| Allowance for Credit Losses |
Allowance for Credit Losses
The table below summarizes the changes in the allowance for credit losses for 2011, 2010 and 2009.
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2011 |
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(Dollars in millions) |
Home
Loans
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Credit Card
and Other
Consumer
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Commercial |
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Total
Allowance
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Allowance for loan and lease losses, January 1 |
$ |
19,252 |
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$ |
15,463 |
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$ |
7,170 |
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$ |
41,885 |
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Loans and leases charged off |
(9,291 |
) |
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(12,247 |
) |
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(3,204 |
) |
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(24,742 |
) |
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Recoveries of loans and leases previously charged off |
894 |
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|
2,124 |
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|
891 |
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|
3,909 |
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Net charge-offs |
(8,397 |
) |
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(10,123 |
) |
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(2,313 |
) |
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(20,833 |
) |
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Provision for loan and lease losses |
10,300 |
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4,025 |
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(696 |
) |
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13,629 |
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Other |
(76 |
) |
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(796 |
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(26 |
) |
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(898 |
) |
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Allowance for loan and lease losses, December 31 |
21,079 |
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8,569 |
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4,135 |
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33,783 |
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Reserve for unfunded lending commitments, January 1 |
— |
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— |
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1,188 |
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1,188 |
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Provision for unfunded lending commitments |
— |
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— |
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(219 |
) |
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(219 |
) |
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Other |
— |
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— |
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(255 |
) |
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(255 |
) |
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Reserve for unfunded lending commitments, December 31 |
— |
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— |
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714 |
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|
714 |
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Allowance for credit losses, December 31 |
$ |
21,079 |
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$ |
8,569 |
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$ |
4,849 |
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$ |
34,497 |
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2010 |
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Home
Loans |
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Credit Card
and Other
Consumer |
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Commercial |
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Total Allowance |
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2010 |
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2009 |
Allowance for loan and lease losses, January 1 (1)
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$ |
16,329 |
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$ |
22,243 |
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$ |
9,416 |
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$ |
47,988 |
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$ |
23,071 |
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Loans and leases charged off |
(10,915 |
) |
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(20,865 |
) |
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(5,610 |
) |
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(37,390 |
) |
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(35,483 |
) |
Recoveries of loans and leases previously charged off |
396 |
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2,034 |
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626 |
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3,056 |
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1,795 |
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Net charge-offs |
(10,519 |
) |
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(18,831 |
) |
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(4,984 |
) |
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(34,334 |
) |
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(33,688 |
) |
Provision for loan and lease losses |
13,335 |
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12,115 |
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2,745 |
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28,195 |
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48,366 |
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Other |
107 |
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(64 |
) |
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(7 |
) |
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36 |
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(549 |
) |
Allowance for loan and lease losses, December 31 |
19,252 |
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15,463 |
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7,170 |
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41,885 |
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37,200 |
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Reserve for unfunded lending commitments, January 1 |
— |
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— |
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1,487 |
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1,487 |
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|
421 |
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Provision for unfunded lending commitments |
— |
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— |
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|
240 |
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240 |
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|
204 |
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Other |
— |
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— |
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(539 |
) |
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(539 |
) |
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862 |
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Reserve for unfunded lending commitments, December 31 |
— |
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— |
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1,188 |
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1,188 |
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1,487 |
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Allowance for credit losses, December 31 |
$ |
19,252 |
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$ |
15,463 |
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$ |
8,358 |
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$ |
43,073 |
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$ |
38,687 |
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(1) |
The 2010 balance includes $10.8 billion of allowance for loan and lease losses related to the adoption of new consolidation guidance. This includes $573 million for the home loans portfolio segment and $10.2 billion for the credit card and other consumer portfolio segment.
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In 2011, for the PCI loan portfolio, the Corporation recorded $2.2 billion in provision for credit losses with a corresponding increase in the valuation allowance included as part of the allowance for loan and lease losses. This compared to $2.2 billion in 2010 and $3.5 billion in 2009. PCI loans that were acquired as part of the Merrill Lynch acquisition were excluded from current period PCI disclosures as the valuation allowance associated with these loans is no longer significant. The valuation allowance associated with the PCI loan portfolio was $8.5 billion, $6.4 billion and $3.9 billion at December 31, 2011, 2010 and 2009, respectively.
The “other” amount under allowance for loan and lease losses for 2011 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 2009 “other” amount includes a $750 million reduction in the allowance for loan and lease losses related to $8.5 billion of credit card loans that were exchanged for a $7.8 billion HTM debt security partially offset by a $340 million increase associated with the reclassification to other assets of the amount reimbursable under residential mortgage cash collateralized synthetic securitizations.
