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, 2018

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, 2018 and 2017.




	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
(Dollars in millions)	December 31, 2018
Consumer real estate
Core portfolio
Residential mortgage	$	1,188		$	249		$	793		$	2,230		$	191,465								$	193,695
Home equity	200			85			387			672			39,338									40,010
Non-core portfolio
Residential mortgage	624			268			2,012			2,904			8,158			$	3,800					14,862
Home equity	119			60			287			466			6,965			845						8,276
Credit card and other consumer
U.S. credit card	577			418			994			1,989			96,349									98,338
Direct/Indirect consumer ⁽⁵⁾	317			90			40			447			90,719									91,166
Other consumer ⁽⁶⁾	—			—			—			—			202									202
Total consumer	3,025			1,170			4,513			8,708			433,196			4,645						446,549
Consumer loans accounted for under the fair value option ⁽⁷⁾																			$	682		682
Total consumer loans and leases	3,025			1,170			4,513			8,708			433,196			4,645			682			447,231
Commercial
U.S. commercial	594			232			573			1,399			297,878									299,277
Non-U.S. commercial	1			49			—			50			98,726									98,776
Commercial real estate ⁽⁸⁾	29			16			14			59			60,786									60,845
Commercial lease financing	124			114			37			275			22,259									22,534
U.S. small business commercial	83			54			96			233			14,332									14,565
Total commercial	831			465			720			2,016			493,981									495,997
Commercial loans accounted for under the fair value option ⁽⁷⁾																			3,667			3,667
Total commercial loans and leases	831			465			720			2,016			493,981						3,667			499,664
Total loans and leases ⁽⁹⁾	$	3,856		$	1,635		$	5,233		$	10,724		$	927,177		$	4,645		$	4,349		$	946,895
Percentage of outstandings	0.41		%	0.17		%	0.55		%	1.13		%	97.92		%	0.49		%	0.46		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $637 million and nonperforming loans of $217 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $269 million and nonperforming loans of $146 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $1.9 billion.


⁽³⁾	Consumer real estate includes $1.8 billion and direct/indirect consumer includes $53 million of nonperforming loans.


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


⁽⁵⁾	Total outstandings includes auto and specialty lending loans and leases of $50.1 billion, unsecured consumer lending loans of $383 million, U.S. securities-based lending loans of $37.0 billion, non-U.S. consumer loans of $2.9 billion and other consumer loans of $746 million.


⁽⁶⁾	Substantially all of other consumer is consumer overdrafts.

⁽⁷⁾

Consumer loans accounted for under the fair value option includes residential mortgage loans of $336 million and home equity loans of $346 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $2.5 billion and non-U.S. commercial loans of $1.1 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.


⁽⁸⁾	Total outstandings includes U.S. commercial real estate loans of $56.6 billion and non-U.S. commercial real estate loans of $4.2 billion.


⁽⁹⁾	Total outstandings includes loans and leases pledged as collateral of $36.7 billion. The Corporation also pledged $166.1 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank (FHLB).




