Annual report pursuant to Section 13 and 15(d)

Outstanding Loans and Leases

v2.4.1.9
Outstanding Loans and Leases
12 Months Ended
Dec. 31, 2014
Loans and Leases Receivable Disclosure [Abstract]  
Outstanding Loans and Leases
Outstanding Loans and Leases
The following tables present total outstanding loans and leases and an aging analysis for the Corporation’s Home Loans, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at December 31, 2014 and 2013.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
(Dollars in millions)
30-59 Days Past Due (1)
 
60-89 Days Past Due (1)
 
90 Days or
More
Past Due (2)
 
Total Past
Due 30 Days
or More
 
Total Current or Less Than 30 Days Past Due (3)
 
Purchased
Credit-impaired
(4)
 
Loans Accounted for Under the Fair Value Option
 
Total
Outstandings
Home loans
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
1,847

 
$
700

 
$
5,561

 
$
8,108

 
$
154,112

 
 
 
 
 
$
162,220

Home equity
218

 
105

 
744

 
1,067

 
50,820

 
 
 
 
 
51,887

Legacy Assets & Servicing portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage (5)
2,008

 
1,060

 
10,513

 
13,581

 
25,244

 
$
15,152

 
 
 
53,977

Home equity
374

 
174

 
1,166

 
1,714

 
26,507

 
5,617

 
 
 
33,838

Credit card and other consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. credit card
494

 
341

 
866

 
1,701

 
90,178

 
 
 
 
 
91,879

Non-U.S. credit card
49

 
39

 
95

 
183

 
10,282

 
 
 
 
 
10,465

Direct/Indirect consumer (6)
245

 
71

 
65

 
381

 
80,000

 
 
 
 
 
80,381

Other consumer (7)
11

 
2

 
2

 
15

 
1,831

 
 
 
 
 
1,846

Total consumer
5,246

 
2,492

 
19,012

 
26,750

 
438,974

 
20,769

 
 
 
486,493

Consumer loans accounted for under the fair value option (8)
 

 
 

 
 

 
 

 
 

 
 

 
$
2,077

 
2,077

Total consumer loans and leases
5,246

 
2,492

 
19,012

 
26,750

 
438,974

 
20,769

 
2,077

 
488,570

Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. commercial
320

 
151

 
318

 
789

 
219,504

 
 
 
 
 
220,293

Commercial real estate (9)
138

 
16

 
288

 
442

 
47,240

 
 
 
 
 
47,682

Commercial lease financing
121

 
41

 
42

 
204

 
24,662

 
 
 
 
 
24,866

Non-U.S. commercial
5

 
4

 

 
9

 
80,074

 
 
 
 
 
80,083

U.S. small business commercial
88

 
45

 
94

 
227

 
13,066

 
 
 
 
 
13,293

Total commercial
672

 
257

 
742

 
1,671

 
384,546

 
 
 
 
 
386,217

Commercial loans accounted for under the fair value option (8)
 

 
 

 
 

 
 

 
 

 
 

 
6,604

 
6,604

Total commercial loans and leases
672

 
257

 
742

 
1,671

 
384,546

 
 
 
6,604

 
392,821

Total loans and leases
$
5,918

 
$
2,749

 
$
19,754

 
$
28,421

 
$
823,520

 
$
20,769

 
$
8,681

 
$
881,391

Percentage of outstandings
0.67
%
 
0.31
%
 
2.24
%
 
3.22
%
 
93.44
%
 
2.36
%
 
0.98
%
 
100.00
%
(1) 
Home loans 30-59 days past due includes fully-insured loans of $2.1 billion and nonperforming loans of $392 million. Home loans 60-89 days past due includes fully-insured loans of $1.1 billion and nonperforming loans of $332 million.
(2) 
Home loans includes fully-insured loans of $11.4 billion.
(3) 
Home loans includes $3.6 billion and direct/indirect consumer includes $27 million of nonperforming loans.
(4) 
PCI loan amounts are shown gross of the valuation allowance.
(5) 
Total outstandings includes pay option loans of $3.2 billion. The Corporation no longer originates this product.
(6) 
Total outstandings includes dealer financial services loans of $37.7 billion, unsecured consumer lending loans of $1.5 billion, U.S. securities-based lending loans of $35.8 billion, non-U.S. consumer loans of $4.0 billion, student loans of $632 million and other consumer loans of $761 million.
(7) 
Total outstandings includes consumer finance loans of $676 million, consumer leases of $1.0 billion, consumer overdrafts of $162 million and other non-U.S. consumer loans of $3 million.
(8) 
Consumer loans accounted for under the fair value option were residential mortgage loans of $1.9 billion and home equity loans of $196 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $1.9 billion and non-U.S. commercial loans of $4.7 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.
(9) 
Total outstandings includes U.S. commercial real estate loans of $45.2 billion and non-U.S. commercial real estate loans of $2.5 billion.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
(Dollars in millions)
30-59 Days
Past Due
(1)
 
60-89 Days Past Due (1)
 
90 Days or
More
Past Due
(2)
 
Total Past
Due 30 Days
or More
 
Total
Current or
Less Than
30 Days
Past Due (3)
 
Purchased
Credit-impaired
(4)
 
Loans
Accounted
for Under
the Fair
Value Option
 
Total Outstandings
Home loans
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
2,151

 
$
754

 
$
7,188

 
$
10,093

 
$
167,243

 
 
 
 

 
$
177,336

Home equity
243

 
113

 
693

 
1,049

 
53,450

 
 
 
 

 
54,499

Legacy Assets & Servicing portfolio
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential mortgage (5)
2,758

 
1,412

 
16,746

 
20,916

 
31,142

 
$
18,672

 
 

 
70,730

Home equity
444

 
221

 
1,292

 
1,957

 
30,623

 
6,593

 
 

 
39,173

Credit card and other consumer
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. credit card
598

 
422

 
1,053

 
2,073

 
90,265

 
 
 
 

 
92,338

Non-U.S. credit card
63

 
54

 
131

 
248

 
11,293

 
 
 
 

 
11,541

Direct/Indirect consumer (6)
431

 
175

 
410

 
1,016

 
81,176

 
 
 
 

 
82,192

Other consumer (7)
24

 
8

 
20

 
52

 
1,925

 
 
 
 

 
1,977

Total consumer
6,712

 
3,159

 
27,533

 
37,404

 
467,117

 
25,265

 
 

529,786

Consumer loans accounted for under the fair value option (8)
 
 
 
 
 
 
 
 
 
 
 
 
$
2,164


2,164

Total consumer loans and leases
6,712

 
3,159

 
27,533

 
37,404

 
467,117

 
25,265

 
2,164

 
531,950

Commercial
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. commercial
363

 
151

 
309

 
823

 
211,734

 
 
 
 

 
212,557

Commercial real estate (9)
30

 
29

 
243

 
302

 
47,591

 
 
 
 

 
47,893

Commercial lease financing
110

 
37

 
48

 
195

 
25,004

 
 
 
 

 
25,199

Non-U.S. commercial
103

 
8

 
17

 
128

 
89,334

 
 
 
 

 
89,462

U.S. small business commercial
87

 
55

 
113

 
255

 
13,039

 
 
 
 

 
13,294

Total commercial
693

 
280

 
730

 
1,703

 
386,702

 
 
 
 

 
388,405

Commercial loans accounted for under the fair value option (8)
 
 
 
 
 
 
 
 
 
 
 
