geccform10q09302011.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 
WASHINGTON, D.C. 20549
 
     
 
FORM 10-Q
  

(Mark One)
        
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 
THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2011
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________to ___________
_____________________________
 
Commission file number 001-06461
_____________________________
 
GENERAL ELECTRIC CAPITAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
  
13-1500700
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
     
901 Main Avenue, Norwalk, Connecticut
  
06851-1168
(Address of principal executive offices)
  
(Zip Code)

(Registrant’s telephone number, including area code) (203) 840-6300

                                                                                              
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þNo ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer ¨ 
Accelerated filer ¨
Non-accelerated filer þ
Smaller reporting company ¨

 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
 
At November 4, 2011, 3,985,404 shares of voting common stock, which constitute all of the outstanding common equity, with a par value of $14 per share were outstanding.
 
REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.
 

 
 
(1)
 


 
General Electric Capital Corporation
 
Part I – Financial Information
  
Page
       
Item 1.
Financial Statements
    
 
Condensed Statement of Current and Retained Earnings
  
3
 
Condensed Statement of Financial Position
  
4
 
Condensed Statement of Cash Flows
  
5
 
Summary of Operating Segments
  
6
 
Notes to Condensed, Consolidated Financial Statements (Unaudited)
  
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
51
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
  
72
Item 4.
Controls and Procedures
  
72
       
Part II – Other Information
    
       
Item 1.
Legal Proceedings
  
73
Item 6.
Exhibits
  
74
Signatures
  
75
     

 
Forward-Looking Statements
 
This document contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; potential market disruptions or other impacts arising in the United States or Europe from developments in the European sovereign debt situation; the impact of conditions in the financial and credit markets on the availability and cost of our funding and on our ability to reduce our asset levels as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; changes in Japanese consumer behavior that may affect our estimates of liability for excess interest refund claims (Grey Zone); potential financial implications from the Japanese natural disaster; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the level of demand and financial performance of the major industries we serve, including, without limitation, air transportation, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation; strategic actions, including acquisitions, joint ventures and dispositions and our success in completing announced transactions and integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

 
(2)
 

Part I. Financial Information
 
 
Item 1. Financial Statements.
 
General Electric Capital Corporation and consolidated affiliates
 
Condensed Statement of Current and Retained Earnings
 
(Unaudited)
 
               
 
Three months ended September 30, 
  
Nine months ended September 30, 
(In millions)
  
2011 
    
2010 
    
2011 
    
2010 
                       
Revenues
                      
Revenues from services (a)
$
 11,180 
  
$
 11,091 
  
$
 35,048 
  
$
 34,343 
Other-than-temporary impairment on investment securities:
                      
   Total other-than-temporary impairment on investment securities
  
 (83)
    
 (36)
    
 (260)
    
 (283)
      Less: Portion of other-than-temporary impairment recognized in
                      
         accumulated other comprehensive income
  
 19 
    
 6 
    
 81 
    
 127 
   Net other-than-temporary impairment on investment securities
                      
      recognized in earnings
  
 (64)
    
 (30)
    
 (179)
    
 (156)
Revenues from services (Note 9)
  
 11,116 
    
 11,061 
    
 34,869 
    
 34,187 
Sales of goods
  
 32 
    
 40 
    
 116 
    
 489 
   Total revenues
  
 11,148 
    
 11,101 
    
 34,985 
    
 34,676 
                       
Costs and expenses
                      
Interest
  
 3,557 
    
 3,565 
    
 10,721 
    
 10,892 
Operating and administrative
  
 3,107 
    
 3,338 
    
 9,778 
    
 10,318 
Cost of goods sold
  
 30 
    
 39 
    
 108 
    
 458 
Investment contracts, insurance losses and insurance annuity benefits
  
 27 
    
 36 
    
 81 
    
 109 
Provision for losses on financing receivables
  
 1,020 
    
 1,637 
    
 2,988 
    
 5,824 
Depreciation and amortization
  
 1,836 
    
 2,016 
    
 5,403 
    
 5,778 
   Total costs and expenses
  
 9,577 
    
 10,631 
    
 29,079 
    
 33,379 
                       
Earnings from continuing operations before income taxes
  
 1,571 
    
 470 
    
 5,906 
    
 1,297 
Benefit (provision) for income taxes
  
 (66)
    
 366 
    
 (890)
    
 825 
                       
Earnings from continuing operations
  
 1,505 
    
 836 
    
 5,016 
    
 2,122 
Earnings (loss) from discontinued operations, net of taxes (Note 2)
  
 2 
    
 (1,051)
    
 277 
    
 (1,501)
Net earnings (loss)
  
 1,507 
    
 (215)
    
 5,293 
    
 621 
Less net earnings (loss) attributable to noncontrolling interests
  
 38 
    
 18 
    
 89 
    
 (9)
Net earnings (loss) attributable to GECC
  
 1,469 
    
 (233)
    
 5,204 
    
 630 
Dividends
  
 – 
    
 – 
    
 – 
    
 – 
Retained earnings at beginning of period
  
 51,702 
    
 46,502 
    
 47,967 
    
 45,639 
Retained earnings at end of period
$
 53,171 
  
$
 46,269 
  
$
 53,171 
  
$
 46,269 
                       
Amounts attributable to GECC
                      
Earnings from continuing operations
$
 1,467 
  
$
 818 
  
$
 4,927 
  
$
 2,131 
Earnings (loss) from discontinued operations, net of taxes
  
 2 
    
 (1,051)
    
 277 
    
 (1,501)
Net earnings (loss) attributable to GECC
$
 1,469 
  
$
 (233)
  
$
 5,204 
  
$
 630 
                       
                       
(a)  
Excluding net other-than-temporary impairment on investment securities.
 

 
See accompanying notes.
 
 

 
(3)
 

General Electric Capital Corporation and consolidated affiliates
 
Condensed Statement of Financial Position
 
 
September 30,
  
December 31,
(In millions)
2011 
  
2010 
   
(Unaudited)
      
Assets
          
Cash and equivalents
$
 82,391 
  
$
 59,538 
Investment securities (Note 3)
  
 17,362 
    
 17,952 
Inventories
  
 44 
    
 66 
Financing receivables – net (Notes 4 and 12)
  
 293,737 
    
 312,234 
Other receivables
  
 13,211 
    
 13,674 
Property, plant and equipment, less accumulated amortization of $24,291
          
   and $25,390
  
 52,309 
    
 53,747 
Goodwill (Note 5)
  
 27,726 
    
 27,508 
Other intangible assets – net (Note 5)
  
 1,702 
    
 1,874 
Other assets
  
 79,743 
    
 79,045 
Assets of businesses held for sale (Note 2)
  
 3,050 
    
 3,127 
Assets of discontinued operations (Note 2)
  
 1,461 
    
 12,375 
Total assets(a)
$
 572,736 
  
$
 581,140 
           
Liabilities and equity
          
Short-term borrowings (Note 6)
$
 121,733 
  
$
 113,646 
Accounts payable
  
 7,835 
    
 6,839 
Non-recourse borrowings of consolidated securitization entities (Note 6)
  
 29,022 
    
 30,018 
Bank deposits (Note 6)
  
 41,515 
    
 37,298 
Long-term borrowings (Note 6)
  
 259,332 
    
 284,346 
Investment contracts, insurance liabilities and insurance annuity benefits
  
 4,859 
    
 5,779 
Other liabilities
  
 21,983 
    
 20,287 
Deferred income taxes
  
 3,091 
    
 6,109 
Liabilities of businesses held for sale (Note 2)
  
 1,813 
    
 592 
Liabilities of discontinued operations (Note 2)
  
 1,261 
    
 2,181 
Total liabilities(a)
  
 492,444 
    
 507,095 
           
Capital stock
  
 56 
    
 56 
Accumulated other comprehensive income – net(b)
          
   Investment securities
  
 (676)
    
 (337)
   Currency translation adjustments
  
 138 
    
 (1,541)
   Cash flow hedges
  
 (1,711)
    
 (1,347)
   Benefit plans
  
 (353)
    
 (380)
Additional paid-in capital
  
 28,462 
    
 28,463 
Retained earnings
  
 53,171 
    
 47,967 
Total GECC shareowner's equity
  
 79,087 
    
 72,881 
Noncontrolling interests(c)
  
 1,205 
    
 1,164 
Total equity
  
 80,292 
    
 74,045 
Total liabilities and equity
$
 572,736 
  
$
 581,140 
           
           
(a)  
Our consolidated assets at September 30, 2011 include total assets of $43,259 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets include net financing receivables of $36,170 million and investment securities of $4,624 million. Our consolidated liabilities at September 30, 2011 include liabilities of certain VIEs for which the VIE creditors do not have recourse to GECC. These liabilities include non-recourse borrowings of consolidated securitization entities (CSEs) of $28,522 million. See Note 13.
 
(b)  
The sum of accumulated other comprehensive income − net was $(2,602) million and $(3,605) million at September 30, 2011 and December 31, 2010, respectively.
 
