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

3 Months Ended

Mar. 31, 2016

Loans and Leases Receivable Disclosure [Abstract]

NOTE 4 – Outstanding Loans and Leases

The following tables present total outstanding loans and leases and an aging analysis for the Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at March 31, 2016 and December 31, 2015.



	March 31, 2016
(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
Consumer real estate
Core portfolio
Residential mortgage	$	1,264		$	494		$	3,364		$	5,122		$	140,200								$	145,322
Home equity	209			97			629			935			46,538									47,473
Legacy Assets & Servicing portfolio
Residential mortgage ⁽⁵⁾	1,240			678			5,337			7,255			20,260			$	11,603					39,118
Home equity	296			140			929			1,365			20,565			4,368						26,298
Credit card and other consumer
U.S. credit card	416			289			743			1,448			84,955									86,403
Non-U.S. credit card	38			27			77			142			9,835									9,977
Direct/Indirect consumer ⁽⁶⁾	182			54			38			274			90,335									90,609
Other consumer ⁽⁷⁾	15			3			3			21			2,155									2,176
Total consumer	3,660			1,782			11,120			16,562			414,843			15,971						447,376
Consumer loans accounted for under the fair value option ⁽⁸⁾																			$	1,946		1,946
Total consumer loans and leases	3,660			1,782			11,120			16,562			414,843			15,971			1,946			449,322
Commercial
U.S. commercial	412			175			320			907			259,795									260,702
Commercial real estate ⁽⁹⁾	55			9			69			133			57,927									58,060
Commercial lease financing	195			10			19			224			20,733									20,957
Non-U.S. commercial	14			14			2			30			92,842									92,872
U.S. small business commercial	74			32			81			187			12,747									12,934
Total commercial	750			240			491			1,481			444,044									445,525
Commercial loans accounted for under the fair value option ⁽⁸⁾																			6,266			6,266
Total commercial loans and leases	750			240			491			1,481			444,044						6,266			451,791
Total loans and leases ⁽¹⁰⁾	$	4,410		$	2,022		$	11,611		$	18,043		$	858,887		$	15,971		$	8,212		$	901,113
Percentage of outstandings	0.49		%	0.22		%	1.29		%	2.00		%	95.32		%	1.77		%	0.91		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.1 billion and nonperforming loans of $320 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $728 million and nonperforming loans of $265 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $6.3 billion.


⁽³⁾	Consumer real estate includes $2.7 billion and direct/indirect consumer includes $20 million of nonperforming loans.


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


⁽⁵⁾	Total outstandings includes pay option loans of $2.2 billion. The Corporation no longer originates this product.


⁽⁶⁾	Total outstandings includes auto and specialty lending loans of $45.4 billion, unsecured consumer lending loans of $774 million, U.S. securities-based lending loans of $39.2 billion, non-U.S. consumer loans of $3.7 billion, student loans of $547 million and other consumer loans of $1.0 billion.


⁽⁷⁾	Total outstandings includes consumer finance loans of $538 million, consumer leases of $1.5 billion and consumer overdrafts of $154 million.


⁽⁸⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $1.6 billion and home equity loans of $348 million. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.6 billion and non-U.S. commercial loans of $3.7 billion. For additional information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Option.


⁽⁹⁾	Total outstandings includes U.S. commercial real estate loans of $54.5 billion and non-U.S. commercial real estate loans of $3.5 billion.


⁽¹⁰⁾	The Corporation pledged $150.4 billion of loans to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Banks. This amount is not included in the parenthetical disclosure of loans and leases pledged as collateral on the Consolidated Balance Sheet as there were no related outstanding borrowings.



