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Credit Quality and the Allowance for Loan and Lease Losses
9 Months Ended
Sep. 30, 2013
Credit Quality and the Allowance for Loan and Leases Losses  
Credit Quality and the Allowance for Loan and Lease Losses

6. Credit Quality and the Allowance for Loan and Lease Losses

The Bancorp disaggregates ALLL balances and transactions in the ALLL by portfolio segment. Credit quality related disclosures for loans and leases are further disaggregated by class.

The following tables summarize transactions in the ALLL by portfolio segment:
             
             
             
For the three months ended September 30, 2013   Residential      
($ in millions) CommercialMortgageConsumerUnallocatedTotal
Transactions in the ALLL:           
 Balance, beginning of period$ 1,183  201  247  104  1,735 
 Losses charged off  (61)  (15)  (65)  -  (141) 
 Recoveries of losses previously charged off  17  3  12  -  32 
 Provision for loan and lease losses  8  5  41  (3)  51 
Balance, end of period$ 1,147  194  235  101  1,677 
             
For the three months ended September 30, 2012   Residential      
($ in millions) CommercialMortgageConsumerUnallocatedTotal
Transactions in the ALLL:           
 Balance, beginning of period$ 1,347  232  316  121  2,016 
 Losses charged off  (76)  (28)  (84)  -  (188) 
 Recoveries of losses previously charged off  14  2  16  -  32 
 Provision for loan and lease losses  2  26  42  (5)  65 
Balance, end of period$ 1,287  232  290  116  1,925 
             
For the nine months ended September 30, 2013   Residential      
($ in millions) CommercialMortgageConsumerUnallocatedTotal
Transactions in the ALLL:           
 Balance, beginning of period$ 1,236  229  278  111  1,854 
 Losses charged off  (189)  (55)  (210)  -  (454) 
 Recoveries of losses previously charged off  46  8  47  -  101 
 Provision for loan and lease losses  54  12  120  (10)  176 
Balance, end of period$ 1,147  194  235  101  1,677 
             
For the nine months ended September 30, 2012   Residential      
($ in millions) CommercialMortgageConsumerUnallocatedTotal
Transactions in the ALLL:           
 Balance, beginning of period$ 1,527  227  365  136  2,255 
 Losses charged off  (289)  (104)  (267)  -  (660) 
 Recoveries of losses previously charged off  47  5  51  -  103 
 Provision for loan and lease losses  2  104  141  (20)  227 
Balance, end of period$ 1,287  232  290  116  1,925 
             

The following tables provide a summary of the ALLL and related loans and leases classified by portfolio segment:
             
    Residential      
As of September 30, 2013 ($ in millions) CommercialMortgageConsumerUnallocatedTotal
ALLL:(a)           
 Individually evaluated for impairment$ 164 (c) 135  54  -  353 
 Collectively evaluated for impairment  983  59  181  -  1,223 
 Loans acquired with deteriorated credit quality  -  -  -  -  - 
 Unallocated  -  -  -  101  101 
Total ALLL$ 1,147  194  235  101  1,677 
Loans and leases:(b)           
 Individually evaluated for impairment$ 1,396 (c) 1,316  516  -  3,228 
 Collectively evaluated for impairment  49,356  11,124  23,429  -  83,909 
 Loans acquired with deteriorated credit quality  -  5  -  -  5 
Total portfolio loans and leases$ 50,752  12,445  23,945  -  87,142 

  • Includes $10 related to leveraged leases.
  • Excludes $89 of residential mortgage loans measured at fair value, and includes $875 of leveraged leases, net of unearned income.
  • Includes five restructured nonaccrual loans at September 30, 2013 associated with a consolidated variable interest entity, in which the Bancorp has no continuing credit risk due to the risk being assumed by a third party, with a recorded investment of $29 and an allowance of $11.