(c)  
Included accumulated other comprehensive income − net attributable to noncontrolling interests of $(150) million and $(137) million at September 30, 2011 and December 31, 2010, respectively.
 

 
See accompanying notes.
 
 

 
(4)
 

General Electric Capital Corporation and consolidated affiliates
 
Condensed Statement of Cash Flows
 
(Unaudited)
 

 
Nine months ended September 30,
(In millions)
  
2011 
    
2010 
           
Cash flows – operating activities
          
Net earnings
$
5,293 
  
$
621 
Less net earnings (loss) attributable to noncontrolling interests
  
89 
    
(9)
Net earnings attributable to GECC
  
5,204 
    
630 
(Earnings) loss from discontinued operations
  
(277)
    
1,501 
Adjustments to reconcile net earnings attributable to GECC
          
   to cash provided from operating activities
          
      Depreciation and amortization of property, plant and equipment
  
5,403 
    
5,778 
      Increase (decrease) in accounts payable
  
1,158 
    
650 
      Provision for losses on financing receivables
  
2,988 
    
5,824 
      All other operating activities
  
1,569 
    
381 
Cash from (used for) operating activities – continuing operations
  
16,045 
    
14,764 
Cash from (used for) operating activities – discontinued operations
  
840 
    
882 
Cash from (used for) operating activities
  
16,885 
    
15,646 
           
Cash flows – investing activities
          
Additions to property, plant and equipment
  
(7,149)
    
(3,113)
Dispositions of property, plant and equipment
  
4,514 
    
3,075 
Increase in loans to customers
  
(234,537)
    
(220,665)
Principal collections from customers – loans
  
249,444 
    
238,998 
Investment in equipment for financing leases
  
(6,920)
    
(6,796)
Principal collections from customers – financing leases
  
9,797 
    
11,519 
Net change in credit card receivables
  
746 
    
577 
Proceeds from sale of discontinued operations
  
8,951 
    
– 
Proceeds from principal business dispositions
  
2,117 
    
905 
Payments for principal businesses purchased
  
(50)
    
(561)
All other investing activities
  
4,590 
    
11,781 
Cash from (used for) investing activities – continuing operations
  
31,503 
    
35,720 
Cash from (used for) investing activities – discontinued operations
  
(809)
    
(267)
Cash from (used for) investing activities
  
30,694 
    
35,453 
           
Cash flows – financing activities
          
Net increase (decrease) in borrowings (maturities of 90 days or less)
  
(2,020)
    
(1,285)
Net increase (decrease) in bank deposits
  
3,746 
    
3,982 
Newly issued debt (maturities longer than 90 days)
          
   Short-term (91 to 365 days)
  
10 
    
464 
   Long-term (longer than one year)
  
33,776 
    
26,513 
   Non-recourse, leveraged lease
  
– 
    
– 
Repayments and other debt reductions (maturities longer than 90 days)
          
   Short-term (91 to 365 days)
  
(58,003)
    
(73,101)
   Long-term (longer than one year)
  
(1,603)
    
(1,679)
   Non-recourse, leveraged lease
  
(640)
    
(544)
Dividends paid to shareowner
  
– 
    
– 
All other financing activities
  
(1,002)
    
(2,096)
Cash from (used for) financing activities – continuing operations
  
(25,736)
    
(47,746)
Cash from (used for) financing activities – discontinued operations
  
(42)
    
(719)
Cash from (used for) financing activities
  
(25,778)
    
(48,465)
           
Effect of currency exchange rate changes on cash and equivalents
  
1,042 
    
(1,037)
           
Increase (decrease) in cash and equivalents
  
22,843 
    
1,597 
Cash and equivalents at beginning of year
  
59,679 
    
63,880 
Cash and equivalents at September 30
  
82,522 
    
65,477 
Less cash and equivalents of discontinued operations at September 30
  
131 
    
1,865 
Cash and equivalents of continuing operations at September 30
$
82,391 
  
$
63,612 
           
           
See accompanying notes.
 
 

 
(5)
 

Summary of Operating Segments
 

 
Three months ended September 30,
  
Nine months ended September 30,
 
(Unaudited)
  
(Unaudited)
(In millions)
2011 
  
2010 
  
2011 
  
2010 
Revenues
                      
CLL
$
 4,512 
  
$
 4,551 
  
$
 13,786 
  
$
 13,651 
Consumer
  
 4,032 
    
 4,097 
    
 13,035 
    
 12,840 
Real Estate
  
 935 
    
 953 
    
 2,834 
    
 2,888 
Energy Financial Services
  
 221 
    
 291 
    
 931 
    
 1,677 
GECAS
  
 1,265 
    
 1,321 
    
 3,917 
    
 3,819 
   Total segment revenues
  
 10,965 
    
 11,213 
    
 34,503 
    
 34,875 
GECC corporate items and eliminations
  
 183 
    
 (112)
    
 482 
    
 (199)
Total revenues in GECC
$
 11,148 
  
$
 11,101 
  
$
 34,985 
  
$
 34,676 
                       
Segment profit
                      
CLL
$
 688 
  
$
 443 
  
$
 1,943 
  
$
 987 
Consumer
  
 737 
    
 773 
    
 2,976 
    
 1,977 
Real Estate
  
 (82)
    
 (405)
    
 (775)
    
 (1,332)
Energy Financial Services
  
 79 
    
 55 
    
 330 
    
 334 
GECAS
  
 208 
    
 158 
    
 835 
    
 763 
    Total segment profit
  
 1,630 
    
 1,024 
    
 5,309 
    
 2,729 
GECC corporate items and eliminations
  
 (163)
    
 (206)
    
 (382)
    
 (598)
Earnings from continuing operations
                      
    attributable to GECC
  
 1,467 
    
 818 
    
 4,927 
    
 2,131 
Earnings (loss) from discontinued operations,
                      
    net of taxes, attributable to GECC
  
 2 
    
 (1,051)
    
 277 
    
 (1,501)
Total net earnings attributable to GECC
$
 1,469 
  
$
 (233)
  
$
 5,204 
  
$
 630 
                       
                       
See accompanying notes.
 
 

 
(6)
 

Notes to Condensed, Consolidated Financial Statements (Unaudited)
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
All of the outstanding common stock of General Electric Capital Corporation (GECC) is owned by General Electric Capital Services, Inc. (GECS), all of whose common stock is owned by General Electric Company (GE Company or GE). Our financial statements consolidate all of our affiliates – companies that we control and in which we hold a majority voting interest. We also consolidate the economic interests we hold in certain businesses within companies in which we hold a voting equity interest and are majority owned by our ultimate parent, but which we have agreed to actively manage and control. See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2010 (2010 consolidated financial statements), which discusses our consolidation and financial statement presentation. GECC includes Commercial Lending and Leasing (CLL), Consumer, Real Estate, Energy Financial Services and GE Capital Aviation Services (GECAS).

As a wholly-owned subsidiary, GECC enters into various operating and financing arrangements with GE. Transactions between related companies are made on an arms-length basis, are eliminated and consist primarily of capital contributions from GE to GECC; GE customer receivables sold to GECC; GECC services for trade receivables management and material procurement; buildings and equipment (including automobiles) leased between GE and GECC; information technology (IT) and other services sold to GECC by GE; aircraft engines manufactured by GE that are installed on aircraft purchased by GECC from third-party producers for lease to others; and various investments, loans and allocations of GE corporate overhead costs.

Beginning January 1, 2011, GE allocates service costs related to its principal pension plans and GE no longer allocates the retiree costs of postretirement healthcare benefits to its segments. This revised allocation methodology better aligns segment operating costs to active employee costs that are managed by the segments. This change did not significantly affect our reported segment results.

We have reclassified certain prior-period amounts to conform to the current-period presentation. Unless otherwise indicated, information in these notes to the condensed, consolidated financial statements relates to continuing operations.

Accounting Changes
 
On July 1, 2011, we adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2011-02, an amendment to Accounting Standards Codification (ASC) 310, Receivables.  ASU 2011-02 provides guidance for determining whether a restructuring of a debt constitutes a troubled debt restructuring (TDR). ASU 2011-02 requires that a restructuring be classified as a TDR when it is both a concession and the debtor is experiencing financial difficulties. The amendment also clarifies the guidance on a creditor’s evaluation of whether it has granted a concession. The amendment applies to restructurings that have occurred subsequent to January 1, 2011. As a result of adopting these amendments on July 1, 2011, we have classified an additional $271 million of financing receivables as TDRs and have recorded an increase of $77 million to our allowance for losses on financing receivables. See Note 12.

Interim Period Presentation
 
The condensed, consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed, consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. It is suggested that these condensed, consolidated financial statements be read in conjunction with the financial statements and notes thereto included in our 2010 consolidated financial statements. We label our quarterly information using a calendar convention, that is, first quarter is labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish interim quarterly closing dates using a fiscal calendar, which requires our businesses to close their books on either a Saturday or Sunday, depending on the business. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar from 1993 through 2013 is available on our website, www.ge.com/secreports.

