Bank of America Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Outstanding Loans and Leases

Outstanding Loans and Leases

12 Months Ended

Dec. 31, 2015

Loans and Leases Receivable Disclosure [Abstract]

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 December 31, 2015 and 2014.




	December 31, 2015
(Dollars in millions)	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⁾			Purchased Credit-impaired ⁽⁴⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
Consumer real estate
Core portfolio
Residential mortgage	$	1,603		$	645		$	3,834		$	6,082		$	139,763								$	145,845
Home equity	225			104			719			1,048			47,216									48,264
Legacy Assets & Servicing portfolio
Residential mortgage ⁽⁵⁾	1,656			890			6,019			8,565			21,435			$	12,066					42,066
Home equity	310			163			1,030			1,503			21,562			4,619						27,684
Credit card and other consumer
U.S. credit card	454			332			789			1,575			88,027									89,602
Non-U.S. credit card	39			31			76			146			9,829									9,975
Direct/Indirect consumer ⁽⁶⁾	227			62			42			331			88,464									88,795
Other consumer ⁽⁷⁾	18			3			4			25			2,042									2,067
Total consumer	4,532			2,230			12,513			19,275			418,338			16,685						454,298
Consumer loans accounted for under the fair value option ⁽⁸⁾																			$	1,871		1,871
Total consumer loans and leases	4,532			2,230			12,513			19,275			418,338			16,685			1,871			456,169
Commercial
U.S. commercial	444			148			332			924			251,847									252,771
Commercial real estate ⁽⁹⁾	36			11			82			129			57,070									57,199
Commercial lease financing	169			32			22			223			27,147									27,370
Non-U.S. commercial	6			1			1			8			91,541									91,549
U.S. small business commercial	83			41			72			196			12,680									12,876
Total commercial	738			233			509			1,480			440,285									441,765
Commercial loans accounted for under the fair value option ⁽⁸⁾																			5,067			5,067
Total commercial loans and leases	738			233			509			1,480			440,285						5,067			446,832
Total loans and leases	$	5,270		$	2,463		$	13,022		$	20,755		$	858,623		$	16,685		$	6,938		$	903,001
Percentage of outstandings	0.59		%	0.27		%	1.44		%	2.30		%	95.08		%	1.85		%	0.77		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.7 billion and nonperforming loans of $379 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $1.0 billion and nonperforming loans of $297 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $7.2 billion.


⁽³⁾	Consumer real estate includes $3.0 billion and direct/indirect consumer includes $21 million of nonperforming loans.


⁽⁴⁾	PCI loan amounts are shown gross of the valuation allowance.


⁽⁵⁾	Total outstandings includes pay option loans of $2.3 billion. The Corporation no longer originates this product.


⁽⁶⁾	Total outstandings includes auto and specialty lending loans of $42.6 billion, unsecured consumer lending loans of $886 million, U.S. securities-based lending loans of $39.8 billion, non-U.S. consumer loans of $3.9 billion, student loans of $564 million and other consumer loans of $1.0 billion.


⁽⁷⁾	Total outstandings includes consumer finance loans of $564 million, consumer leases of $1.4 billion and consumer overdrafts of $146 million.


⁽⁸⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $1.6 billion and home equity loans of $250 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.3 billion and non-U.S. commercial loans of $2.8 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.


⁽⁹⁾	Total outstandings includes U.S. commercial real estate loans of $53.6 billion and non-U.S. commercial real estate loans of $3.5 billion.




	December 31, 2014
(Dollars in millions)	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⁾			Purchased Credit-impaired ⁽⁴⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
Consumer real estate
Core portfolio
Residential mortgage	$	1,847		$	700		$	5,561		$	8,108		$	154,112								$	162,220
Home equity	218			105			744			1,067			50,820									51,887
Legacy Assets & Servicing portfolio
Residential mortgage ⁽⁵⁾	2,008			1,060			10,513			13,581			25,244			$	15,152					53,977
Home equity	374			174			1,166			1,714			26,507			5,617						33,838
Credit card and other consumer
U.S. credit card	494			341			866			1,701			90,178									91,879
Non-U.S. credit card	49			39			95			183			10,282									10,465
Direct/Indirect consumer ⁽⁶⁾	245			71			65			381			80,000									80,381
Other consumer ⁽⁷⁾	11			2			2			15			1,831									1,846
Total consumer	5,246			2,492			19,012			26,750			438,974			20,769						486,493
Consumer loans accounted for under the fair value option ⁽⁸⁾																			$	2,077		2,077
Total consumer loans and leases	5,246			2,492			19,012			26,750			438,974			20,769			2,077			488,570
Commercial
U.S. commercial	320			151			318			789			219,504									220,293
Commercial real estate ⁽⁹⁾	138			16			288			442			47,240									47,682
Commercial lease financing	121			41			42			204			24,662									24,866
Non-U.S. commercial	5			4			—			9			80,074									80,083
U.S. small business commercial	88			45			94			227			13,066									13,293
Total commercial	672			257			742			1,671			384,546									386,217
Commercial loans accounted for under the fair value option ⁽⁸⁾																			6,604			6,604
Total commercial loans and leases	672			257			742			1,671			384,546						6,604			392,821
Total loans and leases	$	5,918		$	2,749		$	19,754		$	28,421		$	823,520		$	20,769		$	8,681		$	881,391
Percentage of outstandings	0.67		%	0.31		%	2.24		%	3.22		%	93.44		%	2.36		%	0.98		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $2.1 billion and nonperforming loans of $392 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $1.1 billion and nonperforming loans of $332 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $11.4 billion.


