Bank of America Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Outstanding Loans and Leases

Outstanding Loans and Leases

9 Months Ended

Sep. 30, 2017

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 September 30, 2017 and December 31, 2016.

During the second quarter of 2017, the Corporation sold 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.




	September 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	$	1,583		$	306		$	986		$	2,875		$	167,782								$	170,657
Home equity	246			111			435			792			44,585									45,377
Non-core portfolio
Residential mortgage ⁽⁵⁾	1,144			540			3,728			5,412			14,978			$	8,399					28,789
Home equity	269			131			613			1,013			10,449			2,913						14,375
Credit card and other consumer
U.S. credit card	492			355			810			1,657			90,945									92,602
Direct/Indirect consumer ⁽⁶⁾	273			82			33			388			93,003									93,391
Other consumer ⁽⁷⁾	7			1			1			9			2,415									2,424
Total consumer	4,014			1,526			6,606			12,146			424,157			11,312						447,615
Consumer loans accounted for under the fair value option ⁽⁸⁾																			$	978		978
Total consumer loans and leases	4,014			1,526			6,606			12,146			424,157			11,312			978			448,593
Commercial
U.S. commercial	459			176			349			984			281,693									282,677
Commercial real estate ⁽⁹⁾	13			2			51			66			59,562									59,628
Commercial lease financing	39			56			45			140			21,273									21,413
Non-U.S. commercial	9			14			—			23			95,873									95,896
U.S. small business commercial	63			38			80			181			13,422									13,603
Total commercial	583			286			525			1,394			471,823									473,217
Commercial loans accounted for under the fair value option ⁽⁸⁾																			5,307			5,307
Total commercial loans and leases	583			286			525			1,394			471,823						5,307			478,524
Total loans and leases ⁽¹⁰⁾	$	4,597		$	1,812		$	7,131		$	13,540		$	895,980		$	11,312		$	6,285		$	927,117
Percentage of outstandings	0.50		%	0.19		%	0.77		%	1.46		%	96.64		%	1.22		%	0.68		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $905 million and nonperforming loans of $282 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $443 million and nonperforming loans of $201 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $3.4 billion.


⁽³⁾	Consumer real estate includes $2.3 billion and direct/indirect consumer includes $39 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 $1.5 billion. The Corporation no longer originates this product.


⁽⁶⁾	Total outstandings includes auto and specialty lending loans of $50.0 billion, unsecured consumer lending loans of $484 million, U.S. securities-based lending loans of $39.3 billion, non-U.S. consumer loans of $2.9 billion and other consumer loans of $682 million.


⁽⁷⁾	Total outstandings includes consumer leases of $2.3 billion and consumer overdrafts of $160 million.


⁽⁸⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $615 million and home equity loans of $363 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.8 billion and non-U.S. commercial loans of $2.5 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 $55.5 billion and non-U.S. commercial real estate loans of $4.2 billion.


⁽¹⁰⁾	The Corporation pledged $152.9 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 were 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 $6.5 billion and $6.4 billion at September 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 September 30, 2017 and December 31, 2016, $336 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 September 30, 2017, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $379 million of which $224 million were current on their contractual payments, while $127 million were 90 days or more past due. Of the contractually current nonperforming loans, approximately 78 percent were discharged in Chapter 7 bankruptcy over 12 months ago, and approximately 68 percent were discharged 24 months or more ago.