 
(7)
 

2. ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS
 
Assets and Liabilities of Businesses Held for Sale
 
In the third quarter of 2011, we committed to sell our CLL marine container leasing business, which consists of our controlling interests in the GE SeaCo joint venture along with other owned marine container assets, and our CLL trailer fleet services business in Mexico.

In the second quarter of 2011, we committed to sell our Consumer business banking operations in Latvia.

In 2010, we committed to sell our Consumer businesses in Argentina, Brazil, and Canada, a CLL business in South Korea, and our Interpark business in Real Estate. The Consumer Canada disposition was completed during the first quarter of 2011. The Consumer Brazil and our Interpark business in Real Estate dispositions were completed during the second quarter of 2011 for proceeds of $22 million and $704 million, respectively. The Consumer Argentina disposition was completed during the third quarter of 2011 for proceeds of $41 million.

Summarized financial information for businesses held for sale is shown below.

 
At
 
September 30,
  
December 31,
(In millions)
2011
  
2010
   
           
      
Assets
  
           
      
Cash and equivalents
$
218 
  
$
54 
Financing receivables – net
  
483 
    
1,917 
Property, plant and equipment – net
  
2,054 
    
103 
Goodwill
  
135 
    
– 
Other intangible assets – net
  
37 
    
187 
Other assets
  
30 
    
841 
Other
  
93 
    
25 
Assets of businesses held for sale
$
3,050 
  
$
3,127 
         
           
Liabilities
          
Short-term borrowings
$
474 
  
$
146 
Accounts payable
  
82 
    
46 
Long-term borrowings
  
1,144 
    
228 
Other liabilities
  
113 
    
172 
Liabilities of businesses held for sale
$
1,813 
  
$
592 

Discontinued Operations
 
Discontinued operations primarily comprised BAC Credomatic GECF Inc. (BAC) (our Central American bank and card business), GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd.), our U.S. mortgage business (WMC), our U.S. recreational vehicle and marine equipment financing business (Consumer RV Marine), Consumer Mexico, Consumer Singapore and our Consumer home lending operations in Australia and New Zealand (Australian Home Lending). Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.


 
(8)
 

Summarized financial information for discontinued operations is shown below.

 
Three months ended September 30,
  
Nine months ended September 30,
(In millions)
2011 
  
2010 
  
2011 
  
2010 
                       
Operations
                      
Total revenues
$
12 
  
$
515 
  
$
336 
  
$
1,565 
                       
                       
Earnings (loss) from discontinued operations before income taxes
$
(7)
  
$
46 
  
$
4 
  
$
170 
Benefit (provision) for income taxes
  
21 
    
3 
    
50 
    
(5)
Earnings (loss) from discontinued operations, net of taxes
$
14 
  
$
49 
  
$
54 
  
$
165 
                       
Disposal
                      
Gain (loss) on disposal before income taxes
$
(45)
  
$
(1,100)
  
$
(86)
  
$
(1,666)
Benefit (provision) for income taxes
  
33 
    
– 
    
309 
    
– 
Gain (loss) on disposal, net of taxes
$
(12)
  
$
(1,100)
  
$
223 
  
$
(1,666)
                       
Earnings (loss) from discontinued operations, net of taxes
$
2 
  
$
(1,051)
  
$
277 
  
$
(1,501)
                       

 
At
 
September 30, 
  
December 31, 
(In millions)
2011 
  
2010 
           
Assets
          
Cash and equivalents
$
131 
  
$
 142 
Financing receivables - net
  
98 
    
10,589 
Other assets
  
1 
    
168 
Other
  
1,231 
    
1,476 
Assets of discontinued operations
$
1,461 
  
$
12,375 
           
Liabilities
          
Accounts payable
$
7 
  
$
 110 
Deferred income taxes
  
206 
    
238 
Other
  
1,048 
    
1,833 
Liabilities of discontinued operations
$
1,261 
  
$
2,181 
           

Assets at September 30, 2011 and December 31, 2010, primarily comprised cash, financing receivables and a deferred tax asset for a loss carryforward, which expires principally in 2015 and in part in 2017, related to the sale of our GE Money Japan business.

BAC Credomatic GECF Inc. (BAC)
 
During the fourth quarter of 2010, we classified BAC as discontinued operations and completed the sale of BAC for $1,920 million. Immediately prior to the sale, and in accordance with terms of a previous agreement, we increased our ownership interest in BAC from 75% to 100% for a purchase price of $633 million. As a result of the sale of our interest in BAC, we recognized an after-tax gain of $780 million in 2010.

BAC revenues from discontinued operations were $264 million and $772 million in the three and nine months ended September 30, 2010, respectively. In total, BAC earnings from discontinued operations, net of taxes, were $19 million and $56 million in the three and nine months ended September 30, 2010, respectively.

GE Money Japan
 
During the third quarter of 2007, we committed to a plan to sell our Japanese personal loan business, Lake, upon determining that, despite restructuring, Japanese regulatory limits for interest charges on unsecured personal loans did not permit us to earn an acceptable return. During the third quarter of 2008, we completed the sale of GE Money Japan, which included Lake, along with our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd. In connection with the sale, we reduced the proceeds from the sale for estimated interest refund claims in excess of the statutory interest rate. Proceeds from the sale were to be increased or decreased based on the actual claims experienced in accordance with loss-sharing terms specified in the sale agreement, with all claims in excess of 258 billion Japanese Yen (approximately $3,000 million) remaining our responsibility. The underlying portfolio to which this obligation relates is in runoff and interest rates were capped for all designated accounts by mid-2009. In the third quarter of 2010, we began making reimbursements under this arrangement.
 
 
 
(9)
 
 
Our overall claims experience developed unfavorably through 2010. We believe that the level of excess interest refund claims has been impacted by the challenging global economic conditions, in addition to Japanese legislative and regulatory changes. In September 2010, a large independent personal loan company in Japan filed for bankruptcy, which precipitated a significant amount of publicity surrounding excess interest refund claims in the Japanese marketplace, along with substantial legal advertising. We observed an increase in claims during September 2010 and higher average daily claims in the fourth quarter of 2010 and the first two months of 2011. Since February and through August 2011, we have experienced substantial declines in the rate of incoming claims, though claims severity has been higher than expected and we experienced an increase in claims in September 2011. As of September 30, 2011, our reserve for reimbursement of claims in excess of the statutory interest rate was $739 million.

The amount of these reserves is based on analyses of recent and historical claims experience, pending and estimated future excess interest refund requests, the estimated percentage of customers who present valid requests, and our estimated payments related to those requests. Our estimated liability for excess interest refund claims at September 30, 2011 assumes the pace of incoming claims will continue to decelerate, although at a lower pace than recently experienced, average exposure per claim remains consistent with historical experience, and we continue to see the impact of our loss mitigation efforts. Estimating the pace of decline in incoming claims can have a significant effect on the total amount of our liability. Holding all other assumptions constant, if claims declined at a rate of one percent higher or lower than our assumed long-term average, our liability estimate would change by approximately $250 million.

Uncertainties around the impact of laws and regulations, challenging economic conditions, the runoff status of the underlying book of business, the financial status of other personal lending companies in Japan and the effects of our mitigation efforts make it difficult to develop a meaningful estimate of the aggregate possible claims exposure. Recent trends, including the effect of governmental actions, market activity regarding other personal loan companies, higher claims severity and consumer activity, may continue to have an adverse effect on claims development.

GE Money Japan earnings (loss) from discontinued operations, net of taxes, were $2 million and $(1,101) million in the three months ended September 30, 2011 and 2010, respectively, and $2 million and $(1,673) million in the nine months ended September 30, 2011 and 2010, respectively.

WMC
 
During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In connection with the sale, WMC retained certain obligations related to loans sold prior to the disposal of the business, including WMC’s contractual obligations to repurchase previously sold loans as to which there was an early payment default or with respect to which certain contractual representations and warranties were not met. All claims received for early payment default have either been resolved or are no longer being pursued.

Pending claims for unmet representations and warranties were $783 million at December 31, 2009, $347 million at December 31, 2010 and $568 million at September 30, 2011. Reserves related to these contractual representations and warranties were $122 million and $101 million at September 30, 2011 and December 31, 2010, respectively. We recorded an adjustment to our reserve of $21 million in the third quarter of 2011 to reflect the higher amount of pending claims and an increase in our reserve for unidentified claims. The amount of these reserves is based upon pending and estimated future loan repurchase requests, the estimated percentage of loans validly tendered for repurchase, and our estimated losses on loans repurchased. A ten percent adverse change in these key assumptions would result in an increase to our reserves of approximately $35 million. Based on our historical experience, we estimate that a small percentage of the total loans WMC originated and sold will be tendered for repurchase, and of those tendered, only a limited amount will qualify as “validly tendered,” meaning the loans sold did not satisfy specified contractual obligations.  Uncertainties surrounding economic conditions, the ability and propensity of mortgage holders to present valid claims and governmental actions make it difficult to develop a meaningful estimate of aggregate possible claim exposure. Actual losses could exceed the reserve amount if actual claim rates, investigative or litigation activity, valid tenders or losses WMC incurs on repurchased loans are higher than we have historically observed with respect to WMC.
 
