Quarterly report pursuant to Section 13 or 15(d)

Outstanding Loans and Leases

v3.4.0.3
Outstanding Loans and Leases
3 Months Ended
Mar. 31, 2016
Loans and Leases Receivable Disclosure [Abstract]  
Outstanding Loans and Leases
NOTE 4 – Outstanding Loans and Leases

The following tables present total outstanding loans and leases and an aging analysis for the Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at March 31, 2016 and December 31, 2015.

 
March 31, 2016
(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
Consumer real estate
 
 
 
 
 
 
 
 
Core portfolio
 
 
 
 
 
 
 
 
Residential mortgage
$
1,264

$
494

$
3,364

$
5,122

$
140,200

 
 
$
145,322

Home equity
209

97

629

935

46,538

 
 
47,473

Legacy Assets & Servicing portfolio
 
 
 
 
 
 
 
 
Residential mortgage (5)
1,240

678

5,337

7,255

20,260

$
11,603

 
39,118

Home equity
296

140

929

1,365

20,565

4,368

 
26,298

Credit card and other consumer
 
 
 
 
 
 
 
 
U.S. credit card
416

289

743

1,448

84,955

 
 
86,403

Non-U.S. credit card
38

27

77

142

9,835

 
 
9,977

Direct/Indirect consumer (6)
182

54

38

274

90,335

 
 
90,609

Other consumer (7)
15

3

3

21

2,155

 
 
2,176

Total consumer
3,660

1,782

11,120

16,562

414,843

15,971

 
447,376

Consumer loans accounted for under the fair value option (8)
 
 
 
 
 
 
$
1,946

1,946

Total consumer loans and leases
3,660

1,782

11,120

16,562

414,843

15,971

1,946

449,322

Commercial
 
 
 
 
 
 
 
 
U.S. commercial
412

175

320

907

259,795

 
 
260,702

Commercial real estate (9)
55

9

69

133

57,927

 
 
58,060

Commercial lease financing
195

10

19

224

20,733

 
 
20,957

Non-U.S. commercial
14

14

2

30

92,842

 
 
92,872

U.S. small business commercial
74

32

81

187

12,747

 
 
12,934

Total commercial
750

240

491

1,481

444,044

 
 
445,525

Commercial loans accounted for under the fair value option (8)
 
 
 
 
 
 
6,266

6,266

Total commercial loans and leases
750

240

491

1,481

444,044

 
6,266

451,791

Total loans and leases (10)
$
4,410

$
2,022

$
11,611

$
18,043

$
858,887

$
15,971

$
8,212

$
901,113

Percentage of outstandings
0.49
%
0.22
%
1.29
%
2.00
%
95.32
%
1.77
%
0.91
%
100.00
%
(1) 
Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.1 billion and nonperforming loans of $320 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $728 million and nonperforming loans of $265 million.
(2) 
Consumer real estate includes fully-insured loans of $6.3 billion.
(3) 
Consumer real estate includes $2.7 billion and direct/indirect consumer includes $20 million of nonperforming loans.
(4) 
PCI loan amounts are shown gross of the valuation allowance.
(5) 
Total outstandings includes pay option loans of $2.2 billion. The Corporation no longer originates this product.
(6) 
Total outstandings includes auto and specialty lending loans of $45.4 billion, unsecured consumer lending loans of $774 million, U.S. securities-based lending loans of $39.2 billion, non-U.S. consumer loans of $3.7 billion, student loans of $547 million and other consumer loans of $1.0 billion.
(7) 
Total outstandings includes consumer finance loans of $538 million, consumer leases of $1.5 billion and consumer overdrafts of $154 million.
(8) 
Consumer loans accounted for under the fair value option were residential mortgage loans of $1.6 billion and home equity loans of $348 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.6 billion and non-U.S. commercial loans of $3.7 billion. For additional information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Option.
(9) 
Total outstandings includes U.S. commercial real estate loans of $54.5 billion and non-U.S. commercial real estate loans of $3.5 billion.
(10) 
The Corporation pledged $150.4 billion of loans to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Banks. This amount is not included in the parenthetical disclosure of loans and leases pledged as collateral on the Consolidated Balance Sheet as there were no related outstanding borrowings.

