PACCAR Financial's Q3 Net Income Jumps 30% Amid Rising Interest Income

TL;DR

**PACCAR Financial is crushing it with loan income, but keep an eye on those rising credit loss provisions – could signal future bumps.**

AI Summary

PACCAR Financial Corp. reported a significant increase in net income for the three and nine months ended September 30, 2025. Net income for the three-month period rose to $37.0 million, a 29.8% increase from $28.5 million in the prior year. For the nine-month period, net income reached $113.9 million, up 29.9% from $87.7 million in 2024. Total interest and other revenues increased by 3.3% to $235.9 million for the three months and by 10.1% to $714.2 million for the nine months, primarily driven by a rise in interest and fee income to $198.5 million and $581.5 million, respectively. However, operating lease and rental revenues decreased to $33.0 million for the quarter and $108.3 million for the nine months. The provision for losses on receivables increased to $14.7 million for the quarter and $32.9 million for the nine months, indicating a higher expectation of credit losses. Total assets slightly increased to $14,039.8 million from $14,020.5 million at December 31, 2024, while total liabilities decreased to $11,921.6 million from $12,019.0 million. Stockholder's equity grew to $2,118.2 million from $2,001.5 million, bolstered by increased retained earnings.

Why It Matters

PACCAR Financial Corp.'s strong earnings growth, driven by increased interest and fee income, signals robust demand for financing PACCAR trucks and equipment, which is a positive for its parent company, PACCAR Inc. The rise in the provision for losses on receivables, however, suggests potential headwinds in credit quality, which investors should monitor closely as it could impact future profitability. This performance reflects the health of the commercial vehicle market and PACCAR's competitive position within it, affecting not only investors but also dealers and customers relying on its financing solutions. The competitive landscape for commercial vehicle financing remains dynamic, and PACCAR Financial's ability to grow its loan portfolio while managing credit risk is crucial.

Risk Assessment

Risk Level: medium — The provision for losses on receivables increased significantly to $14.7 million for the three months ended September 30, 2025, up from $9.9 million in 2024, and to $32.9 million for the nine months, up from $23.1 million. This 48.5% and 42.4% increase, respectively, indicates a higher perceived risk of credit losses within its finance portfolio, which could impact future profitability if economic conditions deteriorate or defaults rise.

Analyst Insight

Investors should consider PACCAR Financial's strong net income growth as a positive indicator of its core financing business, but remain vigilant regarding the increasing provision for credit losses. Monitor future filings for trends in credit quality and non-accrual receivables, as sustained increases could erode profitability. This suggests a 'hold' position, balancing current strength with potential future credit risks.

Financial Highlights

debt To Equity

N/A

revenue

$714.2M

operating Margin

N/A

total Assets

$14,039.8M

total Debt

N/A

net Income

$113.9M

eps

N/A

gross Margin

N/A

cash Position

$49.4M

revenue Growth

+10.1%

Revenue Breakdown

Key Numbers

• $37.0M — Net Income (Q3 2025) (Increased 29.8% from $28.5M in Q3 2024)
• $113.9M — Net Income (YTD Q3 2025) (Increased 29.9% from $87.7M in YTD Q3 2024)
• $198.5M — Interest and Fee Income (Q3 2025) (Increased from $174.9M in Q3 2024, driving revenue growth)
• $581.5M — Interest and Fee Income (YTD Q3 2025) (Increased from $482.9M in YTD Q3 2024)
• $14.7M — Provision for Losses on Receivables (Q3 2025) (Increased 48.5% from $9.9M in Q3 2024, indicating higher credit risk)
• $32.9M — Provision for Losses on Receivables (YTD Q3 2025) (Increased 42.4% from $23.1M in YTD Q3 2024)
• $14,039.8M — Total Assets (Sept 30, 2025) (Slight increase from $14,020.5M at Dec 31, 2024)
• $2,118.2M — Total Stockholder's Equity (Sept 30, 2025) (Increased from $2,001.5M at Dec 31, 2024)
• $49.4M — Cash (Sept 30, 2025) (Decreased from $83.1M at Dec 31, 2024)
• $11,204.6M — Finance and Other Receivables, net (Sept 30, 2025) (Increased from $11,091.3M at Dec 31, 2024)

