12. 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, 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 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 in our 2012 consolidated financial statements.

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

	Financing receivables
	June 30,		December 31,
(In millions)	2013		2012

CLL
Americas	$	70,499	$	72,517
Europe		35,839		37,035
Asia		9,907		11,401
Other		506		605
Total CLL		116,751		121,558

Energy Financial Services		4,671		4,851

GECAS		9,998		10,915

Other		425		486

Total Commercial financing receivables, before allowance for losses	$	131,845	$	137,810

Non-impaired financing receivables	$	127,554	$	132,741
General reserves		639		554

Impaired loans		4,291		5,069
Specific reserves		263		487

The following table displays payment performance of Commercial financing receivables.

	June 30, 2013				December 31, 2012
	Over 30 days		Over 90 days		Over 30 days		Over 90 days
	past due		past due		past due		past due

CLL
Americas	1.0	%	0.6	%	1.1	%	0.5	%
Europe	3.5		2.2		3.7		2.1
Asia	1.0		0.6		0.9		0.6
Other	0.0		0.0		0.1		0.0
Total CLL	1.8		1.1		1.9		1.0

Energy Financial Services	0.0		0.0		0.0		0.0

GECAS	0.1		0.0		0.0		0.0

Other	1.7		1.7		2.8		2.8

Total	1.6		0.9		1.7		0.9

The following table provides further information about Commercial financing receivables that are classified as nonaccrual. Of our $3,413 million and $4,166 million of nonaccrual financing receivables at June 30, 2013 and December 31, 2012, respectively, $2,040 million and $2,647 million are currently paying in accordance with their contractual terms, respectively.

	Nonaccrual financing						Nonearning financing
	receivables						receivables
	June 30,			December 31,			June 30,			December 31,
(Dollars in millions)	2013			2012			2013			2012

CLL
Americas	$	1,715		$	1,951		$	1,232		$	1,333
Europe		1,298			1,740			958			1,299
Asia		384			395			177			193
Other		0			52			0			52
Total CLL		3,397			4,138			2,367			2,877

Energy Financial Services		4			0			4			0

GECAS		0			3			0			0

Other		12			25			6			13
Total	$	3,413		$	4,166		$	2,377		$	2,890

Allowance for losses percentage		26.4	%		25.0	%		37.9	%		36.0	%

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
(In millions)	in loans		balance		loans		in loans		balance		allowance		loans

June 30, 2013

CLL
Americas	$	2,272	$	2,729	$	2,373	$	425	$	613	$	102	$	531
Europe		928		1,758		1,039		436		780		148		543
Asia		138		161		120		76		82		11		89
Other		0		0		0		0		0		0		20
Total CLL		3,338		4,648		3,532		937		1,475		261		1,183
Energy Financial Services		0		0		0		4		4		1		1
GECAS		0		0		0		0		0		0		1
Other		6		9		11		6		7		1		7
Total	$	3,344	$	4,657	$	3,543	$	947	$	1,486	$	263	$	1,192

December 31, 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

We recognized $112 million, $253 million and $115 million of interest income, including $36 million, $92 million and $49 million on a cash basis, for the six months ended June 30, 2013, the year ended December 31, 2012 and the six months ended June 30, 2012, respectively, principally in our CLL Americas business. The total average investment in impaired loans for the six months ended June 30, 2013 and the year ended December 31, 2012 was $4,735 million and $5,688 million, respectively.

Impaired loans classified as TDRs in our CLL business were $3,350 million and $3,872 million at June 30, 2013 and December 31, 2012, respectively, and were primarily attributable to CLL Americas ($2,351 million and $2,577 million, respectively). For the six months ended June 30, 2013, we modified $825 million of loans classified as TDRs, primarily in CLL Americas ($513 million). 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 $1,961 million and $2,796 million of modifications classified as TDRs in the twelve months ended June 30, 2013 and 2012, respectively, $87 million and $96 million have subsequently experienced a payment default in the six months ended June 30, 2013 and 2012, respectively.

