| 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:
June 30, 2017
December 31,
2016
(Dollars in Millions)
Amount
Percent
Amount
Percent
Commercial
Commercial $ 91,212 32.9 %
$ 87,928 32.2 %
Lease financing
5,624
2.0
5,458
2.0
Total commercial 96,836 34.9
93,386 34.2
Commercial Real Estate
Commercial mortgages 30,198 10.9
31,592 11.6
Construction and development
11,710
4.2
11,506
4.2
Total commercial real estate 41,908 15.1
43,098 15.8
Residential Mortgages
Residential mortgages 45,412 16.4
43,632 16.0
Home equity loans, first liens
13,384
4.8
13,642
5.0
Total residential mortgages 58,796 21.2
57,274 21.0
Credit Card 20,861 7.6
21,749 7.9
Other Retail
Retail leasing 7,569 2.7
6,316 2.3
Home equity and second mortgages 16,310 5.9
16,369 6.0
Revolving credit 3,209 1.2
3,282 1.2
Installment 8,602 3.1
8,087 3.0
Automobile 17,695 6.4
17,571 6.4
Student
2,060
.7
2,239
.8
Total other retail
55,445
20.0
53,864
19.7
Total loans, excluding covered loans 273,846 98.8
269,371 98.6
Covered Loans
3,437
1.2
3,836
1.4
Total loans
$ 277,283
100.0 %
$ 273,207
100.0 %
The Company had loans of $85.1 billion at June 30, 2017,
and $84.5 billion at December 31, 2016, pledged at the
Federal Home Loan Bank, and loans of $65.9 billion at
June 30, 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 $813 million
at June 30, 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
Six Months Ended
(Dollars in Millions)
2017
2016
2017
2016
Balance at beginning of period $ 637 $ 1,013
$ 698 $ 957
Accretion (89 ) (103 )
(179 ) (195 )
Disposals (28 ) (33 )
(51 ) (54 )
Reclassifications from nonaccretable difference (a) 30 14
83 183
Other
(4 )
–
(5 )
–
Balance at end of period
$ 546
$ 891
$ 546
$ 891
(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 earnings
and reduced by net charge-offs. Management evaluates the adequacy
of the allowance for incurred losses on a quarterly
basis.
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. 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 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 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 June 30,
(Dollars in Millions)
Commercial
Commercial
Residential
Credit
Other
Total Loans,
Covered
Total
2017
Balance at beginning of period $ 1,429 $ 842 $ 485 $ 955 $ 622 $ 4,333 $ 33 $ 4,366
Add
Provision for credit losses 44 5 (22 ) 239 85 351 (1 ) 350
Deduct
Loans charged-off 104 2 16 227 88 437 – 437
Less recoveries of loans charged-off
(26 )
(11 )
(8 )
(23 )
(29 )
(97 )
–
(97 )
Net loans charged-off 78 (9 ) 8 204 59 340 – 340
Other changes (a)
–
–
–
–
–
–
1
1
Balance at end of period
$ 1,395
$ 856
$ 455
$ 990
$ 648
$ 4,344
$ 33
$ 4,377
2016
Balance at beginning of period $ 1,441 $ 734 $ 556 $ 875 $ 678 $ 4,284 $ 36 $ 4,320
Add
Provision for credit losses 111 14 5 179 16 325 2 327
Deduct
Loans charged-off 107 7 25 189 79 407 – 407
Less recoveries of loans charged-off
(28 )
(7 )
(8 )
(19 )
(28 )
(90 )
–
(90 )
Net loans charged-off 79 – 17 170 51 317 – 317
Other changes (a)
–
–
–
–
–
–
(1 )
(1 )
Balance at end of period
$ 1,473
$ 748
$ 544
$ 884
$ 643
$ 4,292
$ 37
$ 4,329
(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.