 
December 31, 2015
(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
Consumer real estate
 
 
 
 
 
 
 
 
Core portfolio
 
 
 
 
 
 
 
 
Residential mortgage
$
1,603

$
645

$
3,834

$
6,082

$
139,763

 
 
$
145,845

Home equity
225

104

719

1,048

47,216

 
 
48,264

Legacy Assets & Servicing portfolio
 
 
 
 
 
 
 
 
Residential mortgage (5)
1,656

890

6,019

8,565

21,435

$
12,066

 
42,066

Home equity
310

163

1,030

1,503

21,562

4,619

 
27,684

Credit card and other consumer
 
 
 
 
 
 
 
 
U.S. credit card
454

332

789

1,575

88,027

 
 
89,602

Non-U.S. credit card
39

31

76

146

9,829

 
 
9,975

Direct/Indirect consumer (6)
227

62

42

331

88,464

 
 
88,795

Other consumer (7)
18

3

4

25

2,042

 
 
2,067

Total consumer
4,532

2,230

12,513

19,275

418,338

16,685

 
454,298

Consumer loans accounted for under the fair value option (8)
 
 
 
 
 
 
$
1,871

1,871

Total consumer loans and leases
4,532

2,230

12,513

19,275

418,338

16,685

1,871

456,169

Commercial
 
 
 
 
 
 
 
 
U.S. commercial
444

148

332

924

251,847

 
 
252,771

Commercial real estate (9)
36

11

82

129

57,070

 
 
57,199

Commercial lease financing
150

29

20

199

21,153

 
 
21,352

Non-U.S. commercial
6

1

1

8

91,541

 
 
91,549

U.S. small business commercial
83

41

72

196

12,680

 
 
12,876

Total commercial
719

230

507

1,456

434,291

 
 
435,747

Commercial loans accounted for under the fair value option (8)
 
 
 
 
 
 
5,067

5,067

Total commercial loans and leases
719

230

507

1,456

434,291

 
5,067

440,814

Total loans and leases (10)
$
5,251

$
2,460

$
13,020

$
20,731

$
852,629

$
16,685

$
6,938

$
896,983

Percentage of outstandings
0.59
%
0.27
%
1.45
%
2.31
%
95.06
%
1.86
%
0.77
%
100.00
%
(1) 
Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.7 billion and nonperforming loans of $379 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $1.0 billion and nonperforming loans of $297 million.
(2) 
Consumer real estate includes fully-insured loans of $7.2 billion.
(3) 
Consumer real estate includes $3.0 billion and direct/indirect consumer includes $21 million of nonperforming loans.
(4) 
PCI loan amounts are shown gross of the valuation allowance.
(5) 
Total outstandings includes pay option loans of $2.3 billion. The Corporation no longer originates this product.
(6) 
Total outstandings includes auto and specialty lending loans of $42.6 billion, unsecured consumer lending loans of $886 million, U.S. securities-based lending loans of $39.8 billion, non-U.S. consumer loans of $3.9 billion, student loans of $564 million and other consumer loans of $1.0 billion.
(7) 
Total outstandings includes consumer finance loans of $564 million, consumer leases of $1.4 billion and consumer overdrafts of $146 million.
(8) 
Consumer loans accounted for under the fair value option were residential mortgage loans of $1.6 billion and home equity loans of $250 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.3 billion and non-U.S. commercial loans of $2.8 billion. For additional information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Option.
(9) 
Total outstandings includes U.S. commercial real estate loans of $53.6 billion and non-U.S. commercial real estate loans of $3.5 billion.
(10) 
The Corporation pledged $149.4 billion of loans to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Banks. This amount is not included in the parenthetical disclosure of loans and leases pledged as collateral on the Consolidated Balance Sheet as there were no related outstanding borrowings.

