
Manufacturer subvention | Manufacturer subvention | (5,555) | | | (7,398) | | Manufacturer subvention | (4,876) | | | (5,150) | |
Net capitalized cost | Net capitalized cost | 42,082 | | | 47,423 | | Net capitalized cost | 39,991 | | | 40,919 | |
Less: accumulated depreciation | Less: accumulated depreciation | (8,305) | | | (9,494) | | Less: accumulated depreciation | (8,143) | | | (8,218) | |
Leased vehicles, net | Leased vehicles, net | $ | 33,778 | | | $ | 37,929 | | Leased vehicles, net | $ | 31,848 | | | $ | 32,701 | |
Depreciation expense related to leased vehicles, net was $1.2 billion and $1.6 billion for the three months ended September 30, 2022March 31, 2023 and 2021 and $3.6 billion and $4.8 billion for the nine months ended September 30, 2022 and 2021.2022.
The following table summarizes minimum rental payments due to us as lessor under operating leases at September 30, 2022:March 31, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total |
Lease payments under operating leases | $ | 1,396 | | | $ | 4,515 | | | $ | 2,373 | | | $ | 696 | | | $ | 56 | | | $ | 1 | | | $ | 9,037 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ending December 31, |
| 2023 | | 2024 | | 2025 | | 2026 | | 2027 | | Thereafter | | Total |
Lease payments under operating leases | $ | 3,807 | | | $ | 3,293 | | | $ | 1,505 | | | $ | 243 | | | $ | 8 | | | $ | — | | | $ | 8,855 | |
Note 5. Equity in Net Assets of Nonconsolidated Affiliates
We use the equity method to account for our equity interest in joint ventures. The income of these joint ventures is not consolidated into our financial statements; rather, our proportionate share of the earnings is reflected as equity income.
There have been no ownership changes in our joint ventures since December 31, 2021.2022. The following table presents certain aggregated operating data of our joint ventures:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
Summarized Operating Data | 2022 | | 2021 | | 2022 | | 2021 |
Finance charge income | $ | 391 | | | $ | 406 | | | $ | 1,266 | | | $ | 1,254 | |
Income before income taxes | $ | 168 | | | $ | 205 | | | $ | 564 | | | $ | 599 | |
Net income | $ | 126 | | | $ | 154 | | | $ | 424 | | | $ | 450 | |
In June 2022, we received the remaining dividend payment of $26 million from SAIC-GMAC Automotive Finance Company Limited declared in 2021, and reinvested it in SAIC-GMF Leasing Co. Ltd. | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
Summarized Operating Data | | | | | 2023 | | 2022 |
Finance charge income | | | | | $ | 392 | | | $ | 451 | |
Income before income taxes | | | | | $ | 155 | | | $ | 206 | |
Net income | | | | | $ | 116 | | | $ | 154 | |
At September 30, 2022March 31, 2023 and December 31, 2021,2022, we had undistributed earnings of $889$836 million and $740$795 million related to our nonconsolidated affiliates.
Note 6. Debt
| | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 |
| Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Secured debt | | | | | | | |
Revolving credit facilities | $ | 2,839 | | | $ | 2,839 | | | $ | 3,931 | | | $ | 3,931 | |
Securitization notes payable | 38,414 | | | 37,934 | | | 38,200 | | | 37,537 | |
Total secured debt | 41,253 | | | 40,773 | | | 42,131 | | | 41,467 | |
Unsecured debt | | | | | | | |
Senior notes | 47,939 | | | 46,158 | | | 46,111 | | | 43,676 | |
Credit facilities | 1,587 | | | 1,563 | | | 1,473 | | | 1,448 | |
Other unsecured debt | 7,287 | | | 7,288 | | | 7,139 | | | 7,146 | |
Total unsecured debt | 56,814 | | | 55,009 | | | 54,723 | | | 52,270 | |
Total secured and unsecured debt | $ | 98,067 | | | $ | 95,782 | | | $ | 96,854 | | | $ | 93,738 | |
Fair value utilizing Level 2 inputs | | $ | 93,799 | | | | | $ | 91,545 | |
Fair value utilizing Level 3 inputs | | $ | 1,983 | | | | | $ | 2,192 | |
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 6. Debt
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Secured debt | | | | | | | |
Revolving credit facilities | $ | 3,805 | | | $ | 3,804 | | | $ | 3,497 | | | $ | 3,495 | |
Securitization notes payable | 36,929 | | | 36,252 | | | 35,841 | | | 35,906 | |
Total secured debt | 40,733 | | | 40,056 | | | 39,338 | | | 39,401 | |
Unsecured debt | | | | | | | |
Senior notes | 44,259 | | | 41,251 | | | 45,386 | | | 46,539 | |
Credit facilities | 1,362 | | | 1,335 | | | 1,229 | | | 1,211 | |
Other unsecured debt | 7,469 | | | 7,470 | | | 6,608 | | | 6,607 | |
Total unsecured debt | 53,090 | | | 50,055 | | | 53,223 | | | 54,357 | |
Total secured and unsecured debt | $ | 93,823 | | | $ | 90,111 | | | $ | 92,561 | | | $ | 93,758 | |
Fair value utilizing Level 2 inputs | | | $ | 88,350 | | | | | $ | 92,250 | |
Fair value utilizing Level 3 inputs | | | $ | 1,761 | | | | | $ | 1,508 | |
Secured Debt Most of the secured debt was issued by VIEs and is repayable only from proceeds related to the underlying pledged assets. Refer to Note 7 for further information. During the ninethree months ended September 30, 2022,March 31, 2023, we renewed credit facilities with a total borrowing capacity of $18.3$1.8 billion, and we issued $18.0$5.1 billion in aggregate principal amount of securitization notes payable with an initial weighted average interest rate of 2.85%5.25% and maturity dates ranging from 20232027 to 2030.2032.
Unsecured Debt During the ninethree months ended September 30, 2022,March 31, 2023, we issued $7.7$3.2 billion in aggregate principal amount of senior notes with an initial weighted average interest rate of 3.39%5.41% and maturity dates ranging from 20242026 to 2032.2033.
General Motors Financial Company, Inc. is the sole guarantor of its subsidiaries' unsecured debt obligations for which a guarantee is provided.
Compliance with Debt Covenants Several of our revolving credit facilities require compliance with certain financial and operational covenants as well as regular reporting to lenders, including providing certain subsidiary financial statements. Certain of our secured debt agreements also contain various covenants, including maintaining portfolio performance ratios as well as limits on deferment levels. Our unsecured debt obligations contain covenants including limitations on our ability to incur certain liens. At September 30, 2022,March 31, 2023, we were in compliance with these debt covenants.
Note 7. Variable Interest Entities and Other Transfers of Finance Receivables
Securitizations and Credit Facilities The following table summarizes the assets and liabilities related to our consolidated VIEs:
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Restricted cash(a) | Restricted cash(a) | $ | 2,486 | | | $ | 2,740 | | Restricted cash(a) | $ | 2,638 | | | $ | 2,535 | |
Finance receivables, net of fees | Finance receivables, net of fees | $ | 36,003 | | | $ | 31,940 | | Finance receivables, net of fees | $ | 38,109 | | | $ | 38,774 | |
Lease related assets | Lease related assets | $ | 17,143 | | | $ | 16,143 | | Lease related assets | $ | 16,414 | | | $ | 18,456 | |
Secured debt | Secured debt | $ | 40,714 | | | $ | 39,277 | | Secured debt | $ | 41,312 | | | $ | 42,188 | |
_______________
(a) Included in other assets.
We use SPEs that are considered VIEs to issue variable funding notes to third-party, bank-sponsored warehouse facilities or asset-backed securities to investors in securitization transactions. The debt issued by these VIEs is backed by finance receivables and leasing-related assets transferred to the VIEs. We determined that we are the primary beneficiary of the VIEs because our servicing responsibilities give us the power to direct the activities that most significantly impact the performance of the VIEs and our variable interests in the VIEs give us the obligation to absorb losses and the right to receive residual returns that could potentially be significant. The respective assets of the VIEs serve as the sole source of repayment for the debt issued
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
by these entities. Investors in the notes issued by the VIEs do not have recourse to us or our other assets, with the exception of customary representation and warranty repurchase provisions and indemnities that we provide as the servicer. We are not required, and do not currently intend, to provide any additional financial support to these VIEs. While these subsidiaries are included in our condensed consolidated financial statements, these subsidiaries are separate legal entities and the finance receivables, lease-related assets and cash held by these subsidiaries are legally owned by them and are not available to our creditors or creditors of our other subsidiaries.
Other Transfers of Finance Receivables Under certain debt agreements, we transfer finance receivables to entities that we do not control through majority voting interest or through contractual arrangements. These transfers do not meet the criteria to be considered sales under GAAP; therefore, the finance receivables and the related debt are included in our condensed consolidated financial statements, similar to the treatment of finance receivables and related debt of our consolidated VIEs. Any collections received on the transferred receivables are available only for the repayment of the related debt. At September 30, 2022March 31, 2023 and December 31, 2021, $167 million and $500 million2022, an insignificant amount in finance receivables had been transferred in secured funding arrangements to third-party banks, relating to $84 million and $125 millionan insignificant amount in secured debt outstanding.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 8. Derivative Financial Instruments and Hedging Activities
We are exposed to certain risks arising from both our business operations and economic conditions. We manage economic risks, including interest rate risk, primarily by managing the amount, sources, and duration of our assets and liabilities and by using derivative financial instruments. Specifically, we enter into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our borrowings.
Certain of our foreign operations expose us to fluctuations of foreign interest rates and exchange rates. We primarily finance our earning assets with debt in the same currency to minimize the impact to earnings from our exposure to fluctuations in exchange rates. When we use a different currency, these fluctuations may impact the value of our cash receipts and payments in terms of our functional currency. We enter into derivative financial instruments to protect the value or fix the amount of certain assets and liabilities in terms of the relevant functional currency.
