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Finance Assets and Lessor Operating Leases | 9 Months Ended
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Sep. 30, 2020
Receivables [Abstract] |
Finance Assets and Lessor Operating Leases | Finance Assets and Lessor Operating Leases Finance Assets Finance receivables are comprised of sales-type lease receivables and unsecured revolving loan receivables. Sales-type lease receivables are generally due in monthly, quarterly or semi-annual installments over periods ranging from three to five years. Loan receivables arise primarily from financing services offered to our clients for postage and supplies and are generally due monthly; however, clients may rollover outstanding balances. Interest is recognized on loan receivables using the effective interest method. Annual fees are recognized ratably over the annual period covered and client acquisition costs are expensed as incurred. Finance receivables consisted of the following:
| September 30, 2020 |  | December 31, 2019
| North America |  | International |  | Total |  | North America |  | International |  | Total
Sales-type lease receivables |  |  |  |  |  |  |  |  |  |  |
Gross finance receivables | $ | 981,475 |  |  | $ | 201,590 |  |  | $ | 1,183,065 |  |  | $ | 1,055,852 |  |  | $ | 224,202 |  |  | $ | 1,280,054 |
Unguaranteed residual values | 37,191 |  |  | 11,609 |  |  | 48,800 |  |  | 41,934 |  |  | 11,789 |  |  | 53,723 |
Unearned income | (270,499) |  |  | (58,811) |  |  | (329,310) |  |  | (319,281) |  |  | (65,888) |  |  | (385,169) |
Allowance for credit losses | (25,886) |  |  | (4,902) |  |  | (30,788) |  |  | (10,920) |  |  | (2,085) |  |  | (13,005) |
Net investment in sales-type lease receivables | 722,281 |  |  | 149,486 |  |  | 871,767 |  |  | 767,585 |  |  | 168,018 |  |  | 935,603 |
Loan receivables |  |  |  |  |  |  |  |  |  |  |
Loan receivables | 259,832 |  |  | 22,377 |  |  | 282,209 |  |  | 298,247 |  |  | 27,926 |  |  | 326,173 |
Allowance for credit losses | (6,792) |  |  | (488) |  |  | (7,280) |  |  | (5,906) |  |  | (740) |  |  | (6,646) |
Net investment in loan receivables | 253,040 |  |  | 21,889 |  |  | 274,929 |  |  | 292,341 |  |  | 27,186 |  |  | 319,527 |
Net investment in finance receivables | $ | 975,321 |  |  | $ | 171,375 |  |  | $ | 1,146,696 |  |  | $ | 1,059,926 |  |  | $ | 195,204 |  |  | $ | 1,255,130 |
Maturities of gross sales-type lease receivables and gross loan receivables at September 30, 2020 were as follows:
| Sales-type Lease Receivables |  | Loan Receivables
| North America |  | International |  | Total |  | North America |  | International |  | Total
Remaining for year ending December 31, 2020 | $ | 114,724 |  |  | $ | 35,721 |  |  | $ | 150,445 |  |  | $ | 215,593 |  |  | $ | 22,377 |  |  | $ | 237,970 |
Year ending December 31, 2021 | 359,198 |  |  | 75,057 |  |  | 434,255 |  |  | 13,314 |  |  | — |  |  | 13,314 |
Year ending December 31, 2022 | 259,729 |  |  | 49,422 |  |  | 309,151 |  |  | 11,507 |  |  | — |  |  | 11,507 |
Year ending December 31, 2023 | 155,254 |  |  | 27,279 |  |  | 182,533 |  |  | 6,394 |  |  | — |  |  | 6,394 |
Year ending December 31, 2024 | 77,034 |  |  | 11,000 |  |  | 88,034 |  |  | 7,023 |  |  | — |  |  | 7,023 |
Thereafter | 15,536 |  |  | 3,111 |  |  | 18,647 |  |  | 6,001 |  |  | — |  |  | 6,001 |
Total | $ | 981,475 |  |  | $ | 201,590 |  |  | $ | 1,183,065 |  |  | $ | 259,832 |  |  | $ | 22,377 |  |  | $ | 282,209 |
Aging of Receivables The aging of gross finance receivables was as follows:
| September 30, 2020
| Sales-type Lease Receivables |  | Loan Receivables |  |
| North America |  | International |  | North America |  | International |  | Total
Past due amounts 0 - 90 days | $ | 961,346 |  |  | $ | 199,565 |  |  | $ | 254,802 |  |  | $ | 22,096 |  |  | $ | 1,437,809 |
Past due amounts > 90 days | 20,129 |  |  | 2,025 |  |  | 5,030 |  |  | 281 |  |  | 27,465 |
Total | $ | 981,475 |  |  | $ | 201,590 |  |  | $ | 259,832 |  |  | $ | 22,377 |  |  | $ | 1,465,274 |
Past due amounts > 90 days |  |  |  |  |  |  |  |  |
Still accruing interest | $ | 3,365 |  |  | $ | 699 |  |  | $ | 1,461 |  |  | $ | 58 |  |  | $ | 5,583 |
Not accruing interest | 16,764 |  |  | 1,326 |  |  | 3,569 |  |  | 223 |  |  | 21,882 |
Total | $ | 20,129 |  |  | $ | 2,025 |  |  | $ | 5,030 |  |  | $ | 281 |  |  | $ | 27,465 |
| December 31, 2019
