| 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, 2018
December 31,
2017
(Dollars in Millions)
Amount
Percent
Amount
Percent
Commercial
Commercial $ 92,511 33.3 %
$ 91,958 32.8 %
Lease financing
5,586
2.0
5,603
2.0
Total commercial 98,097 35.3
97,561 34.8
Commercial Real Estate
Commercial mortgages 28,982 10.4
29,367 10.5
Construction and development
11,158
4.0
11,096
4.0
Total commercial real estate 40,140 14.4
40,463 14.5
Residential Mortgages
Residential mortgages 47,583 17.1
46,685 16.6
Home equity loans, first liens
12,894
4.7
13,098
4.7
Total residential mortgages 60,477 21.8
59,783 21.3
Credit Card 20,901 7.5
22,180 7.9
Other Retail
Retail leasing 8,048 2.9
7,988 2.8
Home equity and second mortgages 16,030 5.8
16,327 5.8
Revolving credit 3,061 1.1
3,183 1.1
Installment 9,089 3.3
8,989 3.2
Automobile 18,762 6.7
18,934 6.8
Student (a)
327
.1
1,903
.7
Total other retail
55,317
19.9
57,324
20.4
Total loans, excluding covered loans 274,932 98.9
277,311 98.9
Covered Loans
2,979
1.1
3,121
1.1
Total loans
$ 277,911
100.0 %
$ 280,432
100.0 %
(a) Effective March 31, 2018, the
Company transferred all of its federally guaranteed student loans
to loans held for sale.
The Company had
loans of $83.9 billion at March 31, 2018, and
$83.3 billion at December 31, 2017, pledged at the
Federal Home Loan Bank, and loans of $68.4 billion at
March 31, 2018, and $68.0 billion at December 31,
2017, pledged at the Federal Reserve Bank.
Originated loans
are reported at the principal amount outstanding, net of unearned
interest and deferred fees and costs, and any partial charge-offs
recorded. Net unearned interest and deferred fees and costs
amounted to $826 million at March 31, 2018 and
$830 million at December 31, 2017. 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)
2018
2017
Balance at beginning of period $ 350 $ 698
Accretion (91 ) (90 )
Disposals (12 ) (23 )
Reclassifications from nonaccretable difference (a) 10 53
Other
–
(1 )
Balance at end of period
$ 257
$ 637
(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 the
selected loss experience is appropriate 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, delinquency status, 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:
(Dollars in Millions)
Commercial
Commercial
Residential
Credit
Other
Total Loans,
Covered
Total
Balance at December 31, 2017 $ 1,372 $ 831 $ 449 $ 1,056 $ 678 $ 4,386 $ 31 $ 4,417
Add
Provision for credit losses 74 (8 ) 1 219 60 346 (5 ) 341
Deduct
Loans charged-off 94 3 13 248 95 453 – 453
Less recoveries of loans charged-off
(34 )
(6 )
(6 )
(37 )
(29 )
(112 )
–
(112 )
Net loans charged-off 60 (3 ) 7 211 66 341 – 341
Other changes (a)
–
–
–
–
–
–
–
–
Balance at March 31, 2018
$ 1,386
$ 826
$ 443
$ 1,064
$ 672
$ 4,391
$ 26
$ 4,417
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
(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, 2018 Related to
Loans individually evaluated for impairment (a) $ 28 $ 3 $ – $ – $ – $ 31 $ – $ 31
TDRs collectively evaluated for impairment 12 5 138 60 16 231 – 231
Other loans collectively evaluated for impairment 1,346 815 305 1,004 656 4,126 – 4,126
Loans acquired with deteriorated credit quality
–
3
–
–
–
3
26
29
Total allowance for credit losses
$ 1,386
$ 826
$ 443
$ 1,064
$ 672
$ 4,391
$ 26
$ 4,417
Allowance Balance at December 31, 2017 Related to
Loans individually evaluated for impairment (a) $ 23 $ 4 $ – $ – $ – $ 27 $ – $ 27
TDRs collectively evaluated for impairment 14 4 139 60 19 236 1 237
Other loans collectively evaluated for impairment 1,335 818 310 996 659 4,118 – 4,118
Loans acquired with deteriorated credit quality
–
5
–
–
–
5
30
35
Total allowance for credit losses
$ 1,372
$ 831
$ 449
$ 1,056
$ 678