	December 31, 2015
(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
Consumer real estate
Core portfolio
Residential mortgage	$	1,603		$	645		$	3,834		$	6,082		$	139,763								$	145,845
Home equity	225			104			719			1,048			47,216									48,264
Legacy Assets & Servicing portfolio
Residential mortgage ⁽⁵⁾	1,656			890			6,019			8,565			21,435			$	12,066					42,066
Home equity	310			163			1,030			1,503			21,562			4,619						27,684
Credit card and other consumer
U.S. credit card	454			332			789			1,575			88,027									89,602
Non-U.S. credit card	39			31			76			146			9,829									9,975
Direct/Indirect consumer⁽⁶⁾	227			62			42			331			88,464									88,795
Other consumer ⁽⁷⁾	18			3			4			25			2,042									2,067
Total consumer	4,532			2,230			12,513			19,275			418,338			16,685						454,298
Consumer loans accounted for under the fair value option ⁽⁸⁾																			$	1,871		1,871
Total consumer loans and leases	4,532			2,230			12,513			19,275			418,338			16,685			1,871			456,169
Commercial
U.S. commercial	444			148			332			924			251,847									252,771
Commercial real estate ⁽⁹⁾	36			11			82			129			57,070									57,199
Commercial lease financing	150			29			20			199			21,153									21,352
Non-U.S. commercial	6			1			1			8			91,541									91,549
U.S. small business commercial	83			41			72			196			12,680									12,876
Total commercial	719			230			507			1,456			434,291									435,747
Commercial loans accounted for under the fair value option ⁽⁸⁾																			5,067			5,067
Total commercial loans and leases	719			230			507			1,456			434,291						5,067			440,814
Total loans and leases ⁽¹⁰⁾	$	5,251		$	2,460		$	13,020		$	20,731		$	852,629		$	16,685		$	6,938		$	896,983
Percentage of outstandings	0.59		%	0.27		%	1.45		%	2.31		%	95.06		%	1.86		%	0.77		%	100.00		%


⁽¹⁾	Consumer real estate loans 30-59 days past due includes fully-insured loans of $1.7 billion and nonperforming loans of $379 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $1.0 billion and nonperforming loans of $297 million.


⁽²⁾	Consumer real estate includes fully-insured loans of $7.2 billion.


⁽³⁾	Consumer real estate includes $3.0 billion and direct/indirect consumer includes $21 million of nonperforming loans.


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


⁽⁵⁾	Total outstandings includes pay option loans of $2.3 billion. The Corporation no longer originates this product.


⁽⁶⁾	Total outstandings includes auto and specialty lending loans of $42.6 billion, unsecured consumer lending loans of $886 million, U.S. securities-based lending loans of $39.8 billion, non-U.S. consumer loans of $3.9 billion, student loans of $564 million and other consumer loans of $1.0 billion.


⁽⁷⁾	Total outstandings includes consumer finance loans of $564 million, consumer leases of $1.4 billion and consumer overdrafts of $146 million.


⁽⁸⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $1.6 billion and home equity loans of $250 million. 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 $2.8 billion. For additional information, see Note 14 – Fair Value Measurements and Note 15 – Fair Value Option.


⁽⁹⁾	Total outstandings includes U.S. commercial real estate loans of $53.6 billion and non-U.S. commercial real estate loans of $3.5 billion.


⁽¹⁰⁾	The Corporation pledged $149.4 billion of loans to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Banks. This amount is not included in the parenthetical disclosure of loans and leases pledged as collateral on the Consolidated Balance Sheet as there were no related outstanding borrowings.

The Corporation has entered into long-term credit protection agreements with Fannie Mae (FNMA) and Freddie Mac (FHLMC) on loans totaling $4.3 billion and $3.7 billion at March 31, 2016 and December 31, 2015, providing full credit protection on residential mortgage loans that become severely delinquent. All of these loans are individually insured and therefore the Corporation does not record an allowance for credit losses related to these loans.

Nonperforming Loans and Leases

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 March 31, 2016 and December 31, 2015, $471 million and $484 million of such junior-lien home equity loans were included in nonperforming loans.

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 (TDR), 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 March 31, 2016, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms were $741 million of which $433 million were current on their contractual payments, while $270 million were 90 days or more past due. Of the contractually current nonperforming loans, more than 80 percent were discharged in Chapter 7 bankruptcy more than 12 months ago, and approximately 65 percent were discharged 24 months or more ago. As subsequent cash payments are received on these nonperforming loans that are contractually current, 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.

During the three months ended March 31, 2016 and 2015, the Corporation sold nonperforming and other delinquent consumer real estate loans with a carrying value of $1.0 billion and $1.0 billion, including $174 million and $586 million of purchased credit-impaired (PCI) loans. The Corporation recorded net charge-offs of $40 million and net recoveries of $40 million related to these sales for the three months ended March 31, 2016 and 2015. Gains related to these sales of $31 million and $35 million were recorded in other income in the Consolidated Statement of Income for the three months ended March 31, 2016 and 2015.

The table below presents the Corporation's nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at March 31, 2016 and December 31, 2015. 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 2015 Annual Report on Form 10-K.



