Quarterly report pursuant to Section 13 or 15(d)

Allowance for Credit Losses

v3.2.0.727
Allowance for Credit Losses
6 Months Ended
Jun. 30, 2015
Loans and Leases Receivable, Allowance [Abstract]  
Allowance for Credit Losses
NOTE 5 – Allowance for Credit Losses

The table below summarizes the changes in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2015 and 2014.

 
Three Months Ended June 30, 2015
(Dollars in millions)
Consumer Real Estate
 
Credit Card
and Other
Consumer
 
Commercial
 
Total
Allowance for loan and lease losses, April 1
$
5,250

 
$
3,929

 
$
4,497

 
$
13,676

Loans and leases charged off
(533
)
 
(896
)
 
(124
)
 
(1,553
)
Recoveries of loans and leases previously charged off
205

 
204

 
76

 
485

Net charge-offs
(328
)
 
(692
)
 
(48
)
 
(1,068
)
Write-offs of PCI loans
(290
)
 

 

 
(290
)
Provision for loan and lease losses
108

 
445

 
176

 
729

Other (1)
1

 
20

 

 
21

Allowance for loan and lease losses, June 30
4,741

 
3,702

 
4,625

 
13,068

Reserve for unfunded lending commitments, April 1

 

 
537

 
537

Provision for unfunded lending commitments

 

 
51

 
51

Reserve for unfunded lending commitments, June 30

 

 
588

 
588

Allowance for credit losses, June 30
$
4,741

 
$
3,702

 
$
5,213

 
$
13,656

 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2014
Allowance for loan and lease losses, April 1
$
7,556

 
$
4,775

 
$
4,287

 
$
16,618

Loans and leases charged off
(632
)
 
(1,051
)
 
(161
)
 
(1,844
)
Recoveries of loans and leases previously charged off
428

 
241

 
102

 
771

Net charge-offs
(204
)
 
(810
)
 
(59
)
 
(1,073
)
Write-offs of PCI loans
(160
)
 

 

 
(160
)
Provision for loan and lease losses
(284
)
 
441

 
260

 
417

Other (1)

 
11

 
(2
)
 
9

Allowance for loan and lease losses, June 30
6,908

 
4,417

 
4,486

 
15,811

Reserve for unfunded lending commitments, April 1

 

 
509

 
509

Provision for unfunded lending commitments

 

 
(6
)
 
(6
)
Reserve for unfunded lending commitments, June 30

 

 
503

 
503

Allowance for credit losses, June 30
$
6,908

 
$
4,417

 
$
4,989

 
$
16,314

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2015
Allowance for loan and lease losses, January 1
$
5,935

 
$
4,047

 
$
4,437

 
$
14,419

Loans and leases charged off
(1,085
)
 
(1,860
)
 
(253
)
 
(3,198
)
Recoveries of loans and leases previously charged off
388

 
420

 
128

 
936

Net charge-offs
(697
)
 
(1,440
)
 
(125
)
 
(2,262
)
Write-offs of PCI loans
(578
)
 

 

 
(578
)
Provision for loan and lease losses
80

 
1,092

 
313

 
1,485

Other (1)
1

 
3

 

 
4

Allowance for loan and lease losses, June 30
4,741

 
3,702

 
4,625

 
13,068

Reserve for unfunded lending commitments, January 1

 

 
528

 
528

Provision for unfunded lending commitments

 

 
60

 
60

Reserve for unfunded lending commitments, June 30

 

 
588

 
588

Allowance for credit losses, June 30
$
4,741

 
$
3,702

 
$
5,213

 
$
13,656

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2014
Allowance for loan and lease losses, January 1
$
8,518

 
$
4,905

 
$
4,005

 
$
17,428

Loans and leases charged off
(1,228
)
 
(2,179
)
 
(305
)
 
(3,712
)
Recoveries of loans and leases previously charged off
595

 
459

 
197

 
1,251

Net charge-offs
(633
)
 
(1,720
)
 
(108
)
 
(2,461
)
Write-offs of PCI loans
(551
)
 

 

 
(551
)
Provision for loan and lease losses
(425
)
 
1,232

 
594

 
1,401

Other (1)
(1
)
 

 
(5
)
 
(6
)
Allowance for loan and lease losses, June 30
6,908

 
4,417

 
4,486

 
15,811

Reserve for unfunded lending commitments, January 1

 

 
484

 
484

Provision for unfunded lending commitments

 

 
19

 
19

Reserve for unfunded lending commitments, June 30

 

 
503

 
503

Allowance for credit losses, June 30
$
6,908

 
$
4,417

 
$
4,989

 
$
16,314

(1) 
Primarily represents the net impact of portfolio sales, consolidations and deconsolidations, and foreign currency translation adjustments.

