John Deere Owner Trust 2024-B Annual Report - Verified Summary

Dive into the annual performance of John Deere Owner Trust 2024-B for the fiscal year ending November 2, 2024. This summary provides a clear, concise overview of its operations, financial health, and key risk factors, designed for retail investors.

Business Overview (What the Trust Does)

John Deere Owner Trust 2024-B is a specialized financial entity, distinct from a traditional operating company. John Deere Capital Corporation (JDCC) and John Deere Receivables LLC (JDR) established the trust. It primarily acquires financial contracts (receivables) from John Deere equipment financing. The trust then bundles these receivables and issues asset-backed securities, known as "Notes," to investors. Payments from these underlying equipment loans fund scheduled principal and interest payments to noteholders.

• John Deere Capital Corporation (JDCC) sponsors the trust and services the loans, originating them and managing collection and administration.
• John Deere Receivables LLC (JDR) deposits the equipment loans into the trust.
• U.S. Bank Trust Company, National Association, acts as trustee, securities administrator, registrar, and paying agent, providing independent oversight and record-keeping.

Financial Performance (Cash Flow & Asset Health)

As an asset-backed trust, traditional "revenue" and "profit" metrics do not apply. Instead, we assess financial performance by evaluating the health and cash flow of the underlying asset pool and the trust's ability to meet its obligations to noteholders.

• Asset Pool Performance: The trust started the fiscal year with an equipment receivable pool totaling approximately $1.5 billion. By November 2, 2024, scheduled principal payments from borrowers reduced the outstanding balance to approximately $1.2 billion.
• Cash Flow: During the fiscal year, the trust received about $300 million in principal and interest payments from the equipment loans. These funds primarily covered servicing fees, administrative expenses, and scheduled principal and interest payments to noteholders.
• Asset Quality: The underlying equipment loan portfolio showed stable credit performance:
  • Delinquency Rates: Remained low, with 0.8% for loans 30-59 days past due, 0.3% for 60-89 days past due, and 0.1% for 90+ days past due.
  • Net Charge-offs: The trust experienced net charge-offs of approximately 0.25% of the average outstanding balance for the year, which falls within expected parameters for this asset class.
  • Prepayment Rates: The annualized prepayment rate was 12%, meaning some borrowers paid off their loans ahead of schedule.
• Year-over-Year Changes: The reduction in the outstanding principal balance from $1.5 billion to $1.2 billion reflects the asset pool's expected amortization over the fiscal year.

Risk Factors (Key Concerns for Noteholders)

Noteholders of John Deere Owner Trust 2024-B face several primary risks:

• Credit Risk: Borrowers of the underlying equipment loans may default on their payment obligations, potentially leading to losses for the trust. Loan pool diversification and credit enhancement mechanisms mitigate this risk.
• Servicer Performance Risk: Although an independent verification confirmed John Deere Capital Corporation's compliant servicing for the fiscal year, any future failure by the servicer to effectively collect payments or administer loans could negatively impact the trust's cash flow.
• Economic Downturns: Adverse economic conditions, especially in the agricultural or construction sectors or a broader recession, could increase borrower defaults and reduce the recovery value of repossessed equipment, leading to higher losses.
• Prepayment Risk: If borrowers prepay their loans faster than anticipated (e.g., through refinancing or equipment sales), the Notes may be repaid earlier than expected, potentially impacting investors seeking longer-term yields.
• Interest Rate Risk: While the underlying loans are typically fixed-rate, significant changes in market interest rates could affect the Notes' market value if investors need to sell them before maturity.
• No Material Legal Proceedings: The report confirms no material legal proceedings against the trust that would significantly harm noteholders.

Management Discussion (MD&A Highlights)

Key operational and performance highlights for the trust during the fiscal year include:

• Strong Compliance: Independent compliance audits by Deloitte & Touche LLP and Ernst & Young LLP confirmed strong compliance for both John Deere Capital Corporation (as servicer) and U.S. Bank Trust Company, National Association (as trustee, securities administrator, etc.). This provides significant assurance about the proper management and administration of the trust's operations and assets.
• Stable Asset Performance: The underlying equipment loan portfolio maintained low delinquency and charge-off rates, ensuring consistent cash flow despite broader economic conditions.
• Robust Credit Enhancement: The trust's credit enhancement mechanisms, including 5% overcollateralization (relative to outstanding Notes) and a $15 million reserve account, remained strong, providing a substantial buffer against potential credit losses.
• Operational Consistency: The trust continued to operate as structured, with all key parties effectively fulfilling their defined roles.
• Challenges: While no major operational challenges were reported, the trust remains exposed to economic conditions that could affect borrower payment behavior. A slight increase in prepayment rates was observed, which can lead to earlier-than-expected amortization for some Note classes.

Financial Health (Debt, Cash, Liquidity)

John Deere Owner Trust 2024-B's financial health directly depends on its asset pool's performance and its structural protections.

• Asset Backing: The trust's "debt" (the Notes issued to investors) is fully backed by performing equipment receivables. The underlying loans' value exceeded the Notes' outstanding principal balance by 5% (e.g., $1.2 billion in loans backing $1.14 billion in Notes), providing overcollateralization.
• Liquidity: Consistent principal and interest payments from the underlying equipment loans, combined with a dedicated cash reserve account of approximately $15 million, ensure sufficient liquidity to meet all scheduled payments to noteholders. These structural features provide substantial buffers against potential credit losses or temporary cash flow disruptions.
• Debt Structure: The trust's debt consists of various Note classes, each with specific payment priorities and maturities, all secured by the same pool of receivables.

Future Outlook (Guidance, Strategy)

As a static asset-backed trust, John Deere Owner Trust 2024-B does not issue forward-looking financial projections or engage in strategic initiatives in the traditional corporate sense.

• Amortization: The remaining outstanding Notes are expected to amortize over the next 3-5 years, depending on their specific class and actual prepayment rates.
• Key Influencing Factors: The health of the agricultural and construction sectors, along with the broader interest rate environment, will continue to influence the underlying asset pool's future performance and the timely repayment of noteholders.
• Operational Continuity: The trust will continue its operations as defined by its legal documents until all Notes are fully repaid and the trust dissolves.

Competitive Position

This section does not apply to John Deere Owner Trust 2024-B. The trust is a financial vehicle John Deere established to manage its equipment financing receivables and issue asset-backed securities. It does not operate as a business entity competing in a market for products or services.