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Concentration of Credit Risk
 12 Months Ended
Dec. 31, 2011
Concentration of Credit Risk [Abstract]  
Concentration of Credit Risk

24.    Concentration of Credit Risk

 

A concentration of credit risk is defined as a significant credit exposure with an individual or group engaged in similar activities or having similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

We have historically served non-conforming and non-prime consumers. Such customers are individuals who have limited credit histories, modest incomes, high debt-to-income ratios or have experienced credit problems caused by occasional delinquencies, prior charge-offs, bankruptcy or other credit related actions. The majority of our secured receivables have high loan-to-value ratios. Our receivables portfolios include the following types of loans:

 

  •  

Interest-only loans – A loan which allows a customer to pay the interest-only portion of the monthly payment for a period of time which results in lower payments during the initial loan period. However, subsequent events affecting a customer’s financial position could affect their ability to repay the loan in the future when the principal payments are required.

 

  •  

Stated income loans – Loans underwritten based upon the loan applicant’s representation of annual income, which is not verified by receipt of supporting documentation.

The following table summarizes the outstanding balances of interest-only loans and stated income loans in our receivable portfolios at December 31, 2011 and 2010:

 

                 
At December 31,   2011     2010  
    (in billions)  

Interest-only loans

   $ 1.0     $ 1.3  

Stated income loans

     2.2       2.7  

At December 31, 2011 and 2010, interest-only and stated income loans comprise 7 percent and 8 percent of real estate secured receivables, including receivables held for sale, respectively.

 

Because we primarily lend to individual consumers, we do not have receivables from any industry group that equal or exceed 10 percent of total receivables at December 31, 2011 and 2010. We lend nationwide and our receivables are distributed as follows at December 31, 2011:

 

         
State/Region  

Percent of Total

Receivables

  

California

     9 % 

Midwest (IL, IN, IA, KS, MI, MN, MO, NE, ND, OH, SD, WI)

     22  

Southeast (AL, FL, GA, KY, MS, NC, SC, TN)

     21  

West (AK, CO, HI, ID, MT, NV, OR, UT, WA, WY)

     8  

Middle Atlantic (DE, DC, MD, NJ, PA, VA, WV)

     19  

Southwest (AZ, AR, LA, NM, OK, TX)

     8  

Northeast (CT, ME, MA, NH, NY, RI, VT)

     13  

The following table reflects the percentage of consumer receivables by state which individually account for 5 percent or greater of our portfolio.

 

                                                 
     Percentage of Receivables  at
December 31, 2011		     Percentage of Receivables  at
December 31, 2010		  
 

Real Estate

Secured

     Other     Total    

Real Estate

Secured

     Other     Total  

California

     9.5 %      5.1 %      9.1 %      9.9 %      5.8 %      9.4 % 

New York

     7.2       6.8       7.2       7.0       6.8       7.0  

Pennsylvania

     6.1       6.7       6.2       5.9       6.4       6.0  

Florida

     5.9       5.8       5.9       6.3       5.7       6.2  

Ohio

     5.5       6.3       5.6       5.5       6.0       5.6  

 

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

 

 

                                                                 
    2011     2010  
     Fourth     Third     Second     First     Fourth     Third     Second     First  
    (in millions)  

Net interest income

   $ 368     $ 452     $ 511     $ 445     $ 502     $ 542     $ 483     $ 562  

Provision for credit losses

     945       2,182 (1)       583       708       1,056       1,305       1,321       1,664  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net interest loss after provision for credit losses

     (577 )      (1,730 )      (72 )      (263 )      (554 )      (763 )      (838 )      (1,102 ) 

Other revenues

     149       (16 )      195       111       812       (248 )      97       151  

Operating expenses

     441       272       447       371       477       340       281       360  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loss from continuing operations before income tax benefit

     (869 )      (2,018 )      (324 )      (523 )      (219 )      (1,351 )      (1,022 )      (1,311 ) 

Income tax benefit

     270       689       162       303       25       479       391       464  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Loss from continuing operations

     (599 )      (1,329 )      (162 )      (220 )      (194 )      (872 )      (631 )      (847 ) 

Income from discontinued operations

     321       268       114       199       153       120       111       244  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net loss

   $ (278 )    $ (1,061 )    $ (48 )    $ (21 )    $ (41 )    $ (752 )    $ (520 )    $ (603 ) 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

 

(1)

The provision for credit losses for the third quarter of 2011 included approximately $925 million related to the adoption of new accounting guidance for TDR Loans in the third quarter of 2011. See Note 6, “Receivables,” in the accompanying consolidated financial statements for further discussion of the adoption of this new accounting guidance.