Loans and Allowance for Loan Losses |
Note 3—Loans and Allowance
for Loan Losses
The
following table provides the outstanding balances of loans at
September 30, 2012 and December 31, 2011.
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
|
September 30,
2012 |
|
|
December 31,
2011 |
|
Loans held for investment:
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
$ |
20,124 |
|
|
$ |
19,226 |
|
Commercial mortgage
|
|
|
8,293 |
|
|
|
8,175 |
|
Construction
|
|
|
678 |
|
|
|
870 |
|
Lease financing
|
|
|
962 |
|
|
|
965 |
|
|
|
|
|
|
|
|
|
|
Total commercial portfolio
|
|
|
30,057 |
|
|
|
29,236 |
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
21,335 |
|
|
|
19,625 |
|
Home equity and other consumer
loans
|
|
|
3,494 |
|
|
|
3,730 |
|
|
|
|
|
|
|
|
|
|
Total consumer portfolio
|
|
|
24,829 |
|
|
|
23,355 |
|
|
|
|
|
|
|
|
|
|
Total loans held for investment,
excluding FDIC covered loans
|
|
|
54,886 |
|
|
|
52,591 |
|
FDIC covered loans
|
|
|
524 |
|
|
|
949 |
|
|
|
|
|
|
|
|
|
|
Total loans held for
investment(1)
|
|
|
55,410 |
|
|
|
53,540 |
|
Allowance for loan losses
|
|
|
(668 |
) |
|
|
(764 |
) |
|
|
|
|
|
|
|
|
|
Loans held for investment,
net
|
|
$ |
54,742 |
|
|
$ |
52,776 |
|
|
|
|
|
|
|
|
|
|
(1) |
Includes $6 million and ($30) million at September 30,
2012 and December 31, 2011, respectively, for net unamortized
discounts and premiums and deferred fees and costs.
|
Loans Acquired in
Business Combinations
The
Company evaluated loans acquired in the Frontier and Tamalpais
transactions in accordance with accounting guidance related to
loans acquired with deteriorated credit quality as of the
acquisition date. Management elected to account for all acquired
loans, except for revolving lines of credit, within the scope of
the accounting guidance related to loans acquired with deteriorated
credit quality.
The
acquired loans are referred to as “FDIC covered loans”
as the Bank will be reimbursed for a substantial portion of any
future losses on them under the terms of the FDIC loss share
agreements. As of acquisition dates, the estimated fair value of
the purchased credit-impaired loan portfolios of Frontier and
Tamalpais subject to the loss share agreements represents the
present value of expected cash flows from the portfolio. The
difference between the undiscounted contractual cash flows and the
undiscounted expected cash flows is the nonaccretable difference.
The nonaccretable difference recorded at the acquisition date
represents the estimated credit losses in the acquired loan
portfolios at the acquisition date.
The
accretable yield for purchased credit-impaired loans for the three
and nine months ended September 30, 2012 and 2011 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
September 30, |
|
|
For the Nine
Months Ended
September 30, |
|
(Dollars in
millions)
|
|
2012 |
|
|
2011 |
|
|
2012 |
|
|
2011 |
|
Accretable yield, beginning of
period
|
|
$ |
474 |
|
|
$ |
350 |
|
|
$ |
424 |
|
|
$ |
231 |
|
Accretion
|
|
|
(78 |
) |
|
|
(54 |
) |
|
|
(213 |
) |
|
|
(132 |
) |
Reclassifications from nonaccretable
difference during the period
|
|
|
12 |
|
|
|
111 |
|
|
|
197 |
|
|
|
308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretable yield, end of
period
|
|
$ |
408 |
|
|
$ |
407 |
|
|
$ |
408 |
|
|
$ |
407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
carrying amount and outstanding balance for the purchased
credit-impaired loans as of September 30, 2012 and
December 31, 2011 and as of the respective acquisition dates
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
|
September 30,
2012 |
|
|
December 31,
2011 |
|
|
Acquisition
Date |
|
Total outstanding balance
|
|
$ |
1,355 |
|
|
$ |
2,066 |
|
|
$ |
3,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amount
|
|
$ |
494 |
|
|
$ |
902 |
|
|
$ |
1,725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FDIC
covered loans also include revolving lines of credit, which had a
carrying amount of $30 million and $47 million as of
September 30, 2012 and December 31, 2011, respectively.