 
 
(10)
 

 
WMC revenues (loss) from discontinued operations were $(21) million and $(1) million in the three months ended September 30, 2011 and 2010, respectively, and $(21) million and $(4) million in the nine months ended September 30, 2011 and 2010, respectively. In total, WMC’s earnings (loss) from discontinued operations, net of taxes, were $(15) million and $(2) million in the three months ended September 30, 2011 and 2010, respectively, and $(18) million and $(5) million in the nine months ended September 30, 2011 and 2010, respectively.

Other
 
In the second quarter of 2011, we entered into an agreement to sell our Australian Home Lending operations and classified it as discontinued operations. As a result, we recognized an after-tax loss of $148 million in 2011. We completed the sale in the third quarter of 2011 for proceeds of approximately $4,577 million. Australian Home Lending revenues from discontinued operations were $33 million and $118 million in the three months ended September 30, 2011 and 2010, respectively, and $248 million and $386 million in the nine months ended September 30, 2011 and 2010, respectively. Australian Home Lending earnings (loss) from discontinued operations, net of taxes, were $15 million and $14 million in the three months ended September 30, 2011 and 2010, respectively, and $(65) million and $51 million in the nine months ended September 30, 2011 and 2010, respectively.

In the first quarter of 2011, we entered into an agreement to sell our Consumer Singapore business for $692 million. The sale was completed in the second quarter of 2011 and resulted in the recognition of a gain on disposal, net of taxes, of $319 million. Consumer Singapore revenues from discontinued operations were $(1) million and $27 million in the three months ended September 30, 2011 and 2010, respectively, and $30 million and $79 million in the nine months ended September 30, 2011 and 2010, respectively. Consumer Singapore earnings from discontinued operations, net of taxes, were $7 million and $11 million in the three months ended September 30, 2011 and 2010, respectively, and $333 million and $27 million in the nine months ended September 30, 2011 and 2010, respectively.

In the fourth quarter of 2010, we entered into agreements to sell our Consumer RV Marine portfolio and Consumer Mexico business. The Consumer RV Marine and Consumer Mexico dispositions were completed during the first quarter and the second quarter of 2011, respectively, for proceeds of $2,365 million and $1,943 million, respectively. Consumer RV Marine revenues from discontinued operations were $0 million and $52 million in the three months ended September 30, 2011 and 2010, respectively, and $11 million and $160 million in the nine months ended September 30, 2011 and 2010, respectively. Consumer RV Marine earnings (loss) from discontinued operations, net of taxes, were $(1) million and $(8) million in the three months ended September 30, 2011 and 2010, respectively, and $1 million and $(9) million in the nine months ended September 30, 2011 and 2010, respectively. Consumer Mexico revenues from discontinued operations were $1 million and $55 million in the three months ended September 30, 2011 and 2010, respectively, and $68 million and $172 million in the nine months ended September 30, 2011 and 2010, respectively. Consumer Mexico earnings from discontinued operations, net of taxes, were $1 million and $18 million in the three months ended September 30, 2011 and 2010, respectively, and $34 million and $53 million in the nine months ended September 30, 2011 and 2010, respectively.

 
(11)
 

3. INVESTMENT SECURITIES
 
Substantially all of our investment securities are classified as available-for-sale. These comprise investment grade debt securities, including investment securities supporting obligations to holders of guaranteed investment contracts (GICs) in Trinity, and investment securities at our treasury operations. We do not have any securities classified as held to maturity.

 
At
 
September 30, 2011
  
December 31, 2010
     
Gross
  
Gross
          
Gross
  
Gross
    
 
Amortized
  
unrealized
  
unrealized
  
Estimated
  
Amortized
  
unrealized
  
unrealized
  
Estimated
(In millions)
cost
  
gains
  
losses
  
fair value
  
cost
  
gains
  
losses
  
fair value
                                               
Debt
                                              
   U.S. corporate
$
 3,696 
  
$
 59 
  
$
 (168)
  
$
 3,587 
  
$
 3,490 
  
$
169 
  
$
 (14)
  
$
 3,645 
   State and municipal
  
 654 
    
 17 
    
 (141)
    
 530 
    
 918 
    
4 
    
 (232)
    
 690 
   Residential mortgage-backed(a)
  
 1,790 
    
 29 
    
 (281)
    
 1,538 
    
 2,099 
    
14 
    
 (355)
    
 1,758 
   Commercial mortgage-backed
  
 1,480 
    
 25 
    
 (199)
    
 1,306 
    
 1,619 
    
 - 
    
 (183)
    
 1,436 
   Asset-backed
  
 3,925 
    
 2 
    
 (215)
    
 3,712 
    
 3,242 
    
 7 
    
 (190)
    
 3,059 
   Corporate – non-U.S.
  
 1,395 
    
 34 
    
 (124)
    
 1,305 
    
 1,478 
    
 39 
    
 (111)
    
 1,406 
   Government – non-U.S.
  
 1,787 
    
 4 
    
 (133)
    
 1,658 
    
 1,804 
    
 8 
    
 (58)
    
 1,754 
   U.S. government and
                                              
       federal agency
  
 2,523 
    
 13 
    
 –
    
 2,536 
    
 2,663 
    
 3 
    
 (5)
    
 2,661 
Retained interests
  
 29 
    
 14 
    
 (6)
    
 37 
    
 55 
    
 10 
    
 (26)
    
 39 
Equity
                                              
   Available-for-sale
  
 720 
    
 123 
    
 (77)
    
 766 
    
 902 
    
 194 
    
 (9)
    
 1,087 
   Trading
  
 387 
    
 –
    
 –
    
 387 
    
 417 
    
–
    
 –
    
 417 
Total
$
 18,386 
  
$
 320 
  
$
 (1,344)
  
$
 17,362 
  
$
 18,687 
  
$
448 
  
$
 (1,183)
  
$
 17,952 
                                               
                                               
(a)  
Substantially collateralized by U.S. mortgages. Of our total residential mortgage-backed securities (RMBS) portfolio at September 30, 2011, $770 million relates to securities issued by government sponsored entities and $768 million relates to securities of private label issuers. Securities issued by private label issuers are collateralized primarily by pools of individual direct mortgage loans of individual financial institutions.
 
 
 

 
(12)
 

The following tables present the estimated fair values and gross unrealized losses of our available-for-sale investment securities.

 
In loss position for
  
 
Less than 12 months
  
12 months or more
  
     
Gross
      
Gross
  
 
Estimated
  
unrealized
  
Estimated
  
unrealized
  
(In millions)
fair value
  
losses
(a)
fair value
  
losses
(a)
                         
September 30, 2011
                        
Debt
                        
   U.S. corporate
$
 584 
  
$
 (69)
  
$
 451 
  
$
 (99)
  
   State and municipal
  
 56 
    
 (28)
    
 266 
    
 (113)
  
   Residential mortgage-backed
  
 134 
    
 (1)
    
 892 
    
 (280)
  
   Commercial mortgage-backed
  
 –
    
 –
    
 1,304 
    
 (199)
  
   Asset-backed
  
 2,836 
    
 (48)
    
 850 
    
 (167)
  
   Corporate – non-U.S.
  
 38 
    
 (2)
    
 723 
    
 (122)
  
   Government – non-U.S.
  
 578 
    
 (25)
    
 160 
    
 (108)
  
   U.S. government and federal agency
  
 –
    
 –
    
 2 
    
 –
  
Retained interests
  
 –
    
 –
    
 3 
    
 (6)
  
Equity
  
 116 
    
 (77)
    
 –
    
 –
  
Total
$
 4,342 
  
$
 (250)
  
$
 4,651 
  
$
 (1,094)
  
                         
December 31, 2010
                        
Debt
                        
   U.S. corporate
$
 357 
  
$
 (5)
  
$
 337 
  
$
 (9)
  
   State and municipal
  
 137 
    
 (16)
    
 443 
    
 (216)
  
   Residential mortgage-backed
  
 166 
    
 (3)
    
 920 
    
 (352)
  
   Commercial mortgage-backed
  
 779 
    
 (103)
    
 652 
    
 (80)
  
   Asset-backed
  
 111 
    
 (5)
    
 902 
    
 (185)
  
   Corporate – non-U.S.
  
 123 
    
 (2)
    
 673 
    
 (109)
  
   Government – non-U.S.
  