Six Months Ended June 30,
(Dollars in Millions)
Commercial
Commercial
Residential
Credit
Other
Total Loans,
Covered
Total
2017
Balance at beginning of period $ 1,450 $ 812 $ 510 $ 934 $ 617 $ 4,323 $ 34 $ 4,357
Add
Provision for credit losses 98 33 (35 ) 450 150 696 (1 ) 695
Deduct
Loans charged-off 200 5 33 439 177 854 – 854
Less recoveries of loans charged-off
(47 )
(16 )
(13 )
(45 )
(58 )
(179 )
–
(179 )
Net loans charged-off 153 (11 ) 20 394 119 675 – 675
Other changes (a)
–
–
–
–
–
–
–
–
Balance at end of period
$ 1,395
$ 856
$ 455
$ 990
$ 648
$ 4,344
$ 33
$ 4,377
2016
Balance at beginning of period $ 1,287 $ 724 $ 631 $ 883 $ 743 $ 4,268 $ 38 $ 4,306
Add
Provision for credit losses 348 19 (51 ) 336 5 657 – 657
Deduct
Loans charged-off 218 10 48 377 159 812 – 812
Less recoveries of loans charged-off
(56 )
(15 )
(12 )
(43 )
(54 )
(180 )
–
(180 )
Net loans charged-off 162 (5 ) 36 334 105 632 – 632
Other changes (a)
–
–
–
(1 )
–
(1 )
(1 )
(2 )
Balance at end of period
$ 1,473
$ 748
$ 544
$ 884
$ 643
$ 4,292
$ 37
$ 4,329
(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 June 30, 2017 Related to
Loans individually evaluated for impairment (a) $ 33 $ 3 $ – $ – $ – $ 36 $ – $ 36
TDRs collectively evaluated for impairment 14 4 151 64 20 253 1 254
Other loans collectively evaluated for impairment 1,348 844 304 926 628 4,050 – 4,050
Loans acquired with deteriorated credit quality
–
5
–
–
–
5
32
37
Total allowance for credit losses
$ 1,395
$ 856
$ 455
$ 990
$ 648
$ 4,344
$ 33
$ 4,377
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
June 30, 2017
Loans individually evaluated for impairment (a) $ 421 $ 62 $ – $ – $ – $ 483 $ – $ 483
TDRs collectively evaluated for impairment 166 146 3,780 230 168 4,490 33 4,523
Other loans collectively evaluated for impairment 96,249 41,622 55,016 20,631 55,276 268,794 1,290 270,084
Loans acquired with deteriorated credit quality
–
78
–
–
1
79
2,114
2,193
Total loans
$ 96,836
$ 41,908
$ 58,796
$ 20,861
$ 55,445
$ 273,846
$ 3,437
$ 277,283
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 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. Residential
mortgage loans and lines in a first lien position are placed on
nonaccrual status in instances where a partial charge-off occurs
unless the loan is well secured and in the process of collection.
Residential mortgage loans and lines in a junior lien position
secured by 1-4 family
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
June 30, 2017
Commercial $ 96,205 $ 258 $ 51 $ 322 $ 96,836
Commercial real estate 41,753 34 2 119 41,908
Residential mortgages (a) 58,022 126 118 530 58,796
Credit card 20,377 254 229 1 20,861
Other retail
54,935
275
77
158
55,445
Total loans, excluding covered loans 271,292 947 477 1,130 273,846
Covered loans
3,214
49
162
12
3,437
Total loans
$ 274,506
$ 996
$ 639
$ 1,142
$ 277,283
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 June 30, 2017, $240 million of
loans 30–89 days past due and $2.1 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 June 30, 2017, the amount of foreclosed residential real
estate held by the Company, and included in other real estate owned
(“OREO”), was $174 million ($149 million
excluding covered assets), compared with $201 million
($175 million excluding covered assets) at December 31,
2016. These amounts exclude $338 million and $373 million
at June 30, 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 June 30, 2017 and December 31, 2016, was
$1.9 billion and $2.1 billion, respectively, of which $1.5
billion and $1.6 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 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
June 30, 2017
Commercial (b) $ 93,770 $ 1,455 $ 1,611 $ 3,066 $ 96,836
Commercial real estate 40,404 650 854 1,504 41,908
Residential mortgages (c) 58,101 3 692 695 58,796
Credit card 20,630 – 231 231 20,861
Other retail
55,160
10
275
285
55,445
Total loans, excluding covered loans 268,065 2,118 3,663 5,781 273,846
Covered loans
3,376
–
61
61
3,437
Total loans
$ 271,441
$ 2,118
$ 3,724
$ 5,842
$ 277,283
Total outstanding commitments
$ 569,478
$ 3,588
$ 5,044
$ 8,632
$ 578,110
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 June 30, 2017, $784
million of energy loans ($1.7 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 June 30, 2017, $2.1
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 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
June 30, 2017
Commercial $ 656 $ 1,133 $ 50 $ 250
Commercial real estate 281 581 11 1
Residential mortgages 2,158 2,587 127 1
Credit card 230 230 64 –
Other retail
278
474
21
3
Total loans, excluding GNMA and covered loans 3,603 5,005 273 255
Loans purchased from GNMA mortgage pools 1,774 1,774 25 –
Covered loans
41
46
1
–
Total
$ 5,418
$ 6,825
$ 299
$ 255
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 June 30, 2017 and December 31, 2016, had
an associated allowance for credit losses.
