Loans and Allowance for Credit Losses

9 Months Ended

Sep. 30, 2011

Loans and Allowance for Credit Losses [Abstract]

Loans and Allowance for Credit Losses

Note 5    Loans and Allowance for Credit Losses

The composition of the loan portfolio, disaggregated by class and underlying specific portfolio type, was as follows:

	September 30, 2011					December 31, 2010
			Percent					Percent
(Dollars in Millions)	Amount		of Total			Amount		of Total
Commercial
Commercial	$	47,947		23.4	%	$	42,272		21.5	%
Lease financing		5,885		2.9			6,126		3.1
Total commercial		53,832		26.3			48,398		24.6
Commercial real estate
Commercial mortgages		29,241		14.3			27,254		13.8
Construction and development		6,362		3.1			7,441		3.8
Total commercial real estate		35,603		17.4			34,695		17.6
Residential mortgages
Residential mortgages		27,495		13.4			24,315		12.3
Home equity loans, first liens		7,629		3.7			6,417		3.3
Total residential mortgages		35,124		17.1			30,732		15.6
Credit card		16,332		8.0			16,803		8.5
Other retail
Retail leasing		5,173		2.5			4,569		2.3
Home equity and second mortgages		18,410		9.0			18,940		9.6
Revolving credit		3,315		1.6			3,472		1.8
Installment		5,376		2.6			5,459		2.8
Automobile		11,453		5.6			10,897		5.5
Student		4,752		2.4			5,054		2.5
Total other retail		48,479		23.7			48,391		24.5
Total loans, excluding covered loans		189,370		92.5			179,019		90.8
Covered loans		15,398		7.5			18,042		9.2
Total loans	$	204,768		100.0	%	$	197,061		100.0	%

The Company had loans of $62.8 billion at September 30, 2011, and December 31, 2010, pledged at the Federal Home Loan Bank (“FHLB”), and loans of $46.1 billion at September 30, 2011, and $44.6 billion at December 31, 2010, pledged at the Federal Reserve Bank.

Net gains on the sale of loans of $74 million and $105 million for the three months ended September 30, 2011 and 2010, respectively, and $340 million and $308 million for the nine months ended September 30, 2011 and 2010, respectively, were included in noninterest income, primarily in mortgage banking revenue.

Originated loans are presented net of unearned interest and deferred fees and costs, which amounted to $1.1 billion at September 30, 2011, and $1.3 billion at December 31, 2010. In accordance with applicable authoritative accounting guidance, all purchased loans and related indemnification assets are recorded at fair value at the date of purchase. The Company evaluates purchased loans for impairment at the date of purchase in accordance with applicable authoritative accounting guidance. Purchased loans with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are considered “purchased impaired loans”. All other purchased loans are considered “purchased nonimpaired loans”.

Covered assets represent loans and other assets acquired from the FDIC subject to loss sharing agreements in the Downey Savings and Loan Association, F.A.; PFF Bank and Trust; and First Bank of Oak Park Corporation transactions and included expected reimbursements from the FDIC of approximately $2.4 billion at September 30, 2011 and $3.1 billion at December 31, 2010.

The carrying amount of the covered assets consisted of purchased impaired loans, purchased nonimpaired loans, and other assets as shown in the following table:

	September 30, 2011								December 31, 2010
	Purchased		Purchased						Purchased		Purchased
	impaired		nonimpaired		Other				impaired		nonimpaired		Other
(Dollars in Millions)	loans		loans		assets		Total		loans		loans		assets		Total
Commercial loans	$	68	$	160	$	–	$	228	$	70	$	260	$	–	$	330
Commercial real estate loans		2,092		4,385		–		6,477		2,254		5,952		–		8,206
Residential mortgage loans		3,953		1,417		–		5,370		3,819		1,620		–		5,439
Credit card loans		–		5		–		5		–		5		–		5
Other retail loans		–		878		–		878		–		925		–		925
Losses reimbursable by the FDIC		–		–		2,440		2,440		–		–		3,137		3,137
Covered loans		6,113		6,845		2,440		15,398		6,143		8,762		3,137		18,042
Foreclosed real estate		–		–		293		293		–		–		453		453
Total covered assets	$	6,113	$	6,845	$	2,733	$	15,691	$	6,143	$	8,762	$	3,590	$	18,495

