GE 2006 Annual Report Download - page 91

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GECS financing receivables include both loans and fi nancing
leases. Loans represent transactions in a variety of forms, includ-
ing revolving charge and credit, mortgages, installment loans,
intermediate-term loans and revolving loans secured by business
assets. The portfolio includes loans carried at the principal amount
on which finance charges are billed periodically, and loans carried
at gross book value, which includes fi nance charges.
Investment in financing leases consists of direct fi nancing and
leveraged leases of aircraft, railroad rolling stock, autos, other
transportation equipment, data processing equipment, medical
equipment, commercial real estate and other manufacturing,
power generation, and commercial equipment and facilities.
As the sole owner of assets under direct financing leases and
as the equity participant in leveraged leases, GECS is taxed on
total lease payments received and is entitled to tax deductions
NET INVESTMENT IN FINANCING LEASES
December 31 (In millions)
based on the cost of leased assets and tax deductions for interest
paid to third-party participants. GECS is generally entitled to any
residual value of leased assets.
Investment in direct financing and leveraged leases repre-
sents net unpaid rentals and estimated unguaranteed residual
values of leased equipment, less related deferred income. GECS
has no general obligation for principal and interest on notes and
other instruments representing third-party participation related
to leveraged leases; such notes and other instruments have not
been included in liabilities but have been offset against the
related rentals receivable. The GECS share of rentals receivable
on leveraged leases is subordinate to the share of other partici-
pants who also have security interests in the leased equipment.
Total financing leases Direct financing leases(a) Leveraged leases
(b)
2006 2005 2006 2005 2006 2005
Total minimum lease payments receivable $88,598 $86,436 $64,637 $60,594 $23,961 $25,842
Less principal and interest on third-party nonrecourse debt (17,309) (19,061) — — (17,309) (19,061)
Net rentals receivable 71,289 67,375 64,637 60,594 6,652 6,781
Estimated unguaranteed residual value of leased assets 10,062 9,379 7,068 6,260 2,994 3,119
Less deferred income (12,782) (12,445) (9,634) (9,305) (3,148) (3,140)
Investment in financing leases, net of deferred income 68,569 64,309 62,071 57,549 6,498 6,760
Less amounts to arrive at net investment
Allowance for losses (392) (525) (370) (380) (22) (145)
Deferred taxes (8,314) (8,037) (3,410) (3,495) (4,904) (4,542)
Net investment in financing leases $59,863 $55,747 $58,291 $53,674 $ 1,572 $ 2,073
(a) Included $654 million and $475 million of initial direct costs on direct financing leases at December 31, 2006 and 2005, respectively.
(b) Included pre-tax income of $306 million and $248 million and income tax of $115 million and $96 million during 2006 and 2005, respectively. Net investment credits recognized
during 2006 and 2005 were inconsequential.
CONTRACTUAL MATURITIES
Net rentals
(In millions) Total loans receivable
Due in
2007 $ 89,651 $18,422
2008 33,413 15,094
2009 25,731 11,637
2010 14,759 7,860
2011 17,893 5,244
2012 and later 88,896 13,032
Total $270,343 $71,289
We expect actual maturities to differ from contractual maturities.
Individually “impaired” loans are defined by GAAP 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. An analysis of
impaired loans follows.
December 31 (In millions) 2006 2005
Loans requiring allowance for losses $1,346 $1,479
Loans expected to be fully recoverable 497 451
$1,843 $1,930
Allowance for losses $ 446 $ 627
Average investment during year 1,860 2,118
Interest income earned while impaired
(a) 34 46
(a) Recognized principally on cash basis.
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