Credit Loss Reserves

A rollforward of credit loss reserves for receivables in continuing operations for the three and six months ended June 30, 2013 and 2012 was as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(in millions)
Credit loss reserves at beginning of period	$	4,313		$	5,865		$	4,607		$	5,952
Provision for credit losses⁽¹⁾	267			738			291			1,529
Net charge-offs:
Charge-offs⁽²⁾	(527		)	(1,132		)	(926		)	(2,111		)
Recoveries	45			102			118			203
Total net charge-offs	(482		)	(1,030		)	(808		)	(1,908		)
Reserves on receivables transferred to held for sale	—			(965		)	—			(965		)
Other	—			—			8			—
Credit loss reserves at end of period	$	4,098		$	4,608		$	4,098		$	4,608

⁽¹⁾

The three and six months ended June 30, 2012 includes $112 million related to the lower of amortized cost or fair value attributable to credit for personal non-credit card receivables transferred to held for sale at June 30, 2012. See Note 6, "Receivables Held for Sale," for additional information. This amount was recorded as a provision for credit losses and included in the total of reserves on receivables transferred to held for sale. There was no lower of amortized cost or fair value adjustment attributable to credit recorded on the real estate secured receivables transferred to held for sale at either June 30, 2013 or 2012 as these receivables were previously carried at the lower of amortized cost or fair value of the collateral less cost to sell prior to the transfer of the receivable to held for sale.

⁽²⁾

For collateral dependent receivables that are transferred to held for sale, existing credit loss reserves at the time of transfer are recognized as a charge-off. We transferred to held for sale a pool of real estate secured receivables that were carried at the lower of amortized cost or fair value of the collateral less cost and recognized the existing credit loss reserves on these receivables as additional charge-off totaling $119 million during the three and six months ended June 30, 2013 and $333 million during the three and six months ended June 30, 2012. See Note 6, "Receivables Held for Sale," for additional information.

The following table summarizes the changes in credit loss reserves by product/class and the related receivable balance by product during the three and six months ended June 30, 2013 and 2012:



	Real Estate Secured						Personal Non- Credit Card			Total
	First Lien			Second Lien			Personal Non- Credit Card			Total
	(in millions)
Three Months Ended June 30, 2013:
Credit loss reserve balances at beginning of period	$	3,619		$	694		$	—		$	4,313
Provision for credit losses	250			22			(5		)	267
Net charge-offs:
Charge-offs⁽³⁾	(437		)	(90		)	—			(527		)
Recoveries	31			9			5			45
Total net charge-offs	(406		)	(81		)	5			(482		)
Credit loss reserve balance at end of period	$	3,463		$	635		$	—		$	4,098
Six Months Ended June 30, 2013:
Credit loss reserve balances at beginning of period	$	3,867		$	740		$	—		$	4,607
Provision for credit losses	266			62			(37		)	291
Net charge-offs:
Charge-offs⁽³⁾	(738		)	(188		)	—			(926		)
Recoveries	60			21			37			118
Total net charge-offs	(678		)	(167		)	37			(808		)
Other	8			—			—			8
Credit loss reserve balance at end of period	$	3,463		$	635		$	—		$	4,098
Reserve components:
Collectively evaluated for impairment	$	624		$	176		$	—		$	800
Individually evaluated for impairment⁽¹⁾	2,775			458			—			3,233
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	62			1			—			63
Receivables acquired with deteriorated credit quality	2			—			—			2
Total credit loss reserves	$	3,463		$	635		$	—		$	4,098
Receivables:
Collectively evaluated for impairment	$	14,300		$	2,166		$	—		$	16,466
Individually evaluated for impairment⁽¹⁾	10,667			1,098			—			11,765
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	823			48			—			871
Receivables acquired with deteriorated credit quality	8			2			—			10
Total receivables	$	25,798		$	3,314		$	—		$	29,112
Three Months Ended June 30, 2012:
Credit loss reserve balances at beginning of period	$	4,171		$	779		$	915		$	5,865
Provision for credit losses⁽²⁾	508			90			140			738
Net charge-offs:
Charge-offs⁽³⁾	(830		)	(134		)	(168		)	(1,132		)
Recoveries	9			15			78			102
Total net charge-offs	(821		)	(119		)	(90		)	(1,030		)
Reserves on receivables transferred to held for sale	—			—			(965		)	(965		)
Credit loss reserve balance at end of period	$	3,858		$	750		$	—		$	4,608



	Real Estate Secured						Personal Non- Credit Card			Total
	First Lien			Second Lien			Personal Non- Credit Card			Total
	(in millions)
Six Months Ended June 30, 2012:
Credit loss reserve balances at beginning of period	$	4,089		$	823		$	1,040		$	5,952
Provision for credit losses⁽²⁾	1,150			221			158			1,529
Net charge-offs:
Charge-offs⁽³⁾	(1,398		)	(324		)	(389		)	(2,111		)
Recoveries	17			30			156			203
Total net charge-offs	(1,381		)	(294		)	(233		)	(1,908		)
Reserves on receivables transferred to held for sale	—			—			(965		)	(965		)
Credit loss reserve balance at end of period	$	3,858		$	750		$	—		$	4,608
Reserve components:
Collectively evaluated for impairment	$	625		$	187		$	—		$	812
Individually evaluated for impairment⁽¹⁾	3,144			561			—			3,705
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	82			1			—			83
Receivables acquired with deteriorated credit quality	7			1			—			8
Total credit loss reserves	$	3,858		$	750		$	—		$	4,608
Receivables:
Collectively evaluated for impairment	$	18,614		$	2,790		$	—		$	21,404
Individually evaluated for impairment⁽¹⁾	10,918			1,153			—			12,071
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	1,373			68			—			1,441
Receivables acquired with deteriorated credit quality	35			5			—			40
Total receivables	$	30,940		$	4,016		$	—		$	34,956

⁽¹⁾

These amounts represent TDR Loans for which we evaluate reserves using a discounted cash flow methodology. Each loan is individually identified as a TDR Loan and then grouped together with other TDR Loans with similar characteristics. The discounted cash flow impairment analysis is then applied to these groups of TDR Loans. The receivable balance above excludes TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $726 million and $671 million at June 30, 2013 and 2012, respectively. The reserve component above excludes credit loss reserves for TDR Loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell which totaled $51 million and $41 million at June 30, 2013 and 2012, respectively. These credit loss reserves are reflected within receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell in the table above.


⁽²⁾	The three and six months ended June 30, 2012 includes $112 million related to the lower of amortized cost or fair value attributable to credit for personal non-credit card receivables transferred to held for sale at June 30, 2012. See Note 6, "Receivables Held for Sale," for additional information.

⁽³⁾