MARRIOTT VACATIONS WORLDWIDE Corp
For the period ended Mar 31, 2024. Filed May 7, 2024.
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Mar 31, 2024 · Filed May 7, 2024
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6. Vacation Ownership Notes Receivable
| 6. | VACATION OWNERSHIP NOTES RECEIVABLE |
The following table shows the composition of our vacation ownership notes receivable balances, net of reserves.
| March 31, 2024 | December 31, 2023 | |||||
|---|---|---|---|---|---|---|
| ($ in millions) | Originated | Acquired | Total | Originated | Acquired | Total |
| Securitized | $1,785 | $129 | $1,914 | $1,764 | $148 | $1,912 |
| Eligible for securitization(1) | 51 | 2 | 53 | 51 | 1 | 52 |
| Not eligible for securitization(1) | 351 | 18 | 369 | 363 | 16 | 379 |
| Non-securitized | 402 | 20 | 422 | 414 | 17 | 431 |
| Total | $2,187 | $149 | $2,336 | $2,178 | $165 | $2,343 |
| (1)Refer to Footnote 7 “Financial Instruments” for discussion of eligibility of our vacation ownership notes receivable for securitization. | ||||||
We reflect interest income associated with vacation ownership notes receivable on our Income Statements in the Financing revenues caption. The following table summarizes interest income associated with vacation ownership notes receivable.
| Three Months Ended | ||
|---|---|---|
| ($ in millions) | March 31, 2024 | March 31, 2023 |
| Interest income associated with securitized vacation ownership notes receivable | $71 | $67 |
| Interest income associated with non-securitized vacation ownership notes receivable | 10 | 9 |
| Total interest income associated with vacation ownership notes receivable | $81 | $76 |
Credit Quality Indicators - Vacation Ownership Notes Receivable
We use the origination of vacation ownership notes receivable and the FICO scores of the customer by brand as the primary credit quality indicators, as historical performance indicates that there is a relationship between the default behavior of borrowers by FICO score and the brand associated with the vacation ownership interest (“VOI”) they have acquired. The estimates of the variable consideration for originated vacation ownership notes receivable and the reserve for credit losses on the acquired vacation ownership notes receivable are based on default rates that are an output of our static pool analyses and estimates regarding future defaults.
The weighted average FICO score within our consolidated vacation ownership notes receivable pool was 724 and 723, at March 31, 2024 and December 31, 2023, respectively, based upon the FICO score of the borrower at the time of origination.
Acquired Vacation Ownership Notes Receivable
Acquired vacation ownership notes receivable represent vacation ownership notes receivable acquired as part of the ILG Acquisition and the Welk Acquisition. The following table shows future contractual principal payments, net of a $14 million reserve, and interest rates for our acquired vacation ownership notes receivable at March 31, 2024.
| Acquired Vacation Ownership Notes Receivable | |||||
|---|---|---|---|---|---|
| ($ in millions) · Non-Securitized · Securitized · Total | |||||
| 2024, remaining | $4 | $21 | $25 | ||
| 2025 | 3 | 27 | 30 | ||
| 2026 | 3 | 24 | 27 | ||
| 2027 | 3 | 19 | 22 | ||
| 2028 | 2 | 13 | 15 | ||
| Thereafter | 5 | 25 | 30 | ||
| Balance at March 31, 2024 | $20 | $129 | $149 | ||
| Weighted average stated interest rate | 13.8% | 14.2% | 14.1% | ||
| Range of stated interest rates | 0.0% to 21.9% | 0.0% to 21.9% | 0.0% to 21.9% | ||
The following tables show the acquired vacation ownership notes receivable, before reserves, by brand and borrower FICO score at origination.
| Acquired Vacation Ownership Notes Receivable as of March 31, 2024 | ||||||||
|---|---|---|---|---|---|---|---|---|
| ($ in millions) | 700+ | 600 - 699 | < 600 | No Score | Total | |||
| Marriott Vacation Ownership | $42 | $28 | $4 | $8 | $82 | |||
| Hyatt Vacation Ownership | 48 | 31 | 1 | 1 | 81 | |||
| $90 | $59 | $5 | $9 | $163 | ||||
| Acquired Vacation Ownership Notes Receivable as of December 31, 2023 | ||||||||
|---|---|---|---|---|---|---|---|---|
| ($ in millions) | 700+ | 600 - 699 | < 600 | No Score | Total | |||
| Marriott Vacation Ownership | $46 | $32 | $4 | $9 | $91 | |||
| Hyatt Vacation Ownership | 53 | 34 | 1 | 1 | 89 | |||
| $99 | $66 | $5 | $10 | $180 | ||||
Originated Vacation Ownership Notes Receivable
Originated vacation ownership notes receivable represent vacation ownership notes receivable originated by Legacy-ILG and Legacy-Welk subsequent to each respective acquisition date, and all Legacy-MVW vacation ownership notes receivable. The following table shows future principal payments, net of reserves, and interest rates for our originated vacation ownership notes receivable at March 31, 2024.
| Originated Vacation Ownership Notes Receivable | |||||
|---|---|---|---|---|---|
| ($ in millions) · Non-Securitized · Securitized · Total | |||||
| 2024, remaining | $51 | $105 | $156 | ||
| 2025 | 48 | 146 | 194 | ||
| 2026 | 43 | 155 | 198 | ||
| 2027 | 40 | 162 | 202 | ||
| 2028 | 33 | 168 | 201 | ||
| Thereafter | 187 | 1,049 | 1,236 | ||
| Balance at March 31, 2024 | $402 | $1,785 | $2,187 | ||
| Weighted average stated interest rate | 11.9% | 13.3% | 13.0% | ||
| Range of stated interest rates | 0.0% to 20.9% | 0.0% to 20.9% | 0.0% to 20.9% | ||
The following table summarizes the activity related to our originated vacation ownership notes receivable reserve.
