Quarterly report pursuant to Section 13 or 15(d)

Outstanding Loans and Leases

v3.8.0.1
Outstanding Loans and Leases
3 Months Ended
Mar. 31, 2018
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 March 31, 2018 and December 31, 2017.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
(Dollars in millions)
March 31, 2018
Consumer real estate
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
1,080

 
$
284

 
$
962

 
$
2,326

 
$
177,252

 
 
 
 
 
$
179,578

Home equity
202

 
119

 
491

 
812

 
41,756

 
 
 
 
 
42,568

Non-core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage (5)
852

 
406

 
3,106

 
4,364

 
12,580

 
$
7,590

 
 
 
24,534

Home equity
193

 
114

 
549

 
856

 
9,339

 
2,545

 
 
 
12,740

Credit card and other consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. credit card
515

 
355

 
925

 
1,795

 
91,219

 
 
 
 
 
93,014

Direct/Indirect consumer (6)
253

 
73

 
41

 
367

 
90,846

 
 
 
 
 
91,213

Other consumer (7)
9

 
2

 
1

 
12

 
2,848

 
 
 
 
 
2,860

Total consumer
3,104

 
1,353

 
6,075

 
10,532

 
425,840

 
10,135

 
 
 
446,507

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

 
 

 
 

 
 

 
 

 
 

 
$
894

 
894

Total consumer loans and leases
3,104

 
1,353

 
6,075

 
10,532

 
425,840

 
10,135

 
894

 
447,401

Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. commercial
773

 
173

 
416

 
1,362

 
287,114

 
 
 
 
 
288,476

Non-U.S. commercial
36

 

 

 
36

 
97,329

 
 
 
 
 
97,365

Commercial real estate (9)
159

 

 
37

 
196

 
59,889

 
 
 
 
 
60,085

Commercial lease financing
173

 
29

 
27

 
229

 
21,535

 
 
 
 
 
21,764

U.S. small business commercial
79

 
43

 
87

 
209

 
13,683

 
 
 
 
 
13,892

Total commercial
1,220

 
245

 
567

 
2,032

 
479,550

 
 
 
 
 
481,582

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

 
 

 
 

 
 

 
 

 
 

 
5,095

 
5,095

Total commercial loans and leases
1,220

 
245

 
567

 
2,032

 
479,550

 
 
 
5,095

 
486,677

Total loans and leases (10)
$
4,324

 
$
1,598

 
$
6,642

 
$
12,564

 
$
905,390

 
$
10,135

 
$
5,989

 
$
934,078

Percentage of outstandings
0.47
%
 
0.17
%
 
0.71
%
 
1.35
%
 
96.93
%
 
1.08
%
 
0.64
%
 
100.00
%
(1) 
Consumer real estate loans 30-59 days past due includes fully-insured loans of $689 million and nonperforming loans of $267 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $341 million and nonperforming loans of $200 million.
(2) 
Consumer real estate includes fully-insured loans of $2.9 billion.
(3) 
Consumer real estate includes $2.2 billion and direct/indirect consumer includes $43 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 $1.3 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 $428 million, U.S. securities-based lending loans of $38.1 billion, non-U.S. consumer loans of $2.9 billion and other consumer loans of $676 million.
(7) 
Total outstandings includes consumer leases of $2.7 billion and consumer overdrafts of $129 million.
(8) 
Consumer loans accounted for under the fair value option includes residential mortgage loans of $523 million and home equity loans of $371 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $3.2 billion and non-U.S. commercial loans of $1.9 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 $55.6 billion and non-U.S. commercial real estate loans of $4.5 billion.
(10) 
Total outstandings Includes loans and leases pledged as collateral of $47.8 billion. The Corporation also pledged $151.4 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank (FHLB).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
(Dollars in millions)
December 31, 2017
Consumer real estate
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
1,242

 
$
321

 
$
1,040

 
$
2,603

 
$
174,015

 
 
 
 

 
$
176,618

Home equity
215

 
108

 
473

 
796

 
43,449

 
 
 
 

 
44,245

Non-core portfolio
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Residential mortgage (5)
1,028

 
468

 
3,535

 
5,031

 
14,161

 
$
8,001

 
 

 
27,193

Home equity
224

 
121

 
572

 
917

 
9,866

 
2,716

 
 

 
13,499

Credit card and other consumer
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. credit card
542

 
405

 
900

 
1,847

 
94,438

 
 