The table below presents the gross fair value amounts of our derivative financial instruments and the associated notional amounts:
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 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 |
Derivatives designated as hedges | Derivatives designated as hedges | | | | | | | | | | | | Derivatives designated as hedges | | | | | | | | | | | |
Fair value hedges | Fair value hedges | | Fair value hedges | |
Interest rate swaps | Interest rate swaps | $ | 20,950 | | | $ | — | | | $ | 864 | | | $ | 15,058 | | | $ | 74 | | | $ | 88 | | Interest rate swaps | $ | 16,559 | | | $ | 8 | | | $ | 334 | | | $ | 19,950 | | | $ | — | | | $ | 821 | |
Foreign currency swaps | — | | | — | | | — | | | 682 | | | — | | | 59 | | |
| Cash flow hedges | Cash flow hedges | | Cash flow hedges | |
Interest rate swaps | Interest rate swaps | 1,117 | | | 26 | | | 3 | | | 611 | | | 12 | | | 4 | | Interest rate swaps | 1,637 | | | 33 | | | 3 | | | 1,434 | | | 34 | | | 1 | |
Foreign currency swaps | Foreign currency swaps | 6,329 | | | 4 | | | 1,036 | | | 7,419 | | | 85 | | | 201 | | Foreign currency swaps | 8,013 | | | 3 | | | 497 | | | 6,852 | | | — | | | 586 | |
Derivatives not designated as hedges | Derivatives not designated as hedges | | Derivatives not designated as hedges | |
Interest rate contracts | Interest rate contracts | 106,973 | | | 2,250 | | | 1,965 | | | 110,053 | | | 846 | | | 339 | | Interest rate contracts | 114,353 | | | 1,924 | | | 2,073 | | | 113,975 | | | 2,268 | | | 1,984 | |
Foreign currency contracts | — | | | — | | | — | | | 148 | | | — | | | — | | |
| Total | Total | $ | 135,369 | | | $ | 2,280 | | | $ | 3,867 | | | $ | 133,971 | | | $ | 1,017 | | | $ | 691 | | Total | $ | 140,562 | | | $ | 1,968 | | | $ | 2,907 | | | $ | 142,212 | | | $ | 2,302 | | | $ | 3,392 | |
The gross amounts of the fair value of our derivative instruments that are classified as assets or liabilities are included in other assets or other liabilities, respectively. Amounts accrued for interest payments in a net receivable position are included in other assets. Amounts accrued for interest payments in a net payable position are included in other liabilities. All our derivatives are categorized within Level 2 of the fair value hierarchy. The fair value for Level 2 instruments was derived using the market approach based on observable market inputs including quoted prices of similar instruments and foreign exchange and interest rate forward curves.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
We primarily enter into derivative instruments through AmeriCredit Financial Services, Inc. (AFSI); however, our SPEs may also be parties to derivative instruments. Agreements between AFSI and its derivative counterparties include rights of setoff for positions with offsetting values or for collateral held or posted. At September 30, 2022March 31, 2023 and December 31, 2021,2022, the fair value of derivative instruments that are classified as assets or liabilities available for offset was $1.4$1.2 billion and $505 million.$1.3 billion. At September 30, 2022March 31, 2023 and December 31, 2021,2022, we held $471$480 million and $376$553 million of collateral from counterparties that was available for netting against our asset positions. At September 30, 2022March 31, 2023 and December 31, 2021,2022, we had $1.4$1.2 billion and $45 million$1.5 billion of collateral posted to counterparties that was available for netting against our liability positions.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following amounts were recorded in the condensed consolidated balance sheet related to items designated and qualifying as hedged items in fair value hedging relationships:
| | | | | | | | | | | | | | | | | | | | | | | |
| Carrying Amount of Hedged Items | | Cumulative Amount of Fair Value Hedging Adjustments(a) |
| September 30, 2022 | | December 31, 2021 | | September 30, 2022 | | December 31, 2021 |
Unsecured debt | $ | 28,299 | | | $ | 24,964 | | | $ | 801 | | | $ | (226) | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Carrying Amount of Hedged Items | | Cumulative Amount of Fair Value Hedging Adjustments(a) |
| March 31, 2023 | | December 31, 2022 | | March 31, 2023 | | December 31, 2022 |
Unsecured debt | $ | 29,257 | | | $ | 28,319 | | | $ | 752 | | | $ | 781 | |
_________________
(a)Includes $55$470 million and $246$86 million of unamortized gainslosses remaining on hedged items for which hedge accounting has been discontinued at September 30, 2022March 31, 2023 and December 31, 2021.2022.
The table below presents the effect of our derivative financial instruments in the condensed consolidated statements of income:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
| | Interest Expense(a) | | Operating Expenses(b) | | Interest Expense(a) | | Operating Expenses(b) | | Interest Expense(a) | | Operating Expenses(b) | | Interest Expense(a) | | Operating Expenses(b) | | | Interest Expense(a) | | Operating Expenses(b) | | Interest Expense(a) | | Operating Expenses(b) |
Fair value hedges | Fair value hedges | | | | | | | | | | | | | | | | Fair value hedges | | | | | | | | |
Hedged items - interest rate swaps | Hedged items - interest rate swaps | $ | 346 | | | $ | — | | | $ | 69 | | | $ | — | | | $ | 1,023 | | | $ | — | | | $ | 314 | | | $ | — | | Hedged items - interest rate swaps | | $ | (29) | | | $ | — | | | $ | 376 | | | $ | — | |
Interest rate swaps | Interest rate swaps | (341) | | | — | | | (56) | | | — | | | (963) | | | — | | | (273) | | | — | | Interest rate swaps | | 46 | | | — | | | (340) | | | — | |
Hedged items - foreign currency swaps(c) | Hedged items - foreign currency swaps(c) | — | | | — | | | — | | | 16 | | | — | | | 23 | | | — | | | 48 | | Hedged items - foreign currency swaps(c) | | — | | | — | | | — | | | 23 | |
Foreign currency swaps | Foreign currency swaps | — | | | — | | | (2) | | | (16) | | | (2) | | | (24) | | | (11) | | | (44) | | Foreign currency swaps | | — | | | — | | | (2) | | | (24) | |
Cash flow hedges | Cash flow hedges | | Cash flow hedges | | |
Interest rate swaps | Interest rate swaps | 4 | | | — | | | (2) | | | — | | | 9 | | | — | | | (12) | | | — | | Interest rate swaps | | 9 | | | — | | | 2 | | | — | |
Hedged items - foreign currency swaps(c) | Hedged items - foreign currency swaps(c) | — | | | 470 | | | — | | | 166 | | | — | | | 1,129 | | | — | | | 318 | | Hedged items - foreign currency swaps(c) | | — | | | (136) | | | — | | | 160 | |
Foreign currency swaps | Foreign currency swaps | (42) | | | (470) | | | (33) | | | (166) | | | (123) | | | (1,129) | | | (93) | | | (318) | | Foreign currency swaps | | (37) | | | 136 | | | (38) | | | (160) | |
Derivatives not designated as hedges | Derivatives not designated as hedges | | Derivatives not designated as hedges | | |
Interest rate contracts | Interest rate contracts | 31 | | | — | | | 31 | | | — | | | 59 | | | — | | | 70 | | | — | | Interest rate contracts | | 52 | | | — | | | — | | | — | |
Total income (loss) recognized | Total income (loss) recognized | $ | (2) | | | $ | — | | | $ | 7 | | | $ | — | | | $ | 4 | | | $ | — | | | $ | (5) | | | $ | 4 | | Total income (loss) recognized | | $ | 40 | | | $ | — | | | $ | (2) | | | $ | — | |
_________________
(a)Total interest expense was $764 million$1.0 billion and $704$577 million for the three months ended September 30, 2022March 31, 2023 and 2021, and $2.0 billion for the nine months ended September 30, 2022 and 2021.2022.
(b)Total operating expenses were $436$442 million and $381$372 million for the three months ended September 30, 2022March 31, 2023 and 2021, and $1.2 billion for the nine months ended September 30, 2022 and 2021.2022.
(c)Transaction activity recorded in operating expenses related to foreign currency-denominated loans.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The tables below present the effect of our derivative financial instruments in the condensed consolidated statements of comprehensive income:
| | | Gains (Losses) Recognized In Accumulated Other Comprehensive Income (Loss) | | | Gains (Losses) Recognized In Accumulated Other Comprehensive Income (Loss) |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
Fair value hedges | Fair value hedges | | | | | | | | Fair value hedges | | | | |
Foreign currency swaps | Foreign currency swaps | $ | — | | | $ | (1) | | | $ | (2) | | | $ | (5) | | Foreign currency swaps | | $ | — | | | $ | (2) | |
Cash flow hedges | Cash flow hedges | | Cash flow hedges | | |
Interest rate swaps | Interest rate swaps | (1) | | | 4 | | | 9 | | | 10 | | Interest rate swaps | | 1 | | | 4 | |
Foreign currency swaps | Foreign currency swaps | (383) | | | (147) | | | (832) | | | (278) | | Foreign currency swaps | | 29 | | | (57) | |
Total | Total | $ | (384) | | | $ | (144) | | | $ | (825) | | | $ | (273) | | Total | | $ | 30 | | | $ | (55) | |
| | | (Gains) Losses Reclassified From Accumulated Other Comprehensive Income (Loss) Into Income (Loss) | | | (Gains) Losses Reclassified From Accumulated Other Comprehensive Income (Loss) Into Income (Loss) |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
Fair value hedges | Fair value hedges | | | | | | | | Fair value hedges | | | | |
Foreign currency swaps | Foreign currency swaps | $ | — | | | $ | 1 | | | $ | 2 | | | $ | 5 | | Foreign currency swaps | | $ | — | | | $ | 2 | |
Cash flow hedges | Cash flow hedges | | Cash flow hedges | | |
Interest rate swaps | Interest rate swaps | (3) | | | 2 | | | (6) | | | 9 | | Interest rate swaps | | (7) | | | (1) | |
Foreign currency swaps | Foreign currency swaps | 386 | | | 149 | | | 944 | | | 309 | | Foreign currency swaps | | (76) | | | 149 | |
Total | Total | $ | 383 | | | $ | 152 | | | $ | 940 | | | $ | 323 | | Total | | $ | (82) | | | $ | 150 | |
All amounts reclassified from accumulated other comprehensive income (loss) were recorded to interest expense. During the next 12 months, we estimate an insignificant amount of$33 million in losses will be reclassified into pre-tax earnings from derivatives designated for hedge accounting.
Note 9. Commitments and Contingencies
Legal Proceedings We are subject to various pending and potential legal and regulatory proceedings in the ordinary course of business, including litigation, arbitration, claims, investigations, examinations, subpoenas and enforcement proceedings. Some litigation against us could take the form of class actions. The outcome of these proceedings is inherently uncertain, and thus we cannot confidently predict how or when proceedings will be resolved. An adverse outcome in one or more of these proceedings could result in substantial damages, settlements, fines, penalties, diminished income or reputational harm.
In accordance with the current accounting standards for loss contingencies, we establish reserves for legal matters when it is probable that a loss associated with the matter has been incurred and the amount of the loss can be reasonably estimated. The actual costs of resolving legal matters may be higher or lower than any amounts reserved for these matters. At September 30, 2022,March 31, 2023, we estimated our reasonably possible legal exposure for unfavorable outcomes isto be approximately $169$168 million, and we have accrued $145$143 million.
Other Administrative Tax Matters We accrue non-income tax liabilities for contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. In the event any losses are sustained in excess of accruals, they will be charged against income at that time.
In evaluating indirect tax matters, we take into consideration factors such as our historical experience with matters of similar nature, specific facts and circumstances, and the likelihood of prevailing. We reevaluate and update our accruals as matters progress over time, where there is a reasonable possibility that losses exceeding amounts already recognized may be incurred. Our estimate of the additional range of loss is up to $64$79 million at September 30, 2022.March 31, 2023.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 10. Shareholders' Equity
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Common Stock | Common Stock | | | | Common Stock | | | |
Number of shares authorized | Number of shares authorized | 10,000,000 | | | 10,000,000 | | Number of shares authorized | 10,000,000 | | | 10,000,000 | |
Number of shares issued and outstanding | Number of shares issued and outstanding | 5,050,000 | | | 5,050,000 | | Number of shares issued and outstanding | 5,050,000 | | | 5,050,000 | |
During the ninethree months ended September 30, 2022 and 2021,March 31, 2023, our Board of Directors declared and paid dividends of $1.0 billion and $1.8 billion$450 million on our common stock to General Motors Holdings LLC.
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
Preferred Stock | Preferred Stock | | | | Preferred Stock | | | |
Number of shares authorized | Number of shares authorized | 250,000,000 | | | 250,000,000 | | Number of shares authorized | 250,000,000 | | | 250,000,000 | |
Number of shares issued and outstanding | Number of shares issued and outstanding | | Number of shares issued and outstanding | |
Fixed-to-Floating Rate Cumulative Perpetual Preferred Stock, Series A (Series A Preferred Stock) | Fixed-to-Floating Rate Cumulative Perpetual Preferred Stock, Series A (Series A Preferred Stock) | 1,000,000 | | | 1,000,000 | | Fixed-to-Floating Rate Cumulative Perpetual Preferred Stock, Series A (Series A Preferred Stock) | 1,000,000 | | | 1,000,000 | |
Fixed-to-Floating Rate Cumulative Perpetual Preferred Stock, Series B (Series B Preferred Stock) | Fixed-to-Floating Rate Cumulative Perpetual Preferred Stock, Series B (Series B Preferred Stock) | 500,000 | | | 500,000 | | Fixed-to-Floating Rate Cumulative Perpetual Preferred Stock, Series B (Series B Preferred Stock) | 500,000 | | | 500,000 | |
Fixed-Rate Reset Cumulative Perpetual Preferred Stock, Series C (Series C Preferred Stock) | Fixed-Rate Reset Cumulative Perpetual Preferred Stock, Series C (Series C Preferred Stock) | 500,000 | | | 500,000 | | Fixed-Rate Reset Cumulative Perpetual Preferred Stock, Series C (Series C Preferred Stock) | 500,000 | | | 500,000 | |
During both the ninethree months ended September 30,March 31, 2023 and 2022, we paid dividends of $58$29 million to holders of record of our Series A Preferred Stock, $32$16 million to holders of record of our Series B Preferred Stock, and $29 million to holders of record of our Series C Preferred Stock. During the nine months ended September 30, 2021, we paid dividends of $58 million to holders of record of our Series A Preferred Stock, $32 million to holders of record of our Series B Preferred Stock, and $30$14 million to holders of record of our Series C Preferred Stock.