	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
(Dollars in millions)	December 31, 2017
Consumer real estate
Core portfolio
Residential mortgage	$	1,242		$	321		$	1,040		$	2,603		$	174,015								$	176,618
Home equity	215			108			473			796			43,449									44,245
Non-core portfolio
Residential mortgage	1,028			468			3,535			5,031			14,161			$	8,001					27,193
Home equity	224			121			572			917			9,866			2,716						13,499
Credit card and other consumer
U.S. credit card	542			405			900			1,847			94,438									96,285
Direct/Indirect consumer ⁽⁵⁾	330			104			44			478			95,864									96,342
Other consumer ⁽⁶⁾	—			—			—			—			166									166
Total consumer	3,581			1,527			6,564			11,672			431,959			10,717						454,348
Consumer loans accounted for under the fair value option ⁽⁷⁾																			$	928		928
Total consumer loans and leases	3,581			1,527			6,564			11,672			431,959			10,717			928			455,276
Commercial
U.S. commercial	547			244			425			1,216			283,620									284,836
Non-U.S. commercial	52			1			3			56			97,736									97,792
Commercial real estate ⁽⁸⁾	48			10			29			87			58,211									58,298
Commercial lease financing	110			68			26			204			21,912									22,116
U.S. small business commercial	95			45			88			228			13,421									13,649
Total commercial	852			368			571			1,791			474,900									476,691
Commercial loans accounted for under the fair value option ⁽⁷⁾																			4,782			4,782
Total commercial loans and leases	852			368			571			1,791			474,900						4,782			481,473
Total loans and leases ⁽⁹⁾	$	4,433		$	1,895		$	7,135		$	13,463		$	906,859		$	10,717		$	5,710		$	936,749
Percentage of outstandings	0.48		%	0.20		%	0.76		%	1.44		%	96.81		%	1.14		%	0.61		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $850 million and nonperforming loans of $253 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $386 million and nonperforming loans of $195 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $3.2 billion.


⁽³⁾	Consumer real estate includes $2.3 billion and direct/indirect consumer includes $43 million of nonperforming loans.


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


⁽⁵⁾	Total outstandings includes auto and specialty lending loans and leases of $52.4 billion, unsecured consumer lending loans of $469 million, U.S. securities-based lending loans of $39.8 billion, non-U.S. consumer loans of $3.0 billion and other consumer loans of $684 million.


⁽⁶⁾	Substantially all of other consumer is consumer overdrafts.

⁽⁷⁾

Consumer loans accounted for under the fair value option includes residential mortgage loans of $567 million and home equity loans of $361 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $2.6 billion and non-U.S. commercial loans of $2.2 billion. For additional information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option.


⁽⁸⁾	Total outstandings includes U.S. commercial real estate loans of $54.8 billion and non-U.S. commercial real estate loans of $3.5 billion.


⁽⁹⁾	Total outstandings includes loans and leases pledged as collateral of $40.1 billion. The Corporation also pledged $160.3 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and FHLB.

The Corporation categorizes consumer real estate loans as core and non-core based on loan and customer characteristics such as origination date, product type, LTV, FICO score and delinquency status consistent with its current consumer and mortgage servicing strategy. Generally, loans that were originated after January 1, 2010, qualified under government-sponsored enterprise (GSE) underwriting guidelines, or otherwise met the Corporation’s underwriting guidelines in place in 2015 are characterized as core loans. All other loans are generally characterized as non-core loans and represent runoff portfolios.

The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $6.1 billion and $6.3 billion at December 31, 2018 and 2017, 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.

During 2018, the Corporation sold $11.6 billion of consumer real estate loans compared to $4.0 billion in 2017. In addition to recurring loan sales, the 2018 amount includes sales of loans, primarily non-core, with a carrying value of $9.6 billion and related gains of $731 million recorded in other income in the Consolidated Statement of Income.

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, 2018 and 2017, $221 million and $330 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, 2018, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $185 million of which $98 million were current on their contractual payments, while $70 million were 90 days or more past due. Of the contractually current nonperforming loans, 63 percent were discharged in Chapter 7 bankruptcy over 12 months ago, and 55 percent were discharged 24 months or more ago.

During 2018, the Corporation sold nonperforming and PCI consumer real estate loans with a carrying value of $5.3 billion, including $4.4 billion of PCI loans, compared to $1.3 billion, including $803 million of PCI loans, in 2017.

