Quarterly report pursuant to Section 13 or 15(d)

Allowance for Credit Losses

v2.4.0.8
Allowance for Credit Losses
6 Months Ended
Jun. 30, 2013
Receivables [Abstract]  
Allowance for Credit Losses
NOTE 6 – Allowance for Credit Losses

The table below summarizes the changes in the allowance for credit losses by portfolio segment for the three and six months ended June 30, 2013 and 2012.

 
Three Months Ended June 30, 2013
(Dollars in millions)
Home Loans
 
Credit Card
and Other
Consumer
 
Commercial
 
Total
Allowance for loan and lease losses, April 1
$
13,438

 
$
5,874

 
$
3,129

 
$
22,441

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

 
331

 
129

 
639

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

 

 
(313
)
Provision for loan and lease losses
27

 
957

 
236

 
1,220

Other (1)
1

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

 
5,671

 
3,168

 
21,235

Reserve for unfunded lending commitments, April 1

 

 
486

 
486

Provision for unfunded lending commitments

 

 
(9
)
 
(9
)
Other (2)

 

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

 

 
474

 
474

Allowance for credit losses, June 30
$
12,396

 
$
5,671

 
$
3,642

 
$
21,709

 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2012
Allowance for loan and lease losses, April 1
$
20,973

 
$
7,664

 
$
3,574

 
$
32,211

Loans and leases charged off
(1,769
)
 
(2,020
)
 
(622
)
 
(4,411
)
Recoveries of loans and leases previously charged off
127

 
411

 
247

 
785

Net charge-offs
(1,642
)
 
(1,609
)
 
(375
)
 
(3,626
)
Provision for loan and lease losses
679

 
1,054

 
107

 
1,840

Other (1)
(46
)
 
(85
)
 
(6
)
 
(137
)
Allowance for loan and lease losses, June 30
19,964

 
7,024

 
3,300

 
30,288

Reserve for unfunded lending commitments, April 1

 

 
651

 
651

Provision for unfunded lending commitments

 

 
(67
)
 
(67
)
Other (2)

 

 
(10
)
 
(10
)
Reserve for unfunded lending commitments, June 30

 

 
574

 
574

Allowance for credit losses, June 30
$
19,964

 
$
7,024

 
$
3,874

 
$
30,862

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

 
$
6,140

 
$
3,106

 
$
24,179

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

 
649

 
230

 
1,184

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

 

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

 
1,964

 
476

 
2,951

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

 
5,671

 
3,168

 
21,235

Reserve for unfunded lending commitments, January 1

 

 
513

 
513

Provision for unfunded lending commitments

 

 
(27
)
 
(27
)
Other (2)

 

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

 

 
474

 
474

Allowance for credit losses, June 30
$
12,396

 
$
5,671

 
$
3,642

 
$
21,709

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2012
Allowance for loan and lease losses, January 1
$
21,079

 
$
8,569

 
$
4,135

 
$
33,783

Loans and leases charged off
(3,776
)
 
(4,262
)
 
(1,153
)
 
(9,191
)
Recoveries of loans and leases previously charged off
263

 
837

 
409

 
1,509

Net charge-offs
(3,513
)
 
(3,425
)
 
(744
)
 
(7,682
)
Provision for loan and lease losses
2,444

 
1,933

 
(80
)
 
4,297

Other (1)
(46
)
 
(53
)
 
(11
)
 
(110
)
Allowance for loan and lease losses, June 30
19,964

 
7,024

 
3,300

 
30,288

Reserve for unfunded lending commitments, January 1

 

 
714

 
714

Provision for unfunded lending commitments

 

 
(106
)
 
(106
)
Other (2)

 

 
(34
)
 
(34
)
Reserve for unfunded lending commitments, June 30

 

 
574

 
574

Allowance for credit losses, June 30
$
19,964

 
$
7,024

 
$
3,874

 
$
30,862

(1) 
Primarily represents the net impact of portfolio sales, consolidations and deconsolidations, and foreign currency translation adjustments.
(2) 
Primarily represents accretion of the Merrill Lynch purchase accounting adjustment.