The following table summarizes the significant components of accumulated other comprehensive income (loss):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
Unrealized gain (loss) on hedges | Unrealized gain (loss) on hedges | | | | | | | | Unrealized gain (loss) on hedges | | | | |
Beginning balance | Beginning balance | $ | 39 | | | $ | (115) | | | $ | (77) | | | $ | (157) | | Beginning balance | | $ | (21) | | | $ | (77) | |
Change in value of hedges, net of tax | Change in value of hedges, net of tax | (1) | | | 8 | | | 114 | | | 50 | | Change in value of hedges, net of tax | | (52) | | | 95 | |
Ending balance | Ending balance | 38 | | | (107) | | | 38 | | | (107) | | Ending balance | | (73) | | | 19 | |
Defined benefit plans | Defined benefit plans | | | | | | | | Defined benefit plans | | | | |
Beginning balance | Beginning balance | — | | | 1 | | | 1 | | | 1 | | Beginning balance | | 1 | | | 1 | |
Unrealized gain (loss) on subsidiary pension, net of tax | Unrealized gain (loss) on subsidiary pension, net of tax | — | | | — | | | — | | | — | | Unrealized gain (loss) on subsidiary pension, net of tax | | — | | | — | |
Ending balance | Ending balance | — | | | 1 | | | — | | | 1 | | Ending balance | | 1 | | | — | |
Foreign currency translation adjustment | Foreign currency translation adjustment | | | | | | | | Foreign currency translation adjustment | | | | |
Beginning balance | Beginning balance | (1,265) | | | (1,092) | | | (1,197) | | | (1,153) | | Beginning balance | | (1,352) | | | (1,197) | |
Translation gain (loss), net of tax | Translation gain (loss), net of tax | (175) | | | (105) | | | (244) | | | (44) | | Translation gain (loss), net of tax | | 102 | | | 144 | |
Ending balance | Ending balance | (1,441) | | | (1,197) | | | (1,441) | | | (1,197) | | Ending balance | | (1,251) | | | (1,053) | |
Total accumulated other comprehensive income (loss) | Total accumulated other comprehensive income (loss) | $ | (1,402) | | | $ | (1,303) | | | $ | (1,402) | | | $ | (1,303) | | Total accumulated other comprehensive income (loss) | | $ | (1,323) | | | $ | (1,034) | |
Note 11. Income Taxes
We are included in GM’s consolidated U.S. federal income tax return and certain states’ income tax returns. Net operating losses and certain tax credits generated by us have been utilized by GM; however, income tax expense and deferred tax balances are presented in our financial statements as if we filed our own tax returns in each jurisdiction. Refer to Note 2 for further information on related party taxes payable.
GENERAL MOTORS FINANCIAL COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Note 12. Segment Reporting
Our chief operating decision maker evaluates the operating results and performance of our business based on our North America and International Segments. The management of each segment is responsible for executing our strategies. The following tables summarize keyKey operating data for our operating segments:segments were as follows:
| | | Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2021 | | Three Months Ended March 31, 2023 | | Three Months Ended March 31, 2022 |
| | North America | | International | | Total | | North America | | International | | Total | | North America | | International | | Total | | North America | | International | | Total |
Total revenue | Total revenue | $ | 2,939 | | | $ | 248 | | | $ | 3,187 | | | $ | 3,128 | | | $ | 226 | | | $ | 3,354 | | Total revenue | $ | 3,049 | | | $ | 294 | | | $ | 3,343 | | | $ | 2,930 | | | $ | 226 | | | $ | 3,156 | |
Operating expenses | Operating expenses | 352 | | | 84 | | | 436 | | | 299 | | | 82 | | | 381 | | Operating expenses | 358 | | | 84 | | | 442 | | | 303 | | | 69 | | | 372 | |
Leased vehicle expenses | Leased vehicle expenses | 926 | | | 14 | | | 939 | | | 1,076 | | | 12 | | | 1,088 | | Leased vehicle expenses | 1,022 | | | 17 | | | 1,039 | | | 842 | | | 13 | | | 855 | |
Provision for loan losses | Provision for loan losses | 148 | | | 32 | | | 180 | | | 126 | | | 15 | | | 141 | | Provision for loan losses | 114 | | | 17 | | | 131 | | | 98 | | | 24 | | | 122 | |
Interest expense | Interest expense | 671 | | | 93 | | | 764 | | | 645 | | | 59 | | | 704 | | Interest expense | 877 | | | 123 | | | 1,000 | | | 507 | | | 70 | | | 577 | |
Equity income | Equity income | — | | | 44 | | | 44 | | | — | | | 53 | | | 53 | | Equity income | — | | | 41 | | | 41 | | | — | | | 54 | | | 54 | |
Income before income taxes | Income before income taxes | $ | 842 | | | $ | 68 | | | $ | 911 | | | $ | 982 | | | $ | 111 | | | $ | 1,093 | | Income before income taxes | $ | 677 | | | $ | 94 | | | $ | 771 | | | $ | 1,179 | | | $ | 105 | | | $ | 1,284 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2021 |
| North America | | International | | Total | | North America | | International | | Total |
Total revenue | $ | 8,773 | | | $ | 716 | | | $ | 9,489 | | | $ | 9,487 | | | $ | 700 | | | $ | 10,187 | |
Operating expenses | 970 | | | 232 | | | 1,202 | | | 940 | | | 230 | | | 1,170 | |
Leased vehicle expenses | 2,610 | | | 40 | | | 2,650 | | | 3,120 | | | 37 | | | 3,157 | |
Provision for loan losses | 416 | | | 84 | | | 500 | | | 118 | | | 56 | | | 174 | |
Interest expense | 1,738 | | | 246 | | | 1,984 | | | 1,812 | | | 175 | | | 1,987 | |
Equity income | — | | | 148 | | | 148 | | | — | | | 157 | | | 157 | |
Income before income taxes | $ | 3,039 | | | $ | 262 | | | $ | 3,301 | | | $ | 3,497 | | | $ | 359 | | | $ | 3,856 | |
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | North America | | International | | Total | | North America | | International | | Total | | North America | | International | | Total | | North America | | International | | Total |
Finance receivables, net | Finance receivables, net | $ | 66,420 | | | $ | 4,425 | | | $ | 70,845 | | | $ | 58,883 | | | $ | 4,096 | | | $ | 62,979 | | Finance receivables, net | $ | 70,940 | | | $ | 5,238 | | | $ | 76,178 | | | $ | 69,705 | | | $ | 4,809 | | | $ | 74,514 | |
Leased vehicles, net | Leased vehicles, net | $ | 33,558 | | | $ | 219 | | | $ | 33,778 | | | $ | 37,741 | | | $ | 188 | | | $ | 37,929 | | Leased vehicles, net | $ | 31,566 | | | $ | 282 | | | $ | 31,848 | | | $ | 32,454 | | | $ | 247 | | | $ | 32,701 | |
Total assets | Total assets | $ | 112,375 | | | $ | 7,436 | | | $ | 119,811 | | | $ | 106,572 | | | $ | 7,214 | | | $ | 113,786 | | Total assets | $ | 115,050 | | | $ | 8,515 | | | $ | 123,565 | | | $ | 114,612 | | | $ | 7,934 | | | $ | 122,545 | |
Note 13. Regulatory Capital and Other Regulatory Matters
We are required to comply with a wide variety of laws and regulations. Certain of our entities operate in international markets as either banks or regulated finance companies that are subject to regulatory restrictions. These regulatory restrictions, among other things, require that certain of these entities meet minimum capital requirements and may restrict dividend distributions and ownership of certain assets. We were in compliance with all regulatory capital requirements as most recently reported. Total assets of our regulated international banks and finance companies were approximately $5.3$6.2 billion and $5.1$5.8 billion at September 30, 2022March 31, 2023 and December 31, 2021.2022.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) are not guarantees of future performance and may involve risks and uncertainties that could cause actual results to differ materially from those projected. Refer to the "Forward-Looking Statements" section of this MD&A and the "Risk Factors" section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021,2022, as filed with the Securities and Exchange Commission (SEC) on February 2, 2022 (2021January 31, 2023 (2022 Form 10-K), for a discussion of these risks and uncertainties.
Basis of Presentation
This MD&A should be read in conjunction with the accompanying condensed consolidated financial statements and notes thereto and the audited consolidated financial statements and notes thereto included in our 20212022 Form 10-K.
Except as otherwise specified, dollar amounts presented within tables are stated in millions. Certain columns and rows may not add due to rounding. Average balances are calculated using daily balances, where available. Otherwise, average balances are calculated using monthly balances.
Overview
We continue to monitor the impact of the COVID-19 pandemic, government actions and measures taken to prevent its spread, and the potential to affect our operations, particularly in China. We are also monitoring the current global economic environment, including specifically, the inflationary pressures in the U.S. and the macroeconomic impact of the conflict in Ukraine, and any resulting impacts on our financial position, liquidity and results of operations. Refer to the "Risk Factors" section of our 20212022 Form 10-K for additional information.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “Act”)Act) was signed into law. The Act modifiesmodified climate and clean energy corporate tax provisions, including amendments to the consumer credit for electric vehicle consumer tax credit available under current tax law. New(EV) purchases, and added new tax credits for commercial electric vehicle purchases are included inEV purchases. We expect to generate commercial EV tax credits, and we continue to evaluate the Act effective beginning in 2023. The Act also implements a new 15% corporate minimum tax based on modified U.S. financial statement net income that is effective beginning in 2023. We are evaluating the potential impact of the tax credits and corporate minimum tax requirement on our financial position and results including our net earnings and cash flow.of operations.
Results of Operations
Key Drivers Income before income taxes for the ninethree months ended September 30, 2022March 31, 2023 decreased to $3.3$0.8 billion from $3.9$1.3 billion for the ninethree months ended September 30, 2021.March 31, 2022. Key drivers of the change include the following:
•Leased vehicle income decreased $904$248 million primarily due to a decrease in the average balance of the leased vehicles portfolio.
•Leased vehicle expenses decreased $507Finance charge income on retail finance receivables increased $222 million primarily due to a $1.1 billion decrease in depreciation on leased vehicles, resulting from increased residual value estimates and a decreasegrowth in the size of the portfolio partially offset byand an increase in the effective yield. The effective yield on our retail finance receivables increased primarily due to increased average interest rates on new loan originations, as we pass through increased interest costs in our pricing of new loans.
•Finance charge income on commercial finance receivables increased $136 million due to an increase in the effective yield as a $626result of higher benchmark rates, as well as an increase in the size of the portfolio.
•Leased vehicle expenses increased $184 million primarily due to a $163 million decrease in lease termination gains associated with higher leased portfolio net book values at termination and fewer vehicles returned to us for remarketing.terminated leases.
