Quarterly report pursuant to Section 13 or 15(d)

Outstanding Loans and Leases

v3.7.0.1
Outstanding Loans and Leases
6 Months Ended
Jun. 30, 2017
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 June 30, 2017 and December 31, 2016.
During the second quarter of 2017, the Corporation completed the sale of its non-U.S. consumer credit card business. This business, which at December 31, 2016 included $9.2 billion of non-U.S. credit card loans and the related allowance for loan and lease losses of $243 million, was presented in assets of business held for sale on the Consolidated Balance Sheet. In this Note, all applicable amounts for December 31, 2016 include these balances, unless otherwise noted. For additional information, see Note 1 – Summary of Significant Accounting Principles.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2017
(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
$
995

 
$
264

 
$
1,029

 
$
2,288

 
$
163,921

 
 
 
 
 
$
166,209

Home equity
202

 
105

 
427

 
734

 
45,908

 
 
 
 
 
46,642

Non-core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage (5)
1,073

 
519

 
4,113

 
5,705

 
16,258

 
$
9,274

 
 
 
31,237

Home equity
234

 
120

 
677

 
1,031

 
11,099

 
3,170

 
 
 
15,300

Credit card and other consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. credit card
465

 
313

 
772

 
1,550

 
89,226

 
 
 
 
 
90,776

Direct/Indirect consumer (6)
238

 
69

 
33

 
340

 
93,153

 
 
 
 
 
93,493

Other consumer (7)
20

 
5

 
6

 
31

 
2,627

 
 
 
 
 
2,658

Total consumer
3,227

 
1,395

 
7,057

 
11,679

 
422,192

 
12,444

 
 
 
446,315

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

 
 

 
 

 
 

 
 

 
 

 
$
1,035

 
1,035

Total consumer loans and leases
3,227

 
1,395

 
7,057

 
11,679

 
422,192

 
12,444

 
1,035

 
447,350

Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. commercial
350

 
446

 
361

 
1,157

 
276,518

 
 
 
 
 
277,675

Commercial real estate (9)
24

 
10

 
50

 
84

 
59,093

 
 
 
 
 
59,177

Commercial lease financing
54

 
72

 
27

 
153

 
21,675

 
 
 
 
 
21,828

Non-U.S. commercial
121

 
74

 

 
195

 
90,591

 
 
 
 
 
90,786

U.S. small business commercial
52

 
34

 
80

 
166

 
13,394

 
 
 
 
 
13,560

Total commercial
601

 
636

 
518

 
1,755

 
461,271

 
 
 
 
 
463,026

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

 
 

 
 

 
 

 
 

 
 

 
6,290

 
6,290

Total commercial loans and leases
601

 
636

 
518

 
1,755

 
461,271

 
 
 
6,290

 
469,316

Total loans and leases (10)
$
3,828

 
$
2,031

 
$
7,575

 
$
13,434

 
$
883,463

 
$
12,444

 
$
7,325

 
$
916,666

Percentage of outstandings
0.42
%
 
0.22
%
 
0.83
%
 
1.47
%
 
96.38
%
 
1.35
%
 
0.80
%
 
100.00
%
(1) 
Consumer real estate loans 30-59 days past due includes fully-insured loans of $837 million and nonperforming loans of $250 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $435 million and nonperforming loans of $203 million.
(2) 
Consumer real estate includes fully-insured loans of $3.7 billion.
(3) 
Consumer real estate includes $2.3 billion and direct/indirect consumer includes $18 million of nonperforming loans.
(4) 
Purchased credit-impaired (PCI) loan amounts are shown gross of the valuation allowance.
(5) 
Total outstandings includes pay option loans of $1.6 billion. The Corporation no longer originates this product.
(6) 
Total outstandings includes auto and specialty lending loans of $49.1 billion, unsecured consumer lending loans of $509 million, U.S. securities-based lending loans of $39.8 billion, non-U.S. consumer loans of $2.9 billion, student loans of $463 million and other consumer loans of $657 million.
(7) 
Total outstandings includes consumer finance loans of $420 million, consumer leases of $2.1 billion and consumer overdrafts of $155 million.
(8) 
Consumer loans accounted for under the fair value option were residential mortgage loans of $666 million and home equity loans of $369 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $3.2 billion and non-U.S. commercial loans of $3.1 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 $55.6 billion and non-U.S. commercial real estate loans of $3.6 billion.
(10) 
The Corporation pledged $152.8 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, 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 more information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Option.
(9) 
Total outstandings includes U.S. commercial real estate loans of $54.3 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 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.
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 (GSE) 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 troubled debt restructuring (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 $6.6 billion and $6.4 billion at June 30, 2017 and December 31, 2016, 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 June 30, 2017 and December 31, 2016, $374 million and $428 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 June 30, 2017, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $451 million of which $274 million were current on their contractual payments, while $147 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 71 percent were discharged 24 months or more ago.
During the three and six months ended June 30, 2017, the Corporation sold nonperforming and other delinquent consumer real estate loans with a carrying value of $323 million and $465 million, including $204 million of PCI loans for both periods, compared to $417 million and $1.4 billion, including $150 million and $324 million of PCI loans, for the same periods in 2016. During the six months ended June 30, 2017, the Corporation transferred nonperforming loans with a net carrying value of $198 million to held-for-sale. There were no transfers of nonperforming loans to held-for-sale for the same period in 2016.
The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at June 30, 2017 and December 31, 2016. 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 2016 Annual Report on Form 10-K.
 