During the three and nine months ended September 30, 2017, the Corporation sold nonperforming and other delinquent consumer real estate loans with a carrying value of $700 million and $1.2 billion, including $538 million and $742 million of PCI loans, compared to $360 million and $1.8 billion, including $111 million and $435 million of PCI loans, for the same periods in 2016. The Corporation recorded net recoveries of $88 million and $102 million related to these sales for the three and nine months ended September 30, 2017 compared to net recoveries of $6 million and net charge-offs of $39 million for the same periods in 2016. Gains related to these sales of $38 million and $50 million were recorded in other income in the Consolidated Statement of Income for the three and nine months ended September 30, 2017 compared to gains of $19 million and $63 million for the same periods in 2016. During the nine months ended September 30, 2017, the Corporation transferred nonperforming loans with a net carrying value of $198 million to held-for-sale, which have been subsequently sold during the nine-month period. 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 September 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)	September 30 2017		December 31 2016		September 30 2017		December 31 2016
Consumer real estate
Core portfolio
Residential mortgage ⁽¹⁾	$	1,076	$	1,274	$	396	$	486
Home equity	1,046		969		—		—
Non-core portfolio
Residential mortgage⁽¹⁾	1,442		1,782		2,976		4,307
Home equity	1,645		1,949		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		810		782
Non-U.S. credit card	n/a		n/a		—		66
Direct/Indirect consumer	43		28		31		34
Other consumer	—		2		1		4
Total consumer	5,252		6,004		4,214		5,679
Commercial
U.S. commercial	863		1,256		82		106
Commercial real estate	130		72		—		7
Commercial lease financing	26		36		38		19
Non-U.S. commercial	244		279		—		5
U.S. small business commercial	55		60		68		71
Total commercial	1,318		1,703		188		208
Total loans and leases	$	6,570	$	7,707	$	4,402	$	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 September 30, 2017 and December 31, 2016, residential mortgage includes $2.3 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 $1.1 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 September 30, 2017 and December 31, 2016.




Consumer Real Estate – Credit Quality Indicators ⁽¹⁾
	September 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	$	146,679	$	12,603	$	7,095	$	43,942	$	8,128	$	1,881
Greater than 90 percent but less than or equal to 100 percent	3,288		1,016		624		660		1,211		420
Greater than 100 percent	1,444		1,231		680		775		2,123		612
Fully-insured loans ⁽⁵⁾	19,246		5,540		—		—		—		—
Total consumer real estate	$	170,657	$	20,390	$	8,399	$	45,377	$	11,462	$	2,913
Refreshed FICO score
Less than 620	$	2,285	$	2,560	$	2,102	$	1,192	$	2,268	$	470
Greater than or equal to 620 and less than 680	4,652		2,260		1,740		2,416		2,506		495
Greater than or equal to 680 and less than 740	22,153		3,720		2,446		8,484		2,860		862
Greater than or equal to 740	122,321		6,310		2,111		33,285		3,828		1,086
Fully-insured loans ⁽⁵⁾	19,246		5,540		—		—		—		—
Total consumer real estate	$	170,657	$	20,390	$	8,399	$	45,377	$	11,462	$	2,913


⁽¹⁾	Excludes $978 million of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $1.3 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
	September 30, 2017
(Dollars in millions)	U.S. Credit Card		Direct/Indirect Consumer		Other Consumer
Refreshed FICO score
Less than 620	$	4,612	$	1,578	$	42
Greater than or equal to 620 and less than 680	12,195		2,003		125
Greater than or equal to 680 and less than 740	34,796		12,161		364
Greater than or equal to 740	40,999		34,731		1,730
Other internal credit metrics ^{(1, 2)}	—		42,918		163
Total credit card and other consumer	$	92,602	$	93,391	$	2,424


⁽¹⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽²⁾	Direct/indirect consumer includes $42.2 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk.




Commercial – Credit Quality Indicators ⁽¹⁾
	September 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	$	273,670	$	59,001	$	20,763	$	93,498	$	354
Reservable criticized	9,007		627		650		2,398		50
Refreshed FICO score ⁽³⁾
Less than 620									224
Greater than or equal to 620 and less than 680									615
Greater than or equal to 680 and less than 740									1,842
Greater than or equal to 740									3,683
Other internal credit metrics ^{(3, 4)}									6,835
Total commercial	$	282,677	$	59,628	$	21,413	$	95,896	$	13,603


⁽¹⁾	Excludes $5.3 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $825 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 September 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 97. 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 $1.2 billion were included in TDRs at September 30, 2017, of which $379 million were classified as nonperforming and $442 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 both September 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 $259 million and $363 million at September 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 at September 30, 2017 was $3.7 billion. During the three and nine months ended September 30, 2017, the Corporation reclassified $198 million and $624 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 $326 million and $1.1 billion for the same periods in 2016. The reclassifications represent non-cash investing activities and, accordingly, are not reflected in the Consolidated Statement of Cash Flows.