 642 
    
 (6)
    
 105 
    
 (52)
  
   U.S. government and federal agency
  
 1,613 
    
 (5)
    
 –
    
 –
  
Retained interests
  
 –
    
 –
    
 34 
    
 (26)
  
Equity
  
 46 
    
 (9)
    
 –
    
 –
  
Total
$
 3,974 
  
$
 (154)
  
$
 4,066 
  
$
 (1,029)
  
                         
                         
(a)  
At September 30, 2011, other-than-temporary impairments previously recognized through other comprehensive income (OCI) on securities still held amounted to $(467) million, of which$ (378) million related to RMBS. Gross unrealized losses related to those securities at September 30, 2011 amounted to $(604) million, of which $(495) million related to RMBS.
 
 
We regularly review investment securities for impairment using both qualitative and quantitative criteria. We presently do not intend to sell the vast majority of our debt securities and believe that it is not more likely than not that we will be required to sell these securities that are in an unrealized loss position before recovery of our amortized cost. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during the three and nine months ended September 30, 2011 have not changed from those described in our 2010 consolidated financial statements. See Note 3 in our 2010 consolidated financial statements for additional information regarding these methodologies and inputs.

During the third quarter of 2011, we recorded other-than-temporary impairments of $83 million, of which $64 million was recorded through earnings ($6 million relates to equity securities) and $19 million was recorded in accumulated other comprehensive income (AOCI). At July 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $392 million. During the third quarter, we recognized first time impairments of $36 million and incremental charges on previously impaired securities of $20 million. These amounts included $1 million related to securities that were subsequently sold.

During the third quarter of 2010, we recorded other-than-temporary impairments of $36 million, of which $30 million was recorded through earnings ($23 million relates to equity securities) and $6 million was recorded in AOCI. At July 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $249 million. During the third quarter of 2010, we recognized first time impairments of $2 million which included $1 million related to securities that were subsequently sold.
 
 
 
(13)
 

 
During the nine months ended September 30, 2011, we recorded other-than-temporary impairments of $260 million, of which $179 million was recorded through earnings ($16 million relates to equity securities) and $81 million was recorded in AOCI. At January 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $316 million. During the nine months ended September 30, 2011, we recognized first time impairments of $55 million and incremental charges on previously impaired securities of $99 million. These amounts included $22 million related to securities that were subsequently sold.

During the nine months ended September 30, 2010, we recorded other-than-temporary impairments of $283 million, of which $156 million was recorded through earnings ($24 million relates to equity securities) and $127 million was recorded in AOCI. At January 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $140 million. During the nine months ended September 30, 2010, we recognized first time impairments of $92 million and incremental charges on previously impaired securities of $34 million. These amounts included $15 million related to securities that were subsequently sold.

Contractual Maturities of our Investment in Available-for-Sale Debt Securities (Excluding Mortgage-Backed and Asset-Backed Securities)
 

 
Amortized
  
Estimated
(In millions)
cost
  
fair value
           
Due in
          
    2011
$
 2,663 
  
$
 2,665 
    2012-2015
  
 4,712 
    
 4,720 
    2016-2020
  
 1,734 
    
 1,522 
    2021 and later
  
 932 
    
 695 

We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.

Supplemental information about gross realized gains and losses on available-for-sale investment securities follows.

 
 Three months ended September 30,
  
Nine months ended September 30,
(In millions)
2011 
  
2010 
  
2011 
  
2010 
                       
Gains
$
 25 
  
$
 29 
  
$
 180 
  
$
 135 
Losses, including impairments
  
 (64)
    
 (32)
    
 (188)
    
 (161)
   Net
$
 (39)
  
$
 (3)
  
$
 (8)
  
$
 (26)
                       

Although we generally do not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing our investment securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements and the funding of claims and obligations to policyholders. In some of our bank subsidiaries, we maintain a certain level of purchases and sales volume principally of non-U.S. government debt securities. In these situations, fair value approximates carrying value for these securities.

Proceeds from investment securities sales and early redemptions by the issuer totaled $3,369 million and $4,520 million in the three months ended September 30, 2011 and 2010, respectively, and $13,131 million and $11,449 million in the nine months ended September 30, 2011 and 2010, respectively, principally from the sales of short-term securities in our bank subsidiaries and treasury operations.

We recognized net pre-tax gains (losses) on trading securities of $(29) million and $33 million in the three months ended September 30, 2011 and 2010, respectively, and $26 million and $52 million in the nine months ended September 30, 2011 and 2010, respectively.

 
(14)
 

4. FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES
 
Financing receivables – net, consisted of the following.
 

             
At
             
September 30, 
  
December 31, 
(In millions)
            
2011  
  
2010  
                       
Loans, net of deferred income(a)
            
$
260,552 
  
$
275,877 
Investment in financing leases, net of deferred income
              
39,854 
    
44,390 
               
300,406 
    
320,267 
Less allowance for losses
              
(6,669)
    
(8,033)
Financing receivables – net(b)
            
$
293,737 
  
$
312,234 
                       
                       
(a)  
Deferred income was $2,313 million and $2,351 million at September 30, 2011 and December 31, 2010, respectively.
 
(b)  
Financing receivables at September 30, 2011 and December 31, 2010 included $1,221 million and $1,503 million, respectively, relating to loans that had been acquired in a transfer but have been subject to credit deterioration since origination per Accounting Standards Codification (ASC) 310, Receivables.
 
 
The following tables provide additional information about our financing receivables and related activity in the allowance for losses for our Commercial, Real Estate and Consumer portfolios.
 

 
(15)
 

Financing Receivables – net
 
The following table displays our financing receivables balances.
 

             
At
             
September 30,
  
December 31,
(In millions)
            
2011 
  
2010 
                       
Commercial
                      
CLL
                      
Americas(a)
            
$
81,072 
  
$
88,558 
Europe
              
37,130 
    
37,498 
Asia
              
11,914 
    
11,943 
Other(a)
              
469 
    
664 
Total CLL
              
130,585 
    
138,663 
                       
Energy Financial Services
              
5,977 
    
7,011 
                       
GECAS
              
11,841 
    
12,615 
                       
Other
              
1,388 
    
1,788 
Total Commercial financing receivables
              
149,791 
    
160,077 
                       
Real Estate
                      
Debt
              
25,748 
    
30,249 
Business Properties
              
8,630 
    
9,962 
Total Real Estate financing receivables
              
34,378 
    
40,211 
                       
Consumer
                      
Non-U.S. residential mortgages
              
38,708 
    
40,011 
Non-U.S. installment and revolving credit
              
19,801 
    
20,132 
U.S. installment and revolving credit
              
43,249 
    
43,974 
Non-U.S. auto
              
6,462 
    
7,558 
Other
              
8,017 
    
8,304 
Total Consumer financing receivables
              
116,237 
    
119,979 
                       
Total financing receivables
              
300,406 
    
320,267 
                       
Less allowance for losses
              
(6,669)
    
(8,033)
Total financing receivables – net
            
$
293,737 
  
$
312,234 
                       
                       
(a)  
During the third quarter of 2011, we transferred our Railcar lending and leasing portfolio from CLL Other to CLL Americas. Prior-period amounts were reclassified to conform to the current-period presentation.
 
 

 
(16)
 

Allowance for Losses on Financing Receivables
 
The following tables provide a roll-forward of our allowance for losses on financing receivables.
 

 
Balance at
  
Provision
              
Balance at
 
January 1,
  
charged to
      
Gross
      
September 30,
(In millions)
2011 
  
operations
(a)
Other
(b)
write-offs
(c)
Recoveries
(c)
2011 
                                   
Commercial
                                  
CLL
                                  
Americas
$
1,288 
  
$
250 
  
$
(79)
  
$
(544)
  
$
80 
  
$
995 
Europe
  
429 
    
126 
    
17 
    
(218)
    
49 
    
403 
Asia
  
222 
    
81 
    
16 
    
(194)
    
25 
    
150 
Other
  
6 
    
3 
    
(4)
    
– 
    
– 
    
5 
Total CLL
  
1,945 
    
460 
    
(50)
    
(956)
    
154 
    
1,553 
                                   
                                   
Energy Financial Services
  
22 
    
10 
    
– 
    
(4)
    
8 
    
36 
                                   
GECAS
  
20 
    
(4)
    
– 
    
(2)
    
– 
    
14 
                                   
Other
  
58 
    
13 
    
– 
    
(31)
    
3 
    
43 
Total Commercial
  
2,045 
    
479 
    
(50)
    
(993)
    
165 
    
1,646 
                                   
Real Estate
                                  
Debt
  
1,292 
    
155 
    
13 
    
(494)
    
12 
    
978 
Business Properties
  
196 
    
70 
    
– 
    
(107)
    
4 
    
163 
Total Real Estate
  
1,488 
    
225 
    
13 
    
(601)
    
16 
    
1,141 
                                   
Consumer
                                  
Non-U.S. residential
                                  
   mortgages
  
803 
    
151 
    
11 
    
(229)
    
43 
    
779 
Non-U.S. installment
                                  
   and revolving credit
  
937 
    
413 
    
16 
    
(980)
    
430 
    
816 
U.S. installment and
                                  
   revolving credit
  
2,333 
    
1,587 
    
(1)
    
(2,365)
    
399 
    
1,953 
Non-U.S. auto
  
168 
    
26 
    
7 
    
(176)
    
98 
    
123 
Other
  
259 
    
107 
    
(6)
    
(215)
    
66 
    
211 
Total Consumer
  
4,500 
    
2,284 
    
27 
    
(3,965)
    
1,036 
    
3,882 
Total
$
8,033 
  
$
2,988 
  
$
(10)
  
$
(5,559)
  
$
1,217 
  
$
6,669 
                                   
                                   
(a)  
Included a provision of $77 million at Consumer related to the July 1, 2011 adoption of ASU 2011-02. See Note 12.
 