⁽³⁾	Consumer real estate includes $3.6 billion and direct/indirect consumer includes $27 million of nonperforming loans.


⁽⁴⁾	PCI loan amounts are shown gross of the valuation allowance.


⁽⁵⁾	Total outstandings includes pay option loans of $3.2 billion. The Corporation no longer originates this product.


⁽⁶⁾	Total outstandings includes auto and specialty lending loans of $37.7 billion, unsecured consumer lending loans of $1.5 billion, U.S. securities-based lending loans of $35.8 billion, non-U.S. consumer loans of $4.0 billion, student loans of $632 million and other consumer loans of $761 million.


⁽⁷⁾	Total outstandings includes consumer finance loans of $676 million, consumer leases of $1.0 billion and consumer overdrafts of $162 million.


⁽⁸⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $1.9 billion and home equity loans of $196 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $1.9 billion and non-U.S. commercial loans of $4.7 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.


⁽⁹⁾	Total outstandings includes U.S. commercial real estate loans of $45.2 billion and non-U.S. commercial real estate loans of $2.5 billion.

The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $3.7 billion and $17.2 billion at December 31, 2015 and 2014, 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.

Nonperforming Loans and Leases

The Corporation classifies junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. At December 31, 2015 and 2014, $484 million and $800 million of such junior-lien home equity loans were included in nonperforming loans.

The Corporation classifies consumer real estate loans that have been discharged in Chapter 7 bankruptcy and not reaffirmed by the borrower as TDRs, irrespective of payment history or delinquency status, even if the repayment terms for the loan have not been otherwise modified. The Corporation continues to have a lien on the underlying collateral. At December 31, 2015, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $785 million of which $457 million were current on their contractual payments, while $285 million were 90 days or more past due. Of the contractually current nonperforming loans, more than 80 percent were discharged in Chapter 7 bankruptcy more than 12 months ago, and more than 60 percent were discharged 24 months or more ago. As subsequent cash payments are received on these nonperforming loans that are contractually current, the interest component of the payments is generally recorded as interest income on a cash basis and the principal component is recorded as a reduction in the carrying value of the loan.

During 2015, the Corporation sold nonperforming and other delinquent consumer real estate loans with a carrying value of $3.2 billion, including $1.4 billion of PCI loans, compared to $6.7 billion, including $1.9 billion of PCI loans, in 2014. The Corporation recorded recoveries related to these sales of $133 million and $407 million during 2015 and 2014. Gains related to these sales of $173 million and $247 million were recorded in other income in the Consolidated Statement of Income during 2015 and 2014.

The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at December 31, 2015 and 2014. Nonperforming 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.




Credit Quality

	December 31
	Nonperforming Loans and Leases				Accruing Past Due 90 Days or More
(Dollars in millions)	2015		2014		2015		2014
Consumer real estate
Core portfolio
Residential mortgage ⁽¹⁾	$	1,845	$	2,398	$	2,645	$	3,942
Home equity	1,354		1,496		—		—
Legacy Assets & Servicing portfolio
Residential mortgage⁽¹⁾	2,958		4,491		4,505		7,465
Home equity	1,983		2,405		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		789		866
Non-U.S. credit card	n/a		n/a		76		95
Direct/Indirect consumer	24		28		39		64
Other consumer	1		1		3		1
Total consumer	8,165		10,819		8,057		12,433
Commercial
U.S. commercial	867		701		113		110
Commercial real estate	93		321		3		3
Commercial lease financing	12		3		17		41
Non-U.S. commercial	158		1		1		—
U.S. small business commercial	82		87		61		67
Total commercial	1,212		1,113		195		221
Total loans and leases	$	9,377	$	11,932	$	8,252	$	12,654

⁽¹⁾

Residential mortgage loans in the Core and Legacy Assets & Servicing portfolios accruing past due 90 days or more are fully-insured loans. At December 31, 2015 and 2014, residential mortgage includes $4.3 billion and $7.3 billion of loans on which interest has been curtailed by the FHA, and therefore are no longer accruing interest, although principal is still insured, and $2.9 billion and $4.1 billion 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, see Note 1 – Summary of Significant Accounting Principles. Within the Consumer Real Estate portfolio segment, the primary credit quality indicators are refreshed LTV and refreshed FICO score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan, refreshed quarterly. Home equity loans are evaluated using combined loan-to-value (CLTV) which measures the carrying value of the Corporation’s loan and available line of credit combined with any outstanding senior liens against the property as a percentage of the value of the property securing the loan, refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower’s credit history. At a minimum, FICO scores are refreshed quarterly, and in many cases, more frequently. FICO scores are also a primary credit quality indicator for the Credit Card and Other Consumer portfolio segment and the business card portfolio within U.S. small business commercial. Within the Commercial portfolio segment, loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by the Corporation as Special Mention, Substandard or Doubtful, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans.

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 December 31, 2015 and 2014.




Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

	December 31, 2015
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Legacy Assets & Servicing Residential Mortgage ⁽²⁾		Residential Mortgage PCI ⁽³⁾		Core Portfolio Home Equity ⁽²⁾		Legacy Assets & Servicing Home Equity ⁽²⁾		Home Equity PCI
Refreshed LTV⁽⁴⁾
Less than or equal to 90 percent	$	109,869	$	16,646	$	8,655	$	44,006	$	15,666	$	2,003
Greater than 90 percent but less than or equal to 100 percent	4,251		2,007		1,403		1,652		2,382		852
Greater than 100 percent	2,783		3,212		2,008		2,606		5,017		1,764
Fully-insured loans ⁽⁵⁾	28,942		8,135		—		—		—		—
Total consumer real estate	$	145,845	$	30,000	$	12,066	$	48,264	$	23,065	$	4,619
Refreshed FICO score
Less than 620	$	3,465	$	4,408	$	3,798	$	1,898	$	2,785	$	729
Greater than or equal to 620 and less than 680	5,792		3,438		2,586		3,242		3,817		825
Greater than or equal to 680 and less than 740	22,017		5,605		3,187		9,203		6,527		1,356
Greater than or equal to 740	85,629		8,414		2,495		33,921		9,936		1,709
Fully-insured loans ⁽⁵⁾	28,942		8,135		—		—		—		—
Total consumer real estate	$	145,845	$	30,000	$	12,066	$	48,264	$	23,065	$	4,619


⁽¹⁾	Excludes $1.9 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $2.0 billion of pay option loans. The Corporation no longer originates this product.


⁽⁴⁾	Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.


⁽⁵⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.




Credit Card and Other Consumer – Credit Quality Indicators

	December 31, 2015
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	4,196	$	—	$	1,244	$	217
Greater than or equal to 620 and less than 680	11,857		—		1,698		214
Greater than or equal to 680 and less than 740	34,270		—		10,955		337
Greater than or equal to 740	39,279		—		29,581		1,149
Other internal credit metrics ^{(2, 3, 4)}	—		9,975		45,317		150
Total credit card and other consumer	$	89,602	$	9,975	$	88,795	$	2,067


⁽¹⁾	Twenty-seven percent of the other consumer portfolio is associated with portfolios from certain consumer finance businesses that the Corporation previously exited.


⁽²⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽³⁾	Direct/indirect consumer includes $43.7 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $567 million of loans the Corporation no longer originates, primarily student loans.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2015, 98 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and one percent was 90 days or more past due.




Commercial – Credit Quality Indicators ⁽¹⁾

	December 31, 2015
(Dollars in millions)	U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		Non-U.S. Commercial		U.S. Small Business Commercial ⁽²⁾
Risk ratings
Pass rated	$	243,922	$	56,688	$	26,050	$	87,905	$	571
Reservable criticized	8,849		511		1,320		3,644		96
Refreshed FICO score ⁽³⁾
Less than 620									184
Greater than or equal to 620 and less than 680									543
Greater than or equal to 680 and less than 740									1,627
Greater than or equal to 740									3,027
Other internal credit metrics ^{(3, 4)}									6,828
Total commercial	$	252,771	$	57,199	$	27,370	$	91,549	$	12,876


⁽¹⁾	Excludes $5.1 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $670 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. At December 31, 2015, 98 percent of the balances where internal credit metrics are used was current or less than 30 days past due.


⁽³⁾	Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.


⁽⁴⁾	Other internal credit metrics may include delinquency status, application scores, geography or other factors.




Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

	December 31, 2014
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Legacy Assets & Servicing Residential Mortgage ⁽²⁾		Residential Mortgage PCI ⁽³⁾		Core Portfolio Home Equity ⁽²⁾		Legacy Assets & Servicing Home Equity ⁽²⁾		Home Equity PCI
Refreshed LTV ⁽⁴⁾
Less than or equal to 90 percent	$	100,255	$	18,499	$	9,972	$	45,414	$	17,453	$	2,046
Greater than 90 percent but less than or equal to 100 percent	4,958		3,081		2,005		2,442		3,272		1,048
Greater than 100 percent	4,017		5,265		3,175		4,031		7,496		2,523
Fully-insured loans ⁽⁵⁾	52,990		11,980		—		—		—		—
Total consumer real estate	$	162,220	$	38,825	$	15,152	$	51,887	$	28,221	$	5,617
Refreshed FICO score
Less than 620	$	4,184	$	6,313	$	6,109	$	2,169	$	3,470	$	864
Greater than or equal to 620 and less than 680	6,272		4,032		3,014		3,683		4,529		995
Greater than or equal to 680 and less than 740	21,946		6,463		3,310		10,231		7,905		1,651
Greater than or equal to 740	76,828		10,037		2,719		35,804		12,317		2,107
Fully-insured loans ⁽⁵⁾	52,990		11,980		—		—		—		—
Total consumer real estate	$	162,220	$	38,825	$	15,152	$	51,887	$	28,221	$	5,617


⁽¹⁾	Excludes $2.1 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $2.8 billion of pay option loans. The Corporation no longer originates this product.


⁽⁴⁾	Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.


⁽⁵⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.




Credit Card and Other Consumer – Credit Quality Indicators

	December 31, 2014
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	4,467	$	—	$	1,296	$	266
Greater than or equal to 620 and less than 680	12,177		—		1,892		227
Greater than or equal to 680 and less than 740	34,986		—		10,749		307
Greater than or equal to 740	40,249		—		25,279		881
Other internal credit metrics ^{(2, 3, 4)}	—		10,465		41,165		165
Total credit card and other consumer	$	91,879	$	10,465	$	80,381	$	1,846


⁽¹⁾	Thirty-seven percent of the other consumer portfolio is associated with portfolios from certain consumer finance businesses that the Corporation previously exited.