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, 2018 and 2017. 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

	Nonperforming Loans and Leases				Accruing Past Due 90 Days or More
	December 31
(Dollars in millions)	2018		2017		2018		2017
Consumer real estate
Core portfolio
Residential mortgage ⁽¹⁾	$	1,010	$	1,087	$	274	$	417
Home equity	955		1,079		—		—
Non-core portfolio
Residential mortgage⁽¹⁾	883		1,389		1,610		2,813
Home equity	938		1,565		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		994		900
Direct/Indirect consumer	56		46		38		40
Total consumer	3,842		5,166		2,916		4,170
Commercial
U.S. commercial	794		814		197		144
Non-U.S. commercial	80		299		—		3
Commercial real estate	156		112		4		4
Commercial lease financing	18		24		29		19
U.S. small business commercial	54		55		84		75
Total commercial	1,102		1,304		314		245
Total loans and leases	$	4,944	$	6,470	$	3,230	$	4,415

⁽¹⁾

Residential mortgage loans in the core and non-core portfolios accruing past due 90 days or more are fully-insured loans. At December 31, 2018 and 2017, residential mortgage includes $1.4 billion and $2.2 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 $498 million and $1.0 billion of loans on which interest is still accruing.

n/a = not applicableCredit 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 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. FICO scores are typically refreshed quarterly or more

frequently. Certain borrowers (e.g., borrowers that have had debts discharged in a bankruptcy proceeding) may not have their FICO scores updated. 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, 2018 and 2017.




Consumer Real Estate – Credit Quality Indicators ⁽¹⁾

	Core Residential Mortgage ⁽²⁾		Non-core Residential Mortgage ⁽²⁾		Residential Mortgage PCI		Core Home Equity ⁽²⁾		Non-core Home Equity ⁽²⁾		Home Equity PCI
(Dollars in millions)	December 31, 2018
Refreshed LTV⁽³⁾
Less than or equal to 90 percent	$	173,911	$	6,861	$	3,411	$	39,246	$	5,870	$	608
Greater than 90 percent but less than or equal to 100 percent	2,349		340		193		354		603		112
Greater than 100 percent	817		349		196		410		958		125
Fully-insured loans ⁽⁴⁾	16,618		3,512
Total consumer real estate	$	193,695	$	11,062	$	3,800	$	40,010	$	7,431	$	845
Refreshed FICO score
Less than 620	$	2,125	$	1,264	$	710	$	1,064	$	1,325	$	178
Greater than or equal to 620 and less than 680	4,538		1,068		651		2,008		1,575		145
Greater than or equal to 680 and less than 740	23,841		1,841		1,201		7,008		1,968		220
Greater than or equal to 740	146,573		3,377		1,238		29,930		2,563		302
Fully-insured loans ⁽⁴⁾	16,618		3,512
Total consumer real estate	$	193,695	$	11,062	$	3,800	$	40,010	$	7,431	$	845


⁽¹⁾	Excludes $682 million of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.


⁽⁴⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.




Credit Card and Other Consumer – Credit Quality Indicators

	U.S. Credit Card		Direct/Indirect Consumer		Other Consumer
(Dollars in millions)	December 31, 2018
Refreshed FICO score
Less than 620	$	5,016	$	1,719
Greater than or equal to 620 and less than 680	12,415		3,124
Greater than or equal to 680 and less than 740	35,781		8,921
Greater than or equal to 740	45,126		36,709
Other internal credit metrics ^{(1, 2)}			40,693		$	202
Total credit card and other consumer	$	98,338	$	91,166	$	202


⁽¹⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽²⁾	Direct/indirect consumer includes $39.9 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk.




Commercial – Credit Quality Indicators ⁽¹⁾

	U.S. Commercial		Non-U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		U.S. Small Business Commercial ⁽²⁾
(Dollars in millions)	December 31, 2018
Risk ratings
Pass rated	$	291,918	$	97,916	$	59,910	$	22,168	$	389
Reservable criticized	7,359		860		935		366		29
Refreshed FICO score ⁽³⁾
Less than 620									264
Greater than or equal to 620 and less than 680									684
Greater than or equal to 680 and less than 740									2,072
Greater than or equal to 740									4,254
Other internal credit metrics ^{(3, 4)}									6,873
Total commercial	$	299,277	$	98,776	$	60,845	$	22,534	$	14,565


⁽¹⁾	Excludes $3.7 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $731 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, 2018, 99 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⁾