The table below provides the unpaid principal balance, carrying value and related allowance at September 30, 2017 and December 31, 2016, and the average carrying value and interest income recognized for the three and nine months ended September 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
					September 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					$	9,212	$	7,172	$	—	$	11,151	$	8,695	$	—
Home equity					3,644		1,962		—		3,704		1,953		—
With an allowance recorded
Residential mortgage					$	3,167	$	3,079	$	188	$	4,041	$	3,936	$	219
Home equity					990		909		181		910		824		137
Total
Residential mortgage					$	12,379	$	10,251	$	188	$	15,192	$	12,631	$	219
Home equity					4,634		2,871		181		4,614		2,777		137

	Three Months Ended September 30								Nine Months Ended September 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	$	7,498	$	77	$	9,673	$	83	$	7,964	$	237	$	10,523	$	277
Home equity	2,000		27		1,964		37		2,001		82		1,883		67
With an allowance recorded
Residential mortgage	$	3,254	$	29	$	4,676	$	36	$	3,565	$	97	$	5,371	$	133
Home equity	873		6		822		7		850		18		863		18
Total
Residential mortgage	$	10,752	$	106	$	14,349	$	119	$	11,529	$	334	$	15,894	$	410
Home equity	2,873		33		2,786		44		2,851		100		2,746		85


⁽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 September 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 nine months ended September 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 September 30, 2017 and 2016 ⁽¹⁾

	September 30, 2017								Three Months Ended September 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	$	294	$	263	4.42	%	4.33	%	$	2
Home equity	212		172		4.01		3.96		15
Total	$	506	$	435	4.25		4.17		$	17

	September 30, 2016								Three Months Ended September 30, 2016
Residential mortgage	$	487	$	445	4.83	%	4.51	%	$	4
Home equity	292		223		4.95		3.41		17
Total	$	779	$	668	4.87		4.10		$	21

Consumer Real Estate – TDRs Entered into During the Nine Months Ended September 30, 2017 and 2016 ⁽¹⁾

	September 30, 2017								Nine Months Ended September 30, 2017
Residential mortgage	$	738	$	657	4.49	%	4.25	%	$	5
Home equity	630		491		4.16		3.52		32
Total	$	1,368	$	1,148	4.33		3.90		$	37

	September 30, 2016								Nine Months Ended September 30, 2016
Residential mortgage	$	1,039	$	942	4.77	%	4.29	%	$	9
Home equity	718		552		4.03		2.87		43
Total	$	1,757	$	1,494	4.47		3.71		$	52


⁽¹⁾	During the three and nine months ended September 30, 2017, there was no forgiveness of principal related to residential mortgage loans in connection with TDRs compared to $1 million and $12 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 September 30, 2017 and 2016 due to sales and other dispositions.

The table below presents the September 30, 2017 and 2016 carrying value for consumer real estate loans that were modified in a TDR during the three and nine months ended September 30, 2017 and 2016 by type of modification.




Consumer Real Estate – Modification Programs
	TDRs Entered into During the
	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2017		2016		2017		2016
Modifications under government programs
Contractual interest rate reduction	$	10	$	18	$	56	$	121
Principal and/or interest forbearance	1		2		4		11
Other modifications ⁽¹⁾	7		3		22		21
Total modifications under government programs	18		23		82		153
Modifications under proprietary programs
Contractual interest rate reduction	15		20		178		143
Capitalization of past due amounts	12		4		47		27
Principal and/or interest forbearance	2		2		28		47
Other modifications⁽¹⁾	1		45		45		72
Total modifications under proprietary programs	30		71		298		289
Trial modifications	329		490		605		853
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	58		84		163		199
Total modifications	$	435	$	668	$	1,148	$	1,494


⁽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 and nine months ended September 30, 2017 and 2016 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.




