Credit Loss Reserves

The following table summarizes the changes in credit loss reserves by product/class and the related receivable balance by product during the three and nine months ended September 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 September 30, 2013:
Credit loss reserve balances at beginning of period	$	3,463		$	635		$	—		$	4,098
Provision for credit losses	(145		)	(8		)	(7		)	(160		)
Net charge-offs:
Charge-offs⁽³⁾	(212		)	(72		)	—			(284		)
Recoveries	27			9			7			43
Total net charge-offs	(185		)	(63		)	7			(241		)
Credit loss reserve balance at end of period	$	3,133		$	564		$	—		$	3,697
Nine Months Ended September 30, 2013:
Credit loss reserve balances at beginning of period	$	3,867		$	740		$	—		$	4,607
Provision for credit losses	121			54			(44		)	131
Net charge-offs:
Charge-offs⁽³⁾	(950		)	(260		)	—			(1,210		)
Recoveries	87			30			44			161
Total net charge-offs	(863		)	(230		)	44			(1,049		)
Other	8			—			—			8
Credit loss reserve balance at end of period	$	3,133		$	564		$	—		$	3,697
Reserve components:
Collectively evaluated for impairment	$	591		$	151		$	—		$	742
Individually evaluated for impairment⁽¹⁾	2,490			412			—			2,902
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	51			1			—			52
Receivables acquired with deteriorated credit quality	1			—			—			1
Total credit loss reserves	$	3,133		$	564		$	—		$	3,697
Receivables:
Collectively evaluated for impairment	$	13,475		$	2,042		$	—		$	15,517
Individually evaluated for impairment⁽¹⁾	10,362			1,069			—			11,431
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	835			48			—			883
Receivables acquired with deteriorated credit quality	10			3			—			13
Total receivables	$	24,682		$	3,162		$	—		$	27,844
Three Months Ended September 30, 2012:
Credit loss reserve balances at beginning of period	$	3,858		$	750		$	—		$	4,608
Provision for credit losses⁽²⁾	242			50			(5		)	287
Net charge-offs:
Charge-offs⁽³⁾	(379		)	(109		)	—			(488		)
Recoveries	3			14			5			22
Total net charge-offs	(376		)	(95		)	5			(466		)
Credit loss reserve balance at end of period	$	3,724		$	705		$	—		$	4,429



	Real Estate Secured						Personal Non- Credit Card			Total
	First Lien			Second Lien			Personal Non- Credit Card			Total
	(in millions)
Nine Months Ended September 30, 2012:
Credit loss reserve balances at beginning of period	$	4,089		$	823		$	1,040		$	5,952
Provision for credit losses⁽²⁾	1,392			271			153			1,816
Net charge-offs:
Charge-offs⁽³⁾	(1,777		)	(433		)	(389		)	(2,599		)
Recoveries	20			44			161			225
Total net charge-offs	(1,757		)	(389		)	(228		)	(2,374		)
Reserves on receivables transferred to held for sale	—			—			(965		)	(965		)
Credit loss reserve balance at end of period	$	3,724		$	705		$	—		$	4,429
Reserve components:
Collectively evaluated for impairment	$	572		$	178		$	—		$	750
Individually evaluated for impairment⁽¹⁾	3,065			525			—			3,590
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	5			1			—			6
Total credit loss reserves	$	3,724		$	705		$	—		$	4,429
Receivables:
Collectively evaluated for impairment	$	17,501		$	2,640		$	—		$	20,141
Individually evaluated for impairment⁽¹⁾	10,854			1,112			—			11,966
Receivables carried at the lower of amortized cost or fair value of the collateral less cost to sell	1,775			65			—			1,840
Receivables acquired with deteriorated credit quality	13			3			—			16
Total receivables	$	30,143		$	3,820		$	—		$	33,963

⁽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 $637 million and $1,001 million at September 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 $36 million and $61 million at September 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 nine months ended September 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⁾

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 $21 million and $140 million during the three and nine months ended September 30, 2013, respectively, and $333 million during the nine months ended September 30, 2012. See Note 6, "Receivables Held for Sale," for additional information.