•Provision for loan lossesInterest expense increased $326$423 million primarily due to a reduction in reserve levels recordedan increase in the nine months ended September 30, 2021 as a resulteffective rate of actualinterest on our debt, resulting from higher benchmark rates and increased credit performance that was better than forecast and favorable expectations for future charge-offs and recoveries,spreads, as well as an economic forecast weighted more heavily to a weaker outlook as of September 30, 2022. Purchases of finance receivables increased for the nine months ended September 30, 2022 compared to the same period in 2021; however, the volume impact to provision expense was substantially offset by an improvementincrease in the credit mixaverage debt outstanding.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Non-GAAP MeasuresMeasure
Return on Average Common Equity Return on average common equity is a generally accepted accounting principle (GAAP) measure widely used to measure earnings in relation to invested capital. Our return on average common equity decreased to 25.3%19.6% for the four quarters ended September 30, 2022March 31, 2023 from 29.5%29.8% for the four quarters ended September 30, 2021March 31, 2022 primarily due to decreased earnings.
Return on Average Tangible Common Equity We use return on average tangible common equity, a non-generally accepted accounting principle (GAAP)non-GAAP measure, to measure our contribution to General Motors Company's (GM) enterprise profitability and cash flow.flows. Our return on average tangible common equity decreased to 27.9%21.5% for the four quarters ended September 30, 2022March 31, 2023 from 32.7%32.9% for the four quarters ended September 30, 2021March 31, 2022 primarily due to decreased earnings.
GENERAL MOTORS FINANCIAL COMPANY, INC.
The following table presents our reconciliation of return on average tangible common equity to return on average common equity, the most directly comparable GAAP measure:
| | | Four Quarters Ended | | Four Quarters Ended |
| | September 30, 2022 | | September 30, 2021 | | March 31, 2023 | | March 31, 2022 |
Net income attributable to common shareholder | Net income attributable to common shareholder | $ | 3,269 | | | $ | 3,538 | | Net income attributable to common shareholder | $ | 2,589 | | | $ | 3,754 | |
| Average equity | Average equity | $ | 14,871 | | | $ | 13,974 | | Average equity | $ | 15,211 | | | $ | 14,556 | |
Less: average preferred equity | Less: average preferred equity | (1,969) | | | (1,969) | | Less: average preferred equity | (1,969) | | | (1,969) | |
Average common equity | Average common equity | 12,902 | | | 12,005 | | Average common equity | 13,242 | | | 12,587 | |
Less: average goodwill | (1,171) | | | (1,171) | | |
Less: average goodwill and intangible assets | | Less: average goodwill and intangible assets | (1,172) | | | (1,171) | |
Average tangible common equity | Average tangible common equity | $ | 11,731 | | | $ | 10,834 | | Average tangible common equity | $ | 12,069 | | | $ | 11,415 | |
| Return on average common equity | Return on average common equity | 25.3 | % | | 29.5 | % | Return on average common equity | 19.6 | % | | 29.8 | % |
Return on average tangible common equity | Return on average tangible common equity | 27.9 | % | | 32.7 | % | Return on average tangible common equity | 21.5 | % | | 32.9 | % |
Our calculation of this non-GAAP measure may not be comparable to similarly titled measures of other companies due to potential differences between companies in the method of calculation. As a result, the use of this non-GAAP measure has limitations and should not be considered superior to, in isolation from, or as a substitute for, related U.S. GAAP measures. This non-GAAP measure allows investors the opportunity to measure and monitor our performance against our externally communicated targets and evaluate the investment decisions being made by management to improve our return on average tangible common equity. Management uses this measure in its financial, investment and operational decision-making processes, for internal reporting and as part of its forecasting and budgeting processes. For these reasons, we believe this non-GAAP measure is useful forto our investors.
Three Months Ended September 30, 2022March 31, 2023 compared to Three Months Ended September 30, 2021March 31, 2022
| Average Earning Assets | Average Earning Assets | Three Months Ended September 30, | | 2022 vs. 2021 | Average Earning Assets | Three Months Ended March 31, | | 2023 vs. 2022 |
| | 2022 | | 2021 | | Amount | | Percentage | | 2023 | | 2022 | | Amount | | Percentage |
Average retail finance receivables | Average retail finance receivables | $ | 62,549 | | | $ | 57,216 | | | $ | 5,333 | | | 9.3 | % | Average retail finance receivables | $ | 66,614 | | | $ | 58,827 | | | $ | 7,787 | | | 13.2 | % |
Average commercial finance receivables | Average commercial finance receivables | 8,200 | | | 4,994 | | | 3,206 | | | 64.2 | % | Average commercial finance receivables | 10,762 | | | 6,987 | | | 3,775 | | | 54.0 | % |
Average finance receivables | Average finance receivables | 70,749 | | | 62,210 | | | 8,539 | | | 13.7 | % | Average finance receivables | 77,376 | | | 65,814 | | | 11,562 | | | 17.6 | % |
Average leased vehicles, net | Average leased vehicles, net | 34,581 | | | 40,255 | | | (5,674) | | | (14.1) | % | Average leased vehicles, net | 32,272 | | | 37,249 | | | (4,977) | | | (13.4) | % |
Average earning assets | Average earning assets | $ | 105,330 | | | $ | 102,465 | | | $ | 2,865 | | | 2.8 | % | Average earning assets | $ | 109,648 | | | $ | 103,063 | | | $ | 6,585 | | | 6.4 | % |
| Retail finance receivables purchased | Retail finance receivables purchased | $ | 9,396 | | | $ | 7,800 | | | $ | 1,596 | | | 20.5 | % | Retail finance receivables purchased | $ | 9,104 | | | $ | 8,074 | | | $ | 1,030 | | | 12.8 | % |
| Leased vehicles purchased | Leased vehicles purchased | $ | 3,503 | | | $ | 3,849 | | | $ | (346) | | | (9.0) | % | Leased vehicles purchased | $ | 3,926 | | | $ | 3,542 | | | $ | 384 | | | 10.8 | % |
|
Average retail finance receivables increased primarily due to new loan originations in excess of principal collections and payoffs. Our penetration of GM's retail sales in the U.S. decreased to 42.9%was 45.9% and 46.1% for the three months ended September 30, 2022 from 44.3% for the three months ended September 30, 2021, driven by a lower mix of lease financing, partially offset by a higher share of retail loan financing.March 31, 2023 and 2022. Penetration levels vary depending on incentive financing programs available and competing third-party financing products in the market.
Average commercial finance receivables increased primarily due to higher floorplan penetration and increased new vehicle inventory, resulting in an increasegrowth in the average amount financed per dealer.
Leased vehicles purchased decreased primarily due to reduced lease financing incentive levels.dealer, resulting from increased new vehicle inventory, as well as higher floorplan penetration.
GENERAL MOTORS FINANCIAL COMPANY, INC.
| Revenue | Revenue | Three Months Ended September 30, | | 2022 vs. 2021 | Revenue | Three Months Ended March 31, | | 2023 vs. 2022 |
| | 2022 | | 2021 | | Amount | | Percentage | | 2023 | | 2022 | | Amount | | Percentage |
Finance charge income | Finance charge income | | | | | | | | Finance charge income | | | | | | | |
Retail finance receivables | Retail finance receivables | $ | 1,041 | | | $ | 990 | | | $ | 51 | | | 5.2 | % | Retail finance receivables | $ | 1,167 | | | $ | 945 | | | $ | 222 | | | 23.5 | % |
Commercial finance receivables | Commercial finance receivables | $ | 117 | | | $ | 45 | | | $ | 72 | | | 160.0 | % | Commercial finance receivables | $ | 201 | | | $ | 65 | | | $ | 136 | | | 209.2 | % |
Leased vehicle income | Leased vehicle income | $ | 1,912 | | | $ | 2,246 | | | $ | (334) | | | (14.9) | % | Leased vehicle income | $ | 1,818 | | | $ | 2,066 | | | $ | (248) | | | (12.0) | % |
Other income | Other income | $ | 118 | | | $ | 73 | | | $ | 45 | | | 61.6 | % | Other income | $ | 156 | | | $ | 80 | | | $ | 76 | | | 95.0 | % |
Equity income | Equity income | $ | 44 | | | $ | 53 | | | $ | (9) | | | (17.0) | % | Equity income | $ | 41 | | | $ | 54 | | | $ | (13) | | | (24.1) | % |
Effective yield - retail finance receivables | Effective yield - retail finance receivables | 6.6 | % | | 6.9 | % | | Effective yield - retail finance receivables | 7.1 | % | | 6.5 | % | |
Effective yield - commercial finance receivables | Effective yield - commercial finance receivables | 5.7 | % | | 3.6 | % | | Effective yield - commercial finance receivables | 7.6 | % | | 3.8 | % | |
Finance Charge Income - Retail Finance ReceivablesFinance charge income on retail finance receivables increased for the three months ended September 30, 2022 compared to the same period in 2021 due to growth in the size of the portfolio, partially offset by a decreaseand an increase in the effective yield. The effective yield on our retail finance receivables decreasedincreased primarily due to increased lending to borrowers with prime credit.average interest rates on new loan originations, as we pass through increased interest costs in our pricing of new loans. The effective yield represents finance charges, rate subvention and fees recorded in earnings during the period as a percentage of average retail finance receivables.
Finance Charge Income - Commercial Finance Receivables Finance charge income on commercial finance receivables increased due to an increase in the size of the portfolio, as well as an increase in the effective yield as a result of higher benchmark rates.rates, as well as an increase in the size of the portfolio.
Leased Vehicle Income Leased vehicle income decreased primarily due to a decrease in the average balance of the leased vehicles portfolio.
Other Income Other income increased primarily due to higher investment income resulting from an increase in benchmark interest rates.
| Costs and Expenses | Costs and Expenses | Three Months Ended September 30, | | 2022 vs. 2021 | Costs and Expenses | Three Months Ended March 31, | | 2023 vs. 2022 |
| | 2022 | | 2021 | | Amount | | Percentage | | 2023 | | 2022 | | Amount | | Percentage |
Operating expenses | Operating expenses | $ | 436 | | | $ | 381 | | | $ | 55 | | | 14.4 | % | Operating expenses | $ | 442 | | | $ | 372 | | | $ | 70 | | | 18.8 | % |
Leased vehicle expenses | Leased vehicle expenses | $ | 939 | | | $ | 1,088 | | | $ | (149) | | | (13.7) | % | Leased vehicle expenses | $ | 1,039 | | | $ | 855 | | | $ | 184 | | | 21.5 | % |
Provision for loan losses | Provision for loan losses | $ | 180 | | | $ | 141 | | | $ | 39 | | | 27.7 | % | Provision for loan losses | $ | 131 | | | $ | 122 | | | $ | 9 | | | 7.4 | % |
Interest expense | Interest expense | $ | 764 | | | $ | 704 | | | $ | 60 | | | 8.5 | % | Interest expense | $ | 1,000 | | | $ | 577 | | | $ | 423 | | | 73.3 | % |
Average debt outstanding | Average debt outstanding | $ | 93,656 | | | $ | 94,675 | | | $ | (1,019) | | | (1.1) | % | Average debt outstanding | $ | 96,880 | | | $ | 92,802 | | | $ | 4,078 | | | 4.4 | % |
Effective rate of interest on debt | Effective rate of interest on debt | 3.2 | % | | 3.0 | % | | Effective rate of interest on debt | 4.2 | % | | 2.5 | % | |
Operating Expenses Operating expenses as an annualized percentage of average earning assets were 1.6% and 1.5% for the three months ended September 30, 2022March 31, 2023 and 2021.2022.