Key Players & Entities

• PACCAR Financial Corp. (company) — registrant and wholly owned subsidiary
• PACCAR Inc (company) — parent company of PACCAR Financial Corp.
• Financial Accounting Standards Board (FASB) (regulator) — issuer of accounting standards updates
• $37.0 million (dollar_amount) — net income for three months ended September 30, 2025
• $113.9 million (dollar_amount) — net income for nine months ended September 30, 2025
• $14.7 million (dollar_amount) — provision for losses on receivables for three months ended September 30, 2025
• $32.9 million (dollar_amount) — provision for losses on receivables for nine months ended September 30, 2025
• $198.5 million (dollar_amount) — interest and fee income for three months ended September 30, 2025
• $581.5 million (dollar_amount) — interest and fee income for nine months ended September 30, 2025
• September 30, 2025 (date) — end of the reporting period

FAQ

Risk Factors

• Increased Provision for Credit Losses [high — financial]: The provision for losses on receivables increased to $14.7 million for Q3 2025 (up 48.5% from $9.9 million in Q3 2024) and $32.9 million for YTD 2025 (up 42.4% from $23.1 million in YTD 2024). This indicates a heightened expectation of credit losses, likely due to a 'soft truckload market' and normalizing used truck values.
• Higher Charge-offs on Receivables [high — financial]: Net charge-offs increased to $31.4 million in the first nine months of 2025 from $14.9 million in the same period of 2024. This was attributed to losses on four large fleet customers and higher average loss severity due to normalizing used truck market values.
• Soft Truckload Market Impact [medium — market]: The 'soft truckload market' is cited as a reason for increased charge-offs. This market condition can impact the ability of PACCAR's customers to generate revenue and meet their financing obligations.
• Normalizing Used Truck Market Values [medium — market]: The company experienced higher average loss severity due to normalizing used truck market values. This implies that the collateral backing some loans may be worth less than in prior periods, increasing potential losses upon repossession.
• Dependence on PACCAR Inc. [medium — operational]: As a wholly owned subsidiary of PACCAR Inc, PACCAR Financial Corp.'s operations are fundamentally affected by its relationship with its parent company. This creates a concentration risk tied to the performance and strategy of PACCAR Inc.
• New Accounting Pronouncements [low — regulatory]: The company will need to implement ASU 2023-09 (effective after Dec 15, 2024) for income tax disclosures and ASU 2024-03 (effective after Dec 15, 2026) for expense disaggregation. While not impacting financial statements directly, these require compliance efforts.

Industry Context

PACCAR Financial Corp. operates within the commercial vehicle financing sector, closely tied to the PACCAR Inc truck manufacturing business. The industry is cyclical, influenced by freight demand, economic conditions, and interest rate environments. Competitors include other captive finance companies, commercial banks, and independent finance firms. Trends include increasing adoption of technology in fleet management and evolving emissions regulations impacting truck purchases.

Regulatory Implications

As a financial services provider, PACCAR Financial Corp. is subject to various financial regulations, including those related to lending practices, capital adequacy, and consumer protection. Changes in accounting standards, such as ASU 2023-09 and ASU 2024-03, require ongoing compliance efforts and potential adjustments to disclosure practices.

What Investors Should Do

1. Monitor credit quality trends closely.
2. Analyze the impact of the 'soft truckload market'.
3. Evaluate the revenue mix shift.
4. Assess the impact of normalizing used truck values.

Key Dates

• 2025-09-30: End of Third Quarter 2025 — Reporting period for the 10-Q, showing increased net income and revenues but also higher provisions for credit losses.
• 2024-12-31: End of Fiscal Year 2024 — Prior year-end balance sheet figures for comparison, showing a slight increase in total assets and growth in stockholder's equity.
• 2024-09-30: End of Third Quarter 2024 — Prior year comparable period for income statement items, showing lower net income and revenues, and lower provisions for credit losses.

Glossary

Provision for losses on receivables

An expense set aside by a company to cover potential losses from customers who may not be able to repay their debts. (An increase here signals PACCAR Financial Corp. anticipates more defaults or credit issues among its borrowers.)

Non-accrual status

A loan or receivable status where interest income is no longer recognized until the borrower makes significant payments or the loan is brought current. (Indicates that certain receivables are experiencing payment difficulties, a key indicator of credit risk.)

Allowance for credit losses

A contra-asset account that reduces the carrying amount of finance receivables to their net realizable value, representing management's estimate of uncollectible amounts. (The balance of this allowance directly impacts the reported value of the company's receivables and reflects its assessment of credit risk.)

Charge-offs

The process of removing a debt from a company's books when it is deemed uncollectible. (Represents actual losses incurred on receivables, providing a concrete measure of credit problems.)

Dealer wholesale financing

Financing provided to dealerships to purchase inventory (trucks and equipment) that they intend to sell. (A key segment of PACCAR Financial's business, its performance is sensitive to dealer inventory levels and sales demand.)

