| 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,
2017
December 31,
2016
(Dollars in Millions)
Amount
Percent
Amount
Percent
Commercial
Commercial $ 91,449 32.8 %
$ 87,928 32.2 %
Lease financing
5,479
2.0
5,458
2.0
Total commercial 96,928 34.8
93,386 34.2
Commercial Real Estate
Commercial mortgages 29,902 10.7
31,592 11.6
Construction and development
11,528
4.1
11,506
4.2
Total commercial real estate 41,430 14.8
43,098 15.8
Residential Mortgages
Residential mortgages 46,107 16.6
43,632 16.0
Home equity loans, first liens
13,210
4.7
13,642
5.0
Total residential mortgages 59,317 21.3
57,274 21.0
Credit Card 20,923 7.5
21,749 7.9
Other Retail
Retail leasing 7,923 2.8
6,316 2.3
Home equity and second mortgages 16,308 5.9
16,369 6.0
Revolving credit 3,225 1.2
3,282 1.2
Installment 8,900 3.2
8,087 3.0
Automobile 18,530 6.6
17,571 6.4
Student
1,973
.7
2,239
.8
Total other retail
56,859
20.4
53,864
19.7
Total loans, excluding covered loans 275,457 98.8
269,371 98.6
Covered Loans
3,262
1.2
3,836
1.4
Total loans
$ 278,719
100.0 %
$ 273,207
100.0 %
The Company had loans of $85.2 billion at September 30,
2017, and $84.5 billion at December 31, 2016, pledged at
the Federal Home Loan Bank, and loans of $66.8 billion at
September 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 $825 million
at September 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
Nine Months Ended
(Dollars in Millions)
2017
2016
2017
2016
Balance at beginning of period $ 546 $ 891
$ 698 $ 957
Accretion (107 ) (102 )
(286 ) (297 )
Disposals (17 ) (23 )
(68 ) (77 )
Reclassifications from nonaccretable difference (a) 47 31
130 214
Other
(3 )
–
(8 )
–
Balance at end of period
$ 466
$ 797
$ 466
$ 797
(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
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:
Three Months Ended September 30,
(Dollars in Millions)
Commercial
Commercial
Residential
Credit
Other
Total Loans,
Covered
Total
2017
Balance at beginning of period $ 1,395 $ 856 $ 455 $ 990 $ 648 $ 4,344 $ 33 $ 4,377
Add
Provision for credit losses 71 (12 ) 2 216 84 361 (1 ) 360
Deduct
Loans charged-off 115 2 16 214 86 433 – 433
Less recoveries of loans charged-off
(32 )
(9 )
(9 )
(27 )
(26 )
(103 )
–
(103 )
Net loans charged-off 83 (7 ) 7 187 60 330 – 330
Other changes (a)
–
–
–
–
–
–
–
–
Balance at end of period
$ 1,383
$ 851
$ 450
$ 1,019
$ 672
$ 4,375
$ 32
$ 4,407
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
(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
2017
Balance at beginning of period $ 1,450 $ 812 $ 510 $ 934 $ 617 $ 4,323 $ 34 $ 4,357
Add
Provision for credit losses 169 21 (33 ) 666 234 1,057 (2 ) 1,055
Deduct
Loans charged-off 315 7 49 653 263 1,287 – 1,287
Less recoveries of loans charged-off
(79 )
(25 )
(22 )
(72 )
(84 )
(282 )
–
(282 )
Net loans charged-off 236 (18 ) 27 581 179 1,005 – 1,005
Other changes (a)
–
–
–
–
–
–
–
–
Balance at end of period
$ 1,383
$ 851
$ 450
$ 1,019
$ 672
$ 4,375
$ 32
$ 4,407
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
(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, 2017 Related to
Loans individually evaluated for impairment (a) $ 25 $ 2 $ – $ – $ – $ 27 $ – $ 27
TDRs collectively evaluated for impairment 12 4 139 62 16 233 1 234
Other loans collectively evaluated for impairment 1,346 840 311 957 656 4,110 – 4,110
Loans acquired with deteriorated credit quality
–
5
–
–
–
5
31
36
Total allowance for credit losses
$ 1,383
$ 851
$ 450
$ 1,019
$ 672
$ 4,375
$ 32
$ 4,407
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
September 30, 2017
