| 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, 2018
December 31,
2017
(Dollars in Millions)
Amount
Percent
Amount
Percent
Commercial
Commercial $ 93,786 33.5 %
$ 91,958 32.8 %
Lease financing
5,571
2.0
5,603
2.0
Total commercial 99,357 35.5
97,561 34.8
Commercial Real Estate
Commercial mortgages 28,187 10.0
29,367 10.5
Construction and development
11,212
4.0
11,096
4.0
Total commercial real estate 39,399 14.0
40,463 14.5
Residential Mortgages
Residential mortgages 48,682 17.4
46,685 16.6
Home equity loans, first liens
12,627
4.5
13,098
4.7
Total residential mortgages 61,309 21.9
59,783 21.3
Credit Card 21,566 7.7
22,180 7.9
Other Retail
Retail leasing 8,253 3.0
7,988 2.8
Home equity and second mortgages 16,083 5.7
16,327 5.8
Revolving credit 3,144 1.1
3,183 1.1
Installment 9,363 3.4
8,989 3.2
Automobile 18,567 6.6
18,934 6.8
Student (a)
313
.1
1,903
.7
Total other retail
55,723
19.9
57,324
20.4
Total loans, excluding covered loans 277,354 99.0
277,311 98.9
Covered Loans
2,823
1.0
3,121
1.1
Total loans
$ 280,177
100.0 %
$ 280,432
100.0 %
(a) During the first six months of
2018, the Company sold all of its federally guaranteed student
loans.
The Company had loans of $90.0 billion at June 30, 2018,
and $83.3 billion at December 31, 2017, pledged at the
Federal Home Loan Bank, and loans of $68.7 billion at
June 30, 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 $823 million at June 30, 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 June 30
Six Months Ended June 30
(Dollars in Millions)
2018
2017
2018
2017
Balance at beginning of period $ 257 $ 637
$ 350 $ 698
Accretion (90 ) (89 )
(181 ) (179 )
Disposals (15 ) (28 )
(27 ) (51 )
Reclassifications from nonaccretable difference (a) 5 30
15 83
Other
–
(4 )
–
(5 )
Balance at end of period
$ 157
$ 546
$ 157
$ 546
(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 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 Real Estate
Residential Mortgages
Credit
Other
Total Loans, Excluding Covered Loans
Covered
Total
2018
Balance at beginning of period $ 1,386 $ 826 $ 443 $ 1,064 $ 672 $ 4,391 $ 26 $ 4,417
Add
Provision for credit losses 63 (14 ) (3 ) 228 55 329 (2 ) 327
Deduct
Loans charged-off 83 2 12 248 92 437 – 437
Less recoveries of loans charged-off
(25 )
(2 )
(8 )
(38 )
(32 )
(105 )
–
(105 )
Net loans charged-off 58 – 4 210 60 332 – 332
Other changes (a)
–
–
–
–
–
–
(1 )
(1 )
Balance at end of period
$ 1,391
$ 812
$ 436
$ 1,082
$ 667
$ 4,388
$ 23
$ 4,411
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
(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
2018
Balance at beginning of period $ 1,372 $ 831 $ 449 $ 1,056 $ 678 $ 4,386 $ 31 $ 4,417
Add
Provision for credit losses 137 (22 ) (2 ) 447 115 675 (7 ) 668
Deduct
Loans charged-off 177 5 25 496 187 890 – 890
Less recoveries of loans charged-off
(59 )
(8 )
(14 )
(75 )
(61 )
(217 )
–
(217 )
Net loans charged-off 118 (3 ) 11 421 126 673 – 673
Other changes (a)
–
–
–
–
–
–
(1 )
(1 )
Balance at end of period
$ 1,391
$ 812
$ 436
$ 1,082
$ 667
$ 4,388
$ 23
$ 4,411
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
(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 Real Estate
Residential Mortgages
Credit Card
Other Retail
Total Loans, Excluding Covered Loans
Covered Loans
Total Loans
Allowance Balance at June 30, 2018 Related to
Loans individually evaluated for impairment (a) $ 19 $ 3 $ – $ – $ – $ 22 $ – $ 22
TDRs collectively evaluated for impairment 14 3 136 61 16 230 1 231
Other loans collectively evaluated for impairment 1,358 803 300 1,021 651 4,133 – 4,133
Loans acquired with deteriorated credit quality
–
3
–
–
–
3
22
25
Total allowance for credit losses
$ 1,391
$ 812
$ 436
$ 1,082
$ 667
$ 4,388
$ 23
$ 4,411
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
June 30, 2018
Loans individually evaluated for impairment (a) $ 272 $ 53 $ – $ – $ – $ 325 $ – $ 325
TDRs collectively evaluated for impairment 158 135 3,377 233 184 4,087 34 4,121
Other loans collectively evaluated for impairment 98,927 39,175 57,931 21,333 55,539 272,905 876 273,781
Loans acquired with deteriorated credit quality
–
36
1
–
–
37
1,913
1,950
Total loans
$ 99,357
$ 39,399
$ 61,309
$ 21,566
$ 55,723
$ 277,354
$ 2,823
$ 280,177
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 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 Past Due
90 Days or More Past Due
Nonperforming
Total
June 30, 2018
Commercial $ 98,847 $ 228 $ 58 $ 224 $ 99,357
Commercial real estate 39,250 42 3 104 39,399
Residential mortgages (a) 60,636 160 113 400 61,309
Credit card 21,054 263 249 – 21,566
Other retail
55,134
320
91
178
55,723
Total loans, excluding covered loans 274,921 1,013 514 906 277,354
Covered loans
2,644
47
126
6
2,823
Total loans
$ 277,565
$ 1,060
$ 640
$ 912
$ 280,177
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 June 30, 2018, $371
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 $385 million and $1.9
billion at December 31, 2017, respectively.