Acquired loans were recorded at fair value at acquisition date,
factoring in credit losses expected to be incurred over the life of
the loan. Accordingly, an allowance for loan losses was not carried
over or recorded as of the respective acquisition dates. The
acquired loans are subject to the Bank’s internal credit
review. When credit deterioration is noted subsequent to the
respective acquisition dates, a provision for loan losses is
charged to earnings, with a partial offset reflecting the increase
to the FDIC indemnification asset for FDIC covered
loans.
Allowance for Loan
Losses
The
Company maintains an allowance for loan losses to absorb losses
inherent in the loan portfolio. The allowance for loan losses is
based on our regular, quarterly assessments of the estimated
probable losses inherent in the loan portfolio. The Company’s
methodology for measuring the appropriate level of the allowance
relies on several key elements, which include the formula
allowance, the specific allowance for impaired loans and the
unallocated allowance.
The
following tables provide a reconciliation of changes in the
allowance for loan losses by portfolio segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
2012 |
|
(Dollars in
millions)
|
|
Commercial |
|
|
Consumer |
|
|
FDIC
Covered
Loans |
|
|
Unallocated |
|
|
Total |
|
Allowance for loan losses, beginning
of period
|
|
$ |
388 |
|
|
$ |
126 |
|
|
$ |
4 |
|
|
$ |
138 |
|
|
$ |
656 |
|
(Reversal of) provision for loan
losses
|
|
|
(17 |
) |
|
|
30 |
|
|
|
— |
|
|
|
30 |
|
|
|
43 |
|
(Reversal of) provision for FDIC
covered loan losses not subject to FDIC indemnification
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
Increase in allowance covered by FDIC
indemnification
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
|
|
8 |
|
Other
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Loans charged off
|
|
|
13 |
|
|
|
41 |
|
|
|
3 |
|
|
|
— |
|
|
|
57 |
|
Recoveries of loans previously
charged off
|
|
|
13 |
|
|
|
1 |
|
|
|
1 |
|
|
|
— |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses, end of
period
|
|
$ |
372 |
|
|
$ |
116 |
|
|
$ |
12 |
|
|
$ |
168 |
|
|
$ |
668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30,
2011 |
|
(Dollars in
millions)
|
|
Commercial |
|
|
Consumer |
|
|
FDIC
Covered
Loans |
|
|
Unallocated |
|
|
Total |
|
Allowance for loan losses, beginning
of period
|
|
$ |
475 |
|
|
$ |
151 |
|
|
$ |
17 |
|
|
$ |
183 |
|
|
$ |
826 |
|
(Reversal of) provision for loan
losses
|
|
|
30 |
|
|
|
13 |
|
|
|
— |
|
|
|
(56 |
) |
|
|
(13 |
) |
(Reversal of) provision for FDIC
covered loan losses not subject to FDIC indemnification
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Decrease in allowance covered by FDIC
indemnification
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Loans charged off
|
|
|
35 |
|
|
|
21 |
|
|
|
1 |
|
|
|
— |
|
|
|
57 |
|
Recoveries of loans previously
charged off
|
|
|
10 |
|
|
|
2 |
|
|
|
1 |
|
|
|
— |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses, end of
period
|
|
$ |
479 |
|
|
$ |
145 |
|
|
$ |
17 |
|
|
$ |
127 |
|
|
$ |
768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
2012 |
|
(Dollars in
millions)
|
|
Commercial |
|
|
Consumer |
|
|
FDIC
Covered
Loans |
|
|
Unallocated |
|
|
Total |
|
Allowance for loan losses, beginning
of period
|
|
$ |
474 |
|
|
$ |
138 |
|
|
$ |
17 |
|
|
$ |
135 |
|
|
$ |
764 |
|
(Reversal of) provision for loan
losses
|
|
|
(58 |
) |
|
|
56 |
|
|
|
— |
|
|
|
33 |
|
|
|
31 |
|
(Reversal of) provision for FDIC
covered loan losses not subject to FDIC indemnification
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Decrease in allowance covered by FDIC
indemnification
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
|
|
(1 |
) |
Other
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
Loans charged off
|
|
|
79 |
|
|
|
80 |
|
|
|
5 |
|
