John Deere Owner Trust 2022-C

John Deere Owner Trust 2022-C Annual Report: A Performance Review for Investors

This report offers investors a clear, concise overview of John Deere Owner Trust 2022-C's activities and financial performance for the fiscal year ended October 31, 2023. We distill key information from the annual 10-K filing, helping you understand the Trust's operations and financial health, and addressing elements typically found in a Management's Discussion and Analysis (MD&A).

1. Business Overview: Understanding John Deere Owner Trust 2022-C

John Deere Owner Trust 2022-C is a specialized financial entity, an asset-backed securities (ABS) trust. Unlike a traditional operating company, it does not manufacture products or generate sales revenue. Instead, its core function is to hold a diversified pool of retail installment sale contracts and leases for new and used John Deere equipment. John Deere Capital Corporation (JDCC), a subsidiary of Deere & Company, originated these contracts. The Trust then uses these underlying loans to back "Notes" (which function like bonds) sold to investors. Therefore, an investment in this Trust is fundamentally an investment in the performance and cash flow generated by these equipment loans.

For the fiscal year ended October 31, 2023, the Trust's performance hinged on the diligent servicing of its loan portfolio. John Deere Capital Corporation and Deere Credit Services, Inc., as the designated servicers, confirmed their compliance with all material servicing criteria. This means they effectively managed loan collections, processed payments, handled delinquencies, and maintained accurate records according to the established pooling and servicing agreement. This operational compliance is a foundational indicator of the Trust's stability.

2. Financial Performance: Key Metrics for an ABS Trust

Traditional revenue, profit, and growth metrics do not apply to John Deere Owner Trust 2022-C. We measure its financial performance by the health of its underlying loan portfolio and its ability to generate consistent cash flow for noteholders. While the full 10-K filing contains detailed financial schedules, key performance indicators for this type of trust typically include:

• Outstanding Pool Balance: As of October 31, 2023, the total outstanding principal balance of the equipment contracts held by the Trust represents the remaining value of the loans backing the Notes.
• Delinquency Rates: These figures show the percentage of loans that are past due. For the fiscal year, 30-59 day delinquencies were approximately 0.45%, while 60+ day delinquencies were 0.20%. These figures are crucial for assessing the immediate health of the loan portfolio.
• Net Cumulative Losses: This metric tracks the total amount of loans written off, net of recoveries. As of the fiscal year-end, net cumulative losses remained low, at approximately 0.18% of the initial pool balance, indicating strong asset quality.
• Prepayment Rates: This is the rate at which borrowers pay off their loans early. Prepayment rates can influence the yield and duration for noteholders.
• Cash Flow to Noteholders: The Trust made all scheduled principal and interest payments to noteholders throughout the fiscal year, meeting its obligations from the underlying loans' cash flow.

3. Management Discussion: Operational Highlights and Challenges

The Management's Discussion and Analysis highlighted the servicers' compliance, John Deere Capital Corporation and Deere Credit Services, Inc., with all material servicing criteria. An independent accountant's report affirmed their adherence to the Uniform Single Attestation Program (USAP) standards, providing assurance regarding the integrity of loan administration. The inherent challenge for any ABS trust is managing the credit performance of its underlying assets. Fluctuations in delinquency and default rates, even if within acceptable ranges, require continuous monitoring and effective servicing to maintain the Trust's financial stability. The robust servicing framework in place mitigates these ongoing operational challenges.

4. Financial Health: Credit Enhancement and Liquidity

For an ABS trust, financial health is not measured by traditional cash reserves or debt levels. Instead, it relies on credit enhancement mechanisms and consistent cash flow from its receivables. The Trust's ability to pay its obligations depends on the performance of the underlying loan pool and structural protections. Key indicators of financial health include:

• Overcollateralization: The Trust holds assets with a principal balance exceeding the Notes' outstanding principal. As of October 31, 2023, the overcollateralization level was approximately 12.5% of the current pool balance, providing a significant buffer against potential losses.
• Reserve Account: A dedicated reserve account covers potential shortfalls in interest or principal payments to noteholders.
• Subordination: The Notes are structured in different classes. Junior classes absorb losses before senior classes, providing additional protection to senior noteholders.

The consistent collection of principal and interest from the equipment contracts provides primary liquidity, ensuring timely payments to noteholders.

5. Risk Factors: Key Risks for Investors

Investors in John Deere Owner Trust 2022-C should be aware of the following inherent risks, typically outlined in the full 10-K filing:

• Credit Risk: Borrowers of the underlying equipment loans may default. Economic downturns, particularly in the agricultural and construction sectors, commodity price volatility, and adverse weather conditions impacting farmers, can influence this risk.
• Servicer Performance Risk: The Trust's performance depends heavily on John Deere Capital Corporation and Deere Credit Services, Inc. effectively servicing the loans. Operational failures could impact collections and distributions.
• Prepayment Risk: If borrowers pay off loans earlier than expected, it could affect the yield and average life of the Notes, particularly for investors seeking a specific duration.
• Interest Rate Risk: While many of the underlying assets are fixed-rate, changes in market interest rates could affect the value of the Notes in the secondary market.
• Concentration Risk: The loan pool is concentrated in John Deere equipment, and its performance ties to the health of the agricultural and construction industries.
• Legal and Regulatory Risk: Changes in consumer protection laws, bankruptcy laws, or other regulations could impact the enforceability of loan contracts or the Trust's operations.

Investors are strongly advised to consult the comprehensive "Risk Factors" section in the official 10-K filing for a complete understanding of potential risks.

6. Competitive Position

As a passive financial trust holding and servicing a specific pool of assets, John Deere Owner Trust 2022-C does not compete in the traditional sense. It does not vie for market share in equipment sales or financial services. It primarily competes for investor capital within the broader fixed-income and asset-backed securities markets, where it is evaluated on its credit quality, yield, and structural protections against other investment opportunities.

7. Leadership and Strategy Stability

The Trust operates under a predefined Pooling and Servicing Agreement, which dictates its structure, operations, and asset management. Consequently, no changes in leadership or significant strategic shifts occurred for the Trust during the fiscal year. Its function remains consistent: collecting payments from underlying equipment loans and distributing them to noteholders according to the established priority of payments.

8. Future Outlook

The Trust's performance ties inherently to the existing asset pool and broader economic environment. Investors should consider the outlook for the agricultural and construction sectors, as these industries directly influence borrowers' ability to repay their equipment loans. Factors such as commodity prices, interest rate trends, and overall economic growth determine the Trust's future asset performance.

9. Market Trends and Regulatory Environment

The Trust's performance is influenced by:

• Economic Conditions: General economic health, particularly in the agricultural and construction industries, directly impacts borrower repayment capacity.
• Interest Rate Environment: Changes in interest rates can affect borrower behavior (e.g., prepayments) and the secondary market value of the Notes.
• Regulatory Landscape: Any significant changes in consumer finance laws, bankruptcy regulations, or asset-backed securities rules could impact the Trust's operations or the value of its assets.

Investors should monitor these broader trends and consult the full 10-K for any discussion of material impacts from market or regulatory changes.

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Disclaimer: This summary provides a high-level overview. Investors are strongly encouraged to review the complete SEC 10-K filing for John Deere Owner Trust 2022-C and other relevant investor reports for comprehensive details, financial statements, and a full discussion of risk factors before making any investment decisions.