 
7,878

 
7,878

Total commercial loans and leases
693

 
280

 
730

 
1,703

 
386,702

 
 
 
7,878

 
396,283

Total loans and leases
$
7,405

 
$
3,439

 
$
28,263

 
$
39,107

 
$
853,819

 
$
25,265

 
$
10,042

 
$
928,233

Percentage of outstandings
0.80
%
 
0.37
%
 
3.04
%
 
4.21
%
 
91.99
%
 
2.72
%
 
1.08
%
 
100.00
%

(1) 
Home loans 30-59 days past due includes fully-insured loans of $2.5 billion and nonperforming loans of $623 million. Home loans 60-89 days past due includes fully-insured loans of $1.2 billion and nonperforming loans of $410 million.
(2) 
Home loans includes fully-insured loans of $17.0 billion.
(3) 
Home loans includes $5.9 billion and direct/indirect consumer includes $33 million of nonperforming loans.
(4) 
PCI loan amounts are shown gross of the valuation allowance.
(5) 
Total outstandings includes pay option loans of $4.4 billion. The Corporation no longer originates this product.
(6) 
Total outstandings includes dealer financial services loans of $38.5 billion, unsecured consumer lending loans of $2.7 billion, U.S. securities-based lending loans of $31.2 billion, non-U.S. consumer loans of $4.7 billion, student loans of $4.1 billion and other consumer loans of $1.0 billion.
(7) 
Total outstandings includes consumer finance loans of $1.2 billion, consumer leases of $606 million, consumer overdrafts of $176 million and other non-U.S. consumer loans of $5 million.
(8) 
Consumer loans accounted for under the fair value option were residential mortgage loans of $2.0 billion and home equity loans of $147 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $1.5 billion and non-U.S. commercial loans of $6.4 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.
(9) 
Total outstandings includes U.S. commercial real estate loans of $46.3 billion and non-U.S. commercial real estate loans of $1.6 billion.
The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $17.2 billion and $28.2 billion at December 31, 2014 and 2013, providing full credit protection on residential mortgage loans that become severely delinquent. All of these loans are individually insured and therefore the Corporation does not record an allowance for credit losses related to these loans.
Nonperforming Loans and Leases
The Corporation classifies junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. At December 31, 2014 and 2013, $800 million and $1.2 billion of such junior-lien home equity loans were included in nonperforming loans.
The Corporation classifies consumer real estate loans that have been discharged in Chapter 7 bankruptcy and not reaffirmed by the borrower as troubled debt restructurings (TDRs), irrespective of payment history or delinquency status, even if the repayment terms for the loan have not been otherwise modified. The Corporation continues to have a lien on the underlying collateral. At December 31, 2014, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $1.4 billion of which $901 million were current on their contractual payments, while $395 million were 90 days or more past due. Of the contractually current nonperforming loans, more than 80 percent were discharged in Chapter 7 bankruptcy more than 12 months ago, and more than 60 percent were discharged 24 months or more ago. As subsequent cash payments are received on the loans that are contractually current, the interest component of the payments is generally recorded as interest income on a cash basis and the principal component is recorded as a reduction in the carrying value of the loan.
Excluding purchased credit-impaired (PCI) loans, the Corporation sold nonperforming and other delinquent consumer loans with a carrying value, excluding the related allowance, of $4.8 billion and $2.0 billion, and recognized gains of $247 million and $58 million recorded in noninterest income, during 2014 and 2013.

The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at December 31, 2014 and 2013. Nonperforming loans held-for-sale (LHFS) are excluded from nonperforming loans and leases as they are recorded at either fair value or the lower of cost or fair value. For more information on the criteria for classification as nonperforming, see Note 1 – Summary of Significant Accounting Principles.
 
 
 
 
 
 
 
 
Credit Quality
 
 
 
 
 
 
 
 
 
 
 
December 31
 
Nonperforming Loans and Leases (1)
 
Accruing Past Due
90 Days or More
(Dollars in millions)
2014
 
2013
 
2014
 
2013
Home loans
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
Residential mortgage (2)
$
2,398

 
$
3,316

 
$
3,942

 
$
5,137

Home equity
1,496

 
1,431

 

 

Legacy Assets & Servicing portfolio
 

 
 

 
 

 
 
Residential mortgage (2)
4,491

 
8,396

 
7,465

 
11,824

Home equity
2,405

 
2,644

 

 

Credit card and other consumer
 

 
 

 
 
 
 
U.S. credit card
n/a

 
n/a

 
866

 
1,053

Non-U.S. credit card
n/a

 
n/a

 
95

 
131

Direct/Indirect consumer
28

 
35

 
64

 
408

Other consumer
1

 
18

 
1

 
2

Total consumer
10,819

 
15,840

 
12,433

 
18,555

Commercial
 

 
 

 
 

 
 

U.S. commercial
701

 
819

 
110

 
47

Commercial real estate
321

 
322

 
3

 
21

Commercial lease financing
3

 
16

 
41

 
41

Non-U.S. commercial
1

 
64

 

 
17

U.S. small business commercial
87

 
88

 
67

 
78

Total commercial
1,113

 
1,309

 
221

 
204

Total loans and leases
$
11,932

 
$
17,149

 
$
12,654

 
$
18,759

(1) 
Nonperforming loan balances do not include nonaccruing TDRs removed from the PCI loan portfolio prior to January 1, 2010 of $102 million and $260 million at December 31, 2014 and 2013.
(2) 
Residential mortgage loans in the Core and Legacy Assets & Servicing portfolios accruing past due 90 days or more are fully-insured loans. At December 31, 2014 and 2013, residential mortgage includes $7.3 billion and $13.0 billion of loans on which interest has been curtailed by the FHA, and therefore are no longer accruing interest, although principal is still insured, and $4.1 billion and $4.0 billion of loans on which interest is still accruing.
n/a = not applicable
Credit Quality Indicators
The Corporation monitors credit quality within its Home Loans, Credit Card and Other Consumer, and Commercial portfolio segments based on primary credit quality indicators. For more information on the portfolio segments, see Note 1 – Summary of Significant Accounting Principles. Within the Home Loans portfolio segment, the primary credit quality indicators are refreshed LTV and refreshed FICO score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan, refreshed quarterly. Home equity loans are evaluated using combined loan-to-value (CLTV) which measures the carrying value of the combined loans that have liens against the property and the available line of credit as a percentage of the value of the property securing the loan, refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower’s credit history. At a minimum, FICO scores are refreshed quarterly, and in many cases, more frequently. FICO scores are also a primary credit quality indicator for the Credit Card and Other Consumer portfolio segment and the business card portfolio within U.S. small business commercial. Within the Commercial portfolio segment, loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by the Corporation as Special Mention, Substandard or Doubtful, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans.

The following tables present certain credit quality indicators for the Corporation’s Home Loans, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at December 31, 2014 and 2013.
 