⁽²⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽³⁾	Direct/indirect consumer includes $39.7 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $632 million of loans the Corporation no longer originates, primarily student loans.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2014, 98 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and one percent was 90 days or more past due.




Commercial – Credit Quality Indicators ⁽¹⁾

	December 31, 2014
(Dollars in millions)	U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		Non-U.S. Commercial		U.S. Small Business Commercial ⁽²⁾
Risk ratings
Pass rated	$	213,839	$	46,632	$	23,832	$	79,367	$	751
Reservable criticized	6,454		1,050		1,034		716		182
Refreshed FICO score ⁽³⁾
Less than 620									184
Greater than or equal to 620 and less than 680									529
Greater than or equal to 680 and less than 740									1,591
Greater than or equal to 740									2,910
Other internal credit metrics ^{(3, 4)}									7,146
Total commercial	$	220,293	$	47,682	$	24,866	$	80,083	$	13,293


⁽¹⁾	Excludes $6.6 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $762 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. At December 31, 2014, 98 percent of the balances where internal credit metrics are used was current or less than 30 days past due.


⁽³⁾	Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.


⁽⁴⁾	Other internal credit metrics may include delinquency status, application scores, geography or other factors.

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. Impaired loans include nonperforming commercial loans and all consumer and commercial TDRs. Impaired loans exclude nonperforming consumer loans and nonperforming commercial leases unless they are classified as TDRs. Loans accounted for under the fair value option are also excluded. PCI loans are excluded and reported separately on page 178. For additional information, see Note 1 – Summary of Significant Accounting Principles.

Consumer Real Estate

Impaired consumer real estate loans within the Consumer Real Estate portfolio segment consist entirely of TDRs. Excluding PCI loans, most modifications of consumer real estate loans meet the definition of TDRs when a binding offer is extended to a borrower. Modifications of consumer real estate loans are done in accordance with the government’s Making Home Affordable Program (modifications under government programs) or the Corporation’s proprietary programs (modifications under proprietary programs). These modifications are considered to be TDRs if concessions have been granted to borrowers experiencing financial difficulties. Concessions may include reductions in interest rates, capitalization of past due amounts, principal and/or interest forbearance, payment extensions, principal and/or interest forgiveness, or combinations thereof.

Prior to permanently modifying a loan, the Corporation may enter into trial modifications with certain borrowers under both government and proprietary programs. Trial modifications generally represent a three- to four-month period during which the borrower makes monthly payments under the anticipated modified payment terms. Upon successful completion of the trial period, the Corporation and the borrower enter into a permanent modification. Binding trial modifications are classified as TDRs when the trial offer is made and continue to be classified as TDRs regardless of whether the borrower enters into a permanent modification.

Consumer real estate loans that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower of $1.8 billion were included in TDRs at December 31, 2015, of which $785 million were classified as nonperforming and $765 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.

A consumer real estate loan, excluding PCI loans which are reported separately, is not classified as impaired unless it is a TDR. Once such a loan has been designated as a TDR, it is then individually assessed for impairment. Consumer real estate TDRs are measured primarily based on the net present value of the estimated cash flows discounted at the loan’s original effective interest rate, as discussed in the following paragraph. If the carrying value of a TDR exceeds this amount, a specific allowance is recorded as a component of the allowance for loan and lease losses. Alternatively, consumer real estate TDRs that are considered to be dependent solely on the collateral for repayment (e.g., due to the lack of income verification) are measured based on the estimated fair value of the collateral and a charge-off is recorded if the carrying value exceeds the fair value of the collateral. Consumer real estate loans that reached 180 days past due prior to modification had been charged off to their net realizable value, less costs to sell, before they were modified as TDRs in accordance with established policy. Therefore, modifications of consumer real estate loans that are 180 or more days past due as TDRs do not have an impact on the allowance for loan and lease losses nor are additional charge-offs required at the time of modification. Subsequent declines in the fair value of the collateral after a loan has reached 180 days past due are recorded as charge-offs. Fully-insured loans are protected against principal loss, and therefore, the Corporation does not record an allowance for loan and lease losses on the outstanding principal balance, even after they have been modified in a TDR.

The net present value of the estimated cash flows used to measure impairment is based on model-driven estimates of projected payments, prepayments, defaults and loss-given-default (LGD). Using statistical modeling methodologies, the Corporation estimates the probability that a loan will default prior to maturity based on the attributes of each loan. The factors that are most relevant to the probability of default are the refreshed LTV, or in the case of a subordinated lien, refreshed CLTV, borrower credit score, months since origination (i.e., vintage) and geography. Each of these factors is further broken down by present collection status (whether the loan is current, delinquent, in default or in bankruptcy). Severity (or LGD) is estimated based on the refreshed LTV for first mortgages or CLTV for subordinated liens. The estimates are based on the Corporation’s historical experience as adjusted to reflect an assessment of environmental factors that may not be reflected in the historical data, such as changes in real estate values, local and national economies, underwriting standards and the regulatory environment. The probability of default models also incorporate recent experience with modification programs including redefaults subsequent to modification, a loan’s default history prior to modification and the change in borrower payments post-modification.