	Core Residential Mortgage ⁽²⁾		Non-core Residential Mortgage ⁽²⁾		Residential Mortgage PCI		Core Home Equity ⁽²⁾		Non-core Home Equity ⁽²⁾		Home Equity PCI
(Dollars in millions)	December 31, 2017
Refreshed LTV ⁽³⁾
Less than or equal to 90 percent	$	153,669	$	12,135	$	6,872	$	43,048	$	7,944	$	1,781
Greater than 90 percent but less than or equal to 100 percent	3,082		850		559		549		1,053		412
Greater than 100 percent	1,322		1,011		570		648		1,786		523
Fully-insured loans ⁽⁴⁾	18,545		5,196
Total consumer real estate	$	176,618	$	19,192	$	8,001	$	44,245	$	10,783	$	2,716
Refreshed FICO score
Less than 620	$	2,234	$	2,390	$	1,941	$	1,169	$	2,098	$	452
Greater than or equal to 620 and less than 680	4,531		2,086		1,657		2,371		2,393		466
Greater than or equal to 680 and less than 740	22,934		3,519		2,396		8,115		2,723		786
Greater than or equal to 740	128,374		6,001		2,007		32,590		3,569		1,012
Fully-insured loans ⁽⁴⁾	18,545		5,196
Total consumer real estate	$	176,618	$	19,192	$	8,001	$	44,245	$	10,783	$	2,716


⁽¹⁾	Excludes $928 million of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Refreshed LTV percentages for PCI loans are calculated using the carrying value net of the related valuation allowance.


⁽⁴⁾	Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.




Credit Card and Other Consumer – Credit Quality Indicators

	U.S. Credit Card		Direct/Indirect Consumer		Other Consumer
(Dollars in millions)	December 31, 2017
Refreshed FICO score
Less than 620	$	4,730	$	2,005
Greater than or equal to 620 and less than 680	12,422		4,064
Greater than or equal to 680 and less than 740	35,656		10,371
Greater than or equal to 740	43,477		36,445
Other internal credit metrics ^{(1, 2)}			43,457		$	166
Total credit card and other consumer	$	96,285	$	96,342	$	166


⁽¹⁾	Other internal credit metrics may include delinquency status, geography or other factors.


⁽²⁾	Direct/indirect consumer includes $42.8 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk.




Commercial – Credit Quality Indicators ⁽¹⁾

	U.S. Commercial		Non-U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		U.S. Small Business Commercial ⁽²⁾
(Dollars in millions)	December 31, 2017
Risk ratings
Pass rated	$	275,904	$	96,199	$	57,732	$	21,535	$	322
Reservable criticized	8,932		1,593		566		581		50
Refreshed FICO score ⁽³⁾
Less than 620									223
Greater than or equal to 620 and less than 680									625
Greater than or equal to 680 and less than 740									1,875
Greater than or equal to 740									3,713
Other internal credit metrics ^{(3, 4)}									6,841
Total commercial	$	284,836	$	97,792	$	58,298	$	22,116	$	13,649


⁽¹⁾	Excludes $4.8 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $709 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, 2017, 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. For more 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 government programs or the Corporation’s 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 $858 million were included in TDRs at December 31, 2018, of which $185 million were classified as nonperforming and $344 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.

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. 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.

At December 31, 2018 and 2017, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were not significant. Consumer real estate foreclosed properties totaled $244 million and $236 million at December 31, 2018 and 2017. The carrying value of consumer real estate loans, including fully-insured and PCI loans, for which formal foreclosure proceedings were in process at December 31, 2018 was $2.5 billion. During 2018 and 2017, the Corporation reclassified $670 million and $815 million 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 in the Consolidated Statement of Cash Flows.