(b)  
Other primarily included transfers to held for sale and the effects of currency exchange.
 
(c)  
Net write-offs (write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables.
 
 
 
(17)
 
 
 
 
Balance at
  
Adoption of
  
Balance at
  
Provision
              
Balance at
 
December 31,
  
ASU 2009
  
January 1,
  
charged to
      
Gross
      
September 30,
(In millions)
2009 
  
16 & 17(a)
  
2010 
  
operations
  
Other(b)
  
write-offs(c) 
  
Recoveries(c)
  
2010 
                                               
Commercial
                                              
CLL
                                              
Americas
$
1,180 
  
$
66 
  
$
1,246 
  
$
823 
  
$
(20)
  
$
(787)
  
$
95 
  
$
1,357 
Europe
  
575 
    
– 
    
575 
    
190 
    
(47)
    
(348)
    
41 
    
411 
Asia
  
244 
    
(10)
    
234 
    
131 
    
(10)
    
(118)
    
15 
    
252 
Other
  
10 
    
– 
    
10 
    
(3)
    
– 
    
– 
    
– 
    
7 
Total CLL
  
2,009 
    
56 
    
2,065 
    
1,141 
    
(77)
    
(1,253)
    
151 
    
2,027 
                                               
                                               
Energy Financial Services
  
28 
    
– 
    
28 
    
56 
    
1 
    
– 
    
– 
    
85 
                                               
GECAS
  
104 
    
– 
    
104 
    
17 
    
– 
    
(96)
    
– 
    
25 
                                               
Other
  
34 
    
– 
    
34 
    
23 
    
(2)
    
(3)
    
1 
    
53 
Total Commercial
  
2,175 
    
56 
    
2,231 
    
1,237 
    
(78)
    
(1,352)
    
152 
    
2,190 
                                               
Real Estate
                                              
Debt
  
1,358 
    
(3)
    
1,355 
    
794 
    
5 
    
(505)
    
– 
    
1,649 
Business Properties
  
136 
    
45 
    
181 
    
124 
    
(7)
    
(92)
    
2 
    
208 
Total Real Estate
  
1,494 
    
42 
    
1,536 
    
918 
    
(2)
    
(597)
    
2 
    
1,857 
                                               
Consumer
                                              
Non-U.S. residential
                                              
   mortgages
  
892 
    
– 
    
892 
    
224 
    
(57)
    
(259)
    
67 
    
867 
Non-U.S. installment
                                              
   and revolving credit
  
1,106 
    
– 
    
1,106 
    
810 
    
(46)
    
(1,318)
    
422 
    
974 
U.S. installment and
                                              
   revolving credit
  
1,551 
    
1,602 
    
3,153 
    
2,342 
    
(3)
    
(3,285)
    
344 
    
2,551 
Non-U.S. auto
  
292 
    
– 
    
292 
    
83 
    
(36)
    
(269)
    
128 
    
198 
Other
  
292 
    
– 
    
292 
    
210 
    
(24)
    
(298)
    
64 
    
244 
Total Consumer
  
4,133 
    
1,602 
    
5,735 
    
3,669 
    
(166)
    
(5,429)
    
1,025 
    
4,834 
Total
$
7,802 
  
$
1,700 
  
$
9,502 
  
$
5,824 
  
$
(246)
  
$
(7,378)
  
$
1,179 
  
$
8,881 
                                               
                                               
(a)  
Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010.
 
(b)  
Other primarily included the effects of currency exchange.
 
(c)  
Net write-offs (write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables.
 

See Note 12 for supplemental information about the credit quality of financing receivables and allowance for losses on financing receivables.

 
(18)
 

5. GOODWILL AND OTHER INTANGIBLE ASSETS
 
Goodwill and other intangible assets – net, consisted of the following.
 

 
At
 
September 30,
  
December 31,
(In millions)
2011 
  
2010 
           
Goodwill
$
 27,726 
  
$
 27,508 
           
Other intangible assets
          
    Intangible assets subject to amortization
$
 1,702 
  
$
 1,874 
           

Changes in goodwill balances follow.
 

         
Dispositions,
      
 
Balance at
      
currency
  
Balance at
  
 
January 1,
      
exchange
  
September 30,
  
(In millions)
2011 
  
Acquisitions
  
and other
  
2011 
  
                         
CLL
$
 13,893 
  
$
 8 
  
$
 78 
  
$
 13,979 
  
Consumer
  
 10,817 
    
 –
    
 163 
    
 10,980 
  
Real Estate
  
 1,089 
    
 –
    
 (31)
    
 1,058 
  
Energy Financial Services
  
 1,562 
    
 –
    
 –
    
 1,562 
  
GECAS
  
 147 
    
 –
    
 –
    
 147 
  
Total
$
 27,508 
  
$
 8 
  
$
 210 
  
$
 27,726 
  
                         

Goodwill balances increased $218 million during the nine months ended September 30, 2011, primarily as a result of the weaker U.S. dollar ($399 million). Our reporting units and related goodwill balances are CLL ($13,979 million), Consumer ($10,980 million), Real Estate ($1,058 million), Energy Financial Services ($1,562 million) and GECAS ($147 million) at September 30, 2011.

We test goodwill for impairment annually and more frequently if circumstances warrant. We determine fair values for each of the reporting units using an income approach. When available and appropriate, we use comparative market multiples to corroborate discounted cash flow results. For purposes of the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in our forecasts. We derive our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Discount rates used in our reporting unit valuations ranged from 11.0% to 13.75%. Valuations using the market approach reflect prices and other relevant observable information generated by market transactions involving comparable businesses.
 
 
 
(19)
 

 
Compared to the market approach, the income approach more closely aligns each reporting unit valuation to our business profile, including geographic markets served and product offerings. Required rates of return, along with uncertainty inherent in the forecasts of future cash flows, are reflected in the selection of the discount rate. Equally important, under this approach, reasonably likely scenarios and associated sensitivities can be developed for alternative future states that may not be reflected in an observable market price. A market approach allows for comparison to actual market transactions and multiples. It can be somewhat more limited in its application because the population of potential comparables is often limited to publicly-traded companies where the characteristics of the comparative business and ours can be significantly different, market data is usually not available for divisions within larger conglomerates or non-public subsidiaries that could otherwise qualify as comparable, and the specific circumstances surrounding a market transaction (e.g., synergies between the parties, terms and conditions of the transaction, etc.) may be different or irrelevant with respect to our business. It can also be difficult, under certain market conditions, to identify orderly transactions between market participants in similar businesses. We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation and weight the methodologies appropriately.

We performed our annual impairment test of goodwill for all of our reporting units in the third quarter using data as of July 1, 2011. The impairment test consists of two steps: in step one, the carrying value of the reporting unit is compared with its fair value; in step two, which is applied when the carrying value is more than its fair value, the amount of goodwill impairment, if any, is derived by deducting the fair value of the reporting unit’s assets and liabilities from the fair value of its equity, and comparing that amount with the carrying amount of goodwill. In performing the valuations, we used cash flows that reflected management’s forecasts and discount rates that included risk adjustments consistent with the current market conditions. Based on the results of our step one testing, the fair values of each of the CLL, Consumer, Energy Financial Services and GECAS reporting units exceeded their carrying values; therefore, the second step of the impairment test was not required to be performed and no goodwill impairment was recognized.

Our Real Estate reporting unit had a goodwill balance of $1,087 million at June 30, 2011. As of July 1, 2011, the carrying amount exceeded the estimated fair value of our Real Estate reporting unit by approximately $0.7 billion. The estimated fair value of the Real Estate reporting unit is based on a number of assumptions about future business performance and investment, including loss estimates for the existing finance receivable and investment portfolio, new debt origination volume and margins, and anticipated stabilization of the real estate market allowing for sales of real estate investments at normalized margins. Our assumed discount rate was 11.25% and was derived by applying a capital asset pricing model and corroborated using equity analyst research reports and implied cost of equity based on forecasted price to earnings per share multiples for similar companies. Given the volatility and uncertainty in the current commercial real estate environment, there is uncertainty about a number of assumptions upon which the estimated fair value is based. Different loss estimates for the existing portfolio, changes in the new debt origination volume and margin assumptions, changes in the expected pace of the commercial real estate market recovery, or changes in the equity return expectation of market participants may result in changes in the estimated fair value of the Real Estate reporting unit.