 
 
 
 
 
 
 
 
 
 
 
Home Loans – Credit Quality Indicators (1)
 
 
 
December 31, 2014
(Dollars in millions)
Core Portfolio Residential
Mortgage (2)
 
Legacy Assets & Servicing Residential
Mortgage
(2)
 
Residential Mortgage PCI (3)
 
Core Portfolio Home Equity (2)
 
Legacy Assets & Servicing Home Equity (2)
 
Home
Equity PCI
Refreshed LTV (4, 5)
 

 
 

 
 

 
 

 
 
 
 
Less than or equal to 90 percent
$
100,255

 
$
18,499

 
$
9,972

 
$
45,414

 
$
17,453

 
$
2,046

Greater than 90 percent but less than or equal to 100 percent
4,958

 
3,081

 
2,005

 
2,442

 
3,272

 
1,048

Greater than 100 percent
4,017

 
5,265

 
3,175

 
4,031

 
7,496

 
2,523

Fully-insured loans (6)
52,990

 
11,980

 

 

 

 

Total home loans
$
162,220

 
$
38,825

 
$
15,152

 
$
51,887

 
$
28,221

 
$
5,617

Refreshed FICO score
 
 
 
 
 
 
 
 
 
 
 
Less than 620
$
4,184

 
$
6,313

 
$
6,109

 
$
2,169

 
$
3,470

 
$
864

Greater than or equal to 620 and less than 680
6,272

 
4,032

 
3,014

 
3,683

 
4,529

 
995

Greater than or equal to 680 and less than 740
21,946

 
6,463

 
3,310

 
10,231

 
7,905

 
1,651

Greater than or equal to 740
76,828

 
10,037

 
2,719

 
35,804

 
12,317

 
2,107

Fully-insured loans (6)
52,990

 
11,980

 

 

 

 

Total home loans
$
162,220

 
$
38,825

 
$
15,152

 
$
51,887

 
$
28,221

 
$
5,617

(1) 
Excludes $2.1 billion of loans accounted for under the fair value option.
(2) 
Excludes PCI loans.
(3) 
Includes $2.8 billion of pay option loans. The Corporation no longer originates this product.
(4) 
Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.
(5) 
Effective December 31, 2014, with the exception of high-value properties, underlying values for LTV ratios are primarily determined using automated valuation models. For high-value properties, generally with an original value of $1 million or more, estimated property values are determined using the CoreLogic Case-Shiller Index. Prior-period values have been updated to reflect this change. Previously reported values were primarily determined through an index-based approach.
(6) 
Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.
 
 
 
 
 
 
 
 
Credit Card and Other Consumer – Credit Quality Indicators
 
 
 
December 31, 2014
(Dollars in millions)
U.S. Credit
Card
 
Non-U.S.
Credit Card
 
Direct/Indirect
Consumer
 
Other
Consumer (1)
Refreshed FICO score
 

 
 

 
 

 
 

Less than 620
$
4,467

 
$

 
$
1,296

 
$
266

Greater than or equal to 620 and less than 680
12,177

 

 
1,892

 
227

Greater than or equal to 680 and less than 740
34,986

 

 
10,749

 
307

Greater than or equal to 740
40,249

 

 
25,279

 
881

Other internal credit metrics (2, 3, 4)

 
10,465

 
41,165

 
165

Total credit card and other consumer
$
91,879

 
$
10,465

 
$
80,381

 
$
1,846

(1) 
Thirty-seven percent of the other consumer portfolio is associated with portfolios from certain consumer finance businesses that the Corporation previously exited.
(2) 
Other internal credit metrics may include delinquency status, geography or other factors.
(3) 
Direct/indirect consumer includes $39.7 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $632 million of loans the Corporation no longer originates.
(4) 
Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2014, 98 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and one percent was 90 days or more past due.
 
 
 
 
 
 
 
 
 
 
Commercial – Credit Quality Indicators (1)
 
 
 
December 31, 2014
(Dollars in millions)
U.S.
Commercial
 
Commercial
Real Estate
 
Commercial
Lease
Financing
 
Non-U.S.
Commercial
 
U.S. Small
Business
Commercial (2)
Risk ratings
 

 
 

 
 

 
 

 
 

Pass rated
$
213,839

 
$
46,632

 
$
23,832

 
$
79,367

 
$
751

Reservable criticized
6,454

 
1,050

 
1,034

 
716

 
182

Refreshed FICO score (3)
 
 
 
 
 
 
 
 
 

Less than 620
 

 
 

 
 

 
 

 
184

Greater than or equal to 620 and less than 680
 
 
 
 
 
 
 
 
529

Greater than or equal to 680 and less than 740
 
 
 
 
 
 
 
 
1,591

Greater than or equal to 740
 
 
 
 
 
 
 
 
2,910

Other internal credit metrics (3, 4)
 
 
 
 
 
 
 
 
7,146

Total commercial
$
220,293

 
$
47,682

 
$
24,866

 
$
80,083

 
$
13,293

(1) 
Excludes $6.6 billion of loans accounted for under the fair value option.
(2) 
U.S. small business commercial includes $762 million of criticized business card and small business loans which are evaluated using refreshed FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. At December 31, 2014, 98 percent of the balances where internal credit metrics are used was current or less than 30 days past due.
(3) 
Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.
(4) 
Other internal credit metrics may include delinquency status, application scores, geography or other factors.
 
 
 
 
 
 
 
 
 
 
 
 
Home Loans – Credit Quality Indicators (1)
 
 
 
December 31, 2013
(Dollars in millions)
Core Portfolio Residential
Mortgage (2)
 
Legacy Assets & Servicing Residential
Mortgage
(2)
 
Residential Mortgage PCI (3)
 
Core Portfolio Home Equity (2)
 
Legacy Assets & Servicing Home Equity (2)
 
Home
Equity PCI
Refreshed LTV (4, 5)
 

 
 

 
 

 
 

 
 
 
 
Less than or equal to 90 percent
$
94,255

 
$
21,587

 
$
10,605

 
$
44,892

 
$
17,006

 
$
1,598

Greater than 90 percent but less than or equal to 100 percent
7,013

 
4,216

 
2,638

 
3,178

 
3,948

 
1,121

Greater than 100 percent
6,356

 
8,720

 
5,429

 
6,429

 
11,626

 
3,874

Fully-insured loans (6)
69,712

 
17,535

 

 

 

 

Total home loans
$
177,336

 
$
52,058

 
$
18,672

 
$
54,499

 
$
32,580

 
$
6,593

Refreshed FICO score
 

 
 

 
 

 
 

 
 

 
 

Less than 620
$
5,334

 
$
9,955

 
$
9,129

 
$
2,415

 
$
4,259

 
$
1,045

Greater than or equal to 620 and less than 680
7,164

 
5,276

 
3,349

 
4,211

 
5,133

 
1,172

Greater than or equal to 680 and less than 740
22,617

 
7,639

 
3,211

 
11,726

 
9,143

 
1,936

Greater than or equal to 740
72,509

 
11,653

 
2,983

 
36,147

 
14,045

 
2,440

Fully-insured loans (6)
69,712

 
17,535

 

 

 

 

Total home loans
$
177,336

 
$
52,058

 
$
18,672

 
$
54,499

 
$
32,580

 
$
6,593

(1) 
Excludes $2.2 billion of loans accounted for under the fair value option.
(2) 
Excludes PCI loans.
(3) 
Includes $4.0 billion of pay option loans. The Corporation no longer originates this product.
(4) 
Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.
(5) 
Effective December 31, 2014, with the exception of high-value properties, underlying values for LTV ratios are primarily determined using automated valuation models. For high-value properties, generally with an original value of $1 million or more, estimated property values are determined using the CoreLogic Case-Shiller Index. Prior-period values have been updated to reflect this change. Previously reported values were primarily determined through an index-based approach.
(6) 
Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.
 