Loans individually evaluated for impairment (a) $ 386 $ 44 $ – $ – $ – $ 430 $ – $ 430
TDRs collectively evaluated for impairment 138 143 3,509 231 185 4,206 33 4,239
Other loans collectively evaluated for impairment 96,404 41,166 55,807 20,692 56,673 270,742 1,177 271,919
Loans acquired with deteriorated credit quality
–
77
1
–
1
79
2,052
2,131
Total loans
$ 96,928
$ 41,430
$ 59,317
$ 20,923
$ 56,859
$ 275,457
$ 3,262
$ 278,719
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
September 30, 2017
Commercial $ 96,389 $ 218 $ 52 $ 269 $ 96,928
Commercial real estate 41,242 62 4 122 41,430
Residential mortgages (a) 58,581 155 107 474 59,317
Credit card 20,375 296 251 1 20,923
Other retail
56,282
331
83
163
56,859
Total loans, excluding covered loans 272,869 1,062 497 1,029 275,457
Covered loans
3,056
48
152
6
3,262
Total loans
$ 275,925
$ 1,110
$ 649
$ 1,035
$ 278,719
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 September 30, 2017,
$297 million of loans 30–89 days past due and
$1.8 billion of loans 90 days or more past due purchased from
Government National Mortgage Association (“GNMA”)
mortgage pools whose repayments are insured by the Federal Housing
Administration or guaranteed by the United States Department of
Veterans Affairs, were classified as current, compared with
$273 million and $2.5 billion at December 31, 2016,
respectively.
At September 30, 2017, the amount of foreclosed residential
real estate held by the Company, and included in other real estate
owned (“OREO”), was $182 million
($156 million excluding covered assets), compared with
$201 million ($175 million excluding covered assets) at
December 31, 2016. These amounts exclude $300 million and
$373 million at September 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 September 30, 2017 and
December 31, 2016, was $1.7 billion and
$2.1 billion, respectively, of which $1.3 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
September 30, 2017
Commercial (b) $ 94,127 $ 1,328 $ 1,473 $ 2,801 $ 96,928
Commercial real estate 39,998 640 792 1,432 41,430
Residential mortgages (c) 58,671 3 643 646 59,317
Credit card 20,671 – 252 252 20,923
Other retail
56,567
5
287
292
56,859
Total loans, excluding covered loans 270,034 1,976 3,447 5,423 275,457
Covered loans
3,209
–
53
53
3,262
Total loans
$ 273,243
$ 1,976
$ 3,500
$ 5,476
$ 278,719
Total outstanding commitments
$ 579,628
$ 3,232
$ 4,684
$ 7,916
$ 587,544
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 September 30, 2017,
$611 million of energy loans ($1.3 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 September 30, 2017,
$1.8 billion of GNMA loans 90 days or more past due and
$1.6 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
September 30, 2017
Commercial $ 592 $ 1,040 $ 39 $ 168
Commercial real estate 263 545 11 –
Residential mortgages 2,064 2,471 121 1
Credit card 231 231 62 –
Other retail
298
508
19
4
Total loans, excluding GNMA and covered loans 3,448 4,795 252 173
Loans purchased from GNMA mortgage pools 1,571 1,571 20 –
Covered loans
35
43
1
–
Total
$ 5,054
$ 6,409
$ 273
$ 173
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 September 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 September 30
Commercial $ 624 $ 3
$ 845 $ 2
Commercial real estate 272 2
334 6
Residential mortgages 2,111 25
2,381 30
Credit card 231 1
214 1
Other retail
288
4
287
3
Total loans, excluding GNMA and covered loans 3,526 35
4,061 42
Loans purchased from GNMA mortgage pools 1,672 17
1,458 23
Covered loans
38
–
38
–
Total
$ 5,236
$ 52
$ 5,557
$ 65
Nine Months Ended September 30
