| Loans and Allowance for Credit Losses | Note 4 Loans and Allowance for Credit
Losses
The composition of the loan portfolio, disaggregated by class and
underlying specific portfolio type, was as follows:
September 30,
2015
December 31,
2014
(Dollars in Millions)
Amount
Percent
Amount
Percent
Commercial
Commercial $ 80,313 31.5 %
$ 74,996 30.2 %
Lease financing
5,226
2.1
5,381
2.2
Total commercial 85,539 33.6
80,377 32.4
Commercial Real Estate
Commercial mortgages 32,089 12.6
33,360 13.5
Construction and development
10,389
4.1
9,435
3.8
Total commercial real estate 42,478 16.7
42,795 17.3
Residential Mortgages
Residential mortgages 39,341 15.4
38,598 15.6
Home equity loans, first liens
13,008
5.1
13,021
5.2
Total residential mortgages 52,349 20.5
51,619 20.8
Credit Card 18,583 7.3
18,515 7.5
Other Retail
Retail leasing 5,387 2.1
5,871 2.4
Home equity and second mortgages 16,188 6.3
15,916 6.4
Revolving credit 3,334 1.3
3,309 1.3
Installment 6,949 2.7
6,242 2.5
Automobile 16,484 6.5
14,822 6.0
Student
2,709
1.1
3,104
1.3
Total other retail
51,051
20.0
49,264
19.9
Total loans, excluding covered loans 250,000 98.1
242,570 97.9
Covered Loans
4,791
1.9
5,281
2.1
Total loans
$ 254,791
100.0 %
$ 247,851
100.0 %
The Company had loans of $78.5 billion at September 30, 2015,
and $79.8 billion at December 31, 2014, pledged at the Federal
Home Loan Bank, and loans of $62.8 billion at September 30,
2015, and $61.8 billion at December 31, 2014, pledged at
the Federal Reserve Bank.
Originated loans are reported at the principal amount outstanding,
net of unearned interest and deferred fees and costs. Net unearned
interest and deferred fees and costs amounted to $559 million at
September 30, 2015, and $574 million at December 31,
2014. All purchased loans and related indemnification assets are
recorded at fair value at the date of purchase. The Company
evaluates purchased loans for impairment at the date of purchase in
accordance with applicable authoritative accounting guidance.
Purchased loans with evidence of credit deterioration since
origination for which it is probable that all contractually
required payments will not be collected are considered
“purchased impaired loans.” All other purchased loans
are considered “purchased nonimpaired loans.”
Changes in the accretable balance for purchased impaired loans were
as follows:
Three Months Ended
Nine Months Ended
(Dollars in Millions)
2015
2014
2015
2014
Balance at beginning of period $ 1,076 $ 1,487
$ 1,309 $ 1,655
Accretion (91 ) (105 )
(289 ) (336 )
Disposals (32 ) (34 )
(102 ) (103 )
Reclassifications from nonaccretable difference (a) 120 38
157 172
Other
1
–
(1 )
(2 )
Balance at end of period
$ 1,074
$ 1,386
$ 1,074
$ 1,386
(a) Primarily relates to changes in
expected credit performance.
Allowance for
Credit Losses The allowance for
credit losses reserves for probable and estimable losses incurred
in the Company’s loan and lease portfolio, including unfunded
credit commitments, and includes certain amounts that do not
represent loss exposure to the Company because those losses are
recoverable under loss sharing agreements with the Federal Deposit
Insurance Corporation (“FDIC”). The allowance for
credit losses is increased through provisions charged to operating
earnings and reduced by net charge-offs. Management evaluates the
allowance each quarter to ensure it appropriately reserves for
incurred losses.
