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Supplemental Information About The Credit Quality Of Financing Receivables And Allowance For Losses On Financing Receivables
 3 Months Ended
Mar. 31, 2015
Credit Quality Financing Receivables [Abstract]  
Supplemental Information About Credit Quality Of Financing Receivables And Allowance For Losses On Financing Receivables

13. SUPPLEMENTAL INFORMATION ABOUT THE CREDIT QUALITY OF FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES

As described in Note 4, our CLL and Consumer portfolios have been significantly reduced as most of these portfolios have been reclassified to either financing receivables held for sale or assets of businesses held for sale. In addition our Real Estate business has been classified as a discontinued operation.

Credit Quality Indicators

Detailed information about the credit quality of our Commercial and Consumer financing receivables portfolios is provided below. 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 nonaccrual data as key performance indicators. The categories used within this section such as impaired loans, troubled debt restructuring (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 nonaccrual and delinquent are used in our process for managing our financing receivables.

PAST DUE AND NONACCRUAL FINANCING RECEIVABLES
March 31, 2015December 31, 2014
Over 30 daysOver 90 daysOver 30 daysOver 90 days
(In millions)past duepast dueNonaccrualpast duepast dueNonaccrual
Commercial
CLL$636$137$25$1,986$1,033$2,000
Energy Financial Services10-63--68
GECAS --255--419
Total Commercial646137343(a)1,9861,0332,487(a)
Consumer2,2091,056(b) 2(c) 5,1372,495(b) 1,484(c)
Total$2,855$1,193$345$7,123$3,528$3,971
Total as a percent of financing receivables3.5%1.5%0.4%3.2%1.6%1.8%

(a) Included $321 million and $1,549 million at March 31, 2015 and December 31, 2014, respectively, which are currently paying in accordance with their contractual terms.

(b) Included $1,054 million and $1,231 million of Consumer loans at March 31, 2015 and December 31, 2014, respectively, which are over 90 days past due and continue to accrue interest until the accounts are written off in the period that the account becomes 180 days past due.

(c) Included none and $179 million at March 31, 2015 and December 31, 2014, respectively, which are currently paying in accordance with their contractual terms.

IMPAIRED LOANS AND RELATED RESERVES
With no specific allowanceWith a specific allowance
RecordedUnpaidAverageRecordedUnpaidAverage
investmentprincipalinvestmentinvestmentprincipalAssociatedinvestment
(In millions)in loansbalancein loansin loansbalanceallowance(a)in loans
March 31, 2015
Commercial
CLL$8$8$1,150$6$6$5$206
Energy Financial Services54555399-12
GECAS170175250----
Other-------
Total Commercial(b)2322381,45315155218
Consumer(c)--69726625(d)2441,383
Total$232$238$1,522$741$640$249$1,601
December 31, 2014
Commercial
CLL$2,292$4,397$2,725$406$1,125$133$717
Energy Financial Services53542615151224
GECAS32933788---15
Other------1
Total Commercial(b)2,6744,7882,8394211,140145757
Consumer(c)1381791202,0422,0924082,547
Total$2,812$4,967$2,959$2,463$3,232$553$3,304

(a) Write-offs to net realizable value are recognized against the allowance for losses primarily in the reporting period in which management has deemed all or a portion of the financing receivable to be uncollectible, but not later than 360 days after initial recognition of a specific reserve for a collateral dependent loan.

(b) We recognized $6 million, $178 million and $57 million of interest income, including none on a cash basis, in the three months ended March 31, 2015, the year ended December 31, 2014 and the three months ended March 31, 2014, respectively, principally in CLL. The total average investment in impaired loans for the three months ended March 31, 2015 and the year ended December 31, 2014 was $1,671 million and $3,596 million, respectively.

(c) We recognized $23 million, $126 million and $46 million of interest income, including $1 million, $5 million and an insignificant amount on a cash basis, in the three months ended March 31, 2015, the year ended December 31, 2014 and the three months ended March 31, 2014, respectively. The total average investment in impaired loans for the three months ended March 31, 2015 and the year ended December 31, 2014 was $1,452 million and $2,667 million, respectively.

(d) Unpaid principal balance excludes accrued interest and fees.