Credit Quality
	Nonperforming Loans and Leases				Accruing Past Due 90 Days or More
(Dollars in millions)	March 31 2016		December 31 2015		March 31 2016		December 31 2015
Consumer real estate
Core portfolio
Residential mortgage ⁽¹⁾	$	1,616	$	1,845	$	2,302	$	2,645
Home equity	1,310		1,354		—		—
Legacy Assets & Servicing portfolio
Residential mortgage ⁽¹⁾	2,360		2,958		4,032		4,505
Home equity	1,934		1,983		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		743		789
Non-U.S. credit card	n/a		n/a		77		76
Direct/Indirect consumer	26		24		31		39
Other consumer	1		1		2		3
Total consumer	7,247		8,165		7,187		8,057
Commercial
U.S. commercial	1,236		867		85		113
Commercial real estate	91		93		—		3
Commercial lease financing	29		12		13		15
Non-U.S. commercial	165		158		2		1
U.S. small business commercial	82		82		60		61
Total commercial	1,603		1,212		160		193
Total loans and leases	$	8,850	$	9,377	$	7,347	$	8,250

⁽¹⁾

Residential mortgage loans in the Core and Legacy Assets & Servicing portfolios accruing past due 90 days or more are fully-insured loans. At March 31, 2016 and December 31, 2015, residential mortgage includes $3.4 billion and $4.3 billion of loans on which interest has been curtailed by the Federal Housing Administration (FHA), and therefore are no longer accruing interest, although principal is still insured, and $2.9 billion and $2.9 billion of loans on which interest is still accruing.

n/a = not applicable

Credit Quality Indicators

The Corporation monitors credit quality within its Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments based on primary credit quality indicators. For more information on the portfolio segments, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K. Within the Consumer Real Estate portfolio segment, the primary credit quality indicators are refreshed LTV and refreshed FICO score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan, refreshed quarterly. Home equity loans are evaluated using combined loan-to-value (CLTV) which measures the carrying value of the Corporation's loan and available line of credit combined with any outstanding senior liens against the property as a percentage of the value of the property securing the loan, refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower's credit history. 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 quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans.

The following tables present certain credit quality indicators for the Corporation's Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at March 31, 2016 and December 31, 2015.



Consumer Real Estate – Credit Quality Indicators ⁽¹⁾
	March 31, 2016
(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	$	112,721	$	15,636	$	8,247	$	43,534	$	14,925	$	1,882
Greater than 90 percent but less than or equal to 100 percent	4,153		1,863		1,228		1,545		2,290		786
Greater than 100 percent	2,633		2,992		2,128		2,394		4,715		1,700
Fully-insured loans ⁽⁵⁾	25,815		7,024		—		—		—		—
Total consumer real estate	$	145,322	$	27,515	$	11,603	$	47,473	$	21,930	$	4,368
Refreshed FICO score
Less than 620	$	3,259	$	3,845	$	3,497	$	1,817	$	2,640	$	678
Greater than or equal to 620 and less than 680	5,549		3,181		2,519		3,174		3,639		773
Greater than or equal to 680 and less than 740	21,959		5,346		3,155		8,891		6,182		1,281
Greater than or equal to 740	88,740		8,119		2,432		33,591		9,469		1,636
Fully-insured loans ⁽⁵⁾	25,815		7,024		—		—		—		—
Total consumer real estate	$	145,322	$	27,515	$	11,603	$	47,473	$	21,930	$	4,368


⁽¹⁾	Excludes $1.9 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $1.9 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
	March 31, 2016
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	4,111	$	—	$	1,305	$	210
Greater than or equal to 620 and less than 680	11,547		—		1,806		216
Greater than or equal to 680 and less than 740	33,256		—		11,598		356
Greater than or equal to 740	37,489		—		31,426		1,236
Other internal credit metrics ^{(2, 3, 4)}	—		9,977		44,474		158
Total credit card and other consumer	$	86,403	$	9,977	$	90,609	$	2,176


⁽¹⁾	At March 31, 2016, 25 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 $42.9 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $550 million of loans the Corporation no longer originates, primarily student loans.


⁽⁴⁾	Non-U.S. credit card represents the U.K. credit card portfolio which is evaluated using internal credit metrics, including delinquency status. At March 31, 2016, 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)
	March 31, 2016
(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	$	249,399	$	57,584	$	20,154	$	89,138	$	524
Reservable criticized	11,303		476		803		3,734		87
Refreshed FICO score ⁽³⁾
Less than 620									187
Greater than or equal to 620 and less than 680									550
Greater than or equal to 680 and less than 740									1,657
Greater than or equal to 740									3,141
Other internal credit metrics ^{(3, 4)}									6,788
Total commercial	$	260,702	$	58,060	$	20,957	$	92,872	$	12,934


⁽¹⁾	Excludes $6.3 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $681 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 March 31, 2016, 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.



