LOANS RECEIVABLE, NET

9 Months Ended

Sep. 30, 2024

The Company classifies loans receivable as “On-line merchant”, “In-store merchant”, “Consumer”, and “Credit cards”. As of September 30, 2024 and December 31, 2023, the components of current and non-current Loans receivable, net were as follows:


	September 30, 2024
	Loans receivable		Allowance for doubtful accounts		Loans receivable, net
	(In millions)
On-line merchant	$	495	$	(140)	$	355
In-store merchant	673		(253)		420
Consumer	2,504		(732)		1,772
Credit cards	2,344		(487)		1,857
Total	$	6,016	$	(1,612)	$	4,404


	December 31, 2023
	Loans receivable		Allowance for doubtful accounts		Loans receivable, net
	(In millions)
On-line merchant	$	429	$	(119)	$	310
In-store merchant	332		(137)		195
Consumer	1,808		(592)		1,216
Credit cards	1,209		(236)		973
Total	$	3,778	$	(1,084)	$	2,694

The allowance for doubtful accounts with respect to the Company’s loans receivable amounts to $1,637 million and $1,102 million as of September 30, 2024 and December 31, 2023, respectively, which includes $25 million and $18 million related to unused agreed loan commitment on credit cards portfolio presented in Other liabilities of the interim condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024 and December 31, 2023, the Company is exposed to off-balance sheet unused agreed loan commitments on credit cards portfolio, which expose the Company to credit risks for $2,498 million and $934 million, respectively. For the nine and three-month periods ended September 30, 2024, the Company recognized in provision for doubtful accounts $9 million and $5 million as expected credit losses, and $5 million and $2 million for the same periods in 2023, respectively.

The Company closely monitors credit quality for all loans receivable on a recurring basis to assess and manage its exposure to credit risk. To assess merchants and consumers seeking a loan under the Mercado Credito solution, the Company uses, among other indicators, risk models internally developed as a credit quality indicator to help predict the merchant’s and consumer’s ability to repay the principal balance and interest related to the credit. The risk model uses multiple variables as predictors of the merchant’s and consumer’s ability to repay the credit, including external and internal indicators. Internal indicators consider user behavior related to credit/payment history, and with lower weight in the risk models, the Company uses the number of transactions in the Company’s ecosystem and the merchant’s annual sales volume, among other indicators. In addition, the Company considers external bureau information to enhance the model and the decision making process.

The amortized cost of the loans receivable classified by the Company’s credit quality internal indicator was as follows:


	September 30, 2024		December 31, 2023
	(In millions)
1-14 days past due	$	178	$	99
15-30 days past due	138		92
31-60 days past due	180		114
61-90 days past due	149		103
91-120 days past due	154		111
121-150 days past due	143		97
151-180 days past due	144		82
181-210 days past due	134		76
211-240 days past due	128		74
241-270 days past due	111		69
271-300 days past due	91		59
301-330 days past due	91		74
331-360 days past due	82		66
Total past due	1,723		1,116
To become due	4,293		2,662
Total	$	6,016	$	3,778

As of September 30, 2024 and December 31, 2023, renegotiations represented 1.5% and 2.8% of the loans receivable portfolio, respectively.

The following tables summarize the allowance for doubtful accounts activity during the nine-month periods ended September 30, 2024 and 2023:


	September 30, 2024
	On-line merchant		In-store merchant		Consumer		Credit cards		Total
	(In millions)
Balance at beginning of year	$	119	$	137	$	592	$	236	$	1,084
Net charged to Net Income	107		221		575		406		1,309
Currency translation adjustments	(6)		(14)		(37)		(39)		(96)
Write-offs (1)	(80)		(91)		(398)		(116)		(685)
Balance at end of period	$	140	$	253	$	732	$	487	$	1,612


	September 30, 2023
	On-line merchant		In-store merchant		Consumer		Credit cards		Total
	(In millions)
Balance at beginning of year	$	120	$	145	$	614	$	225	$	1,104
Net charged to Net Income	81		93		417		140		731
Currency translation adjustments	3		—		9		10		22
Write-offs (1)	(84)		(111)		(467)		(171)		(833)
Balance at end of period	$	120	$	127	$	573	$	204	$	1,024

(1) The Company writes off loans when customer balance becomes 360 days past due.