             
    Residential      
As of December 31, 2012 ($ in millions) Commercial MortgageConsumerUnallocatedTotal
ALLL:(a)           
 Individually evaluated for impairment$ 95  137  62 -  294 
 Collectively evaluated for impairment  1,140  91  216 -  1,447 
 Loans acquired with deteriorated credit quality  1  1 - -  2 
 Unallocated - - -  111  111 
Total ALLL$ 1,236  229  278  111  1,854 
Loans and leases:(b)           
 Individually evaluated for impairment$ 980  1,298  544 -  2,822 
 Collectively evaluated for impairment  48,407  10,637  23,833 -  82,877 
 Loans acquired with deteriorated credit quality  1  6  - -  7 
Total portfolio loans and leases$ 49,388  11,941  24,377  -  85,706 

  • Includes $11 related to leveraged leases.
  • Excludes $76 of residential mortgage loans measured at fair value, and includes $862 of leveraged leases, net of unearned income.

CREDIT RISK PROFILE

 

Commercial Portfolio Segment

For purposes of monitoring the credit quality and risk characteristics of its commercial portfolio segment, the Bancorp disaggregates the segment into the following classes: commercial and industrial, commercial mortgage owner-occupied, commercial mortgage non-owner occupied, commercial construction and commercial leasing.

 

To facilitate the monitoring of credit quality within the commercial portfolio segment, and for purposes of analyzing historical loss rates used in the determination of the ALLL for the commercial portfolio segment, the Bancorp utilizes the following categories of credit grades: pass, special mention, substandard, doubtful or loss. The five categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter. Pass ratings, which are assigned to those borrowers that do not have identified potential or well defined weaknesses and for which there is a high likelihood of orderly repayment, are updated periodically based on the size and credit characteristics of the borrower. All other categories are updated on a quarterly basis during the month preceding the end of the calendar quarter.

 

The Bancorp assigns a special mention rating to loans and leases that have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the loan or lease or the Bancorp's credit position. 

 

The Bancorp assigns a substandard rating to loans and leases that are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. Substandard loans and leases have well defined weaknesses or weaknesses that could jeopardize the orderly repayment of the debt. Loans and leases in this grade also are characterized by the distinct possibility that the Bancorp will sustain some loss if the deficiencies noted are not addressed and corrected.

 

The Bancorp assigns a doubtful rating to loans and leases that have all the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors that may work to the advantage of and strengthen the credit quality of the loan or lease, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors may include a proposed merger or acquisition, liquidation proceeding, capital injection, perfecting liens on additional collateral or refinancing plans.

 

Loans and leases classified as loss are considered uncollectible and are charged off in the period in which they are determined to be uncollectible. Because loans and leases in this category are fully charged down, they are not included in the following tables.

 

The following table summarizes the credit risk profile of the Bancorp’s commercial portfolio segment, by class:
            
    Special      
As of September 30, 2013 ($ in millions) PassMentionSubstandardDoubtfulTotal
Commercial and industrial loans$ 35,499  903  1,828 23  38,253 
Commercial mortgage owner occupied loans  3,889  214  469  -  4,572 
Commercial mortgage non-owner occupied loans  2,693  268  519  -  3,480 
Commercial construction loans  678  35  162  -  875 
Commercial leases  3,480  50  42  -  3,572 
Total$ 46,239  1,470  3,020  23  50,752 

            
    Special      
As of December 31, 2012 ($ in millions) PassMentionSubstandardDoubtfulTotal
Commercial and industrial loans$ 33,521  1,113  1,379  25  36,038 
Commercial mortgage owner occupied loans  3,934  338  603  1  4,876 
Commercial mortgage non-owner occupied loans  2,958  449  815  5  4,227 
Commercial construction loans  444  59  195  -  698 
Commercial leases  3,483  48  18  -  3,549 
Total$ 44,340  2,007  3,010  31  49,388 
            

Consumer Portfolio Segment

For purposes of monitoring the credit quality and risk characteristics of its consumer portfolio segment, the Bancorp disaggregates the segment into the following classes: home equity, automobile loans, credit card, and other consumer loans and leases. The Bancorp's residential mortgage portfolio segment is also a separate class.