|
|
— |
|
|
|
164 |
|
Recoveries of loans previously
charged off
|
|
|
34 |
|
|
|
2 |
|
|
|
2 |
|
|
|
— |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses, end of
period
|
|
$ |
372 |
|
|
$ |
116 |
|
|
$ |
12 |
|
|
$ |
168 |
|
|
$ |
668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
2011 |
|
(Dollars in
millions)
|
|
Commercial |
|
|
Consumer |
|
|
FDIC
Covered
Loans |
|
|
Unallocated |
|
|
Total |
|
Allowance for loan losses, beginning
of period
|
|
$ |
683 |
|
|
$ |
185 |
|
|
$ |
25 |
|
|
$ |
298 |
|
|
$ |
1,191 |
|
(Reversal of) provision for loan
losses
|
|
|
(62 |
) |
|
|
26 |
|
|
|
— |
|
|
|
(171 |
) |
|
|
(207 |
) |
Provision for FDIC covered loan
losses not subject to FDIC indemnification
|
|
|
— |
|
|
|
— |
|
|
|
(2 |
) |
|
|
— |
|
|
|
(2 |
) |
Decrease in allowance covered by FDIC
indemnification
|
|
|
— |
|
|
|
— |
|
|
|
(5 |
) |
|
|
— |
|
|
|
(5 |
) |
Other
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
Loans charged off
|
|
|
182 |
|
|
|
69 |
|
|
|
2 |
|
|
|
— |
|
|
|
253 |
|
Recoveries of loans previously
charged off
|
|
|
41 |
|
|
|
3 |
|
|
|
1 |
|
|
|
— |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses, end of
period
|
|
$ |
479 |
|
|
$ |
145 |
|
|
$ |
17 |
|
|
$ |
127 |
|
|
$ |
768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following tables show the allowance for loan losses and related
loan balances by portfolio segment as of September 30, 2012
and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
(Dollars in
millions)
|
|
Commercial |
|
|
Consumer |
|
|
FDIC
covered
loans |
|
|
Unallocated |
|
|
Total |
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for
impairment
|
|
$ |
20 |
|
|
$ |
49 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
69 |
|
Collectively evaluated for
impairment
|
|
|
352 |
|
|
|
67 |
|
|
|
— |
|
|
|
168 |
|
|
|
587 |
|
Purchased credit-impaired
loans
|
|
|
— |
|
|
|
— |
|
|
|
12 |
|
|
|
— |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for loan
losses
|
|
$ |
372 |
|
|
$ |
116 |
|
|
$ |
12 |
|
|
$ |
168 |
|
|
$ |
668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for
impairment
|
|
$ |
350 |
|
|
$ |
262 |
|
|
$ |
8 |
|
|
$ |
— |
|
|
$ |
620 |
|
Collectively evaluated for
impairment
|
|
|
29,707 |
|
|
|
24,567 |
|
|
|
22 |
|
|
|
— |
|
|
|
54,296 |
|
Purchased credit-impaired
loans
|
|
|
— |
|
|
|
— |
|
|
|
494 |
|
|
|
— |
|
|
|
494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans held for
investment
|
|
$ |
30,057 |
|
|
$ |
24,829 |
|
|
$ |
524 |
|
|
$ |
— |
|
|
$ |
55,410 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
|
(Dollars in
millions)
|
|
Commercial |
|
|
Consumer |
|
|
FDIC
covered
loans |
|
|
Unallocated |
|
|
Total |
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for
impairment
|
|
$ |
54 |
|
|
$ |
14 |
|
|
$ |
1 |
|
|
$ |
— |
|
|
$ |
69 |
|
Collectively evaluated for
impairment
|
|
|
420 |
|
|
|
124 |
|
|
|
— |
|
|
|
135 |
|
|
|
679 |
|
Purchased credit-impaired
loans
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
|
|
— |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance for loan
losses
|
|
$ |
474 |
|
|
$ |
138 |
|
|
$ |
17 |
|
|
$ |
135 |
|
|
$ |
764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans held for investment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individually evaluated for
impairment
|
|
$ |
416 |
|
|
$ |
144 |
|
|
$ |
12 |
|
|
$ |
— |
|
|
$ |
572 |
|
Collectively evaluated for
impairment
|
|
|
28,820 |
|
|
|
23,211 |
|
|
|
35 |
|
|
|
— |
|
|
|
52,066 |
|
Purchased credit-impaired
loans
|
|
|
— |
|
|
|
— |
|
|
|
902 |
|
|
|
— |
|
|
|
902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans held for
investment
|
|
$ |
29,236 |
|
|
$ |
23,355 |
|
|
$ |
949 |
|
|
$ |
— |
|
|
$ |
53,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual and Past
Due Loans
The
following table presents nonaccrual loans as of September 30,
