Quarterly report pursuant to Section 13 or 15(d)

Outstanding Loans and Leases

v3.19.3
Outstanding Loans and Leases
9 Months Ended
Sep. 30, 2019
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, 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
 
 
 
 
 
 
(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
 
 
 
 
 
 
 
 
(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.