Consumer Real Estate – TDRs Entering Payment Default that were Modified During the Preceding 12 Months

	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2017		2016		2017		2016
Modifications under government programs	$	16	$	51	$	62	$	230
Modifications under proprietary programs	32		40		99		145
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	16		42		93		124
Trial modifications ⁽²⁾	54		161		312		648
Total modifications	$	118	$	294	$	566	$	1,147


⁽¹⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.


⁽²⁾	Includes trial modification offers 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 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 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.




Impaired Loans – Credit Card and Other Consumer
					September 30, 2017						December 31, 2016
(Dollars in millions)					Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance
With no recorded allowance
Direct/Indirect consumer					$	53	$	25	$	—	$	49	$	22	$	—
With an allowance recorded
U.S. credit card					$	452	$	458	$	125	$	479	$	485	$	128
Non-U.S. credit card					n/a		n/a		n/a		88		100		61
Direct/Indirect consumer					1		2		—		3		3		—
Total
U.S. credit card					$	452	$	458	$	125	$	479	$	485	$	128
Non-U.S. credit card					n/a		n/a		n/a		88		100		61
Direct/Indirect consumer					54		27		—		52		25		—

	Three Months Ended September 30								Nine Months Ended September 30
	2017				2016				2017				2016
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With no recorded allowance
Direct/Indirect consumer	$	20	$	—	$	21	$	—	$	19	$	—	$	21	$	—
With an allowance recorded
U.S. credit card	$	457	$	6	$	539	$	7	$	466	$	18	$	571	$	24
Non-U.S. credit card	—		—		107		—		62		1		115		2
Direct/Indirect consumer	2		—		7		—		2		—		12		—
Total
U.S. credit card	$	457	$	6	$	539	$	7	$	466	$	18	$	571	$	24
Non-U.S. credit card	—		—		107		—		62		1		115		2
Direct/Indirect consumer	22		—		28		—		21		—		33		—


⁽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.

n/a = not applicable

The table below provides information on the Corporation’s primary modification programs for the Credit Card and Other Consumer TDR portfolio at September 30, 2017 and December 31, 2016.




Credit Card and Other Consumer – TDRs by Program Type
	Internal Programs				External Programs				Other ⁽¹⁾				Total				Percent of Balances Current or Less Than 30 Days Past Due
(Dollars in millions)	September 30 2017		December 31 2016		September 30 2017		December 31 2016		September 30 2017		December 31 2016		September 30 2017		December 31 2016		September 30 2017		December 31 2016
U.S. credit card	$	201	$	220	$	256	$	264	$	1	$	1	$	458	$	485	88.30	%	88.99	%
Non-U.S. credit card	n/a		11		n/a		7		n/a		82		n/a		100		n/a		38.47
Direct/Indirect consumer	1		2		1		1		25		22		27		25		89.05		90.49
Total TDRs by program type	$	202	$	233	$	257	$	272	$	26	$	105	$	485	$	610	88.34		80.79


⁽¹⁾	Other TDRs for non-U.S. credit card included modifications of accounts that are ineligible for a fixed payment plan.

n/a = not applicable

The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the September 30, 2017 and 2016 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during the three and nine months ended September 30, 2017 and 2016, and net charge-offs recorded during the period in which the modification occurred.




Credit Card and Other Consumer – TDRs Entered into During the Three and Nine Months Ended September 30, 2017 and 2016
	Three Months Ended September 30								Nine Months Ended September 30
	2017
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Mod Interest Rate		Post-Mod Interest Rate		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Mod Interest Rate		Post-Mod Interest Rate
U.S. credit card	$	60	$	64	17.96	%	5.40	%	$	152	$	161	17.88	%	5.49	%
Direct/Indirect consumer	22		14		4.92		4.53		29		18		4.99		4.37
Total ⁽²⁾	$	82	$	78	15.64		5.25		$	181	$	179	16.57		5.37

	2016
U.S. credit card	$	46	$	50	17.48	%	5.33	%	$	126	$	134	17.42	%	5.45	%
Non-U.S. credit card	32		36		24.11		0.38		63		73		23.93		0.44
Direct/Indirect consumer	7		4		4.13		4.08		16		9		4.50		4.33
Total ⁽²⁾	$	85	$	90	19.55		3.27		$	205	$	216	19.05		3.72


⁽¹⁾	Includes accrued interest and fees.


