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Financing Receivables and Allowance For Losses On Financing Receivables
 12 Months Ended
Dec. 31, 2012
Loans and Leases Receivable Disclosure [Abstract]  
Financing Receivables and Allowance For Losses On Financing Receivables

NOTE 4. FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES

  
December 31 (In millions)2012 2011
      
Loans, net of deferred income(a)$241,465 $256,895
Investment in financing leases, net of deferred income 32,471  38,142
  273,936  295,037
Less allowance for losses (4,985)  (6,190)
Financing receivables – net(b)$268,951 $288,847
      
      

  • Deferred income was $2,182 million and $2,329 million at December 31, 2012 and December 31, 2011, respectively.
  • Financing receivables at December 31, 2012 and December 31, 2011 included $750 million and $1,062 million, respectively, relating to loans that had been acquired in a transfer but have been subject to credit deterioration since origination per ASC 310, Receivables.

GECC financing receivables include both loans and financing leases. Loans represent transactions in a variety of forms, including revolving charge and credit, mortgages, installment loans, intermediate-term loans and revolving loans secured by business assets. The portfolio includes loans carried at the principal amount on which finance charges are billed periodically, and loans carried at gross book value, which includes finance charges.

 

Investment in financing leases consists of direct financing and leveraged leases of aircraft, railroad rolling stock, autos, other transportation equipment, data processing equipment, medical equipment, commercial real estate and other manufacturing, power generation, and commercial equipment and facilities.

 

For federal income tax purposes, the leveraged leases and the majority of the direct financing leases are leases in which GECC depreciates the leased assets and is taxed upon the accrual of rental income. Certain direct financing leases are loans for federal income tax purposes. For these transactions, GECC is taxed only on the portion of each payment that constitutes interest, unless the interest is tax-exempt (e.g., certain obligations of state governments).

 

Investment in direct financing and leveraged leases represents net unpaid rentals and estimated unguaranteed residual values of leased equipment, less related deferred income. GECC has no general obligation for principal and interest on notes and other instruments representing third-party participation related to leveraged leases; such notes and other instruments have not been included in liabilities but have been offset against the related rentals receivable. The GECC share of rentals receivable on leveraged leases is subordinate to the share of other participants who also have security interests in the leased equipment. For federal income tax purposes, GECC is entitled to deduct the interest expense accruing on non-recourse financing related to leveraged leases.

Net Investment in Financing Leases

 Total financing leases Direct financing leases(a) Leveraged leases(b)
December 31 (In millions)2012 2011 2012 2011 2012 2011
                  
Total minimum lease payments receivable$ 36,451 $44,157 $ 29,416 $33,667 $ 7,035 $10,490
 Less principal and interest on third-party                 
    non-recourse debt  (4,662)  (6,812)   -   -   (4,662)  (6,812)
Net rentals receivables  31,789  37,345   29,416  33,667   2,373  3,678
Estimated unguaranteed residual value of                 
    leased assets  6,346  7,592   4,272  5,140   2,074  2,452
Less deferred income  (5,664)  (6,795)   (4,453)  (5,219)   (1,211)  (1,576)
Investment in financing leases, net of                 
    deferred income  32,471  38,142   29,235  33,588   3,236  4,554
Less amounts to arrive at net investment                 
      Allowance for losses  (198)  (294)   (193)  (281)   (5)  (13)
      Deferred taxes  (4,506)  (6,718)   (2,245)  (2,938)   (2,261)  (3,780)
Net investment in financing leases$ 27,767 $31,130 $ 26,797 $30,369 $ 970 $761
                  
                  

(a)       Included $330 million and $413 million of initial direct costs on direct financing leases at December 31, 2012 and 2011, respectively.

(b)       Included pre-tax income of $81 million and $116 million and income tax of $32 million and $45 million during 2012 and 2011, respectively. Net investment credits recognized on leveraged leases. during 2012 and 2011 were insignificant.

Contractual Maturities

 Total Net rentals
(In millions)loans receivable
      
Due in     
    2013$56,668 $8,700
    2014 22,076  6,633
    2015 19,889  5,235
    2016 18,214  3,751
    2017 17,114  2,234
    2018 and later 48,593  5,236
  182,554  31,789
    Consumer revolving loans 58,911   -
Total$241,465 $31,789
      

We expect actual maturities to differ from contractual maturities.

 

The following tables provide additional information about our financing receivables and related activity in the allowance for losses for our Commercial, Real Estate and Consumer portfolios.

 

Financing Receivables – net

 

    
December 31 (In millions)2012 2011
      
Commercial     
CLL     
Americas$72,517 $80,505
Europe 37,035  36,899
Asia 11,401  11,635
Other 605  436
Total CLL 121,558  129,475
      
Energy Financial Services 4,851  5,912
      
GECAS 10,915  11,901
      
Other 486  1,282
Total Commercial financing receivables 137,810  148,570
      
Real Estate     
Debt 19,746  24,501
Business Properties(a) 1,200  8,248
Total Real Estate financing receivables 20,946  32,749
      
Consumer     
Non-U.S. residential mortgages 33,451  35,550
Non-U.S. installment and revolving credit 18,546  18,544
U.S. installment and revolving credit 50,853  46,689
Non-U.S. auto 4,260  5,691
Other 8,070  7,244
Total Consumer financing receivables 115,180  113,718
      
Total financing receivables 273,936  295,037
      
Less allowance for losses (4,985)  (6,190)
Total financing receivables – net$268,951 $288,847
      
      

  • In 2012, we completed the sale of a portion of our Business Properties portfolio.

