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

6 Months Ended

Jun. 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 June 30, 2013 and December 31, 2012.



	June 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⁾	$	2,133		$	658		$	7,404		$	10,195		$	162,062								$	172,257
Home equity	238			122			619			979			56,428									57,407
Legacy Assets & Servicing portfolio
Residential mortgage ⁽⁶⁾	2,974			1,408			22,410			26,792			33,686			$	21,224					81,702
Home equity	454			254			1,292			2,000			33,173			7,431						42,604
Credit card and other consumer
U.S. credit card	603			430			1,167			2,200			88,323									90,523
Non-U.S. credit card	70			59			158			287			10,053									10,340
Direct/Indirect consumer ⁽⁷⁾	417			191			488			1,096			82,262									83,358
Other consumer ⁽⁸⁾	44			18			2			64			1,739									1,803
Total consumer loans	6,933			3,140			33,540			43,613			467,726			28,655						539,994
Consumer loans accounted for under the fair value option ⁽⁹⁾																			$	1,052		1,052
Total consumer	6,933			3,140			33,540			43,613			467,726			28,655			1,052			541,046
Commercial
U.S. commercial	248			176			463			887			206,056									206,943
Commercial real estate ⁽¹⁰⁾	108			90			511			709			41,417									42,126
Commercial lease financing	92			114			28			234			23,678									23,912
Non-U.S. commercial	16			—			—			16			86,694									86,710
U.S. small business commercial	91			61			152			304			12,120									12,424
Total commercial loans	555			441			1,154			2,150			369,965									372,115
Commercial loans accounted for under the fair value option ⁽⁹⁾																			8,409			8,409
Total commercial	555			441			1,154			2,150			369,965						8,409			380,524
Total loans and leases	$	7,488		$	3,581		$	34,694		$	45,763		$	837,691		$	28,655		$	9,461		$	921,570
Percentage of outstandings	0.81		%	0.39		%	3.76		%	4.96		%	90.90		%	3.11		%	1.03		%


⁽¹⁾	Home loans 30-59 days past due includes fully-insured loans of $2.5 billion and nonperforming loans of $761 million. Home loans 60-89 days past due includes fully-insured loans of $1.0 billion and nonperforming loans of $516 million.


⁽²⁾	Home loans includes fully-insured loans of $20.6 billion.


⁽³⁾	Home loans includes $6.3 billion and direct/indirect consumer includes $46 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 $83 million.


⁽⁶⁾	Total outstandings includes pay option loans of $5.8 billion. The Corporation no longer originates this product.


⁽⁷⁾	Total outstandings includes dealer financial services loans of $36.8 billion, consumer lending loans of $3.6 billion, U.S. securities-based lending loans of $30.0 billion, non-U.S. consumer loans of $7.5 billion, student loans of $4.4 billion and other consumer loans of $1.1 billion.


⁽⁸⁾	Total outstandings includes consumer finance loans of $1.3 billion, consumer leases of $351 million, other non-U.S. consumer loans of $5 million and consumer overdrafts of $149 million.


⁽⁹⁾	Consumer loans accounted for under the fair value option were residential mortgage loans of $1.1 billion. Commercial loans accounted for under the fair value option were U.S. commercial loans of $2.0 billion and non-U.S. commercial loans of $6.4 billion. For addition information, see Note 16 – Fair Value Measurements and Note 17 – Fair Value Option.


⁽¹⁰⁾	Total outstandings includes U.S. commercial real estate loans of $40.3 billion and non-U.S. commercial real estate loans of $1.8 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, other non-U.S. consumer loans of $5 million and consumer overdrafts of $177 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 $420 million and $500 million at June 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 June 30, 2013 and December 31, 2012, the Corporation had a receivable of $230 million and $305 million from these vehicles for reimbursement of losses, and principal of $14.8 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 $25.5 billion and $24.3 billion at June 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 June 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 June 30, 2013, nonperforming loans discharged in Chapter 7 bankruptcy with no change in repayment terms at the time of discharge were $2.0 billion of which $1.0 billion were current on their contractual payments while $930 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 45 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 June 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. See Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K for further information on the criteria for classification as nonperforming.



