The Company provides retail financial services to customers of its dealers in the U.S. and Canada. The origination of retail loans is a separate and distinct transaction between the Company and the retail customer, unrelated to the Company’s sale of product to its dealers. Retail finance receivables consist of secured promissory notes and secured installment sales contracts and are primarily related to dealer sales of motorcycles to retail customers. The Company holds either titles or liens on titles to vehicles financed by promissory notes and installment sales contracts.

The Company offers wholesale financing to its dealers in the U.S. and Canada. Wholesale finance receivables are related primarily to the Company's sale of motorcycles, related parts and accessories and apparel to dealers. Wholesale loans to dealers are generally secured by financed inventory or property.

Finance receivables, net were as follows (in thousands):


	September 30, 2024		December 31, 2023		September 30, 2023
Retail finance receivables	$	6,961,975	$	6,818,699	$	6,998,397
Wholesale finance receivables	1,238,324		1,061,532		1,049,541
	8,200,299		7,880,231		8,047,938
Allowance for credit losses	(399,912)		(381,966)		(392,714)
	$	7,800,387	$	7,498,265	$	7,655,224

The Company’s finance receivables are reported at amortized cost, net of the allowance for credit losses. Amortized cost includes the principal outstanding, accrued interest, and deferred loan fees and costs. The Company's allowance for credit losses reflects expected lifetime credit losses on its finance receivables. Based on differences in the nature of the finance receivables and the underlying methodology for calculating the allowance for credit losses, the Company segments its finance receivables into the retail and wholesale portfolios. The Company further disaggregates each portfolio by credit quality indicators. As the credit risk varies between the retail and wholesale portfolios, the Company utilizes different credit quality indicators for each portfolio.

The retail portfolio primarily consists of a large number of small balance, homogeneous finance receivables. The Company performs a collective evaluation of the adequacy of the retail allowance for credit losses. The Company utilizes a vintage-based loss forecast methodology that includes decompositions for probability of default, exposure at default, attrition rate, and recovery balance rate. Reasonable and supportable economic forecasts for a two-year period are incorporated into the methodology to reflect the estimated impact of changes in future economic conditions, such as unemployment rates, household obligations or other relevant factors, over the two-year reasonable and supportable period. For periods beyond the Company’s reasonable and supportable forecasts, the Company reverts to its average historical loss experience using a mean-reversion process over a three-year period. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, or term as well as other relevant factors.

The wholesale portfolio is primarily composed of large balance, non-homogeneous loans. The Company’s evaluation for the wholesale allowance for credit losses is first based on a loan-by-loan review to determine whether the loans share similar risk characteristics. The Company individually evaluates loans that do not share risk characteristics. Loans identified as those for which foreclosure is probable are classified as Non-Performing, and a specific allowance for credit losses is established when appropriate. The specific allowance is determined based on the amortized cost of the related finance receivable and the estimated fair value of the collateral, less selling costs and the cash that the Company expects to receive. Finance receivables in the wholesale portfolio not individually assessed are aggregated, based on similar risk characteristics, according to the Company’s internal risk rating system and measured collectively. The related allowance for credit losses is based on factors such as the specific borrower’s financial performance and ability to repay, the Company’s past credit loss experience, reasonable and supportable economic forecasts, and the value of the underlying collateral and expected recoveries.

The Company considers various third-party economic forecast scenarios as part of estimating the allowance for expected credit losses and applies a probability-weighting to those economic forecast scenarios. Each quarter, the Company's outlook on economic conditions impacts the Company's retail and wholesale estimates for expected credit losses. At the end of the third quarter of 2024, the Company's probability weighting of its economic forecast scenarios was weighted towards more pessimistic scenarios given continued challenging macro-economic conditions including a persistently high interest rate environment, ongoing elevated inflation levels and muted consumer confidence.

Additionally, the historical experience incorporated into the portfolio-specific models does not fully reflect the Company's comprehensive expectations regarding the future. As such, the Company incorporated qualitative factors to establish an appropriate allowance for credit losses balance. These factors include motorcycle recovery value considerations, delinquency adjustments, specific problem loan trends, and changes in other portfolio-specific loan characteristics. During the first nine months of 2024, the Company experienced increased retail credit losses driven by several factors connected to the macro-economic environment and related customer and industry dynamics, including the impact of higher motorcycle payments and general inflationary pressures on customers. Additionally, the Company experienced downward pressure on recovery values at auction during the first nine months of 2024.

