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, 2018

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.


⁽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, 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 September 30				Nine Months Ended September 30
(Dollars in millions)	2018		2017		2018		2017
Modifications under government programs	$	8	$	16	$	32	$	62
Modifications under proprietary programs	43		32		130		99
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	12		16		51		93
Trial modifications ⁽²⁾	18		54		85		312
Total modifications	$	81	$	118	$	298	$	566


⁽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.




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)					September 30, 2018						December 31, 2017
With no recorded allowance
Direct/Indirect consumer					$	63	$	29	$	—	$	58	$	28	$	—
With an allowance recorded
U.S. credit card					$	501	$	512	$	143	$	454	$	461	$	125
Direct/Indirect consumer					—		—		—		1		1		—
Total
U.S. credit card					$	501	$	512	$	143	$	454	$	461	$	125
Direct/Indirect consumer					63		29		—		59		29		—

	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
Direct/Indirect consumer	$	30	$	1	$	20	$	—	$	29	$	2	$	19	$	—
With an allowance recorded
U.S. credit card	$	498	$	7	$	457	$	6	$	481	$	19	$	466	$	18
Non-U.S. credit card ⁽³⁾	—		—		—		—		—		—		62		1
Direct/Indirect consumer	1		—		2		—		1		—		2		—
Total
U.S. credit card	$	498	$	7	$	457	$	6	$	481	$	19	$	466	$	18
Non-U.S. credit card ⁽³⁾	—		—		—		—		—		—		62		1
Direct/Indirect consumer	31		1		22		—		30		2		21		—


⁽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.


⁽³⁾	In the second quarter of 2017, the Corporation sold its non-U.S. consumer credit card business.

The table below provides information on the Corporation’s primary modification programs for the Credit Card and Other Consumer TDR portfolio at September 30, 2018 and December 31, 2017.




Credit Card and Other Consumer – TDRs by Program Type

	U.S. Credit Card						Direct/Indirect Consumer						Total TDRs by Program Type
(Dollars in millions)	September 30 2018			December 31 2017			September 30 2018			December 31 2017			September 30 2018			December 31 2017
Internal programs	$	242		$	203		$	—		$	1		$	242		$	204
External programs	269			257			—			—			269			257
Other	1			1			29			28			30			29
Total	$	512		$	461		$	29		$	29		$	541		$	490
Percent of balances current or less than 30 days past due	86		%	87		%	90		%	88		%	86		%	87		%

The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the September 30, 2018 and 2017 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, 2018 and 2017.




Credit Card and Other Consumer – TDRs Entered into During the Three and Nine Months Ended September 30, 2018 and 2017

	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate
(Dollars in millions)	Three Months Ended September 30, 2018								Nine Months Ended September 30, 2018
U.S. credit card	$	84	$	91	19.45	%	5.19	%	$	212	$	224	19.30	%	5.24	%
Direct/Indirect consumer	18		10		4.61		4.50		33		19		4.77		4.58
Total ⁽²⁾	$	102	$	101	17.94		5.12		$	245	$	243	18.16		5.19

	Three Months Ended September 30, 2017								Nine Months Ended September 30, 2017
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


⁽¹⁾	Includes accrued interest and fees.


⁽²⁾	Net charge-offs were $16 million and $38 million for the three and nine months ended September 30, 2018 compared to $14 million and $33 million for the same periods in 2017.

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 new U.S. credit card TDRs and 16 percent of 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, 2018 that had been modified in a TDR during the preceding 12 months were $10 million and $26 million for U.S. credit card and $1 million and $6 million for direct/indirect consumer. During the three and nine months ended September 30, 2017, loans that entered into payment default 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.

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 2017 Annual Report on Form 10-K.

At September 30, 2018 and December 31, 2017, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were $256 million and $205 million.

Commercial foreclosed properties totaled $30 million and $52 million at September 30, 2018 and December 31, 2017.

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, 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. Certain impaired commercial loans do not have a related allowance because the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.