Credit Quality
	Nonperforming Loans and Leases ⁽¹⁾				Accruing Past Due 90 Days or More
(Dollars in millions)	June 30 2013		December 31 2012		June 30 2013		December 31 2012
Home loans
Core portfolio
Residential mortgage ⁽²⁾	$	3,404	$	3,193	$	5,273	$	3,984
Home equity	1,355		1,265		—		—
Legacy Assets & Servicing portfolio
Residential mortgage ⁽²⁾	10,912		11,862		15,331		18,173
Home equity	2,796		3,017		—		—
Credit card and other consumer
U.S. credit card	n/a		n/a		1,167		1,437
Non-U.S. credit card	n/a		n/a		158		212
Direct/Indirect consumer	72		92		462		545
Other consumer	1		2		2		2
Total consumer	18,540		19,431		22,393		24,353
Commercial
U.S. commercial	1,279		1,484		50		65
Commercial real estate	627		1,513		25		29
Commercial lease financing	10		44		22		15
Non-U.S. commercial	80		68		1		—
U.S. small business commercial	107		115		100		120
Total commercial	2,103		3,224		198		229
Total loans and leases	$	20,643	$	22,655	$	22,591	$	24,582


⁽¹⁾	Nonperforming loan balances do not include nonaccruing TDRs removed from the PCI loan portfolio prior to January 1, 2010 of $485 million and $521 million at June 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 June 30, 2013 and December 31, 2012, residential mortgage included $16.0 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 $4.6 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 June 30, 2013 and December 31, 2012.



Home Loans – Credit Quality Indicators ⁽¹⁾
	June 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	$	87,720	$	22,436	$	11,690	$	44,322	$	15,605	$	2,029
Greater than 90 percent but less than or equal to 100 percent	7,965		4,739		3,143		5,162		4,349		728
Greater than 100 percent	8,321		12,293		6,391		7,923		15,219		4,674
Fully-insured loans ⁽⁵⁾	68,251		21,010		—		—		—		—
Total home loans	$	172,257	$	60,478	$	21,224	$	57,407	$	35,173	$	7,431

Refreshed FICO score
Less than 620	$	6,037	$	12,752	$	11,796	$	2,432	$	4,640	$	1,354
Greater than or equal to 620 and less than 680	8,186		6,302		3,450		4,316		5,453		1,318
Greater than or equal to 680 and less than 740	24,662		8,388		3,105		12,050		9,717		2,121
Greater than or equal to 740	65,121		12,026		2,873		38,609		15,363		2,638
Fully-insured loans ⁽⁵⁾	68,251		21,010		—		—		—		—
Total home loans	$	172,257	$	60,478	$	21,224	$	57,407	$	35,173	$	7,431


⁽¹⁾	Excludes loans accounted for under the fair value option of $1.1 billion.


⁽²⁾	Excludes PCI loans.


⁽³⁾	Includes $5.3 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
	June 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	$	5,159	$	—	$	1,437	$	604
Greater than or equal to 620 and less than 680	13,103		—		3,138		283
Greater than or equal to 680 and less than 740	35,932		—		9,601		214
Greater than or equal to 740	36,329		—		25,602		197
Other internal credit metrics ^{(2, 3, 4)}	—		10,340		43,580		505
Total credit card and other consumer	$	90,523	$	10,340	$	83,358	$	1,803


⁽¹⁾	72 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 $37.4 billion of securities-based lending which is overcollateralized and therefore has minimal credit risk and $4.4 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 June 30, 2013, 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⁾
	June 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	$	199,336	$	39,875	$	22,780	$	85,017	$	1,399
Reservable criticized	7,607		2,251		1,132		1,693		474
Refreshed FICO score ⁽³⁾
Less than 620									243
Greater than or equal to 620 and less than 680									542
Greater than or equal to 680 and less than 740									1,572
Greater than or equal to 740									2,762
Other internal credit metrics ^{(3, 4)}									5,432
Total commercial	$	206,943	$	42,126	$	23,912	$	86,710	$	12,424


⁽¹⁾	Excludes loans accounted for under the fair value option of $8.4 billion.