2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
|
September 30,
2012 |
|
|
December 31,
2011 |
|
Commercial and industrial
|
|
$ |
36 |
|
|
$ |
127 |
|
Commercial mortgage
|
|
|
91 |
|
|
|
139 |
|
Construction
|
|
|
— |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
Total commercial portfolio
|
|
|
127 |
|
|
|
282 |
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
325 |
|
|
|
285 |
|
Home equity and other consumer
loans
|
|
|
52 |
|
|
|
24 |
|
|
|
|
|
|
|
|
|
|
Total consumer portfolio
|
|
|
377 |
|
|
|
309 |
|
|
|
|
|
|
|
|
|
|
Total nonaccrual loans, excluding
FDIC covered loans
|
|
|
504 |
|
|
|
591 |
|
FDIC covered loans
|
|
|
30 |
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
Total nonaccrual loans
|
|
$ |
534 |
|
|
$ |
638 |
|
|
|
|
|
|
|
|
|
|
Troubled debt restructured loans that
continue to accrue interest
|
|
$ |
364 |
|
|
$ |
252 |
|
|
|
|
|
|
|
|
|
|
Troubled debt restructured nonaccrual
loans (included in the total nonaccrual loans above)
|
|
$ |
228 |
|
|
$ |
221 |
|
|
|
|
|
|
|
|
|
|
In
accordance with recently issued federal banking agency supervisory
guidance, the Company classifies junior lien loans as nonperforming
when the first lien loan becomes 90 days or more past due even if
the junior lien loan is performing. Effective in the second quarter
of 2012, $21 million of performing home equity loans was
reclassified to nonaccrual.
The
following table shows an aging of the balance of loans held for
investment, excluding FDIC covered loans, by class as of
September 30, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
|
|
Aging Analysis of
Loans |
|
(Dollars in
millions)
|
|
Current |
|
|
30 to 89
Days
Past Due |
|
|
90 Days
or More
Past Due |
|
|
Total Past
Due |
|
|
Total |
|
Commercial and industrial
|
|
$ |
21,015 |
|
|
$ |
68 |
|
|
$ |
3 |
|
|
$ |
71 |
|
|
$ |
21,086 |
|
Commercial mortgage
|
|
|
8,255 |
|
|
|
32 |
|
|
|
6 |
|
|
|
38 |
|
|
|
8,293 |
|
Construction
|
|
|
678 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial portfolio
|
|
|
29,948 |
|
|
|
100 |
|
|
|
9 |
|
|
|
109 |
|
|
|
30,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
20,952 |
|
|
|
187 |
|
|
|
196 |
|
|
|
383 |
|
|
|
21,335 |
|
Home equity and other consumer
loans
|
|
|
3,428 |
|
|
|
47 |
|
|
|
19 |
|
|
|
66 |
|
|
|
3,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer portfolio
|
|
|
24,380 |
|
|
|
234 |
|
|
|
215 |
|
|
|
449 |
|
|
|
24,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans held for investment,
excluding FDIC covered loans
|
|
$ |
54,328 |
|
|
$ |
334 |
|
|
$ |
224 |
|
|
$ |
558 |
|
|
$ |
54,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2011 |
|
|
|
Aging Analysis of
Loans |
|
(Dollars in
millions)
|
|
Current |
|
|
30 to 89
Days
Past Due |
|
|
90 Days
or More
Past Due |
|
|
Total Past
Due |
|
|
Total |
|
Commercial and industrial
|
|
$ |
20,033 |
|
|
$ |
121 |
|
|
$ |
37 |
|
|
$ |
158 |
|
|
$ |
20,191 |
|
Commercial mortgage
|
|
|
8,111 |
|
|
|
49 |
|
|
|
15 |
|
|
|
64 |
|
|
|
8,175 |
|
Construction
|
|
|
855 |
|
|
|
— |
|
|
|
15 |
|
|
|
15 |
|
|
|
870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial portfolio
|
|
|
28,999 |
|
|
|
170 |
|
|
|
67 |
|
|
|
237 |
|
|
|
29,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
19,228 |
|
|
|
188 |
|
|
|
209 |
|
|
|
397 |
|
|
|
19,625 |
|
Home equity and other consumer
loans
|
|
|
3,686 |
|
|
|
24 |
|
|
|
20 |
|
|
|
44 |
|
|
|
3,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer portfolio
|
|
|
22,914 |
|
|
|
212 |
|
|
|
229 |
|
|
|
441 |
|
|
|
23,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans held for investment,
excluding FDIC covered loans
|
|
$ |
51,913 |
|
|
$ |
382 |
|
|
$ |
296 |
|
|
$ |
678 |
|
|
$ |
52,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans 90
days or more past due and still accruing totaled $1 million at both
September 30, 2012 and December 31, 2011.