Consumer Real Estate – Credit Quality Indicators ⁽¹⁾
	December 31, 2015
(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	$	109,869	$	16,646	$	8,655	$	44,006	$	15,666	$	2,003
Greater than 90 percent but less than or equal to 100 percent	4,251		2,007		1,403		1,652		2,382		852
Greater than 100 percent	2,783		3,212		2,008		2,606		5,017		1,764
Fully-insured loans ⁽⁵⁾	28,942		8,135		—		—		—		—
Total consumer real estate	$	145,845	$	30,000	$	12,066	$	48,264	$	23,065	$	4,619
Refreshed FICO score
Less than 620	$	3,465	$	4,408	$	3,798	$	1,898	$	2,785	$	729
Greater than or equal to 620 and less than 680	5,792		3,438		2,586		3,242		3,817		825
Greater than or equal to 680 and less than 740	22,017		5,605		3,187		9,203		6,527		1,356
Greater than or equal to 740	85,629		8,414		2,495		33,921		9,936		1,709
Fully-insured loans ⁽⁵⁾	28,942		8,135		—		—		—		—
Total consumer real estate	$	145,845	$	30,000	$	12,066	$	48,264	$	23,065	$	4,619


⁽¹⁾	Excludes $1.9 billion of loans accounted for under the fair value option.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $2.0 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, 2015
(Dollars in millions)	U.S. Credit Card		Non-U.S. Credit Card		Direct/Indirect Consumer		Other Consumer ⁽¹⁾
Refreshed FICO score
Less than 620	$	4,196	$	—	$	1,244	$	217
Greater than or equal to 620 and less than 680	11,857		—		1,698		214
Greater than or equal to 680 and less than 740	34,270		—		10,955		337
Greater than or equal to 740	39,279		—		29,581		1,149
Other internal credit metrics ^{(2, 3, 4)}	—		9,975		45,317		150
Total credit card and other consumer	$	89,602	$	9,975	$	88,795	$	2,067


⁽¹⁾	At December 31, 2015, 27 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 $43.7 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $567 million of loans the Corporation no longer originates, primarily student loans.


⁽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, 2015, 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⁾
	December 31, 2015
(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	$	243,922	$	56,688	$	20,644	$	87,905	$	571
Reservable criticized	8,849		511		708		3,644		96
Refreshed FICO score ⁽³⁾
Less than 620									184
Greater than or equal to 620 and less than 680									543
Greater than or equal to 680 and less than 740									1,627
Greater than or equal to 740									3,027
Other internal credit metrics ^{(3, 4)}									6,828
Total commercial	$	252,771	$	57,199	$	21,352	$	91,549	$	12,876


⁽¹⁾	Excludes $5.1 billion of loans accounted for under the fair value option.


⁽²⁾	U.S. small business commercial includes $670 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, 2015, 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. 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. PCI loans are excluded and reported separately on page 152. For additional information, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K.

Consumer Real Estate

Impaired consumer real estate loans within the Consumer Real Estate portfolio segment consist entirely of TDRs. Excluding PCI loans, most modifications of consumer real estate loans meet the definition of TDRs when a binding offer is extended to a borrower. Modifications of consumer real estate loans are done in accordance with 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.

Prior to permanently modifying a loan, the Corporation may enter into trial modifications with certain borrowers under both government and proprietary programs. Trial modifications generally represent a three- to four-month period during which the borrower makes monthly payments under the anticipated modified payment terms. Upon successful completion of the trial period, the Corporation and the borrower enter into a permanent modification. Binding trial modifications are classified as TDRs when the trial offer is made and continue to be classified as TDRs regardless of whether the borrower enters into a permanent modification.

Consumer real estate loans that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower of $1.7 billion were included in TDRs at March 31, 2016, of which $741 million were classified as nonperforming and $675 million were loans fully-insured by the Federal Housing Administration (FHA). For more information on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.

