Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2012

Loans and Allowance for Credit Losses [Abstract]

Loans and Allowance for Credit Losses

Note 3 Loans and Allowance for Credit Losses

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

	March 31, 2012					December 31, 2011
(Dollars in Millions)	Amount		Percent of Total			Amount		Percent of Total
Commercial
Commercial	$	53,035		25.0	%	$	50,734		24.2	%
Lease financing		5,754		2.7			5,914		2.8
Total commercial		58,789		27.7			56,648		27.0
Commercial real estate
Commercial mortgages		30,215		14.2			29,664		14.1
Construction and development		5,887		2.8			6,187		3.0
Total commercial real estate		36,102		17.0			35,851		17.1
Residential mortgages
Residential mortgages		29,610		14.0			28,669		13.7
Home equity loans, first liens		8,831		4.2			8,413		4.0
Total residential mortgages		38,441		18.2			37,082		17.7
Credit card		16,572		7.8			17,360		8.3
Other retail
Retail leasing		5,125		2.4			5,118		2.4
Home equity and second mortgages		17,697		8.4			18,131		8.6
Revolving credit		3,230		1.5			3,344		1.6
Installment		5,321		2.5			5,348		2.6
Automobile		11,907		5.6			11,508		5.5
Student		4,557		2.2			4,658		2.2
Total other retail		47,837		22.6			48,107		22.9
Total loans, excluding covered loans		197,741		93.3			195,048		93.0
Covered loans		14,178		6.7			14,787		7.0
Total loans	$	211,919		100.0	%	$	209,835		100.0	%

The Company had loans of $66.5 billion at March 31, 2012, and $67.0 billion at December 31, 2011, pledged at the Federal Home Loan Bank (“FHLB”), and loans of $48.1 billion at March 31, 2012, and $47.2 billion at December 31, 2011, pledged at the Federal Reserve Bank.

Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and costs. Net unearned interest and deferred fees and costs amounted to $1.0 billion at March 31, 2012, and $1.1 billion at December 31, 2011. 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.”

On the acquisition date, the estimate of the contractually required payments receivable for all purchased impaired loans acquired in the first quarter 2012 acquisition of BankEast, a subsidiary of BankEast Corporation, from the Federal Deposit Insurance Corporation (“FDIC”) was $63 million, the cash flows expected to be collected was $41 million including interest, and the estimated fair value of the loans was $28 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 BankEast transaction, the estimate as of the acquisition date of the contractually required payments receivable was $135 million, the contractual cash flows not expected to be collected was $22 million, and the estimated fair value of the loans was $96 million. The BankEast transaction did not include a loss sharing agreement.

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

Three Months Ended March 31
(Dollars in Millions)	2012			2011
Balance at beginning of period	$	2,619		$	2,890
Purchases		13			100
Accretion		(115	)		(112	)
Disposals		(42	)		(1	)
Reclassifications (to)/from nonaccretable difference (a)		132			(48	)
Other		(2	)		(28	)
Balance at end of period	$	2,605		$	2,801

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

Allowance for Credit Losses 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 based on 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, at a minimum, 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 Troubled Debt Restructuring (“TDR”) loans in the consumer lending segment is determined on a homogenous pool basis utilizing expected cash flows discounted using, at a minimum, 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.

Covered assets represent loans and other assets acquired from the FDIC, subject to loss sharing agreements, and include expected reimbursements from the FDIC. 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.

In addition, subsequent payment defaults on loan modifications considered TDRs are considered in the underlying factors used in the determination of the appropriateness of the allowance for credit losses. For each loan segment, the Company estimates future loan charge-offs through a variety of analysis, trends and underlying assumptions. With respect to the commercial lending segment, TDRs may be collectively evaluated for impairment where observed performance history, including defaults, is a primary driver of the loss allocation. For commercial TDRs individually evaluated for impairment, attributes of the borrower are the primary factors in determining the allowance for credit losses. However, incorporation of loss history is factored into the allowance methodology applied to this category of loans. With respect to the consumer lending segment, performance of the portfolio, including defaults on TDRs, is considered when estimating future cash flows.

