| December 31 (In millions) | 2004 | 2003 | ||||
|---|---|---|---|---|---|---|
| Time sales and loans, net of deferred income | $ | 220,593 | $ | 189,050 | ||
| Investment in financing leases, net of deferred income | 67,754 | 65,320 | ||||
| 288,347 | 254,370 | |||||
| Less allowance for losses (note 13) | (5,648 | ) | (6,256 | ) | ||
| Financing receivables–net | $ | 282,699 | $ | 248,114 | ||
Included in the above are the financing receivables of consolidated, liquidating securitization entities as follows:
| December 31 (In millions) | 2004 | 2003 | ||||
|---|---|---|---|---|---|---|
| Time sales and loans, net of deferred income | $ | 20,728 | $ | 18,258 | ||
| Investment in financing leases, net of deferred income | 2,125 | 3,827 | ||||
| 22,853 | 22,085 | |||||
| Less allowance for losses | (5 | ) | – | |||
| Financing receivables–net | $ | 22,848 | $ | 22,085 | ||
Details by segment follow.
| December 31 (In millions) | 2004 | 2003 | ||||
|---|---|---|---|---|---|---|
| COMMERCIAL FINANCE | ||||||
| Equipment | $ | 74,970 | $ | 68,085 | ||
| Commercial and industrial | 36,443 | 35,035 | ||||
| Real estate | 20,470 | 20,171 | ||||
| Commercial aircraft | 13,562 | 12,424 | ||||
| 145,445 | 135,715 | |||||
| CONSUMER FINANCE | ||||||
| Non-U.S. residential mortgages | 42,201 | 19,593 | ||||
| Non-U.S. installment and revolving credit | 33,889 | 31,954 | ||||
| Non-U.S. auto | 23,517 | 20,729 | ||||
| U.S. installment and revolving credit | 21,385 | 16,545 | ||||
| Other | 6,771 | 5,856 | ||||
| 127,763 | 94,677 | |||||
| EQUIPMENT & OTHER SERVICES | 15,139 | 23,978 | ||||
| 288,347 | 254,370 | |||||
| Less allowance for losses | (5,648) | (6,256) | ||||
| Total | $ | 282,699 | $ | 248,114 | ||
GECS financing receivables include both time sales and loans and financing leases. Time sales and loans represent transactions in a variety of forms, including time sales, revolving charge and credit, mortgages, installment loans, intermediate-term loans and revolving loans secured by business assets. The portfolio includes time sales and loans carried at the principal amount on which finance charges are billed periodically, and time sales and loans carried at gross book value, which includes finance charges.
Investment in financing leases consists of direct financing and leveraged leases of aircraft, railroad rolling stock, autos, other transportation equipment, data processing equipment and medical equipment, as well as other manufacturing, power generation, commercial real estate, 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 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 represents 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 participants who also have security interests in the leased equipment.
NET INVESTMENT IN FINANCING LEASES
| Total financing leases | Direct financing leases | Leveraged leases | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| December 31 (In millions) | 2004 | 2003 | 2004 | 2003 | 2004 | 2003 | ||||||||||||
| Total minimum lease payments receivable | $ | 91,840 | $ | 91,592 | $ | 63,733 | $ | 62,121 | $ | 28,107 | $ | 29,471 | ||||||
| Less principal and interest on third-party nonrecourse debt | (20,992 | ) | (22,144 | ) | – | – | (20,992 | ) | (22,144 | ) | ||||||||
| Net rentals receivable | 70,848 | 69,448 | 63,733 | 62,121 | 7,115 | 7,327 | ||||||||||||
| Estimated unguaranteed residual value of leased assets | 10,323 | 9,747 | 6,898 | 6,072 | 3,425 | 3,675 | ||||||||||||
| Less deferred income | (13,417 | ) | (13,875 | ) | (9,966 | ) | (10,099 | ) | (3,451 | ) | (3,776 | ) | ||||||
| Investment in financing leases, net of deferred income | 67,754 | 65,320 | 60,665 | 58,094 | 7,089 | 7,226 | ||||||||||||
| Less amounts to arrive at net investment | ||||||||||||||||||
| Allowance for losses | (1,090 | ) | (830 | ) | (903 | ) | (734 | ) | (187 | ) | (96 | ) | ||||||
| Deferred taxes | (9,767 | ) | (10,250 | ) | (5,099 | ) | (5,793 | ) | (4,668 | ) | (4,457 | ) | ||||||
| Net investment in financing leases | $ | 56,897 | $ | 54,240 | $ | 54,663 | $ | 51,567 | $ | 2,234 | $ | 2,673 | ||||||
CONTRACTUAL MATURITIES
| (In millions) | Total time sales and loans | Net rentals receivable | ||||
|---|---|---|---|---|---|---|
| Due in | ||||||
| 2005 | $ | 66,085 | $ | 17,767 | ||
| 2006 | 31,394 | 14,595 | ||||
| 2007 | 25,461 | 10,900 | ||||
| 2008 | 13,770 | 7,908 | ||||
| 2009 | 13,796 | 5,097 | ||||
| 2010 and later | 70,087 | 14,581 | ||||
| Total | $ | 220,593 | $ | 70,848 | ||
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) | 2004 | 2003 | ||||
|---|---|---|---|---|---|---|
| Loans requiring allowance for losses | $ | 1,689 | $ | 1,062 | ||
| Loans expected to be fully recoverable | 520 | 1,430 | ||||
| $ | 2,209 | $ | 2,492 | |||
| Allowance for losses | $ | 749 | $ | 434 | ||
| Average investment during year | 2,403 | 2,318 | ||||
| Interest income earned while impaired(a) | 26 | 33 | ||||
| (a) | Recognized principally on cash basis. |
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