The allowance recorded for loans in the commercial lending segment
is based on reviews of individual credit relationships and
considers the migration analysis of commercial lending segment
loans and actual loss experience. In the migration analysis applied
to risk rated loan portfolios, the Company currently examines up to
a 14-year period of loss experience. For each loan type, this
historical loss experience is adjusted as necessary to consider any
relevant changes in portfolio composition, lending policies,
underwriting standards, risk management practices or economic
conditions. The results of the analysis are evaluated quarterly to
confirm an appropriate historical time frame is selected for each
commercial loan type. The allowance recorded for impaired loans
greater than $5 million in the commercial lending segment is
based on an individual loan analysis utilizing expected cash flows
discounted using the original effective interest rate, the
observable market price of the loan, or the fair value of the
collateral for collateral-dependent loans, rather than the
migration analysis. The allowance recorded for all other commercial
lending segment loans is determined on a homogenous pool basis and
includes consideration of product mix, risk characteristics of the
portfolio, bankruptcy experience, portfolio growth and historical
losses, adjusted for current trends. The Company also considers the
impacts of any loan modifications made to commercial lending
segment loans and any subsequent payment defaults to its
expectations of cash flows, principal balance, and current
expectations about the borrower’s ability to pay in
determining the allowance for credit losses.
The allowance recorded for Troubled Debt Restructuring
(“TDR”) loans and purchased impaired loans in the
consumer lending segment is determined on a homogenous pool basis
utilizing expected cash flows discounted using the original
effective interest rate of the pool, or the prior quarter effective
rate, respectively. The allowance for collateral-dependent loans in
the consumer lending segment is determined based on the fair value
of the collateral less costs to sell. The allowance recorded for
all other consumer lending segment loans is determined on a
homogenous pool basis and includes consideration of product mix,
risk characteristics of the portfolio, bankruptcy experience,
delinquency status, refreshed loan-to-value ratios when possible,
portfolio growth and historical losses, adjusted for current
trends. The Company also considers any modifications made to
consumer lending segment loans including the impacts of any
subsequent payment defaults since modification in determining the
allowance for credit losses, such as the borrower’s ability
to pay under the restructured terms, and the timing and amount of
payments.
The allowance for the covered loan segment is evaluated each
quarter in a manner similar to that described for non-covered loans
and reflects decreases in expected cash flows of those loans after
the acquisition date. The provision for credit losses for covered
loans considers the indemnification provided by the FDIC.
In addition, subsequent payment defaults on loan modifications
considered TDRs are considered in the underlying factors used in
the determination of the appropriateness of the allowance for
credit losses. For each loan segment, the Company estimates future
loan charge-offs through a variety of analysis, trends and
underlying assumptions. With respect to the commercial lending
segment, TDRs may be collectively evaluated for impairment where
observed performance history, including defaults, is a primary
driver of the loss allocation. For commercial TDRs individually
evaluated for impairment, attributes of the borrower are the
primary factors in determining the allowance for credit losses.
However, historical loss experience is also incorporated into the
allowance methodology applied to this category of loans. With
respect to the consumer lending segment, performance of the
portfolio, including defaults on TDRs, is considered when
estimating future cash flows.
The Company’s methodology for determining the appropriate
allowance for credit losses for all the loan segments also
considers the imprecision inherent in the methodologies used. As a
result, in addition to the amounts determined under the
methodologies described above, management also considers the
potential impact of other qualitative factors which include, but
are not limited to, economic factors; geographic and other
concentration risks; delinquency and nonaccrual trends; current
business conditions; changes in lending policy, underwriting
standards, internal review and other relevant business practices;
and the regulatory environment. The consideration of these items
results in adjustments to allowance amounts included in the
Company’s allowance for credit losses for each of the above
loan segments.
The Company also assesses the credit risk associated with
off-balance sheet loan commitments, letters of credit, and
derivatives. Credit risk associated with derivatives is reflected
in the fair values recorded for those positions. The liability for
off-balance sheet credit exposure related to loan commitments and
other credit guarantees is included in other liabilities. Because
business processes and credit risks associated with unfunded credit
commitments are essentially the same as for loans, the Company
utilizes similar processes to estimate its liability for unfunded
credit commitments.
