Quarterly report pursuant to Section 13 or 15(d)

Allowance for Credit Losses

v2.4.0.6
Allowance for Credit Losses
9 Months Ended
Sep. 30, 2012
Receivables [Abstract]  
Allowance for Credit Losses
NOTE 6 – Allowance for Credit Losses

The table below summarizes the changes in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2012 and 2011.

 
Three Months Ended September 30, 2012
(Dollars in millions)
Home Loans
 
Credit Card
and Other
Consumer
 
Commercial
 
Total
Allowance for loan and lease losses, July 1
$
19,964

 
$
7,024

 
$
3,300

 
$
30,288

Loans and leases charged off
(2,480
)
 
(1,721
)
 
(492
)
 
(4,693
)
Recoveries of loans and leases previously charged off
137

 
294

 
140

 
571

Net charge-offs
(2,343
)
 
(1,427
)
 
(352
)
 
(4,122
)
Provision for loan and lease losses
617

 
960

 
233

 
1,810

Write-off of home equity PCI loans
(1,705
)
 

 

 
(1,705
)
Other (1)
1

 
(36
)
 
(3
)
 
(38
)
Allowance for loan and lease losses, September 30
16,534

 
6,521

 
3,178

 
26,233

Reserve for unfunded lending commitments, July 1

 

 
574

 
574

Provision for unfunded lending commitments

 

 
(36
)
 
(36
)
Other (2)

 

 
(20
)
 
(20
)
Reserve for unfunded lending commitments, September 30

 

 
518

 
518

Allowance for credit losses, September 30
$
16,534

 
$
6,521

 
$
3,696

 
$
26,751

 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2011
Allowance for loan and lease losses, July 1
$
20,953

 
$
10,931

 
$
5,428

 
$
37,312

Loans and leases charged off
(2,325
)
 
(2,813
)
 
(810
)
 
(5,948
)
Recoveries of loans and leases previously charged off
220

 
443

 
199

 
862

Net charge-offs
(2,105
)
 
(2,370
)
 
(611
)
 
(5,086
)
Provision for loan and lease losses
1,958

 
1,508

 
8

 
3,474

Other (1)
(74
)
 
(544
)
 

 
(618
)
Allowance for loan and lease losses, September 30
20,732

 
9,525

 
4,825

 
35,082

Reserve for unfunded lending commitments, July 1

 

 
897

 
897

Provision for unfunded lending commitments

 

 
(67
)
 
(67
)
Other (2)

 

 
(40
)
 
(40
)
Reserve for unfunded lending commitments, September 30

 

 
790

 
790

Allowance for credit losses, September 30
$
20,732

 
$
9,525

 
$
5,615

 
$
35,872

 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2012
Allowance for loan and lease losses, January 1
$
21,079

 
$
8,569

 
$
4,135

 
$
33,783

Loans and leases charged off
(6,256
)
 
(5,983
)
 
(1,645
)
 
(13,884
)
Recoveries of loans and leases previously charged off
400

 
1,131

 
549

 
2,080

Net charge-offs
(5,856
)
 
(4,852
)
 
(1,096
)
 
(11,804
)
Provision for loan and lease losses
3,061

 
2,893

 
153

 
6,107

Write-off of home equity PCI loans
(1,705
)
 

 

 
(1,705
)
Other (1)
(45
)
 
(89
)
 
(14
)
 
(148
)
Allowance for loan and lease losses, September 30
16,534

 
6,521

 
3,178

 
26,233

Reserve for unfunded lending commitments, January 1

 

 
714

 
714

Provision for unfunded lending commitments

 

 
(142
)
 
(142
)
Other (2)

 

 
(54
)
 
(54
)
Reserve for unfunded lending commitments, September 30

 

 
518

 
518

Allowance for credit losses, September 30
$
16,534

 
$
6,521

 
$
3,696

 
$
26,751

 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2011
Allowance for loan and lease losses, January 1
$
19,252

 
$
15,463

 
$
7,170

 
$
41,885

Loans and leases charged off
(7,187
)
 
(9,789
)
 
(2,475
)
 
(19,451
)
Recoveries of loans and leases previously charged off
585

 
1,409

 
678

 
2,672

Net charge-offs
(6,602
)
 
(8,380
)
 
(1,797
)
 
(16,779
)
Provision for loan and lease losses
8,155

 
3,016

 
(521
)
 
10,650

Other (1)
(73
)
 
(574
)
 
(27
)
 
(674
)
Allowance for loan and lease losses, September 30
20,732

 
9,525

 
4,825

 
35,082

Reserve for unfunded lending commitments, January 1

 

 
1,188

 
1,188

Provision for unfunded lending commitments

 

 
(174
)
 
(174
)
Other (2)

 

 
(224
)
 
(224
)
Reserve for unfunded lending commitments, September 30

 