Leased Vehicle Expenses Leased vehicle expenses decreased for the three months ended September 30, 2022 compared to the same period in 2021,increased primarily due to a $338 million decrease in depreciation on leased vehicles, resulting from increased residual value estimates and a decrease in the size of the portfolio, partially offset by a $191$163 million decrease in lease termination gains associated with higher leased portfolio net book values at termination and fewer vehicles returned to us for remarketing.terminated leases.
Provision for Loan Losses Interest expenseThe provision for loan losses Interest expense increased primarily due to an increase in retail finance receivables purchased in the three months ended September 30, 2022 compared to the three months ended September 30, 2021, as well as an economic forecast weighted more heavily to a weaker outlook as of September 30, 2022.
Interest Expense Interest expense increased primarily due to an increased effective rate of interest on our debt, partially offset by a decreaseresulting from higher benchmark rates and increased credit spreads, as well as an increase in the average debt outstanding.
Taxes Our consolidated effective income tax rate was 25.7%25.5% and 26.1%26.2% of income before income taxes and equity income for the three months ended September 30, 2022March 31, 2023 and 2021.2022. The decrease in the effective income tax rate is primarily due to a lower percentage of income being taxed at higher rates forfavorable impact from our other non-U.S. entities included in our effectiveelectric vehicle tax rate calculation.credit.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Other Comprehensive Income (Loss)
Unrealized Gain (Loss) on Hedges Unrealized gain (loss) on hedges included in other comprehensive income (loss) were $(1)$(52) million and $8$95 million for the three months ended September 30, 2022March 31, 2023 and 2021.
Unrealized gains and losses on cash flow hedges of our floating rate debt are reclassified into earnings in the same period during which the hedged transactions affect earnings via principal remeasurement or accrual of interest expense.
Foreign Currency Translation Adjustment Foreign currency translation adjustments included in other comprehensive income (loss) were $(175) million and $(105) million for the three months ended September 30, 2022 and 2021. Translation adjustments resulted from changes in the values of our international currency-denominated assets and liabilities as the value of the U.S. Dollar changed in relation to international currencies. The foreign currency translation loss for the three months ended September 30, 2022 was primarily due to depreciating values of the Chinese Yuan Renminbi, Canadian Dollar and Brazilian Real in relation to the U.S. Dollar. The foreign currency translation loss for the three months ended September 30, 2021 was primarily due to depreciating values of the Brazilian Real, Canadian Dollar and Mexican Peso in relation to the U.S. Dollar.
Nine Months Ended September 30, 2022 compared to Nine Months Ended September 30, 2021
| | | | | | | | | | | | | | | | | | | | | | | |
Average Earning Assets | Nine Months Ended September 30, | | 2022 vs. 2021 |
| 2022 | | 2021 | | Amount | | Percentage |
Average retail finance receivables | $ | 60,614 | | | $ | 54,962 | | | $ | 5,652 | | | 10.3 | % |
Average commercial finance receivables | 7,655 | | | 6,436 | | | 1,219 | | | 18.9 | % |
Average finance receivables | 68,269 | | | 61,398 | | | 6,871 | | | 11.2 | % |
Average leased vehicles, net | 35,943 | | | 40,266 | | | (4,324) | | | (10.7) | % |
Average earning assets | $ | 104,212 | | | $ | 101,664 | | | $ | 2,548 | | | 2.5 | % |
| | | | | | | |
Retail finance receivables purchased | $ | 26,431 | | | $ | 25,163 | | | $ | 1,268 | | | 5.0 | % |
| | | | | | | |
Leased vehicles purchased | $ | 10,915 | | | $ | 15,482 | | | $ | (4,567) | | | (29.5) | % |
| | | | | | | |
Average retail finance receivables increased primarily due to new loan originations in excess of principal collections and payoffs. Our penetration of GM's retail sales in the U.S. was 44.5% and 43.7% for the nine months ended September 30, 2022 and 2021. Penetration levels vary depending on incentive financing programs available and competing third-party financing products in the market.
Average commercial finance receivables increased primarily due to higher floorplan penetration and increased new vehicle inventory, resulting in an increase in the average amount financed per dealer.
Leased vehicles purchased decreased primarily due to reduced lease financing incentive levels.
| | | | | | | | | | | | | | | | | | | | | | | |
Revenue | Nine Months Ended September 30, | | 2022 vs. 2021 |
| 2022 | | 2021 | | Amount | | Percentage |
Finance charge income | | | | | | | |
Retail finance receivables | $ | 2,963 | | | $ | 2,913 | | | $ | 50 | | | 1.7 | % |
Commercial finance receivables | $ | 267 | | | $ | 174 | | | $ | 93 | | | 53.4 | % |
Leased vehicle income | $ | 5,967 | | | $ | 6,871 | | | $ | (904) | | | (13.2) | % |
Other income | $ | 292 | | | $ | 229 | | | $ | 63 | | | 27.5 | % |
Equity income | $ | 148 | | | $ | 157 | | | $ | (9) | | | (5.7) | % |
Effective yield - retail finance receivables | 6.5 | % | | 7.1 | % | | | | |
Effective yield - commercial finance receivables | 4.7 | % | | 3.6 | % | | | | |
Finance Charge Income - Retail Finance Receivables Finance charge income on retail finance receivables was flat for the nine months ended September 30, 2022 compared to the same period in 2021 as the growth in the size of the portfolio was substantially offset by a decrease in effective yield. The effective yield on our retail finance receivables decreased primarily due to increased lending to borrowers with prime credit. The effective yield represents finance charges, rate subvention and fees recorded in earnings during the period as a percentage of average retail finance receivables.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Finance Charge Income - Commercial Finance Receivables Finance charge income on commercial finance receivables increased due to an increase in the size of the portfolio, as well as an increase in the effective yield as a result of higher benchmark rates.
Leased Vehicle Income Leased vehicle income decreased primarily due to a decrease in the average balance of the leased vehicles portfolio.
Other Income Other income increased primarily due to higher investment income resulting from an increase in benchmark interest rates.
| | | | | | | | | | | | | | | | | | | | | | | |
Costs and Expenses | Nine Months Ended September 30, | | 2022 vs. 2021 |
| 2022 | | 2021 | | Amount | | Percentage |
Operating expenses | $ | 1,202 | | | $ | 1,170 | | | $ | 32 | | | 2.7 | % |
Leased vehicle expenses | $ | 2,650 | | | $ | 3,157 | | | $ | (507) | | | (16.1) | % |
Provision for loan losses | $ | 500 | | | $ | 174 | | | $ | 326 | | | 187.4 | % |
Interest expense | $ | 1,984 | | | $ | 1,987 | | | $ | (3) | | | (0.2) | % |
Average debt outstanding | $ | 93,137 | | | $ | 94,419 | | | $ | (1,282) | | | (1.4) | % |
Effective rate of interest on debt | 2.8 | % | | 2.8 | % | | | | |
Operating Expenses Operating expenses as an annualized percentage of average earning assets were 1.5% for the nine months ended September 30, 2022 and 2021.
Leased Vehicle Expenses Leased vehicle expenses decreased primarily due to a $1.1 billion decrease in depreciation on leased vehicles, resulting from increased residual value estimates and a decrease in the size of the portfolio, partially offset by a $626 million decrease in lease termination gains associated with higher leased portfolio net book values and fewer vehicles returned to us for remarketing.
Provision for Loan Losses Provision for loan losses increased primarily due to a reduction in reserve levels recorded in the nine months ended September 30, 2021 as a result of actual credit performance that was better than forecast and favorable expectations for future charge-offs and recoveries, as well as an economic forecast weighted more heavily to a weaker outlook as of September 30, 2022. Purchases of finance receivables increased for the nine months ended September 30, 2022 compared to the same period in 2021; however, the volume impact to provision expense was substantially offset by an improvement in the credit mix of receivables purchased.
Taxes Our consolidated effective income tax rate was 26.1% and 26.4% of income before income taxes and equity income for the nine months ended September 30, 2022 and 2021. The decrease in the effective income tax rate is primarily due to a lower percentage of income being taxed at higher rates for our other non-U.S. entities included in our effective tax rate calculation.
Unrealized Gain (Loss) on Hedges Unrealized gains on hedges included in other comprehensive income (loss) were $114 million and $50 million for the nine months ended September 30, 2022 and 2021. The change in unrealized gain (loss) was primarily due to changes in the fair value of our foreign currency swap agreements.
Unrealized gains and losses on cash flow hedges of our floating rate debt are reclassified into earnings in the same period during which the hedged transactions affect earnings via principal remeasurement or accrual of interest expense.
Foreign Currency Translation Adjustment Foreign currency translation adjustments included in other comprehensive income (loss) were $(244)$102 million and $(44)$144 million for the ninethree months ended September 30, 2022March 31, 2023 and 2021.2022. Translation
GENERAL MOTORS FINANCIAL COMPANY, INC.
adjustments resulted from changes in the values of our international currency-denominated assets and liabilities as the value of the U.S. Dollar changed in relation to international currencies. The foreign currency translation lossgain for the ninethree months ended September 30, 2022March 31, 2023 was primarily due to depreciatingappreciating values of the Mexican Peso, Chinese Yuan Renminbi and Canadian DollarBrazilian Real in relation to the U.S. Dollar. The foreign currency translation lossgain for the ninethree months ended September 30, 2021March 31, 2022 was primarily due to depreciatingappreciating values of the Brazilian Real, Chilean Peso and Mexican Peso partially offset by the appreciating value of the Chinese Yuan Renminbi in relation to the U.S. Dollar.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Earning Assets Quality
Retail Finance Receivables Our retail finance receivables portfolio includes loans made to consumers and businesses to finance the purchase of vehicles for personal and commercial use. A summary of the credit risk profile by FICO score or its equivalent, determined at origination, of the retail finance receivables is as follows:
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | Amount | | Percent | | Amount | | Percent | | Amount | | Percent | | Amount | | Percent |
Prime - FICO Score 680 and greater | Prime - FICO Score 680 and greater | $ | 45,543 | | | 71.8 | % | | $ | 39,419 | | | 67.9 | % | Prime - FICO Score 680 and greater | $ | 49,829 | | | 73.6 | % | | $ | 47,543 | | | 72.8 | % |
Near-prime - FICO Score 620 to 679 | Near-prime - FICO Score 620 to 679 | 8,331 | | | 13.1 | | | 8,479 | | | 14.6 | | Near-prime - FICO Score 620 to 679 | 8,498 | | | 12.6 | | | 8,392 | | | 12.8 | |
Sub-prime - FICO Score less than 620 | Sub-prime - FICO Score less than 620 | 9,587 | | | 15.1 | | | 10,195 | | | 17.5 | | Sub-prime - FICO Score less than 620 | 9,377 | | | 13.8 | | | 9,388 | | | 14.4 | |
Retail finance receivables, net of fees | Retail finance receivables, net of fees | 63,461 | | | 100.0 | % | | 58,093 | | | 100.0 | % | Retail finance receivables, net of fees | 67,704 | | | 100.0 | % | | 65,322 | | | 100.0 | % |
Less: allowance for loan losses | Less: allowance for loan losses | (2,044) | | | | | (1,839) | | | | Less: allowance for loan losses | (2,123) | | | | | (2,062) | | | |
Retail finance receivables, net | Retail finance receivables, net | $ | 61,416 | | | $ | 56,254 | | | Retail finance receivables, net | $ | 65,581 | | | $ | 63,260 | | |
Number of outstanding contracts | Number of outstanding contracts | 2,907,976 | | | 2,861,963 | | | Number of outstanding contracts | 2,988,563 | | | 2,942,175 | | |
Average amount of outstanding contracts (in dollars)(a) | Average amount of outstanding contracts (in dollars)(a) | $ | 21,823 | | | $ | 20,298 | | | Average amount of outstanding contracts (in dollars)(a) | $ | 22,654 | | | $ | 22,202 | | |
Allowance for loan losses as a percentage of retail finance receivables, net of fees | Allowance for loan losses as a percentage of retail finance receivables, net of fees | 3.2 | % | | 3.2 | % | | Allowance for loan losses as a percentage of retail finance receivables, net of fees | 3.1 | % | | 3.2 | % | |
_________________
(a)Average amount of outstanding contracts is calculated as retail finance receivables, net of fees, divided by number of outstanding contracts.