 
 
 
 
 
 
 
Credit Quality
 
 
 
 
 
 
 
 
 
 
 
Nonperforming Loans and Leases
 
Accruing Past Due
90 Days or More
(Dollars in millions)
June 30
2017
 
December 31
2016
 
June 30
2017
 
December 31
2016
Consumer real estate
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
Residential mortgage (1)
$
1,051

 
$
1,274

 
$
398

 
$
486

Home equity
970

 
969

 

 

Non-core portfolio
 

 
 

 
 

 
 
Residential mortgage (1)
1,528

 
1,782

 
3,301

 
4,307

Home equity
1,711

 
1,949

 

 

Credit card and other consumer
 

 
 

 
 
 
 
U.S. credit card
n/a

 
n/a

 
772

 
782

Non-U.S. credit card
n/a

 
n/a

 

 
66

Direct/Indirect consumer
19

 
28

 
32

 
34

Other consumer
3

 
2

 
3

 
4

Total consumer
5,282

 
6,004

 
4,506

 
5,679

Commercial
 

 
 

 
 

 
 

U.S. commercial
1,039

 
1,256

 
74

 
106

Commercial real estate
123

 
72

 

 
7

Commercial lease financing
28

 
36

 
22

 
19

Non-U.S. commercial
269

 
279

 

 
5

U.S. small business commercial
61

 
60

 
68

 
71

Total commercial
1,520

 
1,703

 
164

 
208

Total loans and leases
$
6,802

 
$
7,707

 
$
4,670

 
$
5,887

(1) 
Residential mortgage loans in the core and non-core portfolios accruing past due 90 days or more are fully-insured loans. At June 30, 2017 and December 31, 2016, residential mortgage includes $2.4 billion and $3.0 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 $1.3 billion and $1.8 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. Within the consumer portfolio segments, 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. 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. Within the Commercial portfolio segment, loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans. For more information on the portfolio segments and credit quality indicators, see Note 1 – Summary of Significant Accounting Principles and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation's 2016 Annual Report on Form 10-K.
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 June 30, 2017 and December 31, 2016.
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Real Estate – Credit Quality Indicators (1)
 
June 30, 2017
(Dollars in millions)
Core Residential
Mortgage (2)
 
Non-core Residential
Mortgage
(2)
 
Residential Mortgage PCI (3)
 
Core Home Equity (2)
 
Non-core Home Equity (2)
 
Home
Equity PCI
Refreshed LTV (4)
 

 
 

 
 

 
 

 
 
 
 
Less than or equal to 90 percent
$
140,898

 
$
13,168

 
$
7,436

 
$
44,878

 
$
8,128

 
$
1,810

Greater than 90 percent but less than or equal to 100 percent
3,640

 
1,185

 
839

 
808

 
1,392

 
525

Greater than 100 percent
1,671

 
1,545

 
999

 
956

 
2,610

 
835

Fully-insured loans (5)
20,000

 
6,065

 

 

 

 

Total consumer real estate
$
166,209

 
$
21,963

 
$
9,274

 
$
46,642

 
$
12,130

 
$
3,170

Refreshed FICO score
 
 
 
 
 
 
 
