| Allowance for Credit Losses |
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NOTE 6 – Allowance for Credit Losses |
The table below summarizes the changes in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2013 and 2012.
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Three Months Ended September 30, 2013 |
(Dollars in millions) |
Home Loans |
|
Credit Card
and Other
Consumer |
|
Commercial |
|
Total |
Allowance for loan and lease losses, July 1 |
$ |
12,396 |
|
|
$ |
5,671 |
|
|
$ |
3,168 |
|
|
$ |
21,235 |
|
Loans and leases charged off |
(766 |
) |
|
(1,296 |
) |
|
(267 |
) |
|
(2,329 |
) |
Recoveries of loans and leases previously charged off |
243 |
|
|
292 |
|
|
107 |
|
|
642 |
|
Net charge-offs |
(523 |
) |
|
(1,004 |
) |
|
(160 |
) |
|
(1,687 |
) |
Write-offs of PCI loans |
(443 |
) |
|
— |
|
|
— |
|
|
(443 |
) |
Provision for loan and lease losses |
(920 |
) |
|
730 |
|
|
481 |
|
|
291 |
|
Other (1)
|
3 |
|
|
33 |
|
|
— |
|
|
36 |
|
Allowance for loan and lease losses, September 30 |
10,513 |
|
|
5,430 |
|
|
3,489 |
|
|
19,432 |
|
Reserve for unfunded lending commitments, July 1 |
— |
|
|
— |
|
|
474 |
|
|
474 |
|
Provision for unfunded lending commitments |
— |
|
|
— |
|
|
5 |
|
|
5 |
|
Other (2)
|
— |
|
|
— |
|
|
1 |
|
|
1 |
|
Reserve for unfunded lending commitments, September 30 |
— |
|
|
— |
|
|
480 |
|
|
480 |
|
Allowance for credit losses, September 30 |
$ |
10,513 |
|
|
$ |
5,430 |
|
|
$ |
3,969 |
|
|
$ |
19,912 |
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|
|
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Three Months Ended September 30, 2012 |
Allowance for loan and lease losses, July 1 |
$ |
19,964 |
|
|
$ |
7,024 |
|
|
$ |
3,300 |
|
|
$ |
30,288 |
|
Loans and leases charged off |
(2,480 |
) |
|
(1,721 |
) |
|
(492 |
) |
|
(4,693 |
) |
Recoveries of loans and leases previously charged off |
137 |
|
|
294 |
|
|
140 |
|
|
571 |
|
Net charge-offs |
(2,343 |
) |
|
(1,427 |
) |
|
(352 |
) |
|
(4,122 |
) |
Write-offs of PCI loans |
(1,705 |
) |
|
— |
|
|
— |
|
|
(1,705 |
) |
Provision for loan and lease losses |
617 |
|
|
960 |
|
|
233 |
|
|
1,810 |
|
Other (1)
|
1 |
|
|
(36 |
) |
|
(3 |
) |
|
(38 |
) |
Allowance for loan and lease losses, September 30 |
16,534 |
|
|
6,521 |
|
|
3,178 |
|
|
26,233 |
|
Reserve for unfunded lending commitments, July 1 |
— |
|
|
— |
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|
574 |
|
|
574 |
|
Provision for unfunded lending commitments |
— |
|
|
— |
|
|
(36 |
) |
|
(36 |
) |
Other (2)
|
— |
|
|
— |
|
|
(20 |
) |
|
(20 |
) |
Reserve for unfunded lending commitments, September 30 |
— |
|
|
— |
|
|
518 |
|
|
518 |
|
Allowance for credit losses, September 30 |
$ |
16,534 |
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|
$ |
6,521 |
|
|
$ |
3,696 |
|
|
$ |
26,751 |
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Nine Months Ended September 30, 2013 |
Allowance for loan and lease losses, January 1 |
$ |
14,933 |
|
|
$ |
6,140 |
|
|
$ |
3,106 |
|
|
$ |
24,179 |
|
Loans and leases charged off |
(2,895 |
) |
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(4,338 |
) |
|
(908 |
) |
|
(8,141 |
) |
Recoveries of loans and leases previously charged off |
548 |
|
|
941 |
|
|
337 |
|
|
1,826 |
|
Net charge-offs |
(2,347 |
) |
|
(3,397 |
) |
|
(571 |
) |
|
(6,315 |
) |
Write-offs of PCI loans |
(1,595 |
) |
|
— |
|
|
— |
|
|
(1,595 |
) |
Provision for loan and lease losses |
(409 |
) |
|
2,694 |
|
|
957 |
|
|
3,242 |
|
Other (1)
|
(69 |
) |
|
(7 |
) |
|
(3 |
) |
|
(79 |
) |
Allowance for loan and lease losses, September 30 |
10,513 |
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|
5,430 |
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|
3,489 |