At December 31, 2015 and 2014, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were immaterial. Consumer real estate foreclosed properties totaled $444 million and $630 million at December 31, 2015 and 2014. The carrying value of consumer real estate loans, including fully-insured and PCI loans, for which formal foreclosure proceedings were in process as of December 31, 2015 was $5.8 billion. During 2015 and 2014, the Corporation reclassified $2.1 billion and $1.9 billion 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 on the Consolidated Statement of Cash Flows.

The table below provides the unpaid principal balance, carrying value and related allowance at December 31, 2015 and 2014, and the average carrying value and interest income recognized for 2015, 2014 and 2013 for impaired loans in the Corporation’s Consumer Real Estate portfolio segment, and includes primarily loans managed by Legacy Assets & Servicing (LAS). 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

	December 31, 2015						December 31, 2014
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
With no recorded allowance
Residential mortgage	$	14,888	$	11,901	$	—	$	19,710	$	15,605	$	—
Home equity	3,545		1,775		—		3,540		1,630		—
With an allowance recorded
Residential mortgage	$	6,624	$	6,471	$	399	$	7,861	$	7,665	$	531
Home equity	1,047		911		235		852		728		196
Total
Residential mortgage	$	21,512	$	18,372	$	399	$	27,571	$	23,270	$	531
Home equity	4,592		2,686		235		4,392		2,358		196

	2015				2014				2013
	Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾
With no recorded allowance
Residential mortgage	$	13,867	$	403	$	15,065	$	490	$	16,625	$	621
Home equity	1,777		89		1,486		87		1,245		76
With an allowance recorded
Residential mortgage	$	7,290	$	236	$	10,826	$	411	$	13,926	$	616
Home equity	785		24		743		25		912		41
Total
Residential mortgage	$	21,157	$	639	$	25,891	$	901	$	30,551	$	1,237
Home equity	2,562		113		2,229		112		2,157		117


⁽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 December 31, 2015, 2014 and 2013 unpaid principal balance, carrying value, and average pre- and post-modification interest rates on consumer real estate loans that were modified in TDRs during 2015, 2014 and 2013, and net charge-offs recorded during the period in which the modification occurred. 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. These TDRs are primarily managed by LAS.




Consumer Real Estate – TDRs Entered into During 2015, 2014 and 2013 ⁽¹⁾

	December 31, 2015								2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate ⁽²⁾		Net Charge-offs ⁽³⁾
Residential mortgage	$	2,986	$	2,655	4.98	%	4.43	%	$	97
Home equity	1,019		775		3.54		3.17		84
Total	$	4,005	$	3,430	4.61		4.11		$	181

	December 31, 2014								2014
Residential mortgage	$	5,940	$	5,120	5.28	%	4.93	%	$	72
Home equity	863		592		4.00		3.33		99
Total	$	6,803	$	5,712	5.12		4.73		$	171

	December 31, 2013								2013
Residential mortgage	$	11,233	$	10,016	5.30	%	4.27	%	$	235
Home equity	878		521		5.29		3.92		192
Total	$	12,111	$	10,537	5.30		4.24		$	427


⁽¹⁾	During 2015, 2014 and 2013, the Corporation forgave principal of $396 million, $53 million and $467 million, respectively, related to residential mortgage loans in connection with TDRs.


⁽²⁾	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.


⁽³⁾	Net charge-offs include amounts recorded on loans modified during the period that are no longer held by the Corporation at December 31, 2015, 2014 and 2013 due to sales and other dispositions.

The table below presents the December 31, 2015, 2014 and 2013 carrying value for consumer real estate loans that were modified in a TDR during 2015, 2014 and 2013, by type of modification.




Consumer Real Estate – Modification Programs

	TDRs Entered into During 2015
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value
Modifications under government programs
Contractual interest rate reduction	$	408	$	23	$	431
Principal and/or interest forbearance	4		7		11
Other modifications ⁽¹⁾	46		—		46
Total modifications under government programs	458		30		488
Modifications under proprietary programs
Contractual interest rate reduction	191		28		219
Capitalization of past due amounts	69		10		79
Principal and/or interest forbearance	124		44		168
Other modifications⁽¹⁾	34		95		129
Total modifications under proprietary programs	418		177		595
Trial modifications	1,516		452		1,968
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	263		116		379
Total modifications	$	2,655	$	775	$	3,430

	TDRs Entered into During 2014
Modifications under government programs
Contractual interest rate reduction	$	643	$	56	$	699
Principal and/or interest forbearance	16		18		34
Other modifications ⁽¹⁾	98		1		99
Total modifications under government programs	757		75		832
Modifications under proprietary programs
Contractual interest rate reduction	244		22		266
Capitalization of past due amounts	71		2		73
Principal and/or interest forbearance	66		75		141
Other modifications⁽¹⁾	40		47		87
Total modifications under proprietary programs	421		146		567
Trial modifications	3,421		182		3,603
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	521		189		710
Total modifications	$	5,120	$	592	$	5,712

	TDRs Entered into During 2013
Modifications under government programs
Contractual interest rate reduction	$	1,815	$	48	$	1,863
Principal and/or interest forbearance	35		24		59
Other modifications ⁽¹⁾	100		—		100
Total modifications under government programs	1,950		72		2,022
Modifications under proprietary programs
Contractual interest rate reduction	2,799		40		2,839
Capitalization of past due amounts	132		2		134
Principal and/or interest forbearance	469		17		486
Other modifications⁽¹⁾	105		25		130
Total modifications under proprietary programs	3,505		84		3,589
Trial modifications	3,410		87		3,497
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	1,151		278		1,429
Total modifications	$	10,016	$	521	$	10,537


⁽¹⁾	Includes other modifications such as term or payment extensions and repayment plans.