Credit Quality
Indicators
Management analyzes the Company’s loan portfolios by
applying specific monitoring policies and procedures that vary
according to the relative risk profile and other characteristics
within the various loan portfolios. For further information related
to the credit quality indicators the Company uses to monitor the
portfolio, see Note 3 to the consolidated financial statements in
the Company’s 2011 Form 10-K.
The
following tables summarize the loans in the commercial portfolio
segment monitored for credit quality based on internal ratings,
excluding $460 million and $864 million covered by FDIC loss share
agreements, at September 30, 2012 and December 31, 2011,
respectively. The amounts presented reflect unpaid principal
balances less charge-offs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
(Dollars in
millions)
|
|
Commercial
and Industrial |
|
|
Construction |
|
|
Commercial
Mortgage |
|
|
Total |
|
Pass
|
|
$ |
20,007 |
|
|
$ |
636 |
|
|
$ |
7,551 |
|
|
$ |
28,194 |
|
Special Mention
|
|
|
609 |
|
|
|
37 |
|
|
|
249 |
|
|
|
895 |
|
Classified
|
|
|
318 |
|
|
|
4 |
|
|
|
303 |
|
|
|
625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
20,934 |
|
|
$ |
677 |
|
|
$ |
8,103 |
|
|
$ |
29,714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
|
(Dollars in
millions)
|
|
Commercial
and Industrial |
|
|
Construction |
|
|
Commercial
Mortgage |
|
|
Total |
|
Pass
|
|
$ |
18,594 |
|
|
$ |
674 |
|
|
$ |
7,201 |
|
|
$ |
26,469 |
|
Special Mention
|
|
|
466 |
|
|
|
126 |
|
|
|
453 |
|
|
|
1,045 |
|
Classified
|
|
|
390 |
|
|
|
71 |
|
|
|
501 |
|
|
|
962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
19,450 |
|
|
$ |
871 |
|
|
$ |
8,155 |
|
|
$ |
28,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
reported for pass and criticized loans at December 31, 2011
have been restated to include $266 million and $87 million,
respectively, of loans that were not originally reported in the
Company’s 2011 Form 10-K.
The
Company monitors the credit quality of its consumer segment based
primarily on payment status. The following tables summarize the
loans in the consumer portfolio segment, which excludes $64 million
and $85 million of loans covered by FDIC loss share agreements, at
September 30, 2012 and December 31, 2011,
respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
(Dollars in
millions)
|
|
Accrual |
|
|
Nonaccrual |
|
|
Total |
|
Residential mortgage
|
|
$ |
21,010 |
|
|
$ |
325 |
|
|
$ |
21,335 |
|
Home equity and other consumer
loans
|
|
|
3,442 |
|
|
|
52 |
|
|
|
3,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
24,452 |
|
|
$ |
377 |
|
|
$ |
24,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
|
(Dollars in
millions)
|
|
Accrual |
|
|
Nonaccrual |
|
|
Total |
|
Residential mortgage
|
|
$ |
19,340 |
|
|
$ |
285 |
|
|
$ |
19,625 |
|
Home equity and other consumer
loans
|
|
|
3,706 |
|
|
|
24 |
|
|
|
3,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
23,046 |
|
|
$ |
309 |
|
|
$ |
23,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
Company also monitors the credit quality for substantially all of
its consumer portfolio segment using credit scores provided by Fair
Isaac Corporation (FICO) and refreshed weighted average
loan-to-value (LTV) ratios. FICO credit scores are refreshed at
least quarterly to monitor the quality of the portfolio. Refreshed
LTV measures the carrying amount of the loan as a percentage of the
estimated current value of the property securing the loan. Home
equity loans are evaluated using combined LTV, which measures the
carrying amount of the combined loans that have liens against the
property (including unused amounts for home equity line products)
as a percentage of the estimated current value of the property
securing the loans. The LTV ratios are refreshed on a quarterly
basis, using the most recent home pricing index (HPI) data
available for the property location.