 
 
 
 
 
 
 
Credit Card and Other Consumer – Credit Quality Indicators
 
 
 
December 31, 2013
(Dollars in millions)
U.S. Credit
Card
 
Non-U.S.
Credit Card
 
Direct/Indirect
Consumer
 
Other
Consumer (1)
Refreshed FICO score
 

 
 

 
 

 
 

Less than 620
$
4,989

 
$

 
$
1,220

 
$
539

Greater than or equal to 620 and less than 680
12,753

 

 
3,345

 
264

Greater than or equal to 680 and less than 740
35,413

 

 
9,887

 
199

Greater than or equal to 740
39,183

 

 
26,220

 
188

Other internal credit metrics (2, 3, 4)

 
11,541

 
41,520

 
787

Total credit card and other consumer
$
92,338

 
$
11,541

 
$
82,192

 
$
1,977

(1) 
Sixty percent of the other consumer portfolio is associated with portfolios from certain consumer finance businesses that the Corporation previously exited.
(2) 
Other internal credit metrics may include delinquency status, geography or other factors.
(3) 
Direct/indirect consumer includes $35.8 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $4.1 billion of loans the Corporation no longer originates.
(4) 
Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2013, 98 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and one percent was 90 days or more past due.
 
 
 
 
 
 
 
 
 
 
Commercial – Credit Quality Indicators (1)
 
 
 
December 31, 2013
(Dollars in millions)
U.S.
Commercial
 
Commercial
Real Estate
 
Commercial
Lease
Financing
 
Non-U.S.
Commercial
 
U.S. Small
Business
Commercial (2)
Risk ratings
 

 
 

 
 

 
 

 
 

Pass rated
$
205,416

 
$
46,507

 
$
24,211

 
$
88,138

 
$
1,191

Reservable criticized
7,141

 
1,386

 
988

 
1,324

 
346

Refreshed FICO score (3)
 
 
 
 
 
 
 
 
 
Less than 620
 
 
 
 
 
 
 
 
224

Greater than or equal to 620 and less than 680
 
 
 
 
 
 
 
 
534

Greater than or equal to 680 and less than 740
 
 
 
 
 
 
 
 
1,567

Greater than or equal to 740
 
 
 
 
 
 
 
 
2,779

Other internal credit metrics (3, 4)
 
 
 
 
 
 
 
 
6,653

Total commercial
$
212,557

 
$
47,893

 
$
25,199

 
$
89,462

 
$
13,294

(1) 
Excludes $7.9 billion of loans accounted for under the fair value option.
(2) 
U.S. small business commercial includes $289 million of criticized business card and small business loans which are evaluated using refreshed FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. At December 31, 2013, 99 percent of the balances where internal credit metrics are used was current or less than 30 days past due.
(3) 
Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.
(4) 
Other internal credit metrics may include delinquency status, application scores, geography or other factors.
Impaired Loans and Troubled Debt Restructurings
A loan is considered impaired when, based on current information, it is probable that the Corporation will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans and all consumer and commercial TDRs. Impaired loans exclude nonperforming consumer loans and nonperforming commercial leases unless they are classified as TDRs. Loans accounted for under the fair value option are also excluded. PCI loans are excluded and reported separately on page 189. For additional information, see Note 1 – Summary of Significant Accounting Principles.
Home Loans
Impaired home loans within the Home Loans portfolio segment consist entirely of TDRs. Excluding PCI loans, most modifications of home loans meet the definition of TDRs when a binding offer is extended to a borrower. Modifications of home loans are done in accordance with the government’s Making Home Affordable Program (modifications under government programs) or the Corporation’s proprietary programs (modifications under proprietary programs). These modifications are considered to be TDRs if concessions have been granted to borrowers experiencing financial difficulties. Concessions may include reductions in interest rates, capitalization of past due amounts, principal and/or interest forbearance, payment extensions, principal and/or interest forgiveness, or combinations thereof. During 2013 and 2012, the Corporation provided interest rate modifications to qualified borrowers pursuant to the 2012 National Mortgage Settlement and these interest rate modifications are not considered to be TDRs.
Prior to permanently modifying a loan, the Corporation may enter into trial modifications with certain borrowers under both government and proprietary programs. Trial modifications generally represent a three- to four-month period during which the borrower makes monthly payments under the anticipated modified payment terms. Upon successful completion of the trial period, the Corporation and the borrower enter into a permanent modification. Binding trial modifications are classified as TDRs when the trial offer is made and continue to be classified as TDRs regardless of whether the borrower enters into a permanent modification.
Home loans that have been discharged in Chapter 7 bankruptcy with no change in repayment terms of $2.4 billion were included in TDRs at December 31, 2014, of which $1.4 billion were classified as nonperforming and $1.0 billion were loans fully-insured by the Federal Housing Administration (FHA). For more information on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.
A home loan, excluding PCI loans which are reported separately, is not classified as impaired unless it is a TDR. Once such a loan has been designated as a TDR, it is then individually assessed for impairment. Home loan TDRs are measured primarily based on the net present value of the estimated cash flows discounted at the loan’s original effective interest rate, as discussed in the following paragraph. If the carrying value of a TDR exceeds this amount, a specific allowance is recorded as a component of the allowance for loan and lease losses. Alternatively, home loan TDRs that are considered to be dependent solely on the collateral for repayment (e.g., due to the lack of income verification or as a result of being discharged in Chapter 7 bankruptcy) are measured based on the estimated fair value of the collateral and a charge-off is recorded if the carrying value exceeds the fair value of the collateral. Home loans that reached 180 days past due prior to modification had been charged off to their net realizable value, less costs to sell, before they were modified as TDRs in accordance with established policy. Therefore, modifications of home loans that are 180 or more days past due as TDRs do not have an impact on the allowance for loan and lease losses nor are additional charge-offs required at the time of modification. Subsequent declines in the fair value of the collateral after a loan has reached 180 days past due are recorded as charge-offs. Fully-insured loans are protected against principal loss, and therefore, the Corporation does not record an allowance for loan and lease losses on the outstanding principal balance, even after they have been modified in a TDR.
The net present value of the estimated cash flows used to measure impairment is based on model-driven estimates of projected payments, prepayments, defaults and loss-given-default (LGD). Using statistical modeling methodologies, the Corporation estimates the probability that a loan will default prior to maturity based on the attributes of each loan. The factors that are most relevant to the probability of default are the refreshed LTV, or in the case of a subordinated lien, refreshed CLTV, borrower credit score, months since origination (i.e., vintage) and geography. Each of these factors is further broken down by present collection status (whether the loan is current, delinquent, in default or in bankruptcy). Severity (or LGD) is estimated based on the refreshed LTV for first mortgages or CLTV for subordinated liens. The estimates are based on the Corporation’s historical experience as adjusted to reflect an assessment of environmental factors that may not be reflected in the historical data, such as changes in real estate values, local and national economies, underwriting standards and the regulatory environment. The probability of default models also incorporate recent experience with modification programs including redefaults subsequent to modification, a loan’s default history prior to modification and the change in borrower payments post-modification.
At December 31, 2014 and 2013, remaining commitments to lend additional funds to debtors whose terms have been modified in a home loan TDR were immaterial. Home loan foreclosed properties totaled $630 million and $533 million at December 31, 2014 and 2013.

The table below provides the unpaid principal balance, carrying value and related allowance at December 31, 2014 and 2013, and the average carrying value and interest income recognized for 2014, 2013 and 2012 for impaired loans in the Corporation’s Home Loans portfolio segment and includes primarily loans managed by Legacy Assets & Servicing. Certain impaired home loans do not have a related allowance as the current valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.
 
