Annual report pursuant to Section 13 and 15(d)

Outstanding Loans and Leases

v3.19.3.a.u2
Outstanding Loans and Leases
12 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
Outstanding Loans and Leases Outstanding Loans and Leases
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, 2019 and 2018.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
 
Loans Accounted for Under the Fair Value Option
 
Total
Outstandings
(Dollars in millions)
December 31, 2019
Consumer real estate
 

 
 
 
 

 
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
$
1,378

 
$
261

 
$
565

 
$
2,204

 
$
223,566

 
 
 
$
225,770

Home equity
135

 
70

 
198

 
403

 
34,823

 
 
 
35,226

Non-core portfolio
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
458

 
209

 
1,263

 
1,930

 
8,469

 
 
 
10,399

Home equity
34

 
16

 
72

 
122

 
4,860

 
 
 
4,982

Credit card and other consumer
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit card
564

 
429

 
1,042

 
2,035

 
95,573

 
 
 
97,608

Direct/Indirect consumer (4)
297

 
85

 
35

 
417

 
90,581

 
 
 
90,998

Other consumer

 

 

 

 
192

 
 
 
192

Total consumer
2,866

 
1,070

 
3,175

 
7,111

 
458,064

 
 
 
465,175

Consumer loans accounted for under the fair value option (5)
 

 
 

 
 

 
 

 
 

 
$
594

 
594

Total consumer loans and leases
2,866

 
1,070

 
3,175

 
7,111

 
458,064

 
594

 
465,769

Commercial
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. commercial
788

 
279

 
371

 
1,438

 
305,610

 
 
 
307,048

Non-U.S. commercial
35

 
23

 
8

 
66

 
104,900

 
 
 
104,966

Commercial real estate (6)
144

 
19

 
119

 
282

 
62,407

 
 
 
62,689

Commercial lease financing
100

 
56

 
39

 
195

 
19,685

 
 
 
19,880

U.S. small business commercial
119

 
56

 
107

 
282

 
15,051

 
 
 
15,333

Total commercial
1,186

 
433

 
644

 
2,263

 
507,653

 
 
 
509,916

Commercial loans accounted for under the fair value option (5)
 

 
 

 
 

 
 

 
 

 
7,741

 
7,741

Total commercial loans and leases
1,186

 
433

 
644

 
2,263

 
507,653

 
7,741

 
517,657

Total loans and leases (7)
$
4,052

 
$
1,503

 
$
3,819

 
$
9,374

 
$
965,717

 
$
8,335

 
$
983,426

Percentage of outstandings
0.41
%
 
0.15
%
 
0.39
%
 
0.95
%
 
98.20
%
 
0.85
%
 
100.00
%
(1) 
Consumer real estate loans 30-59 days past due includes fully-insured loans of $517 million and nonperforming loans of $139 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $206 million and nonperforming loans of $114 million.
(2) 
Consumer real estate includes fully-insured loans of $1.1 billion.
(3) 
Consumer real estate includes $856 million and direct/indirect consumer includes $45 million of nonperforming loans.
(4) 
Total outstandings primarily includes auto and specialty lending loans and leases of $50.4 billion, U.S. securities-based lending loans of $36.7 billion and non-U.S. consumer loans of $2.8 billion.
(5) 
Consumer loans accounted for under the fair value option includes residential mortgage loans of $257 million and home equity loans of $337 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $4.7 billion and non-U.S. commercial loans of $3.1 billion. For more information, see Note 21 – Fair Value Measurements and Note 22 – Fair Value Option.
(6) 
Total outstandings includes U.S. commercial real estate loans of $59.0 billion and non-U.S. commercial real estate loans of $3.7 billion.
(7) 
Total outstandings includes loans and leases pledged as collateral of $25.9 billion. The Corporation also pledged $168.2 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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)
 
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
757

 
309

 
2,201

 
3,267

 
11,595

 
 

 
14,862

Home equity
139

 
69

 
339

 
547

 
7,729

 
 

 
8,276

Credit card and other consumer
 
 
 

 
 

 
 

 
 

 
 

 
 

Credit card
577

 
418

 
994

 
1,989

 
96,349

 
 

 
98,338

Direct/Indirect consumer (4)
317

 
90

 
40

 
447

 
90,719

 
 

 
91,166

Other consumer (5)

 

 

 

 
202

 
 

 
202

Total consumer
3,178

 
1,220

 
4,754

 
9,152

 
437,397

 
 

446,549

Consumer loans accounted for under the fair value option (6)
 
 
 
 
 
 
 
 
 