The
following tables summarize the loans in the consumer portfolio
segment monitored for credit quality based on refreshed FICO scores
and refreshed LTV ratios at September 30, 2012 and
December 31, 2011. These tables exclude loans serviced by
third-parties and loans covered by FDIC loss share agreements, as
discussed above. The amounts presented reflect unpaid principal
balances less partial charge-offs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
(Dollars in
millions)
|
|
Residential mortgage |
|
|
Home equity and other
consumer loans |
|
|
Total |
|
|
Percentage of
total |
|
FICO scores:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
720 and above
|
|
$ |
16,024 |
|
|
$ |
2,381 |
|
|
$ |
18,405 |
|
|
|
76 |
% |
Below 720
|
|
|
4,305 |
|
|
|
967 |
|
|
|
5,272 |
|
|
|
22 |
|
No FICO available(1)
|
|
|
418 |
|
|
|
68 |
|
|
|
486 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
20,747 |
|
|
$ |
3,416 |
|
|
$ |
24,163 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
|
(Dollars in
millions)
|
|
Residential mortgage |
|
|
Home equity and other
consumer loans |
|
|
Total |
|
|
Percentage
of total |
|
FICO scores:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
720 and above
|
|
$ |
14,553 |
|
|
$ |
2,533 |
|
|
$ |
17,086 |
|
|
|
75 |
% |
Below 720
|
|
|
4,319 |
|
|
|
1,044 |
|
|
|
5,363 |
|
|
|
24 |
|
No FICO available(1)
|
|
|
247 |
|
|
|
69 |
|
|
|
316 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
19,119 |
|
|
$ |
3,646 |
|
|
$ |
22,765 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents loans for which management was not able to obtain an
updated FICO score (e.g., due to recent profile
changes).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012 |
|
(Dollars in
millions)
|
|
Residential mortgage |
|
|
Home equity loans |
|
|
Total |
|
|
Percentage of total |
|
LTV ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 80 percent
|
|
$ |
16,369 |
|
|
$ |
2,089 |
|
|
$ |
18,458 |
|
|
|
77 |
% |
80-100 percent
|
|
|
2,984 |
|
|
|
586 |
|
|
|
3,570 |
|
|
|
15 |
|
Greater than 100 percent
|
|
|
1,296 |
|
|
|
590 |
|
|
|
1,886 |
|
|
|
7 |
|
No LTV available(1)
|
|
|
99 |
|
|
|
65 |
|
|
|
164 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
20,748 |
|
|
$ |
3,330 |
|
|
$ |
24,078 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
|
(Dollars in
millions)
|
|
Residential mortgage |
|
|
Home equity loans |
|
|
Total |
|
|
Percentage of total |
|
LTV ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 80 percent
|
|
$ |
12,464 |
|
|
$ |
2,028 |
|
|
$ |
14,492 |
|
|
|
64 |
% |
80-100 percent
|
|
|
4,415 |
|
|
|
612 |
|
|
|
5,027 |
|
|
|
22 |
|
Greater than 100 percent
|
|
|
2,146 |
|
|
|
675 |
|
|
|
2,821 |
|
|
|
12 |
|
No LTV available(1)
|
|
|
94 |
|
|
|
236 |
|
|
|
330 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
19,119 |
|
|
$ |
3,551 |
|
|
$ |
22,670 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents loans for which management was not able to obtain
refreshed property values.
|
Troubled Debt
Restructurings
The
following table provides a summary of the Company’s recorded
investment in troubled debt restructurings (TDRs) as of
September 30, 2012 and December 31, 2011. The summary
includes those TDRs that are on nonaccrual status and those that
continue to accrue interest. The Company had $41 million in
commitments to lend additional funds to borrowers with loan
modifications classified as TDRs as of September 30,
2012.
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
|
September 30,
2012 |
|
|
December 31,
2011 |
|
Commercial and industrial
|
|
$ |
173 |
|
|
$ |
151 |
|
Commercial mortgage
|
|
|
112 |
|
|
|
104 |
|
Construction
|
|
|
39 |
|
|
|
66 |
|
|
|
|
|
|
|
|
|
|
Total commercial portfolio
|
|
|
324 |
|
|
|
321 |
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
244 |
|
|
|
142 |
|
Home equity and other consumer
loans
|
|
|
18 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
Total consumer portfolio
|
|
|
262 |
|
|
|
144 |
|
|
|
|
|
|
|
|
|
|
FDIC covered loans
|
|
|
6 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
Total restructured loans
|
|
$ |
592 |
|
|
$ |
473 |
|
|
|
|
|
|
|
|
|
|
For the
nine months ended September 30, 2012, TDR modifications in the
commercial portfolio segment were primarily composed of interest
rate changes, maturity extensions, principal paydowns, covenant
waivers and payment deferrals, or some combination thereof. In the
consumer portfolio segment, substantially all of the modifications
were composed of interest rate reductions and maturity extensions.
Due to the implementation of recent OCC regulatory accounting
guidance in the third quarter of 2012, the Company considers single
family residential mortgages and home equity loans as TDRs when the
loan has been discharged in Chapter 7 bankruptcy and the borrower
has not reaffirmed the debt. As a result of implementing this
guidance, the Company recorded $67 million of consumer loans as
TDRs, $35 million of which were placed on nonaccrual at
September 30, 2012. The Company also recorded incremental
charge-offs of $17 million in the third quarter of 2012 reflecting
the write-down to collateral value of loans subjected to this
guidance. For the commercial and consumer portfolio segments, the
allowance for loan losses for TDRs is measured on an individual
loan basis or in pools with similar risk
characteristics.
The
following tables provide the pre- and post-modification outstanding
recorded investment amounts of TDRs as of the date of the
restructuring that occurred during the three and nine months ended
September 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
September 30, 2012 |
|
|
For the Nine Months Ended
September 30, 2012 |
|
(Dollars in
millions)
|
|
Pre-Modification
Outstanding
Recorded
Investment(1) |
|
|
Post-Modification
Outstanding
Recorded
Investment(2) |
|
|
Pre-Modification
Outstanding
Recorded
Investment(1) |
|
|
Post-Modification
Outstanding
Recorded
Investment(2) |
|
Commercial and industrial
|
|
$ |
29 |
|
|
$ |
27 |
|
|
$ |
103 |
|
|
$ |
97 |
|
Commercial mortgage
|
|
|
1 |
|
|
|
1 |
|
|
|
22 |
|
|
|
20 |
|
Construction
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial portfolio
|
|
|
37 |
|
|
|
35 |
|
|
|
132 |
|
|
|
124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
74 |
|
|
|
69 |
|
|
|
127 |
|
|
|
122 |
|
Home equity and other consumer
loans
|
|
|
28 |
|
|
|
16 |
|
|
|
28 |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer portfolio
|
|
|
102 |
|
|
|
85 |
|
|
|
155 |
|
|
|
138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FDIC covered loans
|
|
|
3 |
|
|
|
2 |
|
|
|
4 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
142 |
|
|
$ |
122 |
|
|
$ |
291 |
|
|
$ |
265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Represents the recorded investment in the loan immediately
prior to the restructuring event.
|
(2) |
Represents the recorded investment in the loan immediately
following the restructuring event. It includes the effect of
paydowns that were required as part of the restructuring
terms.
|
The
following table provides the recorded investment amounts of TDRs at
the date of default, for which there was a payment default during
the three and nine months ended September 30, 2012, and where
the default occurred within the first twelve months after
modification into a TDR. A payment default is defined as the loan
being 60 days or more past due.
|
|
|
|
|
|
|
|
|
(Dollars in
millions)
|
|
As of the Three
Months Ended
September 30, 2012 |
|
|
As of the Nine
Months Ended
September 30, 2012 |
|
Commercial and industrial
|
|
$ |
— |
|
|
$ |
2 |
|
Commercial mortgage
|
|
|
— |
|
|
|
1 |
|
Construction
|
|
|
— |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
Total commercial portfolio
|
|
|
— |
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
3 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
Total consumer portfolio
|
|
|
3 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
FDIC covered loans
|
|
|
— |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
3 |
|
|
$ |
39 |
|
|
|
|
|
|
|
|
|
|
For the
consumer portfolio, historical payment defaults and the propensity
to redefault are some of the factors considered when determining
the allowance for loan losses for situations where impairment is
measured using the present value of expected future cash flows
discounted at the loan’s effective interest rate. The
Company also may use the loan’s observable market price, or
the fair value of the collateral if the loan is collateral
dependent, to measure impairment.
Loan
Impairment
The
Company’s impaired loans generally include larger commercial
and industrial, construction, commercial mortgage loans, and TDRs
where it is probable that the Company will be unable to collect all
amounts due according to the contractual terms of the loan
agreement. When the value of an impaired loan is less than the
recorded investment in the loan, the Company records an impairment
allowance.
