| 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 months ended March 31, 2013 and 2012.
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Three Months Ended March 31, 2013 |
(Dollars in millions) |
Home Loans |
|
Credit Card
and Other
Consumer |
|
Commercial |
|
Total |
Allowance for loan and lease losses, January 1 |
$ |
14,933 |
|
|
$ |
6,140 |
|
|
$ |
3,106 |
|
|
$ |
24,179 |
|
Loans and leases charged off |
(1,193 |
) |
|
(1,553 |
) |
|
(316 |
) |
|
(3,062 |
) |
Recoveries of loans and leases previously charged off |
126 |
|
|
318 |
|
|
101 |
|
|
545 |
|
Net charge-offs |
(1,067 |
) |
|
(1,235 |
) |
|
(215 |
) |
|
(2,517 |
) |
Provision for loan and lease losses |
484 |
|
|
1,007 |
|
|
240 |
|
|
1,731 |
|
Write-offs of PCI loans |
(839 |
) |
|
— |
|
|
— |
|
|
(839 |
) |
Other (1)
|
(73 |
) |
|
(38 |
) |
|
(2 |
) |
|
(113 |
) |
Allowance for loan and lease losses, March 31 |
13,438 |
|
|
5,874 |
|
|
3,129 |
|
|
22,441 |
|
Reserve for unfunded lending commitments, January 1 |
— |
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|
— |
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|
513 |
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|
513 |
|
Provision for unfunded lending commitments |
— |
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— |
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|
(18 |
) |
|
(18 |
) |
Other (2)
|
— |
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— |
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|
(9 |
) |
|
(9 |
) |
Reserve for unfunded lending commitments, March 31 |
— |
|
|
— |
|
|
486 |
|
|
486 |
|
Allowance for credit losses, March 31 |
$ |
13,438 |
|
|
$ |
5,874 |
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|
$ |
3,615 |
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|
$ |
22,927 |
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Three Months Ended March 31, 2012 |
Allowance for loan and lease losses, January 1 |
$ |
21,079 |
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|
$ |
8,569 |
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$ |
4,135 |
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$ |
33,783 |
|
Loans and leases charged off |
(2,007 |
) |
|
(2,242 |
) |
|
(531 |
) |
|
(4,780 |
) |
Recoveries of loans and leases previously charged off |
136 |
|
|
426 |
|
|
162 |
|
|
724 |
|
Net charge-offs |
(1,871 |
) |
|
(1,816 |
) |
|
(369 |
) |
|
(4,056 |
) |
Provision for loan and lease losses |
1,765 |
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|
879 |
|
|
(187 |
) |
|
2,457 |
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Other (1)
|
— |
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|
32 |
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|
(5 |
) |
|
27 |
|
Allowance for loan and lease losses, March 31 |
20,973 |
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|
7,664 |
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|
3,574 |
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|
32,211 |
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Reserve for unfunded lending commitments, January 1 |
— |
|
|
— |
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|
714 |
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|
714 |
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Provision for unfunded lending commitments |
— |
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|
— |
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|
(39 |
) |
|
(39 |
) |
Other (2)
|
— |
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— |
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|
(24 |
) |
|
(24 |
) |
Reserve for unfunded lending commitments, March 31 |
— |
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|
— |
|
|
651 |
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|
651 |
|
Allowance for credit losses, March 31 |
$ |
20,973 |
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|
$ |
7,664 |
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|
$ |
4,225 |
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|
$ |
32,862 |
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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 months ended March 31, 2013 and 2012, for the PCI loan portfolios, the Corporation recorded a provision benefit of $207 million and provision expense of $487 million with a corresponding change in the valuation allowance included as part of the allowance for loan and lease losses. Subsequent to the substantial fulfillment of the principal reduction commitments associated with the National Mortgage Settlement, the Corporation reviewed certain PCI loans that were ineligible for the program but had similar characteristics as the eligible PCI loans. Based on this review, the Corporation updated its estimates as to the likelihood of any proceeds being received from the ineligible PCI loans and wrote off the loans where the expectation of future cash proceeds is now considered remote. This primarily resulted in write-offs in the PCI loan portfolios of $839 million with a corresponding decrease in the PCI valuation allowance during the three months ended March 31, 2013. The valuation allowance associated with the PCI loan portfolios was $4.5 billion and $5.5 billion at March 31, 2013 and December 31, 2012.
