| Allowance for Credit Losses |
Allowance for Credit Losses
The table below summarizes the changes in the allowance for credit losses by portfolio segment for 2013, 2012 and 2011.
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2013 |
(Dollars in millions) |
Home
Loans
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Credit Card
and Other
Consumer
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|
Commercial |
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Total
Allowance
|
Allowance for loan and lease losses, January 1 |
$ |
14,933 |
|
|
$ |
6,140 |
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|
$ |
3,106 |
|
|
$ |
24,179 |
|
Loans and leases charged off |
(3,766 |
) |
|
(5,495 |
) |
|
(1,108 |
) |
|
(10,369 |
) |
Recoveries of loans and leases previously charged off |
879 |
|
|
1,141 |
|
|
452 |
|
|
2,472 |
|
Net charge-offs |
(2,887 |
) |
|
(4,354 |
) |
|
(656 |
) |
|
(7,897 |
) |
Write-offs of PCI loans |
(2,336 |
) |
|
— |
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|
— |
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|
(2,336 |
) |
Provision for loan and lease losses |
(1,124 |
) |
|
3,139 |
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|
1,559 |
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|
3,574 |
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Other |
(68 |
) |
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(20 |
) |
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(4 |
) |
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(92 |
) |
Allowance for loan and lease losses, December 31 |
8,518 |
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|
4,905 |
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|
4,005 |
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|
17,428 |
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Reserve for unfunded lending commitments, January 1 |
— |
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— |
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|
513 |
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|
513 |
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Provision for unfunded lending commitments |
— |
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— |
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(18 |
) |
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(18 |
) |
Other |
— |
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— |
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(11 |
) |
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(11 |
) |
Reserve for unfunded lending commitments, December 31 |
— |
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— |
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|
484 |
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|
484 |
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Allowance for credit losses, December 31 |
$ |
8,518 |
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$ |
4,905 |
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$ |
4,489 |
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$ |
17,912 |
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2012 |
Allowance for loan and lease losses, January 1 |
$ |
21,079 |
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$ |
8,569 |
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$ |
4,135 |
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$ |
33,783 |
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Loans and leases charged off |
(7,849 |
) |
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(7,727 |
) |
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(2,096 |
) |
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(17,672 |
) |
Recoveries of loans and leases previously charged off |
496 |
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1,519 |
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|
749 |
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2,764 |
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Net charge-offs |
(7,353 |
) |
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(6,208 |
) |
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(1,347 |
) |
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(14,908 |
) |
Write-offs of PCI loans |
(2,820 |
) |
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— |
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— |
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(2,820 |
) |
Provision for loan and lease losses |
4,073 |
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|
3,899 |
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|
338 |
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8,310 |
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Other |
(46 |
) |
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(120 |
) |
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(20 |
) |
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(186 |
) |
Allowance for loan and lease losses, December 31 |
14,933 |
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6,140 |
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3,106 |
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24,179 |
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Reserve for unfunded lending commitments, January 1 |
— |
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— |
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|
714 |
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|
714 |
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Provision for unfunded lending commitments |
— |
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— |
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(141 |
) |
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(141 |
) |
Other |
— |
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— |
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(60 |
) |
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(60 |
) |
Reserve for unfunded lending commitments, December 31 |
— |
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— |
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|
513 |
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|
513 |
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Allowance for credit losses, December 31 |
$ |
14,933 |
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$ |
6,140 |
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$ |
3,619 |
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$ |
24,692 |
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2011 |
Allowance for loan and lease losses, January 1 |
$ |
19,252 |
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$ |
15,463 |
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$ |
7,170 |
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$ |
41,885 |
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Loans and leases charged off |
(9,291 |
) |
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(12,247 |
) |
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(3,204 |
) |
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(24,742 |
) |
Recoveries of loans and leases previously charged off |
894 |
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2,124 |
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|
891 |
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|
3,909 |
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Net charge-offs |
(8,397 |
) |
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(10,123 |
) |
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(2,313 |
) |
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(20,833 |
) |
Provision for loan and lease losses |
10,300 |
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4,025 |
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(696 |
) |
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13,629 |
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Other |
(76 |
) |
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(796 |
) |
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(26 |
) |
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(898 |
) |
Allowance for loan and lease losses, December 31 |
21,079 |
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8,569 |
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4,135 |
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33,783 |
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Reserve for unfunded lending commitments, January 1 |
— |
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— |
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1,188 |
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1,188 |
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Provision for unfunded lending commitments |
— |
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— |
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(219 |
) |
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(219 |
) |
Other |
— |
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— |
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(255 |
) |
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(255 |
) |
Reserve for unfunded lending commitments, December 31 |
— |
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— |
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|
714 |
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|
714 |
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Allowance for credit losses, December 31 |
$ |
21,079 |
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$ |
8,569 |
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$ |
4,849 |
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$ |
34,497 |
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In 2013, for the PCI loan portfolio, the Corporation recorded a benefit of $707 million in the provision for credit losses with a corresponding decrease in the valuation allowance included as part of the allowance for loan and lease losses. This compared to a benefit of $103 million in 2012 and expense of $2.2 billion in 2011. Write-offs in the PCI loan portfolio totaled $2.3 billion and $2.8 billion with a corresponding decrease in the PCI valuation allowance during 2013 and 2012. There were no write-offs in the PCI loan portfolio in 2011. Write-offs in 2013 included certain PCI loans that were ineligible for the National Mortgage Settlement, but had characteristics similar to the eligible loans and the expectation of future cash proceeds was considered remote. Write-offs of PCI loans in 2012 primarily related to the National Mortgage Settlement. The valuation allowance associated with the PCI loan portfolio was $2.5 billion, $5.5 billion and $8.5 billion at December 31, 2013, 2012 and 2011, respectively.