Retail loans

Financing provided directly to end-customers for the purchase of trucks and equipment. (Represents the largest portion of the company's finance receivables and is directly tied to truck sales.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, PACCAR Financial Corp. has demonstrated robust revenue growth, with total interest and other revenues up 10.1% year-to-date, driven by a significant increase in interest and fee income. Net income also saw a substantial rise of 29.9% year-to-date. However, this positive performance is tempered by a notable increase in the provision for losses on receivables, up 42.4% year-to-date, and a significant rise in net charge-offs, indicating deteriorating credit quality and increased risk within the loan portfolio.

Key Financial Figures

• $300.0 Million — egistered Series P Medium-Term Notes $300.0 Million Due May 11, 2026 PCAR26 The NASDAQ
• $100 — atest practicable date: Common Stock, $100 par value— 145,000 shares as of October

Filing Documents

• pcar-20250930.htm (10-Q) — 3239KB
• pcar-ex31_a.htm (EX-31.A) — 18KB
• pcar-ex31_b.htm (EX-31.B) — 17KB
• pcar-ex32_a.htm (EX-32.A) — 20KB
• 0001193125-25-258541.txt ( ) — 12633KB
• pcar-20250930.xsd (EX-101.SCH) — 876KB
• pcar-20250930_htm.xml (XML) — 3424KB

FINANCIAL STATEMENTS

FINANCIAL STATEMENTS: 3 Balance Sheets — September 30, 2025 (Unaudited) and December 31, 2024 4 5 6

Notes to Financial Statements (Unaudited)

Notes to Financial Statements (Unaudited) 7 ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 21 ITEM 4.

CONTROLS AND PROCEDURES

CONTROLS AND PROCEDURES 29 PART II. OTHER INFORMATION: 30 ITEM 1.

LEGAL PROCEEDINGS

LEGAL PROCEEDINGS 30 ITEM 1A.

RISK FACTORS

RISK FACTORS 30 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES 30 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 30 ITEM 4. MINE SAFETY DISCLOSURES 30 ITEM 5. OTHER INFORMATION 30 ITEM 6. EXHIBITS 30 EXHIBIT INDEX 31

SIGNATURES

SIGNATURES 32 PACCAR FINANCIAL CORP.

– FINANCI AL INFORMATION

PART I – FINANCI AL INFORMATION

FINANCI AL STATEMENTS

ITEM 1. FINANCI AL STATEMENTS Three Months Ended Nine Months Ended September 30 September 30 (Millions of Dollars) 2025 2024 2025 2024 Interest and fee income $ 198.5 $ 174.9 $ 581.5 $ 482.9 Operating lease and rental revenues 33.0 45.4 108.3 140.1 Used truck sales and other revenues 4.4 8.1 24.4 25.6 TOTAL INTEREST AND OTHER REVENUES 235.9 228.4 714.2 648.6 Interest and other borrowing costs 125.7 112.0 368.0 299.5 Depreciation and other rental expenses 26.3 43.2 90.8 132.3 Cost of used truck sales and other expenses 2.6 7.4 20.8 24.5 Selling, general and administrative expenses 17.5 18.1 51.9 53.3 Provision for losses on receivables 14.7 9.9 32.9 23.1 TOTAL EXPENSES 186.8 190.6 564.4 532.7 INCOME BEFORE INCOME TAXES 49.1 37.8 149.8 115.9 Income taxes 12.1 9.3 35.9 28.2 NET INCOME $ 37.0 $ 28.5 $ 113.9 $ 87.7 COMPREHENSIVE INCOME $ 35.3 $ 22.8 $ 109.1 $ 83.2 RETAINED EARNINGS AT BEGINNING OF PERIOD $ 1,846.3 $ 1,712.3 $ 1,769.4 $ 1,703.1 RETAINED EARNINGS AT END OF PERIOD $ 1,883.3 $ 1,740.8 $ 1,883.3 $ 1,740.8 Earnings per share and dividends per share are not reported because the Company is a wholly owned subsidiary of PACCAR Inc. See Notes to Financial Statements. - 3 - PACCAR FINANCIAL CORP. BALANCE SHEETS September 30 December 31 2025 2024* (Millions of Dollars) (Unaudited) ASSETS Cash $ 49.4 $ 83.1 Finance and other receivables, net of allowance for losses (2025 - $ 75.9 and 2024 - $ 74.4 ) 11,204.6 11,091.3 Due from PACCAR and affiliates 2,138.0 2,070.5 Equipment on operating leases, net of accumulated depreciation (2025 - $ 278.4 and 2024 - $ 314.6 ) 394.4 509.1 Other assets 253.4 266.5 TOTAL ASSETS $ 14,039.