 
 

 
96,285

Direct/Indirect consumer (6)
320

 
102

 
43

 
465

 
93,365

 
 
 
 

 
93,830

Other consumer (7)
10

 
2

 
1

 
13

 
2,665

 
 
 
 

 
2,678

Total consumer
3,581

 
1,527

 
6,564

 
11,672

 
431,959

 
10,717

 
 

454,348

Consumer loans accounted for under the fair value option (8)
 
 
 
 
 
 
 
 
 
 
 
 
$
928


928

Total consumer loans and leases
3,581

 
1,527

 
6,564

 
11,672

 
431,959

 
10,717

 
928

 
455,276

Commercial
 
 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. commercial
547

 
244

 
425

 
1,216

 
283,620

 
 
 
 

 
284,836

Non-U.S. commercial
52

 
1

 
3

 
56

 
97,736

 
 
 
 

 
97,792

Commercial real estate (9)
48

 
10

 
29

 
87

 
58,211

 
 
 
 

 
58,298

Commercial lease financing
110

 
68

 
26

 
204

 
21,912

 
 
 
 

 
22,116

U.S. small business commercial
95

 
45

 
88

 
228

 
13,421

 
 
 
 

 
13,649

Total commercial
852

 
368

 
571

 
1,791

 
474,900

 
 
 
 

 
476,691

Commercial loans accounted for under the fair value option (8)
 
 
 
 
 
 
 
 
 
 
 
 
4,782

 
4,782

Total commercial loans and leases
852

 
368

 
571

 
1,791

 
474,900

 
 
 
4,782

 
481,473

Total loans and leases (10)
$
4,433

 
$
1,895

 
$
7,135

 
$
13,463

 
$
906,859

 
$
10,717

 
$
5,710

 
$
936,749

Percentage of outstandings
0.48
%
 
0.20
%
 
0.76
%
 
1.44
%
 
96.81
%
 
1.14
%
 
0.61
%
 
100.00
%

(1) 
Consumer real estate loans 30-59 days past due includes fully-insured loans of $850 million and nonperforming loans of $253 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $386 million and nonperforming loans of $195 million.
(2) 
Consumer real estate includes fully-insured loans of $3.2 billion.
(3) 
Consumer real estate includes $2.3 billion and direct/indirect consumer includes $43 million of nonperforming loans.
(4) 
PCI loan amounts are shown gross of the valuation allowance.
(5) 
Total outstandings includes pay option loans of $1.4 billion. The Corporation no longer originates this product.
(6) 
Total outstandings includes auto and specialty lending loans of $49.9 billion, unsecured consumer lending loans of $469 million, U.S. securities-based lending loans of $39.8 billion, non-U.S. consumer loans of $3.0 billion and other consumer loans of $684 million.
(7) 
Total outstandings includes consumer leases of $2.5 billion and consumer overdrafts of $163 million.
(8) 
Consumer loans accounted for under the fair value option includes residential mortgage loans of $567 million and home equity loans of $361 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $2.6 billion and non-U.S. commercial loans of $2.2 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 $54.8 billion and non-U.S. commercial real estate loans of $3.5 billion.
(10) 
Total outstandings Includes loans and leases pledged as collateral of $40.1 billion. The Corporation also pledged $160.3 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and FHLB.
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. All other loans are generally characterized as non-core loans and represent run-off portfolios.
The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $6.2 billion and $6.3 billion at March 31, 2018 and December 31, 2017, providing full credit protection on residential mortgage loans that become severely delinquent. All of these loans are individually insured and therefore the Corporation does not record an allowance for credit losses related to these loans.
Nonperforming Loans and Leases
The Corporation classifies junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. At March 31, 2018 and December 31, 2017, $294 million and $330 million of such junior-lien home equity loans were included in nonperforming loans.
The Corporation classifies consumer real estate loans that have been discharged in Chapter 7 bankruptcy and not reaffirmed by the borrower as troubled debt restructurings (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 March 31, 2018, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $299 million of which $165 million were current on their contractual payments, while $113 million were 90 days or more past due. Of the contractually current nonperforming loans, 62 percent were discharged in Chapter 7 bankruptcy over 12 months ago, and 53 percent were discharged 24 months or more ago.
During the three months ended March 31, 2018 and 2017, the Corporation sold nonperforming and other delinquent consumer real estate loans with a carrying value of $378 million and $142 million, including $109 million and $0 of PCI loans. The Corporation recorded net recoveries of $20 million and $11 million related to these sales. Gains related to these sales of $16 million and $6 million were recorded in other income in the Consolidated Statement of Income. During the three months ended March 31, 2018 and 2017, the Corporation transferred consumer nonperforming loans with a net carrying value of $2 million and $221 million to held for sale.
The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at March 31, 2018 and December 31, 2017. 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 2017 Annual Report on Form 10-K.
 