 
 
 
 
 
 
 
 
 
 
 
Impaired Loans – Home Loans
 
 
 
 
 
 
 
 
 
December 31, 2014
 
December 31, 2013
(Dollars in millions)
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
 
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
With no recorded allowance
 

 
 

 
 

 
 

 
 

 
 
Residential mortgage
$
19,710

 
$
15,605

 
$

 
$
21,567

 
$
16,450

 
$

Home equity
3,540

 
1,630

 

 
3,249

 
1,385

 

With an allowance recorded
 
 
 
 
 

 
 
 
 
 
 
Residential mortgage
$
7,861

 
$
7,665

 
$
531

 
$
13,341

 
$
12,862

 
$
991

Home equity
852

 
728

 
196

 
893

 
761

 
240

Total
 

 
 

 
 

 
 
 
 
 
 
Residential mortgage
$
27,571

 
$
23,270

 
$
531

 
$
34,908

 
$
29,312

 
$
991

Home equity
4,392

 
2,358

 
196

 
4,142

 
2,146

 
240

 
 
 
 
 
 
 
 
 
 
 
 
 
2014
 
2013
 
2012
 
Average
Carrying
Value
 
Interest
Income
Recognized
(1)
 
Average
Carrying
Value
 
Interest
Income
Recognized
(1)
 
Average
Carrying
Value
 
Interest
Income
Recognized
(1)
With no recorded allowance
 

 
 

 
 
 
 
 
 
 
 
Residential mortgage
$
15,065

 
$
490

 
$
16,625

 
$
621

 
$
10,937

 
$
366

Home equity
1,486

 
87

 
1,245

 
76

 
734

 
49

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
10,826

 
$
411

 
$
13,926

 
$
616

 
$
11,575

 
$
423

Home equity
743

 
25

 
912

 
41

 
1,145

 
44

Total
 

 
 

 
 
 
 
 
 
 
 
Residential mortgage
$
25,891

 
$
901

 
$
30,551

 
$
1,237

 
$
22,512

 
$
789

Home equity
2,229

 
112

 
2,157

 
117

 
1,879

 
93

(1) 
Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal is considered collectible.
The following table presents the December 31, 2014, 2013 and 2012 unpaid principal balance, carrying value, and average pre- and post-modification interest rates on home loans that were modified in TDRs during 2014, 2013 and 2012, and net charge-offs recorded during the period in which the modification occurred. The following Home Loans portfolio segment tables include loans that were initially classified as TDRs during the period and also loans that had previously been classified as TDRs and were modified again during the period. These TDRs are primarily managed by Legacy Assets & Servicing.
 
 
 
 
 
 
 
 
 
 
Home Loans – TDRs Entered into During 2014, 2013 and 2012 (1)
 
 
 
December 31, 2014
 
2014
(Dollars in millions)
Unpaid Principal Balance
 
Carrying
Value
 
Pre-Modification Interest Rate
 
Post-Modification Interest Rate (2)
 
Net
Charge-offs (3)
Residential mortgage
$
5,940

 
$
5,120

 
5.28
%
 
4.93
%
 
$
72

Home equity
863

 
592

 
4.00

 
3.33

 
99

Total
$
6,803

 
$
5,712

 
5.12

 
4.73

 
$
171

 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
2013
Residential mortgage
$
11,233

 
$
10,016

 
5.30
%
 
4.27
%
 
$
235

Home equity
878

 
521

 
5.29

 
3.92

 
192

Total
$
12,111

 
$
10,537

 
5.30

 
4.24

 
$
427

 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
 
2012
Residential mortgage
$
15,088

 
$
12,228

 
5.52
%
 
4.70
%
 
$
523

Home equity
1,721

 
858

 
5.22

 
4.39

 
716

Total
$
16,809

 
$
13,086

 
5.49

 
4.66

 
$
1,239

(1) 
TDRs entered into during 2014 include modifications with principal forgiveness of $53 million related to residential mortgage and $1 million related to home equity. TDRs entered into during 2013 include residential mortgage modifications with principal forgiveness of $467 million. TDRs entered into during 2012 include modifications with principal forgiveness of $778 million related to residential mortgage and $9 million related to home equity.
(2) 
The post-modification interest rate reflects the interest rate applicable only to permanently completed modifications, which exclude loans that are in a trial modification period.
(3) 
Net charge-offs include amounts recorded on loans modified during the period that are no longer held by the Corporation at December 31, 2014, 2013 and 2012 due to sales and other dispositions.
The table below presents the December 31, 2014, 2013 and 2012 carrying value for home loans that were modified in a TDR during 2014, 2013 and 2012, by type of modification.
 
 
 
 
 
 
Home Loans – Modification Programs
 
 
 
TDRs Entered into During 2014
(Dollars in millions)
Residential Mortgage
 
Home
Equity
 
Total Carrying Value
Modifications under government programs
 
 
 
 
 
Contractual interest rate reduction
$
643

 
$
56

 
$
699

Principal and/or interest forbearance
16

 
18

 
34

Other modifications (1)
98

 
1

 
99

Total modifications under government programs
757

 
75

 
832

Modifications under proprietary programs
 
 
 
 
 
Contractual interest rate reduction
244

 
22

 
266

Capitalization of past due amounts
71

 
2

 
73

Principal and/or interest forbearance
66

 
75

 
141

Other modifications (1)
40

 
47

 
87

Total modifications under proprietary programs
421

 
146

 
567

Trial modifications
3,421

 
182

 
3,603

Loans discharged in Chapter 7 bankruptcy (2)
521

 
189

 
710

Total modifications
$
5,120

 
$
592

 
$
5,712

 
 
 
 
 
 
 
TDRs Entered into During 2013
Modifications under government programs
 
 
 
 
 
Contractual interest rate reduction
$
1,815

 
$
48

 
$
1,863

Principal and/or interest forbearance
35

 
24

 
59

Other modifications (1)
100

 

 
100

Total modifications under government programs
1,950

 
72

 
2,022

Modifications under proprietary programs
 
 
 
 
 
Contractual interest rate reduction
2,799

 
40

 
2,839

Capitalization of past due amounts
132

 
2

 
134

Principal and/or interest forbearance
469

 
17

 
486

Other modifications (1)
105

 
25

 
130

Total modifications under proprietary programs
3,505

 
84

 
3,589

Trial modifications
3,410

 
87

 
3,497

Loans discharged in Chapter 7 bankruptcy (2)
1,151

 
278

 
1,429

Total modifications
$
10,016

 
$
521

 
$
10,537

 
 
 
 
 
 
 
TDRs Entered into During 2012
Modifications under government programs
 
 
 
 
 
Contractual interest rate reduction
$
642

 
$
78

 
$
720

Principal and/or interest forbearance
51

 
31

 
82

Other modifications (1)
37

 
1

 
38

Total modifications under government programs
730

 
110

 
840

Modifications under proprietary programs
 
 
 
 
 
Contractual interest rate reduction
3,350

 
44

 
3,394

Capitalization of past due amounts
144

 

 
144

Principal and/or interest forbearance
424

 
16

 
440

Other modifications (1)
97

 
21

 
118

Total modifications under proprietary programs
4,015

 
81

 
4,096

Trial modifications
4,547

 
69

 
4,616

Loans discharged in Chapter 7 bankruptcy (2)
2,936

 
598

 
3,534

Total modifications
$
12,228

 
$
858

 
$
13,086

(1) 
Includes other modifications such as term or payment extensions and repayment plans.
(2) 
Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
The table below presents the carrying value of loans that entered into payment default during 2014, 2013 and 2012 that were modified in a TDR during the 12 months preceding payment default. Total carrying value includes loans with a carrying value of $2.0 billion, $2.4 billion and $667 million that entered into payment default during 2014, 2013 and 2012 but were no longer held by the Corporation as of December 31, 2014, 2013 and 2012 due to sales and other dispositions. A payment default for home loan TDRs is recognized when a borrower has missed three monthly payments (not necessarily consecutively) since modification. Payment defaults on a trial modification where the borrower has not yet met the terms of the agreement are included in the table below if the borrower is 90 days or more past due three months after the offer to modify is made.
 