 

The Bancorp considers repayment performance as the best indicator of credit quality for residential mortgage and consumer loans, which includes both the delinquency status and performing versus nonperforming status of the loans. The delinquency status of all residential mortgage and consumer loans is presented by class in the age analysis section below while the performing versus nonperforming status is presented in the table below. Residential mortgage loans that have principal and interest payments that have become past due 150 days and home equity loans with principal and interest payments that have become past due 180 days are classified as nonperforming unless such loans are both well secured and in the process of collection. Residential mortgage, home equity, automobile, and other consumer loans and leases that have been modified in a TDR and subsequently become past due 90 days are classified as nonperforming unless the loan is both well secured and in the process of collection. Credit card loans that have been modified in a TDR are classified as nonperforming unless such loans have a sustained repayment performance of six months or greater and are reasonably assured of repayment in accordance with the restructured terms. Well secured loans are collateralized by perfected security interests in real and/or personal property for which the Bancorp estimates proceeds from sale would be sufficient to recover the outstanding principal and accrued interest balance of the loan and pay all costs to sell the collateral. The Bancorp considers a loan in the process of collection if collection efforts or legal action is proceeding and the Bancorp expects to collect funds sufficient to bring the loan current or recover the entire outstanding principal and accrued interest balance.

The following table presents a summary of the Bancorp’s residential mortgage and consumer portfolio segments disaggregated into performing versus nonperforming status as of:
          
  September 30, 2013December 31, 2012
($ in millions) PerformingNonperformingPerformingNonperforming
Residential mortgage loans(a)$ 12,279  166  11,704  237 
Home equity  9,308  48  9,965  53 
Automobile loans  12,071  1  11,970  2 
Credit card  2,123  34  2,058  39 
Other consumer loans and leases  360  -  289  1 
Total$ 36,141  249  35,986  332 

  • Excludes $89 and $76 of loans measured at fair value at September 30, 2013 and December 31, 2012, respectively.

Age Analysis of Past Due Loans and Leases     
The following tables summarize the Bancorp’s recorded investment in portfolio loans and leases by age and class:
               
     Past Due    
   Current   90 Days     90 Days Past
As of September 30, 2013 Loans and  30-89 andTotal Total LoansDue and Still
($ in millions) Leases(c) Days(c)Greater(c)Past Dueand LeasesAccruing
Commercial:             
 Commercial and industrial loans $38,083 36 134 170 38,253 3 
 Commercial mortgage owner occupied loans 4,492 8 72 80 4,572  - 
 Commercial mortgage non-owner occupied loans 3,423 11 46 57 3,480  - 
 Commercial construction loans 844  - 31 31 875  - 
 Commercial leases 3,571  - 1 1 3,572  - 
Residential mortgage loans(a) (b) 12,142 69 234 303 12,445 73 
Consumer:             
 Home equity 9,166 96 94 190 9,356 46 
 Automobile loans 12,016 47 9 56 12,072 8 
 Credit card 2,092 35 30 65 2,157 26 
 Other consumer loans and leases  358 2  - 2 360  - 
Total portfolio loans and leases(a)$86,187 304 651 955 87,142 156 

  • Excludes $89 of loans measured at fair value.
  • Information for current residential mortgage loans includes advances made pursuant to servicing agreements for GNMA mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. As of September 30, 2013, $83 of these loans were 30-89 days past due and $379 were 90 days or more past due. The Bancorp recognized $1 and $2 of losses during the three and nine months ended September 30, 2013, respectively, due to claim denials and curtailments associated with these advances.
  • Includes accrual and nonaccrual loans and leases.

               
     Past Due    
   Current   90 Days     90 Days Past
As of December 31, 2012 Loans and  30-89andTotal Total LoansDue and Still
($ in millions) Leases(c) Days(c)Greater(c)Past Dueand LeasesAccruing
Commercial:             
 Commercial and industrial loans $35,826 46 166 212 36,038 1 
 Commercial mortgage owner occupied loans 4,752 29 95 124 4,876 22 
 Commercial mortgage non-owner occupied loans 4,094 21 112 133 4,227  - 
 Commercial construction loans 622  - 76 76 698 1 
 Commercial leases 3,546 2 1 3 3,549  - 
Residential mortgage loans(a) (b) 11,547 87 307 394 11,941 75 
Consumer:             
 Home equity 9,782 126 110 236 10,018 58 
 Automobile loans 11,900 62 10 72 11,972 8 
 Credit card 2,025 38 34 72 2,097 30 
 Other consumer loans and leases  287 2 1 3 290  - 
Total portfolio loans and leases(a) (d)$84,381 413 912 1,325 85,706 195 