Activity in the allowance for credit losses by portfolio class was
as follows:
Three Months Ended September 30,
(Dollars in Millions)
Commercial
Commercial
Residential
Credit
Other
Total Loans,
Covered
Total
2015
Balance at beginning of period $ 1,180 $ 735 $ 737 $ 873 $ 752 $ 4,277 $ 49 $ 4,326
Add
Provision for credit losses 114 (10 ) (24 ) 156 46 282 – 282
Deduct
Loans charged off 91 2 31 171 77 372 – 372
Less recoveries of loans charged off
(20 )
(13 )
(6 )
(18 )
(23 )
(80 )
–
(80 )
Net loans charged off 71 (11 ) 25 153 54 292 – 292
Other changes (a)
–
–
–
–
–
–
(10 )
(10 )
Balance at end of period
$ 1,223
$ 736
$ 688
$ 876
$ 744
$ 4,267
$ 39
$ 4,306
2014
Balance at beginning of period $ 1,111 $ 725 $ 848 $ 874 $ 779 $ 4,337 $ 112 $ 4,449
Add
Provision for credit losses 83 (6 ) (13 ) 162 84 310 1 311
Deduct
Loans charged off 80 10 48 174 96 408 2 410
Less recoveries of loans charged off
(22 )
(6 )
(6 )
(16 )
(23 )
(73 )
(1 )
(74 )
Net loans charged off 58 4 42 158 73 335 1 336
Other changes (a)
–
–
–
–
–
–
(10 )
(10 )
Balance at end of period
$ 1,136
$ 715
$ 793
$ 878
$ 790
$ 4,312
$ 102
$ 4,414
(a) Includes net changes in credit
losses to be reimbursed by the FDIC and reductions in the allowance
for covered loans where the reversal of a previously recorded
allowance was offset by an associated decrease in the
indemnification asset, and the impact of any loan sales.
Nine Months Ended September 30,
(Dollars in Millions)
Commercial
Commercial
Residential
Credit
Other
Total Loans,
Covered
Total
2015
Balance at beginning of period $ 1,146 $ 726 $ 787 $ 880 $ 771 $ 4,310 $ 65 $ 4,375
Add
Provision for credit losses 234 (18 ) (6 ) 481 134 825 2 827
Deduct
Loans charged off 230 16 113 543 233 1,135 – 1,135
Less recoveries of loans charged off
(74 )
(44 )
(20 )
(58 )
(72 )
(268 )
–
(268 )
Net loans charged off 156 (28 ) 93 485 161 867 – 867
Other changes (a)
(1 )
–
–
–
–
(1 )
(28 )
(29 )
Balance at end of period
$ 1,223
$ 736
$ 688
$ 876
$ 744
$ 4,267
$ 39
$ 4,306
2014
Balance at beginning of period $ 1,075 $ 776 $ 875 $ 884 $ 781 $ 4,391 $ 146 $ 4,537
Add
Provision for credit losses 210 (64 ) 74 495 227 942 (1 ) 941
Deduct
Loans charged off 219 27 171 546 291 1,254 10 1,264
Less recoveries of loans charged off
(70 )
(30 )
(15 )
(48 )
(73 )
(236 )
(2 )
(238 )
Net loans charged off 149 (3 ) 156 498 218 1,018 8 1,026
Other changes (a)
–
–
–
(3 )
–
(3 )
(35 )
(38 )
Balance at end of period
$ 1,136
$ 715
$ 793
$ 878
$ 790
$ 4,312
$ 102
$ 4,414
(a) Includes net changes in credit
losses to be reimbursed by the FDIC and reductions in the allowance
for covered loans where the reversal of a previously recorded
allowance was offset by an associated decrease in the
indemnification asset, and the impact of any loan sales.
