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, 2019

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, 2019 and December 31, 2018.




	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⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
(Dollars in millions)	September 30, 2019
Consumer real estate
Core portfolio
Residential mortgage	$	1,156		$	232		$	665		$	2,053		$	214,170					$	216,223
Home equity	145			63			202			410			35,706						36,116
Non-core portfolio
Residential mortgage	491			211			1,390			2,092			9,157						11,249
Home equity	41			19			88			148			5,310						5,458
Credit card and other consumer
U.S. credit card	564			413			960			1,937			93,009						94,946
Direct/Indirect consumer ⁽⁴⁾	271			80			31			382			90,454						90,836
Other consumer	—			—			—			—			208						208
Total consumer	2,668			1,018			3,336			7,022			448,014						455,036
Consumer loans accounted for under the fair value option ⁽⁵⁾																$	640		640
Total consumer loans and leases	2,668			1,018			3,336			7,022			448,014			640			455,676
Commercial
U.S. commercial	589			222			624			1,435			309,547						310,982
Non-U.S. commercial	60			9			10			79			101,005						101,084
Commercial real estate ⁽⁶⁾	135			12			23			170			62,628						62,798
Commercial lease financing	31			14			47			92			20,015						20,107
U.S. small business commercial	84			52			102			238			14,991						15,229
Total commercial	899			309			806			2,014			508,186						510,200
Commercial loans accounted for under the fair value option ⁽⁵⁾																7,034			7,034
Total commercial loans and leases	899			309			806			2,014			508,186			7,034			517,234
Total loans and leases ⁽⁷⁾	$	3,567		$	1,327		$	4,142		$	9,036		$	956,200		$	7,674		$	972,910
Percentage of outstandings	0.37		%	0.14		%	0.42		%	0.93		%	98.28		%	0.79		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $510 million and nonperforming loans of $149 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $206 million and nonperforming loans of $116 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $1.2 billion.


⁽³⁾	Consumer real estate includes $852 million and direct/indirect consumer includes $51 million of nonperforming loans.


⁽⁴⁾	Total outstandings includes auto and specialty lending loans and leases of $50.3 billion, unsecured consumer lending loans of $328 million, U.S. securities-based lending loans of $36.5 billion, non-U.S. consumer loans of $3.0 billion and other consumer loans of $694 million.

⁽⁵⁾

Consumer loans accounted for under the fair value option includes residential mortgage loans of $275 million and home equity loans of $365 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $4.7 billion and non-U.S. commercial loans of $2.4 billion. For additional information, see Note 15 – Fair Value Measurements and Note 16 – Fair Value Option.


⁽⁶⁾	Total outstandings includes U.S. commercial real estate loans of $58.1 billion and non-U.S. commercial real estate loans of $4.7 billion.


⁽⁷⁾	Total outstandings includes loans and leases pledged as collateral of $29.6 billion. The Corporation also pledged $165.1 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⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
(Dollars in millions)	December 31, 2018
Consumer real estate
Core portfolio
Residential mortgage	$	1,188		$	249		$	793		$	2,230		$	191,465					$	193,695
Home equity	200			85			387			672			39,338						40,010
Non-core portfolio
Residential mortgage	757			309			2,201			3,267			11,595						14,862
Home equity	139			69			339			547			7,729						8,276
Credit card and other consumer
U.S. credit card	577			418			994			1,989			96,349						98,338
Direct/Indirect consumer ⁽⁴⁾	317			90			40			447			90,719						91,166
Other consumer ⁽⁵⁾	—			—			—			—			202						202
Total consumer	3,178			1,220			4,754			9,152			437,397						446,549
Consumer loans accounted for under the fair value option ⁽⁶⁾																$	682		682
Total consumer loans and leases	3,178			1,220			4,754			9,152			437,397			682			447,231
Commercial
U.S. commercial	594			232			573			1,399			297,878						299,277
Non-U.S. commercial	1			49			—			50			98,726						98,776
Commercial real estate ⁽⁷⁾	29			16			14			59			60,786						60,845
Commercial lease financing	124			114			37			275			22,259						22,534
U.S. small business commercial	83			54			96			233			14,332						14,565
Total commercial	831			465			720			2,016			493,981						495,997
Commercial loans accounted for under the fair value option ⁽⁶⁾																3,667			3,667
Total commercial loans and leases	831			465			720			2,016			493,981			3,667			499,664
Total loans and leases ⁽⁸⁾	$	4,009		$	1,685		$	5,474		$	11,168		$	931,378		$	4,349		$	946,895
Percentage of outstandings	0.42		%	0.18		%	0.58		%	1.18		%	98.36		%	0.46		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $637 million and nonperforming loans of $217 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $269 million and nonperforming loans of $146 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $1.9 billion.


