Annual report pursuant to Section 13 and 15(d)

Outstanding Loans and Leases

v3.6.0.2
Outstanding Loans and Leases
12 Months Ended
Dec. 31, 2016
Receivables [Abstract]  
Outstanding Loans and Leases
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 December 31, 2016 and 2015.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 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
$
1,340

 
$
425

 
$
1,213

 
$
2,978

 
$
153,519

 
 
 
 
 
$
156,497

Home equity
239

 
105

 
451

 
795

 
48,578

 
 
 
 
 
49,373

Non-core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage (5)
1,338

 
674

 
5,343

 
7,355

 
17,818

 
$
10,127

 
 
 
35,300

Home equity
260

 
136

 
832

 
1,228

 
12,231

 
3,611

 
 
 
17,070

Credit card and other consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. credit card
472

 
341

 
782

 
1,595

 
90,683

 
 
 
 
 
92,278

Non-U.S. credit card
37

 
27

 
66

 
130

 
9,084

 
 
 
 
 
9,214

Direct/Indirect consumer (6)
272

 
79

 
34

 
385

 
93,704

 
 
 
 
 
94,089

Other consumer (7)
26

 
8

 
6

 
40

 
2,459

 
 
 
 
 
2,499

Total consumer
3,984

 
1,795

 
8,727

 
14,506

 
428,076

 
13,738

 
 
 
456,320

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

 
 

 
 

 
 

 
 

 
 

 
$
1,051

 
1,051

Total consumer loans and leases
3,984

 
1,795

 
8,727

 
14,506

 
428,076

 
13,738

 
1,051

 
457,371

Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. commercial
952

 
263

 
400

 
1,615

 
268,757

 
 
 
 
 
270,372

Commercial real estate (9)
20

 
10

 
56

 
86

 
57,269

 
 
 
 
 
57,355

Commercial lease financing
167

 
21

 
27

 
215

 
22,160

 
 
 
 
 
22,375

Non-U.S. commercial
348

 
4

 
5

 
357

 
89,040

 
 
 
 
 
89,397

U.S. small business commercial
96

 
49

 
84

 
229

 
12,764

 
 
 
 
 
12,993

Total commercial
1,583

 
347

 
572

 
2,502

 
449,990

 
 
 
 
 
452,492

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

 
 

 
 

 
 

 
 

 
 

 
6,034

 
6,034

Total commercial loans and leases
1,583

 
347

 
572

 
2,502

 
449,990

 
 
 
6,034

 
458,526

Total consumer and commercial loans and leases (10) 
$
5,567

 
$
2,142

 
$
9,299

 
$
17,008

 
$
878,066

 
$
13,738

 
$
7,085

 
$
915,897

Less: Loans of business held for sale (10)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(9,214
)
Total loans and leases (11)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
906,683

Percentage of outstandings (10)
0.61
%
 
0.23
%
 
1.02
%
 
1.86
%
 
95.87
%
 
1.50
%
 
0.77
%
 
100.00
%
(1) 
Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.1 billion and nonperforming loans of $266 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $547 million and nonperforming loans of $216 million.
(2) 
Consumer real estate includes fully-insured loans of $4.8 billion.
(3) 
Consumer real estate includes $2.5 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 $1.8 billion. The Corporation no longer originates this product.
(6) 
Total outstandings includes auto and specialty lending loans of $48.9 billion, unsecured consumer lending loans of $585 million, U.S. securities-based lending loans of $40.1 billion, non-U.S. consumer loans of $3.0 billion, student loans of $497 million and other consumer loans of $1.1 billion.
(7) 
Total outstandings includes consumer finance loans of $465 million, consumer leases of $1.9 billion and consumer overdrafts of $157 million.
(8) 
Consumer loans accounted for under the fair value option were residential mortgage loans of $710 million and home equity loans of $341 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.9 billion and non-U.S. commercial loans of $3.1 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 $54.3 billion and non-U.S. commercial real estate loans of $3.1 billion.
(10) 
Includes non-U.S. credit card loans, which are included in assets of business held for sale on the Consolidated Balance Sheet.
(11) 
The Corporation pledged $143.1 billion of loans to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank (FHLB). 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
$
1,214

 
$
368

 
$
1,414

 
$
2,996

 
$
138,799

 


 
 

 
$
141,795

Home equity
200

 
93

 
579

 
872

 
54,045

 


 
 

 
54,917

Non-core portfolio
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential mortgage (5)
2,045

 
1,167

 
8,439

 
11,651

 
22,399

 
$
12,066

 
 

 
46,116

Home equity
335

 
174

 
1,170

 
1,679

 
14,733

 
4,619

 
 