 
790

 
790

Allowance for credit losses, September 30
$
20,732

 
$
9,525

 
$
5,615

 
$
35,872

(1) 
Represents primarily the impact of portfolio sales, deconsolidations and foreign currency translation adjustments.
(2) 
Represents primarily accretion of the Merrill Lynch purchase accounting adjustment and the impact of funding previously unfunded positions.
During the three and nine months ended September 30, 2012, for the PCI loan portfolios, the Corporation recorded a benefit of $166 million and expense of $327 million in the provision for credit losses with a corresponding change in the valuation allowance included as part of the allowance for loan and lease losses. This compared to no provision for credit losses and expense of $2.0 billion for the same periods in 2011. In addition, there were $1.7 billion of write-offs in the home equity PCI portfolio primarily due to $1.6 billion of home equity loans fully forgiven in connection with the National Mortgage Settlement with a corresponding decrease in the PCI valuation allowance. These write-offs had no impact on the provision for credit losses as these loans were fully reserved. The valuation allowance associated with the PCI loan portfolios was $7.1 billion and $8.5 billion at September 30, 2012 and December 31, 2011.

The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at September 30, 2012 and December 31, 2011.

Allowance and Carrying Value by Portfolio Segment
 
 
 
 
 
 
 
 
September 30, 2012
(Dollars in millions)
Home Loans
 
Credit Card
and Other
Consumer
 
Commercial
 
Total
Impaired loans and troubled debt restructurings (1)
 
 
 
 
 
 
 
Allowance for loan and lease losses (2)
$
1,689

 
$
1,423

 
$
391

 
$
3,503

Carrying value (3)
27,576

 
4,487

 
5,714

 
37,777

Allowance as a percentage of carrying value
6.12
%
 
31.71
%
 
6.84
%
 
9.27
%
Loans collectively evaluated for impairment
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
7,764

 
$
5,098

 
$
2,787

 
$
15,649

Carrying value (3, 4)
314,052

 
187,113

 
318,607

 
819,772

Allowance as a percentage of carrying value (4)
2.47
%
 
2.72
%
 
0.87
%
 
1.91
%
Purchased credit-impaired loans
 
 
 
 
 
 
 
Valuation allowance
$
7,081

 
n/a

 
n/a

 
$
7,081

Carrying value gross of valuation allowance
27,848

 
n/a

 
n/a

 
27,848

Valuation allowance as a percentage of carrying value
25.43
%
 
n/a

 
n/a

 
25.43
%
Total
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
16,534

 
$
6,521

 
$
3,178

 
$
26,233

Carrying value (3, 4)
369,476

 
191,600

 
324,321

 
885,397

Allowance as a percentage of carrying value (4)
4.47
%
 
3.40
%
 
0.98
%
 
2.96
%
 
 
 
 
 
 
 
 
 
December 31, 2011
Impaired loans and troubled debt restructurings (1)
 
 
 
 
 
 
 
Allowance for loan and lease losses (2)
$
1,946

 
$
2,410

 
$
545

 
$
4,901

Carrying value (3)
21,462

 
7,100

 
8,113

 
36,675

Allowance as a percentage of carrying value
9.07
%
 
33.94
%
 
6.71
%
 
13.36
%
Loans collectively evaluated for impairment
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
10,674

 
$
6,159

 
$
3,590

 
$
20,423

Carrying value (3, 4)
344,821

 
202,010

 
302,089

 
848,920

Allowance as a percentage of carrying value (4)
3.10
%
 
3.05
%
 
1.19
%
 
2.41
%
Purchased credit-impaired loans
 
 
 
 
 
 
 
Valuation allowance
$
8,459

 
n/a

 
n/a

 
$
8,459

Carrying value gross of valuation allowance
31,801

 
n/a

 
n/a

 
31,801

Valuation allowance as a percentage of carrying value
26.60
%
 
n/a

 
n/a

 
26.60
%
Total
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
21,079

 
$
8,569

 
$
4,135

 
$
33,783

Carrying value (3, 4)
398,084

 
209,110

 
310,202

 
917,396

Allowance as a percentage of carrying value (4)
5.30
%
 
4.10
%
 
1.33
%
 
3.68
%
(1) 
Impaired loans include nonperforming commercial loans and all TDRs, including both commercial and consumer TDRs. Impaired loans exclude nonperforming consumer loans unless they are TDRs, and all consumer and commercial loans accounted for under the fair value option.
(2) 
Commercial impaired allowance for loan and lease losses includes $109 million and $172 million at September 30, 2012 and December 31, 2011 related to U.S. small business commercial renegotiated TDR loans.
(3) 
Amounts are presented gross of the allowance for loan and lease losses.
(4) 
Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $7.6 billion and $8.8 billion at September 30, 2012 and December 31, 2011.
n/a = not applicable