 
 
 
 
 
 
 
Credit Quality
 
 
 
 
 
 
 
 
 
 
 
Nonperforming Loans
and Leases
 
Accruing Past Due
90 Days or More
(Dollars in millions)
March 31
2018
 
December 31
2017
 
March 31
2018
 
December 31
2017
Consumer real estate
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
Residential mortgage (1)
$
1,073

 
$
1,087

 
$
385

 
$
417

Home equity
1,118

 
1,079

 

 

Non-core portfolio
 

 
 

 
 

 
 
Residential mortgage (1)
1,189

 
1,389

 
2,500

 
2,813

Home equity
1,480

 
1,565

 

 

Credit card and other consumer
 

 
 

 
 
 
 
U.S. credit card
n/a

 
n/a

 
925

 
900

Direct/Indirect consumer
46

 
46

 
38

 
40

Other consumer

 

 
1

 

Total consumer
4,906

 
5,166

 
3,849

 
4,170

Commercial
 

 
 

 
 

 
 

U.S. commercial
1,059

 
814

 
98

 
144

Non-U.S. commercial
255

 
299

 

 
3

Commercial real estate
73

 
112

 
13

 
4

Commercial lease financing
27

 
24

 
8

 
19

U.S. small business commercial
58

 
55

 
76

 
75

Total commercial
1,472

 
1,304

 
195

 
245

Total loans and leases
$
6,378

 
$
6,470

 
$
4,044

 
$
4,415

(1) 
Residential mortgage loans in the core and non-core portfolios accruing past due 90 days or more are fully-insured loans. At March 31, 2018 and December 31, 2017, residential mortgage includes $2.0 billion and $2.2 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 $885 million and $1.0 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 and their related credit quality indicators, see Significant Accounting Principles Loans and Leases in Note 1 – Summary of Significant Accounting Principles and Credit Quality Indicators in Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 2017 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 March 31, 2018 and December 31, 2017.
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Real Estate – Credit Quality Indicators (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
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
(Dollars in millions)
March 31, 2018
Refreshed LTV (4)
 

 
 

 
 

 
 

 
 
 
 
Less than or equal to 90 percent
$
157,236

 
$
10,484

 
$
6,535

 
$
41,498

 
$
7,629

 
$
1,691

Greater than 90 percent but less than or equal to 100 percent
3,046

 
783

 
530

 
488

 
985

 
379

Greater than 100 percent
1,357

 
907

 
525

 
582

 
1,581

 
475

Fully-insured loans (5)
17,939

 
4,770

 

 

 

 

Total consumer real estate
$
179,578

 
$
16,944

 
$
7,590

 
$
42,568

 
$
10,195

 
$
2,545

Refreshed FICO score
 
 
 
 
 
 
 
 
 
 
 
Less than 620
$
2,183

 
$
2,060

 
$
1,790

 
$
1,165

 
$
1,976

 
$
425

Greater than or equal to 620 and less than 680
4,417

 
1,771

 
1,530

 
2,261

 
2,243

 
425

Greater than or equal to 680 and less than 740
22,407

 
2,988

 
2,273

 
7,685

 
2,592

 
729

Greater than or equal to 740
132,632

 
5,355

 
1,997

 
31,457

 
3,384

 
966

Fully-insured loans (5)
17,939

 
4,770

 

 

 

 

Total consumer real estate
$
179,578

 
$
16,944

 
$
7,590

 
$
42,568

 
$
10,195

 
$
2,545

(1) 
Excludes $894 million of loans accounted for under the fair value option.
(2) 
Excludes PCI loans.
(3) 
Includes $1.1 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
 
 
 
 
 
 
 
U.S. Credit
Card
 
Direct/Indirect
Consumer
 
Other
Consumer
(Dollars in millions)
March 31, 2018
Refreshed FICO score
 

 
 

 
 

Less than 620
$
4,704

 
$
1,635

 
$
57

Greater than or equal to 620 and less than 680
12,052

 
1,902

 
155

Greater than or equal to 680 and less than 740
34,673

 
11,480

 
429

Greater than or equal to 740
41,585

 
34,467

 
2,088

Other internal credit metrics (1, 2)

 
41,729

 
131

Total credit card and other consumer
$
93,014

 
$
91,213

 
$
2,860

(1) 
Other internal credit metrics may include delinquency status, geography or other factors.
(2) 
Direct/indirect consumer includes $41.1 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk.
 
