| 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, 2017
December 31,
2016
(Dollars in Millions)
Amount
Percent
Amount
Percent
Commercial
Commercial $ 88,883 32.5 %
$ 87,928 32.2 %
Lease financing
5,608
2.0
5,458
2.0
Total commercial 94,491 34.5
93,386 34.2
Commercial Real Estate
Commercial mortgages 31,046 11.4
31,592 11.6
Construction and development
11,786
4.3
11,506
4.2
Total commercial real estate 42,832 15.7
43,098 15.8
Residential Mortgages
Residential mortgages 44,667 16.3
43,632 16.0
Home equity loans, first liens
13,599
5.0
13,642
5.0
Total residential mortgages 58,266 21.3
57,274 21.0
Credit Card 20,387 7.5
21,749 7.9
Other Retail
Retail leasing 6,793 2.5
6,316 2.3
Home equity and second mortgages 16,163 5.9
16,369 6.0
Revolving credit 3,164 1.1
3,282 1.2
Installment 8,179 3.0
8,087 3.0
Automobile 17,522 6.4
17,571 6.4
Student
2,145
.8
2,239
.8
Total other retail
53,966
19.7
53,864
19.7
Total loans, excluding covered loans 269,942 98.7
269,371 98.6
Covered Loans
3,635
1.3
3,836
1.4
Total loans
$ 273,577
100.0 %
$ 273,207
100.0 %
The Company had loans of $83.2 billion at March 31, 2017,
and $84.5 billion at December 31, 2016, pledged at the
Federal Home Loan Bank, and loans of $66.3 billion at
March 31, 2017, and $66.5 billion at December 31,
2016, 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 $734 million
at March 31, 2017, and $672 million at December 31,
2016. 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)
2017
2016
Balance at beginning of period $ 698 $ 957
Accretion (90 ) (92 )
Disposals (23 ) (21 )
Reclassifications from nonaccretable difference (a) 53 169
Other
(1 )
–
Balance at end of period
$ 637
$ 1,013
(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 16-year
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
The allowance for the covered loan segment is evaluated each
quarter in a manner similar to that described for non-covered
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 and other
relevant business practices; results of internal review; 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 off-balance
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, 2016 $ 1,450 $ 812 $ 510 $ 934 $ 617 $ 4,323 $ 34 $ 4,357
Add
Provision for credit losses 54 28 (13 ) 211 65 345 – 345
Deduct
Loans charged-off 96 3 17 212 89 417 – 417
Less recoveries of loans charged-off
(21 )
(5 )
(5 )
(22 )
(29 )
(82 )
–
(82 )
Net loans charged-off 75 (2 ) 12 190 60 335 – 335
Other changes (a)
–
–
–
–
–
–
(1 )
(1 )
Balance at March 31, 2017
$ 1,429
$ 842
$ 485
$ 955
$ 622
$ 4,333
$ 33
$ 4,366
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
(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, 2017 Related to
Loans individually evaluated for impairment (a) $ 50 $ 4 $ – $ – $ – $ 54 $ – $ 54
TDRs collectively evaluated for impairment 17 3 162 65 17 264 1 265
Other loans collectively evaluated for impairment 1,362 830 323 890 605 4,010 – 4,010
Loans acquired with deteriorated credit quality
–
5
–
–
–
5
32
37
Total allowance for credit losses
$ 1,429
$ 842
$ 485
$ 955
$ 622
$ 4,333
$ 33
$ 4,366
Allowance Balance at December 31, 2016 Related to
Loans individually evaluated for impairment (a) $ 50 $ 4 $ – $ – $ – $ 54 $ – $ 54
TDRs collectively evaluated for impairment 12 4 180 65 20 281 1 282
Other loans collectively evaluated for impairment 1,388 798 330 869 597 3,982 – 3,982
Loans acquired with deteriorated credit quality
–
6
–
–
–
6
33
39
Total allowance for credit losses
$ 1,450
$ 812
$ 510
$ 934
$ 617
$ 4,323
$ 34
$ 4,357
(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, 2017
Loans individually evaluated for impairment (a) $ 534 $ 62 $ – $ – $ – $ 596 $ – $ 596
TDRs collectively evaluated for impairment 170 131 3,749 229 169 4,448 34 4,482
Other loans collectively evaluated for impairment 93,780 42,523 54,516 20,158 53,796 264,773 1,421 266,194
Loans acquired with deteriorated credit quality
7
116
1
–
1
125
2,180
2,305
Total loans
$ 94,491
$ 42,832
$ 58,266
$ 20,387
$ 53,966
$ 269,942
$ 3,635
$ 273,577
December 31, 2016
Loans individually evaluated for impairment (a) $ 623 $ 70 $ – $ – $ – $ 693 $ – $ 693
TDRs collectively evaluated for impairment 145 146 3,678 222 173 4,364 35 4,399
Other loans collectively evaluated for impairment 92,611 42,751 53,595 21,527 53,691 264,175 1,553 265,728
Loans acquired with deteriorated credit quality
7
131
1
–
–
139
2,248
2,387
Total loans
$ 93,386
$ 43,098
$ 57,274
$ 21,749
$ 53,864
$ 269,371
$ 3,836
$ 273,207
(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 1-4 charge-off 1-4 family charged-off. charged-off 1-4 charged-off charged-off charge-off.