At September 30, 2011, $.3 billion of the purchased impaired loans included in covered loans were classified as nonperforming assets, compared with $.5 billion at December 31, 2010, because the expected cash flows are primarily based on the liquidation of underlying collateral and the timing and amount of the cash flows could not be reasonably estimated. Interest income is recognized on other purchased impaired loans through accretion of the difference between the carrying amount of those loans and their expected cash flows. The initial determination of the fair value of the purchased loans includes the impact of expected credit losses and, therefore, no allowance for credit losses is recorded at the purchase date. To the extent credit deterioration occurs after the date of acquisition, the Company records an allowance for credit losses.

On the acquisition date, the estimate of the contractually required payments receivable for all purchased impaired loans acquired in the FCB transaction were $502 million, the cash flows expected to be collected were $338 million including interest, and the estimated fair values of the loans were $238 million. These amounts were determined based upon the estimated remaining life of the underlying loans, which includes the effects of estimated prepayments. For the purchased nonimpaired loans acquired in the FCB transaction, the estimate as of the acquisition date of the contractually required payments receivable were $1.2 billion, the contractual cash flows not expected to be collected were $184 million, and the estimated fair value of the loans was $828 million.

Changes in the accretable balance for all purchased impaired loans, including those acquired in the FCB transaction, were as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(Dollars in Millions)	2011			2010			2011			2010
Balance at beginning of period	$	3,015		$	2,749		$	2,890		$	2,845
Purchases		–			–			100			–
Accretion		(110	)		(103	)		(337	)		(308	)
Disposals		(43	)		(2	)		(47	)		(20	)
Reclassifications (to)/from nonaccretable difference (a)		(170	)		156			117			316
Other		(7	)		(4	)		(38	)		(37	)
Balance at end of period	$	2,685		$	2,796		$	2,685		$	2,796

(a) Primarily relates to changes in expected credit performance and changes in variable rates.

The allowance for credit losses reserves for probable and estimable losses incurred in the Company’s loan and lease portfolio and includes certain amounts that do not represent loss exposure to the Company because those losses are recoverable under loss sharing agreements with the FDIC. The allowance for credit losses is increased through provisions charged to operating earnings and reduced by net charge-offs. Management evaluates the allowance each quarter to ensure it appropriately reserves for incurred losses.

The allowance recorded for loans in the commercial lending segment is generally based on quarterly reviews of individual credit relationships and considers the migration analysis of commercial lending segment loans and actual loss experience. The Company currently uses an 11 year period of historical losses in considering actual loss experience. This timeframe and the results of the analysis are evaluated quarterly to determine the appropriateness. The allowance recorded for impaired loans greater than $5 million in the commercial lending segment is based on an individual loan analysis utilizing expected cash flows discounted using the original effective interest rate, the observable market price, or the fair value of the collateral for collateral-dependent loans. The allowance recorded for all other commercial lending segment loans is determined on a homogenous pool basis and includes consideration of product mix, risk characteristics of the portfolio, bankruptcy experience, and historical losses, adjusted for current trends. The Company also considers the impacts of any loan modifications made to commercial lending segment loans and any subsequent payment defaults to its expectations of cash flows, principal balance, and current expectations about the borrower’s ability to pay in determining the allowance for credit losses.

The allowance recorded for purchased impaired and TDR loans in the consumer lending segment is determined on a homogenous pool basis utilizing expected cash flows discounted using the original effective interest rate of the pool. The allowance recorded for all other consumer lending segment loans is determined on a homogenous pool basis and includes consideration of product mix, risk characteristics of the portfolio, bankruptcy experience, and historical losses, adjusted for current trends. The Company also considers any modifications made to consumer lending segment loans including the impacts of any subsequent payment defaults since modification in determining the allowance for credit losses, such as borrower’s ability to pay under the restructured terms, and the timing and amount of payments.

The allowance for covered segment loans is evaluated each quarter in a manner similar to that described for non-covered loans and represents any decreases in expected cash flows of those loans after the acquisition date. The provision for credit losses for covered segment loans considers the indemnification provided by the FDIC.

