FORM 10-K

51 Finance receivables categorized based on the credit quality indicators and by delinquency aging category are summarized as follows: (Dollars in millions) December 30, 2017 December 31, 2016 Performing $ 733 $ 758 Watchlist 56 101 Nonaccrual 61 87 Nonaccrual as a percentage of finance receivables 7.18% 9.20% Less than 31 days past due $ 791 $ 857 31-60 days past due 25 49 61-90 days past due 14 18 Over 90 days past due 20 22 60+ days contractual delinquency as a percentage of finance receivables 4.00% 4.23% Impaired Loans On a quarterly basis, we evaluate individual finance receivables for impairment in non-homogeneous portfolios and larger balance accounts in homogeneous loan portfolios. A finance receivable is considered impaired when it is probable that we will be unable to collect all amounts due according to the contractual terms of the loan agreement based on our review of the credit quality indicators described above. Impaired finance receivables include both nonaccrual accounts and accounts for which full collection of principal and interest remains probable, but the account’s original terms have been, or are expected to be, significantly modified. If the modification specifies an interest rate equal to or greater than a market rate for a finance receivable with comparable risk, the account is not considered impaired in years subsequent to the modification. Interest income recognized on impaired loans was not significant in 2017 or 2016. A summary of impaired finance receivables, excluding leveraged leases, and the average recorded investment is provided below: (In millions) December 30, 2017 December 31, 2016 Recorded investment: Impaired loans with related allowance for losses $ 24 $ 55 Impaired loans with no related allowance for losses 70 65 Total $ 94 $ 120 Unpaid principal balance $ 106 $ 125 Allowance for losses on impaired loans 6 11 Average recorded investment 92 101 Allowance for Losses A rollforward of the allowance for losses on finance receivables and a summary of its composition, based on how the underlying finance receivables are evaluated for impairment, is provided below. The finance receivables reported in this table specifically exclude $98 million and $99 million of leveraged leases at December 30, 2017 and December 31, 2016, respectively, in accordance with U.S. generally accepted accounting principles. (In millions) December 30, 2017 December 31, 2016 Balance at beginning of year $ 41 $ 48 Provision for losses (11) (1) Charge-offs (6) (16) Recoveries 7 10 Balance at end of year $ 31 $ 41 Allowance based on collective evaluation $ 25 $ 30 Allowance based on individual evaluation 6 11 Finance receivables evaluated collectively 658 727 Finance receivables evaluated individually 94 120