| Originated Vacation Ownership Notes Receivable Reserve | |||
|---|---|---|---|
| ($ in millions) | Non-Securitized | Securitized | Total |
| Balance at December 31, 2023 | $195 | $260 | $455 |
| Increase (decrease) in vacation ownership notes receivable reserve | 47 | (5) | 42 |
| Securitizations | (63) | 63 | — |
| Clean-up call | 34 | (34) | — |
| Write-offs | (45) | — | (45) |
| Defaulted vacation ownership notes receivable repurchase activity(1) | 33 | (33) | — |
| Balance at March 31, 2024 | $201 | $251 | $452 |
| (1)Reflects the change attributable to the transfer of the reserve from the securitized vacation ownership notes receivable reserve to the non-securitized vacation ownership notes receivable reserve when we voluntarily repurchased securitized vacation ownership notes receivable. | |||
The following tables show originated vacation ownership notes receivable, before reserves, by brand and borrower FICO score at origination.
| Originated Vacation Ownership Notes Receivable as of March 31, 2024 | ||||||||
|---|---|---|---|---|---|---|---|---|
| ($ in millions) | 700 + | 600 - 699 | < 600 | No Score | Total | |||
| Marriott Vacation Ownership | $1,381 | $608 | $57 | $327 | $2,373 | |||
| Hyatt Vacation Ownership | 191 | 70 | 2 | 3 | 266 | |||
| $1,572 | $678 | $59 | $330 | $2,639 | ||||
| Originated Vacation Ownership Notes Receivable as of December 31, 2023 | ||||||||
|---|---|---|---|---|---|---|---|---|
| ($ in millions) | 700 + | 600 - 699 | < 600 | No Score | Total | |||
| Marriott Vacation Ownership | $1,381 | $609 | $57 | $323 | 2,370 | |||
| Hyatt Vacation Ownership | 188 | 70 | 2 | 3 | 263 | |||
| $1,569 | $679 | $59 | $326 | $2,633 | ||||
The following tables detail the origination year of our originated vacation ownership notes receivable, before reserves, by brand and borrower FICO score at origination as of March 31, 2024, and gross write-offs by brand for the first quarter of 2024.
| Originated Vacation Ownership Notes Receivable - Marriott Vacation Ownership | ||||||
|---|---|---|---|---|---|---|
| ($ in millions) | 2024 | 2023 | 2022 | 2021 | 2020 & Prior | Total |
| 700 + | $98 | $470 | $353 | $191 | $269 | $1,381 |
| 600 - 699 | 30 | 183 | 155 | 98 | 142 | 608 |
| < 600 | 3 | 17 | 14 | 9 | 14 | 57 |
| No Score | 39 | 138 | 59 | 23 | 68 | 327 |
| $170 | $808 | $581 | $321 | $493 | $2,373 | |
| Gross write-offs | $— | $7 | $12 | $8 | $12 | $39 |
| Originated Vacation Ownership Notes Receivable - Hyatt Vacation Ownership | ||||||
|---|---|---|---|---|---|---|
| ($ in millions) | 2024 | 2023 | 2022 | 2021 | 2020 & Prior | Total |
| 700 + | $27 | $79 | $56 | $25 | $4 | $191 |
| 600 - 699 | 8 | 27 | 23 | 10 | 2 | 70 |
| < 600 | — | 1 | — | 1 | — | 2 |
| No Score | — | 2 | 1 | — | — | 3 |
| $35 | $109 | $80 | $36 | $6 | $266 | |
| Gross write-offs | $— | $2 | $3 | $1 | $— | $6 |
Vacation Ownership Notes Receivable on Non-Accrual Status
For both non-securitized and securitized vacation ownership notes receivable, we estimated the average remaining default rates of 12.62% as of March 31, 2024 and 13.00% as of December 31, 2023. A 0.5 percentage point increase in the estimated default rate would have resulted in an increase in the related vacation ownership notes receivable reserve of $13 million as of both March 31, 2024 and December 31, 2023.
The following table shows our recorded investment in non-accrual vacation ownership notes receivable, which are vacation ownership notes receivable that are 90 days or more past due.
| Vacation Ownership Notes Receivable | |||
|---|---|---|---|
| ($ in millions) | Non-Securitized | Securitized | Total |
| Investment in vacation ownership notes receivable on non-accrual status at March 31, 2024 | $153 | $27 | $180 |
| Investment in vacation ownership notes receivable on non-accrual status at December 31, 2023 | $141 | $27 | $168 |
The following table shows the aging of the recorded investment in principal, before reserves, in vacation ownership notes receivable as of March 31, 2024 and December 31, 2023.
| As of March 31, 2024 | As of December 31, 2023 | |||||
|---|---|---|---|---|---|---|
| ($ in millions) | Non-Securitized | Securitized | Total | Non-Securitized | Securitized | Total |
| 31 – 90 days past due | $32 | $68 | $100 | $31 | $72 | $103 |
| 91 – 120 days past due | 12 | 15 | 27 | 7 | 19 | 26 |
| Greater than 120 days past due | 141 | 12 | 153 | 134 | 8 | 142 |
| Total past due | 185 | 95 | 280 | 172 | 99 | 271 |
| Current | 444 | 2,078 | 2,522 | 460 | 2,082 | 2,542 |
| Total vacation ownership notes receivable | $629 | $2,173 | $2,802 | $632 | $2,181 | $2,813 |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.