A consumer real estate 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. Consumer real estate TDRs are measured primarily based on the net present value of the estimated cash flows discounted at the loan's original effective interest rate, 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, consumer real estate TDRs that are considered to be dependent solely on the collateral for repayment (e.g., due to the lack of income verification) are measured based on the estimated fair value of the collateral and a charge-off is recorded if the carrying value exceeds the fair value of the collateral. Consumer real estate loans that reached 180 days past due prior to modification had been charged off to their net realizable value, less costs to sell, before they were modified as TDRs in accordance with established policy. Therefore, modifications of consumer real estate loans that are 180 or more days past due as TDRs do not have an impact on the allowance for loan and lease losses nor are additional charge-offs required at the time of modification. Subsequent declines in the fair value of the collateral after a loan has reached 180 days past due are recorded as charge-offs. Fully-insured loans are protected against principal loss, and therefore, the Corporation does not record an allowance for loan and lease losses on the outstanding principal balance, even after they have been modified in a TDR.

The net present value of the estimated cash flows used to measure impairment 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 March 31, 2016 and December 31, 2015, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were immaterial. Consumer real estate foreclosed properties totaled $421 million and $444 million at March 31, 2016 and December 31, 2015. The carrying value of consumer real estate loans, including fully-insured and PCI loans, for which formal foreclosure proceedings were in process as of March 31, 2016 was $5.3 billion. During the three months ended March 31, 2016 and 2015, the Corporation reclassified $416 million and $654 million of consumer real estate loans to foreclosed properties or, for properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans), to other assets. The reclassifications represent non-cash investing activities and, accordingly, are not reflected on the Consolidated Statement of Cash Flows.

The table below provides the unpaid principal balance, carrying value and related allowance at March 31, 2016 and December 31, 2015, and the average carrying value and interest income recognized for the three months ended March 31, 2016 and 2015 for impaired loans in the Corporation's Consumer Real Estate portfolio segment and includes primarily loans managed by Legacy Assets & Servicing (LAS). Certain impaired consumer real estate loans do not have a related allowance as the current valuation of these impaired loans exceeded the carrying value, which is net of previously recorded charge-offs.



Impaired Loans – Consumer Real Estate
							Three Months Ended March 31
	March 31, 2016						2016				2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Related Allowance		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾
With no recorded allowance
Residential mortgage	$	13,356	$	10,581	$	—	$	11,418	$	94	$	15,393	$	108
Home equity	3,586		1,806		—		1,808		13		1,692		25
With an allowance recorded
Residential mortgage	$	5,811	$	5,675	$	348	$	6,072	$	51	$	7,586	$	64
Home equity	1,036		913		202		898		6		714		7
Total
Residential mortgage	$	19,167	$	16,256	$	348	$	17,490	$	145	$	22,979	$	172
Home equity	4,622		2,719		202		2,706		19		2,406		32

	December 31, 2015
With no recorded allowance
Residential mortgage	$	14,888	$	11,901	$	—
Home equity	3,545		1,775		—
With an allowance recorded
Residential mortgage	$	6,624	$	6,471	$	399
Home equity	1,047		911		235
Total
Residential mortgage	$	21,512	$	18,372	$	399
Home equity	4,592		2,686		235


⁽¹⁾	Interest income recognized includes interest accrued and collected on the outstanding balances of accruing impaired loans as well as interest cash collections on nonaccruing impaired loans for which the principal is considered collectible.

The table below presents the March 31, 2016 and 2015 unpaid principal balance, carrying value, and average pre- and post-modification interest rates on consumer real estate loans that were modified in TDRs during the three months ended March 31, 2016 and 2015, and net charge-offs recorded during the period in which the modification occurred. The following Consumer Real Estate portfolio segment tables include loans that were initially classified as TDRs during the period and also loans that had previously been classified as TDRs and were modified again during the period. These TDRs are primarily managed by LAS.



Consumer Real Estate – TDRs Entered into During the Three Months Ended March 31, 2016 and 2015 ⁽¹⁾
	March 31, 2016								Three Months Ended March 31, 2016
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate ⁽²⁾		Net Charge-offs ⁽³⁾
Residential mortgage	$	526	$	488	4.72	%	4.61	%	$	2
Home equity	231		181		3.50		3.39		10
Total	$	757	$	669	4.35		4.24		$	12

	March 31, 2015								Three Months Ended March 31, 2015
Residential mortgage	$	1,879	$	1,640	5.04	%	4.91	%	$	17
Home equity	258		184		4.08		3.55		11
Total	$	2,137	$	1,824	4.93		4.74		$	28


⁽¹⁾	During the three months ended March 31, 2016 and 2015, the Corporation forgave principal of $10 million and $159 million related to residential mortgage loans in connection with TDRs.


⁽²⁾	The post-modification interest rate reflects the interest rate applicable only to permanently completed modifications, which exclude loans that are in a trial modification period.


⁽³⁾	Net charge-offs include amounts recorded on loans modified during the period that are no longer held by the Corporation at March 31, 2016 and 2015 due to sales and other dispositions.

The table below presents the March 31, 2016 and 2015 carrying value for consumer real estate loans that were modified in a TDR during the three months ended March 31, 2016 and 2015 by type of modification.



Consumer Real Estate – Modification Programs
	TDRs Entered into During the Three Months Ended March 31, 2016
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value
Modifications under government programs
Contractual interest rate reduction	$	22	$	5	$	27
Principal and/or interest forbearance	—		2		2
Other modifications ⁽¹⁾	9		—		9
Total modifications under government programs	31		7		38
Modifications under proprietary programs
Contractual interest rate reduction	12		1		13
Capitalization of past due amounts	7		1		8
Principal and/or interest forbearance	3		—		3
Other modifications ⁽¹⁾	1		1		2
Total modifications under proprietary programs	23		3		26
Trial modifications	368		149		517
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	66		22		88
Total modifications	$	488	$	181	$	669

	TDRs Entered into During the Three Months Ended March 31, 2015
Modifications under government programs
Contractual interest rate reduction	$	76	$	11	$	87
Principal and/or interest forbearance	—		3		3
Other modifications ⁽¹⁾	15		—		15
Total modifications under government programs	91		14		105
Modifications under proprietary programs
Contractual interest rate reduction	50		2		52
Capitalization of past due amounts	30		2		32
Principal and/or interest forbearance	11		2		13
Other modifications ⁽¹⁾	7		25		32
Total modifications under proprietary programs	98		31		129
Trial modifications	1,340		96		1,436
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	111		43		154
Total modifications	$	1,640	$	184	$	1,824


⁽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.

The table below presents the carrying value of consumer real estate loans that entered into payment default during the three months ended March 31, 2016 and 2015 that were modified in a TDR during the 12 months preceding payment default. A payment default for consumer real estate TDRs is recognized when a borrower has missed three monthly payments (not necessarily consecutively) since modification. Payment defaults 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.



Consumer Real Estate – TDRs Entering Payment Default That Were Modified During the Preceding 12 Months
	Three Months Ended March 31, 2016
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value
Modifications under government programs	$	93	$	—	$	93
Modifications under proprietary programs	43		22		65
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	40		5		45
Trial modifications	237		37		274
Total modifications	$	413	$	64	$	477

	Three Months Ended March 31, 2015
Modifications under government programs	$	107	$	1	$	108
Modifications under proprietary programs	40		12		52
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	71		10		81
Trial modifications ⁽²⁾	1,768		24		1,792
Total modifications	$	1,986	$	47	$	2,033


⁽¹⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.


⁽²⁾	Includes $1.4 billion for the three months ended March 31, 2015 of trial modification offers made in connection with the August 2014 Department of Justice settlement to which the customer did not respond.

Credit Card and Other Consumer

Impaired loans within the Credit Card and Other Consumer portfolio segment consist entirely of loans that have been modified in TDRs (the 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, local and international 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, the accounts of non-U.S. credit card customers who do not qualify for a fixed payment plan may have their interest rates reduced, as required by certain local jurisdictions. These modifications, which are also TDRs, tend to experience higher payment default rates given that the borrowers may lack the ability to repay even with the interest rate reduction. In substantially 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). The Corporation classifies other secured consumer loans that have been discharged in Chapter 7 bankruptcy as TDRs which are written down to collateral value and placed on nonaccrual status no later than the time of discharge. For more information on the regulatory guidance on loans discharged in Chapter 7 bankruptcy, see Nonperforming Loans and Leases in this Note.

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 has been placed on a fixed payment plan.

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. 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.



Impaired Loans – Credit Card and Other Consumer – Renegotiated TDRs
							Three Months Ended March 31
	March 31, 2016						2016				2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Related Allowance		Average Carrying Value		Interest Income Recognized ⁽²⁾		Average Carrying Value		Interest Income Recognized ⁽²⁾
With no recorded allowance
Direct/Indirect consumer	$	49	$	21	$	—	$	21	$	—	$	25	$	—
With an allowance recorded
U.S. credit card	$	559	$	569	$	136	$	606	$	9	$	847	$	13
Non-U.S. credit card	101		119		70		122		1		159		1
Direct/Indirect consumer	11		13		2		18		—		82		1
Total
U.S. credit card	$	559	$	569	$	136	$	606	$	9	$	847	$	13
Non-U.S. credit card	101		119		70		122		1		159		1
Direct/Indirect consumer	60		34		2		39		—		107		1

	December 31, 2015
With no recorded allowance
Direct/Indirect consumer	$	50	$	21	$	—
With an allowance recorded
U.S. credit card	$	598	$	611	$	176
Non-U.S. credit card	109		126		70
Direct/Indirect consumer	17		21		4
Total
U.S. credit card	$	598	$	611	$	176
Non-U.S. credit card	109		126		70
Direct/Indirect consumer	67		42		4


⁽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 March 31, 2016 and December 31, 2015.



