GE 2011 Annual Report Download - page 127

GE 2011 ANNUAL REPORT 125
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Real Estate TDRs increased from $4,866 million at December 31,
2010 to $7,006 million at December 31, 2011, primarily driven by
loans scheduled to mature during 2011, some of which were
modifi ed during 2011 and classifi ed as TDRs upon modifi cation.
We deem loan modifi cations to be TDRs when we have granted a
concession to a borrower experiencing fi nancial diffi culty 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 com-
pensates 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 modifi ed terms are not at current market
rates of interest, even if the modifi ed loans are expected to be
fully recoverable. For the year ended December 31, 2011, we
modifi ed $3,965 million of loans classifi ed 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 addi-
tion to, or sometimes in lieu of, fees and rate increases. Of our
modifi cations classifi ed as TDRs in the last year, $140 million have
subsequently experienced a payment default.
CREDIT QUALITY INDICATORS
Due to the primarily non-recourse nature of our Debt portfolio,
loan-to-value ratios provide the best indicators of the credit qual-
ity of the portfolio. By contrast, the credit quality of the Business
Properties portfolio is primarily infl uenced by the strength of the
borrower’s general credit quality, which is refl ected in our internal
risk rating process, consistent with the process we use for our
Commercial portfolio.
Loan-to-value ratio
December 31 (In millions)
Less
than 80% 80% to 95%
Greater
than 95%
2011
Debt $14,454 $4,593 $5,454
2010
Debt $12,362 $9,392 $8,495
Internal Risk Rating
December 31 (In millions) A B C
2011
Business Properties $ 7,628 $ 110 $ 510
2010
Business Properties $ 8,746 $ 437 $ 779
Within Real Estate-Debt, these fi nancing receivables are primarily
concentrated in our North American and European Lending plat-
forms and are secured by various property types. A substantial
majority of the Real Estate-Debt fi nancing receivables with loan-
to-value ratios greater than 95% are paying in accordance with
contractual terms. Substantially all of these loans and substantially
all of the Real Estate-Business Properties fi nancing receivables
included in Category C are impaired loans which are subject to the
specifi c reserve evaluation process described in Note 1. The ulti-
mate recoverability of impaired loans is driven by collection
strategies that do not necessarily depend on the sale of the under-
lying collateral and include full or partial repayments through
third-party refi nancing and restructurings.
Consumer
At December 31, 2011, our U.S. consumer fi nancing receivables
included private-label credit card and sales fi nancing for approxi-
mately 56 million customers across the U.S. with no metropolitan
area accounting for more than 5% of the portfolio. Of the total U.S.
consumer fi nancing receivables, approximately 65% relate to
credit card loans, which are often subject to profi t and loss-sharing
arrangements with the retailer (which are recorded in revenues),
and the remaining 35% are sales fi nance receivables, which pro-
vide fi nancing to customers in areas such as electronics,
recreation, medical and home improvement.
FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES
The following table provides further information about general
and specifi c reserves related to Consumer fi nancing receivables.
CONSUMER
Financing receivables
December 31 (In millions) 2011 2010
Non-U.S. residential mortgages $ 36,170 $ 40,011
Non-U.S. installment and revolving credit 18,544 20,132
U.S. installment and revolving credit 46,689 43,974
Non-U.S. auto 5,691 7,558
Other 7,244 8,304
Total Consumer financing receivables, before
allowance for losses $114,338 $119,979
Non-impaired financing receivables $111,233 $117,431
General reserves 3,014 3,945
Impaired loans 3,105 2,548
Specific reserves 717 555
PAST DUE FINANCING RECEIVABLES
The following table displays payment performance of Consumer
fi nancing receivables.
CONSUMER
2011 2010
December 31
Over 30 days
past due
Over 90 days
past due (a) Over 30 days
past due
Over 90 days
past due (a)
Non-U.S. residential
mortgages 13.4% 8.8% 13.7% 8.8%
Non-U.S. installment
and revolving credit 4.1 1.2 4.5 1.3
U.S. installment and
revolving credit 5.0 2.2 6.2 2.8
Non-U.S. auto 3.1 0.5 3.3 0.6
Other 3.5 2.0 4.2 2.3
Total 7.3 4.0 8.1 4.4
(a) Included $45 million and $65 million of loans at December 31, 2011 and
December 31, 2010, respectively, which are over 90 days past due and accruing
interest, mainly representing accretion on loans acquired at a discount.