⁽²⁾	Net charge-offs were $14 million and $33 million for the three and nine months ended September 30, 2017 compared to $26 million and $43 million for the same periods in 2016.

Credit card and other consumer loans are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows in the calculation of the allowance for loan and lease losses for impaired credit card and other consumer loans. Based on historical experience, the Corporation estimates that 13 percent of both new U.S. credit card TDRs and new direct/indirect consumer TDRs may be in payment default within 12 months after modification. Loans that entered into payment default during the three and nine months ended September 30, 2017 that had been modified in a TDR during the preceding 12 months were $7 million and $19 million for U.S. credit card and $1 million and $3 million for direct/indirect consumer. During the three and nine months ended September 30, 2016, loans that entered into payment default that had been modified in a TDR during the preceding 12 months were $7 million and $23 million for U.S. credit card, $31 million and $95 million for non-U.S. credit card, and $0 and $2 million for direct/indirect consumer.

Commercial Loans

Impaired commercial loans include nonperforming loans and TDRs (both performing and nonperforming). For more information on impaired commercial loans, see Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation's 2016 Annual Report on Form 10-K.

At September 30, 2017 and December 31, 2016, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were $279 million and $461 million.

Commercial foreclosed properties totaled $40 million and $14 million at September 30, 2017 and December 31, 2016.

The table below provides information on impaired loans in the Commercial loan portfolio segment including the unpaid principal balance, carrying value and related allowance at September 30, 2017 and December 31, 2016, and the average carrying value and interest income recognized for the three and nine months ended September 30, 2017 and 2016. Certain impaired commercial loans do not have a related allowance as the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.




Impaired Loans – Commercial
					September 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
U.S. commercial					$	683	$	675	$	—	$	860	$	827	$	—
Commercial real estate					117		106		—		77		71		—
Non-U.S. commercial					44		27		—		130		130		—
With an allowance recorded
U.S. commercial					$	1,466	$	1,132	$	123	$	2,018	$	1,569	$	132
Commercial real estate					151		39		13		243		96		10
Commercial lease financing					13		12		2		6		4		—
Non-U.S. commercial					497		437		67		545		432		104
U.S. small business commercial ⁽¹⁾					82		70		27		85		73		27
Total
U.S. commercial					$	2,149	$	1,807	$	123	$	2,878	$	2,396	$	132
Commercial real estate					268		145		13		320		167		10
Commercial lease financing					13		12		2		6		4		—
Non-U.S. commercial					541		464		67		675		562		104
U.S. small business commercial ⁽¹⁾					82		70		27		85		73		27

	Three Months Ended September 30								Nine Months Ended September 30
	2017				2016				2017				2016
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With no recorded allowance
U.S. commercial	$	726	$	3	$	940	$	5	$	822	$	9	$	726	$	10
Commercial real estate	77		1		59		—		61		1		67		—
Non-U.S. commercial	14		—		32		—		55		—		18		—
With an allowance recorded
U.S. commercial	$	1,166	$	9	$	1,624	$	16	$	1,305	$	25	$	1,570	$	46
Commercial real estate	72		—		87		1		85		2		95		3
Commercial lease financing	10		—		4		—		6		—		2		—
Non-U.S. commercial	463		3		397		5		466		9		372		11
U.S. small business commercial⁽¹⁾	72		—		81		1		74		—		91		1
Total
U.S. commercial	$	1,892	$	12	$	2,564	$	21	$	2,127	$	34	$	2,296	$	56
Commercial real estate	149		1		146		1		146		3		162		3
Commercial lease financing	10		—		4		—		6		—		2		—
Non-U.S. commercial	477		3		429		5		521		9		390		11
U.S. small business commercial ⁽¹⁾	72		—		81		1		74		—		91		1


⁽¹⁾	Includes U.S. small business commercial renegotiated TDR loans and related allowance.


