| Allowance for Credit Losses |
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NOTE 7 – Allowance for Credit Losses |
The tables below present the changes in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2011 and 2010.
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Three Months Ended September 30, 2011 |
(Dollars in millions) |
Home Loans |
|
Credit Card
and Other
Consumer |
|
Commercial |
|
Total
Allowance |
Allowance for loan and lease losses, July 1 |
$ |
20,953 |
|
|
$ |
10,931 |
|
|
$ |
5,428 |
|
|
$ |
37,312 |
|
Loans and leases charged off |
(2,325 |
) |
|
(2,813 |
) |
|
(810 |
) |
|
(5,948 |
) |
Recoveries of loans and leases previously charged off |
220 |
|
|
443 |
|
|
199 |
|
|
862 |
|
Net charge-offs |
(2,105 |
) |
|
(2,370 |
) |
|
(611 |
) |
|
(5,086 |
) |
Provision for loan and lease losses |
1,958 |
|
|
1,508 |
|
|
8 |
|
|
3,474 |
|
Other (1)
|
(74 |
) |
|
(544 |
) |
|
— |
|
|
(618 |
) |
Allowance for loan and lease losses, September 30 |
20,732 |
|
|
9,525 |
|
|
4,825 |
|
|
35,082 |
|
Reserve for unfunded lending commitments, July 1 |
— |
|
|
— |
|
|
897 |
|
|
897 |
|
Provision for unfunded lending commitments |
— |
|
|
— |
|
|
(67 |
) |
|
(67 |
) |
Other |
— |
|
|
— |
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|
(40 |
) |
|
(40 |
) |
Reserve for unfunded lending commitments, September 30 |
— |
|
|
— |
|
|
790 |
|
|
790 |
|
Allowance for credit losses, September 30 |
$ |
20,732 |
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|
$ |
9,525 |
|
|
$ |
5,615 |
|
|
$ |
35,872 |
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|
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Nine Months Ended September 30, 2011 |
Allowance for loan and lease losses, January 1 |
$ |
19,252 |
|
|
$ |
15,463 |
|
|
$ |
7,170 |
|
|
$ |
41,885 |
|
Loans and leases charged off |
(7,187 |
) |
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(9,789 |
) |
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(2,475 |
) |
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(19,451 |
) |
Recoveries of loans and leases previously charged off |
585 |
|
|
1,409 |
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|
678 |
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|
2,672 |
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Net charge-offs |
(6,602 |
) |
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(8,380 |
) |
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(1,797 |
) |
|
(16,779 |
) |
Provision for loan and lease losses |
8,155 |
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|
3,016 |
|
|
(521 |
) |
|
10,650 |
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Other (1)
|
(73 |
) |
|
(574 |
) |
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(27 |
) |
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(674 |
) |
Allowance for loan and lease losses, September 30 |
20,732 |
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|
9,525 |
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|
4,825 |
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|
35,082 |
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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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|
(174 |
) |
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(174 |
) |
Other |
— |
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— |
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(224 |
) |
|
(224 |
) |
Reserve for unfunded lending commitments, September 30 |
— |
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|
— |
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|
790 |
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|
790 |
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Allowance for credit losses, September 30 |
$ |
20,732 |
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|
$ |
9,525 |
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$ |
5,615 |
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$ |
35,872 |
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Three Months Ended September 30, 2010 |
Allowance for loan and lease losses, July 1 |
$ |
18,838 |
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|
$ |
17,692 |
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$ |
8,725 |
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$ |
45,255 |
|
Loans and leases charged off |
(2,140 |
) |
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(4,593 |
) |
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(1,191 |
) |
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(7,924 |
) |
Recoveries of loans and leases previously charged off |
91 |
|
|
536 |
|
|
100 |
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|
727 |
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Net charge-offs |
(2,049 |
) |
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(4,057 |
) |
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(1,091 |
) |
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(7,197 |
) |
Provision for loan and lease losses |
1,635 |
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|
3,168 |
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|
592 |
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|
5,395 |
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Other |
12 |
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|
122 |
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(6 |
) |
|
128 |
|
Allowance for loan and lease losses, September 30 |
18,436 |
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|
16,925 |
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|
8,220 |
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|
43,581 |
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Reserve for unfunded lending commitments, July 1 |
— |
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— |
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|
1,413 |
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|
1,413 |
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Provision for unfunded lending commitments |
— |
|
|
— |
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|
1 |
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|
1 |
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Other |
— |
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— |
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(120 |
) |
|
(120 |
) |
Reserve for unfunded lending commitments, September 30 |
— |
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— |
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1,294 |
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|
1,294 |
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Allowance for credit losses, September 30 |
$ |
18,436 |
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$ |
16,925 |
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$ |
9,514 |
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$ |
44,875 |
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Nine Months Ended September 30, 2010 |
Allowance for loan and lease losses, January 1 |
$ |
16,329 |
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$ |
22,243 |
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$ |
9,416 |
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$ |
47,988 |
|
Loans and leases charged off |
(8,529 |
) |
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(16,772 |
) |
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(4,430 |
) |
|
(29,731 |
) |
Recoveries of loans and leases previously charged off |
262 |
|
|
1,543 |
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|
375 |
|
|
2,180 |
|
Net charge-offs |
(8,267 |
) |
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(15,229 |
) |
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(4,055 |
) |
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(27,551 |
) |
Provision for loan and lease losses |
10,267 |
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|
9,967 |
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|
2,865 |
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|
23,099 |
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Other |
107 |
|
|
(56 |
) |
|
(6 |
) |
|
45 |
|
Allowance for loan and lease losses, September 30 |
18,436 |
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|
16,925 |
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|
8,220 |
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|
43,581 |
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Reserve for unfunded lending commitments, January 1 |
— |
|
|
— |
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|
1,487 |
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|
1,487 |
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Provision for unfunded lending commitments |
— |
|
|
— |
|
|
207 |
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|
207 |
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Other |
— |
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|
— |
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|
(400 |
) |
|
(400 |
) |
Reserve for unfunded lending commitments, September 30 |
— |
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— |
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1,294 |
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|
1,294 |
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Allowance for credit losses, September 30 |
$ |
18,436 |
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$ |
16,925 |
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$ |
9,514 |
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$ |
44,875 |
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(1) Credit card and other consumer includes $463 million of reserves that were transferred to LHFS primarily as a result of the announced agreement to sell the Corporation's Canadian consumer card business.