Based on the results of the step one testing, we performed the second step of the impairment test described above as of July 1, 2011. Based on the results of the second step analysis for the Real Estate reporting unit, the estimated implied fair value of goodwill exceeded the carrying value of goodwill by approximately $3.9 billion. Accordingly, no goodwill impairment was required. In the second step, unrealized losses in an entity’s assets have the effect of increasing the estimated implied fair value of goodwill. The results of the second step analysis were attributable to several factors. The primary driver was the excess of the carrying value over the estimated fair value of our Real Estate Equity Investments, which approximated $4.1 billion at that time. Other drivers for the favorable outcome include the unrealized losses in the Real Estate finance receivable portfolio and the fair value premium on the Real Estate reporting unit allocated debt. The results of the second step analysis are highly sensitive to these measurements, as well as the key assumptions used in determining the estimated fair value of the Real Estate reporting unit.

Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. If current conditions persist longer or deteriorate further than expected, it is reasonably possible that the judgments and estimates described above could change in future periods.


 
(20)
 

Intangible Assets Subject to Amortization
 

 
At
 
September 30, 2011
  
December 31, 2010
 
Gross
          
Gross
        
 
carrying
  
Accumulated
      
carrying
  
Accumulated
    
(In millions)
amount
  
amortization
  
Net
  
amount
  
amortization
  
Net
                                   
                                   
Customer-related
$
 1,239 
  
$
 (710)
  
$
 529 
  
$
 1,112 
  
$
 (588)
  
$
 524 
Patents, licenses and trademarks
  
 276 
    
 (225)
    
 51 
    
 599 
    
 (532)
    
 67 
Capitalized software
  
 2,150 
    
 (1,650)
    
 500 
    
 2,016 
    
 (1,522)
    
 494 
Lease valuations
  
 1,565 
    
 (969)
    
 596 
    
 1,646 
    
 (917)
    
 729 
All other
  
 288 
    
 (262)
    
 26 
    
 326 
    
 (266)
    
 60 
Total
$
 5,518 
  
$
 (3,816)
  
$
 1,702 
  
$
 5,699 
  
$
 (3,825)
  
$
 1,874 

Amortization related to intangible assets subject to amortization was $139 million and $152 million in the three months ended September 30, 2011 and 2010, respectively, and $410 million and $476 million in the nine months ended September 30, 2011 and 2010, respectively.
 

 
(21)
 

6. BORROWINGS AND BANK DEPOSITS
 
Borrowings are summarized in the following table.

 
At
(In millions)
September 30,
  
December 31,
 
2011 
  
2010 
Short-term borrowings
          
Commercial paper
          
   U.S.
$
25,659 
  
$
27,398 
   Non-U.S.
  
9,922 
    
9,497 
Current portion of long-term borrowings(a)(b)(c)(e)
  
76,423 
    
65,610 
GE Interest Plus notes(d)
  
8,533 
    
9,058 
Other(c)
  
1,196 
    
2,083 
Total short-term borrowings
$
121,733 
  
$
113,646 
           
Long-term borrowings
          
Senior unsecured notes(a)(b)
$
234,968 
  
$
263,043 
Subordinated notes(e)
  
4,569 
    
2,276 
Subordinated debentures(f)(g)
  
7,430 
    
7,298 
Other(c)(h)
  
12,365 
    
11,729 
Total long-term borrowings
$
259,332 
  
$
284,346 
           
Non-recourse borrowings of consolidated securitization entities(i)
$
29,022 
  
$
30,018 
           
Bank deposits(j)
$
41,515 
  
$
37,298 
           
Total borrowings and bank deposits
$
451,602 
  
$
465,308 
           
           
(a)  
GECC had issued and outstanding $45,045 million and $53,495 million of senior, unsecured debt that was guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program at September 30, 2011 and December 31, 2010, respectively. Of the above amounts, $32,495 million and $18,455 million is included in current portion of long-term borrowings at September 30, 2011 and December 31, 2010, respectively.
 
(b)  
Included in total long-term borrowings were $2,047 million and $2,395 million of obligations to holders of guaranteed investment contracts at September 30, 2011 and December 31, 2010, respectively. If the long-term credit rating of GECC were to fall below AA-/Aa3 or its short-term credit rating were to fall below A-1+/P-1, GECC could be required to provide up to $1,916 million as of September 30, 2011, to repay holders of GICs.
 
(c)  
Included $9,392 million and $11,117 million of funding secured by real estate, aircraft and other collateral at September 30, 2011 and December 31, 2010, respectively, of which $3,475 million and $4,653 million is non-recourse to GECC at September 30, 2011 and December 31, 2010, respectively.
 
(d)  
Entirely variable denomination floating rate demand notes.
 
(e)  
Included $117 million of subordinated notes guaranteed by GE included in current portion of long-term borrowings at September 30, 2011 and in long-term borrowings at December 31, 2010.
 
(f)  
Subordinated debentures receive rating agency equity credit and were hedged at issuance to the U.S. dollar equivalent of $7,725 million.
 
(g)  
Includes $2,981 million of subordinated debentures, which constitute the sole assets of wholly-owned trusts who have issued trust preferred securities. Obligations associated with these trusts are unconditionally guaranteed by GECC.
 
(h)  
Included $2,066 million and $1,984 million of covered bonds at September 30, 2011 and December 31, 2010, respectively. If the short-term credit rating of GECC were reduced below A-1/P-1, GECC would be required to partially cash collateralize these bonds in an amount up to $790 million at September 30, 2011.
 
(i)  
Included at September 30, 2011 and December 31, 2010, were $11,670 million and $10,499 million of current portion of long-term borrowings, respectively, and $17,352 million and $19,519 million of long-term borrowings, respectively. See Note 13.
 
(j)  
Included $18,786 million and $18,781 million of deposits in non-U.S. banks at September 30, 2011 and December 31, 2010, respectively, and $14,755 million and $11,606 million of certificates of deposits with maturities greater than one year at September 30, 2011 and December 31, 2010, respectively.
 
 

 
(22)
 

7. INCOME TAXES
 
The balance of “unrecognized tax benefits,” the amount of related interest and penalties we have provided and what we believe to be the range of reasonably possible changes in the next 12 months were:
 

 
At
 
September 30,
  
December 31,
(In millions)
2011 
  
2010 
           
Unrecognized tax benefits
$
2,991 
  
$
2,949 
      Portion that, if recognized, would reduce tax expense and effective tax rate(a)
  
1,436 
    
1,330 
Accrued interest on unrecognized tax benefits
  
561 
    
577 
Accrued penalties on unrecognized tax benefits
  
66 
    
73 
Reasonably possible reduction to the balance of unrecognized
          
   tax benefits in succeeding 12 months
  
0-1,300
    
0-1,200
      Portion that, if recognized, would reduce tax expense and effective tax rate(a)
  
0-250
    
0-250
           
           
(a)  
Some portion of such reduction may be reported as discontinued operations.
 
 
The IRS is currently auditing the GE consolidated income tax returns for 2006-2009, a substantial portion of which include our activities. In addition, certain other U.S. tax deficiency issues and refund claims for previous years were unresolved. It is reasonably possible that the 2006–2007 U.S. audit cycle will be completed during the next 12 months, which could result in a decrease in our balance of “unrecognized tax benefits” – that is, the aggregate tax effect of differences between tax return positions and the benefits recognized in our financial statements. We believe that there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties.

GE and GECC file a consolidated U.S. federal income tax return. This enables GE to use GECC tax deductions and credits to reduce the tax that otherwise would have been payable by GE. The GECC effective tax rate for each period reflects the benefit of these tax reductions in the consolidated return. GE makes cash payments to GECC for these tax reductions at the time GE’s tax payments are due. The effect of GECC on the amount of the consolidated tax liability from the formation of the GE NBC Universal joint venture will be settled in cash when it otherwise would have reduced the liability of the group absent the tax on formation.

 
(23)
 

8. SHAREOWNER’S EQUITY
 
A summary of increases (decreases) in GECC shareowner’s equity that did not result directly from transactions with the shareowner, net of income taxes, follows.

 
 Three months ended September 30,
  
Nine months ended September 30,
(In millions)
2011 
  
2010 
  
2011 
  
2010 
                       
Net earnings attributable to GECC
$
1,469 
  
$
(233)
  
$
5,204 
  
$
630 
Investment securities – net
  
(300)
    
163 
    
(339)
    
137 
Currency translation adjustments – net
  
(848)
    
1,036 
    
1,679 
    
(2,942)
Cash flow hedges – net
  
(105)
    
(278)
    
(364)
    
198 
Benefit plans – net
  
28 
    
(14)
    
27 
    
51 
Total
$
244 
  
$
674 
  
$
6,207 
  
$
(1,926)
                       

Changes to noncontrolling interests are as follows.