 
21,031

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 20 – Fair Value Measurements and Note 21 – 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 FHLB. 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.
In connection with an agreement to sell the Corporation's non-U.S. consumer credit card business, this business, which includes $9.2 billion of non-U.S. credit card loans and related allowance for loan and lease losses of $243 million, was reclassified to assets of business held for sale on the Consolidated Balance Sheet as of December 31, 2016. In this Note, all applicable amounts include these balances, unless otherwise noted. For more information, see Note 1 – Summary of Significant Accounting Principles.
The Corporation categorizes consumer real estate loans as core and non-core based on loan and customer characteristics such as origination date, product type, LTV, FICO score and delinquency status consistent with its current consumer and mortgage servicing strategy. Generally, loans that were originated after January 1, 2010, qualified under government-sponsored enterprise underwriting guidelines, or otherwise met the Corporation's underwriting guidelines in place in 2015 are characterized as core loans. Loans held in legacy private-label securitizations, government-insured loans originated prior to 2010, loan products no longer originated, and loans originated prior to 2010 and classified as nonperforming or modified in a TDR prior to 2016 are generally characterized as non-core loans, and are principally run-off portfolios.
The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $6.4 billion and $3.7 billion at December 31, 2016 and 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 December 31, 2016 and 2015, $428 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 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, 2016, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $543 million of which $332 million were current on their contractual payments, while $181 million were 90 days or more past due. Of the contractually current nonperforming loans, approximately 81 percent were discharged in Chapter 7 bankruptcy over 12 months ago, and approximately 70 percent were discharged 24 months or more ago.
During 2016, the Corporation sold nonperforming and other delinquent consumer real estate loans with a carrying value of $2.2 billion, including $549 million of PCI loans, compared to $3.2 billion, including $1.4 billion of PCI loans, in 2015. The Corporation recorded net charge-offs related to these sales of $30 million during 2016 and net recoveries of $133 million during 2015. Gains related to these sales of $75 million and $173 million were recorded in other income in the Consolidated Statement of Income during 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 December 31, 2016 and 2015. Nonperforming 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
 
Accruing Past Due
90 Days or More
(Dollars in millions)
2016
 
2015
 
2016
 
2015
Consumer real estate
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
Residential mortgage (1)
$
1,274

 
$
1,825

 
$
486

 
$
382

Home equity
969

 
974

 

 

Non-core portfolio
 

 
 

 
 

 
 
Residential mortgage (1)
1,782

 
2,978

 
4,307

 
6,768

Home equity
1,949

 
2,363

 

 

Credit card and other consumer
 

 
 

 
 
 
 
U.S. credit card
n/a

 
n/a

 
782

 
789

Non-U.S. credit card
n/a

 
n/a

 
66

 
76

Direct/Indirect consumer
28

 
24

 
34

 
39

Other consumer
2

 
1

 
4

 
3

Total consumer
6,004

 
8,165

 
5,679

 
8,057

Commercial
 

 
 

 
 

 
 

U.S. commercial
1,256

 
867

 
106

 
113

Commercial real estate
72

 
93

 
7

 
3

Commercial lease financing
36

 
12

 
19

 
15

Non-U.S. commercial
279

 
158

 
5

 
1

U.S. small business commercial
60

 
82

 
71

 
61

Total commercial
1,703

 
1,212

 
208

 
193

Total loans and leases
$
7,707

 
$
9,377

 
$
5,887

 
$
8,250

(1) 
Residential mortgage loans in the core and non-core portfolios accruing past due 90 days or more are fully-insured loans. At December 31, 2016 and 2015, residential mortgage includes $3.0 billion and $4.3 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 $1.8 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. 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 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. FICO scores are typically refreshed quarterly or more frequently. Certain borrowers (e.g., borrowers that have had debts discharged in a bankruptcy proceeding) may not have their FICO scores updated. 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 December 31, 2016 and 2015.
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Real Estate – Credit Quality Indicators (1)
 
 
 
December 31, 2016
(Dollars in millions)
Core Portfolio Residential
Mortgage (2)
 
Non-core Residential
Mortgage
(2)
 
Residential Mortgage PCI (3)
 
Core Portfolio Home Equity (2)
 
Non-core Home Equity (2)
 
Home
Equity PCI
Refreshed LTV (4)
 

 
 

 
 

 
 

 
 
 
 
Less than or equal to 90 percent
$
129,737

 
$
14,280

 
$
7,811

 
$
47,171

 
$
8,480

 
$
1,942

Greater than 90 percent but less than or equal to 100 percent
3,634

 
1,446

 
1,021

 
1,006

 
1,668

 
630

Greater than 100 percent
1,872

 
1,972

 
1,295

 
1,196

 
3,311

 
1,039

Fully-insured loans (5)
21,254

 
7,475

 

