NOTE 16. SUPPLEMENTAL INFORMATION ABOUT THE CREDIT QUALITY OF FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES

We provide further detailed information about the credit quality of our Commercial, Real Estate and Consumer financing receivables portfolios. For each portfolio, we describe the characteristics of the financing receivables and provide information about collateral, payment performance, credit quality indicators, and impairment. We manage these portfolios using delinquency and nonearning data as key performance indicators. The categories used within this section such as impaired loans, TDR and nonaccrual financing receivables are defined by the authoritative guidance and we base our categorization on the related scope and definitions contained in the related standards. The categories of nonearning and delinquent are defined by us and are used in our process for managing our financing receivables. Definitions of these categories are provided in Note 1.

The following table provides further information about general and specific reserves related to Commercial financing receivables.

	Financing receivables

December 31 (In millions)	2012		2011

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, before allowance for losses	$	137,810	$	148,570

Non-impaired financing receivables	$	132,741	$	142,908
General reserves		554		718

Impaired loans		5,069		5,662
Specific reserves		487		812

The following table displays payment performance of Commercial financing receivables.


	2012				2011
	Over 30 days		Over 90 days		Over 30 days		Over 90 days
December 31	past due		past due		past due		past due

CLL
Americas	1.1	%	0.5	%	1.3	%	0.8	%
Europe	3.7		2.1		3.8		2.1
Asia	0.9		0.6		1.3		1.0
Other	0.1		0.0		2.0		0.1
Total CLL	1.9		1.0		2.0		1.2

Energy Financial Services	0.0		0.0		0.3		0.3

GECAS	0.0		0.0		0.0		0.0

Other	2.8		2.8		3.7		3.5

Total	1.7		0.9		1.8		1.1

The following table provides further information about Commercial financing receivables that are classified as nonaccrual. Of our $4,166 million and $4,718 million of nonaccrual financing receivables at December 31, 2012 and December 31, 2011, respectively, $2,647 million and $1,227 million are currently paying in accordance with their contractual terms, respectively.

	Nonaccrual financing						Nonearning financing
	receivables						receivables

December 31 (Dollars in millions)	2012			2011			2012			2011

CLL
Americas	$	1,951		$	2,417		$	1,333		$	1,862
Europe		1,740			1,599			1,299			1,167
Asia		395			428			193			269
Other		52			68			52			11
Total CLL		4,138			4,512			2,877			3,309

Energy Financial Services		0			22			0			22

GECAS		3			69			0			55

Other		25			115			13			65
Total	$	4,166		$	4,718		$	2,890		$	3,451

Allowance for losses percentage		25.0	%		32.4	%		36.0	%		44.3	%

The following table provides information about loans classified as impaired and specific reserves related to Commercial.

	With no specific allowance						With a specific allowance
		Recorded	Unpaid		Average			Recorded	Unpaid				Average
	investment		principal		investment in		investment		principal		Associated		investment in
December 31 (In millions)	in loans		balance		loans		in loans		balance		allowance		loans

2012

CLL
Americas	$	2,487	$	2,927	$	2,535	$	557	$	681	$	178	$	987
Europe		1,131		1,901		1,009		643		978		278		805
Asia		62		64		62		109		120		23		134
Other		0		0		43		52		68		6		16
Total CLL		3,680		4,892		3,649		1,361		1,847		485		1,942
Energy Financial Services		0		0		2		0		0		0		7
GECAS		0		0		17		3		3		0		5
Other		17		28		26		8		8		2		40
Total	$	3,697	$	4,920	$	3,694	$	1,372	$	1,858	$	487	$	1,994

2011

CLL
Americas	$	2,136	$	2,219	$	2,128	$	1,367	$	1,415	$	425	$	1,468
Europe		936		1,060		1,001		730		717		263		602
Asia		85		83		94		156		128		84		214
Other		54		58		13		11		11		2		5
Total CLL		3,211		3,420		3,236		2,264		2,271		774		2,289
Energy Financial Services		4		4		20		18		18		9		87
GECAS		28		28		59		0		0		0		11
Other		62		63		67		75		75		29		97
Total	$	3,305	$	3,515	$	3,382	$	2,357	$	2,364	$	812	$	2,484

We recognized $253 million and $193 million of interest income, including $92 million and $59 million on a cash basis, for the years ended December 31, 2012 and 2011, respectively, principally in our CLL Americas business. The total average investment in impaired loans for the years ended December 31, 2012 and 2011 was $5,688 million and $5,866 million, respectively.