⁽³⁾	Consumer real estate includes $1.8 billion and direct/indirect consumer includes $53 million of nonperforming loans.


⁽⁴⁾	Total outstandings includes auto and specialty lending loans and leases of $50.1 billion, unsecured consumer lending loans of $383 million, U.S. securities-based lending loans of $37.0 billion, non-U.S. consumer loans of $2.9 billion and other consumer loans of $746 million.


⁽⁵⁾	Substantially all of other consumer is consumer overdrafts.

⁽⁶⁾

Consumer loans accounted for under the fair value option includes residential mortgage loans of $336 million and home equity loans of $346 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $2.5 billion and non-U.S. commercial loans of $1.1 billion. For additional information, see Note 15 – Fair Value Measurements and Note 16 – Fair Value Option.


⁽⁷⁾	Total outstandings includes U.S. commercial real estate loans of $56.6 billion and non-U.S. commercial real estate loans of $4.2 billion.


⁽⁸⁾	Total outstandings includes loans and leases pledged as collateral of $36.7 billion. The Corporation also pledged $166.1 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 runoff portfolios.

The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $7.0 billion and $6.1 billion at September 30, 2019 and December 31, 2018, 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, 2019, the Corporation sold $2.3 billion and $4.2 billion of consumer real

estate compared to $3.9 billion and $6.5 billion for the same periods in 2018.

Nonperforming Loans and Leases

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 loans have not been otherwise modified. The Corporation continues to have a lien on the underlying collateral. At September 30, 2019, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $112 million of which $56 million were current on their contractual payments, while $46 million were 90 days or more past due. Of the contractually current nonperforming loans, 61 percent were discharged in Chapter 7 bankruptcy over 12 months ago, and 50 percent were discharged 24 months or more ago.

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, 2019 and December 31, 2018. 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 2018 Annual Report on Form 10-K.




Credit Quality

	Nonperforming Loans and Leases				Accruing Past Due 90 Days or More
(Dollars in millions)	September 30 2019		December 31 2018		September 30 2019		December 31 2018
Consumer real estate
Core portfolio
Residential mortgage ⁽¹⁾	$	930	$	1,010	$	186	$	274
Home equity	380		955		—		—
Non-core portfolio
Residential mortgage⁽¹⁾	621		883		1,017		1,610
Home equity	205		938		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		960		994
Direct/Indirect consumer	53		56		29		38
Total consumer	2,189		3,842		2,192		2,916
Commercial
U.S. commercial	966		794		338		197
Non-U.S. commercial	51		80		10		—
Commercial real estate	185		156		3		4
Commercial lease financing	35		18		22		29
U.S. small business commercial	50		54		94		84
Total commercial	1,287		1,102		467		314
Total loans and leases	$	3,476	$	4,944	$	2,659	$	3,230

⁽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, 2019 and December 31, 2018, residential mortgage includes $858 million and $1.4 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 $345 million and $498 million 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 Note 1 – Summary of Significant Accounting Principles and Note 5 – Outstanding Loans and Leases to the

Consolidated Financial Statements of the Corporation’s 2018 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, 2019 and December 31, 2018.




Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

	Core Residential Mortgage		Non-core Residential Mortgage		Core Home Equity		Non-core Home Equity		Core Residential Mortgage		Non-core Residential Mortgage		Core Home Equity		Non-core Home Equity
(Dollars in millions)	September 30, 2019								December 31, 2018
Refreshed LTV
Less than or equal to 90 percent	$	195,967	$	7,952	$	35,548	$	4,415	$	173,911	$	10,272	$	39,246	$	6,478
Greater than 90 percent but less than or equal to 100 percent	3,142		346		267		413		2,349		533		354		715
Greater than 100 percent	1,041		333		301		630		817		545		410		1,083
Fully-insured loans ⁽²⁾	16,073		2,618						16,618		3,512
Total consumer real estate	$	216,223	$	11,249	$	36,116	$	5,458	$	193,695	$	14,862	$	40,010	$	8,276
Refreshed FICO score
Less than 620	$	2,040	$	1,306	$	782	$	627	$	2,125	$	1,974	$	1,064	$	1,503
Greater than or equal to 620 and less than 680	4,716		1,160		1,581		885		4,538		1,719		2,008		1,720
Greater than or equal to 680 and less than 740	25,555		2,198		6,157		1,550		23,841		3,042		7,008		2,188
Greater than or equal to 740	167,839		3,967		27,596		2,396		146,573		4,615		29,930		2,865
Fully-insured loans ⁽²⁾	16,073		2,618						16,618		3,512
Total consumer real estate	$	216,223	$	11,249	$	36,116	$	5,458	$	193,695	$	14,862	$	40,010	$	8,276


⁽¹⁾	Excludes $640 million and $682 million of loans accounted for under the fair value option at September 30, 2019 and December 31, 2018.


⁽²⁾	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		U.S. Credit Card		Direct/Indirect Consumer		Other Consumer
(Dollars in millions)	September 30, 2019						December 31, 2018
Refreshed FICO score
Less than 620	$	4,970	$	1,470			$	5,016	$	1,719
Greater than or equal to 620 and less than 680	11,908		2,757				12,415		3,124
Greater than or equal to 680 and less than 740	34,652		8,490				35,781		8,921
Greater than or equal to 740	43,416		37,953				45,126		36,709
Other internal credit metrics ^{(1, 2)}			40,166		$	208			40,693		$	202
Total credit card and other consumer	$	94,946	$	90,836	$	208	$	98,338	$	91,166	$	202


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


⁽²⁾	Direct/indirect consumer includes $39.5 billion and $39.9 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk at September 30, 2019 and December 31, 2018.




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, 2019
Risk ratings
Pass rated	$	302,826	$	100,152	$	61,901	$	19,757	$	235
Reservable criticized	8,156		932		897		350		21
Refreshed FICO score
Less than 620									293
Greater than or equal to 620 and less than 680									738
Greater than or equal to 680 and less than 740									2,229
Greater than or equal to 740									4,767
Other internal credit metrics ⁽³⁾									6,946
Total commercial	$	310,982	$	101,084	$	62,798	$	20,107	$	15,229

	December 31, 2018
Risk ratings
Pass rated	$	291,918	$	97,916	$	59,910	$	22,168	$	389
Reservable criticized	7,359		860		935		366		29
Refreshed FICO score
Less than 620									264
Greater than or equal to 620 and less than 680									684
Greater than or equal to 680 and less than 740									2,072
Greater than or equal to 740									4,254
Other internal credit metrics ⁽³⁾									6,873
Total commercial	$	299,277	$	98,776	$	60,845	$	22,534	$	14,565


⁽¹⁾	Excludes $7.0 billion and $3.7 billion of loans accounted for under the fair value option at September 30, 2019 and December 31, 2018.

⁽²⁾

At September 30, 2019 and December 31, 2018, U.S. small business commercial includes $716 million and $731 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. Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.

⁽³⁾

Other internal credit metrics may include delinquency status, application scores, geography or other factors. At both September 30, 2019 and December 31, 2018, 99 percent of the balances where internal credit metrics are used were current or less than 30 days past due.