Delinquency The following is a consolidated summary of delinquent retail finance receivables:
| | | September 30, 2022 | | September 30, 2021 | | March 31, 2023 | | March 31, 2022 |
| | Amount | | Percentage | | Amount | | Percentage | | Amount | | Percent | | Amount | | Percent |
31 - 60 days | 31 - 60 days | $ | 1,185 | | | 1.9 | % | | $ | 989 | | | 1.7 | % | 31 - 60 days | $ | 1,188 | | | 1.8 | % | | $ | 983 | | | 1.7 | % |
Greater than 60 days | Greater than 60 days | 394 | | | 0.6 | | | 315 | | | 0.5 | | Greater than 60 days | 363 | | | 0.5 | | | 302 | | | 0.5 | |
Total finance receivables more than 30 days delinquent | Total finance receivables more than 30 days delinquent | 1,579 | | | 2.5 | | | 1,304 | | | 2.2 | | Total finance receivables more than 30 days delinquent | 1,551 | | | 2.3 | | | 1,285 | | | 2.2 | |
In repossession | In repossession | 46 | | | 0.1 | | | 34 | | | 0.1 | | In repossession | 44 | | | 0.1 | | | 39 | | | 0.1 | |
Total finance receivables more than 30 days delinquent or in repossession | Total finance receivables more than 30 days delinquent or in repossession | $ | 1,625 | | | 2.6 | % | | $ | 1,338 | | | 2.3 | % | Total finance receivables more than 30 days delinquent or in repossession | $ | 1,595 | | | 2.4 | % | | $ | 1,324 | | | 2.2 | % |
At September 30, 2022,March 31, 2023, delinquency increased from September 30, 2021,March 31, 2022, but continued to be lower than historical levels primarily due to improvement in the credit mix of the portfolio and resiliency of the consumer.levels. We expect that delinquency will increase over time relative to current levels, but may remain below pre-pandemic levels due to improvement in the credit mix of the portfolio.
Troubled Debt Restructurings (TDRs)Loan Modifications The number of loans classified as TDRs was 16,745 and 41,871Loan modifications extended to the borrowers experiencing financial difficulty were insignificant for the three and nine months ended September 30, 2022 compared to 12,807 and 33,227 for the three and nine months ended September 30, 2021. Prior to July 1, 2021, payment deferrals granted to retail loan customers with accounts in good standing, but impacted by the COVID-19 pandemic, were not considered concessions for purposes of TDR classification for up to six months of deferral.March 31, 2023. Refer to Note 3 to our condensed consolidated financial statements for further information on TDRs.loan modifications.Net Charge-offs The following table presents charge-off data with respect to our retail finance receivables portfolio:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Charge-offs | $ | 289 | | | $ | 207 | | | $ | 811 | | | $ | 664 | |
Less: recoveries | (171) | | | (133) | | | (510) | | | (426) | |
Net charge-offs | $ | 118 | | | $ | 74 | | | $ | 301 | | | $ | 238 | |
Net charge-offs as an annualized percentage of average retail finance receivables | 0.7 | % | | 0.5 | % | | 0.7 | % | | 0.6 | % |
Net charge-offs for the three and nine months ended September 30, 2022 increased compared to the same periods in 2021, but continued to be lower than historical levels primarily due to improvement in the credit mix of the portfolio, continued strong recovery rates on repossessed vehicles relative to historical levels, and resiliency of the consumer. We expect net charge- | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
Charge-offs | | | | | $ | 322 | | | $ | 275 | |
Less: recoveries | | | | | (186) | | | (177) | |
Net charge-offs | | | | | $ | 136 | | | $ | 97 | |
Net charge-offs as an annualized percentage of average retail finance receivables | | | | | 0.8 | % | | 0.7 | % |
GENERAL MOTORS FINANCIAL COMPANY, INC.
offsNet charge-offs for the three months ended March 31, 2023 increased compared to the same period in 2022, but continued to be lower than historical levels. We expect net charge-offs will increase over time relative to current levels, but may remain below pre-pandemic levels due to improvement in the credit mix of the portfolio.
| Commercial Finance Receivables | Commercial Finance Receivables | September 30, 2022 | | December 31, 2021 | Commercial Finance Receivables | March 31, 2023 | | December 31, 2022 |
Commercial finance receivables, net of fees | Commercial finance receivables, net of fees | $ | 9,471 | | | $ | 6,772 | | Commercial finance receivables, net of fees | $ | 10,627 | | | $ | 11,288 | |
Less: allowance for loan losses | Less: allowance for loan losses | (42) | | | (47) | | Less: allowance for loan losses | (29) | | | (34) | |
Commercial finance receivables, net | Commercial finance receivables, net | $ | 9,429 | | | $ | 6,725 | | Commercial finance receivables, net | $ | 10,597 | | | $ | 11,254 | |
Number of dealers | Number of dealers | 2,391 | | | 2,305 | | Number of dealers | 2,406 | | | 2,431 | |
Average carrying amount per dealer | Average carrying amount per dealer | $ | 4 | | | $ | 3 | | Average carrying amount per dealer | $ | 4 | | | $ | 5 | |
Allowance for loan losses as a percentage of commercial finance receivables, net of fees | Allowance for loan losses as a percentage of commercial finance receivables, net of fees | 0.4 | % | | 0.7 | % | Allowance for loan losses as a percentage of commercial finance receivables, net of fees | 0.3 | % | | 0.3 | % |
At September 30, 2022 and DecemberNo commercial loans were modified for the three months ended March 31, 2021, no commercial finance receivables were classified as TDRs.2023. Activity in the allowance for commercial loan losses was insignificant for the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, and substantially all of our commercial finance receivables were current with respect to payment status at September 30, 2022March 31, 2023 and December 31, 2021.2022.
Leased Vehicles The following table summarizes activity in our operating lease portfolio (in thousands, except where noted):
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | | Three Months Ended March 31, |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 |
Operating leases purchased | Operating leases purchased | 80 | | | 88 | | | 250 | | | 357 | | Operating leases purchased | | $ | 86 | | | $ | 80 | |
Operating leases terminated | Operating leases terminated | 140 | | | 127 | | | 442 | | | 426 | | Operating leases terminated | | 126 | | | 151 | |
Operating leased vehicles returned(a) | Operating leased vehicles returned(a) | 4 | | | 6 | | | 8 | | | 96 | | Operating leased vehicles returned(a) | | 13 | | | 2 | |
Percentage of leased vehicles returned(b) | Percentage of leased vehicles returned(b) | 3 | % | | 5 | % | | 2 | % | | 23 | % | Percentage of leased vehicles returned(b) | | 10 | % | | 1 | % |
________________
(a)Represents the number of vehicles returned to us for remarketing.
(b)Calculated as the number of operating leased vehicles returned divided by the number of operating leases terminated.
The return rate is largely dependent on the level of used vehicle values at lease termination compared to contractual residual values at lease inception. Used vehicle prices, although lower year-over-year, were sustained at high levelsgenerally higher than contractual residual values for the three and nine months ended September 30, 2022,March 31, 2023, primarily due to low new vehicle inventory,above-average seasonal demand and resulted in unusually low return rates. The high levels of used vehicle prices also resulted in gainssupply. Gains on terminations of leased vehicles of $267were $206 million and $990$369 million for the three and nine months ended September 30, 2022, compared to $458 millionMarch 31, 2023 and $1.6 billion for the same periods in 2021.2022. The decrease in gains for the three months ended March 31, 2023 compared to the same period in 2022, is primarily due to higher residual value estimates resulting in decreased depreciation expense, as well asleased portfolio net book values at termination and fewer vehicles returned for the three and nine months ended September 30, 2022 compared to the same periods in 2021. For the remainder of 2022, weterminated leases. We expect used vehicle prices to remain elevated primarily duemoderate and the return rate to sustained low new vehicle inventory and reduced incentive levels, but to decrease relative to 2021 peak levels.increase through 2023, as market prices on used vehicles approach contractual residual values.
The following table summarizes the residual value based on our most recent estimates and the number of units included in leased vehicles, net by vehicle type (units in thousands):
| | | September 30, 2022 | | December 31, 2021 | | March 31, 2023 | | December 31, 2022 |
| | Residual Value | | Units | | Percentage of Units | | Residual Value | | Units | | Percentage of Units | | Residual Value | | Units | | Percentage of Units | | Residual Value | | Units | | Percentage of Units |
Crossovers | Crossovers | $ | 14,791 | | | 770 | | | 67.4 | % | | $ | 16,696 | | | 897 | | | 67.3 | % | Crossovers | $ | 13,797 | | | 710 | | | 67.4 | % | | $ | 14,207 | | | 736 | | | 67.3 | % |
Trucks | Trucks | 7,155 | | | 237 | | | 20.8 | | | 7,886 | | | 264 | | | 19.8 | | Trucks | 6,829 | | | 221 | | | 21.0 | | | 6,961 | | | 228 | | | 20.9 | |
SUVs | SUVs | 2,666 | | | 68 | | | 5.9 | | | 3,104 | | | 80 | | | 5.9 | | SUVs | 2,537 | | | 64 | | | 6.1 | | | 2,595 | | | 66 | | | 6.0 | |
Cars | Cars | 1,041 | | | 67 | | | 5.9 | | | 1,430 | | | 93 | | | 7.0 | | Cars | 904 | | | 58 | | | 5.6 | | | 964 | | | 63 | | | 5.8 | |
Total | Total | $ | 25,654 | | | 1,141 | | | 100.0 | % | | $ | 29,116 | | | 1,334 | | | 100.0 | % | Total | $ | 24,067 | | | 1,053 | | | 100.0 | % | | $ | 24,727 | | | 1,092 | | | 100.0 | % |
At September 30,March 31, 2023 and 2022, and 2021, 99.5% and 99.6% of our operating leases were current with respect to payment status.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Liquidity and Capital Resources
General Our primary sources of cash are finance charge income, leasing income and proceeds from the sale of terminated leased vehicles, net proceeds from credit facilities, securitizations, secured and unsecured borrowings, and collections and recoveries on finance receivables. Our primaryknown material uses of cash are purchases and funding of finance receivables and leased vehicles, repayment or repurchases of secured and unsecured debt, funding credit enhancement requirements in connection with securitizations and secured credit facilities, interest costs, operating expenses, income taxes and dividend payments.
Typically, our purchase and funding of retail and commercial finance receivables and leased vehicles are initially financed by utilizing cash and borrowings on our secured credit facilities. Subsequently, we typically obtain long-term financing for finance receivables and leased vehicles through securitization transactions and the issuance of unsecured debt.
Cruise is the GM global segment responsible for the development and commercialization of autonomous vehicle technology. We have a multi-year credit agreement with Cruise whereby we may provide advances to Cruise, over time, through 2024, to fund the purchase of autonomous vehicles from GM. At March 31, 2023 and December 31, 2022, Cruise had $151 million and $113 million of borrowings outstanding and access to an additional $4.5 billion in advances under the credit agreement.