⁽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 2015, 2014 and 2013 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. Payment defaults on a trial modification where the borrower has not yet met the terms of the agreement are included in the table below if the borrower is 90 days or more past due three months after the offer to modify is made.




Consumer Real Estate – TDRs Entering Payment Default That Were Modified During the Preceding 12 Months

	2015
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value ⁽¹⁾
Modifications under government programs	$	452	$	5	$	457
Modifications under proprietary programs	263		24		287
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	238		47		285
Trial modifications ⁽³⁾	2,997		181		3,178
Total modifications	$	3,950	$	257	$	4,207

	2014
Modifications under government programs	$	696	$	4	$	700
Modifications under proprietary programs	714		12		726
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	481		70		551
Trial modifications	2,231		56		2,287
Total modifications	$	4,122	$	142	$	4,264

	2013
Modifications under government programs	$	454	$	2	$	456
Modifications under proprietary programs	1,117		4		1,121
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	964		30		994
Trial modifications	4,376		14		4,390
Total modifications	$	6,911	$	50	$	6,961


⁽¹⁾	Includes loans with a carrying value of $1.8 billion, $2.0 billion and $2.4 billion that entered into payment default during 2015, 2014 and 2013, respectively, but were no longer held by the Corporation as of December 31, 2015, 2014 and 2013 due to sales and other dispositions.


⁽²⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.


⁽³⁾	Includes $1.7 billion of trial modification offers made in connection with the 2014 settlement with the U.S. Department of Justice to which the customer has not responded for 2015.

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 renegotiated credit card and other consumer TDR portfolio, collectively referred to as the renegotiated TDR portfolio). The Corporation seeks to assist customers that are experiencing financial difficulty by modifying loans while ensuring compliance with federal, local and international laws and guidelines. Credit card and other consumer loan modifications generally involve reducing the interest rate on the account and placing the customer on a fixed payment plan not exceeding 60 months, all of which are considered TDRs. In addition, the accounts of non-U.S. credit card customers who do not qualify for a fixed payment plan may have their interest rates reduced, as required by certain local jurisdictions. These modifications, which are also TDRs, tend to experience higher payment default rates given that the borrowers may lack the ability to repay even with the interest rate reduction. In substantially all cases, the customer’s available line of credit is canceled. 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. For more information on the regulatory guidance on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.

All credit card and substantially all other consumer loans that have been modified in TDRs remain on accrual status until the loan is either paid in full or charged off, which occurs no later than the end of the month in which the loan becomes 180 days past due or generally at 120 days past due for a loan that has been placed on a fixed payment plan.

The allowance for impaired credit card and substantially all other consumer loans is based on the present value of projected cash flows, which incorporates the Corporation’s historical payment default and loss experience on modified loans, discounted using the portfolio’s average contractual interest rate, excluding promotionally priced loans, in effect prior to restructuring. Credit card and other consumer loans are included in homogeneous pools which are collectively evaluated for impairment. For these portfolios, loss forecast models are utilized that consider a variety of factors including, but not limited to, historical loss experience, delinquency status, economic trends and credit scores.




Impaired Loans – Credit Card and Other Consumer – Renegotiated TDRs

	December 31, 2015						December 31, 2014
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance
With no recorded allowance
Direct/Indirect consumer	$	50	$	21	$	—	$	59	$	25	$	—
With an allowance recorded
U.S. credit card	$	598	$	611	$	176	$	804	$	856	$	207
Non-U.S. credit card	109		126		70		132		168		108
Direct/Indirect consumer	17		21		4		76		92		24
Total
U.S. credit card	$	598	$	611	$	176	$	804	$	856	$	207
Non-U.S. credit card	109		126		70		132		168		108
Direct/Indirect consumer	67		42		4		135		117		24

	2015				2014				2013
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With no recorded allowance
Direct/Indirect consumer	$	22	$	—	$	27	$	—	$	42	$	—
Other consumer	—		—		33		2		34		2
With an allowance recorded
U.S. credit card	$	749	$	43	$	1,148	$	71	$	2,144	$	134
Non-U.S. credit card	145		4		210		6		266		7
Direct/Indirect consumer	51		3		180		9		456		24
Other consumer	—		—		23		1		28		2
Total
U.S. credit card	$	749	$	43	$	1,148	$	71	$	2,144	$	134
Non-U.S. credit card	145		4		210		6		266		7
Direct/Indirect consumer	73		3		207		9		498		24
Other consumer	—		—		56		3		62		4


⁽¹⁾	Includes accrued interest and fees.


⁽²⁾	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 provides information on the Corporation’s primary modification programs for the renegotiated TDR portfolio at December 31, 2015 and 2014.




Credit Card and Other Consumer – Renegotiated TDRs by Program Type

	December 31
	Internal Programs				External Programs				Other ⁽¹⁾				Total				Percent of Balances Current or Less Than 30 Days Past Due
(Dollars in millions)	2015		2014		2015		2014		2015		2014		2015		2014		2015		2014
U.S. credit card	$	313	$	450	$	296	$	397	$	2	$	9	$	611	$	856	88.74	%	84.99	%
Non-U.S. credit card	21		41		10		16		95		111		126		168		44.25		47.56
Direct/Indirect consumer	11		50		7		34		24		33		42		117		89.12		85.21
Total renegotiated TDRs	$	345	$	541	$	313	$	447	$	121	$	153	$	779	$	1,141	81.55		79.51


⁽¹⁾	Other TDRs for non-U.S. credit card include modifications of accounts that are ineligible for a fixed payment plan.