The
following tables show information about impaired loans by class as
of September 30, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2012 |
|
|
|
Recorded
Investment |
|
|
Allowance
for Impaired
Loans |
|
|
Average
Balance |
|
|
Unpaid Principal Balance |
|
(Dollars in
millions)
|
|
With an
Allowance |
|
|
Without an
Allowance |
|
|
Total |
|
|
|
|
With an
Allowance |
|
|
Without an
Allowance |
|
Commercial and industrial
|
|
$ |
125 |
|
|
$ |
65 |
|
|
$ |
190 |
|
|
$ |
18 |
|
|
$ |
201 |
|
|
$ |
131 |
|
|
$ |
66 |
|
Commercial mortgage
|
|
|
17 |
|
|
|
104 |
|
|
|
121 |
|
|
|
2 |
|
|
|
121 |
|
|
|
21 |
|
|
|
127 |
|
Construction
|
|
|
4 |
|
|
|
35 |
|
|
|
39 |
|
|
|
— |
|
|
|
52 |
|
|
|
4 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial portfolio
|
|
|
146 |
|
|
|
204 |
|
|
|
350 |
|
|
|
20 |
|
|
|
374 |
|
|
|
156 |
|
|
|
231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
260 |
|
|
|
— |
|
|
|
260 |
|
|
|
48 |
|
|
|
188 |
|
|
|
297 |
|
|
|
— |
|
Home equity and other consumer
loans
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer portfolio
|
|
|
262 |
|
|
|
— |
|
|
|
262 |
|
|
|
49 |
|
|
|
190 |
|
|
|
299 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total, excluding FDIC covered
loans
|
|
|
408 |
|
|
|
204 |
|
|
|
612 |
|
|
|
69 |
|
|
|
564 |
|
|
|
455 |
|
|
|
231 |
|
FDIC covered loans
|
|
|
— |
|
|
|
8 |
|
|
|
8 |
|
|
|
— |
|
|
|
10 |
|
|
|
1 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
408 |
|
|
$ |
212 |
|
|
$ |
620 |
|
|
$ |
69 |
|
|
$ |
574 |
|
|
$ |
456 |
|
|
$ |
248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2011 |
|
|
|
Recorded
Investment |
|
|
Allowance
for Impaired
Loans |
|
|
Average
Balance |
|
|
Unpaid Principal Balance |
|
(Dollars in
millions)
|
|
With an
Allowance |
|
|
Without an
Allowance |
|
|
Total |
|
|
|
|
With an
Allowance |
|
|
Without an
Allowance |
|
Commercial and industrial
|
|
$ |
182 |
|
|
$ |
38 |
|
|
$ |
220 |
|
|
$ |
46 |
|
|
$ |
185 |
|
|
$ |
191 |
|
|
$ |
40 |
|
Commercial mortgage
|
|
|
27 |
|
|
|
103 |
|
|
|
130 |
|
|
|
2 |
|
|
|
191 |
|
|
|
39 |
|
|
|
124 |
|
Construction
|
|
|
26 |
|
|
|
40 |
|
|
|
66 |
|
|
|
6 |
|
|
|
56 |
|
|
|
29 |
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial portfolio
|
|
|
235 |
|
|
|
181 |
|
|
|
416 |
|
|
|
54 |
|
|
|
432 |
|
|
|
259 |
|
|
|
207 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
142 |
|
|
|
— |
|
|
|
142 |
|
|
|
14 |
|
|
|
117 |
|
|
|
148 |
|
|
|
— |
|
Home equity and other consumer
loans
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
— |
|
|
|
2 |
|
|
|
2 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consumer portfolio
|
|
|
144 |
|
|
|
— |
|
|
|
144 |
|
|
|
14 |
|
|
|
119 |
|
|
|
150 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total, excluding FDIC covered
loans
|
|
|
379 |
|
|
|
181 |
|
|
|
560 |
|
|
|
68 |
|
|
|
551 |
|
|
|
409 |
|
|
|
207 |
|
FDIC covered loans
|
|
|
1 |
|
|
|
11 |
|
|
|
12 |
|
|
|
1 |
|
|
|
16 |
|
|
|
5 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
380 |
|
|
$ |
192 |
|
|
$ |
572 |
|
|
$ |
69 |
|
|
$ |
567 |
|
|
$ |
414 |
|
|
$ |
229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income recognized for impaired loans during the third quarter of
2012 for the commercial, consumer and FDIC covered loan portfolio
segments were $5 million, $5 million and less than $1 million,
respectively. Interest income recognized for impaired loans during
the nine months ended September 30, 2012 for the commercial,
consumer and FDIC covered loan portfolio segments were $9 million,
$8 million and $1 million, respectively.
The
Company transferred a net $200 million of loans from held for
investment to held for sale and sold $233 million in loans during
the nine months ended September 30, 2012.
|