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
(In millions)	A		B		C		Total

June 30, 2013

CLL
Americas	$	66,821	$	1,778	$	1,900	$	70,499
Europe		33,556		573		1,006		35,135
Asia		9,495		91		159		9,745
Other		155		0		0		155
Total CLL		110,027		2,442		3,065		115,534

Energy Financial Services		4,545		0		0		4,545

GECAS		9,819		48		131		9,998

Other		425		0		0		425
Total	$	124,816	$	2,490	$	3,196	$	130,502

December 31, 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

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 June 30, 2013 and December 31, 2012, these financing receivables included $424 million and $458 million rated A, $602 million and $583 million rated B, and $317 million and $452 million rated C, respectively.

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

	Financing receivables
		June 30,		December 31,
(In millions)		2013		2012

Real Estate financing receivables, before allowance for losses	$	19,621	$	20,946

Non-impaired financing receivables	$	14,893	$	15,253
General reserves		91		132

Impaired loans		4,728		5,693
Specific reserves		144		188

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

	June 30, 2013					December 31, 2012
	Over 30 days		Over 90 days			Over 30 days		Over 90 days
	past due		past due			past due		past due

Real Estate	2.1	%		2.0	%	2.3	%		2.2	%

The following table provides further information about Real Estate financing receivables that are classified as nonaccrual. Of our $4,294 million and $4,885 million of nonaccrual financing receivables at June 30, 2013 and December 31, 2012, respectively, $3,884 million and $4,461 million are currently paying in accordance with their contractual terms, respectively.

	Nonaccrual financing						Nonearning financing
	receivables						receivables
	June 30,			December 31,			June 30,			December 31,
(Dollars in millions)	2013			2012			2013			2012

Real Estate	$	4,294		$	4,885		$	419		$	444

Allowance for losses percentage		5.5	%		6.6	%		56.1	%		72.1	%

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

principal

Associated

investment

(In millions)

in loans

balance

in loans

balance

allowance

in loans

June 30, 2013

Real Estate

3,207

3,369

3,295

1,521

1,973

144

1,931

We recognized $110 million, $329 million and $183 million of interest income, including $90 million, $237 million and $129 million on a cash basis, for the six months ended June 30, 2013, the year ended December 31, 2012 and the six months ended June 30, 2012, respectively. The total average investment in impaired loans for the six months ended June 30, 2013 and the year ended December 31, 2012 was $5,226 million and $7,525 million, respectively.

Real Estate TDRs decreased from $5,146 million at December 31, 2012 to $4,356 million at June 30, 2013, primarily driven by resolution of TDRs through paydowns and the impact of currency exchange, partially offset by extensions of loans scheduled to mature during 2013, 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 six months ended June 30, 2013, we modified $776 million of loans classified as TDRs. 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 $2,858 million and $4,454 million of modifications classified as TDRs in the twelve months ended June 30, 2013 and 2012, respectively, $65 million and $407 million have subsequently experienced a payment default in the six months ended June 30, 2013 and 2012, respectively.

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.

	Loan-to-value ratio
	June 30, 2013						December 31, 2012
	Less than		80% to		Greater than		Less than		80% to		Greater than
(In millions)	80%		95%		95%		80%		95%		95%

Debt	$	13,977	$	1,970	$	2,591	$	13,570	$	2,572	$	3,604

By contrast, the credit quality of the owner occupied/credit tenant 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. As of June 30, 2013, the internal risk rating of A, B and C for our owner occupied/credit tenant portfolio approximated $681 million, $201 million and $201 million, respectively, as compared to the December 31, 2012, ratings of $956 million, $25 million and $219 million, 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 our owner occupied/credit tenant financing receivables included in Category C are impaired loans that are subject to the specific reserve evaluation process described in Note 1 in our 2012 consolidated financial statements. 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 June 30, 2013, our U.S. consumer financing receivables included private-label credit card and sales financing for approximately 55 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 65% 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 35% 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
	June 30,		December 31,
(In millions)	2013		2012

Non-U.S. residential mortgages	$	31,784	$	33,451
Non-U.S. installment and revolving credit		17,620		18,546
U.S. installment and revolving credit		50,155		50,853
Non-U.S. auto		3,808		4,260
Other		7,547		8,070
Total Consumer financing receivables, before allowance for losses	$	110,914	$	115,180

Non-impaired financing receivables	$	107,705	$	111,960
General reserves		3,483		2,950

Impaired loans		3,209		3,220
Specific reserves		668		674

The following table displays payment performance of Consumer financing receivables.

	June 30, 2013				December 31, 2012
	Over 30 days		Over 90 days		Over 30 days		Over 90 days
	past due		past due(a)		past due		past due(a)

Non-U.S. residential mortgages	11.8	%	7.4	%	12.0	%	7.5	%
Non-U.S. installment and revolving credit	4.0		1.2		3.9		1.1
U.S. installment and revolving credit	3.9		1.7		4.6		2.0
Non-U.S. auto	3.3		0.4		3.1		0.5
Other	2.8		1.6		2.8		1.7
Total	6.1		3.2		6.5		3.4

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

	Nonaccrual financing						Nonearning financing
	receivables						receivables
	June 30,			December 31,			June 30,			December 31,
(Dollars in millions)	2013			2012			2013			2012

Non-U.S. residential mortgages	$	2,399		$	2,600		$	2,388		$	2,569
Non-U.S. installment and revolving credit		225			224			225			224
U.S. installment and revolving credit		822			1,026			822			1,026
Non-U.S. auto		21			24			21			24
Other		379			427			324			351
Total	$	3,846		$	4,301		$	3,780		$	4,194

Allowance for losses percentage		107.9	%		84.3	%		109.8	%		86.4	%

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 $3,209 million (with an unpaid principal balance of $3,298 million) and comprised $85 million with no specific allowance, primarily all in our Consumer–Other portfolio, and $3,124 million with a specific allowance of $668 million at June 30, 2013. The impaired loans with a specific allowance included $312 million with a specific allowance of $73 million in our Consumer–Other portfolio and $2,812 million with a specific allowance of $595 million across the remaining Consumer business and had an unpaid principal balance and average investment of $3,183 million and $3,117 million, respectively, at June 30, 2013. We recognized $115 million, $169 million and $76 million of interest income, including $1 million, $5 million and $3 million on a cash basis, for the six months ended June 30, 2013, the year ended December 31, 2012 and the six months ended June 30, 2012, respectively, principally in our Consumer–U.S. installment and revolving credit portfolios. The total average investment in impaired loans for the six months ended June 30, 2013 and the year ended December 31, 2012 was $3,211 million and $3,056 million, respectively.

Impaired loans classified as TDRs in our Consumer business were $3,068 million and $3,053 million at June 30, 2013 and December 31, 2012, 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 six months ended June 30, 2013, we modified $852 million of consumer loans for borrowers experiencing financial difficulties, which are classified as TDRs, and included $541 million of non-U.S. consumer loans, primarily residential mortgages, credit cards and personal loans and $311 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 $1,694 million and $2,106 million of modifications classified as TDRs in the twelve months ended June 30, 2013 and 2012, respectively, $158 million and $352 million have subsequently experienced a payment default in the six months ended June 30, 2013 and 2012, respectively.

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
	June 30, 2013						December 31, 2012
	80% or		Greater than		Greater than		80% or		Greater than		Greater than
(In millions)	less		80% to 90%		90%		less		80% to 90%		90%

Non-U.S. residential mortgages	$	17,764	$	5,340	$	8,680	$	18,613	$	5,739	$	9,099

The majority of these financing receivables are in our U.K. and France portfolios and have re-indexed loan-to-value ratios of 80% and 57%, respectively. We have third-party mortgage insurance for about 30% of the balance of Consumer non-U.S. residential mortgage loans with loan-to-value ratios greater than 90% at June 30, 2013. 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
	June 30, 2013						December 31, 2012
	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	$	10,262	$	4,162	$	3,196	$	10,493	$	4,496	$	3,557
U.S. installment and
revolving credit		32,869		9,876		7,410		33,204		9,753		7,896
Non-U.S. auto		2,881		546		381		3,141		666		453

Of those financing receivable accounts with credit bureau equivalent scores of 614 or less at June 30, 2013, 97% 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 June 30, 2013, Consumer – Other financing receivables of $6,385 million, $433 million and $729 million were rated A, B, and C, respectively. At December 31, 2012, Consumer – Other financing receivables of $6,873 million, $451 million and $746 million were rated A, B, and C, respectively.