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|
19,432 |
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Reserve for unfunded lending commitments, January 1 |
— |
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|
— |
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|
513 |
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|
513 |
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Provision for unfunded lending commitments |
— |
|
|
— |
|
|
(22 |
) |
|
(22 |
) |
Other (2)
|
— |
|
|
— |
|
|
(11 |
) |
|
(11 |
) |
Reserve for unfunded lending commitments, September 30 |
— |
|
|
— |
|
|
480 |
|
|
480 |
|
Allowance for credit losses, September 30 |
$ |
10,513 |
|
|
$ |
5,430 |
|
|
$ |
3,969 |
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$ |
19,912 |
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Nine Months Ended September 30, 2012 |
Allowance for loan and lease losses, January 1 |
$ |
21,079 |
|
|
$ |
8,569 |
|
|
$ |
4,135 |
|
|
$ |
33,783 |
|
Loans and leases charged off |
(6,256 |
) |
|
(5,983 |
) |
|
(1,645 |
) |
|
(13,884 |
) |
Recoveries of loans and leases previously charged off |
400 |
|
|
1,131 |
|
|
549 |
|
|
2,080 |
|
Net charge-offs |
(5,856 |
) |
|
(4,852 |
) |
|
(1,096 |
) |
|
(11,804 |
) |
Write-offs of PCI loans |
(1,705 |
) |
|
— |
|
|
— |
|
|
(1,705 |
) |
Provision for loan and lease losses |
3,061 |
|
|
2,893 |
|
|
153 |
|
|
6,107 |
|
Other (1)
|
(45 |
) |
|
(89 |
) |
|
(14 |
) |
|
(148 |
) |
Allowance for loan and lease losses, September 30 |
16,534 |
|
|
6,521 |
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|
3,178 |
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|
26,233 |
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Reserve for unfunded lending commitments, January 1 |
— |
|
|
— |
|
|
714 |
|
|
714 |
|
Provision for unfunded lending commitments |
— |
|
|
— |
|
|
(142 |
) |
|
(142 |
) |
Other (2)
|
— |
|
|
— |
|
|
(54 |
) |
|
(54 |
) |
Reserve for unfunded lending commitments, September 30 |
— |
|
|
— |
|
|
518 |
|
|
518 |
|
Allowance for credit losses, September 30 |
$ |
16,534 |
|
|
$ |
6,521 |
|
|
$ |
3,696 |
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$ |
26,751 |
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(1) |
Primarily represents the net impact of portfolio sales, consolidations and deconsolidations, and foreign currency translation adjustments. |
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(2) |
Primarily represents accretion of the Merrill Lynch purchase accounting adjustment. |
During the three and nine months ended September 30, 2013, for the PCI loan portfolios, the Corporation recorded a benefit of $248 million and a benefit of $707 million in the 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 a benefit of $166 million and an expense of $327 million in the provision for credit losses for the same periods in 2012. Write-offs in the PCI loan portfolios totaled $443 million and $1.6 billion with a corresponding decrease in the PCI valuation allowance during the three and nine months ended September 30, 2013 compared to write-offs in the PCI loan portfolios of $1.7 billion for both of the same periods in 2012. Write-offs during the nine months ended September 30, 2013 and 2012 included certain home equity PCI loans that were ineligible for the National Mortgage Settlement, but had similar characteristics as the eligible loans and the expectation of future cash proceeds was considered remote. The valuation allowance associated with the PCI loan portfolios was $3.2 billion and $5.5 billion at September 30, 2013 and December 31, 2012.
The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at September 30, 2013 and December 31, 2012.