The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at March 31, 2013 and December 31, 2012.
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Allowance and Carrying Value by Portfolio Segment |
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March 31, 2013 |
(Dollars in millions) |
Home Loans |
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Credit Card
and Other
Consumer |
|
Commercial |
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Total |
Impaired loans and troubled debt restructurings (1)
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Allowance for loan and lease losses (2)
|
$ |
1,795 |
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$ |
903 |
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$ |
408 |
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$ |
3,106 |
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Carrying value (3)
|
33,581 |
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|
3,272 |
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|
4,359 |
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|
41,212 |
|
Allowance as a percentage of carrying value |
5.35 |
% |
|
27.60 |
% |
|
9.36 |
% |
|
7.54 |
% |
Loans collectively evaluated for impairment |
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Allowance for loan and lease losses |
$ |
7,153 |
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|
$ |
4,971 |
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|
$ |
2,721 |
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$ |
14,845 |
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Carrying value (3, 4)
|
296,897 |
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|
180,609 |
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|
354,390 |
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|
831,896 |
|
Allowance as a percentage of carrying value (4)
|
2.41 |
% |
|
2.75 |
% |
|
0.77 |
% |
|
1.78 |
% |
Purchased credit-impaired loans |
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Valuation allowance |
$ |
4,490 |
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|
n/a |
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|
n/a |
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$ |
4,490 |
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Carrying value gross of valuation allowance |
29,664 |
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|
n/a |
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n/a |
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|
29,664 |
|
Valuation allowance as a percentage of carrying value |
15.14 |
% |
|
n/a |
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|
n/a |
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|
15.14 |
% |
Total |
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Allowance for loan and lease losses |
$ |
13,438 |
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|
$ |
5,874 |
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$ |
3,129 |
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$ |
22,441 |
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Carrying value (3, 4)
|
360,142 |
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|
183,881 |
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|
358,749 |
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|
902,772 |
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Allowance as a percentage of carrying value (4)
|
3.73 |
% |
|
3.19 |
% |
|
0.87 |
% |
|
2.49 |
% |
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December 31, 2012 |
Impaired loans and troubled debt restructurings (1)
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Allowance for loan and lease losses (2)
|
$ |
1,700 |
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$ |
1,127 |
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$ |
475 |
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$ |
3,302 |
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Carrying value (3)
|
30,250 |
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|
3,881 |
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|
4,881 |
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|
39,012 |
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Allowance as a percentage of carrying value |
5.62 |
% |
|
29.04 |
% |
|
9.74 |
% |
|
8.46 |
% |
Loans collectively evaluated for impairment |
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Allowance for loan and lease losses |
$ |
7,697 |
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$ |
5,013 |
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$ |
2,631 |
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$ |
15,341 |
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Carrying value (3, 4)
|
304,701 |
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|
187,484 |
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|
341,502 |
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|
833,687 |
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Allowance as a percentage of carrying value (4)
|
2.53 |
% |
|
2.67 |
% |
|
0.77 |
% |
|
1.84 |
% |
Purchased credit-impaired loans |
|
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Valuation allowance |
$ |
5,536 |
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|
n/a |
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|
n/a |
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$ |
5,536 |
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Carrying value gross of valuation allowance |
26,118 |
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|
n/a |
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|
n/a |
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|
26,118 |
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Valuation allowance as a percentage of carrying value |
21.20 |
% |
|
n/a |
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|
n/a |
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|
21.20 |
% |
Total |
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Allowance for loan and lease losses |
$ |
14,933 |
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$ |
6,140 |
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$ |
3,106 |
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$ |
24,179 |
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Carrying value (3, 4)
|
361,069 |
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|
191,365 |
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|
346,383 |
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|
898,817 |
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Allowance as a percentage of carrying value (4)
|
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) |
Commercial impaired allowance for loan and lease losses includes $80 million and $97 million of renegotiated TDR loans related to U.S. small business commercial at March 31, 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 $8.8 billion and $9.0 billion at March 31, 2013 and December 31, 2012.
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n/a = not applicable
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