The following table summarizes our available liquidity:
| Liquidity | Liquidity | September 30, 2022 | | December 31, 2021 | Liquidity | March 31, 2023 | | December 31, 2022 |
Cash and cash equivalents(a) | Cash and cash equivalents(a) | $ | 4,079 | | | $ | 3,948 | | Cash and cash equivalents(a) | $ | 4,352 | | | $ | 4,005 | |
Borrowing capacity on unpledged eligible assets | Borrowing capacity on unpledged eligible assets | 20,757 | | | 19,283 | | Borrowing capacity on unpledged eligible assets | 22,951 | | | 22,041 | |
Borrowing capacity on committed unsecured lines of credit | Borrowing capacity on committed unsecured lines of credit | 512 | | | 518 | | Borrowing capacity on committed unsecured lines of credit | 487 | | | 460 | |
Borrowing capacity on the Junior Subordinated Revolving Credit Facility | Borrowing capacity on the Junior Subordinated Revolving Credit Facility | 1,000 | | | 1,000 | | Borrowing capacity on the Junior Subordinated Revolving Credit Facility | 1,000 | | | 1,000 | |
Borrowing capacity on the GM Revolving 364-Day Credit Facility | Borrowing capacity on the GM Revolving 364-Day Credit Facility | 2,000 | | | 2,000 | | Borrowing capacity on the GM Revolving 364-Day Credit Facility | 2,000 | | | 2,000 | |
Available liquidity | Available liquidity | $ | 28,348 | | | $ | 26,749 | | Available liquidity | $ | 30,790 | | | $ | 29,506 | |
_________________
(a)Includes $337$442 million and $348$384 million in unrestricted cash outside of the U.S. at September 30, 2022March 31, 2023 and December 31, 2021.2022. This cash is considered to be indefinitely invested based on specific plans for reinvestment.
At September 30, 2022,March 31, 2023, available liquidity increased from December 31, 2021,2022, primarily due to increasedan increase in available borrowing capacity on unpledged eligible assets, resulting from the issuance of securitization transactions and unsecured debt, and an increase in cash and cash equivalents. We generally target liquidity levels to support at least six months of our expected net cash outflows, including new originations, without access to new debt financing transactions or other capital markets activity. At September 30, 2022,March 31, 2023, available liquidity exceeded our liquidity targets.
Our support agreement with GM (the Support Agreement) provides that GM will use commercially reasonable efforts to ensure that we will continue to be designated as a subsidiary borrower under GM's corporate revolving credit facilities. We have access, subject to available capacity, to $15.5 billion of GM's unsecured revolving credit facilities consisting of a three-year, $4.3 billion facility and a five-year, $11.2 billion facility. We also have exclusive access to GM's $2.0 billion 364-day revolving credit facility (GM Revolving 364-day Credit Facility) and a $1.0 billion junior subordinated unsecured intercompany revolving credit facility (the Junior Subordinated Revolving Credit Facility). We had no borrowings outstanding under any of the GM revolving credit facilities at September 30, 2022 and December 31, 2021.
Cruise is the GM global segment responsible for the development and commercialization of autonomous vehicle technology. We have a multi-year credit agreement with Cruise whereby we may provide advances to Cruise up to an aggregate of $5.0 billion, over time, through 2024, to fund the purchase of autonomous vehicles from GM. Cruise had $68 million of borrowings outstanding under the credit agreement at September 30, 2022 and no borrowings outstanding at December 31, 2021.
| | | | | | | | | | | | | | | | | |
Cash Flow | Nine Months Ended September 30, | | 2022 vs. 2021 |
| 2022 | | 2021 | |
Net cash provided by (used in) operating activities | $ | 3,829 | | | $ | 5,629 | | | $ | (1,800) | |
Net cash provided by (used in) investing activities | $ | (6,726) | | | $ | (3,243) | | | $ | (3,483) | |
Net cash provided by (used in) financing activities | $ | 2,408 | | | $ | (1,568) | | | $ | 3,976 | |
| | | | | | | | | | | | | | | | | |
Cash Flow | Three Months Ended March 31, | | 2023 vs. 2022 |
| 2023 | | 2022 | |
Net cash provided by (used in) operating activities | $ | 1,724 | | | $ | 1,248 | | | $ | 476 | |
Net cash provided by (used in) investing activities | $ | (1,493) | | | $ | (1,048) | | | $ | (445) | |
Net cash provided by (used in) financing activities | $ | 213 | | | $ | 517 | | | $ | (304) | |
During the ninethree months ended September 30, 2022,March 31, 2023, net cash provided by operating activities decreasedincreased primarily due to a net increase in cash used inprovided by counterparty derivative collateral posting activities of $1.0 billion$584 million, an increase in finance charge income of $358 million, a decrease in taxes paid to GM of $89 million, and an increase in investment income of $72 million, partially offset by an increase in interest paid of $443 million and a decrease in leased vehicle income of $904 million, partially offset by a decrease in interest paid of $128$248 million.
During the ninethree months ended September 30, 2022,March 31, 2023, net cash used in investing activities increased primarily due to an increase in net fundingthe purchases of commercialconsumer finance receivables of $7.3 billion,$961 million, a decrease in proceeds from termination of leased vehicles of $4.5 billion, and$468 million, an increase in the purchases of consumerleased vehicles of $164 million, and a decrease in collections and recoveries on retail finance receivables of $1.1 billion,$130 million, partially offset by an increase in net collections of commercial finance receivables of $1.3 billion.
During the three months ended March 31, 2023, net cash provided by financing activities decreased primarily due to an increase in dividend payments of $450 million and a decrease in borrowings of $53 million, partially offset by a decrease in debt repayments of $193 million.
GENERAL MOTORS FINANCIAL COMPANY, INC.
decrease in purchasesStatus of leased vehiclesCredit RatingsWe receive ratings from four independent credit rating agencies: DBRS Limited, Fitch Ratings (Fitch), Moody's Investors Service (Moody's) and Standard & Poor's (S&P). The credit ratings assigned to us from all the credit rating agencies are closely associated with their opinions on GM. In March 2023, Moody's upgraded our senior unsecured notes rating to Baa2 from Baa3 and the short-term commercial paper rating to P-2 from P-3. As of $7.6 billion and an increase in collections and recoveries on retail finance receivables of $1.8 billion.
During the nine months ended September 30, 2022, net cash provided by financing activities increased primarily due to a decrease in debt repayments of $4.3 billion, a decrease in extinguishment of debt of $1.6 billion and a decrease in dividend payments of $0.8 billion, partially offset by a decrease in borrowings of $2.7 billion.April 16, 2023, all other credit ratings remained unchanged since December 31, 2022.
Credit Facilities In the normal course of business, in addition to using our available cash, we fund our operations by borrowing under our credit facilities, which may be secured and/or structured as securitizations, or may be unsecured. We repay these borrowings as appropriate under our liquidity management strategy.
At September 30, 2022March 31, 2023, credit facilities consist of the following:
| Facility Type | Facility Type | | Facility Amount | | Advances Outstanding | Facility Type | | Facility Amount | | Advances Outstanding |
Revolving retail asset-secured facilities(a) | Revolving retail asset-secured facilities(a) | | $ | 22,088 | | | $ | 3,805 | | Revolving retail asset-secured facilities(a) | | $ | 22,052 | | | $ | 2,479 | |
Revolving commercial asset-secured facilities(b) | Revolving commercial asset-secured facilities(b) | | 3,927 | | | — | | Revolving commercial asset-secured facilities(b) | | 4,162 | | | 361 | |
Total secured | Total secured | | 26,015 | | | 3,805 | | Total secured | | 26,214 | | | 2,839 | |
Unsecured committed facilities | Unsecured committed facilities | | 591 | | | 79 | | Unsecured committed facilities | | 568 | | | 81 | |
Unsecured uncommitted facilities(c) | Unsecured uncommitted facilities(c) | | 1,283 | | | 1,283 | | Unsecured uncommitted facilities(c) | | 1,506 | | | 1,506 | |
Total unsecured | Total unsecured | | 1,874 | | | 1,362 | | Total unsecured | | 2,073 | | | 1,587 | |
Junior Subordinated Revolving Credit Facility | Junior Subordinated Revolving Credit Facility | | 1,000 | | | — | | Junior Subordinated Revolving Credit Facility | | 1,000 | | | — | |
GM Revolving 364-Day Credit Facility | GM Revolving 364-Day Credit Facility | | 2,000 | | | — | | GM Revolving 364-Day Credit Facility | | 2,000 | | | — | |
Total | Total | | $ | 30,889 | | | $ | 5,167 | | Total | | $ | 31,288 | | | $ | 4,426 | |
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(a)Includes committed and uncommitted revolving credit facilities backed by retail finance receivables and leases. The financial institutions providing the uncommitted facilities are not contractually obligated to advance funds under them. We had an insignificant amount in advances outstanding and $725$614 million in unused borrowing capacity on these uncommitted facilities at September 30, 2022.March 31, 2023.
(b)Includes revolving credit facilities backed by loans to dealers for floorplan financing.
(c)The financial institutions providing the uncommitted facilities are not contractually obligated to advance funds under them. We had $1.7 billion in unused borrowing capacity on these facilities at September 30, 2022.March 31, 2023.
Refer to Note 6 to our condensed consolidated financial statements for further discussion. Securitization Notes Payable We periodically finance our retail and commercial finance receivables and leases through public and private term securitization transactions, where the securitization markets are sufficiently developed. A summary of securitization notes payable is as follows:
| Year of Transaction | Year of Transaction | | Maturity Date (a) | | Original Note Issuance (b) | | Note Balance At September 30, 2022 | Year of Transaction | | Maturity Date (a) | | Original Note Issuance (b) | | Note Balance At March 31, 2023 |
2018 | 2018 | | March 2024 | - | September 2026 | | $ | 4,352 | | | $ | 488 | | 2018 | | November 2024 | - | September 2026 | | $ | 2,001 | | | $ | 147 | |
2019 | 2019 | | April 2024 | - | July 2027 | | $ | 9,386 | | | 1,944 | | 2019 | | April 2024 | - | July 2027 | | $ | 6,917 | | | 1,401 | |
2020 | 2020 | | August 2023 | - | August 2028 | | $ | 19,784 | | | 6,661 | | 2020 | | August 2023 | - | August 2028 | | $ | 14,176 | | | 5,037 | |
2021 | 2021 | | December 2022 | - | June 2034 | | $ | 23,263 | | | 12,496 | | 2021 | | April 2025 | - | June 2034 | | $ | 22,945 | | | 9,179 | |
2022 | 2022 | | October 2023 | - | February 2030 | | $ | 17,957 | | | 15,403 | | 2022 | | November 2024 | - | October 2035 | | $ | 23,711 | | | 17,827 | |
2023 | | 2023 | | January 2027 | - | June 2032 | | $ | 5,100 | | | 4,886 | |
Total active securitizations | Total active securitizations | | 36,993 | | Total active securitizations | | 38,477 | |
Debt issuance costs | Debt issuance costs | | (64) | | Debt issuance costs | | (63) | |
Total | Total | | $ | 36,929 | | Total | | $ | 38,414 | |
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(a)Maturity dates represent legal final maturity of issued notes. The notes are expected to be paid based on amortization of the finance receivables and leases pledged.
(b)At historical foreign currency exchange rates at the time of issuance.
Our securitizations utilize special purpose entities which are also variable interest entities that meet the requirements to be consolidated in our financial statements. Refer to Note 7 to our condensed consolidated financial statements for further discussion.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Unsecured Debt We periodically access the unsecured debt capital markets through the issuance of senior unsecured notes. At September 30, 2022,March 31, 2023, the aggregate principal amount of our outstanding unsecured senior notes was $45.2$48.8 billion.
We issue other unsecured debt through demand notes, commercial paper offerings and other bank and non-bank funding sources. At September 30, 2022,March 31, 2023, we had $3.9$3.6 billion outstanding in demand notes and $2.3 billion under the U.S. commercial paper program.