  • Excludes $76 of loans measured at fair value.
  • Information for current residential mortgage loans includes advances made pursuant to servicing agreements for GNMA mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. As of December 31, 2012, $80 of these loans were 30-89 days past due and $414 were 90 days or more past due. The Bancorp recognized $2 of losses for the year ended December 31, 2012 due to claim denials and curtailments associated with these advances.
  • Includes accrual and nonaccrual loans and leases.
  • Includes an immaterial amount of government insured commercial loans 30-89 and 90 days past due and accruing whose repayments are insured by the SBA at December 31, 2012.

 

Impaired Loans and Leases

Larger commercial loans and leases included within aggregate borrower relationship balances exceeding $1 million that exhibit probable or observed credit weaknesses are subject to individual review for impairment. The Bancorp also performs an individual review on loans and leases that are restructured in a troubled debt restructuring. The Bancorp considers the current value of collateral, credit quality of any guarantees, the loan structure, and other factors when evaluating whether an individual loan or lease is impaired. Other factors may include the geography and industry of the borrower, size and financial condition of the borrower, cash flow and leverage of the borrower, and the Bancorp's evaluation of the borrower's management. Smaller-balance homogenous loans or leases that are collectively evaluated for impairment are not included in the following tables.

 

The following tables summarize the Bancorp’s impaired loans and leases (by class) that were subject to individual review, which includes all loans and leases restructured in a troubled debt restructuring:
          
    Unpaid    
As of September 30, 2013  PrincipalRecorded   
($ in millions)  BalanceInvestmentAllowance
With a related allowance recorded:        
Commercial:        
 Commercial and industrial loans  $675 578 122 
 Commercial mortgage owner occupied loans(b)  71 59 11 
 Commercial mortgage non-owner occupied loans  117 86 13 
 Commercial construction loans  59 47 7 
 Commercial leases   1  1  - 
Restructured residential mortgage loans  1,079 1,047 135 
Restructured consumer:        
 Home equity  390 386 41 
 Automobile loans  24 24 3 
 Credit card  63 63 10 
 Other consumer loans and leases   2 2  - 
Total impaired loans and leases with a related allowance $2,481 2,293 342 
With no related allowance recorded:        
Commercial:        
 Commercial and industrial loans  $261 207  - 
 Commercial mortgage owner occupied loans  107 97  - 
 Commercial mortgage non-owner occupied loans  268 243  - 
 Commercial construction loans  74 46  - 
 Commercial leases  3 3  - 
Restructured residential mortgage loans  311 269  - 
Restructured consumer:        
 Home equity  42 38  - 
 Automobile loans  3 3  - 
Total impaired loans and leases with no related allowance  1,069 906  - 
Total impaired loans and leases $3,550 3,199 (a)342 

  • Includes $499, $1,233 and $461, respectively, of commercial, residential mortgage and consumer TDRs on accrual status; $241, $83 and $55, respectively, of commercial, residential mortgage and consumer TDRs on nonaccrual status.
  • Excludes five restructured nonaccrual loans at September 30, 2013 associated with a consolidated variable interest entity, in which the Bancorp has no continuing credit risk due to the risk being assumed by a third party, with an unpaid principal balance of $29, a recorded investment of $29, and an allowance of $11.

          
    Unpaid    
As of December 31, 2012  PrincipalRecorded   
($ in millions)  BalanceInvestmentAllowance
With a related allowance recorded:        
Commercial:        
 Commercial and industrial loans  $263 194 65 
 Commercial mortgage owner occupied loans  54 43 5 
 Commercial mortgage non-owner occupied loans  215 160 16 
 Commercial construction loans  48 37 5 
 Commercial leases  8 8 5 
Restructured residential mortgage loans  1,067 1,023 137 
Restructured consumer:        
 Home equity  400 396 46 
 Automobile loans  31 30 4 
 Credit card  74 74 12 
 Other consumer loans and leases   2 2  - 
Total impaired loans and leases with a related allowance $2,162 1,967 295 
With no related allowance recorded:        
Commercial:        
 Commercial and industrial loans  $207 169  - 
 Commercial mortgage owner occupied loans  107 99  - 
 Commercial mortgage non-owner occupied loans  209 199  - 
 Commercial construction loans  109 67  - 
 Commercial leases  5 5  - 
Restructured residential mortgage loans  326 275  - 
Restructured consumer:        
 Home equity  40 39  - 
 Automobile loans  3 3  - 
Total impaired loans and leases with no related allowance  1,006 856  - 
Total impaired loans and leases $3,168 2,823 (a)295 