Due to the use of projections and assumptions in estimating the losses, the amount of losses incurred by the Company in either portfolio could differ from the amounts estimated. Further, the Company’s allowance for credit losses incorporates known conditions at the balance sheet date and the Company’s expectations surrounding the economic forecasts. The


	Three months ended September 30, 2024						Nine months ended September 30, 2024
	Retail		Wholesale		Total		Retail		Wholesale		Total
Balance, beginning of period	$	377,826	$	15,691	$	393,517	$	367,037	$	14,929	$	381,966
Provision for credit losses	55,831		2,146		57,977		172,109		2,908		175,017
Charge-offs	(65,029)		—		(65,029)		(207,109)		—		(207,109)
Recoveries	13,447		—		13,447		50,038		—		50,038
Balance, end of period	$	382,075	$	17,837	$	399,912	$	382,075	$	17,837	$	399,912
	Three months ended September 30, 2023						Nine months ended September 30, 2023
	Retail		Wholesale		Total		Retail		Wholesale		Total
Balance, beginning of period	$	366,919	$	14,861	$	381,780	$	345,275	$	13,436	$	358,711
Provision for credit losses	60,832		22		60,854		169,049		1,447		170,496
Charge-offs	(63,738)		—		(63,738)		(182,183)		—		(182,183)
Recoveries	13,818		—		13,818		45,690		—		45,690
Balance, end of period	$	377,831	$	14,883	$	392,714	$	377,831	$	14,883	$	392,714

The Company manages retail credit risk through its credit approval process and ongoing collection efforts. The Company uses FICO scores, a standard credit rating measurement, to differentiate the expected default rates of retail credit applicants, enabling the Company to better evaluate credit applicants for approval and to tailor pricing according to this assessment. For the Company’s U.S. and Canadian retail finance receivables, the Company determines the credit quality indicator for each loan at origination and does not update the credit quality indicator subsequent to the loan origination date.

As loan performance by credit quality indicator differs between the U.S. and Canadian retail loans, the Company’s credit quality indicators vary for the two portfolios. For U.S. retail finance receivables, those with a FICO score of 740 or above at origination are generally considered super prime, loans with a FICO score between 640 and 740 are generally categorized as prime, and loans with FICO score below 640 are generally considered sub-prime. For Canadian retail finance receivables, those with a FICO score of 700 or above at origination are generally considered super prime, loans with a FICO score between 620 and 700 are generally categorized as prime, and loans with FICO score below 620 are generally considered sub-prime.

The amortized cost along with period gross charge-offs of the Company's U.S. and Canadian retail finance receivables by vintage and credit quality indicator was as follows (in thousands):


	September 30, 2024
	2024		2023		2022		2021		2020		2019 & Prior		Total
U.S. Retail:
Super prime	$	931,374	$	769,173	$	507,694	$	241,713	$	84,111	$	39,590	$	2,573,655
Prime	927,821		901,954		730,870		410,721		166,169		106,766		3,244,301
Sub-prime	281,501		249,447		200,838		134,880		67,592		59,151		993,409
	2,140,696		1,920,574		1,439,402		787,314		317,872		205,507		6,811,365
Canadian Retail:
Super prime	35,280		34,382		21,186		10,573		4,410		1,702		107,533
Prime	9,200		10,340		8,054		4,812		2,782		2,124		37,312
Sub-prime	1,731		1,457		1,132		490		564		391		5,765
	46,211		46,179		30,372		15,875		7,756		4,217		150,610
	$	2,186,907	$	1,966,753	$	1,469,774	$	803,189	$	325,628	$	209,724	$	6,961,975
Gross charge-offs for the nine months ended September 30, 2024:
U.S. Retail	$	4,680	$	65,972	$	67,945	$	36,365	$	15,270	$	13,485	$	203,717
Canadian Retail	87		1,033		976		616		329		351		3,392
	$	4,767	$	67,005	$	68,921	$	36,981	$	15,599	$	13,836	$	207,109