Impaired Loans – Commercial

					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
U.S. commercial					$	697	$	684	$	—	$	576	$	571	$	—
Non-U.S. commercial					10		10		—		14		11		—
Commercial real estate					42		32		—		83		80		—
Commercial lease financing					2		2		—		—		—		—
With an allowance recorded
U.S. commercial					$	1,334	$	1,073	$	115	$	1,393	$	1,109	$	98
Non-U.S. commercial					233		225		19		528		507		58
Commercial real estate					104		20		2		133		41		4
Commercial lease financing					72		72		—		20		18		3
U.S. small business commercial ⁽¹⁾					90		76		29		84		70		27
Total
U.S. commercial					$	2,031	$	1,757	$	115	$	1,969	$	1,680	$	98
Non-U.S. commercial					243		235		19		542		518		58
Commercial real estate					146		52		2		216		121		4
Commercial lease financing					74		74		—		20		18		3
U.S. small business commercial ⁽¹⁾					90		76		29		84		70		27

	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
U.S. commercial	$	640	$	4	$	726	$	3	$	659	$	12	$	822	$	9
Non-U.S. commercial	9		—		14		—		35		2		55		—
Commercial real estate	68		—		77		1		72		1		61		1
Commercial lease financing	3		—		—		—		4		—		—		—
With an allowance recorded
U.S. commercial	$	1,159	$	11	$	1,166	$	9	$	1,168	$	32	$	1,305	$	25
Non-U.S. commercial	287		3		463		3		381		9		466		9
Commercial real estate	10		—		72		—		19		—		85		2
Commercial lease financing	58		1		10		—		32		1		6		—
U.S. small business commercial⁽¹⁾	74		—		72		—		74		—		74		—
Total
U.S. commercial	$	1,799	$	15	$	1,892	$	12	$	1,827	$	44	$	2,127	$	34
Non-U.S. commercial	296		3		477		3		416		11		521		9
Commercial real estate	78		—		149		1		91		1		146		3
Commercial lease financing	61		1		10		—		36		1		6		—
U.S. small business commercial⁽¹⁾	74		—		72		—		74		—		74		—


⁽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, 2018 and 2017 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during the three and nine months ended September 30, 2018 and 2017. 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, 2018 and 2017

	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
(Dollars in millions)	Three Months Ended September 30, 2018				Nine Months Ended September 30, 2018
U.S. commercial	$	595	$	544	$	1,111	$	1,006
Non-U.S. commercial	11		9		4		4
Commercial real estate	—		—		71		71
Commercial lease financing	29		29		92		91
U.S. small business commercial ⁽¹⁾	3		2		8		6
Total ⁽²⁾	$	638	$	584	$	1,286	$	1,178

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


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


⁽²⁾	Net charge-offs were $38 million and $64 million for the three and nine months ended September 30, 2018 compared to $27 million and $89 million for the same periods in 2017.

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 $174 million and $57 million for U.S. commercial and $4 million and $32 million for commercial real estate at September 30, 2018 and 2017.

Purchased Credit-impaired Loans

The table below shows activity for the accretable yield on PCI loans. The reclassifications from nonaccretable difference during the three and nine months ended September 30, 2018 were primarily due to an increase in the expected principal and interest cash flows due to lower default estimates and the rising interest rate environment.




Rollforward of Accretable Yield

(Dollars in millions)	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Accretable yield, beginning of period	$	2,558		$	2,789
Accretion	(117		)	(371		)
Disposals/transfers	(612		)	(824		)
Reclassifications from nonaccretable difference	56			291
Accretable yield, September 30, 2018	$	1,885		$	1,885

During the three and nine months ended September 30, 2018, the Corporation sold PCI loans with a carrying value of $2.0 billion and $2.1 billion. 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. For more information on PCI 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, and for the carrying value and valuation allowance for PCI loans, see Note 6 – Allowance for Credit Losses herein.

Loans Held-for-sale

The Corporation had LHFS of $5.6 billion and $11.4 billion at September 30, 2018 and December 31, 2017. For the nine months ended September 30, 2018 and 2017, cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $23.4 billion and $28.0 billion, and cash used for originations and purchases of LHFS totaled $16.8 billion and $31.4 billion.