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Loans
9 Months Ended
Sep. 30, 2012
Loans

6.    Loans

 

Loans consisted of the following:

 

     

September 30,

2012

    

December 31,

2011

 
     (in millions)  

Commercial loans:

     

Construction and other real estate

   $ 7,920       $ 7,860   

Business banking and middle markets enterprises

     12,497         10,225   

Global banking(1)

     19,011         12,658   

Other commercial

     3,140         2,906   
  

 

 

    

 

 

 

Total commercial

     42,568         33,649   
  

 

 

    

 

 

 

Consumer loans:

     

Home equity mortgages

     2,387         2,563   

Other residential mortgages

     15,086         14,113   

Credit cards

     796         828   

Other consumer

     615         714   
  

 

 

    

 

 

 

Total consumer

     18,884         18,218   
  

 

 

    

 

 

 

Total loans

   $ 61,452       $ 51,867   
  

 

 

    

 

 

 

 

 

(1) 

Represents large multinational firms including globally focused U.S. corporate and financial institutions and USD lending to select high quality Latin American and other multinational customers managed by HSBC on a global basis.

Net deferred origination costs totaled $30 million and $48 million at September 30, 2012 and December 31, 2011, respectively.

At September 30, 2012 and December 31, 2011, we had net unamortized premium on our loans of $29 million and $28 million, respectively. We amortized net premiums of $2 million and $20 million on our loans for the three and nine months ended September 30, 2012, respectively, compared to $10 million and $38 million on our loans for the three and nine months ended September 30, 2011.

 

Age Analysis of Past Due Loans  The following table summarizes the past due status of our loans at September 30, 2012 and December 31, 2011. The aging of past due amounts are determined based on the contractual delinquency status of payments under the loan. An account is generally considered to be contractually delinquent when payments have not been made in accordance with the loan terms. Delinquency status may be affected by customer account management policies and practices such as re-age or modification.

 

     Days Past Due                       
At September 30, 2012    1 - 29 days      30 - 89 days      90+ days      Total Past Due      Current      Total Loans  
     (in millions)  

Commercial loans:

                 

Construction and other real estate

   $ 94       $ 72       $ 105       $ 271       $ 7,649       $ 7,920   

Business banking and middle market enterprises

     486         82         52         620         11,877         12,497   

Global banking

     284         -         8         292         18,719         19,011   

Other commercial

     605         9         26         640         2,500         3,140   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     1469         163         191         1,823         40,745         42,568   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consumer loans:

                 

HELOC and home equity mortgages

     380         20         86         486         1,901         2,387   

Other residential mortgages

     104         460         907         1,471         13,615         15,086   

Credit cards

     29         15         15         59         737         796   

Other consumer

     7         5         32         44         571         615   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

     520         500         1,040         2,060         16,824         18,884   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 1,989       $ 663       $ 1,231       $ 3,883       $ 57,569       $ 61,452   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Days Past Due                       
At December 31, 2011    1 - 29 days      30 - 89 days      90+ days      Total Past Due      Current      Total Loans  
     (in millions)  

Commercial loans:

                 

Construction and other real estate

   $ 72       $ 31       $ 231       $ 334       $ 7,526       $ 7,860   

Business banking and middle market enterprises

     615         58         71         744         9,481         10,225   

Global banking

     898         34         74         1,006         11,652         12,658   

Other commercial

     350         84         21         455         2,451         2,906   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     1,935         207         397         2,539         31,110         33,649   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Consumer loans:

                 

HELOC and home equity mortgages

     181         54         89         324         2,239         2,563   

Other residential mortgages

     109         526         815         1,450         12,663         14,113   

Credit cards

     37         20         20         77         751         828   

Other consumer

     11         6         35         52         662         714   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

     338         606         959         1,903         16,315         18,218   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total loans

   $ 2,273       $ 813       $ 1,356       $ 4,442       $ 47,425         51,867   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Nonaccrual Loans  Nonaccrual loans totaled $1.8 billion at both September 30, 2012 and December 31, 2011, respectively. Interest income that would have been recorded if such nonaccrual loans had been current and in accordance with contractual terms was approximately $37 million and $92 million for the three and nine months ended September 30, 2012, respectively, compared to $27 million and $86 million for the three and nine months ended September 30, 2011, respectively. Interest income (expense) that was included in finance and other interest income on these loans was $10 million for both the three and nine months ended September 30, 2012, respectively, compared to $4 million and $13 million for the three and nine months ended September 30, 2011, respectively. For an analysis of reserves for credit losses, see Note 7, “Allowance for Credit Losses.”