Credit Card and Other Consumer – Renegotiated TDRs by Program Type
	Internal Programs				External Programs				Other ⁽¹⁾				Total				Percent of Balances Current or Less Than 30 Days Past Due
(Dollars in millions)	March 31 2016		December 31 2015		March 31 2016		December 31 2015		March 31 2016		December 31 2015		March 31 2016		December 31 2015		March 31 2016		December 31 2015
U.S. credit card	$	283	$	313	$	284	$	296	$	2	$	2	$	569	$	611	89.54	%	88.74	%
Non-U.S. credit card	18		21		9		10		92		95		119		126		43.22		44.25
Direct/Indirect consumer	7		11		5		7		22		24		34		42		89.74		89.12
Total renegotiated TDRs	$	308	$	345	$	298	$	313	$	116	$	121	$	722	$	779	81.91		81.55


⁽¹⁾	Other TDRs for non-U.S. credit card include modifications of accounts that are ineligible for a fixed payment plan.

The table below provides information on the Corporation's renegotiated TDR portfolio including the March 31, 2016 and 2015 unpaid principal balance, carrying value and average pre- and post-modification interest rates of loans that were modified in TDRs during the three months ended March 31, 2016 and 2015, and net charge-offs recorded during the period in which the modification occurred.



Credit Card and Other Consumer – Renegotiated TDRs Entered into During the Three Months Ended March 31, 2016 and 2015
	March 31, 2016								Three Months Ended March 31, 2016
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ⁽¹⁾		Pre-Modification Interest Rate		Post-Modification Interest Rate		Net Charge-offs
U.S. credit card	$	46	$	50	17.44	%	5.51	%	$	1
Non-U.S. credit card	32		38		24.23		0.36		1
Direct/Indirect consumer	7		4		4.27		4.08		2
Total	$	85	$	92	19.59		3.34		$	4

	March 31, 2015								Three Months Ended March 31, 2015
U.S. credit card	$	69	$	76	17.07	%	5.09	%	$	2
Non-U.S. credit card	39		46		24.11		0.29		2
Direct/Indirect consumer	8		5		6.68		5.74		3
Total	$	116	$	127	19.18		3.38		$	7


⁽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 months ended March 31, 2016 and 2015.



Credit Card and Other Consumer – Renegotiated TDRs Entered into During the Period by Program Type
	Three Months Ended March 31, 2016
(Dollars in millions)	Internal Programs		External Programs		Other ⁽¹⁾		Total
U.S. credit card	$	26	$	24	$	—	$	50
Non-U.S. credit card	1		1		36		38
Direct/Indirect consumer	—		—		4		4
Total renegotiated TDRs	$	27	$	25	$	40	$	92

	Three Months Ended March 31, 2015
U.S. credit card	$	51	$	25	$	—	$	76
Non-U.S. credit card	1		2		43		46
Direct/Indirect consumer	—		—		5		5
Total renegotiated TDRs	$	52	$	27	$	48	$	127

⁽¹⁾ Other TDRs for non-U.S. credit card include modifications of accounts that are ineligible for a fixed payment plan.

Credit card and other consumer loans are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows in the calculation of the allowance for loan and lease losses for impaired credit card and other consumer loans. Based on historical experience, the Corporation estimates that 14 percent of new U.S. credit card TDRs, 88 percent of new non-U.S. credit card TDRs and 13 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 months ended March 31, 2016 and 2015 that had been modified in a TDR during the preceding 12 months were $9 million and $12 million for U.S. credit card, $34 million and $41 million for non-U.S. credit card, and $1 million and $1 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 March 31, 2016 and December 31, 2015, remaining commitments to lend additional funds to debtors whose terms have been modified in a commercial loan TDR were immaterial. Commercial foreclosed properties totaled $10 million and $15 million at March 31, 2016 and December 31, 2015.