Additional detail of the allowance for credit losses by portfolio
class was as follows:
(Dollars in Millions)
Commercial
Commercial
Residential
Credit
Other
Total Loans,
Covered
Total
Allowance Balance at September 30, 2015 Related to
Loans individually evaluated for impairment (a) $ 8 $ 1 $ – $ – $ – $ 9 $ – $ 9
TDRs collectively evaluated for impairment 8 11 280 56 36 391 2 393
Other loans collectively evaluated for impairment 1,207 710 408 820 708 3,853 1 3,854
Loans acquired with deteriorated credit quality
–
14
–
–
–
14
36
50
Total allowance for credit losses
$ 1,223
$ 736
$ 688
$ 876
$ 744
$ 4,267
$ 39
$ 4,306
Allowance Balance at December 31, 2014 Related to
Loans individually evaluated for impairment (a) $ 5 $ 4 $ – $ – $ – $ 9 $ – $ 9
TDRs collectively evaluated for impairment 12 12 319 61 41 445 4 449
Other loans collectively evaluated for impairment 1,129 678 468 819 730 3,824 1 3,825
Loans acquired with deteriorated credit quality
–
32
–
–
–
32
60
92
Total allowance for credit losses
$ 1,146
$ 726
$ 787
$ 880
$ 771
$ 4,310
$ 65
$ 4,375
(a) Represents the allowance for
credit losses related to loans greater than $5 million classified
as nonperforming or TDRs.
Additional detail of loan balances by portfolio class was as
follows:
(Dollars in Millions)
Commercial
Commercial
Residential
Credit
Other
Total Loans,
Covered
Total
September 30, 2015
Loans individually evaluated for impairment (a) $ 267 $ 42 $ 13 $ – $ – $ 322 $ – $ 322
TDRs collectively evaluated for impairment 136 250 4,387 214 219 5,206 35 5,241
Other loans collectively evaluated for impairment 85,135 41,873 47,948 18,369 50,832 244,157 2,176 246,333
Loans acquired with deteriorated credit quality
1
313
1
–
–
315
2,580
2,895
Total loans
$ 85,539
$ 42,478
$ 52,349
$ 18,583
$ 51,051
$ 250,000
$ 4,791
$ 254,791
December 31, 2014
Loans individually evaluated for impairment (a) $ 159 $ 128 $ 12 $ – $ – $ 299 $ – $ 299
TDRs collectively evaluated for impairment 124 393 4,653 240 237 5,647 34 5,681
Other loans collectively evaluated for impairment 80,093 41,744 46,953 18,275 49,027 236,092 2,463 238,555
Loans acquired with deteriorated credit quality
1
530
1
–
–
532
2,784
3,316
Total loans
$ 80,377
$ 42,795
$ 51,619
$ 18,515
$ 49,264
$ 242,570
$ 5,281
$ 247,851
(a) Represents loans greater than $5
million classified as nonperforming or TDRs.
(b) Includes expected reimbursements
from the FDIC under loss sharing agreements.
Credit
Quality The quality of the
Company’s loan portfolios is assessed as a function of net
credit losses, levels of nonperforming assets and delinquencies,
and credit quality ratings as defined by the Company.
For all loan classes, loans are considered past due based on the
number of days delinquent except for monthly amortizing loans which
are classified delinquent based upon the number of contractually
required payments not made (for example, two missed payments is
considered 30 days delinquent). When a loan is placed on nonaccrual
status, unpaid accrued interest is reversed.
Commercial lending segment loans are generally placed on nonaccrual
status when the collection of principal and interest has become 90
days past due or is otherwise considered doubtful. Commercial
lending segment loans are generally fully or partially charged down
to the fair value of the collateral securing the loan, less costs
to sell, when the loan is considered uncollectible.
Consumer lending segment loans are generally charged-off at a
specific number of days or payments past due. Residential mortgages
and other retail loans secured by 1-4 family properties are
generally charged down to the fair value of the collateral securing
the loan, less costs to sell, at 180 days past due, and placed on
nonaccrual status in instances where a partial charge-off occurs
unless the loan is well secured and in the process of collection.