Nonaccrual loans and accruing receivables 90 days or more delinquent are summarized in the following table:

 

     

September 30,

2012

    

December 31,

2011

 
     (in millions)  

Nonaccrual loans:

     

Commercial:

     

Real Estate:

     

Construction and land loans

   $ 98       $ 103   

Other real estate

     353         512   

Business banking and middle markets enterprises

     46         58   

Global banking

     142         137   

Other commercial

     19         15   
  

 

 

    

 

 

 

Total commercial

     658         825   
  

 

 

    

 

 

 

Consumer:

     

Residential mortgages, excluding home equity mortgages

     979         815   

Home equity mortgages

     97         89   
  

 

 

    

 

 

 

Total residential mortgages(1)(2)

     1,076         904   

Other consumer loans

     5         8   
  

 

 

    

 

 

 

Total consumer loans

     1,081         912   
  

 

 

    

 

 

 

Nonaccrual loans held for sale

     51         91   
  

 

 

    

 

 

 

Total nonaccruing loans

     1,790         1,828   
  

 

 

    

 

 

 

Accruing loans contractually past due 90 days or more:

     

Commercial:

     

Real Estate:

     

Construction and land loans

     -         -   

Other real estate

     1         1   

Business banking and middle market enterprises

     7         11   

Other commercial

     1         2   
  

 

 

    

 

 

 

Total commercial

     9         14   
  

 

 

    

 

 

 

Consumer:

     

Credit card receivables

     15         20   

Other consumer

     27         27   
  

 

 

    

 

 

 

Total consumer loans

     42         47   
  

 

 

    

 

 

 

Total accruing loans contractually past due 90 days or more

     51         61   
  

 

 

    

 

 

 

Total nonperforming loans

   $ 1,841       $ 1,889   
  

 

 

    

 

 

 

 

 

(1) 

Nonaccrual residential mortgages includes all receivables which are 90 or more days contractually delinquent as well as second lien loans where the first lien loan that we own or service is 90 or more days contractually delinquent.

 

(2) 

In the third quarter of 2012, we reclassified $83 million of residential mortgage loans discharged under Chapter 7 bankruptcy and not re-affirmed to nonaccrual, consistent with recently issued regulatory guidance. Interest income reversed on these loans was not material.

 

Impaired Loans  A loan is considered to be impaired when it is deemed probable that not all principal and interest amounts due according to the contractual terms of the loan agreement will be collected. Probable losses from impaired loans are quantified and recorded as a component of the overall allowance for credit losses. Commercial and consumer loans for which we have modified the loan terms as part of a troubled debt restructuring are considered to be impaired loans. Additionally, commercial loans in nonaccrual status, or that have been partially charged-off or assigned a specific allowance for credit losses are also considered impaired loans.

Troubled debt restructurings  Troubled debt restructurings (“TDR Loans”) represent loans for which the original contractual terms have been modified to provide for terms that are less than what we would be willing to accept for new loans with comparable risk because of deterioration in the borrower’s financial condition.

Modifications to consumer and commercial loans may include changes to one or more terms of the loan, including, but not limited to, a change in interest rate, extension of the amortization period, reduction in payment amount and partial forgiveness or deferment of principal. A substantial amount of our modifications involve interest rate reductions which lower the amount of interest income we are contractually entitled to receive in future periods. Through lowering the interest rate and other loan term changes, we believe we are able to increase the amount of cash flow that will ultimately be collected from the loan, given the borrower’s financial condition. TDR Loans are reserved for either based on the present value of expected future cash flows discounted at the loans’ original effective interest rate which generally results in a higher reserve requirement for these loans or in the case of certain secured commercial loans, the estimated fair value of the underlying collateral. Once a consumer loan is classified as a TDR Loan, it continues to be reported as such until it is paid off or charged-off. For commercial loans, if subsequent performance is in accordance with the new terms and such terms reflect current market rates at the time of restructure, they will no longer be reported as a TDR loan beginning in the year after restructure.

The following table presents information about receivables which were modified during the three and nine months ended September 30, 2012 and as a result of this action became classified as TDR Loans.