The table below provides information on the Corporation’s renegotiated TDR portfolio including the December 31, 2015, 2014 and 2013 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during 2015, 2014 and 2013, and net charge-offs recorded during the period in which the modification occurred.




Credit Card and Other Consumer – Renegotiated TDRs Entered into During 2015, 2014 and 2013

	December 31, 2015								2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate		Net Charge-offs
U.S. credit card	$	205	$	218	17.07	%	5.08	%	$	26
Non-U.S. credit card	74		86		24.05		0.53		63
Direct/Indirect consumer	19		12		5.95		5.19		9
Total	$	298	$	316	18.58		3.84		$	98

	December 31, 2014								2014
U.S. credit card	$	276	$	301	16.64	%	5.15	%	$	37
Non-U.S. credit card	91		106		24.90		0.68		91
Direct/Indirect consumer	27		19		8.66		4.90		14
Total	$	394	$	426	18.32		4.03		$	142

	December 31, 2013								2013
U.S. credit card	$	299	$	329	16.84	%	5.84	%	$	30
Non-U.S. credit card	134		147		25.90		0.95		138
Direct/Indirect consumer	47		38		11.53		4.74		15
Other consumer	8		8		9.28		5.25		—
Total	$	488	$	522	18.89		4.37		$	183


⁽¹⁾	Includes accrued interest and fees.

The table below provides information on the Corporation’s primary modification programs for the renegotiated TDR portfolio for loans that were modified in TDRs during 2015, 2014 and 2013.




Credit Card and Other Consumer – Renegotiated TDRs Entered into During the Period by Program Type

	2015
(Dollars in millions)	Internal Programs		External Programs		Other ⁽¹⁾		Total
U.S. credit card	$	134	$	84	$	—	$	218
Non-U.S. credit card	3		4		79		86
Direct/Indirect consumer	1		—		11		12
Total renegotiated TDRs	$	138	$	88	$	90	$	316

	2014
U.S. credit card	$	196	$	105	$	—	$	301
Non-U.S. credit card	6		6		94		106
Direct/Indirect consumer	4		2		13		19
Total renegotiated TDRs	$	206	$	113	$	107	$	426

	2013
U.S. credit card	$	192	$	137	$	—	$	329
Non-U.S. credit card	16		9		122		147
Direct/Indirect consumer	15		8		15		38
Other consumer	8		—		—		8
Total renegotiated TDRs	$	231	$	154	$	137	$	522


⁽¹⁾	Other TDRs for non-U.S. credit card include modifications of accounts that are ineligible for a fixed payment plan.

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, 88 percent of new non-U.S. credit card TDRs and 12 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification. Loans that entered into payment default during 2015, 2014 and 2013 that had been modified in a TDR during the preceding 12 months were $43 million, $56 million and $61 million for U.S. credit card, $152 million, $200 million and $236 million for non-U.S. credit card, and $3 million, $5 million and $12 million for direct/indirect consumer.

Commercial Loans

Impaired commercial loans, which include nonperforming loans and TDRs (both performing and nonperforming), are primarily measured based on the present value of payments expected to be received, discounted at the loan’s original effective interest rate. Commercial impaired loans may also be measured based on observable market prices or, for loans that are solely dependent on the collateral for repayment, the estimated fair value of collateral, less costs to sell. If the carrying value of a loan exceeds this amount, a specific allowance is recorded as a component of the allowance for loan and lease losses.

Modifications of loans to commercial borrowers that are experiencing financial difficulty are designed to reduce the Corporation’s loss exposure while providing the borrower with an opportunity to work through financial difficulties, often to avoid foreclosure or bankruptcy. Each modification is unique and reflects the individual circumstances of the borrower. Modifications that result in a TDR may include extensions of maturity at a concessionary (below market) rate of interest, payment forbearances or other actions designed to benefit the customer while mitigating the Corporation’s risk exposure. Reductions in interest rates are rare. Instead, the interest rates are typically increased, although the increased rate may not represent a market rate of interest. Infrequently, concessions may also include principal forgiveness in connection with foreclosure, short sale or other settlement agreements leading to termination or sale of the loan.

At the time of restructuring, the loans are remeasured to reflect the impact, if any, on projected cash flows resulting from the modified terms. If there was no forgiveness of principal and the interest rate was not decreased, the modification may have little or no impact on the allowance established for the loan. If a portion of the loan is deemed to be uncollectible, a charge-off may be recorded at the time of restructuring. Alternatively, a charge-off may have already been recorded in a previous period such that no charge-off is required at the time of modification. For more information on modifications for the U.S. small business commercial portfolio, see Credit Card and Other Consumer in this Note.

At December 31, 2015 and 2014, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were immaterial. Commercial foreclosed properties totaled $15 million and $67 million at December 31, 2015 and 2014.

The table below provides the unpaid principal balance, carrying value and related allowance at December 31, 2015 and 2014, and the average carrying value and interest income recognized for 2015, 2014 and 2013 for impaired loans in the Corporation’s Commercial loan portfolio segment. Certain impaired commercial loans do not have a related allowance as the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.