Loans and lines in a junior lien position secured by 1-4 family
properties are placed on nonaccrual status at 120 days past due or
when behind a first lien that has become 180 days or greater past
due or placed on nonaccrual status. Any secured consumer lending
segment loan whose borrower has had debt discharged through
bankruptcy, for which the loan amount exceeds the fair value of the
collateral, is charged down to the fair value of the related
collateral and the remaining balance is placed on nonaccrual
status. Credit card loans continue to accrue interest until the
account is charged off. Credit cards are charged off at 180 days
past due. Other retail loans not secured by 1-4 family properties
are charged-off at 120 days past due; and revolving consumer lines
are charged off at 180 days past due. Similar to credit cards,
other retail loans are generally not placed on nonaccrual status
because of the relative short period of time to charge-off. Certain
retail customers having financial difficulties may have the terms
of their credit card and other loan agreements modified to require
only principal payments and, as such, are reported as
nonaccrual.
For all loan classes, interest payments received on nonaccrual
loans are generally recorded as a reduction to a loan’s
carrying amount while a loan is on nonaccrual and are recognized as
interest income upon payoff of the loan. However, interest income
may be recognized for interest payments if the remaining carrying
amount of the loan is believed to be collectible. In certain
circumstances, loans in any class may be restored to accrual
status, such as when a loan has demonstrated sustained repayment
performance or no amounts are past due and prospects for future
payment are no longer in doubt; or when the loan becomes well
secured and is in the process of collection. Loans where there has
been a partial charge-off may be returned to accrual status if all
principal and interest (including amounts previously charged-off)
is expected to be collected and the loan is current.
Covered loans not considered to be purchased impaired are evaluated
for delinquency, nonaccrual status and charge-off consistent with
the class of loan they would be included in had the loss share
coverage not been in place. Generally, purchased impaired loans are
considered accruing loans. However, the timing and amount of future
cash flows for some loans is not reasonably estimable, and those
loans are classified as nonaccrual loans with interest income not
recognized until the timing and amount of the future cash flows can
be reasonably estimated.
The following table provides a summary of loans by portfolio class,
including the delinquency status of those that continue to accrue
interest, and those that are nonperforming:
Accruing
(Dollars in Millions)
Current
30-89 Days
90 Days or
Nonperforming
Total
September 30, 2015
Commercial $ 85,119 $ 207 $ 44 $ 169 $ 85,539
Commercial real estate 42,252 62 20 144 42,478
Residential mortgages (a) 51,262 181 171 735 52,349
Credit card 18,132 235 204 12 18,583
Other retail
50,607
202
71
171
51,051
Total loans, excluding covered loans 247,372 887 510 1,231 250,000
Covered loans
4,404
61
315
11
4,791
Total loans
$ 251,776
$ 948
$ 825
$ 1,242
$ 254,791
December 31, 2014
Commercial $ 79,977 $ 247 $ 41 $ 112 $ 80,377
Commercial real estate 42,406 110 20 259 42,795
Residential mortgages (a) 50,330 221 204 864 51,619
Credit card 18,046 229 210 30 18,515
Other retail
48,764
238
75
187
49,264
Total loans, excluding covered loans 239,523 1,045 550 1,452 242,570
Covered loans
4,804
68
395
14
5,281
Total loans
$ 244,327
$ 1,113
$ 945
$ 1,466
$ 247,851
(a) At September 30, 2015, $337
million of loans 30–89 days past due and $2.9 billion of
loans 90 days or more past due purchased from Government National
Mortgage Association (“GNMA”) mortgage pools whose
repayments are insured by the Federal Housing Administration or
guaranteed by the Department of Veterans Affairs, were classified
as current, compared with $431 million and $3.1 billion at
December 31, 2014, respectively.
At September 30, 2015, the amount of foreclosed residential
real estate held by the Company, and included in other real estate
owned, was $271 million ($240 million excluding covered assets),
compared with $270 million ($233 million excluding covered assets)
at December 31, 2014. This excludes $648 million and $641
million at September 30, 2015 and December 31, 2014,
respectively, of foreclosed residential real estate related to
mortgage loans whose payments are primarily insured by the Federal
Housing Administration or guaranteed by the Department of Veterans
Affairs. In addition, the amount of residential mortgage loans
secured by residential real estate in the process of foreclosure at
September 30, 2015 and December 31, 2014, was $2.8
billion and $2.9 billion, respectively, of which $2.0 billion and
$2.1 billion, respectively, related to loans purchased from
Government National Mortgage Association (“GNMA”)
mortgage pools whose repayments are insured by the Federal Housing
Administration or guaranteed by the Department of Veterans
Affairs.