 
 
 
 
 
Home Loans – TDRs Entering Payment Default That Were Modified During the Preceding 12 Months
 
 
 
2014
(Dollars in millions)
 Residential Mortgage
 
Home
Equity
 
Total Carrying Value (1)
Modifications under government programs
$
696

 
$
4

 
$
700

Modifications under proprietary programs
714

 
12

 
726

Loans discharged in Chapter 7 bankruptcy (2)
481

 
70

 
551

Trial modifications
2,231

 
56

 
2,287

Total modifications
$
4,122

 
$
142

 
$
4,264

 
 
 
 
 
 
 
2013
Modifications under government programs
$
454

 
$
2

 
$
456

Modifications under proprietary programs
1,117

 
4

 
1,121

Loans discharged in Chapter 7 bankruptcy (2)
964

 
30

 
994

Trial modifications
4,376

 
14

 
4,390

Total modifications
$
6,911

 
$
50

 
$
6,961

 
 
 
 
 
 
 
2012
Modifications under government programs
$
202

 
$
8

 
$
210

Modifications under proprietary programs
942

 
14

 
956

Loans discharged in Chapter 7 bankruptcy (2)
1,228

 
53

 
1,281

Trial modifications
2,351

 
20

 
2,371

Total modifications
$
4,723

 
$
95

 
$
4,818

(1) 
Total carrying value includes loans with a carrying value of $2.0 billion, $2.4 billion and $667 million that entered into payment default during 2014, 2013 and 2012 but were no longer held by the Corporation as of December 31, 2014, 2013 and 2012 due to sales and other dispositions.
(2) 
Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
Credit Card and Other Consumer
Impaired loans within the Credit Card and Other Consumer portfolio segment consist entirely of loans that have been modified in TDRs (the renegotiated credit card and other consumer TDR portfolio, collectively referred to as the renegotiated TDR portfolio). The Corporation seeks to assist customers that are experiencing financial difficulty by modifying loans while ensuring compliance with federal, local and international laws and guidelines. Credit card and other consumer loan modifications generally involve reducing the interest rate on the account and placing the customer on a fixed payment plan not exceeding 60 months, all of which are considered TDRs. In addition, the accounts of non-U.S. credit card customers who do not qualify for a fixed payment plan may have their interest rates reduced, as required by certain local jurisdictions. These modifications, which are also TDRs, tend to experience higher payment default rates given that the borrowers may lack the ability to repay even with the interest rate reduction. In all cases, the customer’s available line of credit is canceled. The Corporation makes loan modifications directly with borrowers for debt held only by the Corporation (internal programs). Additionally, the Corporation makes loan modifications for borrowers working with third-party renegotiation agencies that provide solutions to customers’ entire unsecured debt structures (external programs). The Corporation classifies other secured consumer loans that have been discharged in Chapter 7 bankruptcy as TDRs which are written down to collateral value and placed on nonaccrual status no later than the time of discharge. For more information on the regulatory guidance on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.
All credit card and substantially all other consumer loans that have been modified in TDRs remain on accrual status until the loan is either paid in full or charged off, which occurs no later than the end of the month in which the loan becomes 180 days past due or generally at 120 days past due for a loan that was placed on a fixed payment plan after July 1, 2012.
The allowance for impaired credit card and substantially all other consumer loans is based on the present value of projected cash flows, which incorporates the Corporation’s historical payment default and loss experience on modified loans, discounted using the portfolio’s average contractual interest rate, excluding promotionally priced loans, in effect prior to restructuring. Credit card and other consumer loans are included in homogeneous pools which are collectively evaluated for impairment. For these portfolios, loss forecast models are utilized that consider a variety of factors including, but not limited to, historical loss experience, delinquency status, economic trends and credit scores.

The table below provides the unpaid principal balance, carrying value and related allowance at December 31, 2014 and 2013, and the average carrying value and interest income recognized for 2014, 2013 and 2012 on the Corporation’s renegotiated TDR portfolio in the Credit Card and Other Consumer portfolio segment.
 
 
 
 
 
 
 
 
 
 
 
 
Impaired Loans – Credit Card and Other Consumer – Renegotiated TDRs
 
 
 
 
 
 
 
 
 
December 31, 2014
 
December 31, 2013
(Dollars in millions)
Unpaid
Principal
Balance
 
Carrying
Value (1)
 
Related
Allowance
 
Unpaid
Principal
Balance
 
Carrying
Value (1)
 
Related
Allowance
With no recorded allowance
 

 
 

 
 

 
 
 
 
 
 
Direct/Indirect consumer
$
59

 
$
25

 
$

 
$
75

 
$
32

 
$

Other consumer

 

 

 
34

 
34

 

With an allowance recorded
 

 
 

 
 

 
 

 
 

 
 
U.S. credit card
$
804

 
$
856

 
$
207

 
$
1,384

 
$
1,465

 
$
337

Non-U.S. credit card
132

 
168

 
108

 
200

 
240

 
149

Direct/Indirect consumer
76

 
92

 
24

 
242

 
282

 
84

Other consumer

 

 

 
27

 
26

 
9

Total
 

 
 

 
 

 
 
 
 
 
 
U.S. credit card
$
804

 
$
856

 
$
207

 
$
1,384

 
$
1,465

 
$
337

Non-U.S. credit card
132

 
168

 
108

 
200

 
240

 
149

Direct/Indirect consumer
135

 
117

 
24

 
317

 
314

 
84

Other consumer

 

 

 
61

 
60

 
9

 
 
 
 
 
 
 
 
 
 
 
 
 
2014
 
2013
 
2012
 
Average
Carrying
Value
 
Interest
Income
Recognized
(2)
 
Average
Carrying
Value
 
Interest
Income
Recognized
(2)
 
Average
Carrying
Value
 
Interest
Income
Recognized
(2)
With no recorded allowance
 
 
 
 
 
 
 
 
 
 
 
Direct/Indirect consumer
$
27

 
$

 
$
42

 
$

 
$
58

 
$

Other consumer
33

 
2

 
34

 
2

 
35

 
2

With an allowance recorded
 

 
 

 
 
 
 
 
 
 
 
U.S. credit card
$
1,148

 
$
71

 
$
2,144

 
$
134

 
$
4,085

 
$
253

Non-U.S. credit card
210

 
6

 
266

 
7

 
464

 
10

Direct/Indirect consumer
180

 
9

 
456

 
24

 
929

 
50

Other consumer
23

 
1

 
28

 
2

 
29

 
2

Total
 

 
 

 
 
 
 
 
 
 
 
U.S. credit card
$
1,148

 
$
71

 
$
2,144

 
$
134

 
$
4,085

 
$
253

Non-U.S. credit card
210

 
6

 
266

 
7

 
464

 
10

Direct/Indirect consumer
207

 
9

 
498

 
24

 
987

 
50

Other consumer
56

 
3

 
62

 
4

 
64

 
4

(1) 
Includes accrued interest and fees.
(2) 
Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal is considered collectible.
The table below provides information on the Corporation’s primary modification programs for the renegotiated TDR portfolio at December 31, 2014 and 2013.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Card and Other Consumer – Renegotiated TDRs by Program Type
 
