Annual report pursuant to Section 13 and 15(d)

Allowance for Credit Losses

v2.4.0.6
Allowance for Credit Losses
12 Months Ended
Dec. 31, 2012
Receivables [Abstract]  
Allowance for Credit Losses
Allowance for Credit Losses
The table below summarizes the changes in the allowance for credit losses by portfolio segment for 2012, 2011 and 2010.
 
 
 
 
 
 
 
 
 
2012
(Dollars in millions)
Home
Loans
 
Credit Card
and Other
Consumer
 
Commercial
 
Total
Allowance
Allowance for loan and lease losses, January 1
$
21,079

 
$
8,569

 
$
4,135

 
$
33,783

Loans and leases charged off
(7,849
)
 
(7,727
)
 
(2,096
)
 
(17,672
)
Recoveries of loans and leases previously charged off
496

 
1,519

 
749

 
2,764

Net charge-offs
(7,353
)
 
(6,208
)
 
(1,347
)
 
(14,908
)
Provision for loan and lease losses
4,073

 
3,899

 
338

 
8,310

Write-offs of home equity PCI loans
(2,820
)
 

 

 
(2,820
)
Other
(46
)
 
(120
)
 
(20
)
 
(186
)
Allowance for loan and lease losses, December 31
14,933

 
6,140

 
3,106

 
24,179

Reserve for unfunded lending commitments, January 1

 

 
714

 
714

Provision for unfunded lending commitments

 

 
(141
)
 
(141
)
Other

 

 
(60
)
 
(60
)
Reserve for unfunded lending commitments, December 31

 

 
513

 
513

Allowance for credit losses, December 31
$
14,933

 
$
6,140

 
$
3,619

 
$
24,692

 
2011
Allowance for loan and lease losses, January 1
$
19,252

 
$
15,463

 
$
7,170

 
$
41,885

Loans and leases charged off
(9,291
)
 
(12,247
)
 
(3,204
)
 
(24,742
)
Recoveries of loans and leases previously charged off
894

 
2,124

 
891

 
3,909

Net charge-offs
(8,397
)
 
(10,123
)
 
(2,313
)
 
(20,833
)
Provision for loan and lease losses
10,300

 
4,025

 
(696
)
 
13,629

Other
(76
)
 
(796
)
 
(26
)
 
(898
)
Allowance for loan and lease losses, December 31
21,079

 
8,569

 
4,135

 
33,783

Reserve for unfunded lending commitments, January 1

 

 
1,188

 
1,188

Provision for unfunded lending commitments

 

 
(219
)
 
(219
)
Other

 

 
(255
)
 
(255
)
Reserve for unfunded lending commitments, December 31

 

 
714

 
714

Allowance for credit losses, December 31
$
21,079

 
$
8,569

 
$
4,849

 
$
34,497


 
2010
Allowance for loan and lease losses, January 1
$
16,329

 
$
22,243

 
$
9,416

 
$
47,988

Loans and leases charged off
(10,915
)
 
(20,865
)
 
(5,610
)
 
(37,390
)
Recoveries of loans and leases previously charged off
396

 
2,034

 
626

 
3,056

Net charge-offs
(10,519
)
 
(18,831
)
 
(4,984
)
 
(34,334
)
Provision for loan and lease losses
13,335

 
12,115

 
2,745

 
28,195

Other
107

 
(64
)
 
(7
)
 
36

Allowance for loan and lease losses, December 31
19,252

 
15,463

 
7,170

 
41,885

Reserve for unfunded lending commitments, January 1

 

 
1,487

 
1,487

Provision for unfunded lending commitments

 

 
240

 
240

Other

 

 
(539
)
 
(539
)
Reserve for unfunded lending commitments, December 31

 

 
1,188

 
1,188

Allowance for credit losses, December 31
$
19,252

 
$
15,463

 
$
8,358

 
$
43,073


In 2012, for the PCI loan portfolio, the Corporation recorded a benefit of $103 million in provision for credit losses with a corresponding decrease in the valuation allowance included as part of the allowance for loan and lease losses. This compared to $2.2 billion in provision for credit losses and a corresponding increase in the valuation allowance in both 2011 and 2010. In 2012, there were $2.8 billion of write-offs in the Countrywide home equity PCI loan portfolio primarily related to 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 portfolio was $5.5 billion, $8.5 billion and $6.4 billion at December 31, 2012, 2011 and 2010, respectively.
The “other” amount under allowance for loan and lease losses primarily represents the net impact of portfolio sales, consolidations and deconsolidations, and foreign currency translation adjustments. The 2011 amount includes a $449 million reduction in the allowance for loan and lease losses related to Canadian consumer card loans that were transferred to LHFS.
The “other” amount under the reserve for unfunded lending commitments for 2012, 2011 and 2010 primarily represents accretion of the Merrill Lynch purchase accounting adjustment and the impact of funding previously unfunded positions.

The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at December 31, 2012 and 2011.
 
 
 
 
 
 
 
 
Allowance and Carrying Value by Portfolio Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 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)
$
1,700

 
$
1,127

 
$
330

 
$
3,157

Carrying value (3)
30,250

 
3,881

 
4,881

 
39,012

Allowance as a percentage of carrying value
5.62
%
 
29.04
%
 
6.76
%
 
8.09
%
Loans collectively evaluated for impairment
 

 
 

 
 

 
 

Allowance for loan and lease losses
$
7,697

 
$
5,013

 
$
2,776

 
$
15,486

Carrying value (3, 4)
304,701

 
187,484

 
341,502

 
833,687

Allowance as a percentage of carrying value (4)
2.53
%
 
2.67
%
 
0.81
%
 
1.86
%
Purchased credit-impaired loans
 

 
 
 
 

 
 

Valuation allowance
$
5,536

 
n/a

 
n/a

 
$
5,536

Carrying value gross of valuation allowance
26,118

 
n/a

 
n/a

 
26,118

Valuation allowance as a percentage of carrying value
21.20
%
 
n/a

 
n/a

 
21.20
%
Total
 

 
 

 
 

 
 

Allowance for loan and lease losses
$
14,933

 
$
6,140

 
$
3,106

 
$
24,179

Carrying value (3, 4)
361,069

 
191,365

 
346,383

 
898,817

Allowance as a percentage of carrying value (4)
4.14
%
 
3.21
%
 
0.90
%
 
2.69
%
 
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 $97 million and $172 million of renegotiated TDR loans related to U.S. small business commercial at December 31, 2012 and 2011.
(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 $9.0 billion and $8.8 billion at December 31, 2012 and 2011.
n/a = not applicable