| Sales-type Lease Receivables |  | Loan Receivables |  |
| North America |  | International |  | North America |  | International |  | Total
Past due amounts 0 - 90 days | $ | 1,032,912 |  |  | $ | 220,819 |  |  | $ | 294,001 |  |  | $ | 27,697 |  |  | $ | 1,575,429 |
Past due amounts > 90 days | 22,940 |  |  | 3,383 |  |  | 4,246 |  |  | 229 |  |  | 30,798 |
Total | $ | 1,055,852 |  |  | $ | 224,202 |  |  | $ | 298,247 |  |  | $ | 27,926 |  |  | $ | 1,606,227 |
Past due amounts > 90 days |  |  |  |  |  |  |  |  |
Still accruing interest | $ | 4,835 |  |  | $ | 1,081 |  |  | $ | 2,094 |  |  | $ | 121 |  |  | $ | 8,131 |
Not accruing interest | 18,105 |  |  | 2,302 |  |  | 2,152 |  |  | 108 |  |  | 22,667 |
Total | $ | 22,940 |  |  | $ | 3,383 |  |  | $ | 4,246 |  |  | $ | 229 |  |  | $ | 30,798 |
Allowance for Credit Losses We estimate an allowance for credit losses based on historical loss experience, the nature of our portfolios, adverse situations that may affect a client's ability to pay, current conditions, reasonable and supportable forecasts and current economic outlook. Credit losses are estimated at the portfolio level based on asset type and geographic market. Historical loss experience was based on actual loss rates over the average term of the asset of five years for sales-type lease receivables and three years for loan receivables (including accrued interest). Additionally, we evaluate current conditions and review third-party economic forecasts on a quarterly basis to determine the impact on the allowance for credit losses. The assumptions used in determining an estimate of credit losses are inherently subjective and actual results may differ significantly from estimated reserves. The allowance for credit losses at September 30, 2020 considers the current economic conditions and resulting impact on a client's future ability to pay amounts due. We establish credit approval limits based on the credit quality of the client and the type of equipment financed. Our policy is to discontinue revenue recognition for lease receivables that are more than 120 days past due and for loan receivables that are more than 90 days past due. We resume revenue recognition when the client's payments reduce the account aging to less than 60 days past due. Finance receivables deemed uncollectible are written off against the allowance after all collection efforts have been exhausted and management deems the account to be uncollectible. We monitor delinquency rates and have experienced a slight increase in our delinquencies during this current economic situation. However, we believe that our finance receivable credit risk is low because of the geographic and industry diversification of our clients and small account balances for most of our clients. Activity in the allowance for credit losses for finance receivables was as follows:
| Sales-type Lease Receivables |  | Loan Receivables |  |
| North America |  | International |  | North America |  | International |  | Total
Balance at December 31, 2019 | $ | 10,920 |  |  | $ | 2,085 |  |  | $ | 5,906 |  |  | $ | 740 |  |  | $ | 19,651 |
Cumulative effect of accounting change | 9,271 |  |  | 1,750 |  |  | (1,116) |  |  | (402) |  |  | 9,503 |
Amounts charged to expense | 10,009 |  |  | 1,314 |  |  | 6,792 |  |  | 429 |  |  | 18,544 |
Write-offs | (5,950) |  |  | (548) |  |  | (7,370) |  |  | (343) |  |  | (14,211) |
Recoveries | 1,488 |  |  | 91 |  |  | 2,399 |  |  | 1 |  |  | 3,979 |
Currency impact | 148 |  |  | 210 |  |  | 181 |  |  | 63 |  |  | 602 |
Balance at September 30, 2020 | $ | 25,886 |  |  | $ | 4,902 |  |  | $ | 6,792 |  |  | $ | 488 |  |  | $ | 38,068 |
| Sales-type Lease Receivables |  | Loan Receivables |  |
| North America |  | International |  | North America |  | International |  | Total
Balance at January 1, 2019 | $ | 10,253 |  |  | $ | 2,355 |  |  | $ | 6,777 |  |  | $ | 837 |  |  | $ | 20,222 |
Amounts charged to expense | 4,587 |  |  | 801 |  |  | 3,547 |  |  | 440 |  |  | 9,375 |
Write-offs | (5,153) |  |  | (842) |  |  | (6,882) |  |  | (608) |  |  | (13,485) |
Recoveries | 1,286 |  |  | 157 |  |  | 2,746 |  |  | 9 |  |  | 4,198 |
Currency impact | 199 |  |  | (254) |  |  | (172) |  |  | 41 |  |  | (186) |
Balance at September 30, 2019 | $ | 11,172 |  |  | $ | 2,217 |  |  | $ | 6,016 |  |  | $ | 719 |  |  | $ | 20,124 |