 
 Three months ended September 30,
  
Nine months ended September 30,
(In millions)
2011 
  
2010 
  
2011 
  
2010 
                       
Beginning balance
$
1,201 
  
$
1,098 
  
$
1,164 
  
$
2,204 
Net earnings
  
38 
    
18 
    
89 
    
(9)
Dividends
  
(4)
    
(4)
    
(17)
    
(21)
Dispositions(a)
  
– 
    
– 
    
– 
    
(979)
AOCI and other (b)
  
(30)
    
14 
    
(31)
    
(69)
Ending balance
$
1,205 
  
$
1,126 
  
$
1,205 
  
$
1,126 
                       
                       
(a)  
Includes the effects of deconsolidating Regency Energy Partners L.P. (Regency) $(979) million during the second quarter of 2010.
 
(b)  
The amount of change related to AOCI and other for the nine months ended September 30, 2010 includes the impact of our adoption of ASC 810, Consolidations, of $(32) million. Changes to other individual components of AOCI attributable to noncontrolling interests were insignificant.
 
 

 
(24)
 

9. REVENUES FROM SERVICES
 
Revenues from services are summarized in the following table.

 
 Three months ended September 30,
  
Nine months ended September 30,
(In millions)
2011 
  
2010 
  
2011 
  
2010 
                       
Interest on loans
$
5,027 
  
$
4,955 
  
$
15,161 
  
$
15,443 
Equipment leased to others
  
2,852 
    
2,799 
    
8,526 
    
8,329 
Fees
  
1,227 
    
1,180 
    
3,531 
    
3,554 
Associated companies(a)(b)
  
389 
    
491 
    
1,997 
    
1,548 
Financing leases
  
554 
    
678 
    
1,837 
    
2,105 
Real estate investments
  
379 
    
330 
    
1,211 
    
961 
Investment income
  
186 
    
204 
    
796 
    
461 
Other items
  
502 
    
424 
    
1,810 
    
1,786 
Total
$
11,116 
  
$
11,061 
  
$
34,869 
  
$
34,187 
                       
                       
(a)  
During the first quarter of 2011, we sold an 18.6% equity interest in Garanti Bank and recorded a pre-tax gain of $690 million. Following the sale, we hold a 2.25% equity ownership interest which is classified as an available-for-sale security.
 
(b)  
Aggregate summarized financial information for significant associated companies assuming a 100% ownership interest included total assets at September 30, 2011 and December 31, 2010 of $104,310 million and $180,015 million, respectively. Assets were primarily financing receivables of $58,115 million and $97,447 million at September 30, 2011 and December 31, 2010, respectively. Total liabilities were $77,363 million and $143,957 million, consisted primarily of bank deposits of $21,579 million and $75,661 million at September 30, 2011 and December 31, 2010, respectively, and debt of $45,387 million and $53,696 million at September 30, 2011 and December 31, 2010, respectively. Revenues in the third quarters of 2011 and 2010 totaled $4,389 million and $5,166 million, respectively, and net earnings in the third quarters of 2011 and 2010 totaled $607 million and $1,247 million, respectively. Revenues in the first nine months of 2011 and 2010 totaled $12,056 million and $14,882 million, respectively, and net earnings in the first nine months of 2011 and 2010 totaled $1,695 million and $3,279 million, respectively.
 
 

10. FAIR VALUE MEASUREMENTS
 
For a description on how we estimate fair value, see Note 1 in our 2010 consolidated financial statements.

The following tables present our assets and liabilities measured at fair value on a recurring basis. Included in the tables are investment securities of $4,624 million and $5,706 million at September 30, 2011 and December 31, 2010, respectively, primarily investment securities supporting obligations to holders of GICs in Trinity (which ceased issuing new investment contracts beginning in the first quarter of 2010), and investment securities held at our treasury operations. Such securities are investment grade.

 
(25)
 


(In millions)
                  
Netting
      
 
Level 1
(a)
Level 2
(a)
Level 3
(b)
adjustment
(c)
Net balance
September 30, 2011
                            
Assets
                            
Investment securities
                            
    Debt
                            
       U.S. corporate
$
 435 
  
$
 1,132 
  
$
 2,020 
  
$
 –
  
$
 3,587 
       State and municipal
  
 –
    
 486 
    
 44 
    
 –
    
 530 
       Residential mortgage-backed
  
 –
    
 1,511 
    
 27 
    
 –
    
 1,538 
       Commercial mortgage-backed
  
 –
    
 1,306 
    
 –
    
 –
    
 1,306 
       Asset-backed
  
 –
    
 852 
    
 2,860 
    
 –
    
 3,712 
       Corporate - non-U.S.
  
 75 
    
 274 
    
 956 
    
 –
    
 1,305 
       Government - non-U.S.
  
 755 
    
 826 
    
 77 
    
 –
    
 1,658 
       U.S. government and federal agency
  
 –
    
 2,536 
    
 –
    
 –
    
 2,536 
   Retained interests
  
 –
    
 –
    
 37 
    
 –
    
 37 
   Equity
                            
        Available-for-sale
  
 750 
    
 –
    
 16 
    
 –
    
 766 
        Trading
  
 387 
    
 –
    
 –
    
 –
    
 387 
Derivatives(d)
  
 –
    
 15,394 
    
 163 
    
 (3,120)
    
 12,437 
Other(e)
  
 –
    
 –
    
 510 
    
 –
    
 510 
Total
$
 2,402 
  
$
 24,317 
  
$
 6,710 
  
$
 (3,120)
  
$
 30,309 
                             
Liabilities
                            
Derivatives
$
 –
  
$
 4,837 
  
$
 32 
  
$
 (3,106)
  
$
 1,763 
Other
  
 –
    
 24 
    
 –
    
 –
    
 24 
Total
$
– 
  
$
4,861 
  
$
32 
  
$
(3,106)
  
$
1,787 
                             
December 31, 2010
                            
Assets
                            
Investment securities
                            
    Debt
                            
       U.S. corporate
$
 588 
  
$
 1,360 
  
$
 1,697 
  
$
 –
  
$
 3,645 
       State and municipal
  
 –
    
 508 
    
 182 
    
 –
    
 690 
       Residential mortgage-backed
  
 47 
    
 1,666 
    
 45 
    
 –
    
 1,758 
       Commercial mortgage-backed
  
 –
    
 1,388 
    
 48 
    
 –
    
 1,436 
       Asset-backed
  
 –
    
 563 
    
 2,496 
    
 –
    
 3,059 
       Corporate - non-U.S.
  
 89 
    
 356 
    
 961 
    
 –
    
 1,406 
       Government - non-U.S.
  
 776 
    
 850 
    
 128 
    
 –
    
 1,754 
       U.S. government and federal agency
  
 –
    
 2,661 
    
 –
    
 –
    
 2,661 
    Retained interests
  
 –
    
 –
    
 39 
    
 –
    
 39 
    Equity
                            
       Available-for-sale
  
 569 
    
 500 
    
 18 
    
 –
    
 1,087 
       Trading
  
 417 
    
 –
    
 –
    
 –
    
 417 
Derivatives(d)
  
 –
    
 10,319 
    
 330 
    
 (3,644)
    
 7,005 
Other(e)
  
 –
    
 –
    
 450 
    
 –
    
 450 
Total
$
 2,486 
  
$
 20,171 
  
$
 6,394 
  
$
 (3,644)
  
$
 25,407 
                             
Liabilities
                            
Derivatives
$
 –
  
$
 6,228 
  
$
 102 
  
$
 (3,635)
  
$
 2,695 
Other
  
 –
    
 31 
    
 –
    
 –
    
 31 
Total
$
 –
  
$
 6,259 
  
$
 102 
  
$
 (3,635)
  
$
 2,726 
                             
                             
(a)  
The fair value of securities transferred between Level 1 and Level 2 was $67 million during the nine months ended September 30, 2011.
 
(b)  
Level 3 investment securities valued using non-binding broker quotes totaled $251 million and $711 million at September 30, 2011 and December 31, 2010, respectively, and were classified as available-for-sale securities.
 
(c)  
The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Included fair value adjustments related to our own and counterparty credit risk.
 
(d)  
The fair value of derivatives included an adjustment for non-performance risk. At September 30, 2011 and December 31, 2010, the cumulative adjustment for non-performance risk was a loss of $14 million and $9 million, respectively. See Note 11 for additional information on the composition of our derivative portfolio.
 
(e)  
Included private equity investments and loans designated under the fair value option.
 
 
 
(26)
 
 
The following tables present the changes in Level 3 instruments measured on a recurring basis for the three and nine months ended September 30, 2011 and 2010. The majority of our Level 3 balances consist of investment securities classified as available-for-sale with changes in fair value recorded in shareowner’s equity.
 
Changes in Level 3 Instruments for the Three Months Ended September 30, 2011
 

                                       
Net
  
(In millions)
                                        
change in
  
         
Net realized/
                              
unrealized
  
       
Net
  
unrealized
                                        
gains
  
     
realized/
  
gains (losses)
                              
(losses)
  
     
unrealized