(In millions)Non-impaired financing receivablesGeneral reservesImpaired loansSpecific reserves
March 31, 2015
Commercial$22,918$89$247$5
Consumer57,5223,011726244
Total$80,440$3,100$973$249
December 31, 2014
Commercial$118,381$758$3,095$145
Consumer98,6403,6032,180408
Total$217,021$4,361$5,275$553

IMPAIRED LOAN BALANCE CLASSIFIED BY THE METHOD USED TO MEASURE IMPAIRMENT
(In millions)March 31, 2015December 31, 2014
Discounted cash flow$834$3,915
Collateral value1391,360
Total$973$5,275

Our loss mitigation strategy is intended to minimize economic loss and, at times, can result in rate reductions, principal forgiveness, extensions, forbearance or other actions, which may cause the related loan to be classified as a troubled debt restructuring (TDR), and also as impaired. The determination of whether these changes to the terms and conditions of our commercial loans meet the TDR criteria includes our consideration of all relevant facts and circumstances. At March 31, 2015, TDRs included in impaired loans were $810 million, primarily relating to Consumer ($726 million) and GECAS ($82 million).

Impaired loans classified as TDRs in our CLL business were $2 million and $1,869 million at March 31, 2015 and December 31, 2014, respectively. For the three months ended March 31, 2015, we modified $2 million of loans classified as TDRs. Changes to these loans primarily included extensions, interest only payment periods, debt to equity exchange and forbearance or other actions, which are in addition to, or sometimes in lieu of, fees and rate increases. Of our $633 million and $1,391 million of modifications classified as TDRs in the twelve months ended March 31, 2015 and 2014, respectively, none and $19 million have subsequently experienced a payment default in the three months ended March 31, 2015 and 2014, respectively.

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. The recorded investment of these impaired loans totaled $726 million (with an unpaid principal balance of $625 million) with a specific allowance of $244 million at March 31, 2015.

Impaired loans classified as TDRs in our Consumer business were $726 million and $2,132 million at March 31, 2015 and December 31, 2014, 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. For the three months ended March 31, 2015, we modified $120 million of U.S. consumer loans, primarily credit cards for borrowers experiencing financial difficulties, which are classified as TDRs. 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 $869 million and $1,339 million of modifications classified as TDRs in the twelve months ended March 31, 2015 and 2014, respectively, $23 million and $57 million have subsequently experienced a payment default in the three months ended March 31, 2015 and 2014, respectively.

Supplemental Credit Quality Information

Commercial

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 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 is 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 internal controls. The frequency of rating updates is set by our credit risk policy, which requires annual Risk Committee approval.

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 that 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 that 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.

COMMERCIAL FINANCING RECEIVABLES BY RISK CATEGORY
Secured
(In millions)ABCTotal
March 31, 2015
CLL$12,131$28$42$12,201
Energy Financial Services2,378171-2,549
GECAS7,4882291007,817
Other127--127
Total$22,124$428$142$22,694
December 31, 2014
CLL$105,230$2,023$2,334$109,587
Energy Financial Services2,47960162,555
GECAS7,9082371188,263
Other130--130
Total$115,747$2,320$2,468$120,535

For our secured financing receivables portfolio, our collateral position and ability to work out problem accounts mitigate 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 primarily composed of senior term lending facilities and factoring programs secured by various asset types including inventory, accounts receivable, cash, equipment, aircraft 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 nonaccrual or impaired.

At March 31, 2015 and December 31, 2014, our unsecured commercial financing receivables included $181 million and $332 million rated A, $290 million and $408 million rated B, and none and $201 million rated C, respectively.

Consumer

At March 31, 2015, our U.S. consumer financing receivables included private-label credit card and sales financing for approximately 60 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 that 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 that provide financing to customers in areas such as electronics, recreation, medical and home improvement.

Our Consumer financing receivables portfolio comprises both secured and unsecured lending. Secured financing receivables are largely comprised of consumer installment loans secured by equipment. 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.

We assess overall credit quality of our U.S. installment and revolving credit portfolio using information from credit bureaus such as Fair Isaac Corporation (FICO) scores. FICO scores are generally obtained at origination of the account and are refreshed at a minimum quarterly, but could be as often as weekly, to assist in predicting customer behavior. We categorize these credit scores into the following three categories; (a) 661 or higher, which are considered the strongest credits; (b) 601 to 660, which are considered moderate credit risk; and (c) 600 or less, which are considered weaker credits.

Refreshed FICO score
March 31, 2015December 31, 2014
661 or601 to600 or661 or601 to600 or
(in millions)higher660lesshigher660less
U.S. installment and
   revolving credit$40,761$11,681$4,486$43,466$11,865$4,532

U.S. installment and revolving credit accounts with FICO scores of 600 or less have an average outstanding balance less than one thousand U.S. dollars and are primarily concentrated in our retail card and sales financing portfolios, 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.

For our Consumer - Other portfolio, 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 March 31, 2015, Consumer – Other financing receivables of $1,038 million, $114 million and $168 million were rated A, B and C, respectively. At December 31, 2014, Consumer – Other financing receivables of $5,006 million, $276 million and $382 million were rated A, B and C, respectively.