Impaired loans classified as TDRs in our CLL business were $3,872 million and $3,642 million at December 31, 2012 and 2011, respectively, and were primarily attributable to CLL Americas ($2,577 million and $2,746 million, respectively). For the year ended December 31, 2012, we modified $2,935 million of loans classified as TDRs, primarily in CLL Americas ($1,739 million) and CLL EMEA ($992 million). Changes to these loans primarily included debt to equity exchange, extensions, interest-only payment periods and forbearance or other actions, which are in addition to, or sometimes in lieu of, fees and rate increases. Of our $2,935 million of modifications classified as TDRs during 2012, $217 million have subsequently experienced a payment default in 2012. Of our $1,856 million of modifications classified as TDRs during 2011, $101 million have subsequently experienced a payment default in 2011.

Substantially all of our Commercial financing receivables portfolio is secured lending and we assess the overall quality of the portfolio based on the potential risk of loss measure. The metric incorporates both the borrower's credit quality along with any related collateral protection.

Our internal risk ratings process is an important source of information in determining our allowance for losses and represents a comprehensive, statistically validated approach to evaluate risk in our financing receivables portfolios. In deriving our internal risk ratings, we stratify our Commercial portfolios into 21 categories of default risk and/or six categories of loss given default to group into three categories: A, B and C. Our process starts by developing an internal risk rating for our borrowers, which are based upon our proprietary models using data derived from borrower financial statements, agency ratings, payment history information, equity prices and other commercial borrower characteristics. We then evaluate the potential risk of loss for the specific lending transaction in the event of borrower default, which takes into account such factors as applicable collateral value, historical loss and recovery rates for similar transactions, and our collection capabilities. Our internal risk ratings process and the models we use are subject to regular monitoring and validation controls. The frequency of rating updates is set by our credit risk policy, which requires annual Risk Committee approval. The models are updated on a regular basis and statistically validated annually, or more frequently as circumstances warrant.

The table below summarizes our Commercial financing receivables by risk category. As described above, financing receivables are assigned one of 21 risk ratings based on our process and then these are grouped by similar characteristics into three categories in the table below. Category A is characterized by either high credit quality borrowers or transactions with significant collateral coverage which substantially reduces or eliminates the risk of loss in the event of borrower default. Category B is characterized by borrowers with weaker credit quality than those in Category A, or transactions with moderately strong collateral coverage which minimizes but may not fully mitigate the risk of loss in the event of default. Category C is characterized by borrowers with higher levels of default risk relative to our overall portfolio or transactions where collateral coverage may not fully mitigate a loss in the event of default.

	Secured
December 31 (In millions)	A		B		C		Total

2012

CLL
Americas	$	68,360	$	1,775	$	2,382	$	72,517
Europe		33,754		1,188		1,256		36,198
Asia		10,732		117		372		11,221
Other		161		0		94		255
Total CLL		113,007		3,080		4,104		120,191

Energy Financial Services		4,725		0		0		4,725

GECAS		10,681		223		11		10,915

Other		486		0		0		486
Total	$	128,899	$	3,303	$	4,115	$	136,317

2011

CLL
Americas	$	73,103	$	2,816	$	4,586	$	80,505
Europe		33,481		1,080		1,002		35,563
Asia		10,644		116		685		11,445
Other		345		–		91		436
Total CLL		117,573		4,012		6,364		127,949

Energy Financial Services		5,727		24		18		5,769

GECAS		10,881		970		50		11,901

Other		1,282		–		–		1,282
Total	$	135,463	$	5,006	$	6,432	$	146,901

For our secured financing receivables portfolio, our collateral position and ability to work out problem accounts mitigates our losses. Our asset managers have deep industry expertise that enables us to identify the optimum approach to default situations. We price risk premiums for weaker credits at origination, closely monitor changes in creditworthiness through our risk ratings and watch list process, and are engaged early with deteriorating credits to minimize economic loss. Secured financing receivables within risk Category C are predominantly in our CLL businesses and are primarily composed of senior term lending facilities and factoring programs secured by various asset types including inventory, accounts receivable, cash, equipment and related business facilities as well as franchise finance activities secured by underlying equipment.

Loans within Category C are reviewed and monitored regularly, and classified as impaired when it is probable that they will not pay in accordance with contractual terms. Our internal risk rating process identifies credits warranting closer monitoring; and as such, these loans are not necessarily classified as nonearning or impaired.

Our unsecured Commercial financing receivables portfolio is primarily attributable to our Interbanca S.p.A. and GE Sanyo Credit acquisitions in Europe and Asia, respectively. At December 31, 2012 and December 31, 2011, these financing receivables included $458 million and $325 million rated A, $583 million and $748 million rated B, and $452 million and $596 million rated C, respectively.