 
 
 
 
 
 
 
 
 
Commercial – Credit Quality Indicators (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.
Commercial
 
Non-U.S.
Commercial
 
Commercial
Real Estate
 
Commercial
Lease
Financing
 
U.S. Small
Business
Commercial (2)
(Dollars in millions)
March 31, 2018
Risk ratings
 

 
 

 
 

 
 

 
 

Pass rated
$
279,492

 
$
95,807

 
$
59,562

 
$
21,275

 
$
314

Reservable criticized
8,984

 
1,558

 
523

 
489

 
42

Refreshed FICO score (3)
 
 
 
 
 
 
 
 
 

Less than 620
 

 
 
 
 
 
 
 
238

Greater than or equal to 620 and less than 680
 
 
 
 
 
 
 
 
648

Greater than or equal to 680 and less than 740
 
 
 
 
 
 
 
 
1,926

Greater than or equal to 740
 
 
 
 
 
 
 
 
3,869

Other internal credit metrics (3, 4)
 
 
 
 
 
 
 
 
6,855

Total commercial
$
288,476

 
$
97,365

 
$
60,085

 
$
21,764

 
$
13,892

(1) 
Excludes $5.1 billion of loans accounted for under the fair value option.
(2) 
U.S. small business commercial includes $719 million of criticized business card and small business loans which are evaluated using refreshed FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. At March 31, 2018, 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)
 
 
 
 
 
 
 
 
 
 
 
 
 
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
(Dollars in millions)
December 31, 2017
Refreshed LTV (4)
 

 
 

 
 

 
 

 
 
 
 
Less than or equal to 90 percent
$
153,669

 
$
12,135

 
$
6,872

 
$
43,048

 
$
7,944

 
$
1,781

Greater than 90 percent but less than or equal to 100 percent
3,082

 
850

 
559

 
549

 
1,053

 
412

Greater than 100 percent
1,322

 
1,011

 
570

 
648

 
1,786

 
523

Fully-insured loans (5)
18,545

 
5,196

 

 

 

 

Total consumer real estate
$
176,618

 
$
19,192

 
$
8,001

 
$
44,245

 
$
10,783

 
$
2,716

Refreshed FICO score
 

 
 

 
 

 
 

 
 

 
 

Less than 620
$
2,234

 
$
2,390

 
$
1,941

 
$
1,169

 
$
2,098

 
$
452

Greater than or equal to 620 and less than 680
4,531

 
2,086

 
1,657

 
2,371

 
2,393

 
466

Greater than or equal to 680 and less than 740
22,934

 
3,519

 
2,396

 
8,115

 
2,723

 
786

Greater than or equal to 740
128,374

 
6,001

 
2,007

 
32,590

 
3,569

 
1,012

Fully-insured loans (5)
18,545

 
5,196

 

 

 

 

Total consumer real estate
$
176,618

 
$
19,192

 
$
8,001

 
$
44,245

 
$
10,783

 
$
2,716

(1) 
Excludes $928 million of loans accounted for under the fair value option.
(2) 
Excludes PCI loans.
(3) 
Includes $1.2 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
 
 
 
 
 
 
 
U.S. Credit
Card
 
Direct/Indirect
Consumer
 
Other
Consumer
(Dollars in millions)
December 31, 2017
Refreshed FICO score
 

 
 

 
 

Less than 620
$
4,730

 
$
1,630

 
$
49

Greater than or equal to 620 and less than 680
12,422

 
2,000

 
143

Greater than or equal to 680 and less than 740
35,656

 
11,906

 
398

Greater than or equal to 740
43,477

 
34,838

 
1,921

Other internal credit metrics (1, 2)

 
43,456

 
167

Total credit card and other consumer
$
96,285

 
$
93,830

 
$
2,678

(1) 
Other internal credit metrics may include delinquency status, geography or other factors.
(2) 
Direct/indirect consumer includes $42.8 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk.
 