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:

(Dollars in Millions)	Commercial			Commercial Real Estate			Residential Mortgages			Credit Card			Other Retail			Total Loans, Excluding Covered Loans			Covered Loans			Total Loans
Balance at December 31, 2010	$	1,104		$	1,291		$	820		$	1,395		$	807		$	5,417		$	114		$	5,531
Add
Provision for credit losses		174			109			128			128			210			749			6			755
Deduct
Loans charged off		161			140			133			268			195			897			2			899
Less recoveries of loans charged off		(22	)		(15	)		(4	)		(21	)		(32	)		(94	)		—			(94	)
Net loans charged off		139			125			129			247			163			803			2			805
Net change for credit losses to be reimbursed by the FDIC		—			—			—			—			—			—			17			17
Balance at March 31, 2011	$	1,139		$	1,275		$	819		$	1,276		$	854		$	5,363		$	135		$	5,498
Balance at December 31, 2011	$	1,010		$	1,154		$	927		$	992		$	831		$	4,914		$	100		$	5,014
Add
Provision for credit losses		105			(46	)		112			178			124			473			8			481
Deduct
Loans charged off		113			83			116			201			167			680			1			681
Less recoveries of loans charged off		(27	)		(12	)		(4	)		(32	)		(35	)		(110	)		—			(110	)
Net loans charged off		86			71			112			169			132			570			1			571
Net change for credit losses to be reimbursed by the FDIC		—			—			—			—			—			—			(5	)		(5	)
Balance at March 31, 2012	$	1,029		$	1,037		$	927		$	1,001		$	823		$	4,817		$	102		$	4,919

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

(Dollars in Millions)	Commercial		Commercial Real Estate		Residential Mortgages		Credit Card		Other Retail		Total Loans, Excluding Covered Loans		Covered Loans		Total Loans
Allowance balance at March 31, 2012 related to
Loans individually evaluated for impairment (a)	$	12	$	48	$	1	$	—	$	—	$	61	$	—	$	61
TDRs collectively evaluated for impairment		37		32		498		208		55		830		1		831
Other loans collectively evaluated for impairment		980		953		428		793		768		3,922		21		3,943
Loans acquired with deteriorated credit quality		—		4		—		—		—		4		80		84
Total allowance for credit losses	$	1,029	$	1,037	$	927	$	1,001	$	823	$	4,817	$	102	$	4,919
Allowance balance at December 31, 2011 related to
Loans individually evaluated for impairment (a)	$	16	$	61	$	1	$	—	$	—	$	78	$	2	$	80
TDRs collectively evaluated for impairment		40		33		490		219		57		839		—		839
Other loans collectively evaluated for impairment		954		1,057		436		773		774		3,994		22		4,016
Loans acquired with deteriorated credit quality		—		3		—		—		—		3		76		79
Total allowance for credit losses	$	1,010	$	1,154	$	927	$	992	$	831	$	4,914	$	100	$	5,014

(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:

(Dollars in Millions)	Commercial		Commercial Real Estate		Residential Mortgages		Credit Card		Other Retail		Total Loans, Excluding Covered Loans		Covered Loans (b)		Total Loans
March 31, 2012
Loans individually evaluated for impairment (a)	$	184	$	738	$	6	$	—	$	—	$	928	$	246	$	1,174
TDRs collectively evaluated for impairment		223		381		3,490		560		149		4,803		109		4,912
Other loans collectively evaluated for impairment		58,371		34,832		34,940		16,012		47,688		191,843		8,186		200,029
Loans acquired with deteriorated credit quality		11		151		5		—		—		167		5,637		5,804
Total loans	$	58,789	$	36,102	$	38,441	$	16,572	$	47,837	$	197,741	$	14,178	$	211,919
December 31, 2011
Loans individually evaluated for impairment (a)	$	222	$	812	$	6	$	—	$	—	$	1,040	$	204	$	1,244
TDRs collectively evaluated for impairment		277		331		3,430		584		148		4,770		113		4,883
Other loans collectively evaluated for impairment		56,138		34,574		33,642		16,776		47,959		189,089		8,616		197,705
Loans acquired with deteriorated credit quality		11		134		4		—		—		149		5,854		6,003
Total loans	$	56,648	$	35,851	$	37,082	$	17,360	$	48,107	$	195,048	$	14,787	$	209,835

(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.