The Corporation has entered into long-term credit protection agreements with Fannie Mae (FNMA) and Freddie Mac (FHLMC) on loans totaling $4.3 billion and $3.7 billion at March 31, 2016 and December 31, 2015, 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 March 31, 2016 and December 31, 2015, $471 million and $484 million 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 (TDR), 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 March 31, 2016, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $741 million of which $433 million were current on their contractual payments, while $270 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 approximately 65 percent were discharged 24 months or more ago. As subsequent cash payments are received on these nonperforming 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.

During the three months ended March 31, 2016 and 2015, the Corporation sold nonperforming and other delinquent consumer real estate loans with a carrying value of $1.0 billion and $1.0 billion, including $174 million and $586 million of purchased credit-impaired (PCI) loans. The Corporation recorded net charge-offs of $40 million and net recoveries of $40 million related to these sales for the three months ended March 31, 2016 and 2015. Gains related to these sales of $31 million and $35 million were recorded in other income in the Consolidated Statement of Income for the three months ended March 31, 2016 and 2015.

The table below presents the Corporation's nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at March 31, 2016 and December 31, 2015. 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 to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K.

Credit Quality
 
 
 
 
 
 
 
 
Nonperforming Loans and Leases
 
Accruing Past Due 90 Days or More
(Dollars in millions)
March 31
2016
 
December 31
2015
 
March 31
2016
 
December 31
2015
Consumer real estate
 
 
 
 
 
 
 
Core portfolio
 
 
 
 
 
 
 
Residential mortgage (1)
$
1,616

 
$
1,845

 
$
2,302

 
$
2,645

Home equity
1,310

 
1,354

 

 

Legacy Assets & Servicing portfolio
 
 
 
 
 
 
 
Residential mortgage (1)
2,360

 
2,958

 
4,032

 
4,505

Home equity
1,934

 
1,983

 

 

Credit card and other consumer
 
 
 
 
 
 
 
U.S. credit card
n/a

 
n/a

 
743

 
789

Non-U.S. credit card
n/a

 
n/a

 
77

 
76

Direct/Indirect consumer
26

 
24

 
31

 
39

Other consumer
1

 
1

 
2

 
3

Total consumer
7,247

 
8,165

 
7,187

 
8,057

Commercial
 
 
 
 
 
 
 
U.S. commercial
1,236

 
867

 
85

 
113

Commercial real estate
91

 
93

 

 
3

Commercial lease financing
29

 
12

 
13

 
15

Non-U.S. commercial
165

 
158

 
2

 
1

U.S. small business commercial
82

 
82

 
60

 
61

Total commercial
1,603

 
1,212

 
160

 
193

Total loans and leases
$
8,850

 
$
9,377

 
$
7,347

 
$
8,250


(1) 
Residential mortgage loans in the Core and Legacy Assets & Servicing portfolios accruing past due 90 days or more are fully-insured loans. At March 31, 2016 and December 31, 2015, residential mortgage includes $3.4 billion and $4.3 billion of loans on which interest has been curtailed by the Federal Housing Administration (FHA), and therefore are no longer accruing interest, although principal is still insured, and $2.9 billion and $2.9 billion of loans on which interest is still accruing.
n/a = not applicable

Credit Quality Indicators

The Corporation monitors credit quality within its Consumer Real Estate, 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 to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K. Within the Consumer Real Estate 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 Corporation's loan and available line of credit combined with any outstanding senior liens against the property 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 Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at March 31, 2016 and December 31, 2015.

Consumer Real Estate – Credit Quality Indicators (1)
 
 
 
 
 
 
 
March 31, 2016
(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)
 
 
 
 
 
 
Less than or equal to 90 percent
$
112,721

$
15,636

$
8,247

$
43,534

$
14,925

$
1,882

Greater than 90 percent but less than or equal to 100 percent
4,153

1,863

1,228

1,545

2,290

786

Greater than 100 percent
2,633

2,992

2,128

2,394

4,715

1,700

Fully-insured loans (5)
25,815

7,024





Total consumer real estate
$
145,322

$
27,515

$
11,603

$
47,473

$
21,930

$
4,368

Refreshed FICO score
 
 
 
 
 
 
Less than 620
$
3,259

$
3,845

$
3,497

$
1,817

$
2,640

$
678

Greater than or equal to 620 and less than 680
5,549

3,181

2,519

3,174

3,639

773

Greater than or equal to 680 and less than 740
21,959

5,346

3,155

8,891

6,182

1,281

Greater than or equal to 740
88,740

8,119

2,432

33,591

9,469

1,636

Fully-insured loans (5)
25,815

7,024





Total consumer real estate
$
145,322

$
27,515

$
11,603

$
47,473

$
21,930

$
4,368

(1) 
Excludes $1.9 billion of loans accounted for under the fair value option.
(2) 
Excludes PCI loans.
(3) 
Includes $1.9 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) 
Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.