⁽²⁾	Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal is considered collectible.

The table below presents the September 30, 2017 and 2016 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during the three and nine months ended September 30, 2017 and 2016, and net charge-offs that were recorded during the period in which the modification occurred. The table below includes loans that were initially classified as TDRs during the period and also loans that had previously been classified as TDRs and were modified again during the period.




Commercial – TDRs Entered into During the Three and Nine Months Ended September 30, 2017 and 2016

	Three Months Ended September 30				Nine Months Ended September 30
	2017
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
U.S. commercial	$	357	$	322	$	763	$	700
Commercial real estate	—		—		16		9
Commercial lease financing	12		12		12		12
Non-U.S. commercial	105		105		105		105
U.S. small business commercial ⁽¹⁾	3		3		11		12
Total ⁽²⁾	$	477	$	442	$	907	$	838

	2016
U.S. commercial	$	793	$	768	$	1,483	$	1,447
Commercial real estate	4		4		11		11
Commercial lease financing	2		2		7		4
Non-U.S. commercial	17		17		265		201
U.S. small business commercial ⁽¹⁾	1		1		4		4
Total ⁽²⁾	$	817	$	792	$	1,770	$	1,667


⁽¹⁾	U.S. small business commercial TDRs are comprised of renegotiated small business card loans.


⁽²⁾	Net charge-offs were $27 million and $89 million for the three and nine months ended September 30, 2017 compared to $14 million and $94 million for the same periods in 2016.

A commercial TDR is generally deemed to be in payment default when the loan is 90 days or more past due, including delinquencies that were not resolved as part of the modification. U.S. small business commercial TDRs are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows, along with observable market prices or fair value of collateral when measuring the allowance for loan and lease losses. TDRs that were in payment default had a carrying value of $57 million and $123 million for U.S. commercial, $32 million and $17 million for commercial real estate and $0 and $2 million for U.S. small business commercial at September 30, 2017 and 2016.

Purchased Credit-impaired Loans

The table below shows activity for the accretable yield on PCI loans, which include the Countrywide Financial Corporation (Countrywide) portfolio and loans repurchased in connection with the 2013 settlement with FNMA. The amount of accretable yield is affected by changes in credit outlooks, including metrics such as default rates and loss severities, prepayment speeds, which can change the amount and period of time over which interest payments are expected to be received, and the interest rates on variable rate loans. The reclassifications from nonaccretable difference in the three and nine months ended September 30, 2017 were primarily due to an increase in the expected principal and interest cash flows due to lower default estimates.




Rollforward of Accretable Yield

(Dollars in millions)	Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
Accretable yield, beginning of period	$	3,288		$	3,805
Accretion	(147		)	(465		)
Disposals/transfers	(282		)	(521		)
Reclassifications from nonaccretable difference	80			120
Accretable yield, September 30, 2017	$	2,939		$	2,939

During the three and nine months ended September 30, 2017, the Corporation sold PCI loans with a carrying value of $538 million and $742 million, which excludes the related allowance of $45 million and $80 million. During the three and nine months ended September 30, 2016, the Corporation sold PCI loans with a carrying value of $111 million and $435 million, which excludes the related allowance of $11 million and $50 million. For more information on PCI loans, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2016 Annual Report on Form 10-K, and for the carrying value and valuation allowance for PCI loans, see Note 5 – Allowance for Credit Losses.

Loans Held-for-sale

The Corporation had LHFS of $13.2 billion and $9.1 billion at September 30, 2017 and December 31, 2016. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $28.0 billion and $22.1 billion for the nine months ended September 30, 2017 and 2016. Cash used for originations and purchases of LHFS totaled $31.4 billion and $24.2 billion for the nine months ended September 30, 2017 and 2016.