 
 
 
 
 
 
 
 
 
Commercial – Credit Quality Indicators (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S.
Commercial
 
Non-U.S.
Commercial
 
Commercial
Real Estate
 
Commercial
Lease
Financing
 
U.S. Small
Business
Commercial (2)
(Dollars in millions)
December 31, 2017
Risk ratings
 

 
 

 
 

 
 

 
 

Pass rated
$
275,904

 
$
96,199

 
$
57,732

 
$
21,535

 
$
322

Reservable criticized
8,932

 
1,593

 
566

 
581

 
50

Refreshed FICO score (3)
 
 
 
 
 
 
 
 
 
Less than 620
 
 
 
 
 
 
 
 
223

Greater than or equal to 620 and less than 680
 
 
 
 
 
 
 
 
625

Greater than or equal to 680 and less than 740
 
 
 
 
 
 
 
 
1,875

Greater than or equal to 740
 
 
 
 
 
 
 
 
3,713

Other internal credit metrics (3, 4)
 
 
 
 
 
 
 
 
6,841

Total commercial
$
284,836

 
$
97,792

 
$
58,298

 
$
22,116

 
$
13,649

(1) 
Excludes $4.8 billion of loans accounted for under the fair value option.
(2) 
U.S. small business commercial includes $709 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, 2017, 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. For additional information on impaired loans, see Note 1 – Summary of Significant Accounting Principles and Note 4 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 2017 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 2017 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 $1.1 billion were included in TDRs at March 31, 2018, of which $299 million were classified as nonperforming and $405 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 March 31, 2018 and December 31, 2017, 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 $264 million and $236 million at March 31, 2018 and December 31, 2017. The carrying value of consumer real estate loans, including fully-insured and PCI loans, for which formal foreclosure proceedings were in process at March 31, 2018 was $3.3 billion. During the three months ended March 31, 2018 and 2017, the Corporation reclassified $168 million and $200 million of consumer real estate loans to foreclosed properties or, for properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans), to other assets. The reclassifications represent non-cash investing activities and, accordingly, are not reflected in the Consolidated Statement of Cash Flows.
The table below provides the unpaid principal balance, carrying value and related allowance at March 31, 2018 and December 31, 2017, and the average carrying value and interest income recognized for the three months ended March 31, 2018 and 2017 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
 
Unpaid
Principal
Balance
 
Carrying
Value
 
Related
Allowance
(Dollars in millions)
March 31, 2018
 
December 31, 2017
With no recorded allowance
 

 
 

 
 

 
 

 
 

 
 
Residential mortgage
$
6,793

 
$
5,451

 
$

 
$
8,856

 
$
6,870

 
$

Home equity
3,583

 
1,943

 

 
3,622

 
1,956

 

With an allowance recorded
 
 
 
 
 

 
 
 
 
 
 
Residential mortgage
$
2,634

 
$
2,568

 
$
157

 
$
2,908

 
$
2,828

 
$
174

Home equity
985

 
910

 
181

 
972

 
900

 
174

Total
 

 
 

 
 

 
 
 
 
 
 
Residential mortgage (1)
$
9,427

 
$
8,019

 
$
157

 
$
11,764

 
$
9,698

 
$
174

Home equity
4,568

 
2,853

 
181

 
4,594

 
2,856

 
174

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average
Carrying
Value
 
Interest
Income
Recognized
(2)
 
Average
Carrying
Value
 
Interest
Income
Recognized
(2)
 
 
 
 
 
Three Months Ended March 31
 
 
 
2018
 
2017
With no recorded allowance
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
 
 
 
$
6,462

 
$
65

 
$
8,456

 
$
79

Home equity
 
 
 
 
1,961

 
27

 
1,991

 
27

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
 
 
 
$
2,705

 
$
25

 
$
3,832

 
$
35

Home equity
 
 
 
 
892

 
6

 
825

 
5

Total
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage (1)
 
 
 
 
$
9,167

 
$
90

 
$
12,288

 
$
114

Home equity
 
 
 
 
2,853

 
33

 
2,816

 
32

(1) 
During the three months ended March 31, 2018, the Corporation transferred impaired residential mortgage loans with a carrying value of $1.2 billion to held for sale.
(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 March 31, 2018 and 2017 unpaid principal balance, carrying value, and average pre- and post-modification interest rates on consumer real estate loans that were modified in TDRs during the three months ended March 31, 2018 and 2017, 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 March 31, 2018 and 2017
 