Credit Card and Other Consumer – Credit Quality Indicators
 
March 31, 2016
(Dollars in millions)
U.S. Credit
Card
 
Non-U.S.
Credit Card
 
Direct/Indirect
Consumer
 
Other
Consumer
(1)
Refreshed FICO score
 
 
 
 
 
 
 
Less than 620
$
4,111

 
$

 
$
1,305

 
$
210

Greater than or equal to 620 and less than 680
11,547

 

 
1,806

 
216

Greater than or equal to 680 and less than 740
33,256

 

 
11,598

 
356

Greater than or equal to 740
37,489

 

 
31,426

 
1,236

Other internal credit metrics (2, 3, 4)

 
9,977

 
44,474

 
158

Total credit card and other consumer
$
86,403

 
$
9,977

 
$
90,609

 
$
2,176

(1) 
At March 31, 2016, 25 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 $42.9 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $550 million of loans the Corporation no longer originates, primarily student loans.
(4) 
Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At March 31, 2016, 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)
 
March 31, 2016
(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
$
249,399

 
$
57,584

 
$
20,154

 
$
89,138

 
$
524

Reservable criticized
11,303

 
476

 
803

 
3,734

 
87

Refreshed FICO score (3)
 
 
 
 
 
 
 
 
 
Less than 620
 
 
 
 
 
 
 
 
187

Greater than or equal to 620 and less than 680
 
 
 
 
 
 
 
 
550

Greater than or equal to 680 and less than 740
 
 
 
 
 
 
 
 
1,657

Greater than or equal to 740
 
 
 
 
 
 
 
 
3,141

Other internal credit metrics (3, 4)
 
 
 
 
 
 
 
 
6,788

Total commercial
$
260,702

 
$
58,060

 
$
20,957

 
$
92,872

 
$
12,934

(1) 
Excludes $6.3 billion of loans accounted for under the fair value option.
(2) 
U.S. small business commercial includes $681 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 March 31, 2016, 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.
Consumer Real Estate – Credit Quality Indicators (1)
 
 
 
 
 
 
 
December 31, 2015
(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)
 
 
 
 
 
 
Less than or equal to 90 percent
$
109,869

$
16,646

$
8,655

$
44,006

$
15,666

$
2,003

Greater than 90 percent but less than or equal to 100 percent
4,251

2,007

1,403

1,652

2,382

852

Greater than 100 percent
2,783

3,212

2,008

2,606

5,017

1,764

Fully-insured loans (5)
28,942

8,135





Total consumer real estate
$
145,845

$
30,000

$
12,066

$
48,264

$
23,065

$
4,619

Refreshed FICO score
 
 
 
 
 
 
Less than 620
$
3,465

$
4,408

$
3,798

$
1,898

$
2,785

$
729

Greater than or equal to 620 and less than 680
5,792

3,438

2,586

3,242

3,817

825

Greater than or equal to 680 and less than 740
22,017

5,605

3,187

9,203

6,527

1,356

Greater than or equal to 740
85,629

8,414

2,495

33,921

9,936

1,709

Fully-insured loans (5)
28,942

8,135





Total consumer real estate
$
145,845

$
30,000

$
12,066

$
48,264

$
23,065

$
4,619

(1) 
Excludes $1.9 billion of loans accounted for under the fair value option.
(2) 
Excludes PCI loans.
(3) 
Includes $2.0 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) 
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, 2015
(Dollars in millions)
U.S. Credit
Card
 
Non-U.S.
Credit Card
 
Direct/Indirect
Consumer
 
Other
Consumer
(1)
Refreshed FICO score
 
 
 
