Quarterly report pursuant to Section 13 or 15(d)

Outstanding Loans and Leases

v3.10.0.1
Outstanding Loans and Leases
9 Months Ended
Sep. 30, 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 September 30, 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)
September 30, 2018
Consumer real estate
 

 
 
 
 

 
 

 
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
1,248

 
$
253

 
$
814

 
$
2,315

 
$
186,975

 
 
 
 
 
$
189,290

Home equity
200

 
89

 
453

 
742

 
39,854

 
 
 
 
 
40,596

Non-core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
815

 
351

 
2,345

 
3,511

 
10,044

 
$
5,341

 
 
 
18,896

Home equity
162

 
78

 
398

 
638

 
8,190

 
1,811

 
 
 
10,639

Credit card and other consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. credit card
546

 
387

 
872

 
1,805

 
93,024

 
 
 
 
 
94,829

Direct/Indirect consumer (5)
297

 
84

 
37

 
418

 
90,920

 
 
 
 
 
91,338

Other consumer (6)

 

 

 

 
203

 
 
 
 
 
203

Total consumer
3,268

 
1,242

 
4,919

 
9,429

 
429,210

 
7,152

 
 
 
445,791

Consumer loans accounted for under the fair value option (7)
 

 
 

 
 

 
 

 
 

 
 

 
$
755

 
755

Total consumer loans and leases
3,268

 
1,242

 
4,919

 
9,429

 
429,210

 
7,152

 
755

 
446,546

Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. commercial
433

 
127

 
469

 
1,029

 
284,633

 
 
 
 
 
285,662

Non-U.S. commercial
29

 

 

 
29

 
95,973

 
 
 
 
 
96,002

Commercial real estate (8)
20

 
33

 
10

 
63

 
60,772

 
 
 
 
 
60,835

Commercial lease financing
48

 
94

 
41

 
183

 
21,363

 
 
 
 
 
21,546

U.S. small business commercial
68

 
48

 
89

 
205

 
14,029

 
 
 
 
 
14,234

Total commercial
598

 
302

 
609

 
1,509

 
476,770

 
 
 
 
 
478,279

Commercial loans accounted for under the fair value option (7)
 

 
 

 
 

 
 

 
 

 
 

 
4,976

 
4,976

Total commercial loans and leases
598

 
302

 
609

 
1,509

 
476,770

 
 
 
4,976

 
483,255

Total loans and leases (9)
$
3,866

 
$
1,544

 
$
5,528

 
$
10,938

 
$
905,980

 
$
7,152

 
$
5,731

 
$
929,801

Percentage of outstandings
0.42
%
 
0.17
%
 
0.59
%
 
1.18
%
 
97.44
%
 
0.77
%
 
0.61
%
 
100.00
%
(1) 
Consumer real estate loans 30-59 days past due includes fully-insured loans of $714 million and nonperforming loans of $233 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $309 million and nonperforming loans of $175 million.
(2) 
Consumer real estate includes fully-insured loans of $2.2 billion.
(3) 
Consumer real estate includes $2.0 billion and direct/indirect consumer includes $44 million of nonperforming loans.
(4) 
Purchased credit-impaired (PCI) loan amounts are shown gross of the valuation allowance.
(5) 
Total outstandings includes auto and specialty lending loans and leases of $50.1 billion, unsecured consumer lending loans of $392 million, U.S. securities-based lending loans of $37.4 billion, non-U.S. consumer loans of $2.7 billion and other consumer loans of $756 million.
(6) 
Substantially all of other consumer is consumer overdrafts.
(7) 
Consumer loans accounted for under the fair value option includes residential mortgage loans of $407 million and home equity loans of $348 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $3.6 billion and non-U.S. commercial loans of $1.4 billion. For more information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Option.
(8) 
Total outstandings includes U.S. commercial real estate loans of $56.9 billion and non-U.S. commercial real estate loans of $3.9 billion.
(9) 
Total outstandings includes loans and leases pledged as collateral of $45.6 billion. The Corporation also pledged $158.5 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
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 (5)
330

 
104

 
44

 
478

 
95,864

 
 
 
 

 
96,342

Other consumer (6)

 

 

 

 
166

 
 
 
 