 

     Three Months  Ended
September 30,
     Nine Months  Ended
September 30,
 
          2012              2011              2012              2011      
     (in millions)  

Commercial loans:

           

Construction and other real estate

   $ 38       $ 27       $ 105       $ 40   

Business banking and middle market enterprises

     1         -         22         6   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     39         27         127         46   
  

 

 

    

 

 

    

 

 

    

 

 

 

Consumer loans:

           

Residential mortgages

     220         56         328         189   

Credit cards

     1         2         3         5   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

     221         58         331         194   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 260       $ 85       $ 458       $ 240   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

The following tables present information about our TDR Loans and the related credit loss reserves for TDR Loans:

 

     

September 30,

2012

    

December 31,

2011

 
     (in millions)  

TDR Loans(1)(2):

     

Commercial loans:

     

Construction and other real estate

   $ 375       $ 342   

Business banking and middle market enterprises

     84         94   

Other commercial

     33         37   
  

 

 

    

 

 

 

Total commercial

     492         473   
  

 

 

    

 

 

 

Consumer loans:

     

Residential mortgages

     883         608   

Credit cards

     16         21   
  

 

 

    

 

 

 

Total consumer

     899         629   
  

 

 

    

 

 

 

Total TDR Loans(3):

   $ 1,391       $ 1,102   
  

 

 

    

 

 

 

 

     

September 30,

2012

    

December 31,

2011

 
     (in millions)  

Allowance for credit losses on TDR Loans(4):

     

Commercial loans:

     

Construction and other real estate

   $ 30       $ 17   

Business banking and middle market enterprises

     3         3   
  

 

 

    

 

 

 

Total commercial

     33         20   
  

 

 

    

 

 

 

Consumer loans:

     

Residential mortgages

     113         94   

Credit cards

     5         7   
  

 

 

    

 

 

 

Total consumer

     118         101   
  

 

 

    

 

 

 

Total Allowance for credit losses on TDR Loans

   $ 151       $ 121   
  

 

 

    

 

 

 

 

 

(1) 

TDR Loans are considered to be impaired loans. For consumer loans, all such loans are considered impaired loans regardless of accrual status. For commercial loans, impaired loans include other loans in addition to TDRs which totaled $378 million and $614 million at September 30, 2012 and December 31, 2011, respectively.

 

(2) 

The TDR Loan balances included in the table above reflect the current carrying amount of TDR Loans and includes all basis adjustments on the loan, such as unearned income, unamortized deferred fees and costs on originated loans, partial charge-offs and premiums or discounts on purchased loans. The following table reflects the unpaid principal balance of TDR Loans:

 

     

September 30,

2012

    

December 31,

2011

 
     (in millions)  

Commercial loans:

     

Construction and other real estate

   $ 407       $ 393   

Business banking and middle market enterprises

     124         147   

Other commercial

     36         40   
  

 

 

    

 

 

 

Total commercial

     567         580   
  

 

 

    

 

 

 

Consumer loans:

     

Residential mortgages

     1,018         682   

Credit cards

     16         20   
  

 

 

    

 

 

 

Total consumer

     1,034         702   
  

 

 

    

 

 

 

Total

   $ 1,601       $ 1,282   
  

 

 

    

 

 

 

 

(3) 

Includes balances of $525 million and $331 million at September 30, 2012 and December 31, 2011, respectively, which are classified as nonaccrual loans.

 

(4) 

Included in the allowance for credit losses.

In the third quarter of 2012, we added $186 million of loans discharged under Chapter 7 bankruptcy and not re-affirmed to our residential mortgage TDR Loan balances, consistent with recently issued regulatory guidance. The impact on the allowance for credit losses was insignificant. These loans will be written down to the lower of amortized cost or fair value of the collateral less cost to sell during the fourth quarter of 2012.

Additional information relating to TDR Loans is presented in the table below.