 
$
682


682

Total consumer loans and leases
3,178

 
1,220

 
4,754

 
9,152

 
437,397

 
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 (7)
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 (6)
 
 
 
 
 
 
 
 
 
 
3,667

 
3,667

Total commercial loans and leases
831

 
465

 
720

 
2,016

 
493,981

 
3,667

 
499,664

Total loans and leases (8)
$
4,009

 
$
1,685

 
$
5,474

 
$
11,168

 
$
931,378

 
$
4,349

 
$
946,895

Percentage of outstandings
0.42
%
 
0.18
%
 
0.58
%
 
1.18
%
 
98.36
%
 
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) 
Total outstandings primarily includes auto and specialty lending loans and leases of $50.1 billion, U.S. securities-based lending loans of $37.0 billion and non-U.S. consumer loans of $2.9 billion.
(5) 
Substantially all of other consumer is consumer overdrafts.
(6) 
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 more information, see Note 21 – Fair Value Measurements and Note 22 – Fair Value Option.
(7) 
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.
(8) 
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.
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 $7.5 billion and $6.1 billion at December 31, 2019 and 2018, 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 2019, the Corporation sold $4.7 billion of consumer real estate compared to $11.6 billion in 2018.
Nonperforming Loans and Leases
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 loans have not been otherwise modified. The Corporation continues to have a lien on the underlying collateral.

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, 2019 and 2018. 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)
2019
 
2018
 
2019
 
2018
Consumer real estate
 

 
 

 
 

 
 

Core portfolio
 
 
 
 
 
 
 
Residential mortgage (1)
$
883

 
$
1,010

 
$
176

 
$
274

Home equity
363

 
955

 

 

Non-core portfolio
 

 
 

 
 

 
 
Residential mortgage (1)
587

 
883

 
912

 
1,610

Home equity
173

 
938

 

 

Credit card and other consumer
 

 
 

 
 
 
 
Credit card
n/a

 
n/a

 
1,042

 
994

Direct/Indirect consumer
47

 
56

 
33

 
38

Total consumer
2,053

 
3,842

 
2,163

 
2,916

Commercial
 

 
 

 
 

 
 

U.S. commercial
1,094

 
794

 
106

 
197

Non-U.S. commercial
43

 
80

 
8

 

Commercial real estate
280

 
156

 
19

 
4

Commercial lease financing
32

 
18

 
20

 
29

U.S. small business commercial
50

 
54

 
97

 
84

Total commercial
1,499

 
1,102

 
250

 
314

Total loans and leases
$
3,552

 
$
4,944

 
$
2,413

 
$
3,230

(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, 2019 and 2018, residential mortgage includes $740 million and $1.4 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 $348 million and $498 million 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 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, 2019 and 2018.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consumer Real Estate – Credit Quality Indicators (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core Residential Mortgage
 
Non-core Residential Mortgage
 
Core
Home Equity
 
Non-core Home Equity
 
Core Residential Mortgage
 
Non-core Residential Mortgage
 
Core
Home Equity
 
Non-core Home Equity
(Dollars in millions)
December 31, 2019
 
December 31, 2018
Refreshed LTV 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

Less than or equal to 90 percent
$
205,357

 
$
7,433

 
$
34,733

 
$
4,127

 
$
173,911

 
$
10,272

 
$
39,246

 
$
6,478

Greater than 90 percent but less than or equal to 100 percent
3,100

 
273

 
226

 
348

 
2,349

 
533

 
354

 
715

Greater than 100 percent
1,049

 
267

 
267

 
507

 
817

 
545

 
410

 
1,083

Fully-insured loans (2)
16,264

 
2,426

 
 
 
 
 
16,618

 
3,512

 
 
 
 
Total consumer real estate
$
225,770

 
$
10,399

 
$
35,226

 
$
4,982

 
$
193,695

 
$
14,862

 
$
40,010

 
$
8,276

Refreshed FICO score
 
 
 
 
 
 
 
 
 

 
 

 
 

 
 

Less than 620
$
2,127

 
$
1,230

 
$
751

 
$
541

 
$
2,125

 
$
1,974

 
$
1,064

 
$
1,503

Greater than or equal to 620 and less than 680
4,821

 
1,053

 
1,550

 
800

 
4,538

 
1,719

 
2,008

 
1,720

Greater than or equal to 680 and less than 740
26,905

 
1,981

 
6,025

 
1,412

 
23,841

 
3,042

 
7,008

 
2,188

Greater than or equal to 740
175,653

 
3,709

 
26,900

 
2,229

 
146,573

 
4,615

 
29,930

 
2,865

Fully-insured loans (2)
16,264

 
2,426

 
 
 
 
 
16,618

 
3,512

 
 
 
 
Total consumer real estate
$
225,770

 
$
10,399

 
$
35,226

 
$
4,982

 
$
193,695

 
$
14,862

 
$
40,010

 
$
8,276

(1) 
Excludes $594 million and $682 million of loans accounted for under the fair value option at December 31, 2019 and 2018.
(2) 
Credit quality indicators are not reported for fully-insured loans as principal repayment is insured.
 