⁽²⁾	U.S. small business commercial includes $311 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 June 30, 2013, 99 percent of the balances where internal credit metrics are used were 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 loans accounted for under the fair value option of $1.0 billion.


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


⁽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 were 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 189.

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, $4.0 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 June 30, 2013, of which $2.0 billion were classified as nonperforming and $2.0 billion were loans fully-insured by the Federal Housing Administration (FHA). Of the $4.0 billion of home loan TDRs, approximately 14 percent, 36 percent and 50 percent had been discharged in Chapter 7 bankruptcy in the six months ended June 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 paragraph below. 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 June 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 $508 million and $650 million at June 30, 2013 and December 31, 2012.

The table below presents impaired loans in the Corporation's Home Loans portfolio segment at June 30, 2013 and December 31, 2012, and for the three and six months ended June 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
					June 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					$	22,352	$	16,803	n/a		$	20,226	$	14,967	n/a
Home equity					2,958		1,244		n/a		2,624		1,103		n/a
With an allowance recorded
Residential mortgage					$	15,697	$	14,829	$	1,367	$	14,223	$	13,158	$	1,252
Home equity					1,107		917		352		1,256		1,022		448
Total
Residential mortgage					$	38,049	$	31,632	$	1,367	$	34,449	$	28,125	$	1,252
Home equity					4,065		2,161		352		3,880		2,125		448

	Three Months Ended June 30								Six Months Ended June 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	$	16,812	$	140	$	8,893	$	76	$	16,353	$	284	$	8,798	$	151
Home equity	1,204		19		485		10		1,169		36		496		19
With an allowance recorded
Residential mortgage	$	14,735	$	124	$	11,474	$	108	$	14,317	$	278	$	11,324	$	208
Home equity	936		11		1,205		13		962		22		1,230		22
Total
Residential mortgage	$	31,547	$	264	$	20,367	$	184	$	30,670	$	562	$	20,122	$	359
Home equity	2,140		30		1,690		23		2,131		58		1,726		41


⁽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 June 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 six months ended June 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 June 30, 2013 and 2012 ⁽¹⁾
	June 30, 2013								Three Months Ended June 30, 2013
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate		Net Charge-offs
Residential mortgage	$	3,988	$	3,518	5.29	%	4.56	%	$	11
Home equity	268		169		6.23		5.20		50
Total	$	4,256	$	3,687	5.35		4.60		$	61

	June 30, 2012								Three Months Ended June 30, 2012
Residential mortgage	$	1,762	$	1,420	5.70	%	4.79	%	$	76
Home equity	139		82		4.33		3.57		29
Total	$	1,901	$	1,502	5.60		4.71		$	105

Home Loans – TDRs Entered into During the Six Months Ended June 30, 2013 and 2012 ⁽¹⁾
	June 30, 2013								Six Months Ended June 30, 2013
Residential mortgage	$	8,843	$	7,798	5.38	%	4.55	%	$	50
Home equity	519		306		5.83		4.59		114
Total	$	9,362	$	8,104	5.41		4.55		$	164

	June 30, 2012								Six Months Ended June 30, 2012
Residential mortgage	$	3,343	$	2,776	5.66	%	4.70	%	$	146
Home equity	333		169		4.85		3.60		93
Total	$	3,676	$	2,945	5.59		4.61		$	239


⁽¹⁾	TDRs entered into during the three and six months ended June 30, 2013 include residential mortgage modifications with principal forgiveness of $125 million and $344 million. TDRs entered into during both the three and six months ended June 30, 2012 include residential mortgage modifications with principal forgiveness of $189 million.