The following table provides further information about general and specific reserves related to Real Estate financing receivables.

	Financing receivables

December 31 (In millions)		2012		2011

Debt	$	19,746	$	24,501
Business Properties(a)		1,200		8,248

Total Real Estate financing receivables, before allowance for losses	$	20,946	$	32,749

Non-impaired financing receivables	$	15,253	$	24,002
General reserves		132		267

Impaired loans		5,693		8,747
Specific reserves		188		822

The following table displays payment performance of Real Estate financing receivables.


	2012					2011
	Over 30 days		Over 90 days			Over 30 days		Over 90 days
December 31	past due		past due			past due		past due

Debt	1.7	%		1.7	%	2.4	%		2.3	%
Business Properties	10.8			10.2		3.9			3.0
Total	2.3			2.2		2.8			2.5

The following table provides further information about Real Estate financing receivables that are classified as nonaccrual. Of our $4,885 million and $6,949 million of nonaccrual financing receivables at December 31, 2012 and December 31, 2011, respectively, $4,461 million and $6,061 million are currently paying in accordance with their contractual terms, respectively.

	Nonaccrual financing						Nonearning financing
	receivables						receivables

December 31 (Dollars in millions)	2012			2011			2012			2011

Debt	$	4,576		$	6,351		$	321		$	541
Business Properties		309			598			123			249
Total	$	4,885		$	6,949		$	444		$	790

Allowance for losses percentage		6.6	%		15.7	%		72.1	%		137.8	%

The following table provides information about loans classified as impaired and specific reserves related to Real Estate.

	With no specific allowance						With a specific allowance
	Recorded		Unpaid		Average		Recorded		Unpaid				Average
	investment		principal		investment		investment		principal		Associated		investment
December 31 (In millions)	in loans		balance		in loans		in loans		balance		allowance		in loans

2012

Debt	$	3,294	$	3,515	$	3,575	$	2,077	$	2,682	$	156	$	3,455
Business Properties		197		197		198		125		125		32		297
Total	$	3,491	$	3,712	$	3,773	$	2,202	$	2,807	$	188	$	3,752

2011

Debt	$	3,558	$	3,614	$	3,568	$	4,560	$	4,652	$	717	$	5,435
Business Properties		232		232		215		397		397		105		460
Total	$	3,790	$	3,846	$	3,783	$	4,957	$	5,049	$	822	$	5,895

We recognized $329 million and $399 million of interest income, including $237 million and $339 million on a cash basis, for the years ended December 31, 2012 and 2011, respectively, principally in our Real Estate-Debt portfolio. The total average investment in impaired loans for the years ended December 31, 2012 and 2011 was $7,525 million and $9,678 million, respectively.

Real Estate TDRs decreased from $7,006 million at December 31, 2011 to $5,146 million at December 31, 2012, primarily driven by resolution of TDRs through paydowns, restructurings, foreclosures and write-offs, partially offset by extensions of loans scheduled to mature during 2012, some of which were classified as TDRs upon modification. We deem loan modifications to be TDRs when we have granted a concession to a borrower experiencing financial difficulty and we do not receive adequate compensation in the form of an effective interest rate that is at current market rates of interest given the risk characteristics of the loan or other consideration that compensates us for the value of the concession. The limited liquidity and higher return requirements in the real estate market for loans with higher loan-to-value (LTV) ratios has typically resulted in the conclusion that the modified terms are not at current market rates of interest, even if the modified loans are expected to be fully recoverable. For the year ended December 31, 2012, we modified $4,351 million of loans classified as TDRs, substantially all in our Debt portfolio. Changes to these loans primarily included maturity extensions, principal payment acceleration, changes to collateral or covenant terms and cash sweeps, which are in addition to, or sometimes in lieu of, fees and rate increases. Of our $4,351 million of modifications classified as TDRs during 2012, $210 million have subsequently experienced a payment default in 2012. Of our $3,965 million of modifications classified as TDRs during 2011, $140 million have subsequently experienced a payment default in 2011.

Due to the primarily non-recourse nature of our Debt portfolio, loan-to-value ratios provide the best indicators of the credit quality of the portfolio. By contrast, the credit quality of the Business Properties portfolio is primarily influenced by the strength of the borrower's general credit quality, which is reflected in our internal risk rating process, consistent with the process we use for our Commercial portfolio.