Allowance for Losses on Financing Receivables

 

 Balance at Provision       Balance at
 January 1, charged to    Gross   December 31,
(In millions)2012 operations Other(a)write-offs(b)Recoveries(b)2012
                  
Commercial                 
CLL                 
Americas$889 $109 $(51) $(568) $111 $490
Europe 400  374  (3)  (390)  64  445
Asia 157  37  (3)  (134)  23  80
Other 4  13  (1)  (10)  –   6
Total CLL 1,450  533  (58)  (1,102)  198  1,021
                  
                  
Energy Financial Services 26  4  –   (24)  3  9
                  
GECAS 17  4  –   (13)  –   8
                  
Other 37  1  (20)  (17)  2  3
Total Commercial 1,530  542  (78)  (1,156)  203  1,041
                  
Real Estate                 
Debt 949  29  (6)  (703)  10  279
Business Properties(c) 140  43  (38)  (107)  3  41
Total Real Estate 1,089  72  (44)  (810)  13  320
                  
Consumer                 
Non-U.S. residential                 
   mortgages 546  111  8  (261)  76  480
Non-U.S. installment                 
   and revolving credit 717  350  26  (1,046)  576  623
U.S. installment and                 
   revolving credit 2,008  2,666  (24)  (2,906)  538  2,282
Non-U.S. auto 101  18  (4)  (146)  98  67
Other 199  132  18  (257)  80  172
Total Consumer 3,571  3,277  24  (4,616)  1,368  3,624
Total$6,190 $3,891 $(98) $(6,582) $1,584 $4,985
                  
                  

  • Other primarily included transfers to held-for-sale and the effects of currency exchange.
  • Net write-offs (gross write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables
  • In 2012, we completed the sale of a portion of our Business Properties portfolio.

 Balance at Provision       Balance at
 January 1, charged to   Gross   December 31,
(In millions)2011 operations(a)Other(b)write-offs(c)Recoveries(c)2011
                  
Commercial                 
CLL                 
Americas$1,288 $281 $(96) $(700) $116 $889
Europe 429  195  (5)  (286)  67  400
Asia 222  105  13  (214)  31  157
Other 6  3  (3)  (2)  0  4
Total CLL 1,945  584  (91)  (1,202)  214  1,450
                  
Energy Financial                  
   Services 22   –   (1)  (4)  9  26
                  
GECAS 20   –    –   (3)   –   17
                  
Other 58  23  0  (47)  3  37
Total Commercial 2,045  607  (92)  (1,256)  226  1,530
                  
Real Estate                 
Debt 1,292  242  2  (603)  16  949
Business Properties 196  82   –   (144)  6  140
Total Real Estate 1,488  324  2  (747)  22  1,089
                  
Consumer                 
Non-U.S. residential                 
   mortgages 689  117  (13)  (296)  49  546
Non-U.S. installment                 
   and revolving credit 937  490  (30)  (1,257)  577  717
U.S. installment and                 
   revolving credit 2,333  2,241  1  (3,095)  528  2,008
Non-U.S. auto 168  30  (4)  (216)  123  101
Other 259  142  (20)  (272)  90  199
Total Consumer 4,386  3,020  (66)  (5,136)  1,367  3,571
Total$7,919 $3,951 $(156) $(7,139) $1,615 $6,190
                  
                  

  • Included a provision of $77 million at Consumer related to the July 1, 2011 adoption of ASU 2011-02.
  • Other primarily included transfers to held-for-sale and the effects of currency exchange.
  • Net write-offs (gross write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables.

 Balance at Provision       Balance at
 January 1, charged to    Gross   December 31,
(In millions)2010(a) operations Other(b)write-offs(c)Recoveries(c)2010
                  
Commercial                 
CLL                 
Americas$1,246 $1,059 $(11) $(1,136) $130 $1,288
Europe 575  269  (37)  (440)  62  429
Asia 234  153  (6)  (181)  22  222
Other 10  (2)  (1)  (1)  –   6
Total CLL 2,065  1,479  (55)  (1,758)  214  1,945
                  
                  
Energy Financial Services 28  65  –   (72)  1  22
                  
GECAS 104  12  –   (96)  –   20
                  
Other 34  33  –   (9)  –   58
Total Commercial 2,231  1,589  (55)  (1,935)  215  2,045
                  
Real Estate                 
Debt 1,355  764  10  (838)  1  1,292
Business Properties 181  146  (8)  (126)  3  196
Total Real Estate 1,536  910  2  (964)  4  1,488
                  
Consumer                 
Non-U.S. residential                 
   mortgages 825  165  (38)  (338)  75  689
Non-U.S. installment                 
   and revolving credit 1,106  1,047  (68)  (1,733)  585  937
U.S. installment and                 
   revolving credit 3,153  3,018  (6)  (4,300)  468  2,333
Non-U.S. auto 292  91  (61)  (313)  159  168
Other 292  265  5  (394)  91  259
Total Consumer 5,668  4,586  (168)  (7,078)  1,378  4,386
Total$9,435 $7,085 $(221) $(9,977) $1,597 $7,919
                  
                  

  • Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010.
  • Other primarily included the effects of currency exchange.
  • Net write-offs (gross write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables.

 

See Note 16 for supplemental information about the credit quality of financing receivables and allowance for losses on financing receivables.