Notes to Financial Statements (Unaudited)

Notes to Financial Statements (Unaudited) (Millions of Dollars) NOTE A – Basis of Presentation PACCAR Financial Corp. (the "Company") is a wholly owned subsidiary of PACCAR Inc ("PACCAR"). The Company primarily provides financing of PACCAR manufactured trucks and related equipment sold by authorized dealers. The Company also finances dealer inventories of transportation equipment and franchises Kenworth and Peterbilt dealerships to engage in full-service and finance leasing. The operations of the Company are fundamentally affected by its relationship with PACCAR. The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. For further information, refer to the financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2024. New Accounting Pronouncements: In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The amendments in this ASU require entities to disclose certain, specific categories within the rate reconciliation and enhance disclosures regarding income taxes paid and income tax expense. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments in this ASU should be applied on a prospective basis; however, retro

Notes to Financial Statements (Unaudited)

Notes to Financial Statements (Unaudited) (Millions of Dollars) NOTE B – Finance and Other Receivables The Company's finance and other receivables include the following: September 30 December 31 2025 2024 Retail loans $ 6,074.7 $ 5,675.3 Retail financing leases 1,836.9 1,846.3 Dealer wholesale financing 2,792.8 3,070.1 Dealer master notes 523.5 518.1 Operating lease receivables and other 52.6 55.9 11,280.5 11,165.7 Less allowance for credit losses: Loans and leases ( 74.1 ) ( 71.8 ) Dealer wholesale financing ( 1.1 ) ( 1.1 ) Operating lease receivables and other ( .7 ) ( 1.5 ) $ 11,204.6 $ 11,091.3 Interest income recognized on finance leases was $ 27.4 and $ 81.8 for the three and nine months ended September 30, 2025, respectively, compared to $ 25.4 and $ 72.2 for the same periods in 2024. Recognition of interest income and rental revenue is suspended (put on non-accrual status) when the receivable becomes more than 90 days past the contractual due date or earlier if some other event causes the Company to determine that collection is not probable. Accordingly, no finance receivables more than 90 days past due were accruing interest at September 30, 2025 or December 31, 2024. Recognition is resumed if the receivable becomes current by the payment of all amounts due under the terms of the existing contract and collection of remaining amounts is considered probable (if not contractually modified) or if the customer makes scheduled payments for three months and collection of remaining amounts is considered probable (if contractually modified). Payments received while the finance receivable is on non-accrual status are applied to interest and principal in accordance with the contractual terms. Allowance for Credit Losses The Company continuously monitors the payment performance of its finance receivables. For large retail finance customers and dealers with wholesale financ

Notes to Financial Statements (Unaudited)

Notes to Financial Statements (Unaudited) (Millions of Dollars) segment generally has less risk than the retail segment. Wholesale receivables generally are shorter in duration than retail receivables, and the Company requires periodic reporting of the wholesale dealer's financial condition, conducts periodic audits of the trucks being financed and, in many cases, obtains guarantees or other security such as dealership assets. In determining the allowance for credit losses, retail loans and finance leases are evaluated together since they relate to a similar customer base, their contractual terms require regular payment of principal and interest, generally over 36 to 60 months , and they are secured by the same type of collateral. The allowance for credit losses consists of both specific and general reserves. The Company individually evaluates certain finance receivables for expected credit losses. Finance receivables that are evaluated individually consist of all wholesale accounts and certain large retail accounts with past due balances or otherwise determined to be at a higher risk of loss. In general, finance receivables that are 90 days past due are placed on non-accrual status. Finance receivables on non-accrual status which have been performing for 90 consecutive days are placed on accrual status if it is deemed probable that the Company will collect all principal and interest payments. Individually evaluated receivables on non-accrual status are generally considered collateral dependent. Large balance retail and all wholesale receivables on non-accrual status are individually evaluated to determine the appropriate reserve for losses. Generally, the determination of reserves for large balance receivables on non-accrual status considers the fair value of the associated collateral. When the underlying collateral fair value exceeds the Company's amortized cost basis, no reserve is recorded. Small balance receivables on non-accrual status with similar ris

Notes to Financial Statements (Unaudited)