 
 
 
 
 
 
 
 
 
 
 
Credit Card and Other Consumer – Credit Quality Indicators
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit
Card
 
Direct/Indirect
Consumer
 
Other Consumer
 
Credit
Card
 
Direct/Indirect
Consumer
 
Other Consumer
(Dollars in millions)
December 31, 2019
 
December 31, 2018
Refreshed FICO score
 

 
 

 
 
 
 
 
 
 
 
Less than 620
$
5,179

 
$
1,720

 
 
 
$
5,016

 
$
1,719

 
 
Greater than or equal to 620 and less than 680
12,277

 
2,734

 
 
 
12,415

 
3,124

 
 
Greater than or equal to 680 and less than 740
35,301

 
8,460

 
 
 
35,781

 
8,921

 
 
Greater than or equal to 740
44,851

 
37,825

 
 
 
45,126

 
36,709

 
 
Other internal credit metrics (1, 2)
 
 
40,259

 
$
192

 
 
 
40,693

 
$
202

Total credit card and other consumer
$
97,608

 
$
90,998

 
$
192

 
$
98,338

 
$
91,166

 
$
202

(1) 
Other internal credit metrics may include delinquency status, geography or other factors.
(2) 
Direct/indirect consumer includes $39.6 billion and $39.9 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk at December 31, 2019 and 2018.
 
 
 
 
 
 
 
 
 
 
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, 2019
Risk ratings
 

 
 

 
 

 
 

 
 

Pass rated
$
299,380

 
$
104,051

 
$
61,598

 
$
19,551

 
$
231

Reservable criticized
7,668

 
915

 
1,091

 
329

 
18

Refreshed FICO score
 
 
 
 
 
 
 
 
 

Less than 620
 

 
 
 
 
 
 
 
308

Greater than or equal to 620 and less than 680
 
 
 
 
 
 
 
 
756

Greater than or equal to 680 and less than 740
 
 
 
 
 
 
 
 
2,267

Greater than or equal to 740
 
 
 
 
 
 
 
 
4,607

Other internal credit metrics (3)
 
 
 
 
 
 
 
 
7,146

Total commercial
$
307,048

 
$
104,966

 
$
62,689

 
$
19,880

 
$
15,333

 
 
 
 
 
 
 
 
 
 
 
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
 
 
 
 
 
 
 
 
 

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)
 
 
 
 
 
 
 
 
6,873

Total commercial
$
299,277

 
$
98,776

 
$
60,845

 
$
22,534

 
$
14,565


(1) 
Excludes $7.7 billion and $3.7 billion of loans accounted for under the fair value option at December 31, 2019 and 2018.
(2) 
At December 31, 2019 and 2018, U.S. small business commercial includes $715 million and $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. Refreshed FICO score and other internal credit metrics are applicable only to the U.S. small business commercial portfolio.
(3) 
Other internal credit metrics may include delinquency status, application scores, geography or other factors. At both December 31, 2019 and 2018, 99 percent of the balances where internal credit metrics are used were current or less than 30 days past due.
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. 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 of $632 million that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower were included in TDRs at December 31, 2019, of which $101 million were classified as nonperforming and $275 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, 2019 and 2018, 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 $229 million and $244 million at December 31, 2019 and 2018. The carrying value of consumer real estate loans, including fully-insured loans, for which formal foreclosure proceedings were in process at December 31, 2019 was $1.6 billion. During 2019 and 2018, the Corporation reclassified $611 million and $670 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, 2019 and 2018 and the average carrying value and interest income recognized in 2019, 2018 and 2017 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, 2019
 
December 31, 2018
With no recorded allowance
 
 
 
 
 

 
 

 
 

 
 

 
 

 
 
Residential mortgage
 
 
 
 
$
4,224

 
$
3,354

 
$

 
$
5,396

 
$
4,268

 
$

Home equity
 
 
 
 
1,176

 
706

 

 
2,948

 
1,599

 

With an allowance recorded
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
Residential mortgage
 
 
 