The Company classifies its loan portfolios using internal credit
quality ratings on a quarterly basis. These ratings include: pass,
special mention and classified, and are an important part of the
Company’s overall credit risk management process and
evaluation of the allowance for credit losses. Loans with a pass
rating represent those not classified on the Company’s rating
scale for problem credits, as minimal credit risk has been
identified. Special mention loans are those that have a potential
weakness deserving management’s close attention. Classified
loans are those where a well-defined weakness has been identified
that may put full collection of contractual cash flows at risk. It
is possible that others, given the same information, may reach
different reasonable conclusions regarding the credit quality
rating classification of specific loans.
The following table provides a summary of loans by portfolio class
and the Company’s internal credit quality rating:
Criticized
(Dollars in Millions)
Pass
Special
Classified (a)
Total
Total
September 30, 2015
Commercial (b) $ 82,468 $ 1,803 $ 1,268 $ 3,071 $ 85,539
Commercial real estate 41,411 324 743 1,067 42,478
Residential mortgages (c) 51,375 7 967 974 52,349
Credit card 18,367 – 216 216 18,583
Other retail
50,749
5
297
302
51,051
Total loans, excluding covered loans 244,370 2,139 3,491 5,630 250,000
Covered loans
4,696
–
95
95
4,791
Total loans
$ 249,066
$ 2,139
$ 3,586
$ 5,725
$ 254,791
Total outstanding commitments
$ 523,370
$ 3,820
$ 4,229
$ 8,049
$ 531,419
December 31, 2014
Commercial (b) $ 78,409 $ 1,204 $ 764 $ 1,968 $ 80,377
Commercial real estate 41,322 451 1,022 1,473 42,795
Residential mortgages (c) 50,479 5 1,135 1,140 51,619
Credit card 18,275 – 240 240 18,515
Other retail
48,932
20
312
332
49,264
Total loans, excluding covered loans 237,417 1,680 3,473 5,153 242,570
Covered loans
5,164
–
117
117
5,281
Total loans
$ 242,581
$ 1,680
$ 3,590
$ 5,270
$ 247,851
Total outstanding commitments
$ 501,535
$ 2,964
$ 4,179
$ 7,143
$ 508,678
(a) Classified rating on consumer
loans primarily based on delinquency status.
(b) At September 30, 2015, $917
million of loans to customers in energy-related businesses had a
special mention or classified rating, compared with $122 million at
December 31, 2014.
(c) At September 30, 2015, $2.9
billion of GNMA loans 90 days or more past due and $2.0 billion of
restructured GNMA loans whose repayments are insured by the Federal
Housing Administration or guaranteed by the Department of Veterans
Affairs were classified with a pass rating, compared with $3.1
billion and $2.2 billion at December 31, 2014,
respectively.
For all loan classes, a loan is considered to be impaired when,
based on current events or information, it is probable the Company
will be unable to collect all amounts due per the contractual terms
of the loan agreement. Impaired loans include all nonaccrual and
TDR loans. For all loan classes, interest income on TDR loans is
recognized under the modified terms and conditions if the borrower
has demonstrated repayment performance at a level commensurate with
the modified terms over several payment cycles. Interest income is
generally not recognized on other impaired loans until the loan is
paid off. However, interest income may be recognized for interest
payments if the remaining carrying amount of the loan is believed
to be collectible.