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



Home Loans – Modification Programs
	TDRs Entered into During the Three Months Ended June 30, 2013
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value
Modifications under government programs
Contractual interest rate reduction	$	187	$	14	$	201
Principal and/or interest forbearance	2		6		8
Other modifications ⁽¹⁾	9		—		9
Total modifications under government programs	198		20		218
Modifications under proprietary programs
Contractual interest rate reduction	896		4		900
Capitalization of past due amounts	26		—		26
Principal and/or interest forbearance	100		3		103
Other modifications ⁽¹⁾	104		—		104
Total modifications under proprietary programs	1,126		7		1,133
Trial modifications	1,811		36		1,847
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	383		106		489
Total modifications	$	3,518	$	169	$	3,687

	TDRs Entered into During the Three Months Ended June 30, 2012
Modifications under government programs
Contractual interest rate reduction	$	15	$	19	$	34
Principal and/or interest forbearance	1		7		8
Other modifications ⁽¹⁾	2		—		2
Total modifications under government programs	18		26		44
Modifications under proprietary programs
Contractual interest rate reduction	500		3		503
Capitalization of past due amounts	22		—		22
Principal and/or interest forbearance	103		2		105
Other modifications ⁽¹⁾	28		6		34
Total modifications under proprietary programs	653		11		664
Trial modifications	749		45		794
Total modifications	$	1,420	$	82	$	1,502


⁽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 issued in the third quarter of 2012. For the three months ended June 30, 2013, home loans of $262 million, or 54 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 Six Months Ended June 30, 2013
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value
Modifications under government programs
Contractual interest rate reduction	$	779	$	25	$	804
Principal and/or interest forbearance	16		13		29
Other modifications ⁽¹⁾	47		—		47
Total modifications under government programs	842		38		880
Modifications under proprietary programs
Contractual interest rate reduction	2,299		31		2,330
Capitalization of past due amounts	57		—		57
Principal and/or interest forbearance	264		8		272
Other modifications ⁽¹⁾	127		6		133
Total modifications under proprietary programs	2,747		45		2,792
Trial modifications	3,301		49		3,350
Loans discharged in Chapter 7 bankruptcy ⁽²⁾	908		174		1,082
Total modifications	$	7,798	$	306	$	8,104

	TDRs Entered into During the Six Months Ended June 30, 2012
Modifications under government programs
Contractual interest rate reduction	$	82	$	52	$	134
Principal and/or interest forbearance	13		17		30
Other modifications ⁽¹⁾	19		1		20
Total modifications under government programs	114		70		184
Modifications under proprietary programs
Contractual interest rate reduction	929		12		941
Capitalization of past due amounts	40		—		40
Principal and/or interest forbearance	202		6		208
Other modifications ⁽¹⁾	77		9		86
Total modifications under proprietary programs	1,248		27		1,275
Trial modifications	1,414		72		1,486
Total modifications	$	2,776	$	169	$	2,945


⁽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 issued in the third quarter of 2012. For the six months ended June 30, 2013, home loans of $569 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 six months ended June 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 June 30, 2013
(Dollars in millions)	Residential Mortgage		Home Equity		Total Carrying Value
Modifications under government programs	$	68	$	—	$	68
Modifications under proprietary programs	264		1		265
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	163		5		168
Trial modifications	1,385		1		1,386
Total modifications	$	1,880	$	7	$	1,887

	Three Months Ended June 30, 2012
Modifications under government programs	$	68	$	2	$	70
Modifications under proprietary programs	243		5		248
Trial modifications	181		6		187
Total modifications	$	492	$	13	$	505