 

     Three Months  Ended
September 30,
     Nine Months  Ended
September 30,
 
          2012              2011              2012              2011      
     (in millions)  

Average balance of TDR Loans:

           

Commercial loans:

           

Construction and other real estate

   $ 364       $ 330       $ 361       $ 360   

Business banking and middle market enterprises

     85         87         92         88   

Other commercial

     34         44         34         47   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     483         461         487         495   
  

 

 

    

 

 

    

 

 

    

 

 

 

Consumer loans:

           

Residential mortgages

     745         550         676         529   

Credit cards

     17         23         16         24   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

     762         573         692         553   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total average balance of TDR Loans

   $ 1,245       $ 1,034       $ 1,179       $ 1,048   
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest income recognized on TDR Loans:

           

Commercial loans:

           

Construction and other real estate

   $ 2       $ 2       $ 6       $ 7   

Other commercial

     3         1         6         4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     5         3         12         11   
  

 

 

    

 

 

    

 

 

    

 

 

 

Consumer loans:

           

Residential mortgages

     8         5         22         15   

Credit cards

     -         -         -         1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

     8         5         22         16   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest income recognized on TDR Loans

   $ 13       $ 8       $ 34       $ 27   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

The following table presents loans which were classified as TDR Loans during the previous 12 months which became 90 days or greater contractually delinquent (for consumer loans 60 days or greater contractually delinquent) during the three and nine months ended September 30, 2012:

 

     Three Months  Ended
September 30,
     Nine Months  Ended
September 30,
 
          2012              2011              2012              2011      
     (in millions)  

Commercial loans:

           

Construction and other real estate

   $ -       $ -       $ -       $ 48   

Business banking and middle market enterprises

     -         -         -         -   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

     -         -         -         48   
  

 

 

    

 

 

    

 

 

    

 

 

 

Consumer loans:

           

Residential mortgages

     57         4         159         9   

Credit cards

     -         1         -         3   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

     57         5         159         12   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 57       $ 5       $ 159       $ 60   
  

 

 

    

 

 

    

 

 

    

 

 

 

Impaired commercial loans  Impaired commercial loan statistics are summarized in the following table:

 

     

Amount with

Impairment

Reserves

    

Amount

without

Impairment

Reserves

    

Total Impaired

Commercial
Loans(1)(2)

    

Impairment

Reserve

 
     (in millions)  

At September 30, 2012:

           

Construction and other real estate

   $ 235       $ 298       $ 533       $ 102   

Business banking and middle market enterprises

     58         50         108         10   

Global banking

     125         18         143         15   

Other commercial

     3         83         86         1   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 421       $ 449       $ 870       $ 128   
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2011:

           

Construction and other real estate

   $ 391       $ 342       $ 733       $ 114   

Business banking and middle market enterprises

     68         59         127         12   

Global banking

     137         -         137         90   

Other commercial

     1         89         90         -   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 597       $ 490       $ 1,087       $ 216   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

(1) 

Includes impaired commercial loans which are also considered TDR Loans as follows:

 

     

September 30,

2012

    

December 31,

2011

 
     (in millions)  

Construction and other real estate

   $ 375       $ 342   

Business banking and middle market enterprises

     84         94   

Other commercial

     33         37   
  

 

 

    

 

 

 

Total

   $ 492       $ 473   
  

 

 

    

 

 

 

 

(2) 

The impaired commercial loan balances included in the table above reflect the current carrying amount of the loan and includes all basis adjustments, such as unamortized deferred fees and costs on originated loans, any premiums or discounts and any principal write-downs. The unpaid principal balance of impaired commercial loans included in the table above are as follows:

 

     

September 30,

2012

    

December 31,

2011

 
     (in millions)  

Construction and other real estate

   $ 565       $ 784   

Business banking and middle market enterprises

     148         180   

Global banking

     143         137   

Other commercial

     89         93   
  

 

 

    

 

 

 

Total

   $ 945       $ 1,194   
  

 

 

    

 

 

 

The following table presents information about average impaired commercial loan balances and interest income recognized on the impaired commercial loans:

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
          2012              2011              2012              2011      
     (in millions)  

Average balance of impaired commercial loans:

           

Construction and other real estate

   $ 562       $ 703       $ 628       $ 745   

Business banking and middle market enterprises

     112         156         122         157   

Global banking

     129         111         103         100   

Other commercial

     87         123         88         116   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total average balance of impaired commercial loans

   $ 890       $ 1,093       $ 941       $ 1,118   
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest income recognized on impaired commercial loans:

           

Construction and other real estate

   $ 5       $ 1       $ 8       $ 5   

Business banking and middle market enterprises

     2         1         4         3   

Other commercial

     1         1         2         2   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total interest income recognized on impaired commercial loans

   $ 8       $ 3       $ 14       $ 10   
  

 

 

    

 