Factors used by the Company in determining whether all principal
and interest payments due on commercial and commercial real estate
loans will be collected and therefore whether those loans are
impaired include, but are not limited to, the financial condition
of the borrower, collateral and/or guarantees on the loan, and the
borrower’s estimated future ability to pay based on industry,
geographic location and certain financial ratios. The evaluation of
impairment on residential mortgages, credit card loans and other
retail loans is primarily driven by delinquency status of
individual loans or whether a loan has been modified, and considers
any government guarantee where applicable. Individual covered
loans, whose future losses are covered by loss sharing agreements
with the FDIC that substantially reduce the risk of credit losses
to the Company, are evaluated for impairment and accounted for in a
manner consistent with the class of loan they would have been
included in had the loss sharing coverage not been in place.
A summary of impaired loans, which include all nonaccrual and TDR
loans, by portfolio class was as follows:
(Dollars in Millions)
Period-end
Unpaid
Valuation
Commitments
September 30, 2015
Commercial $ 439 $ 1,002 $ 19 $ 100
Commercial real estate 362 921 16 2
Residential mortgages 2,638 3,345 239 –
Credit card 214 214 56 –
Other retail
324
523
39
4
Total impaired loans, excluding GNMA and covered loans 3,977 6,005 369 106
Loans purchased from GNMA mortgage pools 2,000 2,000 44 –
Covered loans
42
46
2
1
Total
$ 6,019
$ 8,051
$ 415
$ 107
December 31, 2014
Commercial $ 329 $ 769 $ 21 $ 51
Commercial real estate 624 1,250 23 18
Residential mortgages 2,730 3,495 273 –
Credit card 240 240 61 –
Other retail
361
570
44
4
Total impaired loans, excluding GNMA and covered loans 4,284 6,324 422 73
Loans purchased from GNMA mortgage pools 2,244 2,244 50 –
Covered loans
43
55
4
1
Total
$ 6,571
$ 8,623
$ 476
$ 74
(a) Substantially all loans classified
as impaired at September 30, 2015 and December 31, 2014,
had an associated allowance for credit losses.
Additional information on impaired loans follows:
2015
2014
(Dollars in Millions)
Average
Interest
Average
Interest
Three Months Ended September 30
Commercial $ 408 $ 3
$ 425 $ 4
Commercial real estate 388 3
541 4
Residential mortgages 2,669 31
2,740 33
Credit card 216 1
264 1
Other retail
329
3
373
5
Total impaired loans, excluding GNMA and covered loans 4,010 41
4,343 47
Loans purchased from GNMA mortgage pools 2,040 24
2,647 29
Covered loans
42
–
335
5
Total
$ 6,092
$ 65
$ 7,325
$ 81
Nine Months Ended September 30
Commercial $ 351 $ 9
$ 430 $ 8
Commercial real estate 461 13
598 17
Residential mortgages 2,687 97
2,744 105
Credit card 224 4
281 7
Other retail
342
10
381
13
Total impaired loans, excluding GNMA and covered loans 4,065 133
4,434 150
Loans purchased from GNMA mortgage pools 2,120 74
2,691 95
Covered loans
42
–
389
15
Total
$ 6,227
$ 207
$ 7,514
$ 260
Troubled Debt
Restructurings In certain
circumstances, the Company may modify the terms of a loan to
maximize the collection of amounts due when a borrower is
experiencing financial difficulties or is expected to experience
difficulties in the near-term. Concessionary modifications are
classified as TDRs unless the modification results in only an
insignificant delay in payments to be received. The Company
recognizes interest on TDRs if the borrower complies with the
revised terms and conditions as agreed upon with the Company and
has demonstrated repayment performance at a level commensurate with
the modified terms over several payment cycles, which is generally
six months or greater. To the extent a previous restructuring was
insignificant, the Company considers the cumulative effect of past
restructurings related to the receivable when determining whether a
current restructuring is a TDR. Loans classified as TDRs are
considered impaired loans for reporting and measurement
purposes.