	Six Months Ended June 30, 2013
Modifications under government programs	$	158	$	2	$	160
Modifications under proprietary programs	546		4		550
Loans discharged in Chapter 7 bankruptcy ⁽¹⁾	604		24		628
Trial modifications	1,937		5		1,942
Total modifications	$	3,245	$	35	$	3,280

	Six Months Ended June 30, 2012
Modifications under government programs	$	143	$	4	$	147
Modifications under proprietary programs	620		9		629
Trial modifications	291		9		300
Total modifications	$	1,054	$	22	$	1,076


⁽¹⁾	Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs in accordance with regulatory guidance issued 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 issued 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 June 30, 2013 and December 31, 2012, and for the three and six months ended June 30, 2013 and 2012.



Impaired Loans – Credit Card and Other Consumer – Renegotiated TDRs
					June 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					$	2,010	$	2,021	$	446	$	2,856	$	2,871	$	719
Non-U.S. credit card					254		259		170		311		316		198
Direct/Indirect consumer					435		436		134		633		636		210
Other consumer					28		28		11		30		30		12
Without an allowance recorded
Direct/Indirect consumer					88		42		—		105		58		—
Other consumer					35		35		—		35		35		—
Total
U.S. credit card					$	2,010	$	2,021	$	446	$	2,856	$	2,871	$	719
Non-U.S. credit card					254		259		170		311		316		198
Direct/Indirect consumer					523		478		134		738		694		210
Other consumer					63		63		11		65		65		12

	Three Months Ended June 30								Six Months Ended June 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	$	2,287	$	36	$	4,400	$	69	$	2,505	$	78	$	4,710	$	146
Non-U.S. credit card	273		2		508		3		284		4		540		5
Direct/Indirect consumer	493		7		1,000		13		545		15		1,073		29
Other consumer	28		—		32		—		29		1		32		1
Without an allowance recorded
Direct/Indirect consumer	44		—		—		—		48		—		—		—
Other consumer	35		1		40		1		35		1		40		1
Total
U.S. credit card	$	2,287	$	36	$	4,400	$	69	$	2,505	$	78	$	4,710	$	146
Non-U.S. credit card	273		2		508		3		284		4		540		5
Direct/Indirect consumer	537		7		1,000		13		593		15		1,073		29
Other consumer	63		1		72		1		64		2		72		2


⁽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 June 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)	June 30 2013		December 31 2012		June 30 2013		December 31 2012		June 30 2013		December 31 2012		June 30 2013		December 31 2012		June 30 2013		December 31 2012
U.S. credit card	$	1,243	$	1,887	$	756	$	953	$	22	$	31	$	2,021	$	2,871	83.04	%	81.48	%
Non-U.S. credit card	83		99		31		38		145		179		259		316		46.65		43.71
Direct/Indirect consumer	269		405		159		225		50		64		478		694		84.41		83.11
Other consumer	63		65		—		—		—		—		63		65		73.03		72.73
Total renegotiated TDRs	$	1,658	$	2,456	$	946	$	1,216	$	217	$	274	$	2,821	$	3,946	79.71		78.58

At June 30, 2013 and December 31, 2012, the Corporation had a renegotiated TDR portfolio of $2.8 billion and $3.9 billion of which $2.2 billion was current or less than 30 days past due under the modified terms at June 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 six months ended June 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 June 30, 2013 and 2012
	June 30, 2013								Three Months Ended June 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	$	75	$	76	16.86	%	6.07	%	$	2
Non-U.S. credit card	68		71		26.17		0.67		3
Direct/Indirect consumer	17		12		8.92		5.18		—
Other consumer	2		2		9.53		4.51		—
Total	$	162	$	161	20.26		3.61		$	5

	June 30, 2012								Three Months Ended June 30, 2012
U.S. credit card	$	123	$	127	17.61	%	6.30	%	$	1
Non-U.S. credit card	92		97		26.27		0.78		4
Direct/Indirect consumer	18		18		15.24		3.96		—
Other consumer	3		3		10.11		6.84		—
Total	$	236	$	245	20.77		3.95		$	5