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, see Note 1 – Summary of Significant Accounting Principles and Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 2018 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. 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 5 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

Consumer real estate loans of $671 million that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower were included in TDRs at September 30, 2019, of which $112 million were classified as nonperforming and $290 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, 2019 and December 31, 2018, 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 $188 million and $244 million at September 30, 2019 and December 31, 2018. The carrying value of consumer real estate loans, including fully-insured loans, for which formal foreclosure proceedings were in process at September 30, 2019 was $1.7 billion. During the three and nine months ended September 30, 2019, the Corporation reclassified $128 million and $427 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 following table provides the unpaid principal balance, carrying value and related allowance at September 30, 2019 and December 31, 2018 and the average carrying value and interest

income recognized for the three and nine months ended September 30, 2019 and 2018 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, 2019						December 31, 2018
With no recorded allowance
Residential mortgage					$	4,436	$	3,534	$	—	$	5,396	$	4,268	$	—
Home equity					1,262		756		—		2,948		1,599		—
With an allowance recorded
Residential mortgage					$	1,516	$	1,488	$	74	$	1,977	$	1,929	$	114
Home equity					560		539		71		812		760		144
Total
Residential mortgage					$	5,952	$	5,022	$	74	$	7,373	$	6,197	$	114
Home equity					1,822		1,295		71		3,760		2,359		144

	Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾
	Three Months Ended September 30								Nine Months Ended September 30
	2019				2018				2019				2018
With no recorded allowance
Residential mortgage	$	3,746	$	37	$	5,056	$	52	$	3,955	$	122	$	5,685	$	167
Home equity	1,041		16		1,908		27		1,368		64		1,937		79
With an allowance recorded
Residential mortgage	$	1,551	$	13	$	2,330	$	22	$	1,696	$	47	$	2,508	$	71
Home equity	591		5		864		7		670		17		879		19
Total
Residential mortgage	$	5,297	$	50	$	7,386	$	74	$	5,651	$	169	$	8,193	$	238
Home equity	1,632		21		2,772		34		2,038		81		2,816		98


⁽¹⁾	Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal is considered collectible.

The table below presents the September 30, 2019 and 2018 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of consumer real estate loans that were modified in TDRs during the three and nine months ended September 30, 2019 and 2018. 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, 2019 and 2018

	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, 2019								Nine Months Ended September 30, 2019
Residential mortgage	$	148	$	125	4.29	%	4.25	%	$	368	$	301	4.24	%	4.22	%
Home equity	34		27		5.28		5.27		129		94		5.19		4.60
Total	$	182	$	152	4.48		4.44		$	497	$	395	4.49		4.32

	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	$	346	$	285	4.41		4.29		$	1,229	$	991	4.30		3.94


⁽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.

The table below presents the September 30, 2019 and 2018 carrying value for consumer real estate loans that were modified in a TDR during the three and nine months ended September 30, 2019 and 2018, 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)	2019		2018		2019		2018
Modifications under government programs ⁽¹⁾	$	8	$	12	$	32	$	48
Modifications under proprietary programs ⁽¹⁾	18		33		125		446
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	16		39		54		121
Trial modifications	110		201		184		376
Total modifications	$	152	$	285	$	395	$	991


⁽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, 2019 and 2018 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)	2019		2018		2019		2018
Modifications under government programs	$	7	$	8	$	20	$	32
Modifications under proprietary programs	19		43		68		130
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	8		12		26		51
Trial modifications ⁽²⁾	13		18		40		85
Total modifications	$	47	$	81	$	154	$	298


⁽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 and local 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.

The following table provides the unpaid principal balance, carrying value and related allowance at September 30, 2019 and December 31, 2018 and the average carrying value for the three and nine months ended September 30, 2019 and 2018 for 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
	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance
(Dollars in millions)	September 30, 2019						December 31, 2018
With no recorded allowance
Direct/Indirect consumer	$	74	$	33	$	—	$	72	$	33	$	—
With an allowance recorded
U.S. credit card	$	610	$	624	$	179	$	522	$	533	$	154
Total
U.S. credit card	$	610	$	624	$	179	$	522	$	533	$	154
Direct/Indirect consumer	74		33		—		72		33		—

					Average Carrying Value ⁽²⁾
					Three Months Ended September 30				Nine Months Ended September 30
					2019		2018		2019		2018
With no recorded allowance
Direct/Indirect consumer					$	33	$	30	$	33	$	29
With an allowance recorded
U.S. credit card					$	609	$	498	$	579	$	481


⁽¹⁾	Includes accrued interest and fees.


⁽²⁾	The related interest income recognized, which 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 was considered collectible, was not significant for the three and nine months ended September 30, 2019 and 2018.

The table below provides information on the Corporation’s primary modification programs for the Credit Card and Other Consumer TDR portfolio at September 30, 2019 and December 31, 2018.