The Company’s methodology for determining the appropriate allowance for credit losses for all the loan segments also considers the imprecision inherent in the methodologies used. As a result, in addition to the amounts determined under the methodologies described above, management also considers the potential impact of other qualitative factors which include, but are not limited to, economic factors; geographic and other concentration risks; delinquency and nonaccrual trends; current business conditions; changes in lending policy, underwriting standards, internal review and other relevant business practices; and the regulatory environment. The consideration of these items results in adjustments to allowance amounts included in the Company’s allowance for credit losses for each of the above loan segments.

The Company also assesses the credit risk associated with off-balance sheet loan commitments, letters of credit, and derivatives. Credit risk associated with derivatives is reflected in the fair values recorded for those positions. The liability for off-balance sheet credit exposure related to loan commitments and other credit guarantees is included in other liabilities. Because business processes and credit risks associated with unfunded credit commitments are essentially the same as for loans, the Company utilizes similar processes to estimate its liability for unfunded credit commitments.

Activity in the allowance for credit losses by portfolio class was as follows:

																Total Loans,
				Commercial			Residential			Credit			Other			Excluding			Covered		Total
(Dollars in Millions)	Commercial			Real Estate			Mortgages			Card			Retail			Covered Loans			Loans		Loans
Three months ended September 30, 2011:
Balance at beginning of period	$	1,109		$	1,258		$	841		$	1,140		$	843		$	5,191		$	117	$	5,308
Add
Provision for credit losses		15			88			168			106			131			508			11		519
Deduct
Loans charged off		126			131			124			203			175			759			3		762
Less recoveries of loans charged off		(27	)		(6	)		(2	)		(25	)		(33	)		(93	)		–		(93	)
Net loans charged off		99			125			122			178			142			666			3		669
Net change for credit losses to be reimbursed by the FDIC		–			–			–			–			–			–			32		32
Balance at end of period	$	1,025		$	1,221		$	887		$	1,068		$	832		$	5,033		$	157	$	5,190
Nine months ended September 30, 2011:
Balance at beginning of period	$	1,104		$	1,291		$	820		$	1,395		$	807		$	5,417		$	114	$	5,531
Add
Provision for credit losses		255			344			437			314			477			1,827			19		1,846
Deduct
Loans charged off		412			446			380			712			551			2,501			10		2,511
Less recoveries of loans charged off		(78	)		(32	)		(10	)		(71	)		(99	)		(290	)		–		(290	)
Net loans charged off		334			414			370			641			452			2,211			10		2,221
Net change for credit losses to be reimbursed by the FDIC		–			–			–			–			–			–			34		34
Balance at end of period	$	1,025		$	1,221		$	887		$	1,068		$	832		$	5,033		$	157	$	5,190

Additional detail of the allowance for credit losses by portfolio class was as follows:

											Total Loans,
			Commercial		Residential		Credit		Other		Excluding		Covered		Total
(Dollars in Millions)	Commercial		Real Estate		Mortgages		Card		Retail		Covered Loans		Loans		Loans
Allowance balance at September 30, 2011 related to:
Loans individually evaluated for impairment (a)	$	16	$	70	$	1	$	–	$	–	$	87	$	–	$	87
TDRs collectively evaluated for impairment		37		17		459		226		55		794		–		794
Other loans collectively evaluated for impairment		972		1,132		427		842		777		4,150		26		4,176
Loans acquired with deteriorated credit quality		–		2		–		–		–		2		131		133
Total allowance for credit losses	$	1,025	$	1,221	$	887	$	1,068	$	832	$	5,033	$	157	$	5,190
Allowance balance at December 31, 2010 related to:
Loans individually evaluated for impairment (a)	$	38	$	55	$	–	$	–	$	–	$	93	$	–	$	93
TDRs collectively evaluated for impairment		–		–		320		223		30		573		–		573
Other loans collectively evaluated for impairment		1,066		1,235		500		1,172		777		4,750		28		4,778
Loans acquired with deteriorated credit quality		–		1		–		–		–		1		86		87
Total allowance for credit losses	$	1,104	$	1,291	$	820	$	1,395	$	807	$	5,417	$	114	$	5,531

(a) Represents the allowance for credit losses related to loans greater than $5 million classified as nonperforming or TDRs.