The “other” amount under the reserve for unfunded lending commitments for 2011 and 2010 primarily represents accretion of the Merrill Lynch purchase accounting adjustment and the impact of funding previously unfunded positions. The 2009 amount includes the remaining balance of the acquired Merrill Lynch reserve excluding those commitments accounted for under the fair value option, net of accretion, and the impact of funding previously unfunded positions.
The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at December 31, 2011 and 2010.
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Allowance and Carrying Value by Portfolio Segment |
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December 31, 2011 |
(Dollars in millions) |
Home
Loans
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Credit Card
and Other
Consumer
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Commercial |
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Total |
Impaired loans and troubled debt restructurings (1)
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Allowance for loan and lease losses (2)
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$ |
1,946 |
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$ |
2,410 |
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$ |
545 |
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$ |
4,901 |
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Carrying value (3)
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21,462 |
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7,100 |
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8,113 |
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36,675 |
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Allowance as a percentage of carrying value |
9.07 |
% |
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33.94 |
% |
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6.71 |
% |
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13.36 |
% |
Collectively evaluated for impairment |
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Allowance for loan and lease losses |
$ |
10,674 |
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$ |
6,159 |
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$ |
3,590 |
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$ |
20,423 |
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Carrying value (3, 4)
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344,821 |
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202,010 |
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302,089 |
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848,920 |
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Allowance as a percentage of carrying value (4)
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3.10 |
% |
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3.05 |
% |
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1.19 |
% |
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2.41 |
% |
Purchased credit-impaired loans |
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Valuation allowance |
$ |
8,459 |
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n/a |
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n/a |
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$ |
8,459 |
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Carrying value gross of valuation allowance |
31,801 |
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n/a |
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n/a |
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31,801 |
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Valuation allowance as a percentage of carrying value |
26.60 |
% |
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n/a |
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n/a |
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26.60 |
% |
Total |
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Allowance for loan and lease losses |
$ |
21,079 |
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$ |
8,569 |
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$ |
4,135 |
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$ |
33,783 |
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Carrying value (3, 4)
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398,084 |
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209,110 |
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310,202 |
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917,396 |
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Allowance as a percentage of carrying value (4)
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5.30 |
% |
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4.10 |
% |
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1.33 |
% |
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3.68 |
% |
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December 31, 2010 |
Impaired loans and troubled debt restructurings (1)
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Allowance for loan and lease losses (2)
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$ |
1,871 |
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$ |
4,786 |
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$ |
1,080 |
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$ |
7,737 |
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Carrying value (3)
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13,904 |
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11,421 |
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10,645 |
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35,970 |
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Allowance as a percentage of carrying value |
13.46 |
% |
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41.91 |
% |
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10.15 |
% |
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21.51 |
% |
Collectively evaluated for impairment |
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Allowance for loan and lease losses |
$ |
10,964 |
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$ |
10,677 |
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$ |
6,078 |
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$ |
27,719 |
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Carrying value (3, 4)
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358,765 |
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222,967 |
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282,820 |
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864,552 |
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Allowance as a percentage of carrying value (4)
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3.06 |
% |
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4.79 |
% |
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2.15 |
% |
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3.21 |
% |
Purchased credit-impaired loans |
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Valuation allowance |
$ |
6,417 |
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n/a |
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$ |
12 |
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$ |
6,429 |
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Carrying value gross of valuation allowance |
36,393 |
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n/a |
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204 |
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36,597 |
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Valuation allowance as a percentage of carrying value |
17.63 |
% |
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n/a |
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5.76 |
% |
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17.57 |
% |
Total |
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Allowance for loan and lease losses |
$ |
19,252 |
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$ |
15,463 |
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$ |
7,170 |
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$ |
41,885 |
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Carrying value (3, 4)
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409,062 |
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234,388 |
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293,669 |
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937,119 |
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Allowance as a percentage of carrying value (4)
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4.71 |
% |
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6.60 |
% |
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2.44 |
% |
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4.47 |
% |
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(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 classified as TDRs, and all consumer and commercial loans accounted for under the fair value option. |
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(2) |
Commercial impaired allowance for loan and lease losses includes $172 million and $445 million at December 31, 2011 and 2010 related to U.S. small business commercial renegotiated TDR loans.
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(3) |
Amounts are presented gross of the allowance for loan and lease losses. |
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(4) |
Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $8.8 billion and $3.3 billion at December 31, 2011 and 2010.
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n/a = not applicable
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