	December 31, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
U.S. Retail:
Super prime	$	1,066,321	$	729,339	$	376,474	$	151,004	$	70,627	$	27,013	$	2,420,778
Prime	1,173,463		993,417		584,305		259,995		139,011		78,880		3,229,071
Sub-prime	333,099		275,964		189,688		101,437		63,393		44,568		1,008,149
	2,572,883		1,998,720		1,150,467		512,436		273,031		150,461		6,657,998
Canadian Retail:
Super prime	48,705		31,733		17,744		9,241		4,521		1,524		113,468
Prime	13,764		11,434		7,336		4,390		2,728		1,838		41,490
Sub-prime	1,846		1,546		739		817		525		270		5,743
	64,315		44,713		25,819		14,448		7,774		3,632		160,701
	$	2,637,198	$	2,043,433	$	1,176,286	$	526,884	$	280,805	$	154,093	$	6,818,699
Gross charge-offs for the year ended December 31, 2023:
U.S. Retail	$	20,047	$	102,387	$	74,212	$	30,896	$	18,088	$	14,655	$	260,285
Canadian Retail	527		1,004		866		472		278		483		3,630
	$	20,574	$	103,391	$	75,078	$	31,368	$	18,366	$	15,138	$	263,915


	September 30, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
U.S. Retail:
Super prime	$	916,306	$	806,658	$	424,425	$	175,218	$	87,737	$	37,875	$	2,448,219
Prime	1,033,222		1,086,081		645,931		293,977		163,603		102,427		3,325,241
Sub-prime	296,583		307,280		211,626		114,298		72,587		55,700		1,058,074
	2,246,111		2,200,019		1,281,982		583,493		323,927		196,002		6,831,534
Canadian Retail:
Super prime	43,643		34,700		19,796		10,707		5,929		2,245		117,020
Prime	13,007		12,307		7,968		4,890		3,135		2,362		43,669
Sub-prime	1,839		1,671		852		871		575		366		6,174
	58,489		48,678		28,616		16,468		9,639		4,973		166,863
	$	2,304,600	$	2,248,697	$	1,310,598	$	599,961	$	333,566	$	200,975	$	6,998,397
Gross charge-offs for the nine months ended September 30, 2023:
U.S. Retail	$	5,141	$	71,540	$	54,843	$	23,023	$	13,622	$	11,663	$	179,832
Canadian Retail	75		703		634		337		220		382		2,351
	$	5,216	$	72,243	$	55,477	$	23,360	$	13,842	$	12,045	$	182,183

The Company's credit risk on the wholesale portfolio is different from that of the retail portfolio. Whereas the retail portfolio represents a relatively homogeneous pool of retail finance receivables that exhibit more consistent loss patterns, the wholesale portfolio exposures are less consistent. The Company utilizes an internal credit risk rating system to manage credit risk exposure consistently across wholesale borrowers and individually evaluates credit risk factors for each borrower. The Company uses the following internal credit quality indicators, based on an internal risk rating system, listed from highest level of risk to lowest level of risk for the wholesale portfolio: Doubtful, Substandard, Special Mention, Medium Risk and Low Risk. Based upon the Company’s review, the dealers classified in the Doubtful category are the dealers with the greatest likelihood of being charged-off, while the dealers classified as Low Risk are least likely to be charged-off. Additionally, the Company classifies dealers identified as those in which foreclosure is probable as Non-Performing. The internal rating system considers factors such as the specific borrower's ability to repay and the estimated value of any collateral. Dealer risk rating classifications are reviewed and updated by the Company on a quarterly basis.

The amortized cost of the Company's wholesale finance receivables, by vintage and credit quality indicator, was as follows (in thousands):


	September 30, 2024
	2024		2023		2022		2021		2020		2019 & Prior		Total
Non-Performing	$	1,986	$	2,134	$	122	$	—	$	—	$	2	$	4,244
Doubtful	9,939		4,043		129		—		—		5		14,116
Substandard	14,669		3,391		34		—		—		—		18,094
Special Mention	4,527		1,240		58		—		—		—		5,825
Medium Risk	615		146		—		—		—		—		761
Low Risk	1,008,975		134,065		38,019		2,567		3,500		8,158		1,195,284
	$	1,040,711	$	145,019	$	38,362	$	2,567	$	3,500	$	8,165	$	1,238,324