Additional detail of loan balances by portfolio class was as follows:

											Total Loans,
			Commercial		Residential		Credit		Other		Excluding		Covered			Total
(Dollars in Millions)	Commercial		Real Estate		Mortgages		Card		Retail		Covered Loans		Loans			Loans
September 30, 2011:
Loans individually evaluated for impairment (a)	$	177	$	903	$	6	$	–	$	–	$	1,086	$	182		$	1,268
TDRs collectively evaluated for impairment		241		287		2,949		580		143		4,200		89			4,289
Other loans collectively evaluated for impairment		53,402		34,237		32,160		15,752		48,336		183,887		9,014			192,901
Loans acquired with deteriorated credit quality		12		176		9		–		–		197		6,113			6,310
Total loans	$	53,832	$	35,603	$	35,124	$	16,332	$	48,479	$	189,370	$	15,398	(b)	$	204,768
December 31, 2010:
Loans individually evaluated for impairment (a)	$	295	$	801	$	–	$	–	$	–	$	1,096	$	–		$	1,096
TDRs collectively evaluated for impairment		–		–		1,957		452		114		2,523		–			2,523
Other loans collectively evaluated for impairment		48,103		33,834		28,775		16,351		48,277		175,340		11,899			187,239
Loans acquired with deteriorated credit quality		–		60		–		–		–		60		6,143			6,203
Total loans	$	48,398	$	34,695	$	30,732	$	16,803	$	48,391	$	179,019	$	18,042	(b)	$	197,061

(a)	Represents loans greater than $5 million classified as nonperforming or TDRs.
(b)	Includes expected reimbursements from the FDIC under loss sharing agreements.

Credit Quality The quality of the Company’s loan portfolios is assessed as a function of net credit losses, levels of nonperforming assets and delinquencies, and credit quality ratings as defined by the Company. These credit quality ratings are an important part of the Company’s overall credit risk management process and evaluation of its allowance for credit losses.

For all loan classes, loans are considered past due based on the number of days delinquent except for monthly amortizing loans which are classified delinquent based upon the number of contractually required payments not made (for example, two missed payments is considered 30 days delinquent).

Commercial lending segment loans are placed on nonaccrual status when the collection of principal and interest has become 90 days past due or is otherwise considered doubtful. When a loan is placed on nonaccrual status, unpaid accrued interest is reversed. Commercial lending segment loans are generally fully or partially charged down to the fair value of the collateral securing the loan, less costs to sell, when the loan is considered uncollectible.

Consumer lending segment loans are generally charged-off at a specific number of days or payments past due. Residential mortgages and other retail loans secured by 1-4 family properties are generally charged down to fair market value, less costs to sell, at 180 days past due, and placed on nonaccrual status in instances where a partial charge-off occurs unless the loan is well secured and in the process of collection. Credit card loans continue to accrue interest until the account is charged off. Credit cards are charged off at 180 days past due. Other retail loans not secured by 1-4 family properties are charged-off at 120 days past due; and revolving consumer lines are charged off at 180 days past due. Similar to credit cards, other retail loans are generally not placed on nonaccrual status because of the relative short period of time to charge-off. Certain retail customers having financial difficulties may have the terms of their credit card and other loan agreements modified to require only principal payments and, as such, are reported as nonaccrual.

For all loan classes, interest payments received on nonaccrual loans are generally recorded as a reduction to the loan carrying amount. Interest payments recorded as reductions to a loan’s carrying amount while a loan is on nonaccrual are recognized as interest income only upon payoff of the loan. In certain circumstances, loans in any class may be restored to accrual status, such as when none of the principal and interest is past due and prospects for future payment are no longer in doubt; or the loan becomes well secured and is in the process of collection. Loans where there has been a partial charge-off may be returned to accrual status if all principal and interest (including amounts previously charged-off) is expected to be collected and the loan is current.