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 charged-off)
Covered loans not considered to be purchased impaired are evaluated
for delinquency, nonaccrual status and charge-off
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, 2017
Commercial $ 93,784 $ 216 $ 52 $ 439 $ 94,491
Commercial real estate 42,653 65 4 110 42,832
Residential mortgages (a) 57,429 120 142 575 58,266
Credit card 19,882 252 251 2 20,387
Other retail
53,486
248
75
157
53,966
Total loans, excluding covered loans 267,234 901 524 1,283 269,942
Covered loans
3,389
45
194
7
3,635
Total loans
$ 270,623
$ 946
$ 718
$ 1,290
$ 273,577
December 31, 2016
Commercial $ 92,588 $ 263 $ 52 $ 483 $ 93,386
Commercial real estate 42,922 44 8 124 43,098
Residential mortgages (a) 56,372 151 156 595 57,274
Credit card 21,209 284 253 3 21,749
Other retail
53,340
284
83
157
53,864
Total loans, excluding covered loans 266,431 1,026 552 1,362 269,371
Covered loans
3,563
55
212
6
3,836
Total loans
$ 269,994
$ 1,081
$ 764
$ 1,368
$ 273,207
(a) At March 31, 2017,
$221 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 United States Department of Veterans Affairs,
were classified as current, compared with $273 million and $2.5
billion at December 31, 2016, respectively.
At March 31, 2017, the amount of foreclosed residential real
estate held by the Company, and included in other real estate owned
(“OREO”), was $168 million ($146 million
excluding covered assets), compared with $201 million
($175 million excluding covered assets) at December 31,
2016. These amounts exclude $360 million and $373 million
at March 31, 2017 and December 31, 2016, respectively, of
foreclosed residential real estate related to mortgage loans whose
payments are primarily insured by the Federal Housing
Administration or guaranteed by the United States 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, 2017 and December 31, 2016, was
$2.1 billion, of which $1.6 billion 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 United
States 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 loans 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, 2017
Commercial (b) $ 90,899 $ 1,820 $ 1,772 $ 3,592 $ 94,491
Commercial real estate 41,371 698 763 1,461 42,832
Residential mortgages (c) 57,486 4 776 780 58,266
Credit card 20,134 – 253 253 20,387
Other retail
53,690
2
274
276
53,966
Total loans, excluding covered loans 263,580 2,524 3,838 6,362 269,942
Covered loans
3,569
–
66
66
3,635
Total loans
$ 267,149
$ 2,524
$ 3,904
$ 6,428
$ 273,577
Total outstanding commitments
$ 566,122
$ 5,215
$ 5,392
$ 10,607
$ 576,729
December 31, 2016
Commercial (b) $ 89,739 $ 1,721 $ 1,926 $ 3,647 $ 93,386
Commercial real estate 41,634 663 801 1,464 43,098
Residential mortgages (c) 56,457 10 807 817 57,274
Credit card 21,493 – 256 256 21,749
Other retail
53,576
6
282
288
53,864
Total loans, excluding covered loans 262,899 2,400 4,072 6,472 269,371
Covered loans
3,766
–
70
70
3,836
Total loans
$ 266,665
$ 2,400
$ 4,142
$ 6,542
$ 273,207
Total outstanding commitments
$ 562,704
$ 4,920
$ 5,629
$ 10,549
$ 573,253
(a) Classified rating on consumer
loans primarily based on delinquency status.
(b) At March 31, 2017,
$1.0 billion of energy loans ($2.8 billion of total
outstanding commitments) had a special mention or classified
rating, compared with $1.2 billion of energy loans ($2.8 billion of
total outstanding commitments) at December 31, 2016.
(c) At March 31, 2017,
$2.4 billion of GNMA loans 90 days or more past due and
$1.7 billion of restructured GNMA loans whose repayments are
insured by the Federal Housing Administration or guaranteed by the
United States Department of Veterans Affairs were classified with a
pass rating, compared with $2.5 billion and $1.6 billion
at December 31, 2016, 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, 2017
Commercial $ 784 $ 1,168 $ 69 $ 365
Commercial real estate 263 624 9 –
Residential mortgages 2,206 2,700 129 –
Credit card 229 229 65 –
Other retail
279
455
19
3
Total loans, excluding GNMA and covered loans 3,761 5,176 291 368
Loans purchased from GNMA mortgage pools 1,717 1,717 34 –
Covered loans
36
43
1
1
Total
$ 5,514
$ 6,936
$ 326
$ 369
December 31, 2016
Commercial $ 849 $ 1,364 $ 68 $ 284
Commercial real estate 293 697 10 –
Residential mortgages 2,274 2,847 153 –
Credit card 222 222 64 –
Other retail
281
456
22
4
Total loans, excluding GNMA and covered loans 3,919 5,586 317 288
Loans purchased from GNMA mortgage pools 1,574 1,574 28 –
Covered loans
36
42
1
1
Total
$ 5,529
$ 7,202
$ 346
$ 289
(a) Substantially all loans classified
as impaired at March 31, 2017 and December 31, 2016, had
an associated allowance for credit losses.