  • Includes $431, $1,175 and $480, respectively, of commercial, residential mortgage and consumer TDRs on accrual status;$177, $123 and $64, respectively, of commercial, residential mortgage and consumer TDRs on nonaccrual status.

The following table summarizes the Bancorp’s average impaired loans and leases and interest income by class:
             
     For the three months ended For the nine months ended
     September 30, 2013 September 30, 2013
     AverageInterest AverageInterest
     RecordedIncome RecordedIncome
($ in millions)   InvestmentRecognized InvestmentRecognized
Commercial:           
 Commercial and industrial loans   $553 7 $403 11
 Commercial mortgage owner occupied loans(a)   145 1  140 3
 Commercial mortgage non-owner occupied loans   322 2  326 6
 Commercial construction loans   103 1  109 3
 Commercial leases   8  -  10  -
Restructured residential mortgage loans   1,311 13  1,308 39
Restructured consumer:           
 Home equity   426 6  433 17
 Automobile loans   27 1  29 1
 Credit card   66 1  69 3
 Other consumer loans and leases     2  -   2  -
Total impaired loans and leases  $2,963 32 $2,829 83

  • Excludes five restructured nonaccrual loans, associated with a consolidated variable interest entity in which the Bancorp has no continuing credit risk due to the risk being assumed by a third party, with an average recorded investment of $29 and $30 and an immaterial amount of interest income recognized for the three and nine months ended September 30, 2013, respectively.

     For the three months ended For the nine months ended
     September 30, 2012 September 30, 2012
     AverageInterest AverageInterest
     RecordedIncome RecordedIncome
($ in millions)   InvestmentRecognized InvestmentRecognized
Commercial:
 Commercial and industrial loans   $439 1 $467 3
 Commercial mortgage owner occupied loans   168 1  157 3
 Commercial mortgage non-owner occupied loans  387 3  356 7
 Commercial construction loans  149  -  176 2
 Commercial leases  10  -  10  -
Restructured residential mortgage loans  1,276 13  1,269 38
Restructured consumer: 
 Home equity  438 19  440 37
 Automobile loans  37 1  39 2
 Credit card  78 1  81 3
 Other consumer loans and leases   2  -  2  -
Total impaired loans and leases  $2,984 39 $2,997 95

       
Nonperforming Assets
Nonperforming assets include nonaccrual loans and leases for which ultimate collectability of the full amount of the principal and/or interest is uncertain; restructured commercial and credit card loans which have not yet met the requirements to be classified as a performing asset; restructured consumer loans which are 90 days past due based on the restructured terms unless the loan is both well-secured and in the process of collection; and certain other assets, including OREO and other repossessed property. The following table summarizes the Bancorp’s nonperforming loans and leases, by class, as of:
       
   September 30,December 31,
($ in millions) 20132012
Commercial:     
 Commercial and industrial loans $308 330 
 Commercial mortgage owner occupied loans(a)  112 125 
 Commercial mortgage non-owner occupied loans 70 157 
 Commercial construction loans 30 76 
 Commercial leases 1 9 
Total commercial loans and leases 521 697 
Residential mortgage loans 166 237 
Consumer:     
 Home equity 48 53 
 Automobile loans 1 2 
 Credit card 34 39 
 Other consumer loans and leases   - 1 
Total consumer loans and leases 83 95 
Total nonperforming loans and leases(b) (c)$770 1,029 
OREO and other repossessed property(d) 244 257 

