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, 2019

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
	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
	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.