Quarterly report pursuant to Section 13 or 15(d)

Allowance for Credit Losses

v2.4.0.8
Allowance for Credit Losses
6 Months Ended
Jun. 30, 2014
Receivables [Abstract]  
Allowance for Credit Losses
NOTE 5 – Allowance for Credit Losses

The table below summarizes the changes in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2014 and 2013.

 
Three Months Ended June 30, 2014
(Dollars in millions)
Home Loans
 
Credit Card
and Other
Consumer
 
Commercial
 
Total
Allowance for loan and lease losses, April 1
$
7,556

 
$
4,775

 
$
4,287

 
$
16,618

Loans and leases charged off
(632
)
 
(1,051
)
 
(161
)
 
(1,844
)
Recoveries of loans and leases previously charged off
428

 
241

 
102

 
771

Net charge-offs
(204
)
 
(810
)
 
(59
)
 
(1,073
)
Write-offs of PCI loans
(160
)
 

 

 
(160
)
Provision for loan and lease losses
(284
)
 
441

 
260

 
417

Other (1)

 
11

 
(2
)
 
9

Allowance for loan and lease losses, June 30
6,908

 
4,417

 
4,486

 
15,811

Reserve for unfunded lending commitments, April 1

 

 
509

 
509

Provision for unfunded lending commitments

 

 
(6
)
 
(6
)
Reserve for unfunded lending commitments, June 30

 

 
503

 
503

Allowance for credit losses, June 30
$
6,908

 
$
4,417

 
$
4,989

 
$
16,314

 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2013
Allowance for loan and lease losses, April 1
$
13,438

 
$
5,874

 
$
3,129

 
$
22,441

Loans and leases charged off
(936
)
 
(1,489
)
 
(325
)
 
(2,750
)
Recoveries of loans and leases previously charged off
179

 
331

 
129

 
639

Net charge-offs
(757
)
 
(1,158
)
 
(196
)
 
(2,111
)
Write-offs of PCI loans
(313
)
 

 

 
(313
)
Provision for loan and lease losses
27

 
957

 
236

 
1,220

Other (1)
1

 
(2
)
 
(1
)
 
(2
)
Allowance for loan and lease losses, June 30
12,396

 
5,671

 
3,168

 
21,235

Reserve for unfunded lending commitments, April 1

 

 
486

 
486

Provision for unfunded lending commitments

 

 
(9
)
 
(9
)
Other

 

 
(3
)
 
(3
)
Reserve for unfunded lending commitments, June 30

 

 
474

 
474

Allowance for credit losses, June 30
$
12,396

 
$
5,671

 
$
3,642

 
$
21,709

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2014
Allowance for loan and lease losses, January 1
$
8,518

 
$
4,905

 
$
4,005

 
$
17,428

Loans and leases charged off
(1,228
)
 
(2,179
)
 
(305
)
 
(3,712
)
Recoveries of loans and leases previously charged off
595

 
459

 
197

 
1,251

Net charge-offs
(633
)
 
(1,720
)
 
(108
)
 
(2,461
)
Write-offs of PCI loans
(551
)
 

 

 
(551
)
Provision for loan and lease losses
(425
)
 
1,232

 
594

 
1,401

Other (1)
(1
)
 

 
(5
)
 
(6
)
Allowance for loan and lease losses, June 30
6,908

 
4,417

 
4,486

 
15,811

Reserve for unfunded lending commitments, January 1

 

 
484

 
484

Provision for unfunded lending commitments

 

 
19

 
19

Reserve for unfunded lending commitments, June 30

 

 
503

 
503

Allowance for credit losses, June 30
$
6,908

 
$
4,417

 
$
4,989

 
$
16,314

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2013
Allowance for loan and lease losses, January 1
$
14,933

 
$
6,140

 
$
3,106

 
$
24,179

Loans and leases charged off
(2,129
)
 
(3,042
)
 
(641
)
 
(5,812
)
Recoveries of loans and leases previously charged off
305

 
649

 
230

 
1,184

Net charge-offs
(1,824
)
 
(2,393
)
 
(411
)
 
(4,628
)
Write-offs of PCI loans
(1,152
)
 

 

 
(1,152
)
Provision for loan and lease losses
511

 
1,964

 
476

 
2,951

Other (1)
(72
)
 
(40
)
 
(3
)
 
(115
)
Allowance for loan and lease losses, June 30
12,396

 
5,671

 
3,168

 
21,235

Reserve for unfunded lending commitments, January 1

 

 
513

 
513

Provision for unfunded lending commitments

 

 
(27
)
 
(27
)
Other

 

 
(12
)
 
(12
)
Reserve for unfunded lending commitments, June 30

 

 
474

 
474

Allowance for credit losses, June 30
$
12,396

 
$
5,671

 
$
3,642

 
$
21,709

(1) 
Primarily represents the net impact of portfolio sales, consolidations and deconsolidations, and foreign currency translation adjustments.