 
 
 
 
Less than 620
$
2,329

 
$
2,773

 
$
2,361

 
$
1,210

 
$
2,410

 
$
500

Greater than or equal to 620 and less than 680
4,894

 
2,438

 
1,998

 
2,582

 
2,739

 
547

Greater than or equal to 680 and less than 740
23,308

 
4,106

 
2,756

 
9,026

 
2,964

 
926

Greater than or equal to 740
115,678

 
6,581

 
2,159

 
33,824

 
4,017

 
1,197

Fully-insured loans (5)
20,000

 
6,065

 

 

 

 

Total consumer real estate
$
166,209

 
$
21,963

 
$
9,274

 
$
46,642

 
$
12,130

 
$
3,170

(1) 
Excludes $1.0 billion of loans accounted for under the fair value option.
(2) 
Excludes PCI loans.
(3) 
Includes $1.4 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
 
June 30, 2017
(Dollars in millions)
U.S. Credit
Card
 
Direct/Indirect
Consumer
 
Other
Consumer (1)
Refreshed FICO score
 

 
 

 
 

Less than 620
$
4,349

 
$
1,550

 
$
169

Greater than or equal to 620 and less than 680
11,993

 
2,038

 
217

Greater than or equal to 680 and less than 740
34,147

 
12,257

 
425

Greater than or equal to 740
40,287

 
33,764

 
1,688

Other internal credit metrics (2, 3)

 
43,884

 
159

Total credit card and other consumer
$
90,776

 
$
93,493

 
$
2,658

(1) 
At June 30, 2017, 16 percent of the other consumer portfolio was 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 $42.8 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $464 million of loans the Corporation no longer originates, primarily student loans.
 
 
 
 
 
 
 
 
 
 
Commercial – Credit Quality Indicators (1)
 
June 30, 2017
(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
$
268,793

 
$
58,538

 
$
21,103

 
$
87,639

 
$
376

Reservable criticized
8,882

 
639

 
725

 
3,147

 
57

Refreshed FICO score (3)
 
 
 
 
 
 
 
 
 

Less than 620
 

 
 

 
 

 
 

 
221

Greater than or equal to 620 and less than 680
 
 
 
 
 
 
 
 
623

Greater than or equal to 680 and less than 740
 
 
 
 
 
 
 
 
1,863

Greater than or equal to 740
 
 
 
 
 
 
 
 
3,593

Other internal credit metrics (3, 4)
 
 
 
 
 
 
 
 
6,827

Total commercial
$
277,675

 
$
59,177

 
$
21,828

 
$
90,786

 
$
13,560

(1) 
Excludes $6.3 billion of loans accounted for under the fair value option.
(2) 
U.S. small business commercial includes $806 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 June 30, 2017, 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.
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Real Estate – Credit Quality Indicators (1)
 
December 31, 2016
(Dollars in millions)
Core Residential
Mortgage (2)
 
Non-core Residential
Mortgage
(2)
 
Residential Mortgage PCI (3)
 
Core 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 was 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 was 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.
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 101. For more information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2016 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. For more information on impaired consumer real estate loans, see Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation's 2016 Annual Report on Form 10-K.
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 $1.3 billion were included in TDRs at June 30, 2017, of which $451 million were classified as nonperforming and $465 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.
At June 30, 2017 and December 31, 2016, 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 $285 million and $363 million at June 30, 2017 and December 31, 2016. The carrying value of consumer real estate loans, including fully-insured and PCI loans, for which formal foreclosure proceedings were in process as of June 30, 2017 was $4.1 billion. During the three and six months ended June 30, 2017, the Corporation reclassified $226 million and $426 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. This compared to reclassifications of $392 million and $808 million for the same periods in 2016. 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 June 30, 2017 and December 31, 2016, and the average carrying value and interest income recognized for the three and six months ended June 30, 2017 and 2016 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2017
 
December 31, 2016
(Dollars in millions)
 
 
 
 
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
 
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
With no recorded allowance
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 
Residential mortgage
 
 
 
 
$
9,966

 
$
7,696

 
$

 
$
11,151

 
$
8,695

 
$

Home equity
 
 
 
 
3,692

 
1,987

 

 
3,704

 
1,953

 

With an allowance recorded
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
Residential mortgage
 
 
 
