| 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, 2016
December 31, 2015
(Dollars in Millions)
Amount
Percent
Amount
Percent
Commercial
Commercial $ 87,851 32.4 %
$ 83,116 31.9 %
Lease financing
5,350
2.0
5,286
2.0
Total commercial 93,201 34.4
88,402 33.9
Commercial Real Estate
Commercial mortgages 31,916 11.8
31,773 12.2
Construction and development
11,552
4.2
10,364
3.9
Total commercial real estate 43,468 16.0
42,137 16.1
Residential Mortgages
Residential mortgages 42,846 15.8
40,425 15.5
Home equity loans, first liens
13,383
4.9
13,071
5.0
Total residential mortgages 56,229 20.7
53,496 20.5
Credit Card 20,706 7.6
21,012 8.1
Other Retail
Retail leasing 6,076 2.2
5,232 2.0
Home equity and second mortgages 16,467 6.1
16,384 6.3
Revolving credit 3,247 1.2
3,354 1.3
Installment 7,983 2.9
7,030 2.7
Automobile 17,559 6.5
16,587 6.3
Student
2,332
.9
2,619
1.0
Total other retail
53,664
19.8
51,206
19.6
Total loans, excluding covered loans 267,268 98.5
256,253 98.2
Covered Loans
4,021
1.5
4,596
1.8
Total loans
$ 271,289
100.0 %
$ 260,849
100.0 %
The Company had loans of $83.9 billion at September 30, 2016, and
$78.1 billion at December 31, 2015, pledged at the Federal
Home Loan Bank, and loans of $65.2 billion at September 30, 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 $626 million at
September 30, 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
Nine Months Ended
(Dollars in Millions)
2016
2015
2016
2015
Balance at beginning of period $ 891 $ 1,076
$ 957 $ 1,309
Accretion (102 ) (91 )
(297 ) (289 )
Disposals (23 ) (32 )
(77 ) (102 )
Reclassifications from nonaccretable difference (a) 31 120
214 157
Other
–
1
–
(1 )
Balance at end of period
$ 797
$ 1,074
$ 797
$ 1,074
(a) Primarily relates to changes in
expected credit performance.
Allowance for
Credit Losses The allowance
for credit losses is established 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:
Three Months Ended September 30,
(Dollars in Millions)
Commercial
Commercial
Residential
Credit
Other
Total Loans,
Covered
Total
2016
Balance at beginning of period $ 1,473 $ 748 $ 544 $ 884 $ 643 $ 4,292 $ 37 $ 4,329
Add
Provision for credit losses 90 34 (12 ) 178 37 327 (2 ) 325
Deduct
Loans charged off 104 9 19 182 84 398 – 398
Less recoveries of loans charged off
(17 )
(8 )
(7 )
(21 )
(30 )
(83 )
–
(83 )
Net loans charged off 87 1 12 161 54 315 – 315
Other changes (a)
–
–
–
–
–
–
(1 )
(1 )
Balance at end of period
$ 1,476
$ 781
$ 520
$ 901
$ 626
$ 4,304
$ 34
$ 4,338
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
(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
2016
Balance at beginning of period $ 1,287 $ 724 $ 631 $ 883 $ 743 $ 4,268 $ 38 $ 4,306
Add
Provision for credit losses 438 53 (63 ) 514 42 984 (2 ) 982
Deduct
Loans charged off 322 19 67 559 243 1,210 – 1,210
Less recoveries of loans charged off
(73 )
(23 )
(19 )
(64 )
(84 )
(263 )
–
(263 )
Net loans charged off 249 (4 ) 48 495 159 947 – 947
Other changes (a)
–
–
–
(1 )
–
(1 )
(2 )
(3 )
Balance at end of period
$ 1,476
$ 781
$ 520
$ 901
$ 626
$ 4,304
$ 34
$ 4,338
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
(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, 2016 Related to
Loans individually evaluated for impairment (a) $ 56 $ 2 $ – $ – $ – $ 58 $ – $ 58
TDRs collectively evaluated for impairment 10 4 195 62 28 299 1 300
Other loans collectively evaluated for impairment 1,410 765 325 839 598 3,937 – 3,937
Loans acquired with deteriorated credit quality
–
10
–
–
–
10
33
43
Total allowance for credit losses
$ 1,476
$ 781
$ 520
$ 901
$ 626
$ 4,304
$ 34
$ 4,338
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
September 30, 2016
Loans individually evaluated for impairment (a) $ 600 $ 37 $ – $ – $ – $ 637 $ – $ 637
TDRs collectively evaluated for impairment 145 165 3,519 217 178 4,224 37 4,261
Other loans collectively evaluated for impairment 92,449 43,016 52,710 20,489 53,486 262,150 1,662 263,812
Loans acquired with deteriorated credit quality
7
250
–
–
–
257
2,322
2,579
Total loans
$ 93,201
$ 43,468
$ 56,229
$ 20,706
$ 53,664
$ 267,268
$ 4,021
$ 271,289
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 The credit
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, 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 they are 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, 2016
Commercial $ 92,414 $ 221 $ 49 $ 517 $ 93,201
Commercial real estate 43,320 36 7 105 43,468
Residential mortgages (a) 55,310 146 159 614 56,229
Credit card 20,209 264 229 4 20,706
Other retail
53,183
254
74
153
53,664
Total loans, excluding covered loans 264,436 921 518 1,393 267,268
Covered loans
3,729
55
230
7
4,021