 
 
 
 
Less than 620
$
4,196

 
$

 
$
1,244

 
$
217

Greater than or equal to 620 and less than 680
11,857

 

 
1,698

 
214

Greater than or equal to 680 and less than 740
34,270

 

 
10,955

 
337

Greater than or equal to 740
39,279

 

 
29,581

 
1,149

Other internal credit metrics (2, 3, 4)

 
9,975

 
45,317

 
150

Total credit card and other consumer
$
89,602

 
$
9,975

 
$
88,795

 
$
2,067


(1) 
At December 31, 2015, 27 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 $43.7 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $567 million of loans the Corporation no longer originates, primarily student loans.
(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, 2015, 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, 2015
(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
$
243,922

 
$
56,688

 
$
20,644

 
$
87,905

 
$
571

Reservable criticized
8,849

 
511

 
708

 
3,644

 
96

Refreshed FICO score (3)
 
 
 
 
 
 
 
 
 
Less than 620
 
 
 
 
 
 
 
 
184

Greater than or equal to 620 and less than 680
 
 
 
 
 
 
 
 
543

Greater than or equal to 680 and less than 740
 
 
 
 
 
 
 
 
1,627

Greater than or equal to 740
 
 
 
 
 
 
 
 
3,027

Other internal credit metrics (3, 4)
 
 
 
 
 
 
 
 
6,828

Total commercial
$
252,771

 
$
57,199

 
$
21,352

 
$
91,549

 
$
12,876


(1) 
Excludes $5.1 billion of loans accounted for under the fair value option.
(2) 
U.S. small business commercial includes $670 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, 2015, 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.

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 152. For additional information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K.

Consumer Real Estate

Impaired consumer real estate loans within the Consumer Real Estate portfolio segment consist entirely of TDRs. Excluding PCI loans, most modifications of consumer real estate loans meet the definition of TDRs when a binding offer is extended to a borrower. Modifications of consumer real estate 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.

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.

Consumer real estate loans that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower of $1.7 billion were included in TDRs at March 31, 2016, of which $741 million were classified as nonperforming and $675 million 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 consumer real estate 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. Consumer real estate 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, consumer real estate TDRs that are considered to be dependent solely on the collateral for repayment (e.g., due to the lack of income verification) 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. Consumer real estate 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 consumer real estate 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 March 31, 2016 and December 31, 2015, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were immaterial. Consumer real estate foreclosed properties totaled $421 million and $444 million at March 31, 2016 and December 31, 2015. The carrying value of consumer real estate loans, including fully-insured and PCI loans, for which formal foreclosure proceedings were in process as of March 31, 2016 was $5.3 billion. During the three months ended March 31, 2016 and 2015, the Corporation reclassified $416 million and $654 million of consumer real estate loans to foreclosed properties or, for properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans), to other assets. The reclassifications represent non-cash investing activities and, accordingly, are not reflected on the Consolidated Statement of Cash Flows.

The table below provides the unpaid principal balance, carrying value and related allowance at March 31, 2016 and December 31, 2015, and the average carrying value and interest income recognized for the three months ended March 31, 2016 and 2015 for impaired loans in the Corporation's Consumer Real Estate portfolio segment and includes primarily loans managed by Legacy Assets & Servicing (LAS). Certain impaired consumer real estate 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 – Consumer Real Estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31
 
 
 
 
March 31, 2016
 
2016
 
2015
(Dollars in millions)
 
 
 
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
 
Average
Carrying
Value
 
Interest
Income
Recognized
(1)
 
Average
Carrying
Value
 
Interest
Income
Recognized
(1)
With no recorded allowance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
 
 
$
13,356

 
$
10,581

 
$

 
$
11,418

 
$
94

 
$
15,393

 
$
108

Home equity
 
 
 
3,586

 
1,806

 

 
1,808

 
13

 
1,692

 
25

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
 
 
$
5,811

 
$
5,675

 
$
348

 
$
6,072

 
$
51

 
$
7,586

 
$
64

Home equity
 
 
 