$ 4,386
$ 31
$ 4,417
(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, 2018
Loans individually evaluated for impairment (a) $ 327 $ 50 $ – $ – $ – $ 377 $ – $ 377
TDRs collectively evaluated for impairment 154 151 3,339 234 181 4,059 36 4,095
Other loans collectively evaluated for impairment 97,616 39,881 57,137 20,667 55,136 270,437 977 271,414
Loans acquired with deteriorated credit quality
–
58
1
–
–
59
1,966
2,025
Total loans
$ 98,097
$ 40,140
$ 60,477
$ 20,901
$ 55,317
$ 274,932
$ 2,979
$ 277,911
December 31, 2017
Loans individually evaluated for impairment (a) $ 337 $ 71 $ – $ – $ – $ 408 $ – $ 408
TDRs collectively evaluated for impairment 148 145 3,524 230 186 4,233 36 4,269
Other loans collectively evaluated for impairment 97,076 40,174 56,258 21,950 57,138 272,596 1,073 273,669
Loans acquired with deteriorated credit quality
–
73
1
–
–
74
2,012
2,086
Total loans
$ 97,561
$ 40,463
$ 59,783
$ 22,180
$ 57,324
$ 277,311
$ 3,121
$ 280,432
(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, 2018
Commercial $ 97,494 $ 241 $ 61 $ 301 $ 98,097
Commercial real estate 39,979 38 4 119 40,140
Residential mortgages (a) 59,769 146 132 430 60,477
Credit card 20,356 275 270 – 20,901
Other retail
54,730
320
99
168
55,317
Total loans, excluding covered loans 272,328 1,020 566 1,018 274,932
Covered loans
2,790
47
136
6
2,979
Total loans
$ 275,118
$ 1,067
$ 702
$ 1,024
$ 277,911
December 31, 2017
Commercial $ 97,005 $ 250 $ 57 $ 249 $ 97,561
Commercial real estate 40,279 36 6 142 40,463
Residential mortgages (a) 59,013 198 130 442 59,783
Credit card 21,593 302 284 1 22,180
Other retail
56,685
376
95
168
57,324
Total loans, excluding covered loans 274,575 1,162 572 1,002 277,311
Covered loans
2,917
50
148
6
3,121
Total loans
$ 277,492
$ 1,212
$ 720
$ 1,008
$ 280,432
(a) At March 31, 2018,
$376 million of loans 30–89 days past due and
$1.9 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 $385 million and $1.9 billion at
December 31, 2017, respectively.
At March 31,
2018, the amount of foreclosed residential real estate held by the
Company, and included in OREO, was $138 million
($118 million excluding covered assets), compared with
$156 million ($135 million excluding covered assets) at
December 31, 2017. These amounts exclude $243 million and
$267 million at March 31, 2018 and December 31,
2017, 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, 2018 and
December 31, 2017, was $1.7 billion, of which
$1.3 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 loans that have a
potential weakness deserving management’s close attention.
Classified loans are those loans 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, 2018
Commercial $ 95,757 $ 1,290 $ 1,050 $ 2,340 $ 98,097
Commercial real estate 38,990 556 594 1,150 40,140
Residential mortgages (b) 59,855 18 604 622 60,477
Credit card 20,631 – 270 270 20,901
Other retail
55,005
10
302
312
55,317
Total loans, excluding covered loans 270,238 1,874 2,820 4,694 274,932
Covered loans
2,932
–
47
47
2,979
Total loans
$ 273,170
$ 1,874
$ 2,867
$ 4,741
$ 277,911
Total outstanding commitments
$ 586,609
$ 3,129
$ 3,616
$ 6,745
$ 593,354
December 31, 2017
Commercial $ 95,297 $ 1,130 $ 1,134 $ 2,264 $ 97,561
Commercial real estate 39,162 648 653 1,301 40,463
Residential mortgages (b) 59,141 16 626 642 59,783
Credit card 21,895 – 285 285 22,180
Other retail
57,009
6
309
315
57,324
Total loans, excluding covered loans 272,504 1,800 3,007 4,807 277,311
Covered loans
3,072
–
49
49
3,121
Total loans
$ 275,576
$ 1,800
$ 3,056
$ 4,856
$ 280,432
Total outstanding commitments
$ 584,072
$ 3,142
$ 3,987
$ 7,129
$ 591,201
(a) Classified rating on consumer
loans primarily based on delinquency status.