Covered loans not considered to be purchased impaired are evaluated for delinquency, nonaccrual status and charge-off consistent with the class of loan they would be included in had the loss share coverage not been in place. Generally, purchased impaired loans are considered accruing loans. However, the timing and amount of future cash flows for some loans is not reasonably estimable. Those loans are classified as nonaccrual loans and interest income is not recognized until the timing and amount of the future cash flows can be reasonably estimated.

The following table provides a summary of loans by portfolio class, including the delinquency status of those that continue to accrue interest, and those that are nonperforming:

	Accruing
			30-89 Days		90 Days or
(Dollars in Millions)	Current		Past Due		More Past Due		Nonperforming		Total
September 30, 2011:
Commercial	$	53,189	$	219	$	42	$	382	$	53,832
Commercial real estate		34,197		158		28		1,220		35,603
Residential mortgages (a)		33,728		385		361		650		35,124
Credit card		15,648		225		209		250		16,332
Other retail		47,910		329		174		66		48,479
Total loans, excluding covered loans		184,672		1,316		814		2,568		189,370
Covered loans		13,015		581		792		1,010		15,398
Total loans	$	197,687	$	1,897	$	1,606	$	3,578	$	204,768
December 31, 2010:
Commercial	$	47,412	$	325	$	64	$	597	$	48,398
Commercial real estate		32,986		415		1		1,293		34,695
Residential mortgages (a)		29,140		456		500		636		30,732
Credit card		15,993		269		313		228		16,803
Other retail		47,706		404		216		65		48,391
Total loans, excluding covered loans		173,237		1,869		1,094		2,819		179,019
Covered loans		14,951		757		1,090		1,244		18,042
Total loans	$	188,188	$	2,626	$	2,184	$	4,063	$	197,061

(a)    At September 30, 2011, $507 million of loans 30 – 89 days past due and $2.5 billion of loans 90 days or more past due purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs, were classified as current, compared with $439 million and $2.6 billion at December 31, 2010, respectively.

The Company classifies its loan portfolios using internal credit quality ratings on a quarterly basis. These ratings include: pass, special mention and classified, and are an important part of the Company’s overall credit risk management process and evaluation of the allowance for credit losses. Loans with a pass rating represent those not classified on the Company’s rating scale for problem credits, as minimal credit risk has been identified. Special mention loans are those that have a potential weakness deserving management’s close attention. Classified loans are those where a well-defined weakness has been identified that may put full collection of contractual cash flows at risk. It is possible that others, given the same information, may reach different reasonable conclusions regarding the credit quality rating classification of specific loans.

The following table provides a summary of loans by portfolio class and the Company’s internal credit quality rating:

			Criticized
			Special				Total
(Dollars in Millions)	Pass		Mention		Classified (a)		Criticized		Total
September 30, 2011:
Commercial	$	50,792	$	1,174	$	1,866	$	3,040	$	53,832
Commercial real estate		30,165		1,010		4,428		5,438		35,603
Residential mortgages (b)		33,879		19		1,226		1,245		35,124
Credit card		15,873		–		459		459		16,332
Other retail		48,066		21		392		413		48,479
Total loans, excluding covered loans		178,775		2,224		8,371		10,595		189,370
Covered loans		14,472		208		718		926		15,398
Total loans	$	193,247	$	2,432	$	9,089	$	11,521	$	204,768
Total outstanding commitments	$	393,645	$	3,862	$	10,087	$	13,949	$	407,594
December 31, 2010:
Commercial	$	44,595	$	1,545	$	2,258	$	3,803	$	48,398
Commercial real estate		28,155		1,540		5,000		6,540		34,695
Residential mortgages (b)		29,355		29		1,348		1,377		30,732
Credit card		16,262		–		541		541		16,803
Other retail		47,906		70		415		485		48,391
Total loans, excluding covered loans		166,273		3,184		9,562		12,746		179,019
Covered loans		17,073		283		686		969		18,042
Total loans	$	183,346	$	3,467	$	10,248	$	13,715	$	197,061
Total outstanding commitments	$	370,031	$	4,923	$	11,576	$	16,499	$	386,530

(a)	Classified rating on consumer loans primarily based on delinquency status.
(b)	At September 30, 2011, $2.5 billion of GNMA loans 90 days or more past due and $1.8 billion of restructured GNMA loans whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs were classified with a pass rating, compared with $2.6 billion and $1.1 billion at December 31, 2010, respectively.