	December 31, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	10,934		258		—		—		5		—		11,197
Special Mention	641		30		—		—		—		—		671
Medium Risk	2,905		—		—		—		—		—		2,905
Low Risk	961,519		66,757		5,107		4,962		7,786		628		1,046,759
	$	975,999	$	67,045	$	5,107	$	4,962	$	7,791	$	628	$	1,061,532


	September 30, 2023
	2023		2022		2021		2020		2019		2018 & Prior		Total
Non-Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Doubtful	—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—
Special Mention	603		30		—		—		—		—		633
Medium Risk	2,754		16		—		25		—		—		2,795
Low Risk	934,104		95,436		5,928		5,354		4,601		690		1,046,113
	$	937,461	$	95,482	$	5,928	$	5,379	$	4,601	$	690	$	1,049,541

Retail finance receivables are contractually delinquent if the minimum payment is not received by the specified due date. Retail finance receivables at amortized cost, excluding accrued interest, are generally charged-off when the receivable is 120 days or more delinquent, the related asset is repossessed, or the receivable is otherwise deemed uncollectible. The Company reverses accrued interest related to charged-off accounts against HDFS interest income when the account is charged-off. The Company reversed $6.9 million and $6.2 million of accrued interest against HDFS interest income during the three months ended September 30, 2024 and September 30, 2023, respectively, and $24.0 million and $19.6 million during the nine months ended September 30, 2024 and September 30,2023, respectively. All retail finance receivables accrue interest until either collected or charged-off. Due to the timely write-off of accrued interest, the Company made the election provided under Accounting Standards Codification (ASC) Topic 326, Financial Instruments - Credit Losses to exclude accrued interest from its allowance for credit losses. Accordingly, as of September 30, 2024, December 31, 2023, and September 30, 2023, all retail finance receivables were accounted for as interest-earning receivables.

Wholesale finance receivables are delinquent if the minimum payment is not received by the contractual due date. Wholesale finance receivables are written down once the Company determines that the specific borrower does not have the ability to repay the loan in full. Interest continues to accrue on past due finance receivables until the date the Company determines that foreclosure is probable, and the finance receivable is placed on non-accrual status. The Company will resume accruing interest on these accounts when payments are current according to the terms of the loans and future payments are reasonably assured. While on non-accrual status, all cash received is applied to principal or interest as appropriate. Once an account is charged-off, the Company will reverse the associated accrued interest against HDFS interest income. As the

Company follows a non-accrual policy for interest, the allowance for credit losses excludes accrued interest for the wholesale portfolio. There were no charged-off accounts during the three and nine months ended September 30, 2024 or September 30, 2023. As such, the Company did not reverse any wholesale accrued interest in those periods. At September 30, 2024, December 31, 2023 and September 30, 2023, $0.2 million of wholesale finance receivables were 90 days or more past due and accruing interest.

Additional information related to the wholesale finance receivables on non-accrual status was as follows (in thousands):


	Amortized Cost		Amortized Cost		Interest Income
	January 1, 2024		September 30, 2024		Recognized
Wholesale:
No related allowance recorded	$	—	$	2,423	$	123
Related allowance recorded	—		1,821		123
	$	—	$	4,244	$	246

The aging analysis of the Company's finance receivables was as follows (in thousands):


	September 30, 2024
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,679,994	$	163,963	$	61,542	$	56,476	$	281,981	$	6,961,975
Wholesale finance receivables	1,236,124		832		777		591		2,200		1,238,324
	$	7,916,118	$	164,795	$	62,319	$	57,067	$	284,181	$	8,200,299

	December 31, 2023
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,516,342	$	168,027	$	67,033	$	67,297	$	302,357	$	6,818,699
Wholesale finance receivables	1,060,561		763		25		183		971		1,061,532
	$	7,576,903	$	168,790	$	67,058	$	67,480	$	303,328	$	7,880,231

	September 30, 2023
	Current		31-60 Days Past Due		61-90 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Total
Retail finance receivables	$	6,738,510	$	151,192	$	55,454	$	53,241	$	259,887	$	6,998,397
Wholesale finance receivables	1,049,338		19		22		162		203		1,049,541
	$	7,787,848	$	151,211	$	55,476	$	53,403	$	260,090	$	8,047,938