 

    

 

 

    

 

 

 

Commercial Loan Credit Quality Indicators  The following credit quality indicators are monitored for our commercial loan portfolio:

Criticized asset classifications  These classifications are based on the risk rating standards of our primary regulator. Problem loans are assigned various criticized facility grades. We also assign obligor grades which are used under our allowance for credit losses methodology. Criticized assets for commercial loans are summarized in the following table:

 

      Special Mention      Substandard      Doubtful      Total  
     (in millions)  

At September 30, 2012:

           

Construction and other real estate

   $ 680       $ 782       $ 116       $ 1,578   

Business banking and middle market enterprises

     383         155         9         547   

Global banking

     99         83         124         306   

Other commercial

     38         75         8         121   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

   $ 1,200       $ 1,095       $ 257       $ 2,552   
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2011:

           

Construction and other real estate

   $ 1,009       $ 990       $ 186       $ 2,185   

Business banking and middle market enterprises

     445         241         12         698   

Global banking

     45         397         109         551   

Other commercial

     99         131         -         230   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

   $ 1,598       $ 1,759       $ 307       $ 3,664   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Nonperforming  The status of our commercial loan portfolio is summarized in the following table:

 

     

Performing

Loans

    

Nonaccrual

Loans

    

Accruing Loans

Contractually Past

Due 90 days or More

     Total  
     (in millions)  

At September 30, 2012:

           

Construction and other real estate

   $ 7,468       $ 451       $ 1       $ 7,920   

Business banking and middle market enterprise

     12,444         46         7         12,497   

Global banking

     18,869         142         -         19,011   

Other commercial

     3,120         19         1         3,140   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

   $ 41,901       $ 658       $ 9       $ 42,568   
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2011:

           

Construction and other real estate

   $ 7,244       $ 615       $ 1       $ 7,860   

Business banking and middle market enterprise

     10,156         58         11         10,225   

Global banking

     12,521         137         -         12,658   

Other commercial

     2,889         15         2         2,906   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total commercial

   $ 32,810       $ 825       $ 14       $ 33,649   
  

 

 

    

 

 

    

 

 

    

 

 

 

Credit risk profile  The following table shows the credit risk profile of our commercial loan:

 

      Investment  Grade(1)      Non-Investment Grade      Total  
     (in millions)  

At September 30, 2012:

        

Construction and other real estate

   $ 3,851       $ 4,069       $ 7,920   

Business banking and middle market enterprises

     6,271         6,226         12,497   

Global banking

     15,967         3,044         19,011   

Other commercial

     1,203         1,937         3,140   
  

 

 

    

 

 

    

 

 

 

Total commercial

   $ 27,292       $ 15,276       $ 42,568   
  

 

 

    

 

 

    

 

 

 

At December 31, 2011:

        

Construction and other real estate

   $ 3,133       $ 4,727       $ 7,860   

Business banking and middle market enterprises

     4,612         5,613         10,225   

Global banking

     9,712         2,946         12,658   

Other commercial

     843         2,063         2,906   
  

 

 

    

 

 

    

 

 

 

Total commercial

   $ 18,300       $ 15,349       $ 33,649   
  

 

 

    

 

 

    

 

 

 

 

 

(1) 

Investment grade includes commercial loans with borrowers that have credit ratings of at least BBB- or above or the equivalent based on our internal credit rating system.

 

Consumer Loan Credit Quality Indicators  The following credit quality indicators are monitored for our consumer loan portfolio:

Delinquency  The following table summarizes dollars of two-months-and-over contractual delinquency and as a percent of total loans and loans held for sale (“delinquency ratio”) for our consumer loan:

 

     September 30, 2012     December 31, 2011  
     

Dollars of

Delinquency

    

Delinquency

Ratio

   

Dollars of

Delinquency

    

Delinquency

Ratio

 
     (dollars are in millions)  

Consumer:

          

Residential mortgage, excluding home equity mortgages(1)

   $ 1,100         7.04   $ 1,101         7.19

Home equity mortgages

     67         2.81        99         2.89   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total residential mortgages

     1,167         6.48        1,200         6.41   

Credit card receivables

     22         2.76        28         2.25   

Other consumer

     29         4.26        30         3.17   
  

 

 

    

 

 

   

 

 

    

 

 

 

Total consumer

   $ 1,218         6.25   $ 1,258         6.01
  

 

 

    

 

 

   

 

 

    

 

 

 

 

 

(1) 

At September 30, 2012 and December 31, 2011, residential mortgage loan delinquency includes $970 million and $803 million, respectively, of loans that are carried at the lower of amortized cost or fair value of the collateral less cost to sell.

