Bank of America Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Outstanding Loans and Leases

Outstanding Loans and Leases

9 Months Ended

Sep. 30, 2013

Loans and Leases Receivable Disclosure [Abstract]

NOTE 5 – Outstanding Loans and Leases

The following tables present total outstanding loans and leases and an aging analysis for the Corporation's Home Loans, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at September 30, 2013 and December 31, 2012.



	September 30, 2013
(Dollars in millions)	30-59 Days Past Due ⁽¹⁾			60-89 Days Past Due ⁽¹⁾			90 Days or More Past Due ⁽²⁾			Total Past Due 30 Days or More			Total Current or Less Than 30 Days Past Due ⁽³⁾			Purchased Credit - impaired ⁽⁴⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
Home loans
Core portfolio
Residential mortgage ⁽⁵⁾	$	2,182		$	766		$	7,452		$	10,400		$	167,108								$	177,508
Home equity	230			118			654			1,002			54,714									55,716
Legacy Assets & Servicing portfolio
Residential mortgage ⁽⁶⁾	2,952			1,485			18,793			23,230			32,694			$	20,064					75,988
Home equity	439			234			1,289			1,962			31,871			7,104						40,937
Credit card and other consumer
U.S. credit card	609			454			1,049			2,112			88,168									90,280
Non-U.S. credit card	67			55			142			264			10,819									11,083
Direct/Indirect consumer ⁽⁷⁾	398			188			456			1,042			82,993									84,035
Other consumer ⁽⁸⁾	24			9			19			52			1,861									1,913
Total consumer loans	6,901			3,309			29,854			40,064			470,228			27,168						537,460
Consumer loans accounted for under the fair value option ⁽⁹⁾																			$	2,186		2,186
Total consumer	6,901			3,309			29,854			40,064			470,228			27,168			2,186			539,646
Commercial
U.S. commercial	187			124			445			756			210,358									211,114
Commercial real estate ⁽¹⁰⁾	44			108			440			592			44,348									44,940
Commercial lease financing	29			53			72			154			24,435									24,589
Non-U.S. commercial	286			1			3			290			92,655									92,945
U.S. small business commercial	71			58			128			257			12,891									13,148
Total commercial loans	617			344			1,088			2,049			384,687									386,736
Commercial loans accounted for under the fair value option ⁽⁹⁾																			8,010			8,010
Total commercial	617			344			1,088			2,049			384,687						8,010			394,746
Total loans and leases	$	7,518		$	3,653		$	30,942		$	42,113		$	854,915		$	27,168		$	10,196		$	934,392
Percentage of outstandings	0.81		%	0.39		%	3.31		%	4.51		%	91.49		%	2.91		%	1.09		%


⁽¹⁾	Home loans 30-59 days past due includes fully-insured loans of $2.6 billion and nonperforming loans of $736 million. Home loans 60-89 days past due includes fully-insured loans of $1.2 billion and nonperforming loans of $494 million.


⁽²⁾	Home loans includes fully-insured loans of $18.0 billion.


⁽³⁾	Home loans includes $6.2 billion and direct/indirect consumer includes $39 million of nonperforming loans.


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


⁽⁵⁾	Total outstandings includes non-U.S. residential mortgage loans of $87 million.


⁽⁶⁾	Total outstandings includes pay option loans of $5.2 billion. The Corporation no longer originates this product.


⁽⁷⁾	Total outstandings includes dealer financial services loans of $39.5 billion, consumer lending loans of $3.1 billion, U.S. securities-based lending loans of $30.4 billion, non-U.S. consumer loans of $5.7 billion, student loans of $4.3 billion and other consumer loans of $1.0 billion.


⁽⁸⁾	Total outstandings includes consumer finance loans of $1.2 billion, consumer leases of $492 million, consumer overdrafts of $175 million and other non-U.S. consumer loans of $5 million.


⁽⁹⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $2.2 billion. Commercial loans accounted for under the fair value option were U.S. commercial loans of $1.8 billion and non-U.S. commercial loans of $6.2 billion. For additional information, see Note 16 – Fair Value Measurements and Note 17 – Fair Value Option.


⁽¹⁰⁾	Total outstandings includes U.S. commercial real estate loans of $43.5 billion and non-U.S. commercial real estate loans of $1.4 billion.



	December 31, 2012
(Dollars in millions)	30-59 Days Past Due ⁽¹⁾			60-89 Days Past Due ⁽¹⁾			90 Days or More Past Due ⁽²⁾			Total Past Due 30 Days or More			Total Current or Less Than 30 Days Past Due ⁽³⁾			Purchased Credit - impaired ⁽⁴⁾			Loans Accounted for Under the Fair Value Option			Total Outstandings
Home loans
Core portfolio
Residential mortgage ⁽⁵⁾	$	2,274		$	806		$	6,227		$	9,307		$	160,809								$	170,116
Home equity	273			146			591			1,010			59,841									60,851
Legacy Assets & Servicing portfolio
Residential mortgage ⁽⁶⁾	2,938			1,714			26,728			31,380			33,982			$	17,451					82,813
Home equity	608			357			1,444			2,409			36,213			8,667						47,289
Credit card and other consumer
U.S. credit card	729			582			1,437			2,748			92,087									94,835
Non-U.S. credit card	106			85			212			403			11,294									11,697
Direct/Indirect consumer⁽⁷⁾	569			239			573			1,381			81,824									83,205
Other consumer ⁽⁸⁾	48			19			4			71			1,557									1,628
Total consumer loans	7,545			3,948			37,216			48,709			477,607			26,118						552,434
Consumer loans accounted for under the fair value option ⁽⁹⁾																			$	1,005		1,005
Total consumer	7,545			3,948			37,216			48,709			477,607			26,118			1,005			553,439
Commercial
U.S. commercial	323			133			639			1,095			196,031									197,126
Commercial real estate ⁽¹⁰⁾	79			144			983			1,206			37,431									38,637
Commercial lease financing	84			79			30			193			23,650									23,843
Non-U.S. commercial	2			—			—			2			74,182									74,184
U.S. small business commercial	101			75			168			344			12,249									12,593
Total commercial loans	589			431			1,820			2,840			343,543									346,383
Commercial loans accounted for under the fair value option ⁽⁹⁾																			7,997			7,997
Total commercial	589			431			1,820			2,840			343,543						7,997			354,380
Total loans and leases	$	8,134		$	4,379		$	39,036		$	51,549		$	821,150		$	26,118		$	9,002		$	907,819
Percentage of outstandings	0.90		%	0.48		%	4.30		%	5.68		%	90.45		%	2.88		%	0.99		%


⁽¹⁾	Home loans 30-59 days past due includes fully-insured loans of $2.3 billion and nonperforming loans of $702 million. Home loans 60-89 days past due includes fully-insured loans of $1.3 billion and nonperforming loans of $558 million.