The table below provides the unpaid principal balance, carrying value and related allowance at March 31, 2016 and December 31, 2015, and the average carrying value and interest income recognized for the three months ended March 31, 2016 and 2015 for impaired loans in the Corporation's Commercial loan portfolio segment. 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
							Three Months Ended March 31
	March 31, 2016						2016				2015
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Related Allowance		Average Carrying Value		Interest Income Recognized ⁽¹⁾		Average Carrying Value		Interest Income Recognized ⁽¹⁾
With no recorded allowance
U.S. commercial	$	649	$	624	$	—	$	583	$	2	$	628	$	3
Commercial real estate	82		76		—		77		—		71		1
Non-U.S. commercial	5		5		—		5		—		4		—
With an allowance recorded
U.S. commercial	$	1,978	$	1,648	$	168	$	1,439	$	14	$	818	$	13
Commercial real estate	318		98		13		104		1		332		3
Non-U.S. commercial	472		354		69		368		3		66		1
U.S. small business commercial ⁽¹⁾	109		98		35		102		—		121		—
Total
U.S. commercial	$	2,627	$	2,272	$	168	$	2,022	$	16	$	1,446	$	16
Commercial real estate	400		174		13		181		1		403		4
Non-U.S. commercial	477		359		69		373		3		70		1
U.S. small business commercial ⁽¹⁾	109		98		35		102		—		121		—

	December 31, 2015
With no recorded allowance
U.S. commercial	$	566	$	541	$	—
Commercial real estate	82		77		—
Non-U.S. commercial	4		4		—
With an allowance recorded
U.S. commercial	$	1,350	$	1,157	$	115
Commercial real estate	328		107		11
Non-U.S. commercial	531		381		56
U.S. small business commercial ⁽²⁾	105		101		35
Total
U.S. commercial	$	1,916	$	1,698	$	115
Commercial real estate	410		184		11
Non-U.S. commercial	535		385		56
U.S. small business commercial ⁽²⁾	105		101		35


⁽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.

The table below presents the March 31, 2016 and 2015 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during the three months ended March 31, 2016 and 2015, 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 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 March 31, 2016 and 2015
	March 31, 2016				Three Months Ended March 31, 2016
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Net Charge-offs
U.S. commercial	$	642	$	625	$	5
Commercial real estate	13		12		1
Non-U.S. commercial	199		163		36
U.S. small business commercial ⁽¹⁾	3		4		—
Total	$	857	$	804	$	42

	March 31, 2015				Three Months Ended March 31, 2015
U.S. commercial	$	346	$	327	$	3
Commercial real estate	34		33		—
Non-U.S. commercial	8		8		—
U.S. small business commercial ⁽¹⁾	2		2		—
Total	$	390	$	370	$	3


⁽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 and lease losses. TDRs that were in payment default had a carrying value of $111 million and $110 million for U.S. commercial and $17 million and $60 million for commercial real estate at March 31, 2016 and 2015.

Purchased Credit-impaired Loans

The table below shows activity for the accretable yield on PCI loans, which include the Countrywide Financial Corporation (Countrywide) portfolio and loans repurchased in connection with the 2013 settlement with FNMA. The amount of accretable yield is affected by changes in credit outlooks, including metrics such as default rates and loss severities, prepayment 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 to nonaccretable difference in the three months ended March 31, 2016 were primarily due to an increase in the forecasted prepayment speeds. 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 March 31, 2016
Accretable yield, January 1, 2015	$	5,608
Accretion	(861		)
Disposals/transfers	(465		)
Reclassifications from nonaccretable difference	287
Accretable yield, December 31, 2015	$	4,569
Accretion	(192		)
Disposals/transfers	(111		)
Reclassifications to nonaccretable difference	(16		)
Accretable yield, March 31, 2016	$	4,250

During the three months ended March 31, 2016 and 2015, the Corporation sold PCI loans with a carrying value of $174 million and $586 million, which excludes the related allowance of $20 million and $110 million. For more information on PCI loans, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K, and for the carrying value and valuation allowance for PCI loans, see Note 5 – Allowance for Credit Losses.

Loans Held-for-sale

The Corporation had LHFS of $6.2 billion and $7.5 billion at March 31, 2016 and December 31, 2015. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $7.3 billion and $11.6 billion for the three months ended March 31, 2016 and 2015. Cash used for originations and purchases of LHFS totaled $5.7 billion and $10.6 billion for the three months ended March 31, 2016 and 2015.