Troubled Debt Restructurings

If a borrower is experiencing financial difficulty, the Bancorp may consider, in certain circumstances, modifying the terms of their loan to maximize collection of amounts due. Within each of the Bancorp's loan classes, TDRs typically involve either a reduction of the stated interest rate of the loan, an extension of the loan's maturity date(s) with a stated rate lower than the current market rate for a new loan with similar risk, or in limited circumstances, a reduction of the principal balance of the loan or the loan's accrued interest. Modifying the terms of loans may result in an increase or decrease to the ALLL depending upon the terms modified, the method used to measure the ALLL for a loan prior to modification, and whether any charge-offs were recorded on the loan before or at the time of modification. Refer to the ALLL section of Note 1 in the Bancorp's Form 10-K for the year ended December 31, 2012 for information on the Bancorp's ALLL methodology. Upon modification of a loan, the Bancorp measures the related impairment as the difference between the estimated future cash flows, discounted at the original effective yield of the loan, expected to be collected on the modified loan and the carrying value of the loan. The resulting measurement may result in the need for minimal or no valuation allowance because it is probable that all cash flows will be collected under the modified terms of the loan. In addition, if the stated interest rate was increased in a TDR, the cash flows on the modified loan, using the pre-modification interest rate as the discount rate, often exceed the recorded investment of the loan. Conversely, the Bancorp often recognizes an impairment loss as an increase to the ALLL upon a modification that reduces the stated interest rate on a loan.

 

If a TDR involves a reduction of the principal balance of the loan or the loan's accrued interest, that amount is charged off to the ALLL. As of September 30, 2013 and December 31, 2012, the Bancorp had $41 million and $28 million in line of credit commitments and $23 million and $25 million in letter of credit commitments, respectively, to lend additional funds to borrowers whose terms have been modified in a TDR.

The following table provides a summary of loans modified in a TDR by the Bancorp during the three months ended:
           
    Recorded investmentIncrease  
  Number of loansin loans modified(Decrease)Charge-offs
  modified in a TDRin a TDR to ALLL uponrecognized upon
September 30, 2013 ($ in millions)(a)during the period(b)during the periodmodificationmodification
Commercial:         
 Commercial and industrial loans 56 $79  (13)  - 
 Commercial mortgage owner occupied loans(c)32  7  -  - 
 Commercial mortgage non-owner occupied loans16  11  (2)  - 
 Commercial construction loans1   9  -  - 
Residential mortgage loans452  65 8  - 
Consumer:         
 Home equity117  6  -  - 
 Automobile loans115  2  -  - 
 Credit card1,950  12 2  - 
Total portfolio loans and leases2,739 $191  (5)  - 
           
    Recorded investmentIncrease  
  Number of loansin loans modified(Decrease)Charge-offs
  modified in a TDRin a TDR to ALLL uponrecognized upon
September 30, 2012 ($ in millions)(a)during the period(b)during the periodmodificationmodification
Commercial:         
 Commercial and industrial loans 20 $20  -  5 
 Commercial mortgage owner occupied loans16  29  (3)  2 
 Commercial mortgage non-owner occupied loans12  11  (3)  - 
 Commercial construction loans 3   -  -  - 
 Commercial leases 6   3  -  - 
Residential mortgage loans505  90  7  - 
Consumer:         
 Home equity364  21  1  - 
 Automobile loans213  3  -  - 
 Credit card2,231  13  2  - 
Total portfolio loans and leases3,370 $190  4  7 

The following table provides a summary of loans modified in a TDR by the Bancorp during the nine months ended:
           
    Recorded investmentIncrease  
  Number of loansin loans modified(Decrease)Charge-offs
 modified in a TDRin a TDR to ALLL uponrecognized upon
September 30, 2013 ($ in millions)(a)during the period(b)during the periodmodificationmodification
Commercial:         
 Commercial and industrial loans 119 $201  (13) 1 
 Commercial mortgage owner-occupied loans(c)56  16  (1)  - 
 Commercial mortgage nonowner-occupied loans50  65  (7)  - 
 Commercial construction loans3  16  (1)  - 
Residential mortgage loans1,266  194 24  - 
Consumer:         
 Home equity621  33  -  - 
 Automobile loans363  11 1  - 
 Credit card6,442  39 5  - 
Total portfolio loans and leases8,920 $575  8 1 
           
