Purchased impaired loan accounting addresses differences between contractual cash flows and cash flows expected to be collected from the initial investment in loans if those differences are attributable, at least in part, to credit quality. Several factors were considered when evaluating whether a loan was considered a purchased impaired loan, including the delinquency status of the loan, updated borrower credit status, geographic information, and updated loan-to-values (LTV). GAAP allows purchasers to aggregate purchased impaired loans acquired in the same fiscal quarter into one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. Purchased impaired homogeneous consumer, residential real estate and smaller balance commercial loans with common risk characteristics are aggregated into pools where appropriate. Commercial loans with a total commitment greater than a defined threshold are accounted for individually. The excess of undiscounted cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized as interest income over the remaining life of the loan using the constant effective yield method. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable difference. Subsequent changes in the expected cash flows of individual or pooled purchased impaired loans from the date of acquisition will either impact the accretable yield or result in an impairment charge to provision for credit losses in the period in which the changes become probable. Decreases to the net present value of expected cash flows will generally result in an impairment charge recorded as a provision for credit losses, resulting in an increase to the allowance for loan and lease losses, and a reclassification from accretable yield to nonaccretable difference.

The following table provides purchased impaired loans at June 30, 2014 and December 31, 2013:

Table 69: Purchased Impaired Loans - Balances

		June 30, 2014						December 31, 2013
In millions		Outstanding Balance (a)		Recorded Investment		Carrying Value			Outstanding Balance (a)		Recorded Investment		Carrying Value
Commercial lending
	Commercial	$	218	$	109	$	87		$	282	$	157	$	131
	Commercial real estate		458		370		284			655		516		409
Total commercial lending			676		479		371			937		673		540
Consumer lending
	Consumer		2,343		2,150		1,872			2,523		2,312		1,971
	Residential real estate		2,777		2,928		2,428			3,025		3,121		2,591
Total consumer lending			5,120		5,078		4,300			5,548		5,433		4,562
	Total	$	5,796	$	5,557	$	4,671		$	6,485	$	6,106	$	5,102
(a) Outstanding balance represents the balance on the loan servicing system for active loans. It is possible for the outstanding balance to be lower than the recorded investment for certain loans due to the use of pool accounting.

During the first six months of 2014, $95 million of provision recovery and $24 million of charge-offs were recorded on purchased impaired loans. The comparative amounts for the six months ended June 30, 2013, were $90 million of provision and $70 million of charge-offs. At June 30, 2014, the allowance for loan and lease losses was $.9 billion on $4.9 billion of purchased impaired loans while the remaining $.7 billion of purchased impaired loans required no allowance as the net present value of expected cash flows equaled or exceeded the recorded investment. As of December 31, 2013, the allowance for loan and lease losses related to purchased impaired loans was $1.0 billion. If any allowance for loan losses is recognized on a purchased impaired pool, which is accounted for as a single asset, the entire balance of that pool would be disclosed as requiring an allowance. Subsequent increases in the net present value of cash flows will result in a recovery of any previously recorded allowance for loan and lease losses, to the extent applicable, and/or a reclassification from non-accretable difference to accretable yield, which will be recognized prospectively. Disposals of loans, which may include sales of loans or foreclosures, result in removal of the loans for cash flow estimation purposes. The cash flow re-estimation process is completed quarterly to evaluate the appropriateness of the allowance associated with the purchased impaired loans.

Activity for the accretable yield during the first six months of 2014 and 2013 follows:

Table 70: Purchased Impaired Loans - Accretable Yield

In millions		2014		2013
January 1		$	2,055	$	2,166
Accretion (including excess cash recoveries)			(309)		(368)
Net reclassifications to accretable from non-accretable (a)			208		379
Disposals			(18)		(13)
June 30		$	1,936	$	2,164
(a)	Approximately 78% and 58% of the net reclassifications for the six months ended June 30, 2014 and 2013, respectively, were within the consumer portfolio primarily due to increases in the expected average life of residential and home equity loans. The remaining net reclassifications were predominantly due to future cash flow improvements within the commercial portfolio.