 
 
Unpaid Principal Balance
 
Carrying
Value
 
Pre-Modification Interest Rate
 
Post-Modification Interest Rate (1)
 
Net
Charge-offs (2)
(Dollars in millions)
March 31, 2018
 
Three Months Ended March 31, 2018
Residential mortgage
$
407

 
$
358

 
4.39
%
 
4.36
%
 
$
3

Home equity
207

 
161

 
4.37

 
4.37

 
6

Total
$
614

 
$
519

 
4.39

 
4.36

 
$
9

 
 
 
 
 
 
 
 
 
 
 
March 31, 2017
 
Three Months Ended March 31, 2017
Residential mortgage
$
382

 
$
344

 
4.68
%
 
4.44
%
 
$
2

Home equity
248

 
189

 
4.90

 
3.80

 
6

Total
$
630

 
$
533

 
4.77

 
4.19

 
$
8

(1) 
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.
(2) 
Net charge-offs include amounts recorded on loans modified during the period that are no longer held by the Corporation at March 31, 2018 and 2017 due to sales and other dispositions.
The table below presents the March 31, 2018 and 2017 carrying value for consumer real estate loans that were modified in a TDR during the three months ended March 31, 2018 and 2017, by type of modification.
 
 
 
 
Consumer Real Estate – Modification Programs
 
 
 
 
 
 
 
TDRs Entered into During the Three Months Ended March 31
(Dollars in millions)
2018
 
2017
Modifications under government programs
 
 
 
Contractual interest rate reduction
$
7

 
$
32

Principal and/or interest forbearance

 
1

Other modifications (1)
6

 
2

Total modifications under government programs
13

 
35

Modifications under proprietary programs
 
 
 
Contractual interest rate reduction
11

 
14

Capitalization of past due amounts
14

 
5

Principal and/or interest forbearance
6

 
3

Other modifications (1)
169

 
30

Total modifications under proprietary programs
200

 
52

Trial modifications
242

 
372

Loans discharged in Chapter 7 bankruptcy (2)
64

 
74

Total modifications
$
519

 
$
533

(1) 
Includes other modifications such as term or payment extensions and repayment plans. During the three months ended March 31, 2018, this included $168 million of modifications related to the 2017 hurricanes that met the definition of a TDR. These modifications had been written down to their net realizable value less costs to sell or were fully insured as of March 31, 2018.
(2) 
Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.
The table below presents the carrying value of consumer real estate loans that entered into payment default during the three months ended March 31, 2018 and 2017 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 March 31
(Dollars in millions)
2018
 
2017
Modifications under government programs
$
13

 
$
26

Modifications under proprietary programs
31

 
34

Loans discharged in Chapter 7 bankruptcy (1)
23

 
62

Trial modifications (2)
45

 
212

Total modifications
$
112

 
$
334

(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, placing the customer on a fixed payment plan not exceeding 60 months and canceling the customer’s available line of credit, all of which are considered TDRs. 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.
The table below provides the unpaid principal balance, carrying value and related allowance at March 31, 2018 and December 31, 2017, and the average carrying value and interest income recognized for the three months ended March 31, 2018 and 2017 on TDRs within the Credit Card and Other Consumer portfolio segment.
 
 
 
 
 
 
 
 
 
 
 
 
 
Impaired Loans – Credit Card and Other Consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unpaid
Principal
Balance
 
Carrying
Value (1)
 
Related
Allowance
 
Unpaid
Principal
Balance
 
Carrying
Value (1)
 
Related
Allowance
(Dollars in millions)
 
March 31, 2018
 
December 31, 2017
With no recorded allowance
 
 

 
 

 
 

 
 
 
 
 
 
Direct/Indirect consumer
 
$
59

 
$
28

 
$

 
$
58

 
$
28

 
$

With an allowance recorded
 
 

 
 

 
 

 
 
 
 
 
 
U.S. credit card
 
$
465

 
$
472

 
$
128

 
$
454

 
$
461

 
$
125

Direct/Indirect consumer
 
1

 
1

 

 
1

 
1

 

Total
 
 

 
 

 
 

 
 

 
 

 
 
U.S. credit card
 
$
465

 
$
472

 
$
128

 
$
454

 
$
461

 
$
125

Direct/Indirect consumer
 
60

 
29

 

 
59

 
29

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average
Carrying
Value
 
Interest
Income
Recognized
(2)