Credit Card and Other Consumer – Renegotiated TDRs Entered into During the Six Months Ended June 30, 2013 and 2012
	June 30, 2013								Six Months Ended June 30, 2013
U.S. credit card	$	151	$	153	16.91	%	6.13	%	$	7
Non-U.S. credit card	123		129		26.16		0.71		25
Direct/Indirect consumer	31		22		9.54		5.25		—
Other consumer	3		3		9.48		5.26		—
Total	$	308	$	307	20.11		3.73		$	32

	June 30, 2012								Six Months Ended June 30, 2012
U.S. credit card	$	264	$	268	17.94	%	6.34	%	$	8
Non-U.S. credit card	172		181		26.17		0.88		39
Direct/Indirect consumer	41		41		15.37		4.17		1
Other consumer	6		6		10.05		6.77		—
Total	$	483	$	496	20.61		4.24		$	48


⁽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 six months ended June 30, 2013 and 2012.



Credit Card and Other Consumer – Renegotiated TDRs Entered into During the Period by Program Type
	Three Months Ended June 30, 2013
(Dollars in millions)	Internal Programs		External Programs		Other		Total
U.S. credit card	$	39	$	37	$	—	$	76
Non-U.S. credit card	38		33		—		71
Direct/Indirect consumer	3		3		6		12
Other consumer	2		—		—		2
Total renegotiated TDRs	$	82	$	73	$	6	$	161

	Three Months Ended June 30, 2012
U.S. credit card	$	57	$	70	$	—	$	127
Non-U.S. credit card	51		46		—		97
Direct/Indirect consumer	9		9		—		18
Other consumer	3		—		—		3
Total renegotiated TDRs	$	120	$	125	$	—	$	245

	Six Months Ended June 30, 2013
U.S. credit card	$	80	$	73	$	—	$	153
Non-U.S. credit card	69		60		—		129
Direct/Indirect consumer	7		5		10		22
Other consumer	3		—		—		3
Total renegotiated TDRs	$	159	$	138	$	10	$	307

	Six Months Ended June 30, 2012
U.S. credit card	$	127	$	141	$	—	$	268
Non-U.S. credit card	95		86		—		181
Direct/Indirect consumer	21		20		—		41
Other consumer	6		—		—		6
Total renegotiated TDRs	$	249	$	247	$	—	$	496

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 25 percent of new U.S. credit card TDRs, 67 percent of new non-U.S. credit card TDRs and 21 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 six months ended June 30, 2013 that had been modified in a TDR during the preceding 12 months were $14 million and $38 million for U.S. credit card, $59 million and $121 million for non-U.S. credit card and $1 million and $3 million for direct/indirect consumer. During the three and six months ended June 30, 2012, loans that entered into payment default that had been modified in a TDR during the preceding 12 months were $51 million and $133 million for U.S. credit card, $77 million and $159 million for non-U.S. credit card and $8 million and $24 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 June 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 $129 million and $250 million at June 30, 2013 and December 31, 2012.

The table below presents impaired loans in the Corporation's Commercial loan portfolio segment at June 30, 2013 and December 31, 2012, and for the three and six months ended June 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
					June 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					$	1,007	$	954	n/a		$	1,220	$	1,109	n/a
Commercial real estate					599		546		n/a		1,003		902		n/a
Non-U.S. commercial					90		90		n/a		240		120		n/a
With an allowance recorded
U.S. commercial					$	1,426	$	1,057	$	152	$	1,782	$	1,138	$	159
Commercial real estate					1,079		660		82		2,287		1,262		201
Non-U.S. commercial					296		72		36		280		33		18
U.S. small business commercial ⁽¹⁾					253		243		58		361		317		97
Total
U.S. commercial					$	2,433	$	2,011	$	152	$	3,002	$	2,247	$	159
Commercial real estate					1,678		1,206		82		3,290		2,164		201
Non-U.S. commercial					386		162		36		520		153		18
U.S. small business commercial ⁽¹⁾					253		243		58		361		317		97