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 generally 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 the fair market value of the collateral securing the loan, 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
(Dollars in Millions)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonperforming		Total
March 31, 2012
Commercial	$	58,225	$	208	$	45	$	311	$	58,789
Commercial real estate		35,163		164		16		759		36,102
Residential mortgages (a)		37,086		365		304		686		38,441
Credit card		15,936		208		221		207		16,572
Other retail		47,329		279		164		65		47,837
Total loans, excluding covered loans		193,739		1,224		750		2,028		197,741
Covered loans		12,371		267		742		798		14,178
Total loans	$	206,110	$	1,491	$	1,492	$	2,826	$	211,919
December 31, 2011
Commercial	$	55,991	$	300	$	45	$	312	$	56,648
Commercial real estate		34,800		138		14		899		35,851
Residential mortgages (a)		35,664		404		364		650		37,082
Credit card		16,662		238		236		224		17,360
Other retail		47,516		340		184		67		48,107
Total loans, excluding covered loans		190,633		1,420		843		2,152		195,048
Covered loans		12,589		362		910		926		14,787
Total loans	$	203,222	$	1,782	$	1,753	$	3,078	$	209,835

(a) At March 31, 2012, $403 million of loans 30 – 89 days past due and $2.7 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 $545 million and $2.6 billion at December 31, 2011, 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
(Dollars in Millions)	Pass		Special Mention		Classified (a)		Total Criticized		Total
March 31, 2012
Commercial	$	56,211	$	1,118	$	1,460	$	2,578	$	58,789
Commercial real estate		31,500		756		3,846		4,602		36,102
Residential mortgages (b)		37,226		19		1,196		1,215		38,441
Credit card		16,144		—		428		428		16,572
Other retail		47,444		31		362		393		47,837
Total loans, excluding covered loans		188,525		1,924		7,292		9,216		197,741
Covered loans		13,348		167		663		830		14,178
Total loans	$	201,873	$	2,091	$	7,955	$	10,046	$	211,919
Total outstanding commitments	$	417,052	$	3,306	$	9,033	$	12,339	$	429,391
December 31, 2011
Commercial	$	54,003	$	1,047	$	1,598	$	2,645	$	56,648
Commercial real estate		30,733		793		4,325		5,118		35,851
Residential mortgages (b)		35,814		19		1,249		1,268		37,082
Credit card		16,910		—		450		450		17,360
Other retail		47,665		24		418		442		48,107
Total loans, excluding covered loans		185,125		1,883		8,040		9,923		195,048
Covered loans		13,966		187		634		821		14,787
Total loans	$	199,091	$	2,070	$	8,674	$	10,744	$	209,835
Total outstanding commitments	$	410,457	$	3,418	$	9,690	$	13,108	$	423,565

(a) Classified rating on consumer loans primarily based on delinquency status.

(b) At March 31, 2012, $2.7 billion of GNMA loans 90 days or more past due and $2.0 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 $2.0 billion at December 31, 2011, 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:

(Dollars in Millions)	Period-end Recorded Investment (a)		Unpaid Principal Balance		Valuation Allowance		Commitments to Lend Additional Funds
March 31, 2012
Commercial	$	568	$	1,400	$	54	$	57
Commercial real estate		1,389		2,350		105		9
Residential mortgages		2,703		3,290		487		1
Credit card		560		560		208		—
Other retail		188		197		56		—
Total impaired loans, excluding GNMA and covered loans		5,408		7,797		910		67
Loans purchased from GNMA mortgage pools		1,288		1,288		20		—
Covered loans		1,185		1,533		34		24
Total	$	7,881	$	10,618	$	964	$	91
December 31, 2011
Commercial	$	657	$	1,437	$	62	$	68
Commercial real estate		1,436		2,503		124		25
Residential mortgages		2,652		3,193		482		2
Credit card		584		584		219		—
Other retail		188		197		57		—
Total impaired loans, excluding GNMA and covered loans		5,517		7,914		944		95
Loans purchased from GNMA mortgage pools		1,265		1,265		18		—
Covered loans		1,170		1,642		43		49
Total	$	7,952	$	10,821	$	1,005	$	144

(a) Substantially all loans classified as impaired at March 31, 2012 and December 31, 2011, had an associated allowance for credit losses.