During the three and six months ended June 30, 2015, for the PCI loan portfolio, the Corporation recorded provision expense of $78 million and $28 million with a corresponding increase in the valuation allowance included as part of the allowance for loan and lease losses. This compared to a benefit of $106 million in the provision for credit losses for both of the same periods in 2014. Write-offs in the PCI loan portfolio totaled $290 million and $578 million with a corresponding decrease in the PCI valuation allowance during the three and six months ended June 30, 2015 compared to $160 million and $551 million for the same periods in 2014. Write-offs included $65 million and $175 million associated with the sale of PCI loans during the three and six months ended June 30, 2015 compared to $28 million and $186 million for the same periods in 2014. The valuation allowance associated with the PCI loan portfolio was $1.1 billion and $1.7 billion at June 30, 2015 and December 31, 2014.

The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at June 30, 2015 and December 31, 2014.

Allowance and Carrying Value by Portfolio Segment
 
 
 
 
 
 
 
 
June 30, 2015
(Dollars in millions)
Consumer Real Estate
 
Credit Card
and Other
Consumer
 
Commercial
 
Total
Impaired loans and troubled debt restructurings (1)
 
 
 
 
 
 
 
Allowance for loan and lease losses (2)
$
674

 
$
307

 
$
156

 
$
1,137

Carrying value (3)
24,083

 
934

 
2,376

 
27,393

Allowance as a percentage of carrying value
2.80
%
 
32.87
%
 
6.57
%
 
4.15
%
Loans collectively evaluated for impairment
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
2,965

 
$
3,395

 
$
4,469

 
$
10,829

Carrying value (3, 4)
237,406

 
184,499

 
411,180

 
833,085

Allowance as a percentage of carrying value (4)
1.25
%
 
1.84
%
 
1.09
%
 
1.30
%
Purchased credit-impaired loans
 
 
 
 
 
 
 
Valuation allowance
$
1,102

 
n/a

 
n/a

 
$
1,102

Carrying value gross of valuation allowance
18,342

 
n/a

 
n/a

 
18,342

Valuation allowance as a percentage of carrying value
6.01
%
 
n/a

 
n/a

 
6.01
%
Total
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
4,741

 
$
3,702

 
$
4,625

 
$
13,068

Carrying value (3, 4)
279,831

 
185,433

 
413,556

 
878,820

Allowance as a percentage of carrying value (4)
1.69
%
 
2.00
%
 
1.12
%
 
1.49
%
 
 
 
 
 
 
 
 
 
December 31, 2014
Impaired loans and troubled debt restructurings (1)
 
 
 
 
 
 
 
Allowance for loan and lease losses (2)
$
727

 
$
339

 
$
159

 
$
1,225

Carrying value (3)
25,628

 
1,141

 
2,198

 
28,967

Allowance as a percentage of carrying value
2.84
%
 
29.71
%
 
7.23
%
 
4.23
%
Loans collectively evaluated for impairment
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
3,556

 
$
3,708

 
$
4,278

 
$
11,542

Carrying value (3, 4)
255,525

 
183,430

 
384,019

 
822,974

Allowance as a percentage of carrying value (4)
1.39
%
 
2.02
%
 
1.11
%
 
1.40
%
Purchased credit-impaired loans
 
 
 
 
 
 
 
Valuation allowance
$
1,652

 
n/a

 
n/a

 
$
1,652

Carrying value gross of valuation allowance
20,769

 
n/a

 
n/a

 
20,769

Valuation allowance as a percentage of carrying value
7.95
%
 
n/a

 
n/a

 
7.95
%
Total
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
5,935

 
$
4,047

 
$
4,437

 
$
14,419

Carrying value (3, 4)
301,922

 
184,571

 
386,217

 
872,710

Allowance as a percentage of carrying value (4)
1.97
%
 
2.19
%
 
1.15
%
 
1.65
%
(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.
(2) 
Allowance for loan and lease losses includes $36 million and $35 million related to impaired U.S. small business commercial at June 30, 2015 and December 31, 2014.
(3) 
Amounts are presented gross of the allowance for loan and lease losses.
(4) 
Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $7.6 billion and $8.7 billion at June 30, 2015 and December 31, 2014.
n/a = not applicable