LIBOR Transition The U.K. Financial Conduct Authority, which regulates the LondonInternational Swaps and Derivatives Association launched its Interbank Offered Rate (LIBOR), announced that it will no longer persuade or compel banks(IBOR) Fallbacks Supplement and IBOR Fallbacks Protocol, which came into effect on January 25, 2021. The supplement incorporates fallbacks for new derivatives linked to submit rates forLIBOR, and the calculation of LIBOR after 2021. In March 2021, the ICE Benchmark Administration Limited, the administrator of LIBOR, extended the transition dates of certain U.S. Dollar LIBOR tenorsprotocol enables market participants to June 30, 2023, after which LIBOR reference rates will cease to be provided. Despite this deferral, the LIBOR administrator has advised that no new contracts using U.S. Dollar LIBOR should be entered into after December 31, 2021. It is unknown whether LIBOR will continue to be published by its administrator based on continued bank submissions, or on any other basis, after such dates. Regulators, industry groups and certain committees such as the Alternative Reference Rates Committee have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternativesincorporate fallbacks for certain LIBOR rates,legacy derivatives linked to LIBOR. We have adhered to the protocol, and as of March 31, 2023, we have transitioned all of our LIBOR-based derivative exposure.
For any residual exposure after the end of 2021 or any designated later cessation date, we expect to leverage relevant contractual and statutory solutions to transition such as Secured Overnight Financing Rate, and proposed implementations of the recommended alternatives in floating rate financial instruments.exposure. For more information on the expected replacement of LIBOR, see the "Risk Factors" section of our 20212022 Form 10-K.
Support Agreement - Leverage Ratio Our earning assets leverage ratio calculated in accordance with the terms of the Support Agreement was 7.68x7.85x and 8.07x7.91x at September 30, 2022March 31, 2023 and December 31, 2021,2022, and the applicable leverage ratio threshold was 12.00x. In determining our earning assets leverage ratio (net earning assets divided by adjusted equity) under the Support Agreement, net earning assets means our finance receivables, net, plus leased vehicles, net, and adjusted equity means our equity, net of goodwill and inclusive of outstanding junior subordinated debt, as each may be adjusted for derivative accounting from time to time. The decrease in the earning assets leverage ratio is primarily due to increased shareholders' equity as a result of $2.5 billion in net income, partially offset by $1.0 billion of dividends on our common stock paid to GM.
Asset and Liability Maturity Profile We define our asset and liability maturity profile as the cumulative maturities of our finance receivables, investment in leased vehicles, net of accumulated depreciation, cash and cash equivalents and other assets less our cumulative debt maturities. We manage our balance sheet so that asset maturities will exceed debt maturities each year. The following chart presents our cumulative maturities for assets and debt at September 30, 2022:March 31, 2023:
| | | 2022 | | 2023 | | 2024 | | 2025 and Thereafter | | 2023 | | 2024 | | 2025 | | 2026 and Thereafter |
Encumbered assets | Encumbered assets | $ | 8,018 | | | $ | 33,005 | | | $ | 47,905 | | | $ | 55,632 | | Encumbered assets | $ | 21,898 | | | $ | 42,193 | | | $ | 51,848 | | | $ | 57,161 | |
Unencumbered assets | Unencumbered assets | 17,740 | | | 32,761 | | | 44,899 | | | 64,179 | | Unencumbered assets | 26,624 | | | 40,176 | | | 53,172 | | | 66,405 | |
Total assets | Total assets | 25,757 | | | 65,767 | | | 92,803 | | | 119,811 | | Total assets | 48,522 | | | 82,370 | | | 105,020 | | | 123,565 | |
| Secured debt | Secured debt | 5,880 | | | 24,205 | | | 35,132 | | | 40,799 | | Secured debt | 15,829 | | | 30,499 | | | 37,478 | | | 41,318 | |
Unsecured debt | Unsecured debt | 6,571 | | | 15,659 | | | 23,966 | | | 54,039 | | Unsecured debt | 13,661 | | | 22,522 | | | 33,006 | | | 57,716 | |
Total debt(a) | Total debt(a) | 12,451 | | | 39,864 | | | 59,098 | | | 94,838 | | Total debt(a) | 29,490 | | | 53,021 | | | 70,484 | | | 99,035 | |
Net excess liquidity | Net excess liquidity | $ | 13,306 | | | $ | 25,903 | | | $ | 33,705 | | | $ | 24,973 | | Net excess liquidity | $ | 19,032 | | | $ | 29,349 | | | $ | 34,536 | | | $ | 24,530 | |
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(a)Excludes unamortized debt premium/(discount), unamortized debt issuance costs, and fair value adjustments.
Critical Accounting Estimates
The preparation of condensed financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amount of revenue and expenses in the periods presented. Actual results could differ from those estimates, due to inherent uncertainties in making estimates, and those differences may be material. The critical accounting estimates that affect the condensed consolidated financial statements and the judgment and assumptions used are consistent with those described in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 20212022 Form 10-K.
Forward-Looking Statements
This report contains several "forward-looking statements." Forward-looking statements are those that use words such as "believe," "expect," "intend," "plan," "may," "likely," "should," "estimate," "continue," "future" or "anticipate" and other comparable expressions. These words indicate future events and trends. Forward-looking statements are our current views with
GENERAL MOTORS FINANCIAL COMPANY, INC.
respect to future events and financial performance. These forward-looking statements are subject to many assumptions, risks and uncertainties that could cause actual results to differ significantly from historical results or from those anticipated by us. The most significant risks are detailed from time to time in our filings and reports with the Securities and Exchange Commission (SEC),SEC, including our 20212022 Form 10-K. It is advisable
GENERAL MOTORS FINANCIAL COMPANY, INC.
We caution readers not to place undue reliance on our forward-looking statements. We undertake no obligation to, and do not, publicly update or revise any forward-looking statements, except as required by federal securities laws, whether as a result of new information, future events or otherwise.
The following factors are among those that may cause actual results to differ materially from historical results or from the forward-looking statements:
•GM's ability to sell new vehicles that we finance in the markets we serve;
•dealers' effectiveness in marketing our financial products to consumers;
•the viability of GM-franchised dealers that are commercial loan customers;
•the sufficiency, availability and cost of sources of financing, including credit facilities, securitization programs and secured and unsecured debt issuances;
•the adequacy of our underwriting criteria for loans and leases and the level of net charge-offs, delinquencies and prepayments on the loans and leases we purchase or originate;
•our ability to effectively manage capital or liquidity consistent with evolving business or operational needs, risk management standards and regulatory or supervisory requirements;
•the adequacy of our allowance for loan losses on our finance receivables;
•our ability to maintain and expand our market share due to competition in the automotive finance industry from a large number of banks, credit unions, independent finance companies and other captive automotive finance subsidiaries;
•changes in the automotive industry that result in a change in demand for vehicles and related vehicle financing;
•the effect, interpretation or application of new or existing laws, regulations, court decisions and accounting pronouncements;
•adverse determinations with respect to the application of existing laws, or the results of any audits from tax authorities, as well as changes in tax laws and regulations, supervision, enforcement and licensing across various jurisdictions;
•the prices at which used vehicles are sold in the wholesale auction markets;
•vehicle return rates, our ability to estimate residual value at lease inception and the residual value performance on vehicles we lease;
•interest rate fluctuations and certain related derivatives exposure;
•our joint ventures in China, which we cannot operate solely for our benefit and over which we have limited control;
•changes in the determination of LIBOR and other benchmark rates;rates, such as LIBOR;
•the lengthpandemics, epidemics, disease outbreaks and severity ofother public health crises, including the COVID-19 pandemic;
•our ability to secure private data, proprietary information, manage risks related to security breaches and other disruptions to networks and systems owned or maintained by us or third parties and comply with enterprise data regulations in all key market regions;
•foreign currency exchange rate fluctuations and other risks applicable to our operations outside of the U.S.;
•changes in local, regional, national or international economic, social or political conditions; and
•impact and uncertainties related to climate relatedclimate-related events and climate change legislation.
If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected.
Available Information
Our internet website is www.gmfinancial.com. Our website contains detailed information about us and our subsidiaries. Our Investor Center website at https://investor.gmfinancial.com contains a significant amount of information about our Company, including financial and other information for investors. We encourage investors to visit our website, as we frequently update and post new information about our Company on our website, and it is possible that this information could be deemed to be material information. Our website and information included in or linked to our website are not part of this Quarterly Report on Form 10-Q.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, as well as any amendments to those reports, are available free of charge on our website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. These reports can also be found on the SEC website at www.sec.gov.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in our exposure to market risk since December 31, 2021.2022. Refer to Item 7A. - "Quantitative and Qualitative Disclosures About Market Risk" in our 20212022 Form 10-K.
Item 4. Controls and Procedures
Disclosure Controls and Procedures We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (Exchange Act), is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our principal executive officer (CEO) and principal financial officer (CFO), as appropriate, to allow timely decisions regarding required disclosures.
Our management, with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under the Exchange Act) as of September 30, 2022,March 31, 2023, as required by paragraph (b) of Rules 13a-15 or 15d-15. Based on this evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022.March 31, 2023.
Changes in Internal Control over Financial Reporting There have not been any changes in our internal control over financial reporting during the three months ended September 30, 2022,March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II
Item 1. Legal Proceedings
Refer to Note 9 to our condensed consolidated financial statements for information relating to legal proceedings. Item 1A. Risk Factors
We face a number of significant risks and uncertainties in connection with our operations. Our business and the results of our operations and financial condition could be materially adversely affected by these risk factors. There have been no material changes to the Risk Factors disclosed in our 20212022 Form 10-K.
GENERAL MOTORS FINANCIAL COMPANY, INC.
Item 6. Exhibits
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| | | | Incorporated by Reference |
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4.1 | | 31.1Forty-Ninth Supplemental Indenture, dated January 9, 2023, between General Motors Financial Company, Inc. and Computershare Trust Company, N.A., as trustee, with respect to General Motors Financial Company, Inc.’s 6.000% Senior Notes due 2028 and 6.400% Senior Notes due 2033, incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, filed on January 9, 2023 | | Incorporated by Reference |
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10.1† | | Fourth Amended and Restated 5-Year Revolving Credit Agreement, dated as of March 31, 2023, among General Motors Company, General Motors Financial Company, Inc., the subsidiary borrowers from time to time parties thereto, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citibank, N.A., as syndication agent, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed on March 31, 2023 | | Incorporated by Reference |
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10.2† | | Fifth Amended and Restated 3-Year Revolving Credit Agreement, dated as of March 31, 2023, among General Motors Company, General Motors Financial Company, Inc., the subsidiary borrowers from time to time parties thereto, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citibank, N.A., as syndication agent, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed on March 31, 2023 | | Incorporated by Reference |
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10.3† | | Fifth Amended and Restated 364-Day Revolving Credit Agreement, dated as of March 31, 2023, among General Motors Company, General Motors Financial Company, Inc., the subsidiary borrowers from time to time parties thereto, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Citibank, N.A., as syndication agent, incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K, filed on March 31, 2023 | | Incorporated by Reference |
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31.1 | | | | Filed Herewith |
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101 | | The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022,March 31, 2023, formatted in Inline Extensible Business Reporting Language (iXBRL) includes: (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Comprehensive Income, (iv) the Condensed Consolidated Statements of Shareholders' Equity, (v) the Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements | | Filed Herewith |
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104 | | The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022,March 31, 2023, formatted as iXBRL and contained in Exhibit 101 | | Filed Herewith |
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† Portions of this exhibit have been omitted pursuant to Rule 601(b)(10) of Regulation S-K. The omitted information is not material and would likely cause competitive harm to the registrant if publicly disclosed.
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GENERAL MOTORS FINANCIAL COMPANY, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | | | | General Motors Financial Company, Inc. |
| | | | | (Registrant) |
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Date: | OctoberApril 25, 20222023 | | By: | | /S/ SUSAN B. SHEFFIELD |
| | | | | Susan B. Sheffield |
| | | | | Executive Vice President and |
| | | | | Chief Financial Officer |