| Allowance for Credit Losses |
Allowance for Credit Losses
The table below summarizes the changes in the allowance for credit losses by portfolio segment for 2012, 2011 and 2010.
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2012 |
(Dollars in millions) |
Home
Loans
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Credit Card
and Other
Consumer
|
|
Commercial |
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Total
Allowance
|
Allowance for loan and lease losses, January 1 |
$ |
21,079 |
|
|
$ |
8,569 |
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|
$ |
4,135 |
|
|
$ |
33,783 |
|
Loans and leases charged off |
(7,849 |
) |
|
(7,727 |
) |
|
(2,096 |
) |
|
(17,672 |
) |
Recoveries of loans and leases previously charged off |
496 |
|
|
1,519 |
|
|
749 |
|
|
2,764 |
|
Net charge-offs |
(7,353 |
) |
|
(6,208 |
) |
|
(1,347 |
) |
|
(14,908 |
) |
Provision for loan and lease losses |
4,073 |
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|
3,899 |
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|
338 |
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|
8,310 |
|
Write-offs of home equity PCI loans |
(2,820 |
) |
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— |
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— |
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(2,820 |
) |
Other |
(46 |
) |
|
(120 |
) |
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(20 |
) |
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(186 |
) |
Allowance for loan and lease losses, December 31 |
14,933 |
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|
6,140 |
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|
3,106 |
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|
24,179 |
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Reserve for unfunded lending commitments, January 1 |
— |
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— |
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|
714 |
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|
714 |
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Provision for unfunded lending commitments |
— |
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— |
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(141 |
) |
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(141 |
) |
Other |
— |
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— |
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(60 |
) |
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(60 |
) |
Reserve for unfunded lending commitments, December 31 |
— |
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— |
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|
513 |
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|
513 |
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Allowance for credit losses, December 31 |
$ |
14,933 |
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$ |
6,140 |
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$ |
3,619 |
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$ |
24,692 |
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2011 |
Allowance for loan and lease losses, January 1 |
$ |
19,252 |
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$ |
15,463 |
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$ |
7,170 |
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$ |
41,885 |
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Loans and leases charged off |
(9,291 |
) |
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(12,247 |
) |
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(3,204 |
) |
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(24,742 |
) |
Recoveries of loans and leases previously charged off |
894 |
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|
2,124 |
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|
891 |
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|
3,909 |
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Net charge-offs |
(8,397 |
) |
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(10,123 |
) |
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(2,313 |
) |
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(20,833 |
) |
Provision for loan and lease losses |
10,300 |
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4,025 |
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(696 |
) |
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13,629 |
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Other |
(76 |
) |
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(796 |
) |
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(26 |
) |
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(898 |
) |
Allowance for loan and lease losses, December 31 |
21,079 |
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8,569 |
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4,135 |
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33,783 |
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Reserve for unfunded lending commitments, January 1 |
— |
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— |
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1,188 |
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1,188 |
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Provision for unfunded lending commitments |
— |
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— |
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(219 |
) |
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(219 |
) |
Other |
— |
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— |
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(255 |
) |
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(255 |
) |
Reserve for unfunded lending commitments, December 31 |
— |
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— |
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|
714 |
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|
714 |
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Allowance for credit losses, December 31 |
$ |
21,079 |
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$ |
8,569 |
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$ |
4,849 |
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$ |
34,497 |
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2010 |
Allowance for loan and lease losses, January 1 |
$ |
16,329 |
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$ |
22,243 |
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$ |
9,416 |
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$ |
47,988 |
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Loans and leases charged off |
(10,915 |
) |
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(20,865 |
) |
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(5,610 |
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(37,390 |
) |
Recoveries of loans and leases previously charged off |
396 |
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|
2,034 |
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|
626 |
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|
3,056 |
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Net charge-offs |
(10,519 |
) |
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(18,831 |
) |
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(4,984 |
) |
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(34,334 |
) |
Provision for loan and lease losses |
13,335 |
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|
12,115 |
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2,745 |
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|
28,195 |
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Other |
107 |
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(64 |
) |
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(7 |
) |
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36 |
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Allowance for loan and lease losses, December 31 |
19,252 |
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15,463 |
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7,170 |
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41,885 |
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Reserve for unfunded lending commitments, January 1 |
— |
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— |
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1,487 |
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1,487 |
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Provision for unfunded lending commitments |
— |
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— |
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240 |
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240 |
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Other |
— |
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— |
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(539 |
) |
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(539 |
) |
Reserve for unfunded lending commitments, December 31 |
— |
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— |
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1,188 |
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1,188 |
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Allowance for credit losses, December 31 |
$ |
19,252 |
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$ |
15,463 |
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$ |
8,358 |
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$ |
43,073 |
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In 2012, for the PCI loan portfolio, the Corporation recorded a benefit of $103 million in provision for credit losses with a corresponding decrease in the valuation allowance included as part of the allowance for loan and lease losses. This compared to $2.2 billion in provision for credit losses and a corresponding increase in the valuation allowance in both 2011 and 2010. In 2012, there were $2.8 billion of write-offs in the Countrywide home equity PCI loan portfolio primarily related to the National Mortgage Settlement with a corresponding decrease in the PCI valuation allowance. These write-offs had no impact on the provision for credit losses as these loans were fully reserved. The valuation allowance associated with the PCI loan portfolio was $5.5 billion, $8.5 billion and $6.4 billion at December 31, 2012, 2011 and 2010, respectively.
The “other” amount under allowance for loan and lease losses primarily represents the net impact of portfolio sales, consolidations and deconsolidations, and foreign currency translation adjustments. The 2011 amount includes a $449 million reduction in the allowance for loan and lease losses related to Canadian consumer card loans that were transferred to LHFS.
The “other” amount under the reserve for unfunded lending commitments for 2012, 2011 and 2010 primarily represents accretion of the Merrill Lynch purchase accounting adjustment and the impact of funding previously unfunded positions.
The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at December 31, 2012 and 2011.
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Allowance and Carrying Value by Portfolio Segment |
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December 31, 2012 |
(Dollars in millions) |
Home
Loans
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Credit Card
and Other
Consumer
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Commercial |
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Total |
Impaired loans and troubled debt restructurings (1)
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Allowance for loan and lease losses (2)
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$ |
1,700 |
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$ |
1,127 |
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$ |
330 |
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$ |
3,157 |
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Carrying value (3)
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30,250 |
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3,881 |
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4,881 |
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39,012 |
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Allowance as a percentage of carrying value |
5.62 |
% |
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29.04 |
% |
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6.76 |
% |
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8.09 |
% |
Loans collectively evaluated for impairment |
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Allowance for loan and lease losses |
$ |
7,697 |
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$ |
5,013 |
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$ |
2,776 |
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$ |
15,486 |
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Carrying value (3, 4)
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304,701 |
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187,484 |
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341,502 |
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833,687 |
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Allowance as a percentage of carrying value (4)
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2.53 |
% |
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2.67 |
% |
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0.81 |
% |
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1.86 |
% |
Purchased credit-impaired loans |
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Valuation allowance |
$ |
5,536 |
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n/a |
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n/a |
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$ |
5,536 |
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Carrying value gross of valuation allowance |
26,118 |
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n/a |
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n/a |
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26,118 |
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Valuation allowance as a percentage of carrying value |
21.20 |
% |
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n/a |
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n/a |
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21.20 |
% |
Total |
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Allowance for loan and lease losses |
$ |
14,933 |
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$ |
6,140 |
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$ |
3,106 |
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$ |
24,179 |
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Carrying value (3, 4)
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361,069 |
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191,365 |
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346,383 |
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898,817 |
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Allowance as a percentage of carrying value (4)
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4.14 |
% |
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3.21 |
% |
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0.90 |
% |
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2.69 |
% |
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December 31, 2011 |
Impaired loans and troubled debt restructurings (1)
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Allowance for loan and lease losses (2)
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$ |
1,946 |
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$ |
2,410 |
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$ |
545 |
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$ |
4,901 |
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Carrying value (3)
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21,462 |
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7,100 |
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8,113 |
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36,675 |
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Allowance as a percentage of carrying value |
9.07 |
% |
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33.94 |
% |
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6.71 |
% |
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13.36 |
% |
Loans collectively evaluated for impairment |
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Allowance for loan and lease losses |
$ |
10,674 |
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$ |
6,159 |
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$ |
3,590 |
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$ |
20,423 |
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Carrying value (3, 4)
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344,821 |
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202,010 |
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302,089 |
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848,920 |
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Allowance as a percentage of carrying value (4)
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3.10 |
% |
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3.05 |
% |
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1.19 |
% |
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2.41 |
% |
Purchased credit-impaired loans |
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Valuation allowance |
$ |
8,459 |
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n/a |
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n/a |
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$ |
8,459 |
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Carrying value gross of valuation allowance |
31,801 |
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n/a |
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n/a |
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31,801 |
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Valuation allowance as a percentage of carrying value |
26.60 |
% |
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n/a |
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n/a |
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26.60 |
% |
Total |
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Allowance for loan and lease losses |
$ |
21,079 |
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$ |
8,569 |
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$ |
4,135 |
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$ |
33,783 |
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Carrying value (3, 4)
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398,084 |
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209,110 |
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310,202 |
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|
917,396 |
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Allowance as a percentage of carrying value (4)
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5.30 |
% |
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4.10 |
% |
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1.33 |
% |
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3.68 |
% |
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(1) |
Impaired loans include nonperforming commercial loans and all TDRs, including both commercial and consumer TDRs. Impaired loans exclude nonperforming consumer loans unless they are TDRs, and all consumer and commercial loans accounted for under the fair value option. |
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(2) |
Commercial impaired allowance for loan and lease losses includes $97 million and $172 million of renegotiated TDR loans related to U.S. small business commercial at December 31, 2012 and 2011.
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(3) |
Amounts are presented gross of the allowance for loan and lease losses. |
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(4) |
Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $9.0 billion and $8.8 billion at December 31, 2012 and 2011.
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n/a = not applicable
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