The following table provides the unpaid principal balance, carrying value and related allowance at December 31, 2018 and 2017, and the average carrying value and interest income recognized in 2018, 2017 and 2016 for impaired loans in the Corporation’s Consumer Real Estate portfolio segment. 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

	Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
(Dollars in millions)	December 31, 2018						December 31, 2017
With no recorded allowance
Residential mortgage	$	5,396	$	4,268	$	—	$	8,856	$	6,870	$	—
Home equity	2,948		1,599		—		3,622		1,956		—
With an allowance recorded
Residential mortgage	$	1,977	$	1,929	$	114	$	2,908	$	2,828	$	174
Home equity	812		760		144		972		900		174
Total ⁽¹⁾
Residential mortgage	$	7,373	$	6,197	$	114	$	11,764	$	9,698	$	174
Home equity	3,760		2,359		144		4,594		2,856		174

	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
	2018				2017				2016
With no recorded allowance
Residential mortgage	$	5,424	$	207	$	7,737	$	311	$	10,178	$	360
Home equity	1,894		105		1,997		109		1,906		90
With an allowance recorded
Residential mortgage	$	2,409	$	91	$	3,414	$	123	$	5,067	$	167
Home equity	861		25		858		24		852		24
Total ⁽¹⁾
Residential mortgage	$	7,833	$	298	$	11,151	$	434	$	15,245	$	527
Home equity	2,755		130		2,855		133		2,758		114


⁽¹⁾	During 2018, previously impaired consumer real estate loans with a carrying value of $2.3 billion were sold.


⁽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, 2018, 2017 and 2016 unpaid principal balance, carrying value, and average pre- and post-modification interest rates on consumer real estate loans that were modified in TDRs during 2018, 2017 and 2016. 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.




Consumer Real Estate – TDRs Entered into During 2018, 2017 and 2016

	Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate ⁽¹⁾
(Dollars in millions)	December 31, 2018
Residential mortgage	$	774	$	641	4.33	%	4.21	%
Home equity	489		358		4.46		3.74
Total	$	1,263	$	999	4.38		4.03

	December 31, 2017
Residential mortgage	$	824	$	712	4.43	%	4.16	%
Home equity	764		590		4.22		3.49
Total	$	1,588	$	1,302	4.33		3.83

	December 31, 2016
Residential mortgage	$	1,130	$	1,017	4.73	%	4.16	%
Home equity	849		649		3.95		2.72
Total	$	1,979	$	1,666	4.40		3.54


⁽¹⁾	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.

The table below presents the December 31, 2018, 2017 and 2016 carrying value for consumer real estate loans that were modified in a TDR during 2018, 2017 and 2016, by type of modification.




Consumer Real Estate – Modification Programs

	TDRs Entered into During
(Dollars in millions)	2018		2017		2016
Modifications under government programs
Contractual interest rate reduction	$	19	$	59	$	151
Principal and/or interest forbearance	—		4		13
Other modifications ⁽¹⁾	42		22		23
Total modifications under government programs	61		85		187
Modifications under proprietary programs
Contractual interest rate reduction	209		281		235
Capitalization of past due amounts	96		63		40
Principal and/or interest forbearance	51		38		72
Other modifications⁽¹⁾	167		55		75
Total modifications under proprietary programs	523		437		422
Trial modifications	285		569		831
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	130		211		226
Total modifications	$	999	$	1,302	$	1,666


⁽¹⁾	Includes other modifications such as term or payment extensions and repayment plans. During 2018, this included $198 million of modifications that met the definition of a TDR related to the 2017 hurricanes. These modifications had been written down to their net realizable value less costs to sell or were fully insured as of December 31, 2018.


⁽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 2018, 2017 and 2016 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.




Consumer Real Estate – TDRs Entering Payment Default that were Modified During the Preceding 12 Months

(Dollars in millions)	2018		2017		2016
Modifications under government programs	$	39	$	81	$	262
Modifications under proprietary programs	158		138		196
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	64		116		158
Trial modifications ⁽²⁾	107		391		824
Total modifications	$	368	$	726	$	1,440


⁽¹⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.