Total loans
$ 268,165
$ 976
$ 748
$ 1,400
$ 271,289
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 September 30, 2016, $307
million of loans 30–89 days past due and $2.4 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 September 30, 2016, the amount of foreclosed residential real
estate held by the Company, and included in other real estate owned
(“OREO”), was $229 million ($201 million excluding
covered assets), compared with $282 million ($250 million excluding
covered assets) at December 31, 2015. This excludes $397
million and $535 million at September 30, 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 September 30, 2016 and
December 31, 2015, was $2.2 billion and $2.6 billion,
respectively, of which $1.6 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
September 30, 2016
Commercial (b) $ 89,289 $ 1,702 $ 2,210 $ 3,912 $ 93,201
Commercial real estate 42,204 512 752 1,264 43,468
Residential mortgages (c) 55,394 6 829 835 56,229
Credit card 20,474 – 232 232 20,706
Other retail
53,387
5
272
277
53,664
Total loans, excluding covered loans 260,748 2,225 4,295 6,520 267,268
Covered loans
3,946
–
75
75
4,021
Total loans
$ 264,694
$ 2,225
$ 4,370
$ 6,595
$ 271,289
Total outstanding commitments
$ 557,554
$ 4,805
$ 5,927
$ 10,732
$ 568,286
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 September 30, 2016, $1.4
billion of energy loans ($3.2 billion of total outstanding
commitments) had a special mention or classified rating, compared
with $1.1 billion of energy loans ($1.9 billion of total
outstanding commitments) at December 31, 2015.
(c) At September 30, 2016, $2.4
billion of GNMA loans 90 days or more past due and $1.3 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
September 30, 2016
Commercial $ 825 $ 1,354 $ 68 $ 378
Commercial real estate 379 790 8 1
Residential mortgages 2,363 2,952 165 –
Credit card 217 217 62 –
Other retail
281
457
30
3
Total loans, excluding GNMA and covered loans 4,065 5,770 333 382
Loans purchased from GNMA mortgage pools 1,344 1,344 31 –
Covered loans
38
43
1
1
Total
$ 5,447
$ 7,157
$ 365
$ 383
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 September 30, 2016 and December 31, 2015, had an
associated allowance for credit
losses.
Additional information on impaired loans follows:
2016
2015
(Dollars in Millions)
Average
Interest
Average
Interest
Three Months Ended September 30
Commercial $ 845 $ 2
$ 408 $ 3
Commercial real estate 334 6
388 3
Residential mortgages 2,381 30
2,669 31
Credit card 214 1
216 1
Other retail
287
3
329
3
Total loans, excluding GNMA and covered loans 4,061 42
4,010 41
Loans purchased from GNMA mortgage pools 1,458 23
2,040 24
Covered loans
38
–
42
–
Total
$ 5,557
$ 65
$ 6,092
$ 65
Nine Months Ended September 30
Commercial $ 786 $ 6
$ 351 $ 9
Commercial real estate 321 12
461 13
Residential mortgages 2,457 93
2,687 97
Credit card 212 3
224 4
Other retail
296
9
342
10
Total loans, excluding GNMA and covered loans 4,072 123
4,065 133
Loans purchased from GNMA mortgage pools 1,674 71
2,120 74
Covered loans
38
1
42
–
Total
$ 5,784
$ 195
$ 6,227
$ 207
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
(Dollars in Millions)
Number
Pre-Modification
Post-Modification
Number
Pre-Modification
Post-Modification
Three Months Ended September 30
Commercial 638 $ 200 $ 169
381 $ 111 $ 102
Commercial real estate 26 225 223
35 24 23
Residential mortgages 700 81 87
381 48 47
Credit card 8,051 38 40
7,289 35 36
Other retail
593
9
9
690
19
19
Total loans, excluding GNMA and covered loans 10,008 553 528
8,776 237 227
Loans purchased from GNMA mortgage pools 2,609 317 308
1,986 244 245
Covered loans
15
3
3
4
1
1
Total loans
12,632
$ 873
$ 839
10,766
$ 482
$ 473
Nine Months Ended September 30
Commercial 1,734 $ 692 $ 567
1,170 $ 227 $ 223
Commercial real estate 70 242 240
89 64 62
Residential mortgages 1,192 129 136
1,820 234 232
Credit card 22,693 109 111
19,978 100 101
Other retail
1,669
27
28
1,974
42
42
Total loans, excluding GNMA and covered loans 27,358 1,199 1,082
25,031 667 660
Loans purchased from GNMA mortgage pools 6,978 770 761
5,960 732 731
Covered loans
35
6
6
13
4
4
Total loans
34,371
$ 1,975
$ 1,849
31,004
$ 1,403
$ 1,395
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 2016, at September 30, 2016,
526 residential mortgages, 7 home equity and second mortgage
loans and 510 loans purchased from GNMA mortgage pools with
outstanding balances of $50 million, less than $1 million and
$68 million, respectively, were in a trial period and have
estimated post-modification balances of $64 million, less than
$1 million and $67 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 peri |