The “Other” amount under allowance for loan and lease losses primarily represents the net impact of portfolio sales, consolidations and deconsolidations, and foreign currency translation adjustments. The 2011 amount also includes a $449 million reduction in the allowance for loan and lease losses related to Canadian consumer card loans that were transferred to LHFS.
The “Other” amount under the reserve for unfunded lending commitments primarily represents accretion of the Merrill Lynch & Co., Inc. (Merrill Lynch) purchase accounting adjustment.
The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at December 31, 2013 and 2012.
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Allowance and Carrying Value by Portfolio Segment |
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December 31, 2013 |
(Dollars in millions) |
Home
Loans
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Credit Card
and Other
Consumer
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Commercial |
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Total |
Impaired loans and troubled debt restructurings (1)
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Allowance for loan and lease losses (2)
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$ |
1,231 |
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$ |
579 |
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$ |
277 |
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$ |
2,087 |
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Carrying value (3)
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31,458 |
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2,079 |
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3,048 |
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36,585 |
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Allowance as a percentage of carrying value |
3.91 |
% |
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27.85 |
% |
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9.09 |
% |
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5.70 |
% |
Loans collectively evaluated for impairment |
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Allowance for loan and lease losses |
$ |
4,794 |
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$ |
4,326 |
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$ |
3,728 |
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$ |
12,848 |
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Carrying value (3, 4)
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285,015 |
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185,969 |
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385,357 |
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856,341 |
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Allowance as a percentage of carrying value (4)
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1.68 |
% |
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2.33 |
% |
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0.97 |
% |
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1.50 |
% |
Purchased credit-impaired loans |
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Valuation allowance |
$ |
2,493 |
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n/a |
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n/a |
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$ |
2,493 |
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Carrying value gross of valuation allowance |
25,265 |
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n/a |
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n/a |
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25,265 |
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Valuation allowance as a percentage of carrying value |
9.87 |
% |
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n/a |
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n/a |
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9.87 |
% |
Total |
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Allowance for loan and lease losses |
$ |
8,518 |
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$ |
4,905 |
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$ |
4,005 |
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$ |
17,428 |
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Carrying value (3, 4)
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341,738 |
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188,048 |
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388,405 |
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918,191 |
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Allowance as a percentage of carrying value (4)
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2.49 |
% |
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2.61 |
% |
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1.03 |
% |
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1.90 |
% |
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December 31, 2012 |
Impaired loans and troubled debt restructurings (1)
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Allowance for loan and lease losses (2)
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$ |
1,700 |
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$ |
1,139 |
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$ |
475 |
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$ |
3,314 |
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Carrying value (3)
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30,250 |
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3,946 |
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4,881 |
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39,077 |
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Allowance as a percentage of carrying value |
5.62 |
% |
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28.86 |
% |
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9.73 |
% |
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8.48 |
% |
Loans collectively evaluated for impairment |
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Allowance for loan and lease losses |
$ |
7,697 |
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$ |
5,001 |
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$ |
2,631 |
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$ |
15,329 |
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Carrying value (3, 4)
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304,701 |
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187,419 |
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341,502 |
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833,622 |
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Allowance as a percentage of carrying value (4)
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2.53 |
% |
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2.67 |
% |
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0.77 |
% |
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1.84 |
% |
Purchased credit-impaired loans |
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Valuation allowance |
$ |
5,536 |
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n/a |
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n/a |
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$ |
5,536 |
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Carrying value gross of valuation allowance |
26,118 |
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n/a |
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n/a |
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26,118 |
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Valuation allowance as a percentage of carrying value |
21.20 |
% |
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n/a |
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n/a |
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21.20 |
% |
Total |
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Allowance for loan and lease losses |
$ |
14,933 |
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$ |
6,140 |
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$ |
3,106 |
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$ |
24,179 |
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Carrying value (3, 4)
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361,069 |
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191,365 |
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346,383 |
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|
898,817 |
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Allowance as a percentage of carrying value (4)
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4.14 |
% |
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3.21 |
% |
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0.90 |
% |
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2.69 |
% |
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(1) |
Impaired loans include nonperforming commercial loans and all TDRs, including both commercial and consumer TDRs. Impaired loans exclude nonperforming consumer loans unless they are TDRs, and all consumer and commercial loans accounted for under the fair value option. |
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(2) |
Allowance for loan and lease losses includes $36 million and $97 million related to impaired U.S. small business commercial loans at December 31, 2013 and 2012.
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(3) |
Amounts are presented gross of the allowance for loan and lease losses. |
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(4) |
Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $10.0 billion and $9.0 billion at December 31, 2013 and 2012.
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n/a = not applicable
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