1,036

 
913

 
202

 
898

 
6

 
714

 
7

Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
 
 
$
19,167

 
$
16,256

 
$
348

 
$
17,490

 
$
145

 
$
22,979

 
$
172

Home equity
 
 
 
4,622

 
2,719

 
202

 
2,706

 
19

 
2,406

 
32

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
With no recorded allowance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
 
 
$
14,888

 
$
11,901

 
$

 
 
 
 
 
 
 
 
Home equity
 
 
 
3,545

 
1,775

 

 
 
 
 
 
 
 
 
With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
 
 
$
6,624

 
$
6,471

 
$
399

 
 
 
 
 
 
 
 
Home equity
 
 
 
1,047

 
911

 
235

 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
 
 
$
21,512

 
$
18,372

 
$
399

 
 
 
 
 
 
 
 
Home equity
 
 
 
4,592

 
2,686

 
235

 
 
 
 
 
 
 
 
(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 table below presents the March 31, 2016 and 2015 unpaid principal balance, carrying value, and average pre- and post-modification interest rates on consumer real estate loans that were modified in TDRs during the three months ended March 31, 2016 and 2015, and net charge-offs recorded during the period in which the modification occurred. The following Consumer Real Estate 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 LAS.

Consumer Real Estate – TDRs Entered into During the Three Months Ended March 31, 2016 and 2015 (1)
 
March 31, 2016
 
Three Months Ended March 31, 2016
(Dollars in millions)
Unpaid Principal Balance
 
Carrying
 Value
 
Pre-Modification Interest Rate
 
Post-Modification Interest Rate (2)
 
Net Charge-offs (3)
Residential mortgage
$
526

 
$
488

 
4.72
%
 
4.61
%
 
$
2

Home equity
231

 
181

 
3.50

 
3.39

 
10

Total
$
757

 
$
669

 
4.35

 
4.24

 
$
12

 
 
 
 
 
 
 
 
 
 
 
March 31, 2015
 
Three Months Ended March 31, 2015
Residential mortgage
$
1,879

 
$
1,640

 
5.04
%
 
4.91
%
 
$
17

Home equity
258

 
184

 
4.08

 
3.55

 
11

Total
$
2,137

 
$
1,824

 
4.93

 
4.74

 
$
28


(1) 
During the three months ended March 31, 2016 and 2015, the Corporation forgave principal of $10 million and $159 million related to residential mortgage loans in connection with TDRs.
(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 March 31, 2016 and 2015 due to sales and other dispositions.
The table below presents the March 31, 2016 and 2015 carrying value for consumer real estate loans that were modified in a TDR during the three months ended March 31, 2016 and 2015 by type of modification.

Consumer Real Estate – Modification Programs
 
TDRs Entered into During the
Three Months Ended March 31, 2016
(Dollars in millions)
Residential Mortgage
 
Home
Equity
 
Total Carrying Value
Modifications under government programs
 
 
 
 
 
Contractual interest rate reduction
$
22

 
$
5

 
$
27

Principal and/or interest forbearance

 
2

 
2

Other modifications (1)
9

 

 
9

Total modifications under government programs
31

 
7

 
38

Modifications under proprietary programs
 
 
 
 
 
Contractual interest rate reduction
12

 
1

 
13

Capitalization of past due amounts
7

 
1

 
8

Principal and/or interest forbearance
3

 

 
3

Other modifications (1)
1

 
1

 
2

Total modifications under proprietary programs
23

 
3

 
26

Trial modifications
368

 
149

 
517

Loans discharged in Chapter 7 bankruptcy (2)
66

 
22

 
88

Total modifications
$
488

 
$
181

 
$
669

 
 
 
 
 
 
 
TDRs Entered into During the
Three Months Ended March 31, 2015
Modifications under government programs
 
 
 
 
 
Contractual interest rate reduction
$
76

 
$
11

 
$
87

Principal and/or interest forbearance

 
3

 
3

Other modifications (1)
15

 

 
15

Total modifications under government programs
91

 
14

 
105

Modifications under proprietary programs
 
 
 
 
 
