| 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:
March 31, 2016
December 31,
2015
(Dollars in Millions)
Amount
Percent
Amount
Percent
Commercial
Commercial $ 85,986 32.5 %
$ 83,116 31.9 %
Lease financing
5,291
2.0
5,286
2.0
Total commercial 91,277 34.5
88,402 33.9
Commercial Real Estate
Commercial mortgages 31,936 12.1
31,773 12.2
Construction and development
10,807
4.1
10,364
3.9
Total commercial real estate 42,743 16.2
42,137 16.1
Residential Mortgages
Residential mortgages 41,742 15.8
40,425 15.5
Home equity loans, first liens
13,213
5.0
13,071
5.0
Total residential mortgages 54,955 20.8
53,496 20.5
Credit Card 19,957 7.5
21,012 8.1
Other Retail
Retail leasing 5,268 2.0
5,232 2.0
Home equity and second mortgages 16,332 6.2
16,384 6.3
Revolving credit 3,220 1.2
3,354 1.3
Installment 7,162 2.7
7,030 2.7
Automobile 16,657 6.3
16,587 6.3
Student
2,522
.9
2,619
1.0
Total other retail
51,161
19.3
51,206
19.6
Total loans, excluding covered loans 260,093 98.3
256,253 98.2
Covered Loans
4,429
1.7
4,596
1.8
Total loans
$ 264,522
100.0 %
$ 260,849
100.0 %
The Company had loans of $80.5 billion at March 31, 2016, and
$78.1 billion at December 31, 2015, pledged at the Federal
Home Loan Bank, and loans of $64.5 billion at March 31, 2016,
and $63.4 billion at December 31, 2015, 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 $544 million at
March 31, 2016, and $550 million at December 31,
2015. 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 March 31,
(Dollars in Millions)
2016
2015
Balance at beginning of period $ 957 $ 1,309
Accretion (92 ) (98 )
Disposals (21 ) (27 )
Reclassifications from nonaccretable difference (a) 169 5
Other
–
(2 )
Balance at end of period
$ 1,013
$ 1,187
(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 15-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, less selling costs, 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 each loan segment 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:
(Dollars in Millions)
Commercial
Commercial
Residential
Credit
Other
Total Loans,
Covered
Total
Balance at December 31, 2015 $ 1,287 $ 724 $ 631 $ 883 $ 743 $ 4,268 $ 38 $ 4,306
Add
Provision for credit losses 237 5 (56 ) 157 (11 ) 332 (2 ) 330
Deduct
Loans charged off 111 3 23 188 80 405 – 405
Less recoveries of loans charged off
(28 )
(8 )
(4 )
(24 )
(26 )
(90 )
–
(90 )
Net loans charged off 83 (5 ) 19 164 54 315 – 315
Other changes (a)
–
–
–
(1 )
–
(1 )
–
(1 )
Balance at March 31, 2016
$ 1,441
$ 734
$ 556
$ 875
$ 678
$ 4,284
$ 36
$ 4,320
Balance at December 31, 2014 $ 1,146 $ 726 $ 787 $ 880 $ 771 $ 4,310 $ 65 $ 4,375
Add
Provision for credit losses 98 (23 ) 12 154 23 264 – 264
Deduct
Loans charged off 74 5 41 182 81 383 – 383
Less recoveries of loans charged off
(31 )
(23 )
(6 )
(19 )
(25 )
(104 )
–
(104 )
Net loans charged off 43 (18 ) 35 163 56 279 – 279
Other changes (a)
(1 )
–
–
–
–
(1 )
(8 )
(9 )
Balance at March 31, 2015
$ 1,200
$ 721
$ 764
$ 871
$ 738
$ 4,294
$ 57
$ 4,351
(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 March 31, 2016 Related to
Loans individually evaluated for impairment (a) $ 45 $ 1 $ – $ – $ – $ 46 $ – $ 46
TDRs collectively evaluated for impairment 6 1 221 57 32 317 1 318
Other loans collectively evaluated for impairment 1,390 720 335 818 646 3,909 1 3,910
Loans acquired with deteriorated credit quality
–
12
–
–
–
12
34
46
Total allowance for credit losses
$ 1,441
$ 734
$ 556
$ 875
$ 678
$ 4,284
$ 36
$ 4,320
Allowance Balance at December 31, 2015 Related to
Loans individually evaluated for impairment (a) $ 11 $ 2 $ – $ – $ – $ 13 $ – $ 13
TDRs collectively evaluated for impairment 10 7 236 57 33 343 2 345
Other loans collectively evaluated for impairment 1,266 703 395 826 710 3,900 – 3,900
Loans acquired with deteriorated credit quality
–
12
–
–
–
12
36
48
Total allowance for credit losses
$ 1,287
$ 724
$ 631
$ 883
$ 743
$ 4,268
$ 38
$ 4,306
(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
March 31, 2016
Loans individually evaluated for impairment (a) $ 616 $ 28 $ 13 $ – $ – $ 657 $ – $ 657
TDRs collectively evaluated for impairment 155 220 4,093 212 204 4,884 35 4,919
Other loans collectively evaluated for impairment 90,505 42,205 50,848 19,745 50,957 254,260 1,941 256,201
Loans acquired with deteriorated credit quality
1
290
1
–
–
292
2,453
2,745
Total loans
$ 91,277
$ 42,743
$ 54,955
$ 19,957
$ 51,161
$ 260,093
$ 4,429
$ 264,522
December 31, 2015
Loans individually evaluated for impairment (a) $ 336 $ 41 $ 13 $ – $ – $ 390 $ – $ 390
TDRs collectively evaluated for impairment 138 235 4,241 210 211 5,035 35 5,070
Other loans collectively evaluated for impairment 87,927 41,566 49,241 20,802 50,995 250,531 2,059 252,590
Loans acquired with deteriorated credit quality
1
295
1
–
–
297
2,502
2,799
Total loans
$ 88,402
$ 42,137
$ 53,496
$ 21,012
$ 51,206
$ 256,253
$ 4,596
$ 260,849
(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
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, reducing interest
income in the current period.