 

 

 

Total consumer real estate
$
156,497

 
$
25,173

 
$
10,127

 
$
49,373

 
$
13,459

 
$
3,611

Refreshed FICO score
 
 
 
 
 
 
 
 
 
 
 
Less than 620
$
2,479

 
$
3,198

 
$
2,741

 
$
1,254

 
$
2,692

 
$
559

Greater than or equal to 620 and less than 680
5,094

 
2,807

 
2,241

 
2,853

 
3,094

 
636

Greater than or equal to 680 and less than 740
22,629

 
4,512

 
2,916

 
10,069

 
3,176

 
1,069

Greater than or equal to 740
105,041

 
7,181

 
2,229

 
35,197

 
4,497

 
1,347

Fully-insured loans (5)
21,254

 
7,475

 

 

 

 

Total consumer real estate
$
156,497

 
$
25,173

 
$
10,127

 
$
49,373

 
$
13,459

 
$
3,611

(1) 
Excludes $1.1 billion of loans accounted for under the fair value option.
(2) 
Excludes PCI loans.
(3) 
Includes $1.6 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, 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
$
4,431

 
$

 
$
1,478

 
$
187

Greater than or equal to 620 and less than 680
12,364

 

 
2,070

 
222

Greater than or equal to 680 and less than 740
34,828

 

 
12,491

 
404

Greater than or equal to 740
40,655

 

 
33,420

 
1,525

Other internal credit metrics (2, 3, 4)

 
9,214

 
44,630

 
161

Total credit card and other consumer
$
92,278

 
$
9,214

 
$
94,089

 
$
2,499

(1) 
At December 31, 2016, 19 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 $43.1 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $499 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, 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)
 
 
 
December 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
$
261,214

 
$
56,957

 
$
21,565

 
$
85,689

 
$
453

Reservable criticized
9,158

 
398

 
810

 
3,708

 
71

Refreshed FICO score (3)
 
 
 
 
 
 
 
 
 

Less than 620
 

 
 

 
 

 
 

 
200

Greater than or equal to 620 and less than 680
 
 
 
 
 
 
 
 
591

Greater than or equal to 680 and less than 740
 
 
 
 
 
 
 
 
1,741

Greater than or equal to 740
 
 
 
 
 
 
 
 
3,264

Other internal credit metrics (3, 4)
 
 
 
 
 
 
 
 
6,673

Total commercial
$
270,372

 
$
57,355

 
$
22,375

 
$
89,397

 
$
12,993

(1) 
Excludes $6.0 billion of loans accounted for under the fair value option.
(2) 
U.S. small business commercial includes $755 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, 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)
 
Non-core Residential
Mortgage
(2)
 
Residential Mortgage PCI (3)
 
Core Portfolio Home Equity (2)
 
Non-core Home Equity (2)
 
Home
Equity PCI
Refreshed LTV (4)
 

 
 

 
 

 
 

 
 
 
 
Less than or equal to 90 percent
$
110,023

 
$
16,481

 
$
8,655

 
$
51,262

 
$
8,347

 
$
2,003

Greater than 90 percent but less than or equal to 100 percent
4,038

 
2,224

 
1,403

 
1,858

 
2,190

 
852

Greater than 100 percent
2,638

 
3,364

 
2,008

 
1,797

 
5,875

 
1,764

Fully-insured loans (5)
25,096

 
11,981

 

 

 

 

Total consumer real estate
$
141,795

 
$
34,050

 
$
12,066

 
$
54,917

 
$
16,412

 
$
4,619

Refreshed FICO score
 

 
 

 
 

 
 

 
 

 
 

Less than 620
$
3,129

 
$
4,749

 
$
3,798

 
$
1,322

 
$
3,490

 
$
729

Greater than or equal to 620 and less than 680
5,472

 
3,762

 
2,586

 
3,295

 
3,862

 
825

Greater than or equal to 680 and less than 740
22,486

 
5,138

 
3,187

 
12,180

 
3,451

 
1,356

Greater than or equal to 740
85,612

 
8,420

 
2,495

 
38,120

 
5,609

 
1,709

Fully-insured loans (5)
25,096

 
11,981

 

 

 

 

