Harley-Davidson Financial Services reported a 2.3% year-over-year decline — to $3.1 billion — in total origination volume for 2016 in its latest earnings report. However, loan originations ticked up in 4Q16 to $496.8 million — up 2.8% from the same time a year prior.
The captive’s 2016 originations were comprised of 80% prime loans and 20% subprime loans, which remains the same as the previous year’s origination mix.
Annualized net losses are still rising at HDFS — reaching 1.8% in the fourth quarter, up from 1.4% in the prior-year quarter, according to the earnings. Losses continue to be at the highest level the captive has seen since 2011 when losses were at 1.1%.
Additionally, 30-day delinquencies rose 47 basis points to 4.25% in 4Q16, from 3.78% the same time a year prior.
The increase was due to higher losses on loans in oil-dependent areas and lower used-bike values at auction, John Olin, Harley-Davidson Inc.’s chief financial officer, said during the company’s earnings call today. The continued rise caused the captive to adjust its underwriting in oil-dependent areas during the third quarter.
“We’ve got a robust process to make sure we are taking everything into account,” Olin said of the captive’s strategy. “We feel good about HDFS, and the portfolio changes in underwriting made in the oil-dependent areas,” he added.
Financial services operating income was down 1.7% to $275.5 million in 2016, from $280.2 million in 2015. “We expect HDFS operating income in 2017 to be down year over year — driven by lapping the $9 million gain on last year’s securitization,” Olin said.