 
$
1,426

 
$
1,399

 
$
70

 
$
1,977

 
$
1,929

 
$
114

Home equity
 
 
 
 
543

 
523

 
69

 
812

 
760

 
144

Total
 
 
 
 
 

 
 

 
 

 
 
 
 
 
 
Residential mortgage
 
 
 
 
$
5,650

 
$
4,753

 
$
70

 
$
7,373

 
$
6,197

 
$
114

Home equity
 
 
 
 
1,719

 
1,229

 
69

 
3,760

 
2,359

 
144

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average
Carrying
Value
 
Interest
Income
Recognized
(1)
 
Average
Carrying
Value
 
Interest
Income
Recognized
(1)
 
Average
Carrying
Value
 
Interest
Income
Recognized
(1)
 
 
 
 
 
2019
 
2018
 
2017
With no recorded allowance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
 
 
 
$
3,831

 
$
155

 
$
5,424

 
$
207

 
$
7,737

 
$
311

Home equity
 
 
 
 
1,221

 
76

 
1,894

 
105

 
1,997

 
109

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
 
 
 
$
1,635

 
$
62

 
$
2,409

 
$
91

 
$
3,414

 
$
123

Home equity
 
 
 
 
637

 
22

 
861

 
25

 
858

 
24

Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential mortgage
 
 
 
 
$
5,466

 
$
217

 
$
7,833

 
$
298

 
$
11,151

 
$
434

Home equity
 
 
 
 
1,858

 
98

 
2,755

 
130

 
2,855

 
133

(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, 2019, 2018 and 2017 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of consumer real estate loans that were modified in TDRs during 2019, 2018 and 2017. 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 2019, 2018 and 2017
 
 
 
 
 
 
 
 
 
 
 
Unpaid Principal Balance
 
Carrying
Value
 
Pre-Modification Interest Rate
 
Post-Modification Interest Rate (1)
(Dollars in millions)
 
 
December 31, 2019
Residential mortgage
 
 
 
 
 
 
 
 
$
464

 
$
377

 
4.19
%
 
4.13
%
Home equity
 
 
 
 
 
 
 
 
141

 
101

 
5.04

 
4.31

Total
 
 
 
 
 
 
 
 
$
605

 
$
478

 
4.39

 
4.17

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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

(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, 2019, 2018 and 2017 carrying value for consumer real estate loans that were modified in a TDR during 2019, 2018 and 2017, by type of modification.
 
 
 
 
 
 
Consumer Real Estate – Modification Programs
 
 
 
 
 
 
 
 
 
 
 
TDRs Entered into During
(Dollars in millions)
2019
 
2018
 
2017
Modifications under government programs (1)
$
35

 
$
61

 
$
85

Modifications under proprietary programs (1)
174

 
523

 
437

Loans discharged in Chapter 7 bankruptcy (2)
68

 
130

 
211

Trial modifications
201

 
285

 
569

Total modifications
$
478

 
$
999

 
$
1,302

(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; there were no such modifications in 2019 or 2017. These modifications were 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 2019, 2018 and 2017 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)
 
 
2019
 
2018
 
2017
Modifications under government programs
 
 
$
26

 
$
39

 
$
81

Modifications under proprietary programs
 
 
88

 
158

 
138

Loans discharged in Chapter 7 bankruptcy (1)
 
 
30

 
64

 
116

Trial modifications (2)
 
 
57

 
107

 
391

Total modifications
 
 
$
201

 
$
368

 
$
726

(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 following table provides the unpaid principal balance, carrying value and related allowance at December 31, 2019 and 2018 and the average carrying value for 2019, 2018 and 2017 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, 2019
 
December 31, 2018
 
2019
 
2018
 
2017
With no recorded allowance
 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Direct/Indirect consumer
 
$
73

 
$
32

 
$

 
$
72

 
$
33

 
$

 
$
33

 
$
30

 
$
21

With an allowance recorded
 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 

 
 
Credit card (3)
 
$
633

 
$
647

 
$
188

 
$
522

 
$
533

 
$
154

 
$
594

 
$
491

 
$
511

(1) 
Includes accrued interest and fees.
(2) 
The related interest income recognized, which 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 was considered collectible, was not significant in 2019, 2018 and 2017.
(3) 
The average carrying value in 2017 includes $47 million related to the non-U.S. credit card portfolio, which was sold in the second quarter of 2017.
The table below provides information on the Corporation’s primary modification programs for the Credit Card and Other Consumer TDR portfolio at December 31, 2019 and 2018.
 