Total consumer real estate
$
141,795

 
$
34,050

 
$
12,066

 
$
54,917

 
$
16,412

 
$
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 156. For additional information, see Note 1 – Summary of Significant Accounting Principles.
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 $1.4 billion were included in TDRs at December 31, 2016, of which $543 million were classified as nonperforming and $555 million were loans fully-insured by the FHA. For more information on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.
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. 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.
At December 31, 2016 and 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 $363 million and $444 million at December 31, 2016 and 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 December 31, 2016 was $4.8 billion. During 2016 and 2015, the Corporation reclassified $1.4 billion and $2.1 billion 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 December 31, 2016 and 2015, and the average carrying value and interest income recognized for 2016, 2015 and 2014 for impaired loans in the Corporation’s Consumer Real Estate portfolio segment. 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
 
 
 
 
 
 
 
 
 
December 31, 2016
 
December 31, 2015
(Dollars in millions)
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
 
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
With no recorded allowance
 

 
 

 
 

 
 

 
 

 
 
Residential mortgage
$
11,151

 
$
8,695

 
$

 
$
14,888

 
$
11,901

 
$

Home equity
3,704

 
1,953

 

 
3,545

 
1,775

 

With an allowance recorded
 
 
 
 
 

 
 
 
 
 
 
Residential mortgage
$
4,041

 
$
3,936

 
$
219

 
$
6,624

 
$
6,471

 
$
399

Home equity
910

 
824

 
137

 
1,047

 
911

 
235

Total
 

 
 

 
 

 
 
 
 
 
 
Residential mortgage
$
15,192

 
$
12,631

 
$
219

 
$
21,512

 
$
18,372

 
$
399

Home equity
4,614

 
2,777

 
137

 
4,592

 
2,686

 
235

 
 
 
 
 
 
 
 
 
 
 
 
 
2016
 
2015
 
2014
 
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
$
10,178

 
$
360

 
$
13,867

 
$
403

 
$
15,065

 
$
490

Home equity
1,906

 
90

 
1,777

 
89

 
1,486

 
87

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
5,067

 
$
167

 
$
7,290

 
$
236

 
$
10,826

 
$
411

Home equity
852

 
24

 
785

 
24

 
743

 
25

Total
 

 
 

 
 
 
 
 
 
 
 
Residential mortgage
$
15,245

 
$
527

 
$
21,157

 
$
639

 
$
25,891

 
$
901

Home equity
2,758

 
114

 
2,562

 
113

 
2,229

 
112

(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 December 31, 2016, 2015 and 2014 unpaid principal balance, carrying value, and average pre- and post-modification interest rates on consumer real estate loans that were modified in TDRs during 2016, 2015 and 2014, 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.
 
 
 
 
 
 
 
 
 
 
Consumer Real Estate – TDRs Entered into During 2016, 2015 and 2014 (1)
 
 
 
December 31, 2016
 
2016
(Dollars in millions)
Unpaid Principal Balance
 
Carrying
Value
 
Pre-Modification Interest Rate
 
Post-Modification Interest Rate (2)
 
Net
Charge-offs (3)
Residential mortgage
$
1,130

 
$
1,017

 
4.73
%
 
4.16
%
 
$
11

Home equity
849

 
649

 
3.95

 
2.72

 
61

Total
$
1,979

 
$
1,666

 
4.40

 
3.54

 
$
72

 
 
 
 
 
 
 
 
 
 
 
December 31, 2015
 
2015
Residential mortgage
$
2,986

 
$
2,655

 
4.98
%
 
4.43
%
 
$
97

Home equity
1,019

 
775

 
3.54

 
3.17

 
84

Total
$
4,005

 
$
3,430

 
4.61

 
4.11

 
$
181

 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
2014
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

(1) 
During 2016, 2015 and 2014, the Corporation forgave principal of $13 million, $396 million and $53 million, respectively, 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 December 31, 2016, 2015 and 2014 due to sales and other dispositions.
The table below presents the December 31, 2016, 2015 and 2014 carrying value for consumer real estate loans that were modified in a TDR during 2016, 2015 and 2014, by type of modification.
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Real Estate – Modification Programs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TDRs Entered into During 2016
 
TDRs Entered into During 2015
 
TDRs Entered into During 2014
(Dollars in millions)
Residential Mortgage
 
Home
Equity
 
Residential Mortgage
 
Home
Equity
 
Residential Mortgage
 
Home
Equity
Modifications under government programs
 
 
 
 
 
 
 
 
 
 
 
Contractual interest rate reduction
$
116

 
$
35

 
$
408

 
$
23

 
$
643

 
$
56

Principal and/or interest forbearance
2

 
11

 
4

 
7

 
16

 
18

Other modifications (1)
22

 
1

 
46

 

 
98

 
1

Total modifications under government programs
140

 
47

 
458

 
30

 
757

 
75

Modifications under proprietary programs