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 2019			December 31 2018			September 30 2019			December 31 2018			September 30 2019			December 31 2018
Internal programs	$	322		$	259		$	—		$	—		$	322		$	259
External programs	301			273			—			—			301			273
Other	1			1			33			33			34			34
Total	$	624		$	533		$	33		$	33		$	657		$	566
Percent of balances current or less than 30 days past due	85		%	85		%	80		%	81		%	85		%	85		%

The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the September 30, 2019 and 2018 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, 2019 and 2018.




Credit Card and Other Consumer – TDRs Entered into During the Three and Nine Months Ended September 30, 2019 and 2018

	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, 2019								Nine Months Ended September 30, 2019
U.S. credit card	$	100	$	107	19.62	%	5.36	%	$	267	$	281	19.50	%	5.35	%
Direct/Indirect consumer	19		11		5.32		5.32		35		19		5.23		5.22
Total	$	119	$	118	18.36		5.36		$	302	$	300	18.62		5.34

	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	$	102	$	101	17.94		5.12		$	245	$	243	18.16		5.19


⁽¹⁾	Includes accrued interest and fees.

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 14 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.

Commercial Loans

Impaired commercial loans include nonperforming loans and leases and TDRs (both performing and nonperforming). For more information on impaired commercial loans, see Note 5 – Outstanding Loans and Leases to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.

At September 30, 2019 and December 31, 2018, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were $425 million and $297 million. The balance of commercial TDRs in payment default was not significant at September 30, 2019 and December 31, 2018.

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, 2019 and December 31, 2018, and the average carrying value for the three and nine months ended September 30, 2019 and 2018. 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
	Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
(Dollars in millions)	September 30, 2019						December 31, 2018
With no recorded allowance
U.S. commercial	$	620	$	606	$	—	$	638	$	616	$	—
Non-U.S. commercial	24		24		—		93		93		—
Commercial real estate	22		22		—		—		—		—
Commercial lease financing	13		13		—		—		—		—
With an allowance recorded
U.S. commercial	$	1,659	$	1,495	$	144	$	1,437	$	1,270	$	121
Non-U.S. commercial	254		253		10		155		149		30
Commercial real estate	319		242		59		247		162		16
Commercial lease financing	58		57		3		71		71		—
U.S. small business commercial ⁽¹⁾	84		75		28		83		72		29
Total
U.S. commercial	$	2,279	$	2,101	$	144	$	2,075	$	1,886	$	121
Non-U.S. commercial	278		277		10		248		242		30
Commercial real estate	341		264		59		247		162		16
Commercial lease financing	71		70		3		71		71		—
U.S. small business commercial ⁽¹⁾	84		75		28		83		72		29

					Average Carrying Value ⁽²⁾
					Three Months Ended September 30				Nine Months Ended September 30
					2019		2018		2019		2018
With no recorded allowance
U.S. commercial					$	612	$	640	$	659	$	659
Non-U.S. commercial					57		9		81		35
Commercial real estate					65		68		115		72
Commercial lease financing					7		3		2		4
With an allowance recorded
U.S. commercial					$	1,296	$	1,159	$	1,242	$	1,168
Non-U.S. commercial					251		287		230		381
Commercial real estate					158		10		118		19
Commercial lease financing					72		58		80		32
U.S. small business commercial⁽¹⁾					74		74		74		74
Total
U.S. commercial					$	1,908	$	1,799	$	1,901	$	1,827
Non-U.S. commercial					308		296		311		416
Commercial real estate					223		78		233		91
Commercial lease financing					79		61		82		36
U.S. small business commercial⁽¹⁾					74		74		74		74


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


⁽²⁾	The related interest income recognized, which 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 was considered collectible, was not significant for the three and nine months ended September 30, 2019 and 2018.

Loans Held-for-sale

The Corporation had LHFS of $9.8 billion and $10.4 billion at September 30, 2019 and December 31, 2018. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $19.6 billion and $23.4 billion for the nine months ended September 30, 2019 and 2018. Cash used for originations and purchases of LHFS totaled $18.7 billion and $16.8 billion for the nine months ended September 30, 2019 and 2018.