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 placed on nonaccrual.
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
March 31, 2016
Commercial $ 90,561 $ 195 $ 48 $ 473 $ 91,277
Commercial real estate 42,541 82 16 104 42,743
Residential mortgages (a) 53,975 134 169 677 54,955
Credit card 19,511 219 220 7 19,957
Other retail
50,734
195
75
157
51,161
Total loans, excluding covered loans 257,322 825 528 1,418 260,093
Covered loans
4,086
60
276
7
4,429
Total loans
$ 261,408
$ 885
$ 804
$ 1,425
$ 264,522
December 31, 2015
Commercial $ 87,863 $ 317 $ 48 $ 174 $ 88,402
Commercial real estate 41,907 89 14 127 42,137
Residential mortgages (a) 52,438 170 176 712 53,496
Credit card 20,532 243 228 9 21,012
Other retail
50,745
224
75
162
51,206
Total loans, excluding covered loans 253,485 1,043 541 1,184 256,253
Covered loans
4,236
62
290
8
4,596
Total loans
$ 257,721
$ 1,105
$ 831
$ 1,192
$ 260,849
(a) At March 31, 2016, $271
million of loans 30–89 days past due and $2.8 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 $320 million and $2.9 billion at
December 31, 2015, respectively.
At March 31, 2016, the amount of foreclosed residential real
estate held by the Company, and included in other real estate owned
(“OREO”), was $257 million ($224 million excluding
covered assets), compared with $282 million ($250 million excluding
covered assets) at December 31, 2015. This excludes $477
million and $535 million at March 31, 2016 and
December 31, 2015, 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 March 31, 2016 and
December 31, 2015, was $2.3 billion and $2.6 billion,
respectively, of which $1.7 billion and $1.9 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
March 31, 2016
Commercial (b) $ 87,044 $ 1,495 $ 2,738 $ 4,233 $ 91,277
Commercial real estate 41,665 356 722 1,078 42,743
Residential mortgages (c) 54,037 1 917 918 54,955
Credit card 19,731 – 226 226 19,957
Other retail
50,872
6
283
289
51,161
Total loans, excluding covered loans 253,349 1,858 4,886 6,744 260,093
Covered loans
4,344
–
85
85
4,429
Total loans
$ 257,693
$ 1,858
$ 4,971
$ 6,829
$ 264,522
Total outstanding commitments
$ 544,957
$ 4,551
$ 6,849
$ 11,400
$ 556,357
December 31, 2015
Commercial (b) $ 85,206 $ 1,629 $ 1,567 $ 3,196 $ 88,402
Commercial real estate 41,079 365 693 1,058 42,137
Residential mortgages (c) 52,548 2 946 948 53,496
Credit card 20,775 – 237 237 21,012
Other retail
50,899
6
301
307
51,206
Total loans, excluding covered loans 250,507 2,002 3,744 5,746 256,253
Covered loans
4,507
–
89
89
4,596
Total loans
$ 255,014
$ 2,002
$ 3,833
$ 5,835
$ 260,849
Total outstanding commitments
$ 539,614
$ 3,945
$ 4,845
$ 8,790
$ 548,404
(a) Classified rating on consumer
loans primarily based on delinquency status.
(b) At March 31, 2016, $1.8
billion of loans ($4.2 billion of total outstanding commitments) to
customers in energy-related businesses had a special mention or
classified rating, compared with $1.1 billion of loans ($1.9
billion of total outstanding commitments) at December 31,
2015.