Notes to Financial Statements (Unaudited) (Millions of Dollars) more trucks. All other customer retail accounts are considered owner/operator. These two classes have similar measurement attributes, risk characteristics and common methods to monitor and assess credit risk. The allowance for credit losses is summarized as follows: 2025 Dealer Customer Wholesale Retail Retail Other* Total Balance at January 1 $ 1.1 $ 1.1 $ 70.7 $ 1.5 $ 74.4 Provision for losses .4 33.3 ( .8 ) 32.9 Charge-offs ( 31.9 ) ( 31.9 ) Recoveries .5 .5 Balance at September 30 $ 1.1 $ 1.5 $ 72.6 $ .7 $ 75.9 2024 Dealer Customer Wholesale Retail Retail Other* Total Balance at January 1 $ 1.0 $ 1.7 $ 56.9 $ 1.4 $ 61.0 Provision for losses ( .6 ) 23.7 23.1 Charge-offs ( 15.1 ) ( 15.1 ) Recoveries .2 .2 Balance at September 30 $ 1.0 $ 1.1 $ 65.7 $ 1.4 $ 69.2 * Operating lease and other trade receivables. Charge-offs, net of recoveries, increased to $ 31.4 in the first nine months of 2025 from $ 14.9 in the first nine months of 2024. The increase in charge-offs reflected a soft truckload market and included losses on four large fleet customers which were provisioned for previously. The higher charge-offs also reflect higher average loss severity due to normalizing used truck market values when compared to previous periods. Credit Quality The Company's customers are principally concentrated in the transportation industry in the United States. The Company's portfolio assets are diversified over a large number of customers and dealers with no single customer or dealer balances representing over 10 % of the total portfolio assets as of September 30, 2025 or December 31, 2024. The Company retains as collateral a security interest in the related equipment. At the inception of each contract, the Company considers the cre

Notes to Financial Statements (Unaudited)

Notes to Financial Statements (Unaudited) (Millions of Dollars) The tables below summarize the amortized cost basis of the Company's finance receivables within each credit quality indicator by year of origination and portfolio class and current period gross charge-offs of the Company's finance receivables by year of origination and portfolio class. At September 30, 2025 Revolving Loans 2025 2024 2023 2022 2021 Prior Total Amortized cost: Dealer: Wholesale: Performing $ 2,785.8 $ 2,785.8 Watch 7.0 7.0 $ 2,792.8 $ 2,792.8 Retail: Performing $ 230.5 $ 389.4 $ 525.4 $ 462.0 $ 302.0 $ 132.1 $ 127.3 $ 2,168.7 Watch 4.9 1.0 11.4 3.9 .8 1.8 23.8 $ 230.5 $ 394.3 $ 526.4 $ 473.4 $ 305.9 $ 132.9 $ 129.1 $ 2,192.5 Total dealer $ 3,023.3 $ 394.3 $ 526.4 $ 473.4 $ 305.9 $ 132.9 $ 129.1 $ 4,985.3 Customer retail: Fleet: Performing $ 1,584.7 $ 1,815.3 $ 1,100.1 $ 557.8 $ 210.6 $ 73.1 $ 5,341.6 Watch 44.9 15.0 39.6 35.0 17.1 1.0 152.6 At-risk 6.5 26.6 91.7 27.0 4.7 7.3 163.8 $ 1,636.1 $ 1,856.9 $ 1,231.4 $ 619.8 $ 232.4 $ 81.4 $ 5,658.0 Performing $ 203.2 $ 190.4 $ 77.8 $ 57.0 $ 32.7 $ 8.9 $ 570.0 Watch 1.4 1.8 2.9 2.3 1.0 .3 9.7 At-risk .7 .9 1.0 1.8 .3 .2 4.9 $ 205.3 $ 193.1 $ 81.7 $ 61.1 $ 34.0 $ 9.4 $ 584.6 Total customer retail $ 1,841.4 $ 2,050.0 $ 1,313.1 $ 680.9 $ 266.4 $ 90.8 $ 6,242.6 Total $ 3,023.3 $ 2,235.7 $ 2,576.4 $ 1,786.5 $ 986.8 $ 399.3 $ 219.9 $ 11,227.9 Nine Months Ended September 30, 2025 Revolving Loans 2025 2024 2023 2022 2021 Prior Total Gross charge-offs: Customer retail: Fleet $ 2.4 $ 13.5 $ 1

Notes to Financial Statements (Unaudited)

Notes to Financial Statements (Unaudited) (Millions of Dollars) At December 31, 2024 Revolving Loans 2024 2023 2022 2021 2020 Prior Total Amortized cost: Dealer: Wholesale: Performing $ 3,064.1 $ 3,064.1 Watch 6.0 6.0 $ 3,070.1 $ 3,070.1 Reta

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