 
 
 
 
 
 
 
 
 
 
December 31
 
Internal Programs
 
External Programs
 
Other (1)
 
Total
 
Percent of Balances Current or Less Than 30 Days Past Due
(Dollars in millions)
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
U.S. credit card
$
450

 
$
842

 
$
397

 
$
607

 
$
9

 
$
16

 
$
856

 
$
1,465

 
84.99
%
 
82.77
%
Non-U.S. credit card
41

 
71

 
16

 
26

 
111

 
143

 
168

 
240

 
47.56

 
49.01

Direct/Indirect consumer
50

 
170

 
34

 
106

 
33

 
38

 
117

 
314

 
85.21

 
84.29

Other consumer

 
60

 

 

 

 

 

 
60

 

 
71.08

Total renegotiated TDRs
$
541

 
$
1,143

 
$
447

 
$
739

 
$
153

 
$
197

 
$
1,141

 
$
2,079

 
79.51

 
78.77

(1) 
Other TDRs for non-U.S. credit card include modifications of accounts that are ineligible for a fixed payment plan.
The table below provides information on the Corporation’s renegotiated TDR portfolio including the December 31, 2014, 2013 and 2012 unpaid principal balance, carrying value and average pre- and post-modification interest rates of loans that were modified in TDRs during 2014, 2013 and 2012, and net charge-offs recorded during the period in which the modification occurred.
 
 
 
 
 
 
 
 
 
 
Credit Card and Other Consumer – Renegotiated TDRs Entered into During 2014, 2013 and 2012
 
 
 
December 31, 2014
 
2014
(Dollars in millions)
Unpaid Principal Balance
 
Carrying Value (1)
 
Pre-Modification Interest Rate
 
Post-Modification Interest Rate
 
Net
Charge-offs
U.S. credit card
$
276

 
$
301

 
16.64
%
 
5.15
%
 
$
37

Non-U.S. credit card
91

 
106

 
24.90

 
0.68

 
91

Direct/Indirect consumer
27

 
19

 
8.66

 
4.90

 
14

Total
$
394

 
$
426

 
18.32

 
4.03

 
$
142

 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
2013
U.S. credit card
$
299

 
$
329

 
16.84
%
 
5.84
%
 
$
30

Non-U.S. credit card
134

 
147

 
25.90

 
0.95

 
138

Direct/Indirect consumer
47

 
38

 
11.53

 
4.74

 
15

Other consumer
8

 
8

 
9.28

 
5.25

 

Total
$
488

 
$
522

 
18.89

 
4.37

 
$
183

 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
 
2012
U.S. credit card
$
396

 
$
400

 
17.59
%
 
6.36
%
 
$
45

Non-U.S. credit card
196

 
206

 
26.19

 
1.15

 
190

Direct/Indirect consumer
160

 
113

 
9.59

 
5.72

 
52

Other consumer
9

 
9

 
9.97

 
6.44

 

Total
$
761

 
$
728

 
18.68

 
4.79

 
$
287

(1) 
Includes accrued interest and fees.
The table below provides information on the Corporation’s primary modification programs for the renegotiated TDR portfolio for loans that were modified in TDRs during 2014, 2013 and 2012.
 
 
 
 
 
 
 
 
Credit Card and Other Consumer – Renegotiated TDRs Entered into During the Period by Program Type
 
 
 
2014
(Dollars in millions)
Internal Programs
 
External Programs
 
Other (1)
 
Total
U.S. credit card
$
196

 
$
105

 
$

 
$
301

Non-U.S. credit card
6

 
6

 
94

 
106

Direct/Indirect consumer
4

 
2

 
13

 
19

Total renegotiated TDRs
$
206

 
$
113

 
$
107

 
$
426

 
 
 
 
 
 
 
 
 
2013
U.S. credit card
$
192

 
$
137

 
$

 
$
329

Non-U.S. credit card
16

 
9

 
122

 
147

Direct/Indirect consumer
15

 
8

 
15

 
38

Other consumer
8

 

 

 
8

Total renegotiated TDRs
$
231

 
$
154

 
$
137

 
$
522

 
 
 
 
 
 
 
 
 
2012
U.S. credit card
$
248

 
$
152

 
$

 
$
400

Non-U.S. credit card
38

 
14

 
154

 
206

Direct/Indirect consumer
36

 
19

 
58

 
113

Other consumer
9

 

 

 
9

Total renegotiated TDRs
$
331

 
$
185

 
$
212

 
$
728

(1) 
Other TDRs for non-U.S. credit card include modifications of accounts that are ineligible for a fixed payment plan.
Credit card and other consumer loans are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows in the calculation of the allowance for loan and lease losses for impaired credit card and other consumer loans. Based on historical experience, the Corporation estimates that 14 percent of new U.S. credit card TDRs, 81 percent of new non-U.S. credit card TDRs and 12 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification. Loans that entered into payment default during 2014, 2013 and 2012 that had been modified in a TDR during the preceding 12 months were $56 million, $61 million and $203 million for U.S. credit card, $200 million, $236 million and $298 million for non-U.S. credit card, and $5 million, $12 million and $35 million for direct/indirect consumer, respectively.
Commercial Loans
Impaired commercial loans, which include nonperforming loans and TDRs (both performing and nonperforming), are primarily measured based on the present value of payments expected to be received, discounted at the loan’s original effective interest rate. Commercial impaired loans may also be measured based on observable market prices or, for loans that are solely dependent on the collateral for repayment, the estimated fair value of collateral, less costs to sell. If the carrying value of a loan exceeds this amount, a specific allowance is recorded as a component of the allowance for loan and lease losses.
Modifications of loans to commercial borrowers that are experiencing financial difficulty are designed to reduce the Corporation’s loss exposure while providing the borrower with an opportunity to work through financial difficulties, often to avoid foreclosure or bankruptcy. Each modification is unique and reflects the individual circumstances of the borrower. Modifications that result in a TDR may include extensions of maturity at a concessionary (below market) rate of interest, payment forbearances or other actions designed to benefit the customer while mitigating the Corporation’s risk exposure. Reductions in interest rates are rare. Instead, the interest rates are typically increased, although the increased rate may not represent a market rate of interest. Infrequently, concessions may also include principal forgiveness in connection with foreclosure, short sale or other settlement agreements leading to termination or sale of the loan.
At the time of restructuring, the loans are remeasured to reflect the impact, if any, on projected cash flows resulting from the modified terms. If there was no forgiveness of principal and the interest rate was not decreased, the modification may have little or no impact on the allowance established for the loan. If a portion of the loan is deemed to be uncollectible, a charge-off may be recorded at the time of restructuring. Alternatively, a charge-off may have already been recorded in a previous period such that no charge-off is required at the time of modification. For more information on modifications for the U.S. small business commercial portfolio, see Credit Card and Other Consumer in this Note.
At December 31, 2014 and 2013, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were immaterial. Commercial foreclosed properties totaled $67 million and $90 million at December 31, 2014 and 2013.

The table below provides the unpaid principal balance, carrying value and related allowance at December 31, 2014 and 2013, and the average carrying value and interest income recognized for 2014, 2013 and 2012 for impaired loans in the Corporation’s Commercial loan portfolio segment. Certain impaired commercial loans do not have a related allowance as the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.
 