	Three Months Ended June 30								Six Months Ended June 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	$	979	$	6	$	1,086	$	9	$	1,018	$	12	$	1,061	$	17
Commercial real estate	653		3		1,691		4		742		7		1,832		8
Non-U.S. commercial	113		1		137		—		121		3		125		—
With an allowance recorded
U.S. commercial	$	1,110	$	7	$	1,805	$	7	$	1,113	$	15	$	1,854	$	18
Commercial real estate	842		4		1,789		4		989		9		2,027		10
Non-U.S. commercial	70		1		54		1		47		2		58		1
U.S. small business commercial ⁽¹⁾	253		2		437		3		270		4		455		7
Total
U.S. commercial	$	2,089	$	13	$	2,891	$	16	$	2,131	$	27	$	2,915	$	35
Commercial real estate	1,495		7		3,480		8		1,731		16		3,859		18
Non-U.S. commercial	183		2		191		1		168		5		183		1
U.S. small business commercial ⁽¹⁾	253		2		437		3		270		4		455		7


⁽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 June 30, 2013 and 2012 unpaid principal balance and carrying value of commercial loans that were modified as TDRs during the three and six months ended June 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 June 30, 2013 and 2012
	June 30, 2013				Three Months Ended June 30, 2013
(Dollars in millions)	Unpaid Principal Balance		Carrying Value		Net Charge-offs
U.S. commercial	$	487	$	460	$	5
Commercial real estate	210		193		1
Non-U.S. commercial	74		73		—
U.S. small business commercial ⁽¹⁾	3		3		—
Total	$	774	$	729	$	6

	June 30, 2012				Three Months Ended June 30, 2012
U.S. commercial	$	220	$	162	$	13
Commercial real estate	226		210		—
Non-U.S. commercial	66		66		—
U.S. small business commercial ⁽¹⁾	7		8		—
Total	$	519	$	446	$	13

Commercial – TDRs Entered into During the Six Months Ended June 30, 2013 and 2012
	June 30, 2013				Six Months Ended June 30, 2013
U.S. commercial	$	840	$	813	$	2
Commercial real estate	438		381		3
Non-U.S. commercial	74		73		—
U.S. small business commercial ⁽¹⁾	5		6		1
Total	$	1,357	$	1,273	$	6

	June 30, 2012				Six Months Ended June 30, 2012
U.S. commercial	$	558	$	496	$	15
Commercial real estate	486		401		4
Non-U.S. commercial	66		66		—
U.S. small business commercial ⁽¹⁾	16		17		1
Total	$	1,126	$	980	$	20


⁽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 June 30, 2013 and 2012 had a carrying value of $104 million and $170 million for U.S. commercial, $288 million and $335 million for commercial real estate and $1 million and $12 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 table below provides details on PCI loans acquired during the six months ended June 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 six months ended June 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 June 30, 2013			Six Months Ended June 30, 2013
Accretable yield, beginning of period	$	6,029		$	4,644
Accretion	(300		)	(598		)
Loans purchased	—			1,125
Disposals/transfers	(35		)	(138		)
Reclassifications from nonaccretable difference	1,081			1,742
Accretable yield, June 30, 2013	$	6,775		$	6,775

See Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation's 2012 Annual Report on Form 10-K for further information on PCI loans 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 $14.5 billion and $19.4 billion at June 30, 2013 and December 31, 2012. Proceeds, including cash and securities, from sales, securitizations and paydowns of LHFS were $46.4 billion and $24.6 billion for the six months ended June 30, 2013 and 2012. Amounts used for originations and purchases of LHFS were $40.1 billion and $22.9 billion for the six months ended June 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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