GE 2011 Annual Report Download - page 57

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’   
GE 2011 ANNUAL REPORT 55
Nonaccrual Financing Receivables
The following table provides details related to our nonaccrual and
nonearning fi nancing receivables. Nonaccrual fi nancing receiv-
ables include all nonearning receivables and are those on which
we have stopped accruing interest. We stop accruing interest at
the earlier of the time at which collection becomes doubtful
or the account becomes 90 days past due. Substantially all of the
differences between nonearning and nonaccrual fi nancing
receivables relate to loans which are classifi ed as nonaccrual
fi nancing receivables but are paying on a cash accounting basis,
and therefore excluded from nonearning receivables. Of our
$17.0 billion nonaccrual loans at December 31, 2011, $7.5 billion
are currently paying in accordance with their contractual terms.
December 31, 2011 (In millions)
Nonaccrual
financing
receivables
Nonearning
financing
receivables
Commercial
CLL $ 4,512 $3,309
Energy Financial Services 22 22
GECAS 69 55
Other 115 65
Total Commercial 4,718 3,451
Real Estate 6,949 790
Consumer 5,316 5,064
Total $16,983 $9,305
Impaired Loans
“Impaired” loans in the table below are defi ned as larger balance
or restructured loans for which it is probable that the lender will be
unable to collect all amounts due according to original contractual
terms of the loan agreement. The vast majority of our Consumer
and a portion of our CLL nonaccrual receivables are excluded from
this defi nition, as they represent smaller balance homogeneous
loans that we evaluate collectively by portfolio for impairment.
Impaired loans include nonearning receivables on larger balance
or restructured loans, loans that are currently paying interest under
the cash basis (but are excluded from the nonearning category), and
loans paying currently but which have been previously restructured.
Specifi c reserves are recorded for individually impaired loans
to the extent we have determined that it is probable that we will
be unable to collect all amounts due according to original con-
tractual terms of the loan agreement. Certain loans classifi ed as
impaired may not require a reserve because we believe that we
will ultimately collect the unpaid balance (through collection or
collateral repossession).
Further information pertaining to loans classifi ed as impaired
and specifi c reserves is included in the table below.
December 31 (In millions) 2011 2010
LOANS REQUIRING ALLOWANCE FOR LOSSES
Commercial (a) $ 2,357 $ 2,733
Real Estate 4,957 6,812
Consumer 3,036 2,446
Total loans requiring allowance for losses 10,350 11,991
LOANS EXPECTED TO BE FULLY RECOVERABLE
Commercial (a) 3,305 3,087
Real Estate 3,790 3,005
Consumer 69 102
Total loans expected to be fully recoverable 7,164 6,194
TOTAL IMPAIRED LOANS $17,514 $18,185
ALLOWANCE FOR LOSSES (SPECIFIC RESERVES)
Commercial (a) $ 812 $ 1,031
Real Estate 822 1,150
Consumer 717 555
Total allowance for losses (specific reserves) $ 2,351 $ 2,736
Average investment during the period $18,384 $15,538
Interest income earned while impaired (b) 733 391
(a) Includes CLL, Energy Financial Services, GECAS and Other.
(b) Recognized principally on a cash basis.
We regularly review our Real Estate loans for impairment using
both quantitative and qualitative factors, such as debt service
coverage and loan-to-value ratios. We classify Real Estate loans
as impaired when the most recent valuation refl ects a projected
loan-to-value ratio at maturity in excess of 100%, even if the loan
is currently paying in accordance with contractual terms.
Of our $8.7 billion impaired loans at Real Estate at
December 31, 2011, $7.9 billion are currently paying in accordance
with the contractual terms of the loan and are typically loans
where the borrower has adequate debt service coverage to meet
contractual interest obligations. Impaired loans at CLL primarily
represent senior secured lending positions.
Our impaired loan balance at December 31, 2011 and 2010,
classifi ed by the method used to measure impairment was
as follows.
December 31 (In millions) 2011 2010
METHOD USED TO MEASURE IMPAIRMENT
Discounted cash flow $ 8,981 $ 7,644
Collateral value 8,533 10,541
Total $17,514 $18,185
See Note 1 for further information on collateral dependent loans
and our valuation process.