 
 
 
 
 
 
 
 
 
 
 
Impaired Loans – Commercial
 
 
 
 
 
 
 
 
 
December 31, 2014
 
December 31, 2013
(Dollars in millions)
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
 
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
With no recorded allowance
 

 
 

 
 

 
 

 
 

 
 
U.S. commercial
$
668

 
$
650

 
$

 
$
609

 
$
577

 
$

Commercial real estate
60

 
48

 

 
254

 
228

 

Non-U.S. commercial

 

 

 
10

 
10

 

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 

U.S. commercial
$
1,139

 
$
839

 
$
75

 
$
1,581

 
$
1,262

 
$
164

Commercial real estate
678

 
495

 
48

 
1,066

 
731

 
61

Non-U.S. commercial
47

 
44

 
1

 
254

 
64

 
16

U.S. small business commercial (1)
133

 
122

 
35

 
186

 
176

 
36

Total
 

 
 

 
 

 
 
 
 
 
 
U.S. commercial
$
1,807

 
$
1,489

 
$
75

 
$
2,190

 
$
1,839

 
$
164

Commercial real estate
738

 
543

 
48

 
1,320

 
959

 
61

Non-U.S. commercial
47

 
44

 
1

 
264

 
74

 
16

U.S. small business commercial (1)
133

 
122

 
35

 
186

 
176

 
36

 
 
 
 
 
 
 
 
 
 
 
 
 
2014
 
2013
 
2012
 
Average
Carrying
Value
 
Interest
Income
Recognized
(2)
 
Average
Carrying
Value
 
Interest
Income
Recognized
(2)
 
Average
Carrying
Value
 
Interest
Income
Recognized
(2)
With no recorded allowance
 

 
 

 
 
 
 
 
 
 
 
U.S. commercial
$
546

 
$
12

 
$
442

 
$
6

 
$
588

 
$
9

Commercial real estate
166

 
3

 
269

 
3

 
1,119

 
3

Non-U.S. commercial
15

 

 
28

 

 
104

 

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
U.S. commercial
$
1,198

 
$
51

 
$
1,553

 
$
47

 
$
2,104

 
$
55

Commercial real estate
632

 
16

 
1,148

 
28

 
2,126

 
29

Non-U.S. commercial
52

 
3

 
109

 
5

 
77

 
4

U.S. small business commercial (1)
151

 
3

 
236

 
6

 
409

 
13

Total
 

 
 

 
 
 
 
 
 
 
 
U.S. commercial
$
1,744

 
$
63

 
$
1,995

 
$
53

 
$
2,692

 
$
64

Commercial real estate
798

 
19

 
1,417

 
31

 
3,245

 
32

Non-U.S. commercial
67

 
3

 
137

 
5

 
181

 
4

U.S. small business commercial (1)
151

 
3

 
236

 
6

 
409

 
13

(1) 
Includes U.S. small business commercial renegotiated TDR loans and related allowance.
(2) 
Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal is considered collectible.
The table below presents the December 31, 2014, 2013 and 2012 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during 2014, 2013 and 2012, and net charge-offs recorded during the period in which the modification occurred. The table below includes loans that were initially classified as TDRs during the period and also loans that had previously been classified as TDRs and were modified again during the period.
 
 
 
 
 
 
Commercial – TDRs Entered into During 2014, 2013 and 2012
 
 
 
December 31, 2014
 
2014
(Dollars in millions)
Unpaid Principal Balance
 
Carrying Value
 
Net Charge-offs
U.S. commercial
$
818

 
$
785

 
$
49

Commercial real estate
346

 
346

 
8

Non-U.S. commercial
44

 
43

 

U.S. small business commercial (1)
3

 
3

 

Total
$
1,211

 
$
1,177

 
$
57

 
 
 
 
 
 
 
December 31, 2013
 
2013
U.S. commercial
$
926

 
$
910

 
$
33

Commercial real estate
483

 
425

 
3

Non-U.S. commercial
61

 
44

 
7

U.S. small business commercial (1)
8

 
9

 
1

Total
$
1,478

 
$
1,388

 
$
44

 
 
 
 
 
 
 
December 31, 2012
 
2012
U.S. commercial
$
590

 
$
558

 
$
34

Commercial real estate
793

 
721

 
20

Non-U.S. commercial
90

 
89

 
1

U.S. small business commercial (1)
22

 
22

 
5

Total
$
1,495

 
$
1,390

 
$
60

(1) 
U.S. small business commercial TDRs are comprised of renegotiated small business card loans.
A commercial TDR is generally deemed to be in payment default when the loan is 90 days or more past due, including delinquencies that were not resolved as part of the modification. U.S. small business commercial TDRs are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows, along with observable market prices or fair value of collateral when measuring the allowance for loan and lease losses. TDRs that were in payment default had a carrying value of $103 million, $55 million and $130 million for U.S. commercial and $211 million, $128 million and $455 million for commercial real estate at December 31, 2014, 2013 and 2012, respectively.
Purchased Credit-impaired Loans
PCI loans are acquired loans with evidence of credit quality deterioration since origination for which it is probable at purchase date that the Corporation will be unable to collect all contractually required payments. The following table presents PCI loans acquired in connection with the 2013 settlement with FNMA.
 
 
Purchased Loans at Acquisition Date
 
 
 
(Dollars in millions)
 
Contractually required payments including interest
$
8,274

Less: Nonaccretable difference
2,159

Cash flows expected to be collected (1)
6,115

Less: Accretable yield
1,125

Fair value of loans acquired
$
4,990

(1) 
Represents undiscounted expected principal and interest cash flows at acquisition.
The table below shows activity for the accretable yield on PCI loans, which includes the Countrywide Financial Corporation (Countrywide) portfolio and loans repurchased in connection with the settlement with FNMA. For more information on the settlement with FNMA, see Note 7 – Representations and Warranties Obligations and Corporate Guarantees. The amount of accretable yield is affected by changes in credit outlooks, including metrics such as default rates and loss severities, prepayment speeds, which can change the amount and period of time over which interest payments are expected to be received, and the interest rates on variable rate loans. The reclassifications from nonaccretable difference during 2014 and 2013 were due to lower expected loss rates and a decrease in forecasted prepayment speeds. Changes in the prepayment assumption affect the expected remaining life of the portfolio which results in a change to the amount of future interest cash flows.
 
 

Rollforward of Accretable Yield
 
 
 
(Dollars in millions)
 

Accretable yield, January 1, 2013
$
4,644

Accretion
(1,194
)
Loans Purchased
1,125

Disposals/transfers
(361
)
Reclassifications from nonaccretable difference
2,480

Accretable yield, December 31, 2013
6,694

Accretion
(1,061
)
Disposals/transfers
(506
)
Reclassifications from nonaccretable difference
481

Accretable yield, December 31, 2014
$
5,608


During 2014, the Corporation sold PCI loans with a carrying value of $1.9 billion, which excludes the related allowance of $317 million. For more information on PCI loans, see Note 1 – Summary of Significant Accounting Principles, and for the carrying value and valuation allowance for PCI loans, see Note 5 – Allowance for Credit Losses.
Loans Held-for-sale
The Corporation had LHFS of $12.8 billion and $11.4 billion at December 31, 2014 and 2013. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $40.1 billion, $81.0 billion and $58.0 billion for 2014, 2013 and 2012, respectively. Cash used for originations and purchases of LHFS totaled $40.1 billion, $65.7 billion and $59.5 billion for 2014, 2013 and 2012, respectively.