(c) At March 31, 2016, $2.8
billion of GNMA loans 90 days or more past due and $1.8 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 $2.9
billion and $1.9 billion at December 31, 2015,
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
March 31, 2016
Commercial $ 820 $ 1,365 $ 51 $ 376
Commercial real estate 316 784 3 5
Residential mortgages 2,504 3,141 188 –
Credit card 212 212 57 –
Other retail
301
493
34
3
Total loans, excluding GNMA and covered loans 4,153 5,995 333 384
Loans purchased from GNMA mortgage pools 1,820 1,820 34 –
Covered loans
38
45
1
1
Total
$ 6,011
$ 7,860
$ 368
$ 385
December 31, 2015
Commercial $ 520 $ 1,110 $ 25 $ 154
Commercial real estate 336 847 11 1
Residential mortgages 2,575 3,248 199 –
Credit card 210 210 57 –
Other retail
309
503
35
4
Total loans, excluding GNMA and covered loans 3,950 5,918 327 159
Loans purchased from GNMA mortgage pools 1,913 1,913 40 –
Covered loans
39
48
2
1
Total
$ 5,902
$ 7,879
$ 369
$ 160
(a) Substantially all loans classified
as impaired at March 31, 2016 and December 31, 2015, had
an associated allowance for credit losses.
Additional information on impaired loans follows:
2016
2015
Three Months Ended March 31,
(Dollars in Millions)
Average
Interest
Average
Interest
Commercial $ 670 $ 1
$ 311 $ 2
Commercial real estate 326 3
550 3
Residential mortgages 2,539 32
2,703 33
Credit card 211 1
233 2
Other retail
305
3
355
4
Total loans, excluding GNMA and covered loans 4,051 40
4,152 44
Loans purchased from GNMA mortgage pools 1,867 25
2,201 25
Covered loans
39
–
42
–
Total
$ 5,957
$ 65
$ 6,395
$ 69
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:
2016
2015
Three Months Ended March 31,
(Dollars in Millions)
Number
Pre-Modification Balance
Post-Modification Balance
Number
Pre-Modification Balance
Post-Modification Balance
Commercial 601 $ 160 $ 161
359 $ 23 $ 23
Commercial real estate 24 7 7
25 13 13
Residential mortgages 278 32 32
374 51 51
Credit card 7,988 38 39
6,337 33 33
Other retail
609
11
11
622
11
11
Total loans, excluding GNMA and covered loans 9,500 248 250
7,717 131 131
Loans purchased from GNMA mortgage pools 2,868 313 311
2,024 246 245
Covered loans
3
–
–
1
–
–
Total loans
12,371
$ 561
$ 561
9,742
$ 377
$ 376
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 first quarter of 2016, at March 31, 2016,
120 residential mortgages, 27 home equity and second mortgage
loans and 913 loans purchased from GNMA mortgage pools with
outstanding balances of $15 million, $2 million and $120
million, respectively, were in a trial period and have estimated
post-modification balances of $19 million, $2 million and $124
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 restructuring programs providing customers experiencing
financial difficulty with modifications whereby balances may be
amortized up to 60 months, and generally include waiver of fees and
reduced interest rates.
In addition, the Company considers secured loans to consumer
borrowers that have debt discharged through bankruptcy where the
borrower has not reaffirmed the debt to be TDRs.
Modifications to loans in the covered segment are similar in nature
to that described above for non-covered loans, and the evaluation
and determination of TDR status is similar, except that acquired
loans restructured after acquisition are not considered TDRs for
accounting and disclosure purposes if the loans evidenced credit
deterioration as of the acquisition date and are accounted for in
pools. Losses associated with the modification on covered loans,
including the economic impact of interest rate reductions, are
generally eligible for reimbursement under loss sharing agreements
with the FDIC.
The following table provides a summary of TDR loans that defaulted
(fully or partially charged-off or became 90 days or more past
due) during the periods presented that were modified as TDRs within
12 months previous to default:
2016
2015
Three Months Ended March 31,
(Dollars in Millions)
Number
Amount
Number
Amount
Commercial 112 $ 2
164 $ 2
Commercial real estate 10 5
5 2
Residential mortgages 31 5
106 13
Credit card 1,573 7
1,578 8
Other retail
78
1
131
3
Total loans, excluding GNMA and covered loans 1,804 20
1,984 28
Loans purchased from GNMA mortgage pools 26 3
198 26
Covered loans
–
–
–
–
Total loans
1,830
$ 23
2,182
$ 54
In addition to the defaults in the table above, for the three
months ended March 31, 2016, the Company had a total of 611
residential mortgage loans, home equity and second mortgage loans
and loans purchased from GNMA mortgage pools with aggregate
outstanding balances of $88 million where borrowers did not
successfully complete the trial period arrangement and therefore
are no longer eligible for a permanent modification under the
applicable modification program.
Covered
Assets Covered assets represent loans
and other assets acquired from the FDIC, subject to loss sharing
agreements, and include expected reimbursements from the FDIC. The
carrying amount of the covered assets consisted of purchased
impaired loans, purchased nonimpaired loans and other assets as
shown in the following table:
March 31, 2016
December 31, 2015
(Dollars in Millions)
Purchased
Purchased
Othe |