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Allowance and Carrying Value by Portfolio Segment |
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September 30, 2013 |
(Dollars in millions) |
Home Loans |
|
Credit Card
and Other
Consumer |
|
Commercial |
|
Total |
Impaired loans and troubled debt restructurings (1)
|
|
|
|
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Allowance for loan and lease losses (2)
|
$ |
1,484 |
|
|
$ |
645 |
|
|
$ |
286 |
|
|
$ |
2,415 |
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Carrying value (3)
|
32,606 |
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|
2,416 |
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|
3,356 |
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|
38,378 |
|
Allowance as a percentage of carrying value |
4.55 |
% |
|
26.70 |
% |
|
8.52 |
% |
|
6.29 |
% |
Loans collectively evaluated for impairment |
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|
|
|
|
|
Allowance for loan and lease losses |
$ |
5,795 |
|
|
$ |
4,785 |
|
|
$ |
3,203 |
|
|
$ |
13,783 |
|
Carrying value (3, 4)
|
290,375 |
|
|
184,895 |
|
|
383,380 |
|
|
858,650 |
|
Allowance as a percentage of carrying value (4)
|
2.00 |
% |
|
2.59 |
% |
|
0.84 |
% |
|
1.61 |
% |
Purchased credit-impaired loans |
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|
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Valuation allowance |
$ |
3,234 |
|
|
n/a |
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|
n/a |
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|
$ |
3,234 |
|
Carrying value gross of valuation allowance |
27,168 |
|
|
n/a |
|
|
n/a |
|
|
27,168 |
|
Valuation allowance as a percentage of carrying value |
11.90 |
% |
|
n/a |
|
|
n/a |
|
|
11.90 |
% |
Total |
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Allowance for loan and lease losses |
$ |
10,513 |
|
|
$ |
5,430 |
|
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$ |
3,489 |
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$ |
19,432 |
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Carrying value (3, 4)
|
350,149 |
|
|
187,311 |
|
|
386,736 |
|
|
924,196 |
|
Allowance as a percentage of carrying value (4)
|
3.00 |
% |
|
2.90 |
% |
|
0.90 |
% |
|
2.10 |
% |
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|
|
|
|
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|
December 31, 2012 |
Impaired loans and troubled debt restructurings (1)
|
|
|
|
|
|
|
|
Allowance for loan and lease losses (2)
|
$ |
1,700 |
|
|
$ |
1,139 |
|
|
$ |
475 |
|
|
$ |
3,314 |
|
Carrying value (3)
|
30,250 |
|
|
3,946 |
|
|
4,881 |
|
|
39,077 |
|
Allowance as a percentage of carrying value |
5.62 |
% |
|
28.86 |
% |
|
9.73 |
% |
|
8.48 |
% |
Loans collectively evaluated for impairment |
|
|
|
|
|
|
|
Allowance for loan and lease losses |
$ |
7,697 |
|
|
$ |
5,001 |
|
|
$ |
2,631 |
|
|
$ |
15,329 |
|
Carrying value (3, 4)
|
304,701 |
|
|
187,419 |
|
|
341,502 |
|
|
833,622 |
|
Allowance as a percentage of carrying value (4)
|
2.53 |
% |
|
2.67 |
% |
|
0.77 |
% |
|
1.84 |
% |
Purchased credit-impaired loans |
|
|
|
|
|
|
|
Valuation allowance |
$ |
5,536 |
|
|
n/a |
|
|
n/a |
|
|
$ |
5,536 |
|
Carrying value gross of valuation allowance |
26,118 |
|
|
n/a |
|
|
n/a |
|
|
26,118 |
|
Valuation allowance as a percentage of carrying value |
21.20 |
% |
|
n/a |
|
|
n/a |
|
|
21.20 |
% |
Total |
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|
Allowance for loan and lease losses |
$ |
14,933 |
|
|
$ |
6,140 |
|
|
$ |
3,106 |
|
|
$ |
24,179 |
|
Carrying value (3, 4)
|
361,069 |
|
|
191,365 |
|
|
346,383 |
|
|
898,817 |
|
Allowance as a percentage of carrying value (4)
|
4.14 |
% |
|
3.21 |
% |
|
0.90 |
% |
|
2.69 |
% |
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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) |
Allowance for loan and lease losses includes $45 million and $97 million related to impaired U.S. small business commercial at September 30, 2013 and December 31, 2012.
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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 $10.2 billion and $9.0 billion at September 30, 2013 and December 31, 2012.
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n/a = not applicable
|