	Loan-to-value ratio
	2012						2011
	Less than		80% to		Greater than		Less than		80% to		Greater than
December 31 (In millions)	80%		95%		95%		80%		95%		95%

Debt	$	13,570	$	2,572	$	3,604	$	14,454	$	4,593	$	5,454

At December 31, 2012, Business Properties receivables of $956 million, $25 million and $219 million were rated A, B and C, respectively. At December 31, 2011, Business Properties receivables of $7,628 million, $110 million and $510 million were rated A, B and C, respectively.

Within Real Estate–Debt, these financing receivables are primarily concentrated in our North American and European Lending platforms and are secured by various property types. A substantial majority of the Real Estate–Debt financing receivables with loan-to-value ratios greater than 95% are paying in accordance with contractual terms. Substantially all of these loans and the majority of the Real Estate-Business Properties financing receivables included in Category C are impaired loans which are subject to the specific reserve evaluation process described in Note 1. The ultimate recoverability of impaired loans is driven by collection strategies that do not necessarily depend on the sale of the underlying collateral and include full or partial repayments through third-party refinancing and restructurings.

At December 31, 2012, our U.S. consumer financing receivables included private-label credit card and sales financing for approximately 57 million customers across the U.S. with no metropolitan area accounting for more than 6% of the portfolio. Of the total U.S. consumer financing receivables, approximately 66% relate to credit card loans, which are often subject to profit and loss-sharing arrangements with the retailer (which are recorded in revenues), and the remaining 34% are sales finance receivables, which provide financing to customers in areas such as electronics, recreation, medical and home improvement.

The following table provides further information about general and specific reserves related to Consumer financing receivables.

	Financing receivables

December 31 (In millions)	2012		2011

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, before allowance for losses	$	115,180	$	113,718

Non-impaired financing receivables	$	111,960	$	110,825
General reserves		2,950		2,891

Impaired loans		3,220		2,893
Specific reserves		674		680

The following table displays payment performance of Consumer financing receivables.


	2012				2011
	Over 30 days		Over 90 days		Over 30 days		Over 90 days
December 31	past due		past due(a)		past due		past due(a)

Non-U.S. residential mortgages	12.0	%	7.5	%	12.3	%	7.9	%
Non-U.S. installment and revolving credit	3.9		1.1		4.1		1.2
U.S. installment and revolving credit	4.6		2.0		5.0		2.2
Non-U.S. auto	3.1		0.5		3.1		0.6
Other	2.8		1.7		3.5		2.0
Total	6.5		3.4		6.9		3.7

The following table provides further information about Consumer financing receivables that are classified as nonaccrual.

	Nonaccrual financing						Nonearning financing
	receivables						receivables
December 31 (Dollars in millions)	2012			2011			2012			2011

Non-U.S. residential mortgages	$	2,600		$	2,995		$	2,569		$	2,870
Non-U.S. installment and revolving credit		224			321			224			263
U.S. installment and revolving credit		1,026			990			1,026			990
Non-U.S. auto		24			43			24			43
Other		427			487			351			419
Total	$	4,301		$	4,836		$	4,194		$	4,585

Allowance for losses percentage		84.3	%		73.8	%		86.4	%		77.9	%

The vast majority of our Consumer nonaccrual financing receivables are smaller balance homogeneous loans evaluated collectively, by portfolio, for impairment and therefore are outside the scope of the disclosure requirement for impaired loans. Accordingly, impaired loans in our Consumer business represent restructured smaller balance homogeneous loans meeting the definition of a TDR, and are therefore subject to the disclosure requirement for impaired loans, and commercial loans in our Consumer–Other portfolio. The recorded investment of these impaired loans totaled $3,220 million (with an unpaid principal balance of $3,269 million) and comprised $105 million with no specific allowance, primarily all in our Consumer–Other portfolio, and $3,115 million with a specific allowance of $674 million at December 31, 2012. The impaired loans with a specific allowance included $309 million with a specific allowance of $83 million in our Consumer–Other portfolio and $2,806 million with a specific allowance of $591 million across the remaining Consumer business and had an unpaid principal balance and average investment of $3,152 million and $2,956 million, respectively, at December 31, 2012. We recognized $169 million and $141 million of interest income, including $5 million and $15 million on a cash basis, for the years ended December 31, 2012 and 2011, respectively, principally in our Consumer –Non-U.S. and U.S. installment and revolving credit portfolios. The total average investment in impaired loans for the years ended December 31, 2012 and 2011 was $3,056 million and $2,623 million, respectively.