Contractual interest rate reduction
50

 
2

 
52

Capitalization of past due amounts
30

 
2

 
32

Principal and/or interest forbearance
11

 
2

 
13

Other modifications (1)
7

 
25

 
32

Total modifications under proprietary programs
98

 
31

 
129

Trial modifications
1,340

 
96

 
1,436

Loans discharged in Chapter 7 bankruptcy (2)
111

 
43

 
154

Total modifications
$
1,640

 
$
184

 
$
1,824

(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 consumer real estate loans that entered into payment default during the three months ended March 31, 2016 and 2015 that were modified in a TDR during the 12 months preceding payment default. A payment default for consumer real estate 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.

Consumer Real Estate – TDRs Entering Payment Default That Were Modified During the Preceding 12 Months
 
Three Months Ended March 31, 2016
(Dollars in millions)
 Residential Mortgage
 
Home
Equity
 
Total Carrying Value
Modifications under government programs
$
93

 
$

 
$
93

Modifications under proprietary programs
43

 
22

 
65

Loans discharged in Chapter 7 bankruptcy (1)
40

 
5

 
45

Trial modifications
237

 
37

 
274

Total modifications
$
413

 
$
64

 
$
477

 
 
 
 
 
 
 
Three Months Ended March 31, 2015
Modifications under government programs
$
107

 
$
1

 
$
108

Modifications under proprietary programs
40

 
12

 
52

Loans discharged in Chapter 7 bankruptcy (1)
71

 
10

 
81

Trial modifications (2)
1,768

 
24

 
1,792

Total modifications
$
1,986

 
$
47

 
$
2,033


(1) 
Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
(2) 
Includes $1.4 billion for the three months ended March 31, 2015 of trial modification offers made in connection with the August 2014 Department of Justice settlement to which the customer did not respond.

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 substantially 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 has been placed on a fixed payment plan.

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 March 31, 2016 and December 31, 2015, and the average carrying value and interest income recognized for the three months ended March 31, 2016 and 2015 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31
 
 
 
 
March 31, 2016
 
2016
 
2015
(Dollars in millions)
 
 
 
Unpaid
Principal
Balance
 
Carrying
Value
(1)
 
Related
Allowance
 
Average
Carrying
Value
 
Interest
Income
Recognized
(2)
 
Average
Carrying
Value
 
Interest
Income
Recognized
(2)
With no recorded allowance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct/Indirect consumer
 
 
 
$
49

 
$
21

 
$

 
$
21

 
$

 
$
25

 
$

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. credit card
 
 
 
$
559

 
$
569

 
$
136

 
$
606

 
$
9

 
$
847

 
$
13

Non-U.S. credit card
 
 
 
101

 
119

 
70

 
122

 
1

 
159

 
1

Direct/Indirect consumer
 
 
 
11

 
13

 
2

 
18

 

 
82

 
1

Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. credit card
 
 
 
$
559

 
$
569

 
$
136

 
$
606

 
$
9

 
$
847

 
$
13

Non-U.S. credit card
 
 
 
101

 
119

 
70

 
122

 
1

 
159

 
1

Direct/Indirect consumer
 
 
 
60

 
34

 
2

 
39

 

 
107

 
1

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
 
 
 
 
 
 
 
With no recorded allowance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct/Indirect consumer
 
 
 
$
50

 
$
21

 
$

 
 
 
 
 
 
 
 
With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. credit card
 
 
 
$
598

 
$
611

 
$
176

 
 
 
 
 
 
 
 
Non-U.S. credit card
 
 
 
109

 
126

 
70

 
 
 
 
 
 
 
 
Direct/Indirect consumer
 
 
 
17

 
21

 
4

 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. credit card
 
 
 
$
598

 
$
611

 
$
176

 
 
 
 
 
 
 
 
Non-U.S. credit card
 
 
 
109

 
126

 
70

 
 
 
 
 
 
 
 
Direct/Indirect consumer
 
 
 
67

 
42

 
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 March 31, 2016 and December 31, 2015.

Credit Card and Other Consumer – Renegotiated TDRs by Program Type
 
Internal Programs
 
External Programs
 
Other (1)