 
 
 
 
 
 
 
 
 
 
 
Credit Card and Other Consumer – TDRs by Program Type at December 31
 
 
 
 
 
 
 
Credit Card
 
Direct/Indirect Consumer
 
Total TDRs by Program Type
(Dollars in millions)
2019
 
2018
 
2019
 
2018
 
2019
 
2018
Internal programs
$
339

 
$
259

 
$

 
$

 
$
339

 
$
259

External programs
308

 
273

 

 

 
308

 
273

Other

 
1

 
32

 
33

 
32

 
34

Total
$
647

 
$
533

 
$
32

 
$
33

 
$
679

 
$
566

Percent of balances current or less than 30 days past due
85
%
 
85
%
 
78
%
 
81
%
 
84
%
 
85
%

The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the December 31, 2019, 2018 and 2017 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during 2019, 2018 and 2017.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Credit Card and Other Consumer – TDRs Entered into During 2019, 2018 and 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unpaid Principal Balance
 
Carrying
Value (1)
 
Pre-Modification Interest Rate
 
Post-Modification Interest Rate
(Dollars in millions)
 
 
December 31, 2019
Credit card
 
 
 
 
 
 
 
 
$
340

 
$
355

 
19.18
%
 
5.35
%
Direct/Indirect consumer
 
 
 
 
 
 
 
 
40

 
21

 
5.23

 
5.21

Total
 
 
 
 
 
 
 
 
$
380

 
$
376

 
18.42

 
5.34

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
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
Credit card

 
 
 
 
 
 
 
 
$
203

 
$
213

 
18.47
%
 
5.32
%
Non-U.S. credit card
 
 
 
 
 
 
 
 
37

 
22

 
4.81

 
4.30

Total
 
 
 
 
 
 
 
 
$
240

 
$
235

 
17.17

 
5.22

(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 14 percent of new credit card TDRs and 20 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, 2019 and 2018, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were $445 million and $297 million. The balance of commercial TDRs in payment default was not significant at December 31, 2019 and 2018.
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, 2019 and 2018, and the average carrying value for 2019, 2018 and 2017. 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, 2019
 
December 31, 2018
 
2019
 
2018
 
2017
With no recorded allowance
 
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
U.S. commercial
 
 
$
534

 
$
520

 
$

 
$
638

 
$
616

 
$

 
$
635

 
$
655

 
$
772

Non-U.S. commercial
 
 
123

 
123

 

 
93

 
93

 

 
79

 
43

 
46

Commercial real estate
 
 
67

 
58

 

 

 

 

 
96

 
44

 
69

Commercial lease financing
 
 
12

 
12

 

 

 

 

 
5

 
3

 

With an allowance recorded
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
U.S. commercial
 
 
$
1,776

 
$
1,574

 
$
216

 
$
1,437

 
$
1,270

 
$
121

 
$
1,316

 
$
1,162

 
$
1,260

Non-U.S. commercial
 
 
113

 
113

 
9

 
155

 
149

 
30

 
218

 
327

 
463

Commercial real estate
 
 
322

 
236

 
64

 
247

 
162

 
16

 
149

 
46

 
73

Commercial lease financing
 
 
57

 
51

 
1

 
71

 
71

 

 
73

 
42

 
8

U.S. small business commercial (2)
 
91

 
77

 
30

 
83

 
72

 
29

 
75

 
73

 
73

Total
 
 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
U.S. commercial
 
 
$
2,310

 
$
2,094

 
$
216

 
$
2,075

 
$
1,886

 
$
121

 
$
1,951

 
$
1,817

 
$
2,032

Non-U.S. commercial
 
 
236

 
236

 
9

 
248

 
242

 
30

 
297

 
370

 
509

Commercial real estate
 
 
389

 
294

 
64

 
247

 
162

 
16

 
245

 
90

 
142

Commercial lease financing
 
 
69

 
63

 
1

 
71

 
71

 

 
78

 
45

 
8

U.S. small business commercial (2)
 
91

 
77

 
30

 
83

 
72

 
29

 
75

 
73

 
73


(1) 
The related interest income recognized, which 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 was considered collectible, was not significant in 2019, 2018 and 2017.
(2) 
Includes U.S. small business commercial renegotiated TDR loans and related allowance.
Loans Held-for-sale
The Corporation had LHFS of $9.2 billion and $10.4 billion at December 31, 2019 and 2018. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $30.6 billion, $29.2 billion and $41.3 billion for 2019, 2018 and 2017, respectively. Cash used for originations and purchases of LHFS totaled $28.9 billion, $28.1 billion and $43.5 billion for 2019, 2018 and 2017, respectively.