    Recorded investmentIncrease  
  Number of loansin loans modified(Decrease)Charge-offs
 modified in a TDRin a TDR to ALLL uponrecognized upon
September 30, 2012 ($ in millions)(a)during the period(b)during the periodmodificationmodification
Commercial:         
 Commercial and industrial loans 61 $45  (10)  5 
 Commercial mortgage owner-occupied loans52  45  (6)  2 
 Commercial mortgage nonowner-occupied loans52  78  (8)  - 
 Commercial construction loans14  36  (4)  - 
 Commercial leases6  3  -  - 
Residential mortgage loans1,542  259 22  - 
Consumer:         
 Home equity1,034  63 3  - 
 Automobile loans774  12 2  - 
 Credit card7,963  51 7  - 
Total portfolio loans and leases11,498 $592 6 7 

  • Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality.
  • Represents number of loans post-modification.
  • Excludes five loans modified in a TDR during the nine months ended September 30, 2013 associated with a consolidated variable interest entity in which the Bancorp has no continuing credit risk due to the risk being assumed by a third party. The TDR has a recorded investment of $29, ALLL increased $7 upon modification, and a charge-off of $2 was recognized upon modification.

The Bancorp considers TDRs that become 90 days or more past due under the modified terms as subsequently defaulted. For commercial loans not subject to individual review for impairment, the historical loss rates that are applied to such commercial loans for purposes of determining the allowance include historical losses associated with subsequent defaults on loans previously modified in a TDR. For consumer loans, the Bancorp performs a qualitative assessment of the adequacy of the consumer ALLL by comparing the consumer ALLL to forecasted consumer losses over the projected loss emergence period (the forecasted losses include the impact of subsequent defaults of consumer TDRs). When a residential mortgage, home equity, auto or other consumer loan that has been modified in a TDR subsequently defaults, the present value of expected cash flows used in the measurement of the potential impairment loss is generally limited to the expected net proceeds from the sale of the loan's underlying collateral and any resulting impairment loss is reflected as a charge-off or an increase in ALLL. When a credit card loan that has been modified in a TDR subsequently defaults, the calculation of the impairment loss is consistent with the Bancorp's calculation for other credit card loans that have become 90 days or more past due.

 

The following table provides a summary of subsequent defaults of TDRs that occurred during the three months ended September 30, 2013 and 2012 and within 12 months of the restructuring date:
       
  Number of Recorded
September 30, 2013 ($ in millions)(a)Contracts Investment
Commercial:     
 Commercial and industrial loans 1 $ 5 
 Commercial mortgage owner-occupied loans2   - 
Residential mortgage loans78  11 
Consumer:     
 Home equity21  1 
 Credit card380   2 
Total portfolio loans and leases482 $19 
       
  Number of Recorded
September 30, 2012 ($ in millions)(a)Contracts Investment
Commercial:     
 Commercial mortgage owner-occupied loans1 $1 
Residential mortgage loans98  16 
Consumer:     
 Home equity19  2 
 Automobile loans15   - 
 Credit card376   3 
Total portfolio loans and leases509 $22 

  • Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality.

The following table provides a summary of subsequent defaults that occurred during the nine months ended September 30, 2013 and 2012 and within 12 months of the restructuring date:
       
  Number of Recorded
September 30, 2013 ($ in millions)(a)Contracts Investment
Commercial:     
 Commercial and industrial loans 3 $6 
 Commercial mortgage owner-occupied loans6  1 
Residential mortgage loans304  47 
Consumer:     
 Home equity55  3 
 Automobile loans3   - 
 Credit card1,306   8 
Total portfolio loans and leases1,677 $65 
       
  Number of Recorded
September 30, 2012 ($ in millions)(a)Contracts Investment
Commercial:     
 Commercial mortgage owner-occupied loans3 $2 
 Commercial mortgage nonowner-occupied loans2  1 
 Commercial construction loans2  3 
Residential mortgage loans224  41 
Consumer:     
 Home equity67  5 
 Automobile loans36   - 
 Credit card1,385  10 
Total portfolio loans and leases1,719 $62 

  • Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality.