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Loans and Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2016
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]  
Loans and Allowance for Credit Losses
Note 5:  Loans and Allowance for Credit Losses 
Table 5.1 presents total loans outstanding by portfolio segment and class of financing receivable. Outstanding balances include a total net reduction of $4.5 billion and $3.8 billion at September 30, 2016, and December 31, 2015, respectively, for unearned income, net deferred loan fees, and unamortized discounts and premiums. Outstanding balances at September 30, 2016 also reflect the acquisition of various loans and capital leases from GE Capital as described in Note 2 (Business Combinations).
Table 5.1: Loans Outstanding
(in millions)
Sep 30,
2016

 
Dec 31,
2015

Commercial:
  

 
  

Commercial and industrial
$
324,020

 
299,892

Real estate mortgage
130,223

 
122,160

Real estate construction
23,340

 
22,164

Lease financing
18,871

 
12,367

Total commercial
496,454

 
456,583

Consumer:
 
 
 
Real estate 1-4 family first mortgage
278,689

 
273,869

Real estate 1-4 family junior lien mortgage
48,105

 
53,004

Credit card
34,992

 
34,039

Automobile
62,873

 
59,966

Other revolving credit and installment
40,213

 
39,098

Total consumer
464,872

 
459,976

Total loans
$
961,326

 
916,559


Our foreign loans are reported by respective class of financing receivable in the table above. Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign primarily based on whether the borrower’s primary address is outside of the United States. Table 5.2 presents total commercial foreign loans outstanding by class of financing receivable.
Table 5.2: Commercial Foreign Loans Outstanding
(in millions)
Sep 30,
2016

 
Dec 31,
2015

Commercial foreign loans:
 
 
 
Commercial and industrial
$
51,515

 
49,049

Real estate mortgage
8,466

 
8,350

Real estate construction
310

 
444

Lease financing
958

 
274

Total commercial foreign loans
$
61,249

 
58,117



Loan Purchases, Sales, and Transfers
Table 5.3 summarizes the proceeds paid or received for purchases and sales of loans and transfers from loans held for investment to mortgages/loans held for sale at lower of cost or fair value. This loan activity also includes participating interests, whereby we receive or transfer a portion of a loan. The table excludes PCI loans and loans for which we have elected the fair value option, including loans originated for sale because their loan activity normally does not impact the allowance for credit losses. 
Table 5.3: Loan Purchases, Sales, and Transfers
 
2016
 
 
2015
 
(in millions)
Commercial (1)

 
Consumer (2)

 
Total

 
Commercial

 
Consumer (2)

 
Total

Quarter ended September 30,
 
 
 
 
 
 
 
 
 
 
 
Purchases
$
1,902

 
—

 
1,902

 
1,818

 
29

 
1,847

Sales
(324
)
 
(306
)
 
(630
)
 
(286
)
 
(130
)
 
(416
)
Transfers to MHFS/LHFS
(44
)
 
(1
)
 
(45
)
 
(39
)
 
(7
)
 
(46
)
Nine months ended September 30,
 
 
 
 
 
 
 
 
 
 
 
Purchases
$
29,155

 
—

 
29,155

 
12,648

 
340

 
12,988

Sales
(932
)
 
(985
)
 
(1,917
)
 
(649
)
 
(160
)
 
(809
)
Transfers to MHFS/LHFS
(145
)
 
(5
)
 
(150
)
 
(91
)
 
(14
)
 
(105
)
(1)
Purchases include loans and capital leases from the GE Capital business acquisitions as described in Note 2 (Business Combinations).
(2)
Excludes activity in government insured/guaranteed real estate 1-4 family first mortgage loans. As servicer, we are able to buy delinquent insured/guaranteed loans out of the Government National Mortgage Association (GNMA) pools, and manage and/or resell them in accordance with applicable requirements. These loans are predominantly insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Accordingly, these loans have limited impact on the allowance for loan losses.
Commitments to Lend
A commitment to lend is a legally binding agreement to lend funds to a customer, usually at a stated interest rate, if funded, and for specific purposes and time periods. We generally require a fee to extend such commitments. Certain commitments are subject to loan agreements with covenants regarding the financial performance of the customer or borrowing base formulas on an ongoing basis that must be met before we are required to fund the commitment. We may reduce or cancel consumer commitments, including home equity lines and credit card lines, in accordance with the contracts and applicable law.
We may, as a representative for other lenders, advance funds or provide for the issuance of letters of credit under syndicated loan or letter of credit agreements. Any advances are generally repaid in less than a week and would normally require default of both the customer and another lender to expose us to loss. These temporary advance arrangements totaled approximately $75 billion at both September 30, 2016 and December 31, 2015.
We issue commercial letters of credit to assist customers in purchasing goods or services, typically for international trade. At both September 30, 2016, and December 31, 2015, we had $1.1 billion of outstanding issued commercial letters of credit. We also originate multipurpose lending commitments under which borrowers have the option to draw on the facility for different purposes in one of several forms, including a standby letter of credit. See Note 10 (Guarantees, Pledged Assets and Collateral) for additional information on standby letters of credit. 
When we make commitments, we are exposed to credit risk. The maximum credit risk for these commitments will generally be lower than the contractual amount because a significant portion of these commitments is expected to expire without being used by the customer. In addition, we manage the potential risk in commitments to lend by limiting the total amount of commitments, both by individual customer and in total, by monitoring the size and maturity structure of these commitments and by applying the same credit standards for these commitments as for all of our credit activities.
For loans and commitments to lend, we generally require collateral or a guarantee. We may require various types of collateral, including commercial and consumer real estate, automobiles, other short-term liquid assets such as accounts receivable or inventory and long-lived assets, such as equipment and other business assets. Collateral requirements for each loan or commitment may vary based on the loan product and our assessment of a customer’s credit risk according to the specific credit underwriting, including credit terms and structure.
The contractual amount of our unfunded credit commitments, including unissued standby and commercial letters of credit, is summarized by portfolio segment and class of financing receivable in Table 5.4. The table excludes the standby and commercial letters of credit and temporary advance arrangements described above.
Table 5.4: Unfunded Credit Commitments
(in millions)
Sep 30,
2016

 
Dec 31,
2015

Commercial:
 
 
 
Commercial and industrial
$
309,075

 
296,710

Real estate mortgage
7,807

 
7,378

Real estate construction
18,735

 
18,047

Lease financing
17

 
—

Total commercial
335,634

 
322,135

Consumer:
 
 
 
Real estate 1-4 family first mortgage
39,066

 
34,621

Real estate 1-4 family
junior lien mortgage
41,974

 
43,309

Credit card
102,252

 
98,904

Other revolving credit and installment
28,584

 
27,899

Total consumer
211,876

 
204,733

Total unfunded
credit commitments
$
547,510

 
526,868

Allowance for Credit Losses
Table 5.5 presents the allowance for credit losses, which consists of the allowance for loan losses and the allowance for unfunded credit commitments.
Table 5.5: Allowance for Credit Losses
 
Quarter ended September 30,
 
 
Nine months ended September 30,
 
(in millions)
2016

 
2015

 
2016

 
2015

Balance, beginning of period
$
12,749

 
12,614

 
12,512

 
13,169

Provision for credit losses
805

 
703

 
2,965

 
1,611

Interest income on certain impaired loans (1)
(54
)
 
(48
)
 
(153
)
 
(150
)
Loan charge-offs:
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
Commercial and industrial
(324
)
 
(172
)
 
(1,110
)
 
(459
)
Real estate mortgage
(7
)
 
(9
)
 
(13
)
 
(48
)
Real estate construction
—

 
—

 
(1
)
 
(2
)
Lease financing
(4
)
 
(5
)
 
(25
)
 
(11
)
Total commercial
(335
)
 
(186
)
 
(1,149
)
 
(520
)
Consumer:
  
 
  
 
 
 
 
Real estate 1-4 family first mortgage
(106
)
 
(145
)
 
(366
)
 
(394
)
Real estate 1-4 family junior lien mortgage
(119
)
 
(159
)
 
(385
)
 
(501
)
Credit card
(296
)
 
(259
)
 
(930
)
 
(821
)
Automobile
(215
)
 
(186
)
 
(602
)
 
(531
)
Other revolving credit and installment
(170
)
 
(160
)
 
(508
)
 
(465
)
Total consumer
(906
)
 
(909
)
 
(2,791
)
 
(2,712
)
Total loan charge-offs
(1,241
)
 
(1,095
)
 
(3,940
)
 
(3,232
)
Loan recoveries:
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
Commercial and industrial
65

 
50

 
210

 
192

Real estate mortgage
35

 
32

 
90

 
97

Real estate construction
18

 
8

 
30

 
25

Lease financing
2

 
2

 
10

 
6

Total commercial
120

 
92

 
340

 
320

Consumer:
  
 
  
 
 
 
 
Real estate 1-4 family first mortgage
86

 
83

 
284

 
182

Real estate 1-4 family junior lien mortgage
70

 
70

 
200

 
195

Credit card
51

 
43

 
153

 
123

Automobile
78

 
73

 
248

 
249

Other revolving credit and installment
31

 
31

 
100

 
102

Total consumer
316

 
300

 
985

 
851

Total loan recoveries
436

 
392

 
1,325

 
1,171

Net loan charge-offs
(805
)
 
(703
)
 
(2,615
)
 
(2,061
)
Other
(1
)
 
(4
)
 
(15
)
 
(7
)
Balance, end of period
$
12,694

 
12,562

 
12,694

 
12,562

Components:
  
 
  
 
 
 
 
Allowance for loan losses
$
11,583

 
11,659

 
11,583

 
11,659

Allowance for unfunded credit commitments
1,111

 
903

 
1,111

 
903

Allowance for credit losses
$
12,694

 
12,562

 
12,694

 
12,562

Net loan charge-offs (annualized) as a percentage of average total loans
0.33
%
 
0.31

 
0.37

 
0.31

Allowance for loan losses as a percentage of total loans
1.20

 
1.29

 
1.20

 
1.29

Allowance for credit losses as a percentage of total loans
1.32

 
1.39

 
1.32

 
1.39

(1)
Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize changes in allowance attributable to the passage of time as interest income.

Table 5.6 summarizes the activity in the allowance for credit losses by our commercial and consumer portfolio segments.
Table 5.6: Allowance Activity by Portfolio Segment
  
  

 
  

 
2016

 
  

 
  

 
2015

(in millions)
Commercial

 
Consumer

 
Total

 
Commercial

 
Consumer

 
Total

Quarter ended September 30,
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
7,441

 
5,308

 
12,749

 
6,279

 
6,335

 
12,614

Provision for credit losses
158

 
647

 
805

 
348

 
355

 
703

Interest income on certain impaired loans
(14
)
 
(40
)
 
(54
)
 
(3
)
 
(45
)
 
(48
)
 
 
 
 
 
 
 
 
 
 
 
 
Loan charge-offs
(335
)
 
(906
)
 
(1,241
)
 
(186
)
 
(909
)
 
(1,095
)
Loan recoveries
120

 
316

 
436

 
92

 
300

 
392

Net loan charge-offs
(215
)
 
(590
)
 
(805
)
 
(94
)
 
(609
)
 
(703
)
Other
(1
)
 
—

 
(1
)
 
(4
)
 
—

 
(4
)
Balance, end of period
$
7,369

 
5,325

 
12,694

 
6,526

 
6,036

 
12,562

 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30,
 
 
 
 
 
 
 
 
 
 
 
Balance, beginning of period
$
6,872

 
5,640

 
12,512

 
6,377

 
6,792

 
13,169

Provision for credit losses
1,350

 
1,615

 
2,965

 
368

 
1,243

 
1,611

Interest income on certain impaired loans
(29
)
 
(124
)
 
(153
)
 
(12
)
 
(138
)
 
(150
)
 
 
 
 
 
 
 
 
 
 
 
 
Loan charge-offs
(1,149
)
 
(2,791
)
 
(3,940
)
 
(520
)
 
(2,712
)
 
(3,232
)
Loan recoveries
340

 
985

 
1,325

 
320

 
851

 
1,171

Net loan charge-offs
(809
)
 
(1,806
)
 
(2,615
)
 
(200
)
 
(1,861
)
 
(2,061
)
Other
(15
)
 
—

 
(15
)
 
(7
)
 
—

 
(7
)
Balance, end of period
$
7,369

 
5,325

 
12,694

 
6,526

 
6,036

 
12,562



Table 5.7 disaggregates our allowance for credit losses and recorded investment in loans by impairment methodology.
Table 5.7: Allowance by Impairment Methodology
 
Allowance for credit losses
 
 
Recorded investment in loans
 
(in millions)
Commercial

 
Consumer

 
Total

 
Commercial

 
Consumer

 
Total

September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Collectively evaluated (1)
$
6,254

 
3,531

 
9,785

 
489,945

 
430,259

 
920,204

Individually evaluated (2)
1,113

 
1,794

 
2,907

 
5,672

 
17,741

 
23,413

PCI (3)
2

 
—

 
2

 
837

 
16,872

 
17,709

Total
$
7,369

 
5,325

 
12,694

 
496,454

 
464,872

 
961,326

December 31, 2015
 
Collectively evaluated (1)
$
5,999

 
3,436

 
9,435

 
452,063

 
420,705

 
872,768

Individually evaluated (2)
872

 
2,204

 
3,076

 
3,808

 
20,012

 
23,820

PCI (3)
1

 
—

 
1

 
712

 
19,259

 
19,971

Total
$
6,872

 
5,640

 
12,512

 
456,583

 
459,976

 
916,559

(1)
Represents loans collectively evaluated for impairment in accordance with Accounting Standards Codification (ASC) 450-20, Loss Contingencies (formerly FAS 5), and pursuant to amendments by ASU 2010-20 regarding allowance for non-impaired loans.
(2)
Represents loans individually evaluated for impairment in accordance with ASC 310-10, Receivables (formerly FAS 114), and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.
(3)
Represents the allowance and related loan carrying value determined in accordance with ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality (formerly SOP 03-3) and pursuant to amendments by ASU 2010-20 regarding allowance for PCI loans.
Credit Quality
We monitor credit quality by evaluating various attributes and utilize such information in our evaluation of the appropriateness of the allowance for credit losses. The following sections provide the credit quality indicators we most closely monitor. The credit quality indicators are generally based on information as of our financial statement date, with the exception of updated Fair Isaac Corporation (FICO) scores and updated loan-to-value (LTV)/combined LTV (CLTV).We obtain FICO scores at loan origination and the scores are generally updated at least quarterly, except in limited circumstances, including compliance with the Fair Credit Reporting Act (FCRA). Generally, the LTV and CLTV indicators are updated in the second month of each quarter, with updates no older than June 30, 2016. See the “Purchased Credit-Impaired Loans” section in this Note for credit quality information on our PCI portfolio.
COMMERCIAL CREDIT QUALITY INDICATORS  In addition to monitoring commercial loan concentration risk, we manage a consistent process for assessing commercial loan credit quality. Generally, commercial loans are subject to individual risk assessment using our internal borrower and collateral quality ratings. Our ratings are aligned to Pass and Criticized categories. The Criticized category includes Special Mention, Substandard, and Doubtful categories which are defined by bank regulatory agencies.
Table 5.8 provides a breakdown of outstanding commercial loans by risk category. Of the $22.3 billion in criticized commercial and industrial loans and $6.0 billion in criticized commercial real estate (CRE) loans at September 30, 2016, $3.3 billion and $839 million, respectively, have been placed on nonaccrual status and written down to net realizable collateral value.

Table 5.8: Commercial Loans by Risk Category
(in millions)
Commercial
and
industrial

 
Real
estate
mortgage

 
Real
estate
construction

 
Lease
financing

 
Total

September 30, 2016
 
 
 
 
 
 
 
 
 
By risk category:
 
 
 
 
 
 
 
 
 
Pass
$
301,402

 
124,350

 
22,729

 
17,616

 
466,097

Criticized
22,251

 
5,463

 
551

 
1,255

 
29,520

Total commercial loans (excluding PCI)
323,653

 
129,813

 
23,280

 
18,871

 
495,617

Total commercial PCI loans (carrying value)
367

 
410

 
60

 
—

 
837

Total commercial loans
$
324,020

 
130,223

 
23,340

 
18,871

 
496,454

December 31, 2015
 
 
 
 
 
 
 
 
 
By risk category:
 
 
 
 
 
 
 
 
 
Pass
$
281,356

 
115,025

 
21,546

 
11,772

 
429,699

Criticized
18,458

 
6,593

 
526

 
595

 
26,172

Total commercial loans (excluding PCI)
299,814

 
121,618

 
22,072

 
12,367

 
455,871

Total commercial PCI loans (carrying value)
78

 
542

 
92

 
—

 
712

Total commercial loans
$
299,892

 
122,160

 
22,164

 
12,367

 
456,583



Table 5.9 provides past due information for commercial loans, which we monitor as part of our credit risk management practices.
 
Table 5.9: Commercial Loans by Delinquency Status
(in millions)
Commercial
and
industrial

 
Real
estate
mortgage

 
Real
estate
construction

 
Lease
financing

 
Total

September 30, 2016
 
 
 
 
 
 
 
 
 
By delinquency status:
 
 
 
 
 
 
 
 
 
Current-29 days past due (DPD) and still accruing
$
319,764

 
128,888

 
23,197

 
18,645

 
490,494

30-89 DPD and still accruing
511

 
141

 
24

 
134

 
810

90+ DPD and still accruing
47

 
4

 
—

 
—

 
51

Nonaccrual loans
3,331

 
780

 
59

 
92

 
4,262

Total commercial loans (excluding PCI)
323,653

 
129,813

 
23,280

 
18,871

 
495,617

Total commercial PCI loans (carrying value)
367

 
410

 
60

 
—

 
837

Total commercial loans
$
324,020

 
130,223

 
23,340

 
18,871

 
496,454

December 31, 2015
 
 
 
 
 
 
 
 
 
By delinquency status:
 
 
 
 
 
 
 
 
 
Current-29 DPD and still accruing
$
297,847

 
120,415

 
21,920

 
12,313

 
452,495

30-89 DPD and still accruing
507

 
221

 
82

 
28

 
838

90+ DPD and still accruing
97

 
13

 
4

 
—

 
114

Nonaccrual loans
1,363

 
969

 
66

 
26

 
2,424

Total commercial loans (excluding PCI)
299,814

 
121,618

 
22,072

 
12,367

 
455,871

Total commercial PCI loans (carrying value)
78

 
542

 
92

 
—

 
712

Total commercial loans
$
299,892

 
122,160

 
22,164

 
12,367

 
456,583



CONSUMER CREDIT QUALITY INDICATORS  We have various classes of consumer loans that present unique risks. Loan delinquency, FICO credit scores and LTV for loan types are common credit quality indicators that we monitor and utilize in our evaluation of the appropriateness of the allowance for credit losses for the consumer portfolio segment.
Many of our loss estimation techniques used for the allowance for credit losses rely on delinquency-based models; therefore, delinquency is an important indicator of credit quality and the establishment of our allowance for credit losses. Table 5.10 provides the outstanding balances of our consumer portfolio by delinquency status.
Table 5.10: Consumer Loans by Delinquency Status
(in millions)
Real estate
1-4 family
first
mortgage

 
Real estate
1-4 family
junior lien
mortgage

 
Credit
card

 
Automobile

 
Other
revolving
credit and
installment

 
Total

September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
By delinquency status:
 
 
 
 
 
 
 
 
 
 
 
Current-29 DPD
$
237,074

 
47,094

 
34,158

 
61,498

 
39,821

 
419,645

30-59 DPD
1,810

 
288

 
262

 
1,032

 
150

 
3,542

60-89 DPD
714

 
147

 
180

 
253

 
113

 
1,407

90-119 DPD
312

 
102

 
151

 
85

 
85

 
735

120-179 DPD
338

 
112

 
239

 
5

 
24

 
718

180+ DPD
1,894

 
320

 
2

 
—

 
20

 
2,236

Government insured/guaranteed loans (1)
19,717

 
—

 
—

 
—

 
—

 
19,717

Total consumer loans (excluding PCI)
261,859

 
48,063

 
34,992

 
62,873

 
40,213

 
448,000

Total consumer PCI loans (carrying value)
16,830

 
42

 
—

 
—

 
—

 
16,872

Total consumer loans
$
278,689

 
48,105

 
34,992

 
62,873

 
40,213

 
464,872

December 31, 2015
 
 
 
 
 
 
 
 
 
 
 
By delinquency status:
 
 
 
 
 
 
 
 
 
 
 
Current-29 DPD
$
225,195

 
51,778

 
33,208

 
58,503

 
38,690

 
407,374

30-59 DPD
2,072

 
325

 
257

 
1,121

 
175

 
3,950

60-89 DPD
821

 
184

 
177

 
253

 
107

 
1,542

90-119 DPD
402

 
110

 
150

 
84

 
86

 
832

120-179 DPD
460

 
145

 
246

 
4

 
21

 
876

180+ DPD
3,376

 
393

 
1

 
1

 
19

 
3,790

Government insured/guaranteed loans (1)
22,353

 
—

 
—

 
—

 
—

 
22,353

Total consumer loans (excluding PCI)
254,679

 
52,935

 
34,039

 
59,966

 
39,098

 
440,717

Total consumer PCI loans (carrying value)
19,190

 
69

 
—

 
—

 
—

 
19,259

Total consumer loans
$
273,869

 
53,004

 
34,039

 
59,966

 
39,098

 
459,976

(1)
Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA. Loans insured/guaranteed by the FHA/VA and 90+ DPD totaled $9.8 billion at September 30, 2016, compared with $12.4 billion at December 31, 2015.

Of the $3.7 billion of consumer loans not government insured/guaranteed that are 90 days or more past due at September 30, 2016, $802 million was accruing, compared with $5.5 billion past due and $867 million accruing at December 31, 2015.
Real estate 1-4 family first mortgage loans 180 days or more past due totaled $1.9 billion, or 0.7% of total first mortgages (excluding PCI), at September 30, 2016, compared with $3.4 billion, or 1.3%, at December 31, 2015.
Table 5.11 provides a breakdown of our consumer portfolio by FICO. Most of the scored consumer portfolio has an updated FICO of 680 and above, reflecting a strong current borrower credit profile. FICO is not available for certain loan types and may not be obtained if we deem it unnecessary due to strong collateral and other borrower attributes, substantially all of which are security-based loans originated through retail brokerage of $7.6 billion at September 30, 2016, and $7.0 billion at December 31, 2015.
Table 5.11: Consumer Loans by FICO
(in millions)
Real estate
1-4 family
first
mortgage

 
Real estate
1-4 family
junior lien
mortgage

 
Credit
card

 
Automobile

 
Other
revolving
credit and
installment

 
Total

September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
By FICO:
 
 
 
 
 
 
 
 
 
 
 
< 600
$
7,177

 
2,720

 
3,245

 
9,919

 
943

 
24,004

600-639
5,661

 
2,017

 
2,984

 
6,982

 
1,052

 
18,696

640-679
11,334

 
3,910

 
5,492

 
10,447

 
2,396

 
33,579

680-719
23,451

 
6,783

 
7,124

 
11,341

 
4,395

 
53,094

720-759
38,387

 
9,864

 
7,357

 
8,718

 
5,997

 
70,323

760-799
100,971

 
15,365

 
5,938

 
8,159

 
8,548

 
138,981

800+
49,460

 
6,638

 
2,776

 
6,881

 
6,600

 
72,355

No FICO available
5,701

 
766

 
76

 
426

 
2,651

 
9,620

FICO not required
—

 
—

 
—

 
—

 
7,631

 
7,631

Government insured/guaranteed loans (1)
19,717

 
—

 
—

 
—

 
—

 
19,717

Total consumer loans (excluding PCI)
261,859

 
48,063

 
34,992

 
62,873

 
40,213

 
448,000

Total consumer PCI loans (carrying value)
16,830

 
42

 
—

 
—

 
—

 
16,872

Total consumer loans
$
278,689

 
48,105

 
34,992

 
62,873

 
40,213

 
464,872

December 31, 2015
 
 
 
 
 
 
 
 
 
 


By FICO:
 
 
 
 
 
 
 
 
 
 

< 600
$
8,716

 
3,025

 
2,927

 
9,260

 
965

 
24,893

600-639
6,961

 
2,367

 
2,875

 
6,619

 
1,086

 
19,908

640-679
13,006

 
4,613

 
5,354

 
10,014

 
2,416

 
35,403

680-719
24,460

 
7,863

 
6,857

 
10,947

 
4,388

 
54,515

720-759
38,309

 
10,966

 
7,017

 
8,279

 
6,010

 
70,581

760-799
92,975

 
16,369

 
5,693

 
7,761

 
8,351

 
131,149

800+
44,452

 
6,895

 
3,090

 
6,654

 
6,510

 
67,601

No FICO available
3,447

 
837

 
226

 
432

 
2,395

 
7,337

FICO not required
—

 
—

 
—

 
—

 
6,977

 
6,977

Government insured/guaranteed loans (1)
22,353

 
—

 
—

 
—

 
—

 
22,353

Total consumer loans (excluding PCI)
254,679

 
52,935

 
34,039

 
59,966

 
39,098

 
440,717

Total consumer PCI loans (carrying value)
19,190

 
69

 
—

 
—

 
—

 
19,259

Total consumer loans
$
273,869

 
53,004

 
34,039

 
59,966

 
39,098

 
459,976

(1)
Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
LTV refers to the ratio comparing the loan’s unpaid principal balance to the property’s collateral value. CLTV refers to the combination of first mortgage and junior lien mortgage (including unused line amounts for credit line products) ratios. LTVs and CLTVs are updated quarterly using a cascade approach which first uses values provided by automated valuation models (AVMs) for the property. If an AVM is not available, then the value is estimated using the original appraised value adjusted by the change in Home Price Index (HPI) for the property location. If an HPI is not available, the original appraised value is used. The HPI value is normally the only method considered for high value properties, generally with an original value of $1 million or more, as the AVM values have proven less accurate for these properties.
Table 5.12 shows the most updated LTV and CLTV distribution of the real estate 1-4 family first and junior lien mortgage loan portfolios. We consider the trends in residential real estate markets as we monitor credit risk and establish our allowance for credit losses. In the event of a default, any loss should be limited to the portion of the loan amount in excess of the net realizable value of the underlying real estate collateral value. Certain loans do not have an LTV or CLTV due to industry data availability and portfolios acquired from or serviced by other institutions.
Table 5.12: Consumer Loans by LTV/CLTV
  
September 30, 2016
 
 
December 31, 2015
 
(in millions)
Real estate
1-4 family
first
mortgage
by LTV

 
Real estate
1-4 family
junior lien
mortgage
by CLTV

 
Total

 
Real estate
1-4 family
first
mortgage
by LTV

 
Real estate
1-4 family
junior lien
mortgage
by CLTV

 
Total

By LTV/CLTV:
 
 
 
 
 
 
 
 
 
 
 
0-60%
$
119,444

 
16,499

 
135,943

 
109,558

 
15,805

 
125,363

60.01-80%
100,450

 
15,571

 
116,021

 
92,005

 
16,579

 
108,584

80.01-100%
16,509

 
9,381

 
25,890

 
22,765

 
11,385

 
34,150

100.01-120% (1)
3,015

 
4,055

 
7,070

 
4,480

 
5,545

 
10,025

> 120% (1)
1,385

 
2,041

 
3,426

 
2,065

 
3,051

 
5,116

No LTV/CLTV available
1,339

 
516

 
1,855

 
1,453

 
570

 
2,023

Government insured/guaranteed loans (2)
19,717

 
—

 
19,717

 
22,353

 
—

 
22,353

Total consumer loans (excluding PCI)
261,859

 
48,063

 
309,922

 
254,679

 
52,935

 
307,614

Total consumer PCI loans (carrying value)
16,830

 
42

 
16,872

 
19,190

 
69

 
19,259

Total consumer loans
$
278,689

 
48,105

 
326,794

 
273,869

 
53,004

 
326,873

(1)
Reflects total loan balances with LTV/CLTV amounts in excess of 100%. In the event of default, the loss content would generally be limited to only the amount in excess of 100% LTV/CLTV.
(2)
Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
 
NONACCRUAL LOANS  Table 5.13 provides loans on nonaccrual status. PCI loans are excluded from this table because they continue to earn interest from accretable yield, independent of performance in accordance with their contractual terms.
Table 5.13: Nonaccrual Loans
(in millions)
Sep 30,
2016

 
Dec 31,
2015

Commercial:
  
 
  
Commercial and industrial
$
3,331

 
1,363

Real estate mortgage
780

 
969

Real estate construction
59

 
66

Lease financing
92

 
26

Total commercial
4,262

 
2,424

Consumer:
 
 
 
Real estate 1-4 family first mortgage (1)
5,310

 
7,293

Real estate 1-4 family junior lien mortgage
1,259

 
1,495

Automobile
108

 
121

Other revolving credit and installment
47

 
49

Total consumer
6,724

 
8,958

Total nonaccrual loans
(excluding PCI)
$
10,986

 
11,382

(1)
Includes MHFS of $150 million and $177 million at September 30, 2016, and December 31, 2015, respectively.
LOANS IN PROCESS OF FORECLOSURE  Our recorded investment in consumer mortgage loans collateralized by residential real estate property that are in process of foreclosure was $8.5 billion and $11.0 billion at September 30, 2016 and December 31, 2015, respectively, which included $5.0 billion and $6.2 billion, respectively, of loans that are government insured/guaranteed. We commence the foreclosure process on consumer real estate loans when a borrower becomes 120 days delinquent in accordance with Consumer Finance Protection Bureau Guidelines. Foreclosure procedures and timelines vary depending on whether the property address resides in a judicial or non-judicial state. Judicial states require the foreclosure to be processed through the state’s courts while non-judicial states are processed without court intervention. Foreclosure timelines vary according to state law.
LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING  Certain loans 90 days or more past due as to interest or principal are still accruing, because they are (1) well-secured and in the process of collection or (2) real estate 1-4 family mortgage loans or consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due. PCI loans of $2.2 billion at September 30, 2016, and $2.9 billion at December 31, 2015, are not included in these past due and still accruing loans even though they are 90 days or more contractually past due. These PCI loans are considered to be accruing because they continue to earn interest from accretable yield, independent of performance in accordance with their contractual terms.
Table 5.14 shows non-PCI loans 90 days or more past due and still accruing by class for loans not government insured/guaranteed.
Table 5.14: Loans 90 Days or More Past Due and Still Accruing
(in millions)
Sep 30, 2016

 
Dec 31, 2015

Total (excluding PCI):
$
12,068

 
14,380

Less: FHA insured/guaranteed by the VA (1)(2)
11,198

 
13,373

Less: Student loans guaranteed under the FFELP (3)
17

 
26

Total, not government insured/guaranteed
$
853

 
981

By segment and class, not government insured/guaranteed:
 
 
 
Commercial:
 
 
 
Commercial and industrial
$
47

 
97

Real estate mortgage
4

 
13

Real estate construction
—

 
4

Total commercial
51

 
114

Consumer:
 
 
 
Real estate 1-4 family first mortgage (2)
171

 
224

Real estate 1-4 family junior lien mortgage (2)
54

 
65

Credit card
392

 
397

Automobile
81

 
79

Other revolving credit and installment
104

 
102

Total consumer
802

 
867

Total, not government insured/guaranteed
$
853

 
981

(1)
Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.
(2)
Includes mortgages held for sale 90 days or more past due and still accruing.
(3)
Represents loans whose repayments are predominantly guaranteed by agencies on behalf of the U.S. Department of Education under the FFELP.
IMPAIRED LOANS Table 5.15 summarizes key information for impaired loans. Our impaired loans predominantly include loans on nonaccrual status in the commercial portfolio segment and loans modified in a TDR, whether on accrual or nonaccrual status. These impaired loans generally have estimated losses which are included in the allowance for credit losses. We have impaired loans with no allowance for credit losses when loss content has been previously recognized through charge-offs and we do not anticipate additional charge-offs or losses, or certain loans are currently performing in accordance with their terms and for which no loss has been estimated. Impaired loans exclude PCI loans. Table 5.15 includes trial modifications that totaled $348 million at September 30, 2016, and $402 million at December 31, 2015.
For additional information on our impaired loans and allowance for credit losses, see Note 1 (Summary of Significant Accounting Policies) in our 2015 Form 10-K.
Table 5.15: Impaired Loans Summary
 
 
 
Recorded investment
 
 
 
(in millions)
Unpaid
principal
balance (1)

 
Impaired
loans

 
Impaired loans
with related
allowance for
credit losses

 
Related
allowance for
credit losses

September 30, 2016
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
Commercial and industrial
$
5,054

 
3,885

 
3,444

 
780

Real estate mortgage
1,996

 
1,588

 
1,566

 
292

Real estate construction
186

 
103

 
103

 
23

Lease financing
119

 
96

 
96

 
18

Total commercial
7,355

 
5,672

 
5,209

 
1,113

Consumer:
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
17,189

 
15,028

 
9,898

 
1,328

Real estate 1-4 family junior lien mortgage
2,486

 
2,236

 
1,645

 
344

Credit card
294

 
294

 
294

 
100

Automobile
156

 
89

 
32

 
5

Other revolving credit and installment
101

 
94

 
84

 
17

Total consumer (2)
20,226

 
17,741

 
11,953

 
1,794

Total impaired loans (excluding PCI)
$
27,581

 
23,413

 
17,162

 
2,907

December 31, 2015
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
Commercial and industrial
$
2,746

 
1,835

 
1,648

 
435

Real estate mortgage
2,369

 
1,815

 
1,773

 
405

Real estate construction
262

 
131

 
112

 
23

Lease financing
38

 
27

 
27

 
9

Total commercial
5,415

 
3,808

 
3,560

 
872

Consumer:
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
19,626

 
17,121

 
11,057

 
1,643

Real estate 1-4 family junior lien mortgage
2,704

 
2,408

 
1,859

 
447

Credit card
299

 
299

 
299

 
94

Automobile
173

 
105

 
41

 
5

Other revolving credit and installment
86

 
79

 
71

 
15

Total consumer (2)
22,888

 
20,012

 
13,327

 
2,204

Total impaired loans (excluding PCI)
$
28,303

 
23,820

 
16,887

 
3,076

(1)
Excludes the unpaid principal balance for loans that have been fully charged off or otherwise have zero recorded investment.
(2)
Includes the recorded investment of $1.6 billion and 1.8 billion at September 30, 2016, and December 31, 2015, respectively, of government insured/guaranteed loans that are predominantly insured by the FHA or guaranteed by the VA and generally do not have an allowance. Impaired loans may also have limited, if any, allowance when the recorded investment of the loan approximates estimated net realizable value as a result of charge-offs prior to a TDR modification.
Commitments to lend additional funds on loans whose terms have been modified in a TDR amounted to $440 million and $363 million at September 30, 2016 and December 31, 2015, respectively.
Table 5.16 provides the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans by portfolio segment and class.
Table 5.16: Average Recorded Investment in Impaired Loans
 
Quarter ended September 30,
 
 
Nine months ended September 30,
 
 
2016
 
 
2015
 
 
2016
 
 
2015
 
(in millions)
Average
recorded
investment

 
Recognized
interest
income

 
Average
recorded
investment

 
Recognized
interest
income

 
Average
recorded
investment

 
Recognized
interest
income

 
Average
recorded
investment

 
Recognized
interest
income

Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
3,961

 
25

 
1,407

 
21

 
3,350

 
65

 
1,108

 
64

Real estate mortgage
1,644

 
33

 
2,109

 
34

 
1,699

 
99

 
2,241

 
108

Real estate construction
108

 
3

 
232

 
7

 
117

 
8

 
260

 
22

Lease financing
99

 
—

 
27

 
—

 
89

 
—

 
24

 
—

Total commercial
5,812

 
61

 
3,775

 
62

 
5,255

 
172

 
3,633

 
194

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
15,471

 
203

 
17,761

 
231

 
16,224

 
635

 
18,125

 
697

Real estate 1-4 family junior lien mortgage
2,268

 
32

 
2,467

 
34

 
2,327

 
99

 
2,499

 
103

Credit card
292

 
9

 
310

 
10

 
294

 
26

 
321

 
30

Automobile
90

 
3

 
111

 
3

 
95

 
9

 
118

 
11

Other revolving credit and installment
91

 
2

 
61

 
1

 
84

 
5

 
57

 
3

Total consumer
18,212

 
249

 
20,710

 
279

 
19,024

 
774

 
21,120

 
844

Total impaired loans (excluding PCI)
$
24,024

 
310

 
24,485

 
341

 
24,279

 
946

 
24,753

 
1,038

Interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash basis of accounting
 
 
$
87

 
 
 
104

 
 
 
274

 
 
 
323

Other (1)
 
 
223

 
 
 
237

 
 
 
672

 
 
 
715

Total interest income
 
 
$
310

 
 
 
341

 
 
 
946

 
 
 
1,038

(1)
Includes interest recognized on accruing TDRs, interest recognized related to certain impaired loans which have an allowance calculated using discounting, and amortization of purchase accounting adjustments related to certain impaired loans.


TROUBLED DEBT RESTRUCTURINGS (TDRs)  When, for economic or legal reasons related to a borrower’s financial difficulties, we grant a concession for other than an insignificant period of time to a borrower that we would not otherwise consider, the related loan is classified as a TDR, the balance of which totaled $21.5 billion and $22.7 billion at September 30, 2016 and December 31, 2015, respectively. We do not consider any loans modified through a loan resolution such as foreclosure or short sale to be a TDR.
We may require some consumer borrowers experiencing financial difficulty to make trial payments generally for a period of three to four months, according to the terms of a planned permanent modification, to determine if they can perform according to those terms. These arrangements represent trial modifications, which we classify and account for as TDRs. While loans are in trial payment programs, their original terms are not considered modified and they continue to advance through delinquency status and accrue interest according to their original terms. The planned modifications for these arrangements primarily involve interest rate reductions; however, the exact concession type and resulting financial effect are usually not finalized and do not take effect until the loan is permanently modified. The trial period terms are developed in accordance with our proprietary programs or the U.S. Treasury’s Making Home Affordable programs for real estate 1-4 family first lien (i.e. Home Affordable Modification Program – HAMP) and junior lien (i.e. Second Lien Modification Program – 2MP) mortgage loans.
At September 30, 2016, the loans in trial modification period were $146 million under HAMP, $28 million under 2MP and $174 million under proprietary programs, compared with $130 million, $32 million and $240 million at December 31, 2015, respectively. Trial modifications with a recorded investment of $125 million at September 30, 2016, and $136 million at December 31, 2015, were accruing loans and $223 million and $266 million, respectively, were nonaccruing loans. Our experience is that most of the mortgages that enter a trial payment period program are successful in completing the program requirements and are then permanently modified at the end of the trial period. Our allowance process considers the impact of those modifications that are probable to occur.
Table 5.17 summarizes our TDR modifications for the periods presented by primary modification type and includes the financial effects of these modifications. For those loans that modify more than once, the table reflects each modification that occurred during the period. Loans that both modify and pay off within the period, as well as changes in recorded investment during the period for loans modified in prior periods, are not included in the table.
Table 5.17: TDR Modifications
 
Primary modification type (1)
 
 
Financial effects of modifications
 
(in millions)
Principal (2)

 
Interest
rate
reduction

 
Other
concessions (3)

 
Total

 
Charge-
offs (4)

 
Weighted
average
interest
rate
reduction

 
Recorded
investment
related to
interest rate
reduction (5)

Quarter ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
—

 
10

 
1,032

 
1,042

 
61

 
1.28
%
 
$
10

Real estate mortgage
—

 
28

 
168

 
196

 
1

 
0.99

 
29

Real estate construction
—

 
12

 
—

 
12

 
—

 
0.80

 
12

Lease financing
—

 
—

 
4

 
4

 
—

 
—

 
—

Total commercial
—

 
50

 
1,204

 
1,254

 
62

 
1.01

 
51

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
84

 
79

 
330

 
493

 
11

 
2.56

 
138

Real estate 1-4 family junior lien mortgage
5

 
25

 
22

 
52

 
9

 
3.08

 
29

Credit card
—

 
46

 
—

 
46

 
—

 
12.13

 
46

Automobile
1

 
4

 
15

 
20

 
11

 
6.42

 
4

Other revolving credit and installment
—

 
9

 
3

 
12

 
—

 
6.86

 
9

Trial modifications (6)
—

 
—

 
15

 
15

 
—

 
—

 
—

Total consumer
90

 
163

 
385

 
638

 
31

 
4.82

 
226

Total
$
90

 
213

 
1,589

 
1,892

 
93

 
4.13
%
 
$
277

Quarter ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
3

 
11

 
487

 
501

 
58

 
1.66
%
 
$
11

Real estate mortgage
—

 
44

 
154

 
198

 
—

 
1.46

 
44

Real estate construction
—

 
1

 
9

 
10

 
—

 
1.00

 
1

Lease financing
—

 
—

 
—

 
—

 
—

 
—

 
—

Total commercial
3

 
56

 
650

 
709

 
58

 
1.48

 
56

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
114

 
98

 
514

 
726

 
11

 
2.51

 
188

Real estate 1-4 family junior lien mortgage
8

 
24

 
39

 
71

 
10

 
3.12

 
31

Credit card
—

 
41

 
—

 
41

 
—

 
11.48

 
41

Automobile
—

 
1

 
22

 
23

 
10

 
7.84

 
1

Other revolving credit and installment
—

 
7

 
1

 
8

 
—

 
5.85

 
7

Trial modifications (6)
—

 
—

 
(1
)
 
(1
)
 
—

 
—

 
—

Total consumer
122

 
171

 
575

 
868

 
31

 
4.06

 
268

Total
$
125

 
227

 
1,225

 
1,577

 
89

 
3.61
%
 
$
324

 
Primary modification type (1)
 
 
Financial effects of modifications
 
(in millions)
Principal (2)

 
Interest
rate
reduction

 
Other
concessions (3)

 
Total

 
Charge-
offs (4)

 
Weighted
average
interest
rate
reduction

 
Recorded
investment
related to
interest rate
reduction (5)

Nine months ended September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
42

 
123

 
2,361

 
2,526

 
304

 
1.95
%
 
$
123

Real estate mortgage
—

 
81

 
462

 
543

 
1

 
1.14

 
81

Real estate construction
—

 
26

 
62

 
88

 
—

 
0.94

 
26

Lease financing
—

 
—

 
8

 
8

 
—

 
—

 
—

Total commercial
42

 
230

 
2,893

 
3,165

 
305

 
1.55

 
230

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
272

 
222

 
1,094

 
1,588

 
36

 
2.66

 
395

Real estate 1-4 family junior lien mortgage
17

 
81

 
82

 
180

 
30

 
3.03

 
96

Credit card
—

 
131

 
—

 
131

 
—

 
12.02

 
131

Automobile
2

 
11

 
44

 
57

 
27

 
6.45

 
11

Other revolving credit and installment
—

 
25

 
8

 
33

 
1

 
6.64

 
25

Trial modifications (6)
—

 
—

 
47

 
47

 
—

 
—

 
—

Total consumer
291

 
470

 
1,275

 
2,036

 
94

 
4.80

 
658

Total
$
333

 
700

 
4,168

 
5,201

 
399

 
3.96
%
 
$
888

Nine months ended September 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial and industrial
$
3

 
26

 
1,136

 
1,165

 
60

 
1.17
%
 
$
26

Real estate mortgage
4

 
114

 
734

 
852

 
1

 
1.55

 
114

Real estate construction
11

 
4

 
66

 
81

 
—

 
0.77

 
4

Lease financing
—

 
—

 
—

 
—

 
—

 
—

 
—

Total commercial
18

 
144

 
1,936

 
2,098

 
61

 
1.46

 
144

Consumer:
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
296

 
269

 
1,455

 
2,020

 
38

 
2.53

 
508

Real estate 1-4 family junior lien mortgage
25

 
65

 
129

 
219

 
30

 
3.17

 
86

Credit card
—

 
125

 
—

 
125

 
—

 
11.36

 
125

Automobile
1

 
3

 
66

 
70

 
27

 
8.59

 
3

Other revolving credit and installment
—

 
20

 
5

 
25

 
1

 
5.85

 
20

Trial modifications (6)
—

 
—

 
43

 
43

 
—

 
—

 
—

Total consumer
322

 
482

 
1,698

 
2,502

 
96

 
4.21

 
742

Total
$
340

 
626

 
3,634

 
4,600

 
157

 
3.76
%
 
$
886

(1)
Amounts represent the recorded investment in loans after recognizing the effects of the TDR, if any. TDRs may have multiple types of concessions, but are presented only once in the first modification type based on the order presented in the table above. The reported amounts include loans remodified of $484 million and $369 million, for quarters ended September 30, 2016 and 2015, and $1.1 billion and $1.5 billion for the first nine months of 2016 and 2015, respectively.
(2)
Principal modifications include principal forgiveness at the time of the modification, contingent principal forgiveness granted over the life of the loan based on borrower performance, and principal that has been legally separated and deferred to the end of the loan, with a zero percent contractual interest rate.
(3)
Other concessions include loan renewals, term extensions and other interest and noninterest adjustments, but exclude modifications that also forgive principal and/or reduce the contractual interest rate.
(4)
Charge-offs include write-downs of the investment in the loan in the period it is contractually modified. The amount of charge-off will differ from the modification terms if the loan has been charged down prior to the modification based on our policies. In addition, there may be cases where we have a charge-off/down with no legal principal modification. Modifications resulted in legally forgiving principal (actual, contingent or deferred) of $16 million and $32 million for the quarters ended September 30, 2016 and 2015, and $54 million and $78 million for the first nine months of 2016 and 2015, respectively.
(5)
Reflects the effect of reduced interest rates on loans with an interest rate concession as one of their concession types, which includes loans reported as a principal primary modification type that also have an interest rate concession.
(6)
Trial modifications are granted a delay in payments due under the original terms during the trial payment period. However, these loans continue to advance through delinquency status and accrue interest according to their original terms. Any subsequent permanent modification generally includes interest rate related concessions; however, the exact concession type and resulting financial effect are usually not known until the loan is permanently modified. Trial modifications for the period are presented net of previously reported trial modifications that became permanent in the current period.
Table 5.18 summarizes permanent modification TDRs that have defaulted in the current period within 12 months of their permanent modification date. We are reporting these defaulted TDRs based on a payment default definition of 90 days past due for the commercial portfolio segment and 60 days past due for the consumer portfolio segment.


Table 5.18: Defaulted TDRs
 
Recorded investment of defaults
 
 
Quarter ended September 30,
 
 
Nine months ended September 30,
 
(in millions)
2016

 
2015

 
2016

 
2015

Commercial:
 
 
 
 
 
 
 
Commercial and industrial
$
39

 
12

 
84

 
58

Real estate mortgage
7

 
31

 
58

 
103

Real estate construction
—

 
—

 
3

 
2

Total commercial
46

 
43

 
145

 
163

Consumer:
 
 
 
 
 
 
 
Real estate 1-4 family first mortgage
36

 
49

 
97

 
143

Real estate 1-4 family junior lien mortgage
6

 
5

 
15

 
13

Credit card
15

 
12

 
41

 
39

Automobile
4

 
3

 
10

 
9

Other revolving credit and installment
—

 
1

 
2

 
3

Total consumer
61

 
70

 
165

 
207

Total
$
107

 
113

 
310

 
370

Purchased Credit-Impaired Loans
Substantially all of our PCI loans were acquired from Wachovia on December 31, 2008, at which time we acquired commercial and consumer loans with a carrying value of $18.7 billion and $40.1 billion, respectively. The unpaid principal balance on December 31, 2008 was $98.2 billion for the total of commercial and consumer PCI loans. Table 5.19 presents PCI loans net of any remaining purchase accounting adjustments. Commercial and industrial PCI loans at September 30, 2016, included $290 million from the GE Capital business acquisitions. Real estate 1-4 family first mortgage PCI loans are predominantly Pick-a-Pay loans.
Table 5.19: PCI Loans
(in millions)
Sep 30,
2016

 
Dec 31,
2015

Commercial:
 
 
 
Commercial and industrial
$
367

 
78

Real estate mortgage
410

 
542

Real estate construction
60

 
92

Total commercial
837

 
712

Consumer:
 
 
 
Real estate 1-4 family first mortgage
16,830

 
19,190

Real estate 1-4 family junior lien mortgage
42

 
69

Total consumer
16,872

 
19,259

Total PCI loans (carrying value)
$
17,709

 
19,971

Total PCI loans (unpaid principal balance)
$
25,423

 
28,278



ACCRETABLE YIELD The excess of cash flows expected to be collected over the carrying value of PCI loans is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the loan, or pools of loans. The accretable yield is affected by:
•
changes in interest rate indices for variable rate PCI loans – expected future cash flows are based on the variable rates in effect at the time of the regular evaluations of cash flows expected to be collected;
•
changes in prepayment assumptions – prepayments affect the estimated life of PCI loans which may change the amount of interest income, and possibly principal, expected to be collected; and
•
changes in the expected principal and interest payments over the estimated weighted-average life – updates to expected cash flows are driven by the credit outlook and actions taken with borrowers. Changes in expected future cash flows from loan modifications are included in the regular evaluations of cash flows expected to be collected.
 
The change in the accretable yield related to PCI loans since the merger with Wachovia is presented in Table 5.20. Changes during third quarter 2016 reflect an expectation, as a result of our quarterly evaluation of PCI cash flows, that prepayment of modified Pick-a-Pay loans will significantly increase over their estimated weighted-average life and that expected loss has decreased as a result of reduced loan to value ratios and sustained higher housing prices.
Table 5.20: Change in Accretable Yield
(in millions)
Quarter ended Sep 30, 2016

 
Nine months ended Sep 30, 2016

 
2009-2015

Balance, beginning of period
$
15,727

 
16,301

 
10,447

Change in accretable yield due to acquisitions
(11
)
 
58

 
132

Accretion into interest income (1)
(324
)
 
(992
)
 
(14,212
)
Accretion into noninterest income due to sales (2)
—

 
(9
)
 
(458
)
Reclassification from nonaccretable difference for loans with improving credit-related cash flows 
1,163

 
1,221

 
9,734

Changes in expected cash flows that do not affect nonaccretable difference (3)
(4,936
)
 
(4,960
)
 
10,658

Balance, end of period 
$
11,619

 
11,619

 
16,301

(1)
Includes accretable yield released as a result of settlements with borrowers, which is included in interest income.
(2)
Includes accretable yield released as a result of sales to third parties, which is included in noninterest income.
(3)
Represents changes in cash flows expected to be collected due to the impact of modifications, changes in prepayment assumptions, changes in interest rates on variable rate PCI loans and sales to third parties.

COMMERCIAL PCI CREDIT QUALITY INDICATORS  Table 5.21 provides a breakdown of commercial PCI loans by risk category.
 
Table 5.21: Commercial PCI Loans by Risk Category
(in millions)
Commercial
and
industrial

 
Real
estate
mortgage

 
Real
estate
construction

 
Total

September 30, 2016
 
 
 
 
 
 
 
By risk category:
 
 
 
 
 
 
 
Pass
$
154

 
262

 
49

 
465

Criticized
213

 
148

 
11

 
372

Total commercial PCI loans
$
367

 
410

 
60

 
837

December 31, 2015
 
 
 
 
 
 
 
By risk category:
 
 
 
 
 
 
 
Pass
$
35

 
298

 
68

 
401

Criticized
43

 
244

 
24

 
311

Total commercial PCI loans
$
78

 
542

 
92

 
712



Table 5.22 provides past due information for commercial PCI loans.
Table 5.22: Commercial PCI Loans by Delinquency Status
(in millions)
Commercial
and
industrial

 
Real
estate
mortgage

 
Real
estate
construction

 
Total

September 30, 2016
 
 
 
 
 
 
 
By delinquency status:
 
 
 
 
 
 
 
Current-29 DPD and still accruing
$
364

 
356

 
49

 
769

30-89 DPD and still accruing
3

 
1

 
—

 
4

90+ DPD and still accruing
—

 
53

 
11

 
64

Total commercial PCI loans
$
367

 
410

 
60

 
837

December 31, 2015
 
 
 
 
 
 
 
By delinquency status:
 
 
 
 
 
 
 
Current-29 DPD and still accruing
$
78

 
510

 
90

 
678

30-89 DPD and still accruing
—

 
2

 
—

 
2

90+ DPD and still accruing
—

 
30

 
2

 
32

Total commercial PCI loans
$
78

 
542

 
92

 
712


CONSUMER PCI CREDIT QUALITY INDICATORS  Our consumer PCI loans were aggregated into several pools of loans at acquisition. Below, we have provided credit quality indicators based on the unpaid principal balance (adjusted for write-downs) of the individual loans included in the pool, but we have not allocated the remaining purchase accounting adjustments, which were established at a pool level. Table 5.23 provides the delinquency status of consumer PCI loans.
 
Table 5.23: Consumer PCI Loans by Delinquency Status
  
September 30, 2016
 
 
December 31, 2015
 
(in millions)
Real estate
1-4 family
first
mortgage

 
Real estate
1-4 family
junior lien
mortgage

 
Total

 
Real estate
1-4 family
first
mortgage

 
Real estate
1-4 family
junior lien
mortgage

 
Total

By delinquency status:
 
 
 
 
 
 
 
 
 
 
 
 Current-29 DPD and still accruing
$
16,779

 
179

 
16,958

 
18,086

 
202

 
18,288

30-59 DPD and still accruing
1,486

 
7

 
1,493

 
1,686

 
7

 
1,693

60-89 DPD and still accruing
671

 
3

 
674

 
716

 
3

 
719

90-119 DPD and still accruing
229

 
1

 
230

 
293

 
2

 
295

120-179 DPD and still accruing
254

 
2

 
256

 
319

 
3

 
322

180+ DPD and still accruing
2,271

 
8

 
2,279

 
3,035

 
12

 
3,047

Total consumer PCI loans (adjusted unpaid principal balance)
$
21,690

 
200

 
21,890

 
24,135

 
229

 
24,364

Total consumer PCI loans (carrying value)
$
16,830

 
42

 
16,872

 
19,190

 
69

 
19,259


Table 5.24 provides FICO scores for consumer PCI loans.
Table 5.24: Consumer PCI Loans by FICO
 
September 30, 2016
 
 
December 31, 2015
 
(in millions)
Real estate
1-4 family
first
mortgage

 
Real estate
1-4 family
junior lien
mortgage

 
Total

 
Real estate
1-4 family
first
mortgage

 
Real estate
1-4 family
junior lien
mortgage

 
Total

By FICO:
 
 
 
 
 
 
 
 
 
 
 
< 600
$
4,643

 
50

 
4,693

 
5,737

 
52

 
5,789

600-639
3,167

 
26

 
3,193

 
4,754

 
38

 
4,792

640-679
4,129

 
38

 
4,167

 
6,208

 
48

 
6,256

680-719
3,255

 
38

 
3,293

 
4,283

 
43

 
4,326

720-759
1,801

 
25

 
1,826

 
1,914

 
24

 
1,938

760-799
933

 
16

 
949

 
910

 
13

 
923

800+
257

 
4

 
261

 
241

 
3

 
244

No FICO available
3,505

 
3

 
3,508

 
88

 
8

 
96

Total consumer PCI loans (adjusted unpaid principal balance)
$
21,690

 
200

 
21,890

 
24,135

 
229

 
24,364

Total consumer PCI loans (carrying value)
$
16,830

 
42

 
16,872

 
19,190

 
69

 
19,259



Table 5.25 shows the distribution of consumer PCI loans by LTV for real estate 1-4 family first mortgages and by CLTV for real estate 1-4 family junior lien mortgages. 
Table 5.25: Consumer PCI Loans by LTV/CLTV
 
September 30, 2016
 
 
December 31, 2015
 
(in millions)
Real estate
1-4 family
first
mortgage
by LTV

 
Real estate
1-4 family
junior lien
mortgage
by CLTV

 
Total

 
Real estate
1-4 family
first
mortgage
by LTV

 
Real estate
1-4 family
junior lien
mortgage
by CLTV

 
Total

By LTV/CLTV:
 
 
 
 
 
 
 
 
 
 
 
0-60%
$
7,252

 
36

 
7,288

 
5,437

 
32

 
5,469

60.01-80%
9,384

 
78

 
9,462

 
10,036

 
65

 
10,101

80.01-100%
3,871

 
56

 
3,927

 
6,299

 
80

 
6,379

100.01-120% (1)
926

 
21

 
947

 
1,779

 
36

 
1,815

> 120% (1)
255

 
8

 
263

 
579

 
15

 
594

No LTV/CLTV available
2

 
1

 
3

 
5

 
1

 
6

Total consumer PCI loans (adjusted unpaid principal balance)
$
21,690

 
200

 
21,890

 
24,135

 
229

 
24,364

Total consumer PCI loans (carrying value)
$
16,830

 
42

 
16,872

 
19,190

 
69

 
19,259

(1)
Reflects total loan balances with LTV/CLTV amounts in excess of 100%. In the event of default, the loss content would generally be limited to only the amount in excess of 100% LTV/CLTV.