 
166

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 (7)
 
 
 
 
 
 
 
 
 
 
 
 
$
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 (8)
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 (7)
 
 
 
 
 
 
 
 
 
 
 
 
4,782

 
4,782

Total commercial loans and leases
852

 
368

 
571

 
1,791

 
474,900

 
 
 
4,782

 
481,473

Total loans and leases (9)
$
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 auto and specialty lending loans and leases of $52.4 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.
(6) 
Substantially all of other consumer is consumer overdrafts.
(7) 
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.
(8) 
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.
(9) 
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 $6.1 billion and $6.3 billion at September 30, 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.
During the three and nine months ended September 30, 2018, certain consumer real estate loans, primarily non-core, with carrying values of $3.7 billion and $4.9 billion were sold, resulting in gains of $84 million and $656 million recorded in other income in the Consolidated Statement of Income.
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, 2018 and December 31, 2017, $225 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 September 30, 2018, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $220 million of which $113 million were current on their contractual payments, while $90 million were 90 days or more past due. Of the contractually current nonperforming loans, 66 percent were discharged in Chapter 7 bankruptcy over 12 months ago, and 58 percent were discharged 24 months or more ago.
During the three and nine months ended September 30, 2018, the Corporation sold nonperforming and PCI consumer real estate loans with a carrying value of $2.1 billion and $2.7 billion, including $2.0 billion and $2.1 billion of PCI loans, compared to $700 million and $1.2 billion, including $538 million and $742 million of PCI loans, for the same periods in 2017. During the nine months ended September 30, 2018 and 2017, the Corporation transferred consumer nonperforming loans with a net carrying value of $2 million and $198 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 September 30, 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)
September 30
2018
 
December 31
2017
 
September 30
2018
 
December 31
2017
Consumer real estate
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
Residential mortgage (1)
$
1,011

 
$
1,087

 
$
308

 
$
417

Home equity
1,056

 
1,079

 

 

Non-core portfolio
 

 
 

 
 

 
 
Residential mortgage (1)
1,023

 
1,389

 
1,853

 
2,813

Home equity
1,170

 
1,565

 

 

Credit card and other consumer
 

 
 

 
 
 
 
U.S. credit card
n/a

 
n/a

 
872

 
900

Direct/Indirect consumer
46

 
46

 
35

 
40

Other consumer

 

 

 

Total consumer
4,306

 
5,166

 
3,068

 
4,170

Commercial
 

 
 

 
 

 
 

U.S. commercial
699

 
814

 
114

 
144

Non-U.S. commercial
31

 
299

 

 
3

Commercial real estate
46

 
112

 
1

 
4

Commercial lease financing
14

 
24

 
33

 
19

U.S. small business commercial
58

 
55

 
73

 
75

Total commercial
848

 
1,304

 
221

 
245

Total loans and leases
$
5,154

 
$
6,470

 
$
3,289

 
$
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 September 30, 2018 and December 31, 2017, residential mortgage includes $1.6 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 $579 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 September 30, 2018 and December 31, 2017.
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Real Estate – Credit Quality Indicators (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Core Residential
Mortgage (2)
 
Non-core Residential
Mortgage
(2)
 
Residential Mortgage
PCI
 
Core Home Equity (2)
 
Non-core Home
Equity (2)
 
Home
Equity PCI
(Dollars in millions)
September 30, 2018
Refreshed LTV (3)
 

 
 

 
 

 
 

 
 
 
 
Less than or equal to 90 percent
$
168,949

 
$
8,594

 
$
4,720

 
$
39,719

 
$
6,862

 
$
1,277

Greater than 90 percent but less than or equal to 100 percent
2,483

 
503

 
310

 
409

 
757

 
248

Greater than 100 percent
923

 
544

 
311

 
468

 
1,209

 
286

Fully-insured loans (4)
16,935

 
3,914

 


 


 


 


Total consumer real estate
$
189,290

 
$
13,555

 
$
5,341

 
$
40,596

 
$
8,828

 
$
1,811

Refreshed FICO score
 
 
 
 
 
 
 
 
 
 
 