For all loan classes, a loan is considered to be impaired when, based on current events or information, it is probable the Company will be unable to collect all amounts due per the contractual terms of the loan agreement. Impaired loans include all nonaccrual and TDR loans. For all loan classes, interest income on TDR loans is recognized under the modified terms and conditions if the borrower has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles. Interest income is not recognized on other impaired loans until the loan is paid off.

Factors used by the Company in determining whether all principal and interest payments due on commercial and commercial real estate loans will be collected and therefore whether those loans are impaired, include but are not limited to, the financial condition of the borrower, collateral and/or guarantees on the loan, and the borrower’s estimated future ability to pay based on industry, geographic location and certain financial ratios. The evaluation of impairment on residential mortgages, credit card and other retail loans is primarily driven by delinquency status of individual loans or whether a loan has been modified. Individual covered loans, whose future losses are covered by loss sharing agreements with the FDIC that substantially reduce the risk of credit losses to the Company, are evaluated for impairment and accounted for in a manner consistent with the class of loan they would have been included in had the loss sharing coverage not been in place.

A summary of impaired loans by portfolio class was as follows:

							Commitments
	Period-end		Unpaid				to Lend
	Recorded		Principal		Valuation		Additional
(Dollars in Millions)	Investment (a)		Balance		Allowance		Funds
September 30, 2011:
Commercial	$	637	$	1,596	$	65	$	27
Commercial real estate		1,679		2,986		148		33
Residential mortgages		2,588		3,018		460		–
Credit card		580		580		226		–
Other retail		179		180		56		–
Total impaired loans, excluding GNMA and covered loans		5,663		8,360		955		60
Loans purchased from GNMA mortgage pools		866		866		10		–
Covered loans		1,169		1,704		50		108
Total	$	7,698	$	10,930	$	1,015	$	168
December 31, 2010:
Commercial	$	596	$	1,631	$	59	$	80
Commercial real estate		1,308		2,659		118		17
Residential mortgages		2,440		2,877		334		–
Credit card		452		452		218		–
Other retail		152		189		32		–
Total	$	4,948	$	7,808	$	761	$	97

(a) Substantially all loans classified as impaired at September 30, 2011 and December 31, 2010, had an associated allowance for credit losses.

Additional information on impaired loans follows:

	Three Months Ended				Nine Months Ended
	September 30, 2011				September 30, 2011
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
(Dollars in Millions)	Investment		Recognized		Investment		Recognized
Commercial	$	536	$	4	$	529	$	7
Commercial real estate		1,558		6		1,519		10
Residential mortgages		2,573		24		2,540		74
Credit card		492		4		471		10
Other retail		165		1		160		3
Total impaired loans, excluding GNMA and covered loans		5,324		39		5,219		104
Loans purchased from GNMA mortgage pools		710		10		433		10
Covered loans		1,145		7		584		7
Total	$	7,179	$	56	$	6,236	$	121

Troubled Debt Restructurings In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term. Concessionary modifications are classified as TDRs unless the modification results in only an insignificant delay in payments to be received. The Company accrues interest on TDRs if the borrower complies with the revised terms and conditions as agreed upon with the Company and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles. To the extent a previous restructuring was insignificant, the Company considers the cumulative effect of past restructurings related to the receivable when determining whether a current restructuring is a TDR. Loans classified as TDRs are considered impaired loans for reporting and measurement purposes.

The following table provides a summary of loans modified as TDRs during the periods presented, by portfolio class:

	Three Months Ended September 30, 2011							Nine Months Ended September 30, 2011
			Pre-Modification		Post-Modification					Pre-Modification		Post-Modification
			Outstanding		Outstanding					Outstanding		Outstanding
	Number		Loan		Loan			Number		Loan		Loan
(Dollars in Millions)	of Loans		Balance		Balance			of Loans		Balance		Balance
Commercial		1,137	$	89	$	74			3,984	$	337	$	310
Commercial real estate		115		124		115			380		906		896
Residential mortgages		2,857		440		462	(a)		8,613		1,328		1,383	(a)
Credit card		14,942		78		78			41,610		239		238
Other retail		956		16		16			3,020		55		55
Total loans, excluding covered loans		20,007		747		745			57,607		2,865		2,882
Covered loans		67		148		133			233		456		430
Total loans		20,074	$	895	$	878			57,840	$	3,321	$	3,312

(a) Includes accrued interest and/or outstanding advances capitalized into the outstanding loan balance upon modification under the HAMP program of $32 million and $85 million for the three and nine months ended September 30, 2011, respectively.