The following table provides a summary of loans modified as TDRs
during the periods presented by portfolio class:
2015
2014
(Dollars in Millions)
Number
Pre-Modification Balance
Post-Modification Balance
Number
Pre-Modification Balance
Post-Modification Balance
Three Months Ended September 30
Commercial 381 $ 111 $ 102
448 $ 28 $ 26
Commercial real estate 35 24 23
27 14 13
Residential mortgages 381 48 47
525 71 70
Credit card 7,289 35 36
6,708 35 36
Other retail
690
19
19
810
18
18
Total loans, excluding GNMA and covered loans 8,776 237 227
8,518 166 163
Loans purchased from GNMA mortgage pools 1,986 244 245
2,273 278 278
Covered loans
4
1
1
18
3
3
Total loans
10,766
$ 482
$ 473
10,809
$ 447
$ 444
Nine Months Ended September 30
Commercial 1,170 $ 227 $ 223
1,633 $ 181 $ 169
Commercial real estate 89 64 62
54 33 28
Residential mortgages 1,820 234 232
1,732 232 231
Credit card 19,978 100 101
20,040 111 112
Other retail
1,974
42
42
2,246
52
52
Total loans, excluding GNMA and covered loans 25,031 667 660
25,705 609 592
Loans purchased from GNMA mortgage pools 5,960 732 731
7,198 816 803
Covered loans
13
4
4
38
14
13
Total loans
31,004
$ 1,403
$ 1,395
32,941
$ 1,439
$ 1,408
Residential mortgages, home equity and second mortgages, and loans
purchased from GNMA mortgage pools in the table above include trial
period arrangements offered to customers during the periods
presented. The post-modification balances for these loans reflect
the current outstanding balance until a permanent modification is
made. In addition, the post-modification balances typically include
capitalization of unpaid accrued interest and/or fees under the
various modification programs. For those loans modified as TDRs
during the third quarter of 2015, at September 30, 2015,
205 residential mortgages, 102 home equity and second mortgage
loans and 1,726 loans purchased from GNMA mortgage pools with
outstanding balances of $25 million, $9 million and $226
million, respectively, were in a trial period and have estimated
post-modification balances of $31 million, $10 million and
$230 million, respectively, assuming permanent modification occurs
at the end of the trial period.
The Company has implemented certain restructuring programs that may
result in TDRs. However, many of the Company’s TDRs are also
determined on a case-by-case basis in connection with ongoing loan
collection processes.
For the commercial lending segment, modifications generally result
in the Company working with borrowers on a case-by-case basis.
Commercial and commercial real estate modifications generally
include extensions of the maturity date and may be accompanied by
an increase or decrease to the interest rate, which may not be
deemed a market rate of interest. In addition, the Company may work
with the borrower in identifying other changes that mitigate loss
to the Company, which may include additional collateral or
guarantees to support the loan. To a lesser extent, the Company may
waive contractual principal. The Company classifies all of the
above concessions as TDRs to the extent the Company determines that
the borrower is experiencing financial difficulty.
Modifications for the consumer lending segment are generally part
of programs the Company has initiated. The Company participates in
the U.S. Department of Treasury Home Affordable Modification
Program (“HAMP”). HAMP gives qualifying homeowners an
opportunity to permanently modify residential mortgage loans and
achieve more affordable monthly payments, with the U.S. Department
of Treasury compensating the Company for a portion of the reduction
in monthly amounts due from borrowers participating in this
program. The Company also modifies residential mortgage loans under
Federal Housing Administration, Department of Veterans Affairs, or
its own internal programs. Under these programs, the Company
provides concessions to qualifying borrowers experiencing financial
difficulties. The concessions may include adjustments to interest
rates, conversion of adjustable rates to fixed rates, extension of
maturity dates or deferrals of payments, capitalization of accrued
interest and/or outstanding advances, or in limited situations,
partial forgiveness of loan principal. In most instances,
participation in residential mortgage loan restructuring programs
requires the customer to complete a short-term trial period. A
permanent loan modification is contingent on the customer
successfully completing the trial period arrangement and the loan
documents are not modified until that time. The Company reports
loans in a trial period arrangement as TDRs and continues to report
them as TDRs after the trial period.
Credit card and other retail loan TDRs are generally part of
distinct res |