Less than 620
$
2,115

 
$
1,673

 
$
1,185

 
$
1,118

 
$
1,650

 
$
290

Greater than or equal to 620 and less than 680
4,379

 
1,387

 
1,010

 
2,096

 
1,883

 
288

Greater than or equal to 680 and less than 740
22,973

 
2,327

 
1,574

 
7,113

 
2,288

 
511

Greater than or equal to 740
142,888

 
4,254

 
1,572

 
30,269

 
3,007

 
722

Fully-insured loans (4)
16,935

 
3,914

 


 


 


 


Total consumer real estate
$
189,290

 
$
13,555

 
$
5,341

 
$
40,596

 
$
8,828

 
$
1,811

(1) 
Excludes $755 million of loans accounted for under the fair value option.
(2) 
Excludes PCI loans.
(3) 
Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.
(4) 
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)
September 30, 2018
Refreshed FICO score
 

 
 

 
 
Less than 620
$
4,683

 
$
1,752

 


Greater than or equal to 620 and less than 680
11,974

 
3,260

 


Greater than or equal to 680 and less than 740
34,896

 
9,090

 


Greater than or equal to 740
43,276

 
36,351

 


Other internal credit metrics (1, 2)


 
40,885

 
$
203

Total credit card and other consumer
$
94,829

 
$
91,338

 
$
203

(1) 
Other internal credit metrics may include delinquency status, geography or other factors.
(2) 
Direct/indirect consumer includes $40.1 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)
September 30, 2018
Risk ratings
 

 
 

 
 

 
 

 
 

Pass rated
$
277,732

 
$
94,868

 
$
60,271

 
$
21,173

 
$
275

Reservable criticized
7,930

 
1,134

 
564

 
373

 
31

Refreshed FICO score (3)
 
 
 
 
 
 
 
 
 

Less than 620
 

 
 
 
 
 
 
 
242

Greater than or equal to 620 and less than 680
 
 
 
 
 
 
 
 
650

Greater than or equal to 680 and less than 740
 
 
 
 
 
 
 
 
1,993

Greater than or equal to 740
 
 
 
 
 
 
 
 
4,181

Other internal credit metrics (3, 4)
 
 
 
 
 
 
 
 
6,862

Total commercial
$
285,662

 
$
96,002

 
$
60,835

 
$
21,546

 
$
14,234

(1) 
Excludes $5.0 billion of loans accounted for under the fair value option.
(2) 
U.S. small business commercial includes $699 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, 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
 
Core Home Equity (2)
 
Non-core Home
Equity
(2)
 
Home
Equity PCI
(Dollars in millions)
December 31, 2017
Refreshed LTV (3)
 

 
 

 
 

 
 

 
 
 
 
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 (4)
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 (4)
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) 
Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.
(4) 
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

 
$
2,005

 


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

 
4,064

 


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

 
10,371

 


Greater than or equal to 740
43,477

 
36,445

 


Other internal credit metrics (1, 2)


 
43,457

 
$
166

Total credit card and other consumer
$
96,285

 
$
96,342

 
$
166

(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 $951 million were included in TDRs at September 30, 2018, of which $220 million were classified as nonperforming and $362 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 September 30, 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 not significant. Consumer real estate foreclosed properties totaled $265 million and $236 million at September 30, 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 September 30, 2018 was $2.7 billion. During the three and nine months ended September 30, 2018, the Corporation reclassified $186 million and $505 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 $198 million and $624 million for the same periods in 2017. 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, 2018 and December 31, 2017, and the average carrying value and interest income recognized for the three and nine months ended September 30, 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)
 
 
 
 
September 30, 2018
 
December 31, 2017
With no recorded allowance
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 
Residential mortgage
 
 
 
 
$
6,016

 
$
4,783

 
$

 
$
8,856

 
$
6,870

 
$

Home equity
 
 
 
 
3,345

 
1,828

 

 
3,622

 
1,956

 

With an allowance recorded
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
Residential mortgage
 
 
 
 
$
2,271

 
$
2,215

 
$
134

 
$
2,908

 
$
2,828

 
$
174

Home equity
 
 
 
 
910

 
849

 
165

 
972

 
900

 
174

Total (1)
 
 
 
 
 

 
 

 
 

 
 
 
 
 
 
Residential mortgage
 
 
 