During the three months ended September 30, 2011, the Corporation did not record any new additions to the valuation reserve for the PCI loan portfolio. During the nine months ended September 30, 2011, the Corporation recorded $2.0 billion in provision for credit losses with a corresponding increase in the valuation reserve presented with the allowance for loan and lease losses specifically for the PCI loan portfolio. This compared to $281 million and $1.4 billion for the same periods in 2010. Beginning September 30, 2011, PCI loans that were acquired as part of the Merrill Lynch acquisition were excluded from current period disclosures as the valuation allowance associated with these loans is insignificant. The amount of the allowance for loan and lease losses associated with the PCI loan portfolio was $8.2 billion, $8.4 billion and $6.4 billion at September 30, 2011, June 30, 2011 and December 31, 2010.
The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at September 30, 2011 and December 31, 2010.
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September 30, 2011 |
(Dollars in millions) |
Home Loans |
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Credit Card
and Other
Consumer |
|
Commercial |
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Total |
Impaired loans and troubled debt restructurings (1)
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Allowance for loan and lease losses (2)
|
$ |
1,954 |
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$ |
2,908 |
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$ |
798 |
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$ |
5,660 |
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Carrying value (3)
|
18,659 |
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|
8,151 |
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|
8,921 |
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|
35,731 |
|
Allowance as a percentage of carrying value |
10.47 |
% |
|
35.67 |
% |
|
8.95 |
% |
|
15.84 |
% |
Collectively evaluated for impairment |
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Allowance for loan and lease losses |
$ |
10,539 |
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$ |
6,617 |
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$ |
4,027 |
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$ |
21,183 |
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Carrying value (3, 4)
|
354,486 |
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|
204,022 |
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|
294,420 |
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|
852,928 |
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Allowance as a percentage of carrying value (4)
|
2.97 |
% |
|
3.24 |
% |
|
1.37 |
% |
|
2.48 |
% |
Purchased credit-impaired loans |
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Allowance for loan and lease losses |
$ |
8,239 |
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|
n/a |
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|
n/a |
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$ |
8,239 |
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Carrying value excluding valuation allowance |
32,648 |
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|
n/a |
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|
n/a |
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|
32,648 |
|
Allowance as a percentage of carrying value |
25.24 |
% |
|
n/a |
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|
n/a |
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|
25.24 |
% |
Total |
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Allowance for loan and lease losses |
$ |
20,732 |
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$ |
9,525 |
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$ |
4,825 |
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$ |
35,082 |
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Carrying value (3, 4)
|
405,793 |
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|
212,173 |
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|
303,341 |
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|
921,307 |
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Allowance as a percentage of carrying value (4)
|
5.11 |
% |
|
4.49 |
% |
|
1.59 |
% |
|
3.81 |
% |
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December 31, 2010 |
Impaired loans and troubled debt restructurings (1)
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Allowance for loan and lease losses (2)
|
$ |
1,871 |
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$ |
4,786 |
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$ |
1,080 |
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$ |
7,737 |
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Carrying value (3)
|
13,904 |
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|
11,421 |
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|
10,645 |
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|
35,970 |
|
Allowance as a percentage of carrying value |
13.46 |
% |
|
41.91 |
% |
|
10.15 |
% |
|
21.51 |
% |
Collectively evaluated for impairment |
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Allowance for loan and lease losses |
$ |
10,964 |
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$ |
10,677 |
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$ |
6,078 |
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$ |
27,719 |
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Carrying value (3, 4)
|
358,765 |
|
|
222,967 |
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|
282,820 |
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|
864,552 |
|
Allowance as a percentage of carrying value (4)
|
3.06 |
% |
|
4.79 |
% |
|
2.15 |
% |
|
3.21 |
% |
Purchased credit-impaired loans |
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Allowance for loan and lease losses |
$ |
6,417 |
|
|
n/a |
|
|
$ |
12 |
|
|
$ |
6,429 |
|
Carrying value excluding valuation allowance |
36,393 |
|
|
n/a |
|
|
204 |
|
|
36,597 |
|
Allowance as a percentage of carrying value |
17.63 |
% |
|
n/a |
|
|
5.76 |
% |
|
17.57 |
% |
Total |
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Allowance for loan and lease losses |
$ |
19,252 |
|
|
$ |
15,463 |
|
|
$ |
7,170 |
|
|
$ |
41,885 |
|
Carrying value (3, 4)
|
409,062 |
|
|
234,388 |
|
|
293,669 |
|
|
937,119 |
|
Allowance as a percentage of carrying value (4)
|
4.71 |
% |
|
6.60 |
% |
|
2.44 |
% |
|
4.47 |
% |
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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 classified as TDRs, and all consumer and commercial loans accounted for under the fair value option. |
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(2) |
Commercial impaired allowance for loan and lease losses includes $223 million and $445 million at September 30, 2011 and December 31, 2010 related to U.S. small business commercial renegotiated TDR loans.
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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. Total loans accounted for under the fair value option were $11.2 billion and $3.3 billion at September 30, 2011 and December 31, 2010.
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n/a = not applicable
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