Additional information on impaired loans follows:
2017
2016
Three Months Ended March 31,
(Dollars in Millions)
Average
Interest
Average
Interest
Commercial $ 817 $ 1
$ 670 $ 1
Commercial real estate 278 2
326 3
Residential mortgages 2,240 29
2,539 32
Credit card 225 1
211 1
Other retail
280
4
305
3
Total loans, excluding GNMA and covered loans 3,840 37
4,051 40
Loans purchased from GNMA mortgage pools 1,646 18
1,867 25
Covered loans
36
–
39
–
Total
$ 5,522
$ 55
$ 5,957
$ 65
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:
2017
2016
Three Months Ended March 31,
(Dollars in Millions)
Number
Pre-Modification
Post-Modification
Number
Pre-Modification
Post-Modification
Commercial 830 $ 137 $ 128
601 $ 160 $ 161
Commercial real estate 23 9 8
24 7 7
Residential mortgages 356 40 41
278 32 32
Credit card 9,405 45 46
7,988 38 39
Other retail
622
11
9
609
11
11
Total loans, excluding GNMA and covered loans 11,236 242 232
9,500 248 250
Loans purchased from GNMA mortgage pools 2,929 387 378
2,868 313 311
Covered loans
4
1
1
3
–
–
Total loans
14,169
$ 630
$ 611
12,371
$ 561
$ 561
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 2017, at March 31, 2017,
206 residential mortgages, 20 home equity and second mortgage
loans and 2,636 loans purchased from GNMA mortgage pools with
outstanding balances of $26 million, $1 million and
$351 million, respectively, were in a trial period and have
estimated post-modification balances of $27 million,
$1 million and $342 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
For the commercial lending segment, modifications generally result
in the Company working with borrowers on a case-by-case
Modifications for the consumer lending segment are generally part
of programs the Company has initiated. The Company modifies
residential mortgage loans under Federal Housing Administration,
United States Department of Veterans Affairs, or its own internal
programs. Under these programs, the Company offers qualifying
homeowners the opportunity to permanently modify their loan and
achieve more affordable monthly payments by providing loan
concessions. These 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
The following table provides a summary of TDR loans that defaulted
(fully or partially charged-off
2017
2016
Three Months Ended March 31,
(Dollars in Millions)
Number
Amount
Number
Amount
Commercial 173 $ 8
112 $ 2
Commercial real estate 8 2
10 5
Residential mortgages 72 9
31 5
Credit card 2,047 9
1,573 7
Other retail
129
2
78
1
Total loans, excluding GNMA and covered loans 2,429 30
1,804 20
Loans purchased from GNMA mortgage pools 218 30
26 3
Covered loans
–
–
–
–
Total loans
2,647
$ 60
1,830
$ 23
In addition to the defaults in the table above, the Company had a
total of 426 residential mortgage loans, home equity and second
mortgage loans and loans purchased from GNMA mortgage pools for the
three months ended March 31, 2017, 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. These loans had aggregate
outstanding balances of $51 million for three months ended
March 31, 2017.
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, 2017
December 31, 2016
(Dollars in Millions)
Purchased
Purchased
Other
Total
Purchased
Purchased
Other
Total
Residential mortgage loans $ 2,180 $ 475 $ – $ 2,655
$ 2,248 $ 506 $ – $ 2,754
Other retail loans – 238 – 238
– 278 – 278
Losses reimbursable by the FDIC (a) – – 338 338
– – 381 381
Unamortized changes in FDIC asset (b)
–
–
404
404
–
–
423
423
Covered loans 2,180 713 742 3,635
2,248 784 804 3,836
Foreclosed real estate
–
–
22
22
–
–
26
26
Total covered assets
$ 2,180
$ 713
$ 764
$ 3,657
$ 2,248
$ 784
$ 830
$ 3,862
(a) Relates to loss sharing agreements
with remaining terms up to two years.
(b) Represents decreases in expected
reimbursements by the FDIC as a result of decreases in expected
losses on the covered loans. These amounts are amortized as a
reduction in interest income on covered loans over the shorter of
the expected life of the respective covered loans or the remaining
contractual term of the indemnification agreements.
Interest income is recognized on purchased impaired loans through
accretion of the difference between the carrying amount of those
loans and their expected cash flows. The initial determination of
the fair value of the purchased loans includes the impact of
expected credit losses and, therefore, no allowance for credit
losses is recorded at the purchase date. To the extent credit
deterioration occurs after the date of acquisition, the Company
records an allowance for credit losses. |