⁽²⁾

Includes trial modification offers to which the customer did not respond.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 Corporation seeks to assist customers that are experiencing financial difficulty by modifying loans while ensuring compliance with federal and local laws and guidelines. Credit card and other consumer loan modifications generally involve reducing the interest rate on the account, placing the customer on a fixed payment plan not exceeding 60 months and canceling the customer’s available line of credit, all of which are considered TDRs. 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.

The table below provides the unpaid principal balance, carrying value and related allowance at December 31, 2018 and 2017, and the average carrying value for 2018, 2017 and 2016 on TDRs within the Credit Card and Other Consumer portfolio segment.




Impaired Loans – Credit Card and Other Consumer

	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Average Carrying Value ⁽²⁾
(Dollars in millions)	December 31, 2018						December 31, 2017						2018		2017		2016
With no recorded allowance
Direct/Indirect consumer	$	72	$	33	$	—	$	58	$	28	$	—	$	30	$	21	$	20
With an allowance recorded
U.S. credit card	$	522	$	533	$	154	$	454	$	461	$	125	$	491	$	464	$	556
Non-U.S. credit card ⁽³⁾	n/a		n/a		n/a		n/a		n/a		n/a		n/a		47		111
Direct/Indirect consumer	—		—		—		1		1		—		1		2		10
Total
U.S. credit card	$	522	$	533	$	154	$	454	$	461	$	125	$	491	$	464	$	556
Non-U.S. credit card ⁽³⁾	n/a		n/a		n/a		n/a		n/a		n/a		n/a		47		111
Direct/Indirect consumer	72		33		—		59		29		—		31		23		30


⁽¹⁾	Includes accrued interest and fees.


⁽²⁾	The related interest income recognized, which included 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 was considered collectible, was not significant in 2018, 2017 and 2016.


⁽³⁾	In 2017, the Corporation sold its non-U.S. consumer credit card business.

n/a = not applicable

The table below provides information on the Corporation’s primary modification programs for the Credit Card and Other Consumer TDR portfolio at December 31, 2018 and 2017.




Credit Card and Other Consumer – TDRs by Program Type at December 31

	U.S. Credit Card						Direct/Indirect Consumer						Total TDRs by Program Type
(Dollars in millions)	2018			2017			2018			2017			2018			2017
Internal programs	$	259		$	203		$	—		$	1		$	259		$	204
External programs	273			257			—			—			273			257
Other	1			1			33			28			34			29
Total	$	533		$	461		$	33		$	29		$	566		$	490
Percent of balances current or less than 30 days past due	85		%	87		%	81		%	88		%	85		%	87		%

The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the December 31, 2018, 2017 and 2016 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during 2018, 2017 and 2016.




Credit Card and Other Consumer – TDRs Entered into During 2018, 2017 and 2016

	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate
(Dollars in millions)	December 31, 2018
U.S. credit card	$	278	$	292	19.49	%	5.24	%
Direct/Indirect consumer	42		23		5.10		4.95
Total	$	320	$	315	18.45		5.22

	December 31, 2017
U.S. credit card	$	203	$	213	18.47	%	5.32	%
Direct/Indirect consumer	37		22		4.81		4.30
Total	$	240	$	235	17.17		5.22

	December 31, 2016
U.S. credit card	$	163	$	172	17.54	%	5.47	%
Non-U.S. credit card	66		75		23.99		0.52
Direct/Indirect consumer	21		13		3.44		3.29
Total	$	250	$	260	18.73		3.93


⁽¹⁾	Includes accrued interest and fees.

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 13 percent of new U.S. credit card TDRs and 14 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification.Commercial Loans

Impaired commercial loans include nonperforming loans and TDRs (both performing and nonperforming). 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, 2018 and 2017, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were $297 million and $205 million.

The table below provides information on impaired loans in the Commercial loan portfolio segment including the unpaid principal balance, carrying value and related allowance at December 31, 2018 and 2017, and the average carrying value for 2018, 2017 and 2016. Certain impaired commercial loans do not have a related allowance because the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.