 
$
3,525

 
$
3,424

 
$
211

 
$
4,041

 
$
3,936

 
$
219

Home equity
 
 
 
 
978

 
886

 
170

 
910

 
824

 
137

Total
 
 
 
 
 

 
 

 
 

 
 
 
 
 
 
Residential mortgage
 
 
 
 
$
13,491

 
$
11,120

 
$
211

 
$
15,192

 
$
12,631

 
$
219

Home equity
 
 
 
 
4,670

 
2,873

 
170

 
4,614

 
2,777

 
137

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
 
2017
 
2016
 
2017
 
2016
 
Average
Carrying
Value
 
Interest
Income
Recognized
(1)
 
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
$
7,886

 
$
81

 
$
10,345

 
$
100

 
$
8,192

 
$
160

 
$
10,925

 
$
194

Home equity
1,999

 
28

 
1,870

 
17

 
2,000

 
55

 
1,843

 
30

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
3,647

 
$
33

 
$
5,387

 
$
46

 
$
3,723

 
$
68

 
$
5,737

 
$
97

Home equity
868

 
7

 
873

 
5

 
842

 
12

 
882

 
11

Total
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
11,533

 
$
114

 
$
15,732

 
$
146

 
$
11,915

 
$
228

 
$
16,662

 
$
291

Home equity
2,867

 
35

 
2,743

 
22

 
2,842

 
67

 
2,725

 
41

(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 June 30, 2017 and 2016 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 and six months ended June 30, 2017 and 2016, 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 the Three Months Ended June 30, 2017 and 2016 (1)
 
 
 
June 30, 2017
 
Three Months Ended June 30, 2017
(Dollars in millions)
Unpaid Principal Balance
 
Carrying
Value
 
Pre-Modification Interest Rate
 
Post-Modification Interest Rate (2)
 
Net
Charge-offs (3)
Residential mortgage
$
346

 
$
313

 
4.50
%
 
4.37
%
 
$
1

Home equity
250

 
201

 
4.11

 
3.94

 
11

Total
$
596

 
$
514

 
4.33

 
4.19

 
$
12

 
 
 
 
 
 
 
 
 
 
 
June 30, 2016
 
Three Months Ended June 30, 2016
Residential mortgage
$
437

 
$
405

 
4.68
%
 
4.42
%
 
$
3

Home equity
250

 
200

 
3.81

 
3.27

 
16

Total
$
687

 
$
605

 
4.36

 
4.00

 
$
19

 
 
 
 
 
 
 
 
 
 
Consumer Real Estate – TDRs Entered into During the Six Months Ended June 30, 2017 and 2016 (1)
 
 
 
June 30, 2017
 
Six Months Ended June 30, 2017
Residential mortgage
$
646

 
$
581

 
4.51
%
 
4.34
%
 
$
3

Home equity
469

 
365

 
4.20

 
3.75

 
17

Total
$
1,115

 
$
946

 
4.38

 
4.09

 
$
20

 
 
 
 
 
 
 
 
 
 
 
June 30, 2016
 
Six Months Ended June 30, 2016
Residential mortgage
$
854

 
$
785

 
4.72
%
 
4.45
%
 
$
5

Home equity
460

 
361

 
3.63

 
3.10

 
26

Total
$
1,314

 
$
1,146

 
4.34

 
3.98

 
$
31

(1) 
During the three and six months ended June 30, 2017, the Corporation forgave principal of $0 million and $0 million related to residential mortgage loans in connection with TDRs compared to $1 million and $11 million for the same periods in 2016.
(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 June 30, 2017 and 2016 due to sales and other dispositions.
The table below presents the June 30, 2017 and 2016 carrying value for consumer real estate loans that were modified in a TDR during the three and six months ended June 30, 2017 and 2016 by type of modification.
 
 
 
 
 
 
 
 
Consumer Real Estate – Modification Programs
 
 
 
 
 
 
 
 
 
 
 
TDRs Entered into During the Three Months Ended June 30
 
2017
 
2016
(Dollars in millions)
Residential Mortgage
 
Home
Equity
 
Residential Mortgage
 
Home
Equity
Modifications under government programs
 
 
 
 
 
 
 
Contractual interest rate reduction
$
9

 
$
2

 
$
23

 
$
12

Principal and/or interest forbearance

 
1

 

 
4

Other modifications (1)
3

 

 
8

 

Total modifications under government programs
12

 
3