Additional information on impaired loans follows:

	2012				2011
Three Months Ended March 31 (Dollars in Millions)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial	$	569	$	3	$	547	$	1
Commercial real estate		1,524		7		1,481		2
Residential mortgages		2,638		26		2,507		25
Credit card		548		8		459		3
Other retail		180		2		157		1
Total impaired loans, excluding GNMA and covered loans		5,459		46		5,151		32
Loans purchased from GNMA mortgage pools		1,277		15		162		4
Covered loans		1,178		2		1,198		14
Total	$	7,914	$	63	$	6,511	$	50

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:

	2012								2011
Three Months Ended March 31 (Dollars in Millions)	Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance (d)				Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance (d)
Commercial		1,279	$	91	$	72				1,355	$	95	$	92
Commercial real estate		111		204		197				159		402		385
Residential mortgages		621		111		107	(a	)		955		195		193
Credit card		14,218		80		80				14,410		88		88
Other retail		988		15		15	(b	)		1,011		19		19
Total loans, excluding GNMA and covered loans		17,217		501		471				17,890		799		777
Loans purchased from GNMA mortgage pools		1,400		179		187	(c	)		2,253		301		324
Covered loans		43		140		137				96		218		213
Total loans		18,660	$	820	$	795				20,239	$	1,318	$	1,314

(a) Residential mortgage TDRs include trial period arrangements offered to customers during the period and the post-modification balances for these loans reflect the current outstanding balance until a permanent modification is made. At March 31, 2012, 325 loans with outstanding balances of $57 million were in a trial period and have an estimated post-modification balance of $59 million assuming permanent modification occurs at the end of the trial period.

(b) At March 31, 2012, 32 home equity and second mortgage loans with outstanding balances of $2 million were in a trial period and have an estimated post-modification balance of $1 million assuming permanent modification occurs at the end of the trial period.

(c) At March 31, 2012, 1,104 loans purchased from GNMA mortgage pools with outstanding balances of $139 million were in a trial period and have an estimated post-modification balance of $147 million assuming permanent modification occurs at the end of the trial period.

(d) Post-modification balances for residential mortgages, home equity and second mortgages, and loans purchased from GNMA mortgage pools typically include capitalization of unpaid accrued interest and/or fees under the various modification programs.

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.

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 residential mortgage loans 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. The Company reports loans in a trial period arrangement as TDRs.

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 loss sharing agreements with the FDIC.

The following table provides a summary of TDR loans that defaulted (fully or partially charged-off or became 90 days or more past due) during the periods presented that were modified as TDRs within 12 months previous to default:

	2012				2011
Three Months Ended March 31 (Dollars in Millions)	Number of Loans		Amount Defaulted		Number of Loans		Amount Defaulted
Commercial		241	$	21		89	$	5
Commercial real estate		54		92		—		—
Residential mortgages		64		12		343		74
Credit card		2,526		15		1,713		8
Other retail		184		3		83		2
Total loans, excluding GNMA and covered loans		3,069		143		2,228		89
Loans purchased from GNMA mortgage pools		221		33		156		20
Covered loans		34		60		—		—
Total loans		3,324	$	236		2,384	$	109

In addition to the defaults in the table above, during the three months ended March 31, 2012, the Company had 995 residential mortgage loans, home equity and second mortgage loans, and loans purchased from GNMA mortgage pools with aggregate outstanding balances of $141 million, where borrowers did not successfully complete the trial period arrangement and therefore are no longer eligible for a permanent modification under the applicable modification program.

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

	March 31, 2012								December 31, 2011
(Dollars in Millions)	Purchased Impaired Loans		Purchased Nonimpaired Loans		Other Assets		Total		Purchased Impaired Loans		Purchased Nonimpaired Loans		Other Assets		Total
Commercial loans	$	88	$	118	$	—	$	206	$	68	$	137	$	—	$	205
Commercial real estate loans		1,842		3,742		—		5,584		1,956		4,037		—		5,993
Residential mortgage loans		3,707		1,310		—		5,017		3,830		1,360		—		5,190
Credit card loans		—		5		—		5		—		6		—		6
Other retail loans		—		849		—		849		—		867		—		867
Losses reimbursable by the FDIC		—		—		2,517		2,517		—		—		2,526		2,526
Covered loans		5,637		6,024		2,517		14,178		5,854		6,407		2,526		14,787
Foreclosed real estate		—		—		233		233		—		—		274		274
Total covered assets	$	5,637	$	6,024	$	2,750	$	14,411	$	5,854	$	6,407	$	2,800	$	15,061

At March 31, 2012, $.1 billion of the purchased impaired loans included in covered loans were classified as nonperforming assets, compared with $.2 billion at December 31, 2011, 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.

Net gains on the sale of loans of $287 million and $215 million for the three months ended March 31, 2012 and 2011, respectively, were included in noninterest income, primarily in mortgage banking revenue.