Nonperforming  The status of our consumer loan portfolio is summarized in the following table:

 

     

Performing

Loans

    

Nonaccrual

Loans

    

Accruing Loans

Contractually Past

Due 90 days or More

     Total  
     (in millions)  

At September 30, 2012:

           

Consumer:

           

Residential mortgage, excluding home equity mortgages(1)

   $ 14,107       $ 979       $ -       $ 15,086   

Home equity mortgages

     2,290         97         -         2,387   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total residential mortgages

     16,397         1,076         -         17,473   

Credit card receivables

     781         -         15         796   

Other consumer

     583         5         27         615   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

   $ 17,761       $ 1,081       $ 42       $ 18,884   
  

 

 

    

 

 

    

 

 

    

 

 

 

At December 31, 2011:

           

Consumer:

           

Residential mortgage, excluding home equity mortgages

   $ 13,298       $ 815       $ -       $ 14,113   

Home equity mortgages

     2,474         89         -         2,563   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total residential mortgages

     15,772         904         -         16,676   

Credit card receivables

     808         -         20         828   

Other consumer

     679         8         27         714   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consumer

   $ 17,259       $ 912       $ 47       $ 18,218   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

(1) 

In the third quarter of 2012, we reclassified $83 million of residential mortgage loans discharged under Chapter 7 bankruptcy and not re-affirmed to nonaccrual, consistent with recently issued regulatory guidance. Interest income reversed on these loans was not material.

 

Troubled debt restructurings  See discussion of impaired loans above for further details on this credit quality indicator.

Concentrations of Credit Risk  Our loan portfolio includes the following types of loans:

 

   

High loan-to-value (“LTV”) loans – Certain residential mortgages on primary residences with LTV ratios equal to or exceeding 90 percent at the time of origination and no mortgage insurance, which could result in the potential inability to recover the entire investment in loans involving foreclosed or damaged properties.

 

   

Interest-only loans – A loan which allows a customer to pay the interest-only portion of the monthly payment for a period of time which results in lower payments during the initial loan period. However, subsequent events affecting a customer’s financial position could affect the ability of customers to repay the loan in the future when the principal payments are required.

 

   

Adjustable rate mortgage (“ARM”) loans – A loan which allows us to adjust pricing on the loan in line with market movements. A customer’s financial situation and the general interest rate environment at the time of the interest rate reset could affect the customer’s ability to repay or refinance the loan after the adjustment.

The following table summarizes the balances of high LTV, interest-only and ARM loans in our loan portfolios, including certain loans held for sale, at September 30, 2012 and December 31, 2011, respectively. Loans may appear in more than one category.

 

     

September 30,

2012

    

December 31,

2011

 
     (in billions)  

Residential mortgage loans with high LTV and no mortgage insurance(1)

   $ .9       $ 1.1   

Interest-only residential mortgage loans

     4.0         3.9   

ARM loans(2)

     10.2         9.9   

 

 

(1) 

Residential mortgage loans with high LTV and no mortgage insurance includes both fixed rate and adjustable rate mortgages. Excludes $34 million and $68 million of sub-prime residential mortgage loans held for sale at September 30, 2012 and December 31, 2011, respectively.

 

(2) 

ARM loan balances above exclude $23 million and $28 million of sub-prime residential mortgage loans held for sale at September 30, 2012 and December 31, 2011, respectively. During the remainder of 2012 and during 2013, approximately $43 million and $334 million, respectively, of these ARM loans will experience their first interest rate reset.

 

Concentrations of first and second liens within the outstanding residential mortgage loan portfolio are summarized in the following table. Amounts in the table exclude closed end first lien loans held for sale of $0.5 billion and $2.0 billion at September 30, 2012 and December 31, 2011, respectively.

 

     

September 30,

2012

    

December 31,

2011

 
     (in millions)  

Closed end:

     

First lien

   $ 15,086       $ 14,113   

Second lien

     197         237   

Revolving:

     

Second lien

     2,190         2,326   
  

 

 

    

 

 

 

Total

   $ 17,473       $ 16,676