Impaired loans classified as TDRs in our Consumer business were $3,053 million and $2,723 million at December 31, 2012 and 2011, respectively. We utilize certain loan modification programs for borrowers experiencing financial difficulties in our Consumer loan portfolio. These loan modification programs primarily include interest rate reductions and payment deferrals in excess of three months, which were not part of the terms of the original contract, and are primarily concentrated in our non-U.S. residential mortgage and U.S. credit card portfolios. For the year ended December 31, 2012, we modified $1,756 million of consumer loans for borrowers experiencing financial difficulties, which are classified as TDRs, and included $1,186 million of non-U.S. consumer loans, primarily residential mortgages, credit cards and personal loans and $570 million of U.S. consumer loans, primarily credit cards. We expect borrowers whose loans have been modified under these programs to continue to be able to meet their contractual obligations upon the conclusion of the modification. Of our $1,756 million of modifications classified as TDRs during 2012, $334 million have subsequently experienced a payment default in 2012, primarily in our installment and revolving credit portfolios. Of our $1,924 million of modifications classified as TDRs during 2011, $240 million have subsequently experienced a payment default in 2011.

Our Consumer financing receivables portfolio comprises both secured and unsecured lending. Secured financing receivables comprise residential loans and lending to small and medium-sized enterprises predominantly secured by auto and equipment, inventory finance and cash flow loans. Unsecured financing receivables include private-label credit card financing. A substantial majority of these cards are not for general use and are limited to the products and services sold by the retailer. The private label portfolio is diverse with no metropolitan area accounting for more than 5% of the related portfolio.

For our secured non-U.S. residential mortgage book, we assess the overall credit quality of the portfolio through loan-to-value ratios (the ratio of the outstanding debt on a property to the value of that property at origination). In the event of default and repossession of the underlying collateral, we have the ability to remarket and sell the properties to eliminate or mitigate the potential risk of loss. The table below provides additional information about our non-U.S. residential mortgages based on loan-to-value ratios.

	Loan-to-value ratio
	2012						2011
	80% or		Greater than		Greater than		80% or		Greater than		Greater than
December 31 (In millions)	less		80% to 90%		90%		less		80% to 90%		90%

Non-U.S. residential mortgages	$	18,613	$	5,739	$	9,099	$	19,834	$	6,087	$	9,629

The majority of these financing receivables are in our U.K. and France portfolios and have re-indexed loan-to-value ratios of 83% and 56%, respectively. We have third-party mortgage insurance for about 35% of the balance of Consumer non-U.S. residential mortgage loans with loan-to-value ratios greater than 90% at December 31, 2012. Such loans were primarily originated in Poland, France and the U.K.

For our unsecured lending products, including the non-U.S. and U.S. installment and revolving credit and non-U.S. auto portfolios, we assess overall credit quality using internal and external credit scores. Our internal credit scores imply a probability of default which we consistently translate into three approximate credit bureau equivalent credit score categories, including (a) 681 or higher, which are considered the strongest credits; (b) 615 to 680, considered moderate credit risk; and (c) 614 or less, which are considered weaker credits.

	Internal ratings translated to approximate credit bureau equivalent score
	2012						2011
	681 or		615 to		614 or		681 or		615 to		614 or
(In millions)	higher		680		less		higher		680		less

Non-U.S. installment and
revolving credit	$	10,493	$	4,496	$	3,557	$	9,913	$	4,838	$	3,793
U.S. installment and
revolving credit		33,204		9,753		7,896		28,918		9,398		8,373
Non-U.S. auto		3,141		666		453		3,927		1,092		672

Of those financing receivable accounts with credit bureau equivalent scores of 614 or less at December 31, 2012, 96% relate to installment and revolving credit accounts. These smaller balance accounts have an average outstanding balance less than one thousand U.S. dollars and are primarily concentrated in our retail card and sales finance receivables in the U.S. (which are often subject to profit and loss-sharing arrangements), and closed-end loans outside the U.S., which minimizes the potential for loss in the event of default. For lower credit scores, we adequately price for the incremental risk at origination and monitor credit migration through our risk ratings process. We continuously adjust our credit line underwriting management and collection strategies based on customer behavior and risk profile changes.

Secured lending in Consumer – Other comprises loans to small and medium-sized enterprises predominantly secured by auto and equipment, inventory finance and cash flow loans. We develop our internal risk ratings for this portfolio in a manner consistent with the process used to develop our Commercial credit quality indicators, described above. We use the borrower's credit quality and underlying collateral strength to determine the potential risk of loss from these activities.

At December 31, 2012, Consumer – Other financing receivables of $6,873 million, $451 million and $746 million were rated A, B, and C, respectively. At December 31, 2011, Consumer – Other financing receivables of $5,580 million, $757 million and $907 million were rated A, B, and C, respectively.