Impaired Loans – Commercial

	December 31, 2015						December 31, 2014
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
With no recorded allowance
U.S. commercial	$	566	$	541	$	—	$	668	$	650	$	—
Commercial real estate	82		77		—		60		48		—
Non-U.S. commercial	4		4		—		—		—		—
With an allowance recorded
U.S. commercial	$	1,350	$	1,157	$	115	$	1,139	$	839	$	75
Commercial real estate	328		107		11		678		495		48
Non-U.S. commercial	531		381		56		47		44		1
U.S. small business commercial ⁽¹⁾	105		101		35		133		122		35
Total
U.S. commercial	$	1,916	$	1,698	$	115	$	1,807	$	1,489	$	75
Commercial real estate	410		184		11		738		543		48
Non-U.S. commercial	535		385		56		47		44		1
U.S. small business commercial ⁽¹⁾	105		101		35		133		122		35

	2015				2014				2013
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With no recorded allowance
U.S. commercial	$	688	$	14	$	546	$	12	$	442	$	6
Commercial real estate	75		1		166		3		269		3
Non-U.S. commercial	29		1		15		—		28		—
With an allowance recorded
U.S. commercial	$	953	$	48	$	1,198	$	51	$	1,553	$	47
Commercial real estate	216		7		632		16		1,148		28
Non-U.S. commercial	125		7		52		3		109		5
U.S. small business commercial ⁽¹⁾	109		1		151		3		236		6
Total
U.S. commercial	$	1,641	$	62	$	1,744	$	63	$	1,995	$	53
Commercial real estate	291		8		798		19		1,417		31
Non-U.S. commercial	154		8		67		3		137		5
U.S. small business commercial ⁽¹⁾	109		1		151		3		236		6


⁽¹⁾	Includes U.S. small business commercial renegotiated TDR loans and related allowance.


⁽²⁾	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 December 31, 2015, 2014 and 2013 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during 2015, 2014 and 2013, and net charge-offs that were recorded during the period in which the modification occurred. The table below includes 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.




Commercial – TDRs Entered into During 2015, 2014 and 2013

	December 31, 2015				2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Net Charge-offs
U.S. commercial	$	853	$	779	$	28
Commercial real estate	42		42		—
Non-U.S. commercial	329		326		—
U.S. small business commercial ⁽¹⁾	14		11		3
Total	$	1,238	$	1,158	$	31

	December 31, 2014				2014
U.S. commercial	$	818	$	785	$	49
Commercial real estate	346		346		8
Non-U.S. commercial	44		43		—
U.S. small business commercial ⁽¹⁾	3		3		—
Total	$	1,211	$	1,177	$	57

	December 31, 2013				2013
U.S. commercial	$	926	$	910	$	33
Commercial real estate	483		425		3
Non-U.S. commercial	61		44		7
U.S. small business commercial ⁽¹⁾	8		9		1
Total	$	1,478	$	1,388	$	44


⁽¹⁾	U.S. small business commercial TDRs are comprised of renegotiated small business card loans.

A commercial TDR is generally deemed to be in payment default when the loan is 90 days or more past due, including delinquencies that were not resolved as part of the modification. U.S. small business commercial TDRs 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, along with observable market prices or fair value of collateral when measuring the allowance for loan and lease losses. TDRs that were in payment default had a carrying value of $105 million, $103 million and $55 million for U.S. commercial and $25 million, $211 million and $128 million for commercial real estate at December 31, 2015, 2014 and 2013, respectively.

Purchased Credit-impaired Loans

PCI loans are acquired loans with evidence of credit quality deterioration since origination for which it is probable at purchase date that the Corporation will be unable to collect all contractually required payments.

The following table shows activity for the accretable yield on PCI loans, which include the Countrywide Financial Corporation (Countrywide) portfolio and loans repurchased in connection with the 2013 settlement with FNMA. The amount of accretable yield is affected by changes in credit outlooks, including metrics such as default rates and loss severities, prepayment speeds, which can change the amount and period of time over which interest payments are expected to be received, and the interest rates on variable rate loans. The reclassifications from nonaccretable difference during 2015 and 2014 were primarily due to lower expected loss rates and a decrease in the forecasted prepayment speeds. Changes in the prepayment assumption affect the expected remaining life of the portfolio which results in a change to the amount of future interest cash flows.




Rollforward of Accretable Yield

(Dollars in millions)
Accretable yield, January 1, 2014	$	6,694
Accretion	(1,061		)
Disposals/transfers	(506		)
Reclassifications from nonaccretable difference	481
Accretable yield, December 31, 2014	5,608
Accretion	(861		)
Disposals/transfers	(465		)
Reclassifications from nonaccretable difference	287
Accretable yield, December 31, 2015	$	4,569

During 2015, the Corporation sold PCI loans with a carrying value of $1.4 billion, which excludes the related allowance of $234 million. For more information on PCI loans, see Note 1 – Summary of Significant Accounting Principles, and for the carrying value and valuation allowance for PCI loans, see Note 5 – Allowance for Credit Losses.

Loans Held-for-sale

The Corporation had LHFS of $7.5 billion and $12.8 billion at December 31, 2015 and 2014. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $41.2 billion, $40.1 billion and $81.0 billion for 2015, 2014 and 2013, respectively. Cash used for originations and purchases of LHFS totaled $38.7 billion, $40.1 billion and $65.7 billion for 2015, 2014 and 2013, respectively.