Many of the Company’s TDRs are determined on a case-by-case basis in connection with ongoing loan collection processes. However, the Company has also implemented certain restructuring programs that may result in TDRs. The modifications made to each of the loans presented in the table above varies within each of the portfolio classes, however, generally result in revisions to interest rates, changes to payment frequency, extensions of maturity dates, forgiveness of accrued interest and/or fees, and in limited circumstances, reductions of principal.

For the commercial lending segment, modifications generally result in the Company working with borrowers on a case-by-case basis. Commercial and commercial real estate modifications generally include extensions of the maturity date and may be accompanied by an increase or decrease to the interest rate, which may not be deemed a market rate of interest. In addition, the Company may work with the borrower in identifying other changes that mitigate loss to the Company, which may include additional collateral or guarantees to support the loan. To a lesser extent, the Company may waive contractual principal. The Company classifies these concessions as TDRs to the extent the Company determines that the borrower is experiencing financial difficulty.

Modifications for the consumer lending segment are generally part of programs the Company has initiated. The Company participates in the U.S. Department of Treasury Home Affordable Modification Program (“HAMP”). HAMP gives qualifying homeowners an opportunity to permanently modify their loan and achieve more affordable monthly payments, with the U.S. Department of Treasury compensating the Company for a portion of the reduction in monthly amounts due from borrowers participating in this program. The Company also modifies residential mortgage loans under Federal Housing Administration, Department of Veterans Affairs, or other internal programs. Under these programs, the Company provides concessions to qualifying borrowers experiencing financial difficulties. The concessions may include adjustments to interest rates, conversion of adjustable rates to fixed rates, extension of maturity dates or deferrals of payments, capitalization of accrued interest and/or outstanding advances, or in limited situations, partial forgiveness of loan principal. In most instances, participation in residential mortgage loan restructuring programs requires the customer to complete a short-term trial period. A permanent loan modification is contingent on the customer successfully completing the trial period arrangement and the loan documents are not modified until that time. Loans in trial period arrangements are not reported as TDRs. Loans permanently modified are reported as TDRs. Loans in trial period arrangements were $96 million at September 30, 2011.

Credit card and other retail loan modifications are generally part of two distinct restructuring programs. The Company offers workout programs providing customers experiencing financial difficulty with modifications whereby balances may be amortized up to 60 months, and generally include waiver of fees and reduced interest rates. The Company also provides modification programs to qualifying customers experiencing a temporary financial hardship in which reductions are made to monthly required minimum payments for up to 12 months. Balances related to these programs are generally frozen, however, may be reopened upon successful exit of the program, in which account privileges may be restored.

Modifications to loans in the covered segment are similar in nature to that described above for non-covered loans, and the evaluation and determination of TDR status is similar, except that acquired loans restructured after acquisition are not considered TDRs for purposes of the Company’s accounting and disclosure if the loans evidenced credit deterioration as of the acquisition date and are accounted for in pools. Losses associated with the modification on covered loans, including the economic impact of interest rate reductions, are generally eligible for reimbursement under the loss sharing agreements.

The following table provides a summary of loans modified as TDRs within the previous 12 months for which there was a default (fully or partially charged-off or became 90 days or more past due) during the period:

	Three Months Ended				Nine Months Ended
	September 30, 2011				September 30, 2011
	Number		Amount		Number		Amount
(Dollars in Millions)	of Loans		Defaulted		of Loans		Defaulted
Commercial		245	$	13		513	$	23
Commercial real estate		29		32		37		37
Residential mortgages		318		51		1,011		178
Credit card		2,183		12		6,304		34
Other retail		169		3		391		6
Total		2,944	$	111		8,256	$	278