⁽²⁾	Home loans includes fully-insured loans of $22.2 billion.


⁽³⁾	Home loans includes $5.5 billion and direct/indirect consumer includes $63 million of nonperforming loans.


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


⁽⁵⁾	Total outstandings includes non-U.S. residential mortgage loans of $93 million.


⁽⁶⁾	Total outstandings includes pay option loans of $6.7 billion. The Corporation no longer originates this product.


⁽⁷⁾	Total outstandings includes dealer financial services loans of $35.9 billion, consumer lending loans of $4.7 billion, U.S. securities-based lending loans of $28.3 billion, non-U.S. consumer loans of $8.3 billion, student loans of $4.8 billion and other consumer loans of $1.2 billion.


⁽⁸⁾	Total outstandings includes consumer finance loans of $1.4 billion, consumer leases of $34 million, consumer overdrafts of $177 million and other non-U.S. consumer loans of $5 million.


⁽⁹⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $1.0 billion. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.3 billion and non-U.S. commercial loans of $5.7 billion. For additional information, see Note 16 – Fair Value Measurements and Note 17 – Fair Value Option.


⁽¹⁰⁾	Total outstandings includes U.S. commercial real estate loans of $37.2 billion and non-U.S. commercial real estate loans of $1.5 billion.

The Corporation mitigates a portion of its credit risk on the residential mortgage portfolio through the use of synthetic securitization vehicles. These vehicles issue long-term notes to investors, the proceeds of which are held as cash collateral. The Corporation pays a premium to the vehicles to purchase mezzanine loss protection on a portfolio of residential mortgage loans owned by the Corporation. Cash held in the vehicles is used to reimburse the Corporation in the event that losses on the mortgage portfolio exceed 10 basis points (bps) of the original pool balance, up to the remaining amount of purchased loss protection of $376 million and $500 million at September 30, 2013 and December 31, 2012. The vehicles from which the Corporation purchases credit protection are VIEs. The Corporation does not have a variable interest in these vehicles, and accordingly, these vehicles are not consolidated by the Corporation. Amounts due from the vehicles are recorded in other income (loss) in the Consolidated Statement of Income when the Corporation recognizes a reimbursable loss, as described above. Amounts are collected when reimbursable losses are realized through the sale of the underlying collateral. At September 30, 2013 and December 31, 2012, the Corporation had a receivable of $206 million and $305 million from these vehicles for reimbursement of losses, and principal of $13.5 billion and $17.6 billion of residential mortgage loans was referenced under these agreements. The Corporation records an allowance for credit losses on these loans without regard to the existence of the purchased loss protection as the protection does not represent a guarantee of individual loans.

In addition, the Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $27.6 billion and $24.3 billion at September 30, 2013 and December 31, 2012, providing full 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. For additional information, see Note 8 – Representations and Warranties Obligations and Corporate Guarantees.

Nonperforming Loans and Leases

In accordance with bank regulatory interagency guidance, the Corporation classifies junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. At September 30, 2013 and December 31, 2012, $1.3 billion and $1.5 billion of such loans were included in nonperforming loans.

In accordance with regulatory guidance, the Corporation classifies consumer real estate loans that have been discharged in Chapter 7 bankruptcy and not reaffirmed by the borrower as troubled debt restructurings (TDRs), irrespective of payment history or delinquency status, even if the repayment terms for the loan have not been otherwise modified. The Corporation continues to have a lien on the underlying collateral. At September 30, 2013, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms at the time of discharge were $1.9 billion of which $1.0 billion were current on their contractual payments while $742 million were 90 days or more past due. Of the contractually current nonperforming loans, more than 70 percent were discharged in Chapter 7 bankruptcy more than 12 months ago, and nearly 50 percent were discharged 24 months or more ago. As subsequent cash payments are received, the interest component of the payments is generally recorded as interest income on a cash basis and the principal component is recorded as a reduction in the carrying value of the loan.

The table below presents the Corporation's nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at September 30, 2013 and December 31, 2012. Nonperforming loans held-for-sale (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 to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K.



Credit Quality
	Nonperforming Loans and Leases ⁽¹⁾				Accruing Past Due 90 Days or More
(Dollars in millions)	September 30 2013		December 31 2012		September 30 2013		December 31 2012
Home loans
Core portfolio
Residential mortgage ⁽²⁾	$	3,479	$	3,193	$	5,207	$	3,984
Home equity	1,417		1,265		—		—
Legacy Assets & Servicing portfolio
Residential mortgage ⁽²⁾	9,849		11,862		12,753		18,173
Home equity	2,759		3,017		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		1,049		1,437
Non-U.S. credit card	n/a		n/a		142		212
Direct/Indirect consumer	59		92		437		545
Other consumer	18		2		1		2
Total consumer	17,581		19,431		19,589		24,353
Commercial
U.S. commercial	1,059		1,484		57		65
Commercial real estate	488		1,513		76		29
Commercial lease financing	49		44		66		15
Non-U.S. commercial	86		68		3		—
U.S. small business commercial	103		115		83		120
Total commercial	1,785		3,224		285		229
Total loans and leases	$	19,366	$	22,655	$	19,874	$	24,582


⁽¹⁾	Nonperforming loan balances did not include nonaccruing TDRs removed from the PCI loan portfolio prior to January 1, 2010 of $356 million and $521 million at September 30, 2013 and December 31, 2012.

⁽²⁾

Residential mortgage loans in the Core and Legacy Assets & Servicing portfolios accruing past due 90 days or more are fully-insured loans. At September 30, 2013 and December 31, 2012, residential mortgage includes $13.9 billion and $17.8 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 $4.1 billion and $4.4 billion of loans on which interest is still accruing.

n/a = not applicable

Credit Quality Indicators

The Corporation monitors credit quality within its Home Loans, 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 to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K. Within the Home Loans 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 property securing the loan, refreshed quarterly. Home equity loans are evaluated using combined loan-to-value (CLTV) which measures the carrying value of the combined loans that have liens against the property and the available line of credit as a percentage of the appraised value of the property securing the loan, refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower's credit history. At a minimum, FICO scores are refreshed quarterly, and in many cases, more frequently. FICO scores are also a primary credit quality indicator for the Credit Card and Other Consumer portfolio segment and the business card portfolio within U.S. small business commercial. Within the Commercial portfolio segment, loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by the Corporation as Special Mention, Substandard or Doubtful, which are asset 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 Home Loans, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at September 30, 2013 and December 31, 2012.



Home Loans – Credit Quality Indicators ⁽¹⁾
	September 30, 2013
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Legacy Assets & Servicing Residential Mortgage ⁽²⁾		Residential Mortgage PCI ⁽³⁾		Core Portfolio Home Equity ⁽²⁾		Legacy Assets & Servicing Home Equity ⁽²⁾		Home Equity PCI
Refreshed LTV ⁽⁴⁾
Less than or equal to 90 percent	$	92,172	$	22,199	$	10,760	$	44,827	$	15,827	$	1,963
Greater than 90 percent but less than or equal to 100 percent	6,983		4,526		3,011		4,374		4,290		668
Greater than 100 percent	8,212		10,466		6,293		6,515		13,716		4,473
Fully-insured loans ⁽⁵⁾	70,141		18,733		—		—		—		—
Total home loans	$	177,508	$	55,924	$	20,064	$	55,716	$	33,833	$	7,104

Refreshed FICO score
Less than 620	$	6,032	$	11,770	$	10,871	$	2,413	$	4,478	$	1,296
Greater than or equal to 620 and less than 680	7,955		5,919		3,363		4,187		5,240		1,272
Greater than or equal to 680 and less than 740	25,097		8,133		3,056		11,840		9,414		2,018
Greater than or equal to 740	68,283		11,369		2,774		37,276		14,701		2,518
Fully-insured loans ⁽⁵⁾	70,141		18,733		—		—		—		—
Total home loans	$	177,508	$	55,924	$	20,064	$	55,716	$	33,833	$	7,104


⁽¹⁾	Excludes $2.2 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $4.7 billion of pay option loans. The Corporation no longer originates this product.


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


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



Credit Card and Other Consumer – Credit Quality Indicators
	September 30, 2013
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	5,112	$	—	$	1,293	$	571
Greater than or equal to 620 and less than 680	13,106		—		3,264		273
Greater than or equal to 680 and less than 740	36,054		—		10,087		205
Greater than or equal to 740	36,008		—		27,419		193
Other internal credit metrics ^{(2, 3, 4)}	—		11,083		41,972		671
Total credit card and other consumer	$	90,280	$	11,083	$	84,035	$	1,913


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


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


⁽³⁾	Direct/indirect consumer includes $36.0 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $4.3 billion of loans the Corporation no longer originates.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At September 30, 2013, 98 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and one percent was 90 days or more past due.



Commercial – Credit Quality Indicators ⁽¹⁾
	September 30, 2013
(Dollars in millions)	U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		Non-U.S. Commercial		U.S. Small Business Commercial ⁽²⁾
Risk ratings
Pass rated	$	203,620	$	43,135	$	23,500	$	91,399	$	1,313
Reservable criticized	7,494		1,805		1,089		1,546		391
Refreshed FICO score ⁽³⁾
Less than 620									235
Greater than or equal to 620 and less than 680									548
Greater than or equal to 680 and less than 740									1,594
Greater than or equal to 740									2,820
Other internal credit metrics ^{(3, 4)}									6,247
Total commercial	$	211,114	$	44,940	$	24,589	$	92,945	$	13,148


⁽¹⁾	Excludes $8.0 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $295 million of criticized business card and small business loans which are evaluated using refreshed FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. At September 30, 2013, 99 percent of the balances where internal credit metrics are used was current or less than 30 days past due.


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


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



Home Loans – Credit Quality Indicators ⁽¹⁾
	December 31, 2012
(Dollars in millions)	Core Portfolio Residential Mortgage ⁽²⁾		Legacy Assets & Servicing Residential Mortgage ⁽²⁾		Residential Mortgage PCI ⁽³⁾		Core Portfolio Home Equity ⁽²⁾		Legacy Assets & Servicing Home Equity ⁽²⁾		Home Equity PCI
Refreshed LTV ⁽⁴⁾
Less than or equal to 90 percent	$	80,585	$	20,613	$	8,581	$	44,971	$	15,922	$	2,074
Greater than 90 percent but less than or equal to 100 percent	8,891		5,097		2,368		5,825		4,507		805
Greater than 100 percent	12,984		16,454		6,502		10,055		18,193		5,788
Fully-insured loans ⁽⁵⁾	67,656		23,198		—		—		—		—
Total home loans	$	170,116	$	65,362	$	17,451	$	60,851	$	38,622	$	8,667

Refreshed FICO score
Less than 620	$	6,366	$	14,320	$	8,647	$	2,586	$	5,411	$	1,989
Greater than or equal to 620 and less than 680	8,561		6,157		2,712		4,500		5,921		1,529
Greater than or equal to 680 and less than 740	25,141		8,611		2,976		12,625		10,395		2,299
Greater than or equal to 740	62,392		13,076		3,116		41,140		16,895		2,850
Fully-insured loans ⁽⁵⁾	67,656		23,198		—		—		—		—
Total home loans	$	170,116	$	65,362	$	17,451	$	60,851	$	38,622	$	8,667


⁽¹⁾	Excludes $1.0 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $6.1 billion of pay option loans. The Corporation no longer originates this product.


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


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



Credit Card and Other Consumer – Credit Quality Indicators
	December 31, 2012
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	6,188	$	—	$	1,896	$	668
Greater than or equal to 620 and less than 680	13,947		—		3,367		301
Greater than or equal to 680 and less than 740	37,167		—		9,592		232
Greater than or equal to 740	37,533		—		25,164		212
Other internal credit metrics ^{(2, 3, 4)}	—		11,697		43,186		215
Total credit card and other consumer	$	94,835	$	11,697	$	83,205	$	1,628


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


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


⁽³⁾	Direct/indirect consumer includes $36.5 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $4.8 billion of loans the Corporation no longer originates.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At December 31, 2012, 97 percent of this portfolio was current or less than 30 days past due, one percent was 30-89 days past due and two percent was 90 days or more past due.



Commercial – Credit Quality Indicators ⁽¹⁾
	December 31, 2012
(Dollars in millions)	U.S. Commercial		Commercial Real Estate		Commercial Lease Financing		Non-U.S. Commercial		U.S. Small Business Commercial ⁽²⁾
Risk ratings
Pass rated	$	189,602	$	34,968	$	22,874	$	72,688	$	1,690
Reservable criticized	7,524		3,669		969		1,496		573
Refreshed FICO score ⁽³⁾
Less than 620									400
Greater than or equal to 620 and less than 680									580
Greater than or equal to 680 and less than 740									1,553
Greater than or equal to 740									2,496
Other internal credit metrics ^{(3, 4)}									5,301
Total commercial	$	197,126	$	38,637	$	23,843	$	74,184	$	12,593


⁽¹⁾	Excludes $8.0 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $366 million of criticized business card and small business loans which are evaluated using refreshed FICO scores or internal credit metrics, including delinquency status, rather than risk ratings. At December 31, 2012, 98 percent of the balances where internal credit metrics are used was current or less than 30 days past due.


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


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

Impaired Loans and Troubled Debt Restructurings

A loan is considered impaired when, based on current information, it is probable that the Corporation will be unable to collect all amounts due from the borrower in accordance with the contractual terms of the loan. Impaired loans include nonperforming commercial loans and all consumer and commercial TDRs. For additional information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K. Impaired loans exclude nonperforming consumer loans and nonperforming commercial leases unless they are classified as TDRs. Loans accounted for under the fair value option are also excluded. Purchased credit-impaired (PCI) loans are excluded and reported separately on page 195.

Home Loans

Impaired home loans within the Home Loans portfolio segment consist entirely of TDRs. Excluding PCI loans, most modifications of home loans meet the definition of TDRs when a binding offer is extended to a borrower. Modifications of home loans are done in accordance with the government's Making Home Affordable Program (modifications under government programs) or the Corporation's proprietary programs (modifications under proprietary programs). These modifications are considered to be TDRs if concessions have been granted to borrowers experiencing financial difficulties. Concessions may include reductions in interest rates, capitalization of past due amounts, principal and/or interest forbearance, payment extensions, principal and/or interest forgiveness, or combinations thereof. During 2012, the Corporation implemented a borrower assistance program that provides forgiveness of principal balances in connection with the settlement agreement among the Corporation and certain of its affiliates and subsidiaries, together with the U.S. Department of Justice (DOJ), the U.S. Department of Housing and Urban Development (HUD) and other federal agencies, and 49 state Attorneys General concerning the terms of a global settlement resolving investigations into certain origination, servicing and foreclosure practices (National Mortgage Settlement). In addition, the Corporation also provides interest rate modifications to qualified borrowers pursuant to the National Mortgage Settlement and these interest rate modifications are not considered to be TDRs.

Prior to permanently modifying a loan, the Corporation may enter into trial modifications with certain borrowers under both government and proprietary programs, including the borrower assistance program pursuant to the National Mortgage Settlement. 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.

In accordance with regulatory guidance addressing certain home loans that have been discharged in Chapter 7 bankruptcy, $3.7 billion of home loans that have been discharged in Chapter 7 bankruptcy with no change in repayment terms at the time of discharge were included in TDRs at September 30, 2013, of which $1.9 billion were classified as nonperforming and $1.8 billion were loans fully-insured by the Federal Housing Administration (FHA). Of the $3.7 billion of home loan TDRs, approximately 21 percent, 33 percent and 46 percent were discharged in Chapter 7 bankruptcy in the nine months ended September 30, 2013, in the year ended December 31, 2012 and in years prior to 2012, respectively. For more information on the regulatory guidance on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.

In accordance with applicable accounting guidance, a home loan, excluding PCI loans which are reported separately, is not classified as impaired unless it is a TDR. Once such a loan has been designated as a TDR, it is then individually assessed for impairment. Home loan TDRs are measured primarily based on the net present value of the estimated cash flows discounted at the loan's original effective interest rate, as discussed in the following paragraph. If the carrying value of a TDR exceeds this amount, a specific allowance is recorded as a component of the allowance for loan and lease losses. Alternatively, home loan TDRs that are considered to be dependent solely on the collateral for repayment (e.g., due to the lack of income verification or as a result of being discharged in Chapter 7 bankruptcy) 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. Home loans that reached 180 days past due prior to modification had been charged off to their net realizable value before they were modified as TDRs in accordance with established policy. Therefore, modifications of home loans that are 180 or more days past due as TDRs do not have an impact on the allowance for loan and lease losses nor are additional charge-offs required at the time of modification. Subsequent declines in the fair value of the collateral after a loan has reached 180 days past due are recorded as charge-offs. Fully-insured loans are protected against principal loss, and therefore, the Corporation does not record an allowance for loan and lease losses on the outstanding principal balance, even after they have been modified in a TDR.

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

At September 30, 2013 and December 31, 2012, remaining commitments to lend additional funds to debtors whose terms have been modified in a home loan TDR were immaterial. Home loan foreclosed properties totaled $546 million and $650 million at September 30, 2013 and December 31, 2012.

The table below presents impaired loans in the Corporation's Home Loans portfolio segment at September 30, 2013 and December 31, 2012, and for the three and nine months ended September 30, 2013 and 2012, and includes primarily loans managed by Legacy Assets & Servicing. Certain impaired home loans do not have a related allowance as the current valuation of these impaired loans exceeded the carrying value.



Impaired Loans – Home Loans
					September 30, 2013						December 31, 2012
(Dollars in millions)					Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
With no recorded allowance
Residential mortgage					$	22,528	$	17,165	n/a		$	20,226	$	14,967	n/a
Home equity					3,002		1,328		n/a		2,624		1,103		n/a
With an allowance recorded
Residential mortgage					$	13,793	$	13,227	$	1,141	$	14,223	$	13,158	$	1,252
Home equity					1,069		886		343		1,256		1,022		448
Total
Residential mortgage					$	36,321	$	30,392	$	1,141	$	34,449	$	28,125	$	1,252
Home equity					4,071		2,214		343		3,880		2,125		448

	Three Months Ended September 30								Nine Months Ended September 30
	2013				2012				2013				2012
	Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾
With no recorded allowance
Residential mortgage	$	16,984	$	152	$	11,606	$	88	$	16,563	$	436	$	9,734	$	239
Home equity	1,286		19		819		13		1,208		55		603		32
With an allowance recorded
Residential mortgage	$	14,027	$	173	$	11,435	$	97	$	14,221	$	451	$	11,361	$	305
Home equity	902		9		1,095		12		942		31		1,186		34
Total
Residential mortgage	$	31,011	$	325	$	23,041	$	185	$	30,784	$	887	$	21,095	$	544
Home equity	2,188		28		1,914		25		2,150		86		1,789		66


⁽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.

n/a = not applicable

The table below presents the September 30, 2013 and 2012 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of home loans that were modified in TDRs during the three and nine months ended September 30, 2013 and 2012, and net charge-offs that were recorded during the period in which the modification occurred. The following Home Loans portfolio segment tables include loans that were initially classified as TDRs during the period and also loans that had previously been classified as TDRs and were modified again during the period. These TDRs are managed by Legacy Assets & Servicing.



Home Loans – TDRs Entered into During the Three Months Ended September 30, 2013 and 2012 ⁽¹⁾
	September 30, 2013								Three Months Ended September 30, 2013
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate		Net Charge-offs
Residential mortgage	$	3,275	$	2,947	5.22	%	4.52	%	$	64
Home equity	220		147		5.58		4.33		36
Total	$	3,495	$	3,094	5.22		4.51		$	100

	September 30, 2012								Three Months Ended September 30, 2012
Residential mortgage	$	7,823	$	6,250	5.66	%	4.31	%	$	129
Home equity	1,570		689		4.69		4.54		479
Total	$	9,393	$	6,939	5.51		4.34		$	608

Home Loans – TDRs Entered into During the Nine Months Ended September 30, 2013 and 2012 ⁽¹⁾
	September 30, 2013								Nine Months Ended September 30, 2013
Residential mortgage	$	10,295	$	9,153	5.34	%	4.34	%	$	169
Home equity	706		425		5.55		4.17		139
Total	$	11,001	$	9,578	5.35		4.34		$	308

	September 30, 2012								Nine Months Ended September 30, 2012
Residential mortgage	$	10,064	$	8,179	5.62	%	4.29	%	$	277
Home equity	1,759		785		4.69		4.32		577
Total	$	11,823	$	8,964	5.48		4.30		$	854

⁽¹⁾

TDRs entered into during the three and nine months ended September 30, 2013 include residential mortgage modifications with principal forgiveness of $118 million and $462 million. TDRs entered into during the three and nine months ended September 30, 2012 include residential mortgage modifications with principal forgiveness of $294 million and $462 million and home equity mortgage modifications of $2 million and $5 million.

The following tables present the September 30, 2013 and 2012 carrying value for home loans that were modified in a TDR during the three and nine months ended September 30, 2013 and 2012 by type of modification.



Home Loans – Modification Programs
	TDRs Entered into During the Three Months Ended September 30, 2013
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value
Modifications under government programs
Contractual interest rate reduction	$	393	$	3	$	396
Principal and/or interest forbearance	4		2		6
Other modifications ⁽¹⁾	18		—		18
Total modifications under government programs	415		5		420
Modifications under proprietary programs
Contractual interest rate reduction	764		13		777
Capitalization of past due amounts	26		—		26
Principal and/or interest forbearance	57		7		64
Other modifications ⁽¹⁾	10		—		10
Total modifications under proprietary programs	857		20		877
Trial modifications	1,395		51		1,446
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	280		71		351
Total modifications	$	2,947	$	147	$	3,094

	TDRs Entered into During the Three Months Ended September 30, 2012
Modifications under government programs
Contractual interest rate reduction	$	83	$	21	$	104
Principal and/or interest forbearance	20		11		31
Other modifications ⁽¹⁾	2		—		2
Total modifications under government programs	105		32		137
Modifications under proprietary programs
Contractual interest rate reduction	1,153		15		1,168
Capitalization of past due amounts	58		—		58
Principal and/or interest forbearance	124		5		129
Other modifications ⁽¹⁾	28		6		34
Total modifications under proprietary programs	1,363		26		1,389
Trial modifications	1,905		43		1,948
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	2,877		588		3,465
Total modifications	$	6,250	$	689	$	6,939


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

⁽²⁾

Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs in accordance with regulatory guidance implemented in the third quarter of 2012. The amount for the three months ended September 30, 2012 represents the cumulative impact upon adoption of the regulatory guidance. For the three months ended September 30, 2013, home loans of $196 million, or 56 percent of loans discharged in Chapter 7 bankruptcy, were current or less than 60 days past due.



Home Loans – Modification Programs
	TDRs Entered into During the Nine Months Ended September 30, 2013
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value
Modifications under government programs
Contractual interest rate reduction	$	1,127	$	27	$	1,154
Principal and/or interest forbearance	32		14		46
Other modifications ⁽¹⁾	68		—		68
Total modifications under government programs	1,227		41		1,268
Modifications under proprietary programs
Contractual interest rate reduction	2,829		50		2,879
Capitalization of past due amounts	98		—		98
Principal and/or interest forbearance	435		17		452
Other modifications ⁽¹⁾	89		14		103
Total modifications under proprietary programs	3,451		81		3,532
Trial modifications	3,442		71		3,513
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	1,033		232		1,265
Total modifications	$	9,153	$	425	$	9,578

	TDRs Entered into During the Nine Months Ended September 30, 2012
Modifications under government programs
Contractual interest rate reduction	$	157	$	61	$	218
Principal and/or interest forbearance	30		24		54
Other modifications ⁽¹⁾	18		—		18
Total modifications under government programs	205		85		290
Modifications under proprietary programs
Contractual interest rate reduction	2,054		28		2,082
Capitalization of past due amounts	95		—		95
Principal and/or interest forbearance	248		9		257
Other modifications ⁽¹⁾	62		13		75
Total modifications under proprietary programs	2,459		50		2,509
Trial modifications	2,638		62		2,700
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	2,877		588		3,465
Total modifications	$	8,179	$	785	$	8,964


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

⁽²⁾

Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs in accordance with regulatory guidance implemented in the third quarter of 2012. The amount for the nine months ended September 30, 2012 represents the cumulative impact upon adoption of the regulatory guidance. For the nine months ended September 30, 2013, home loans of $671 million, or 53 percent of loans discharged in Chapter 7 bankruptcy, were current or less than 60 days past due.

The table below presents the carrying value of loans that entered into payment default during the three and nine months ended September 30, 2013 and 2012 and that were modified in a TDR during the 12 months preceding payment default. A payment default for home loan TDRs is recognized when a borrower has missed three monthly payments (not necessarily consecutively) since modification. Payment default on a trial modification where the borrower has not yet met the terms of the agreement are included in the table below if the borrower is 90 days or more past due three months after the offer to modify is made.



Home Loans – TDRs Entering Payment Default That Were Modified During the Preceding 12 Months
	Three Months Ended September 30, 2013
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value
Modifications under government programs	$	86	$	—	$	86
Modifications under proprietary programs	185		—		185
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	205		3		208
Trial modifications	1,205		3		1,208
Total modifications	$	1,681	$	6	$	1,687

	Three Months Ended September 30, 2012
Modifications under government programs	$	27	$	2	$	29
Modifications under proprietary programs	135		2		137
Trial modifications	671		7		678
Total modifications	$	833	$	11	$	844

	Nine Months Ended September 30, 2013
Modifications under government programs	$	244	$	2	$	246
Modifications under proprietary programs	731		4		735
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	809		27		836
Trial modifications	3,142		8		3,150
Total modifications	$	4,926	$	41	$	4,967

	Nine Months Ended September 30, 2012
Modifications under government programs	$	167	$	6	$	173
Modifications under proprietary programs	753		11		764
Trial modifications	963		16		979
Total modifications	$	1,883	$	33	$	1,916


⁽¹⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs in accordance with regulatory guidance implemented in the third quarter of 2012.

Credit Card and Other Consumer

Impaired loans within the Credit Card and Other Consumer portfolio segment consist entirely of loans that have been modified in TDRs (the renegotiated credit card and other consumer TDR portfolio, collectively referred to as the renegotiated TDR portfolio). The Corporation seeks to assist customers that are experiencing financial difficulty by modifying loans while ensuring compliance with federal laws and guidelines. Credit card and other consumer loan modifications generally involve reducing the interest rate on the account and placing the customer on a fixed payment plan not exceeding 60 months, all of which are considered TDRs. In addition, non-U.S. credit card modifications may involve reducing the interest rate on the account without placing the customer on a fixed payment plan, and are also considered TDRs. In all cases, the customer's available line of credit is canceled. The Corporation makes loan modifications directly with borrowers for debt held only by the Corporation (internal programs). Additionally, the Corporation makes loan modifications for borrowers working with third-party renegotiation agencies that provide solutions to customers' entire unsecured debt structures (external programs).

In 2012, regulatory guidance was implemented addressing certain consumer real estate loans that have been discharged in Chapter 7 bankruptcy. The Corporation applies this guidance to other secured consumer loans that have been discharged in Chapter 7 bankruptcy, and such loans are classified as TDRs, written down to collateral value and placed on nonaccrual status no later than the time of discharge. For more information on the regulatory guidance on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.

All credit card and substantially all other consumer loans that have been modified in TDRs remain on accrual status until the loan is either paid in full or charged off, which occurs no later than the end of the month in which the loan becomes 180 days past due or generally at 120 days past due for a loan that was placed on a fixed payment plan after July 1, 2012.

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

The table below provides information on the Corporation's renegotiated TDR portfolio in the Credit Card and Other Consumer portfolio segment at September 30, 2013 and December 31, 2012, and for the three and nine months ended September 30, 2013 and 2012.



Impaired Loans – Credit Card and Other Consumer – Renegotiated TDRs
					September 30, 2013						December 31, 2012
(Dollars in millions)					Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance
With an allowance recorded
U.S. credit card					$	1,706	$	1,716	$	370	$	2,856	$	2,871	$	719
Non-U.S. credit card					246		250		161		311		316		198
Direct/Indirect consumer					351		352		104		633		636		210
Other consumer					28		27		10		30		30		12
Without an allowance recorded
Direct/Indirect consumer					81		37		—		105		58		—
Other consumer					34		34		—		35		35		—
Total
U.S. credit card					$	1,706	$	1,716	$	370	$	2,856	$	2,871	$	719
Non-U.S. credit card					246		250		161		311		316		198
Direct/Indirect consumer					432		389		104		738		694		210
Other consumer					62		61		10		65		65		12

	Three Months Ended September 30								Nine Months Ended September 30
	2013				2012				2013				2012
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With an allowance recorded
U.S. credit card	$	1,926	$	30	$	3,727	$	58	$	2,310	$	108	$	4,380	$	204
Non-U.S. credit card	254		2		447		2		274		6		509		7
Direct/Indirect consumer	406		5		864		12		498		20		1,003		41
Other consumer	27		1		30		—		28		2		32		1
Without an allowance recorded
Direct/Indirect consumer	38		—		—		—		45		—		—		—
Other consumer	34		—		34		1		34		1		35		2
Total
U.S. credit card	$	1,926	$	30	$	3,727	$	58	$	2,310	$	108	$	4,380	$	204
Non-U.S. credit card	254		2		447		2		274		6		509		7
Direct/Indirect consumer	444		5		864		12		543		20		1,003		41
Other consumer	61		1		64		1		62		3		67		3


⁽¹⁾	Includes accrued interest and fees.


⁽²⁾	Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal is considered collectible.

The table below provides information on the Corporation's primary modification programs for the renegotiated TDR portfolio at September 30, 2013 and December 31, 2012.



Credit Card and Other Consumer – Renegotiated TDRs by Program Type
	Internal Programs				External Programs				Other				Total				Percent of Balances Current or Less Than 30 Days Past Due
(Dollars in millions)	September 30 2013		December 31 2012		September 30 2013		December 31 2012		September 30 2013		December 31 2012		September 30 2013		December 31 2012		September 30 2013		December 31 2012
U.S. credit card	$	1,016	$	1,887	$	681	$	953	$	19	$	31	$	1,716	$	2,871	83.74	%	81.48	%
Non-U.S. credit card	78		99		27		38		145		179		250		316		49.34		43.71
Direct/Indirect consumer	215		405		131		225		43		64		389		694		84.62		83.11
Other consumer	61		65		—		—		—		—		61		65		73.13		72.73
Total renegotiated TDRs	$	1,370	$	2,456	$	839	$	1,216	$	207	$	274	$	2,416	$	3,946	80.04		78.58

At September 30, 2013 and December 31, 2012, the Corporation had a renegotiated TDR portfolio of $2.4 billion and $3.9 billion of which $1.9 billion was current or less than 30 days past due under the modified terms at September 30, 2013.

The table below provides information on the Corporation's renegotiated TDR portfolio including the unpaid principal balance, carrying value and average pre- and post-modification interest rates of loans that were modified in TDRs during the three and nine months ended September 30, 2013 and 2012, and net charge-offs that were recorded during the period in which the modification occurred.



Credit Card and Other Consumer – Renegotiated TDRs Entered into During the Three Months September 30, 2013 and 2012
	September 30, 2013								Three Months Ended September 30, 2013
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate		Net Charge-offs
U.S. credit card	$	100	$	102	16.86	%	5.70	%	$	2
Non-U.S. credit card	61		64		26.09		0.67		2
Direct/Indirect consumer	16		12		10.89		4.68		4
Other consumer	2		2		9.10		6.01		—
Total	$	179	$	180	19.65		3.85		$	8

	September 30, 2012								Three Months Ended September 30, 2012
U.S. credit card	$	102	$	105	17.37	%	6.32	%	$	2
Non-U.S. credit card	90		94		26.13		0.77		4
Direct/Indirect consumer	14		14		15.40		3.90		2
Other consumer	2		2		9.91		6.17		—
Total	$	208	$	215	21.00		3.73		$	8

Credit Card and Other Consumer – Renegotiated TDRs Entered into During the Nine Months Ended September 30, 2013 and 2012
	September 30, 2013								Nine Months Ended September 30, 2013
U.S. credit card	$	237	$	240	16.88	%	5.96	%	$	16
Non-U.S. credit card	138		143		26.04		0.87		78
Direct/Indirect consumer	41		31		11.17		4.90		12
Other consumer	4		5		9.35		5.40		—
Total	$	420	$	419	19.51		4.13		$	106

	September 30, 2012								Nine Months Ended September 30, 2012
U.S. credit card	$	342	$	346	17.73	%	6.37	%	$	23
Non-U.S. credit card	194		204		26.18		1.05		111
Direct/Indirect consumer	50		51		15.40		4.14		3
Other consumer	8		8		10.01		6.62		—
Total	$	594	$	609	20.26		4.41		$	137


⁽¹⁾	Includes accrued interest and fees.

The table below provides information on the Corporation's primary modification programs for the renegotiated TDR portfolio for loans that were modified in TDRs during the three and nine months ended September 30, 2013 and 2012.



Credit Card and Other Consumer – Renegotiated TDRs Entered into During the Period by Program Type
	Three Months Ended September 30, 2013
(Dollars in millions)	Internal Programs		External Programs		Other		Total
U.S. credit card	$	62	$	40	$	—	$	102
Non-U.S. credit card	32		32		—		64
Direct/Indirect consumer	4		2		6		12
Other consumer	2		—		—		2
Total renegotiated TDRs	$	100	$	74	$	6	$	180

	Three Months Ended September 30, 2012
U.S. credit card	$	64	$	41	$	—	$	105
Non-U.S. credit card	51		43		—		94
Direct/Indirect consumer	9		5		—		14
Other consumer	2		—		—		2
Total renegotiated TDRs	$	126	$	89	$	—	$	215

	Nine Months Ended September 30, 2013
U.S. credit card	$	132	$	108	$	—	$	240
Non-U.S. credit card	73		70		—		143
Direct/Indirect consumer	11		7		13		31
Other consumer	5		—		—		5
Total renegotiated TDRs	$	221	$	185	$	13	$	419

	Nine Months Ended September 30, 2012
U.S. credit card	$	221	$	125	$	—	$	346
Non-U.S. credit card	109		95		—		204
Direct/Indirect consumer	34		17		—		51
Other consumer	8		—		—		8
Total renegotiated TDRs	$	372	$	237	$	—	$	609

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 23 percent of new U.S. credit card TDRs, 69 percent of new non-U.S. credit card TDRs and 19 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification. Loans that entered into payment default during the three and nine months ended September 30, 2013 that had been modified in a TDR during the preceding 12 months were $11 million and $49 million for U.S. credit card, $60 million and $181 million for non-U.S. credit card and $1 million and $4 million for direct/indirect consumer. During the three and nine months ended September 30, 2012, loans that entered into payment default that had been modified in a TDR during the preceding 12 months were $40 million and $173 million for U.S. credit card, $69 million and $228 million for non-U.S. credit card and $6 million and $31 million for direct/indirect consumer.

Commercial Loans

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

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

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

At September 30, 2013 and December 31, 2012, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were immaterial. Commercial foreclosed properties totaled $116 million and $250 million at September 30, 2013 and December 31, 2012.

The table below presents impaired loans in the Corporation's Commercial loan portfolio segment at September 30, 2013 and December 31, 2012, and for the three and nine months ended September 30, 2013 and 2012. Certain impaired commercial loans do not have a related allowance as the valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.



Impaired Loans – Commercial
					September 30, 2013						December 31, 2012
(Dollars in millions)					Unpaid Principal Balance		Carrying Value		Related Allowance		Unpaid Principal Balance		Carrying Value		Related Allowance
With no recorded allowance
U.S. commercial					$	1,036	$	960	n/a		$	1,220	$	1,109	n/a
Commercial real estate					525		503		n/a		1,003		902		n/a
Non-U.S. commercial					51		40		n/a		240		120		n/a
With an allowance recorded
U.S. commercial					$	1,292	$	881	$	150	$	1,782	$	1,138	$	159
Commercial real estate					1,099		702		74		2,287		1,262		201
Non-U.S. commercial					235		57		17		280		33		18
U.S. small business commercial ⁽¹⁾					224		213		45		361		317		97
Total
U.S. commercial					$	2,328	$	1,841	$	150	$	3,002	$	2,247	$	159
Commercial real estate					1,624		1,205		74		3,290		2,164		201
Non-U.S. commercial					286		97		17		520		153		18
U.S. small business commercial ⁽¹⁾					224		213		45		361		317		97

	Three Months Ended September 30								Nine Months Ended September 30
	2013				2012				2013				2012
	Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With no recorded allowance
U.S. commercial	$	957	$	7	$	1,113	$	9	$	998	$	19	$	1,078	$	26
Commercial real estate	525		3		1,318		4		670		10		1,661		12
Non-U.S. commercial	65		—		140		1		102		3		130		1
With an allowance recorded
U.S. commercial	$	928	$	5	$	1,457	$	7	$	1,051	$	20	$	1,727	$	25
Commercial real estate	661		5		1,552		3		880		14		1,865		13
Non-U.S. commercial	68		—		50		1		55		2		56		2
U.S. small business commercial ⁽¹⁾	218		1		392		3		253		5		433		10
Total
U.S. commercial	$	1,885	$	12	$	2,570	$	16	$	2,049	$	39	$	2,805	$	51
Commercial real estate	1,186		8		2,870		7		1,550		24		3,526		25
Non-U.S. commercial	133		—		190		2		157		5		186		3
U.S. small business commercial ⁽¹⁾	218		1		392		3		253		5		433		10


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


⁽²⁾	Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal is considered collectible.

n/a = not applicable

The table below presents the September 30, 2013 and 2012 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during the three and nine months ended September 30, 2013 and 2012, and net charge-offs that were recorded during the period in which the modification occurred. The table below includes loans that were initially classified as TDRs during the period and, beginning in the first quarter of 2013, also loans that had previously been classified as TDRs and were modified again during the period.



Commercial – TDRs Entered into During the Three Months Ended September 30, 2013 and 2012
	September 30, 2013				Three Months Ended September 30, 2013
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Net Charge-offs
U.S. commercial	$	361	$	357	$	27
Commercial real estate	305		284		—
Non-U.S. commercial	—		—		—
U.S. small business commercial ⁽¹⁾	2		3		—
Total	$	668	$	644	$	27

	September 30, 2012				Three Months Ended September 30, 2012
U.S. commercial	$	152	$	143	$	—
Commercial real estate	373		350		5
Non-U.S. commercial	22		22		—
U.S. small business commercial ⁽¹⁾	5		6		1
Total	$	552	$	521	$	6

Commercial – TDRs Entered into During the Nine Months Ended September 30, 2013 and 2012
	September 30, 2013				Nine Months Ended September 30, 2013
U.S. commercial	$	853	$	771	$	28
Commercial real estate	615		569		3
Non-U.S. commercial	21		7		—
U.S. small business commercial ⁽¹⁾	7		7		1
Total	$	1,496	$	1,354	$	32

	September 30, 2012				Nine Months Ended September 30, 2012
U.S. commercial	$	558	$	534	$	15
Commercial real estate	737		695		12
Non-U.S. commercial	87		87		—
U.S. small business commercial ⁽¹⁾	20		20		3
Total	$	1,402	$	1,336	$	30


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

A commercial TDR is generally deemed to be in payment default when the loan is 90 days or more past due, including delinquencies that were not resolved as part of the modification. U.S. small business commercial TDRs are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows, along with observable market prices or fair value of collateral when measuring the allowance for loan losses. TDRs that were in payment default at September 30, 2013 and 2012 had a carrying value of $128 million and $129 million for U.S. commercial, $269 million and $390 million for commercial real estate and $1 million and $28 million for U.S. small business commercial.

Purchased Credit-impaired Loans

PCI loans are acquired loans with evidence of credit quality deterioration since origination for which it is probable at purchase date that the Corporation will be unable to collect all contractually required payments. The following table provides details on PCI loans acquired in connection with the FNMA Settlement during the nine months ended September 30, 2013.



Purchased Loans at Acquisition Date
(Dollars in millions)
Contractually required payments including interest	$	8,274
Less: Nonaccretable difference	2,159
Cash flows expected to be collected ⁽¹⁾	6,115
Less: Accretable yield	1,125
Fair value of loans acquired	$	4,990


⁽¹⁾	Represents undiscounted expected principal and interest cash flows at acquisition.

The table below shows activity for the accretable yield on PCI loans, which primarily includes the Countrywide Financial Corporation (Countrywide) portfolio and loans repurchased in connection with the FNMA Settlement. For more information on the FNMA Settlement, see Note 8 – Representations and Warranties Obligations and Corporate Guarantees. The amount of accretable yield is affected by changes in credit outlooks, including metrics such as default rates and loss severities, prepayments speeds, which can change the amount and period of time over which interest payments are expected to be received, and the interest rates on variable rate loans. The reclassifications from nonaccretable difference during the three and nine months ended September 30, 2013 were due to increases in expected cash flows driven by improved home prices and lower expected defaults, along with a decrease in prepayment speeds as a result of rising interest rates. Changes in the prepayment assumption affect the expected remaining life of the portfolio which results in a change to the amount of future interest cash flows.



Rollforward of Accretable Yield
(Dollars in millions)	Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013
Accretable yield, beginning of period	$	6,775		$	4,644
Accretion	(303		)	(901		)
Loans purchased	—			1,125
Disposals/transfers	(81		)	(219		)
Reclassifications from nonaccretable difference	292			2,034
Accretable yield, September 30, 2013	$	6,683		$	6,683

For more information on PCI loans, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K and Note 6 – Allowance for Credit Losses herein for the carrying value and valuation allowance for PCI loans.

Loans Held-for-sale

The Corporation had LHFS of $15.0 billion and $19.4 billion at September 30, 2013 and December 31, 2012. Proceeds, including cash and securities, from sales, securitizations and paydowns of LHFS were $65.5 billion and $39.5 billion for the nine months ended September 30, 2013 and 2012. Amounts used for originations and purchases of LHFS were $55.6 billion and $39.8 billion for the nine months ended September 30, 2013 and 2012.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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