 
$
8,287

 
$
6,998

 
$
134

 
$
11,764

 
$
9,698

 
$
174

Home equity
 
 
 
 
4,255

 
2,677

 
165

 
4,594

 
2,856

 
174

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
 
Three Months Ended September 30
 
Nine Months Ended September 30
 
2018
 
2017
 
2018
 
2017
With no recorded allowance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
5,056

 
$
52

 
$
7,498

 
$
77

 
$
5,685

 
$
167

 
$
7,964

 
$
237

Home equity
1,908

 
27

 
2,000

 
27

 
1,937

 
79

 
2,001

 
82

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
2,330

 
$
22

 
$
3,254

 
$
29

 
$
2,508

 
$
71

 
$
3,565

 
$
97

Home equity
864

 
7

 
873

 
6

 
879

 
19

 
850

 
18

Total (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
7,386

 
$
74

 
$
10,752

 
$
106

 
$
8,193

 
$
238

 
$
11,529

 
$
334

Home equity
2,772

 
34

 
2,873

 
33

 
2,816

 
98

 
2,851

 
100

(1) 
During the nine months ended September 30, 2018, previously impaired consumer real estate loans with a carrying value of $1.6 billion were sold.
(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, 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 and nine months ended September 30, 2018 and 2017. 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 and Nine Months Ended September 30, 2018 and 2017
 
 
 
Unpaid Principal Balance
 
Carrying
Value
 
Pre-Modification Interest Rate
 
Post-Modification Interest Rate (1)
 
Unpaid Principal Balance
 
Carrying
Value
 
Pre-Modification Interest Rate
 
Post-Modification Interest Rate (1)
(Dollars in millions)
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
Residential mortgage
$
226

 
$
195

 
4.27
%
 
4.12
%
 
$
747

 
$
635

 
4.22
%
 
4.03
%
Home equity
120

 
90

 
4.67

 
4.60

 
482

 
356

 
4.42

 
3.78

Total (2)
$
346

 
$
285

 
4.41

 
4.29

 
$
1,229

 
$
991

 
4.30

 
3.94

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
Residential mortgage
$
294

 
$
263

 
4.42
%
 
4.33
%
 
$
738

 
$
657

 
4.49
%
 
4.25
%
Home equity
212

 
172

 
4.01

 
3.96

 
630

 
491

 
4.16

 
3.52

Total (2)
$
506

 
$
435

 
4.25

 
4.17

 
$
1,368

 
$
1,148

 
4.33

 
3.90

(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, which include amounts recorded on loans modified during the period that are no longer held by the Corporation at September 30, 2018 and 2017 due to sales and other dispositions, were $9 million and $33 million for the three and nine months ended September 30, 2018 compared to $17 million and $37 million for the same periods in 2017.
The table below presents the September 30, 2018 and 2017 carrying value for consumer real estate loans that were modified in a TDR during the three and nine months ended September 30, 2018 and 2017, 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)
2018
 
2017
 
2018
 
2017
Modifications under government programs
 
 
 
 
 
 
 
Contractual interest rate reduction
$
5

 
$
10

 
$
19

 
$
56

Principal and/or interest forbearance

 
1

 

 
4

Other modifications (1)
7

 
7

 
29

 
22

Total modifications under government programs
12

 
18

 
48

 
82

Modifications under proprietary programs
 
 
 
 
 
 
 
Contractual interest rate reduction
7

 
15

 
159

 
178

Capitalization of past due amounts
10

 
12

 
67

 
47

Principal and/or interest forbearance
2

 
2

 
25

 
28

Other modifications (1)
14

 
1

 
195

 
45

Total modifications under proprietary programs
33

 
30

 
446

 
298

Trial modifications
201

 
329

 
376

 
605

Loans discharged in Chapter 7 bankruptcy (2)
39

 
58

 
121

 
163

Total modifications
$
285

 
$
435

 
$
991

 
$
1,148

(1) 
Includes other modifications such as term or payment extensions and repayment plans. During the nine months ended September 30, 2018, this included $197 million of modifications that met the definition of a TDR related to the 2017 hurricanes. These modifications had been written down to their net realizable value less costs to sell or were fully insured as of September 30, 2018.