Credit Quality The extension of credit and management of credit lines to new and existing clients uses a combination of a client's credit score, where available, and a detailed manual review of their financial condition and payment history or an automated process for certain small dollar applications. Once credit is granted, the payment performance of the client is managed through automated collections processes and is supplemented with direct follow up should an account become delinquent. We have robust automated collections and extensive portfolio management processes to ensure that our global strategy is executed, collection resources are allocated appropriately and enhanced tools and processes are implemented as needed. We use a third party to score the majority of the North America portfolio on a quarterly basis using a commercial credit score. The relative scores are determined based on a number of factors, including financial information, payment history, company type and ownership structure. A fourth class is shown for accounts that are not scored. Absence of a score is not indicative of the credit quality of the account. The degree of risk (low, medium, high), as defined by the third party, refers to the relative risk that an account may become delinquent in the next 12 months. •Low risk accounts are companies with very good credit scores and are considered to approximate the top 30% of all commercial borrowers. •Medium risk accounts are companies with average to good credit scores and are considered to approximate the middle 40% of all commercial borrowers. •High risk accounts are companies with poor credit scores, are delinquent or are at risk of becoming delinquent and are considered to approximate the bottom 30% of all commercial borrowers. The table below shows the gross sales-type lease receivable and loan receivable balances by relative risk class and year of origination based on the relative scores of the accounts within each class.
| Sales Type Lease Receivables |  | Loan Receivables |  | Total
| 2020 |  | 2019 |  | 2018 |  | 2017 |  | 2016 |  | Prior |  |
Low | $ | 187,763 |  |  | $ | 230,942 |  |  | $ | 178,224 |  |  | $ | 101,307 |  |  | $ | 37,346 |  |  | $ | 15,488 |  |  | $ | 185,709 |  |  | $ | 936,779 |
Medium | 39,810 |  |  | 58,779 |  |  | 42,501 |  |  | 24,903 |  |  | 10,491 |  |  | 3,924 |  |  | 59,422 |  |  | 239,830 |
High | 5,752 |  |  | 6,219 |  |  | 4,722 |  |  | 2,605 |  |  | 1,344 |  |  | 184 |  |  | 4,617 |  |  | 25,443 |
Not Scored | 55,694 |  |  | 79,125 |  |  | 53,395 |  |  | 28,611 |  |  | 12,207 |  |  | 1,729 |  |  | 32,461 |  |  | 263,222 |
Total | $ | 289,019 |  |  | $ | 375,065 |  |  | $ | 278,842 |  |  | $ | 157,426 |  |  | $ | 61,388 |  |  | $ | 21,325 |  |  | $ | 282,209 |  |  | $ | 1,465,274 |
The majority of the Not Scored amounts above is within our International portfolio. We do not use a third party to score our International portfolio because the cost to do so is prohibitive, given that it is a localized process, and there is no single credit score model that covers all countries. International credit applications below $50 thousand are subjected to an automated review process. All other credit applications are manually reviewed. A manual review includes obtaining client financial information, credit reports and other available financial information. Approximately 80% of credit applications are approved or denied through the automated review process. Lease Income Lease income from sales-type leases was as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Profit recognized at commencement (1) | $ | 29,169 |  |  | $ | 39,326 |  |  | $ | 80,349 |  |  | $ | 112,422 |
Interest income | 33,654 |  |  | 56,522 |  |  | 101,969 |  |  | 174,045 |
Total lease income from sales-type leases | $ | 62,823 |  |  | $ | 95,848 |  |  | $ | 182,318 |  |  | $ | 286,467 |
(1) Lease contracts do not include variable lease payments. Lessor Operating Leases We also lease mailing equipment under operating leases with terms of one to five years. Maturities of these operating leases are as follows:
Remaining for year ending December 31, 2020 | $ | 17,351 |
Year ending December 31, 2021 | 36,396 |
Year ending December 31, 2022 | 13,688 |
Year ending December 31, 2023 | 7,172 |
Year ending December 31, 2024 | 2,100 |
Thereafter | 399 |
Total | $ | 77,106 |

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