(b) At March 31, 2018,
$1.9 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 $1.9 billion and $1.7 billion
at December 31, 2017, 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, 2018
Commercial $ 540 $ 833 $ 42 $ 214
Commercial real estate 254 573 9 –
Residential mortgages 1,881 2,118 109 1
Credit card 234 234 60 –
Other retail
299
383
19
4
Total loans, excluding GNMA and covered loans 3,208 4,141 239 219
Loans purchased from GNMA mortgage pools 1,566 1,566 30 –
Covered loans
38
46
1
–
Total
$ 4,812
$ 5,753
$ 270
$ 219
December 31, 2017
Commercial $ 550 $ 915 $ 44 $ 199
Commercial real estate 280 596 11 –
Residential mortgages 1,946 2,339 116 1
Credit card 230 230 60 –
Other retail
302
400
22
4
Total loans, excluding GNMA and covered loans 3,308 4,480 253 204
Loans purchased from GNMA mortgage pools 1,681 1,681 25 –
Covered loans
38
44
1
–
Total
$ 5,027
$ 6,205
$ 279
$ 204
(a) Substantially all loans classified
as impaired at March 31, 2018 and December 31, 2017, had
an associated allowance for credit losses.
Additional
information on impaired loans follows:
2018
2017
Three Months Ended March 31
(Dollars in Millions)
Average
Interest
Average
Interest
Commercial $ 545 $ 1
$ 817 $ 1
Commercial real estate 267 2
278 2
Residential mortgages 1,914 20
2,240 29
Credit card 232 1
225 1
Other retail
300
4
280
4
Total loans, excluding GNMA and covered loans 3,258 28
3,840 37
Loans purchased from GNMA mortgage pools 1,624 12
1,646 18
Covered loans
38
–
36
–
Total
$ 4,920
$ 40
$ 5,522
$ 55
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:
2018
2017
Three Months Ended March 31
(Dollars in Millions)
Number
Pre-Modification
Post-Modification
Number
Pre-Modification
Post-Modification
Commercial 623 $ 81 $ 75
830 $ 137 $ 128
Commercial real estate 29 16 16
23 9 8
Residential mortgages 148 17 16
356 40 41
Credit card 8,546 43 43
9,405 45 46
Other retail
559
11
10
622
11
9
Total loans, excluding GNMA and covered loans 9,905 168 160
11,236 242 232
Loans purchased from GNMA mortgage pools 888 117 113
2,929 387 378
Covered loans
–
–
–
4
1
1
Total loans
10,793
$ 285
$ 273
14,169
$ 630
$ 611
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 2018, at March 31, 2018, 50
residential mortgages, 31 home equity and second mortgage loans and
781 loans purchased from GNMA mortgage pools with outstanding
balances of $8 million, $3 million and $105 million,
respectively, were in a trial period and have estimated
post-modification balances of $8 million, $3 million and
$101 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
2018
2017
Three Months Ended March 31
(Dollars in Millions)
Number
Amount
Number
Amount
Commercial 239 $ 9
173 $ 8
Commercial real estate 8 4
8 2
Residential mortgages 56 4
72 9
Credit card 2,036 9
2,047 9
Other retail
77
1
129
2
Total loans, excluding GNMA and covered loans 2,416 27
2,429 30
Loans purchased from GNMA mortgage pools 232 31
218 30
Covered loans
1
–
–
–
Total loans
2,649
$ 58
2,647
$ 60
In addition to the
defaults in the table above, the Company had a total of 275
residential mortgage loans, home equity and second mortgage loans
and loans purchased from GNMA mortgage pools for the three months
ended March 31, 2018, 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 $23 million for the three months ended
March 31, 2018.
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, 2018
December 31, 2017
(Dollars in Millions)
Purchased
Purchased
Other
Total
Purchased
Purchased
Other
Total
Residential mortgage loans $ 1,966 $ 374 $ – $ 2,340
$ 2,012 $ 400 $ – $ 2,412
Other retail loans – 137 – 137
– 151 – 151
Losses reimbursable by the FDIC (a) – – 327 327
– – 320 320
Unamortized changes in FDIC asset (b)
–
–
175
175
–
–
238
238
Covered loans 1,966 511 502 2,979
2,012 551 558 3,121
Foreclosed real estate
–
–
20
20
–
–
21
21
Total covered assets
$ 1,966
$ 511
$ 522
$ 2,999
$ 2,012
$ 551
$ 579
$ 3,142
(a) Relates to loss sharing agreements
with remaining terms up through the fourth quarter of
2019.
(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. |