During the three and six months ended June 30, 2013, for the PCI loan portfolios, the Corporation recorded a benefit of $252 million and $459 million in the provision for credit losses with a corresponding decrease in the valuation allowance included as part of the allowance for loan and lease losses. This compared to $6 million and $493 million in provision for credit losses for the same periods in 2012. Write-offs in the PCI loan portfolios totaled $313 million and $1.2 billion with a corresponding decrease in the PCI valuation allowance during the three and six months ended June 30, 2013; there were no write-offs in the PCI loan portfolios in the prior-year periods. Write-offs during the six months ended June 30, 2013 included certain home equity PCI loans that were ineligible for the National Mortgage Settlement, but had similar characteristics as the eligible loans and the expectation of future cash proceeds was considered remote. The valuation allowance associated with the PCI loan portfolios was $3.9 billion and $5.5 billion at June 30, 2013 and December 31, 2012.

The table below presents the allowance and the carrying value of outstanding loans and leases by portfolio segment at June 30, 2013 and December 31, 2012.

Allowance and Carrying Value by Portfolio Segment
 
 
 
 
 
 
 
 
June 30, 2013
(Dollars in millions)
Home Loans
 
Credit Card
and Other
Consumer
 
Commercial
 
Total
Impaired loans and troubled debt restructurings (1)
 
 
 
 
 
 
 
Allowance for loan and lease losses (2)
$
1,719

 
$
761

 
$
328

 
$
2,808

Carrying value (3)
33,793

 
2,821

 
3,622

 
40,236

Allowance as a percentage of carrying value
5.09
%
 
26.98
%
 
9.06
%
 
6.98
%
Loans collectively evaluated for impairment
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
6,752

 
$
4,910

 
$
2,840

 
$
14,502

Carrying value (3, 4)
291,522

 
183,203

 
368,493

 
843,218

Allowance as a percentage of carrying value (4)
2.32
%
 
2.68
%
 
0.77
%
 
1.72
%
Purchased credit-impaired loans
 
 
 
 
 
 
 
Valuation allowance
$
3,925

 
n/a

 
n/a

 
$
3,925

Carrying value gross of valuation allowance
28,655

 
n/a

 
n/a

 
28,655

Valuation allowance as a percentage of carrying value
13.70
%
 
n/a

 
n/a

 
13.70
%
Total
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
12,396

 
$
5,671

 
$
3,168

 
$
21,235

Carrying value (3, 4)
353,970

 
186,024

 
372,115

 
912,109

Allowance as a percentage of carrying value (4)
3.50
%
 
3.05
%
 
0.85
%
 
2.33
%
 
 
 
 
 
 
 
 
 
December 31, 2012
Impaired loans and troubled debt restructurings (1)
 
 
 
 
 
 
 
Allowance for loan and lease losses (2)
$
1,700

 
$
1,139

 
$
475

 
$
3,314

Carrying value (3)
30,250

 
3,946

 
4,881

 
39,077

Allowance as a percentage of carrying value
5.62
%
 
28.86
%
 
9.73
%
 
8.48
%
Loans collectively evaluated for impairment
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
7,697

 
$
5,001

 
$
2,631

 
$
15,329

Carrying value (3, 4)
304,701

 
187,419

 
341,502

 
833,622

Allowance as a percentage of carrying value (4)
2.53
%
 
2.67
%
 
0.77
%
 
1.84
%
Purchased credit-impaired loans
 
 
 
 
 
 
 
Valuation allowance
$
5,536

 
n/a

 
n/a

 
$
5,536

Carrying value gross of valuation allowance
26,118

 
n/a

 
n/a

 
26,118

Valuation allowance as a percentage of carrying value
21.20
%
 
n/a

 
n/a

 
21.20
%
Total
 
 
 
 
 
 
 
Allowance for loan and lease losses
$
14,933

 
$
6,140

 
$
3,106

 
$
24,179

Carrying value (3, 4)
361,069

 
191,365

 
346,383

 
898,817

Allowance as a percentage of carrying value (4)
4.14
%
 
3.21
%
 
0.90
%
 
2.69
%
(1) 
Impaired loans include nonperforming commercial loans and all TDRs, including both commercial and consumer TDRs. Impaired loans exclude nonperforming consumer loans unless they are TDRs, and all consumer and commercial loans accounted for under the fair value option.
(2) 
Commercial impaired allowance for loan and lease losses includes $58 million and $97 million related to U.S. small business commercial at June 30, 2013 and December 31, 2012.
(3) 
Amounts are presented gross of the allowance for loan and lease losses.
(4) 
Outstanding loan and lease balances and ratios do not include loans accounted for under the fair value option of $9.5 billion and $9.0 billion at June 30, 2013 and December 31, 2012.
n/a = not applicable