Commercial $ 720 $ 5
$ 786 $ 6
Commercial real estate 274 7
321 12
Residential mortgages 2,178 82
2,457 93
Credit card 229 3
212 3
Other retail
282
11
296
9
Total loans, excluding GNMA and covered loans 3,683 108
4,072 123
Loans purchased from GNMA mortgage pools 1,688 54
1,674 71
Covered loans
37
–
38
1
Total
$ 5,408
$ 162
$ 5,784
$ 195
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 September 30
Commercial 616 $ 40 $ 27
638 $ 200 $ 169
Commercial real estate 29 18 16
26 225 223
Residential mortgages 141 15 16
700 81 87
Credit card 8,106 38 38
8,051 38 40
Other retail
1,949
39
32
593
9
9
Total loans, excluding GNMA and covered loans 10,841 150 129
10,008 553 528
Loans purchased from GNMA mortgage pools 1,340 169 171
2,609 317 308
Covered loans
3
–
–
15
3
3
Total loans
12,184
$ 319
$ 300
12,632
$ 873
$ 839
Nine Months Ended September 30
Commercial 2,117 $ 239 $ 195
1,734 $ 692 $ 567
Commercial real estate 93 56 55
70 242 240
Residential mortgages 641 72 73
1,192 129 136
Credit card 25,657 123 124
22,693 109 111
Other retail
3,210
65
55
1,669
27
28
Total loans, excluding GNMA and covered loans 31,718 555 502
27,358 1,199 1,082
Loans purchased from GNMA mortgage pools 5,312 697 686
6,978 770 761
Covered loans
10
2
2
35
6
6
Total loans
37,040
$ 1,254
$ 1,190
34,371
$ 1,975
$ 1,849
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 2017, at September 30, 2017, 61
residential mortgages, 46 home equity and second mortgage loans and
932 loans purchased from GNMA mortgage pools with outstanding
balances of $8 million, $4 million and $122 million,
respectively, were in a trial period and have estimated
post-modification balances of $9 million, $4 million and
$123 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
(Dollars in Millions)
Number
Amount
Number
Amount
Three Months Ended September 30
Commercial 200 $ 25
121 $ 4
Commercial real estate 10 3
6 3
Residential mortgages 84 7
43 4
Credit card 2,076 9
1,617 7
Other retail
89
1
103
1
Total loans, excluding GNMA and covered loans 2,459 45
1,890 19
Loans purchased from GNMA mortgage pools 354 46
39 5
Covered loans
1
–
2
1
Total loans
2,814
$ 91
1,931
$ 25
Nine Months Ended September 30
Commercial 555 $ 49
374 $ 15
Commercial real estate 28 6
21 9
Residential mortgages 251 26
101 13
Credit card 6,107 26
4,822 21
Other retail
320
4
269
5
Total loans, excluding GNMA and covered loans 7,261 111
5,587 63
Loans purchased from GNMA mortgage pools 711 95
93 12
Covered loans
2
–
3
1
Total loans
7,974
$ 206
5,683
$ 76
In addition to the defaults in the table above, the Company had a
total of 402 and 1,278 residential mortgage loans, home equity and
second mortgage loans and loans purchased from GNMA mortgage pools
for the three months and nine months ended September 30, 2017,
respectively, 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 $50 million
and $156 million for three months and nine months ended
September 30, 2017, respectively.
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:
September 30, 2017
December 31, 2016
(Dollars in Millions)
Purchased
Purchased
Other
Total
Purchased
Purchased
Other
Total
Residential mortgage loans $ 2,052 $ 422 $ – $ 2,474
$ 2,248 $ 506 $ – $ 2,754
Other retail loans – 173 – 173
– 278 – 278
Losses reimbursable by the FDIC (a) – – 320 320
– – 381 381
Unamortized changes in FDIC asset (b)
–
–
295
295
–
–
423
423
Covered loans 2,052 595 615 3,262
2,248 784 804 3,836
Foreclosed real estate
–
–
26
26
–
–
26
26
Total covered assets
$ 2,052
$ 595
$ 641
$ 3,288
$ 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. |