During both the three and six months ended June 30, 2014, for the PCI loan portfolio, the Corporation recorded a benefit of $106 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 $252 million and $459 million in the provision for credit losses for the same periods in 2013. Write-offs in the PCI loan portfolio totaled $160 million and $551 million with a corresponding decrease in the PCI valuation allowance during the three and six months ended June 30, 2014 compared to $313 million and $1.2 billion for the same periods in 2013. The valuation allowance associated with the PCI loan portfolio was $1.8 billion and $2.5 billion at June 30, 2014 and December 31, 2013.

The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at June 30, 2014 and December 31, 2013.

Allowance and Carrying Value by Portfolio Segment
 
 
 
 
 
 
 
 
June 30, 2014
(Dollars in millions)
Home Loans
 
Credit Card
and Other
Consumer
 
Commercial
 
Total
Impaired loans and troubled debt restructurings (1)
 
 
 
 
 
 
 
Allowance for loan and lease losses (2)
$
1,069

 
$
438

 
$
278

 
$
1,785

Carrying value (3)
27,520

 
1,541

 
2,881

 
31,942

Allowance as a percentage of carrying value
3.88
%
 
28.42
%
 
9.65
%
 
5.59
%
Loans collectively evaluated for impairment
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
4,003

 
$
3,979

 
$
4,208

 
$
12,190

Carrying value (3, 4)
275,711

 
184,143

 
385,798

 
845,652

Allowance as a percentage of carrying value (4)
1.45
%
 
2.16
%
 
1.09
%
 
1.44
%
Purchased credit-impaired loans
 
 
 
 
 
 
 
Valuation allowance
$
1,836

 
n/a

 
n/a

 
$
1,836

Carrying value gross of valuation allowance
23,404

 
n/a

 
n/a

 
23,404

Valuation allowance as a percentage of carrying value
7.84
%
 
n/a

 
n/a

 
7.84
%
Total
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
6,908

 
$
4,417

 
$
4,486

 
$
15,811

Carrying value (3, 4)
326,635

 
185,684

 
388,679

 
900,998

Allowance as a percentage of carrying value (4)
2.11
%
 
2.38
%
 
1.15
%
 
1.75
%
 
 
 
 
 
 
 
 
 
December 31, 2013
Impaired loans and troubled debt restructurings (1)
 
 
 
 
 
 
 
Allowance for loan and lease losses (2)
$
1,231

 
$
579

 
$
277

 
$
2,087

Carrying value (3)
31,458

 
2,079

 
3,048

 
36,585

Allowance as a percentage of carrying value
3.91
%
 
27.85
%
 
9.09
%
 
5.70
%
Loans collectively evaluated for impairment
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
4,794

 
$
4,326

 
$
3,728

 
$
12,848

Carrying value (3, 4)
285,015

 
185,969

 
385,357

 
856,341

Allowance as a percentage of carrying value (4)
1.68
%
 
2.33
%
 
0.97
%
 
1.50
%
Purchased credit-impaired loans
 
 
 
 
 
 
 
Valuation allowance
$
2,493

 
n/a

 
n/a

 
$
2,493

Carrying value gross of valuation allowance
25,265

 
n/a

 
n/a

 
25,265

Valuation allowance as a percentage of carrying value
9.87
%
 
n/a

 
n/a

 
9.87
%
Total
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
8,518

 
$
4,905

 
$
4,005

 
$
17,428

Carrying value (3, 4)
341,738

 
188,048

 
388,405

 
918,191

Allowance as a percentage of carrying value (4)
2.49
%
 
2.61
%
 
1.03
%
 
1.90
%
(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.
(2) 
Allowance for loan and lease losses includes $39 million and $36 million related to impaired U.S. small business commercial at June 30, 2014 and December 31, 2013.
(3) 
Amounts are presented gross of the allowance for loan and lease losses.
(4) 
Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $10.9 billion and $10.0 billion at June 30, 2014 and December 31, 2013.
n/a = not applicable