NOTE 7 – Allowance for Credit Losses

     The tables below summarize the changes in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2011 and 2010.

		Three Months Ended June 30, 2011
						Credit Card
						and Other								Total
(Dollars in millions)		Home Loans				Consumer				Commercial				Allowance
Allowance for loan and lease losses, April 1		$	20,097			$	13,271			$	6,475			$	39,843
Loans and leases charged off			(2,603	)			(3,245	)			(759	)			(6,607	)
Recoveries of loans and leases previously charged off			210				476				256				942
Net charge-offs			(2,393	)			(2,769	)			(503	)			(5,665	)
Provision for loan and lease losses			3,249				529				(518	)			3,260
Other			-				(100	)			(26	)			(126	)
Allowance for loan and lease losses, June 30			20,953				10,931				5,428				37,312
Reserve for unfunded lending commitments, April 1			-				-				961				961
Provision for unfunded lending commitments			-				-				(5	)			(5	)
Other (1)			-				-				(59	)			(59	)
Reserve for unfunded lending commitments, June 30			-				-				897				897
Allowance for credit losses, June 30		$	20,953			$	10,931			$	6,325			$	38,209
		Six Months Ended June 30, 2011
Allowance for loan and lease losses, January 1		$	19,252			$	15,463			$	7,170			$	41,885
Loans and leases charged off			(4,892	)			(6,976	)			(1,665	)			(13,533	)
Recoveries of loans and leases previously charged off			395				966				479				1,840
Net charge-offs			(4,497	)			(6,010	)			(1,186	)			(11,693	)
Provision for loan and lease losses			6,197				1,508				(529	)			7,176
Other			1				(30	)			(27	)			(56	)
Allowance for loan and lease losses, June 30			20,953				10,931				5,428				37,312
Reserve for unfunded lending commitments, January 1			-				-				1,188				1,188
Provision for unfunded lending commitments			-				-				(107	)			(107	)
Other (1)			-				-				(184	)			(184	)
Reserve for unfunded lending commitments, June 30			-				-				897				897
Allowance for credit losses, June 30		$	20,953			$	10,931			$	6,325			$	38,209
		Three Months Ended June 30, 2010
Allowance for loan and lease losses, April 1		$	17,971			$	19,683			$	9,181			$	46,835
Loans and leases charged off			(2,819	)			(5,916	)			(1,571	)			(10,306	)
Recoveries of loans and leases previously charged off			88				505				156				749
Net charge-offs			(2,731	)			(5,411	)			(1,415	)			(9,557	)
Provision for loan and lease losses			3,659				3,489				957				8,105
Other			(61	)			(69	)			2				(128	)
Allowance for loan and lease losses, June 30			18,838				17,692				8,725				45,255
Reserve for unfunded lending commitments, April 1			-				-				1,521				1,521
Other (1)			-				-				(108	)			(108	)
Reserve for unfunded lending commitments, June 30			-				-				1,413				1,413
Allowance for credit losses, June 30		$	18,838			$	17,692			$	10,138			$	46,668
		Six Months Ended June 30, 2010
Allowance for loan and lease losses, January 1		$	16,329			$	22,243			$	9,416			$	47,988
Loans and leases charged off			(6,389	)			(12,179	)			(3,239	)			(21,807	)
Recoveries of loans and leases previously charged off			171				1,007				275				1,453
Net charge-offs			(6,218	)			(11,172	)			(2,964	)			(20,354	)
Provision for loan and lease losses			8,632				6,799				2,273				17,704
Other			95				(178	)			-				(83	)
Allowance for loan and lease losses, June 30			18,838				17,692				8,725				45,255
Reserve for unfunded lending commitments, January 1			-				-				1,487				1,487
Provision for unfunded lending commitments			-				-				206				206
Other (1)			-				-				(280	)			(280	)
Reserve for unfunded lending commitments, June 30			-				-				1,413				1,413
Allowance for credit losses, June 30		$	18,838			$	17,692			$	10,138			$	46,668

(1)		Represents primarily accretion of the Merrill Lynch purchase accounting adjustment and the impact of funding previously unfunded positions.

     During the three and six months ended June 30, 2011, the Corporation recorded $412 million and $2.0 billion in provision for credit losses with a corresponding increase in the valuation reserve presented with the allowance for loan and lease losses specifically for the PCI loan portfolio. This compared to $256 million and $1.1 billion for the same periods in 2010. The amount of the allowance for loan and lease losses associated with the PCI loan portfolio was $8.4 billion, $8.0 billion and $6.4 billion at June 30, 2011, March 31, 2011 and December 31, 2010.

     The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at June 30, 2011 and December 31, 2010.

		June 30, 2011
						Credit Card
						and Other
(Dollars in millions)		Home Loans				Consumer				Commercial				Total
Impaired loans and troubled debt restructurings (1)
Allowance for loan and lease losses (2)		$	2,094			$	3,372			$	778			$	6,244
Carrying value			17,983				9,279				8,994				36,256
Allowance as a percentage of carrying value			11.64	%			36.34	%			8.66	%			17.22	%
Collectively evaluated for impairment
Allowance for loan and lease losses		$	10,466			$	7,559			$	4,649			$	22,674
Carrying value (3)			356,117				214,437				289,779				860,333
Allowance as a percentage of carrying value (3)			2.94	%			3.53	%			1.60	%			2.64	%
Purchased credit-impaired loans
Allowance for loan and lease losses		$	8,393				n/a			$	1			$	8,394
Carrying value excluding valuation allowance			34,890				n/a				181				35,071
Allowance as a percentage of carrying value			24.06	%			n/a				0.39	%			23.94	%
Total
Allowance for loan and lease losses		$	20,953			$	10,931			$	5,428			$	37,312
Carrying value (3)			408,990				223,716				298,954				931,660
Allowance as a percentage of carrying value (3)			5.12	%			4.89	%			1.82	%			4.00	%
		December 31, 2010
Impaired loans and troubled debt restructurings (1)
Allowance for loan and lease losses (2)		$	1,871			$	4,786			$	1,080			$	7,737
Carrying value			13,904				11,421				10,645				35,970
Allowance as a percentage of carrying value			13.46	%			41.91	%			10.15	%			21.51	%
Collectively evaluated for impairment
Allowance for loan and lease losses		$	10,964			$	10,677			$	6,078			$	27,719
Carrying value (3)			358,765				222,967				282,820				864,552
Allowance as a percentage of carrying value (3)			3.06	%			4.79	%			2.15	%			3.21	%
Purchased credit-impaired loans
Allowance for loan and lease losses		$	6,417				n/a			$	12			$	6,429
Carrying value excluding valuation allowance			36,393				n/a				204				36,597
Allowance as a percentage of carrying value			17.63	%			n/a				5.76	%			17.57	%
Total
Allowance for loan and lease losses		$	19,252			$	15,463			$	7,170			$	41,885
Carrying value (3)			409,062				234,388				293,669				937,119
Allowance as a percentage of carrying value (3)			4.71	%			6.60	%			2.44	%			4.47	%

(1)		Impaired loans include nonperforming commercial loans and all commercial and consumer TDRs. Impaired loans exclude nonperforming consumer loans unless they are classified as TDRs, and all loans and leases that are accounted for under the fair value option.
(2)		Commercial impaired allowance for loan and lease losses includes $268 million and $445 million at June 30, 2011 and December 31, 2010 related to U.S. small business commercial renegotiated TDR loans.
(3)		Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option. Total loans accounted for under the fair value option were $9.6 billion and $3.3 billion at June 30, 2011 and December 31, 2010.
n/a		= not applicable