Impaired Loans – Commercial

	Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance		Average Carrying Value ⁽¹⁾
(Dollars in millions)	December 31, 2018						December 31, 2017						2018		2017		2016
With no recorded allowance
U.S. commercial	$	638	$	616	$	—	$	576	$	571	$	—	$	655	$	772	$	787
Non-U.S. commercial	93		93		—		14		11		—		43		46		34
Commercial real estate	—		—		—		83		80		—		44		69		67
Commercial lease financing	—		—		—		—		—		—		3		—		—
With an allowance recorded
U.S. commercial	$	1,437	$	1,270	$	121	$	1,393	$	1,109	$	98	$	1,162	$	1,260	$	1,569
Non-U.S. commercial	155		149		30		528		507		58		327		463		409
Commercial real estate	247		162		16		133		41		4		46		73		92
Commercial lease financing	71		71		—		20		18		3		42		8		2
U.S. small business commercial ⁽²⁾	83		72		29		84		70		27		73		73		87
Total
U.S. commercial	$	2,075	$	1,886	$	121	$	1,969	$	1,680	$	98	$	1,817	$	2,032	$	2,356
Non-U.S. commercial	248		242		30		542		518		58		370		509		443
Commercial real estate	247		162		16		216		121		4		90		142		159
Commercial lease financing	71		71		—		20		18		3		45		8		2
U.S. small business commercial ⁽²⁾	83		72		29		84		70		27		73		73		87


⁽¹⁾	The related interest income recognized, which included 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 was considered collectible, was not significant in 2018, 2017 and 2016.


⁽²⁾	Includes U.S. small business commercial renegotiated TDR loans and related allowance.

The table below presents the December 31, 2018, 2017 and 2016 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during 2018, 2017 and 2016. 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 2018, 2017 and 2016

	Unpaid Principal Balance		Carrying Value
(Dollars in millions)	December 31, 2018
U.S. commercial	$	1,154	$	1,098
Non-U.S. commercial	166		165
Commercial real estate	115		115
Commercial lease financing	68		68
U.S. small business commercial ⁽¹⁾	9		8
Total	$	1,512	$	1,454

	December 31, 2017
U.S. commercial	$	1,033	$	922
Non-U.S. commercial	105		105
Commercial real estate	35		24
Commercial lease financing	20		17
U.S. small business commercial ⁽¹⁾	13		13
Total	$	1,206	$	1,081

	December 31, 2016
U.S. commercial	$	1,556	$	1,482
Non-U.S. commercial	255		253
Commercial real estate	77		77
Commercial lease financing	6		4
U.S. small business commercial ⁽¹⁾	1		1
Total	$	1,895	$	1,817


⁽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 $150 million, $64 million and $140

million for U.S. commercial and $3 million, $19 million and $34 million for commercial real estate at December 31, 2018, 2017 and 2016, respectively.

Purchased Credit-impaired Loans

The table below shows activity for the accretable yield on PCI loans, which includes 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 2018 and 2017 were primarily due to an increase in the expected principal and interest cash flows due to lower default estimates and the rising interest rate environment.




Rollforward of Accretable Yield

(Dollars in millions)
Accretable yield, January 1, 2017	$	3,805
Accretion	(601		)
Disposals/transfers	(634		)
Reclassifications from nonaccretable difference	219
Accretable yield, December 31, 2017	2,789
Accretion	(457		)
Disposals/transfers	(1,456		)
Reclassifications from nonaccretable difference	368
Accretable yield, December 31, 2018	$	1,244

During 2018 and 2017, the Corporation sold PCI loans with a carrying value of $4.4 billion and $803 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 6 – Allowance for Credit Losses.

Loans Held-for-sale

The Corporation had LHFS of $10.4 billion and $11.4 billion at December 31, 2018 and 2017. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $29.2 billion, $41.3 billion and $32.6 billion for 2018, 2017 and 2016, respectively. Cash used for originations and purchases of LHFS totaled $28.1 billion, $43.5 billion and $33.1 billion for 2018, 2017 and 2016, respectively.