Additional information on impaired loans follows:
2017
2016
(Dollars in Millions)
Average
Interest
Average
Interest
Three Months Ended June 30
Commercial $ 720 $ 1
$ 842 $ 3
Commercial real estate 272 3
302 3
Residential mortgages 2,182 28
2,452 31
Credit card 229 1
212 1
Other retail
279
3
297
3
Total loans, excluding GNMA and covered loans 3,682 36
4,105 41
Loans purchased from GNMA mortgage pools 1,746 19
1,696 23
Covered loans
38
–
38
1
Total
$ 5,466
$ 55
$ 5,839
$ 65
Six Months Ended June 30
Commercial $ 769 $ 2
$ 756 $ 4
Commercial real estate 275 5
314 6
Residential mortgages 2,211 57
2,496 63
Credit card 227 2
211 2
Other retail
279
7
301
6
Total loans, excluding GNMA and covered loans 3,761 73
4,078 81
Loans purchased from GNMA mortgage pools 1,696 37
1,782 48
Covered loans
37
–
38
1
Total
$ 5,494
$ 110
$ 5,898
$ 130
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
(Dollars in Millions)
Number
Pre-Modification
Post-Modification
Number
Pre-Modification
Post-Modification
Three Months Ended June 30
Commercial 671 $ 62 $ 40
495 $ 332 $ 237
Commercial real estate 41 29 31
20 10 10
Residential mortgages 144 17 16
214 16 17
Credit card 8,146 40 40
6,654 33 32
Other retail
639
15
14
467
7
8
Total loans, excluding GNMA and covered loans 9,641 163 141
7,850 398 304
Loans purchased from GNMA mortgage pools 1,043 141 137
1,501 140 142
Covered loans
3
1
1
17
3
3
Total loans
10,687
$ 305
$ 279
9,368
$ 541
$ 449
Six Months Ended June 30
Commercial 1,501 $ 199 $ 168
1,096 $ 492 $ 398
Commercial real estate 64 38 39
44 17 17
Residential mortgages 500 57 57
492 48 49
Credit card 17,551 85 86
14,642 71 71
Other retail
1,261
26
23
1,076
18
19
Total loans, excluding GNMA and covered loans 20,877 405 373
17,350 646 554
Loans purchased from GNMA mortgage pools 3,972 528 515
4,369 453 453
Covered loans
7
2
2
20
3
3
Total loans
24,856
$ 935
$ 890
21,739
$ 1,102
$ 1,010
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 second quarter of 2017, at June 30, 2017,
79 residential mortgages, 37 home equity and second mortgage
loans and 1,000 loans purchased from GNMA mortgage pools with
outstanding balances of $12 million, $4 million and
$136 million, respectively, were in a trial period and have
estimated post-modification balances of $12 million,
$4 million and $132 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 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 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:
2017
2016
(Dollars in Millions)
Number
Amount
Number
Amount
Three Months Ended June 30
Commercial 182 $ 16
141 $ 9
Commercial real estate 10 1
5 1
Residential mortgages 95 10
27 4
Credit card 1,984 8
1,632 7
Other retail
102
1
88
3
Total loans, excluding GNMA and covered loans 2,373 36
1,893 24
Loans purchased from GNMA mortgage pools 139 19
28 4
Covered loans
1
–
1
|