At June 30, 2018, the amount of foreclosed residential real
estate held by the Company, and included in other real estate owned
(“OREO”), was $123 million ($103 million
excluding covered assets), compared with $156 million
($135 million excluding covered assets) at December 31,
2017. These amounts exclude $237 million and $267 million
at June 30, 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 June 30, 2018 and December 31, 2017, was
$1.6 billion and $1.7 billion, respectively, of which
$1.3 billion at both June 30, 2018 and December 31, 2017,
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
June 30, 2018
Commercial $ 97,207 $ 1,216 $ 934 $ 2,150 $ 99,357
Commercial real estate 38,192 543 664 1,207 39,399
Residential mortgages (b) 60,738 14 557 571 61,309
Credit card 21,317 – 249 249 21,566
Other retail
55,409
9
305
314
55,723
Total loans, excluding covered loans 272,863 1,782 2,709 4,491 277,354
Covered loans
2,780
–
43
43
2,823
Total loans
$ 275,643
$ 1,782
$ 2,752
$ 4,534
$ 280,177
Total outstanding commitments
$ 591,015
$ 2,462
$ 3,449
$ 5,911
$ 596,926
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 June 30, 2018, $1.8
billion of GNMA loans 90 days or more past due and $1.7 billion of
restructured GNMA loans whose repayments are insured by the Federal
Housing Administration or guaranteed by the United States
Department of Veterans Affairs were classified with a pass rating,
compared with $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 to Lend Additional Funds
June 30, 2018
Commercial $ 488 $ 860 $ 34 $ 170
Commercial real estate 230 481 8 –
Residential mortgages 1,811 2,031 99 1
Credit card 233 233 61 –
Other retail
308
387
19
5
Total loans, excluding GNMA and covered loans 3,070 3,992 221 176
Loans purchased from GNMA mortgage pools 1,665 1,665 38 –
Covered loans
36
40
1
–
Total
$ 4,771
$ 5,697
$ 260
$ 176
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 June 30, 2018 and December 31, 2017, had
an associated allowance for credit losses.
Additional information on impaired loans follows:
2018
2017
(Dollars in Millions)
Average
Interest
Average
Interest
Three Months Ended June 30
Commercial $ 514 $ 1
$ 720 $ 1
Commercial real estate 242 2
272 3
Residential mortgages 1,846 19
2,182 28
Credit card 234 1
229 1
Other retail
303
4
279
3
Total loans, excluding GNMA and covered loans 3,139 27
3,682 36
Loans purchased from GNMA mortgage pools 1,616 12
1,746 19
Covered loans
37
1
38
–
Total
$ 4,792
$ 40
$ 5,466
$ 55
Six Months Ended June 30
Commercial $ 530 $ 2
$ 769 $ 2
Commercial real estate 255 4
275 5
Residential mortgages 1,880 39
2,211 57
Credit card 233 2
227 2
Other retail
301
8
279
7
Total loans, excluding GNMA and covered loans 3,199 55
3,761 73
Loans purchased from GNMA mortgage pools 1,620 24
1,696 37
Covered loans
37
1
37
–
Total
$ 4,856
$ 80
$ 5,494
$ 110
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
(Dollars in Millions)
Number
Pre-Modification
Post-Modification
Number of Loans
Pre-Modification
Post-Modification
Three Months Ended June 30
Commercial 724 $ 132 $ 126
671 $ 62 $ 40
Commercial real estate 30 15 14
41 29 31
Residential mortgages 105 20 20
144 17 16
Credit card 7,461 37 38
8,146 40 40
Other retail
535
17
17
639
15
14
Total loans, excluding GNMA and covered loans 8,855 221 215
9,641 163 141
Loans purchased from GNMA mortgage pools 2,248 298 295
1,043 141 137
Covered loans
–
–
–
3
1
1
Total loans
11,103
$ 519
$ 510
10,687
$ 305
$ 279
Six Months Ended June 30
Commercial 1,347 $ 213 $ 201
1,501 $ 199 $ 168
Commercial real estate 59 31 30
64 38 39
Residential mortgages 253 37 36
500 57 57
Credit card 16,007 80 81
17,551 85 86
Other retail
1,094
28
27
1,261
26
23
Total loans, excluding GNMA and covered loans 18,760 389 375
20,877 405 373
Loans purchased from GNMA mortgage pools 3,136 415 408
3,972 528 515
Covered loans
–
–
–
7
2
2
Total loans
21,896
$ 804
$ 783
24,856
$ 935
$ 890
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 2018, at June 30, 2018, 44
residential mortgages, 22 home equity and second mortgage loans and
1,582 loans purchased from GNMA mortgage pools with outstanding
balances of $13 million, $8 million and
$208 million, respectively, were in a trial period and have
estimated post-modification balances of $13 million,
$7 million and $212 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 interest rate. 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:
2018
2017
(Dollars in Millions)
Number of Loans
Amount
Number of Loans
Amount
Three Months Ended June 30
Commercial 177 $ 3
182 $ 16
Commercial real estate 8 2
10 1
Residential mortgages 58 7
95 10
Credit card 1,933 8
1,984 8
Other retail
70
1
102
1
Total loans, excl |
