GE 2013 Annual Report Download - page 56

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54 GE 2013 ANNUAL REPORT
period the account becomes 180 days past due. Previously, we
stopped accruing interest on consumer credit cards when the
account became 90 days past due. In addition, the revised meth-
ods limit the use of the cash basis of accounting for nonaccrual
fi nancing receivables.
As a result of these revisions, consumer credit card receiv-
ables of $1.1 billion that were previously classifi ed as both
nonaccrual and nonearning were returned to accrual status in
the fourth quarter of 2013. In addition, $1.5 billion of Real Estate
and CLL fi nancing receivables previously classifi ed as nonaccrual,
paying in accordance with contractual terms and accounted for
on the cash basis, were returned to accrual status, while $2.2 bil-
lion of fi nancing receivables previously classifi ed as nonaccrual
and accounted for on the cash basis (primarily in Real Estate and
CLL) were placed into the nonearning category based on our
assessment of the short-term outlook for resolution through
payoff or refi nance. These changes had an insignifi cant effect
on earnings.
Given that the revised methods result in nonaccrual and
nonearning amounts that are substantially the same, we plan to
discontinue the reporting of nonearning fi nancing receivables,
one of our internal performance metrics, and report selected
ratios related to nonaccrual fi nancing receivables in the fi rst
quarter of 2014.
Substantially all of the differences between nonearning and
nonaccrual fi nancing receivables relate to loans that are clas-
sifi ed as nonaccrual fi nancing receivables but are paying on a
cash accounting basis, and therefore excluded from nonearning
receivables. Of our $7.9 billion nonaccrual loans at December 31,
2013, $4.2 billion are currently paying in accordance with their
contractual terms. Further information on our nonaccrual and
nonearning fi nancing receivables is provided in Notes 1 and 6.
Nonaccrual financing receivables Nonearning financing receivables
December 31 (In millions) 2013 2012 2013 2012
Commercial
CLL $ 2,734 $ 4,138 $ 2,702 $ 2,877
Energy Financial Services 4 — 4 —
GECAS — 3 — —
Other 6 25 6 13
Total Commercial 2,744 4,166 2,712 2,890
Real Estate (a) 2,551 4,885 2,301 444
Consumer (b) 2,620 4,288 2,219 4,181
Total $ 7,915 $ 13,339 $ 7,232 $ 7,515
(a) During the fourth quarter of 2013, we reclassified financing receivables of $1.0 billion from nonaccrual to accrual status and $2.1 billion from nonaccrual to nonearning, as
discussed above.
(b) During the fourth quarter of 2013, we reclassified consumer credit card receivables of $1.1 billion from both nonaccrual and nonearning to accrual status, as discussed above.
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 con-
tractual 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 that had
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) 2013 2012
LOANS REQUIRING ALLOWANCE FOR LOSSES
Commercial (a) $ 1,116 $ 1,372
Real Estate 1,245 2,202
Consumer 2,879 3,103
Total loans requiring allowance for losses 5,240 6,677
LOANS EXPECTED TO BE FULLY RECOVERABLE
Commercial (a) 2,776 3,697
Real Estate 2,615 3,491
Consumer 109 105
Total loans expected to be fully recoverable 5,500 7,293
TOTAL IMPAIRED LOANS $ 10,740 $ 13,970
ALLOWANCE FOR LOSSES (SPECIFIC RESERVES)
Commercial (a) $ 328 $ 487
Real Estate 74 188
Consumer 567 673
Total allowance for losses (specific reserves) $ 969 $ 1,348
Average investment during the period $ 12,347 $ 16,262
Interest income earned while impaired (b) 626 750
(a) Includes CLL, Energy Financial Services, GECAS and Other.
(b) Recognized principally on an accrual basis.