Loans

6 Months Ended

Jun. 30, 2017

NOTE 4—LOANS

Loan Portfolio Composition

Our loan portfolio consists of loans held for investment, including loans held in our consolidated trusts, and loans held for sale, and is divided into three portfolio segments: credit card, consumer banking and commercial banking. Credit card loans consist of domestic and international credit card loans. Consumer banking loans consist of auto, home and retail banking loans. Commercial banking loans consist of commercial and multifamily real estate, commercial and industrial, and small-ticket commercial real estate loans.

Our portfolio of loans held for investment also includes certain consumer and commercial loans acquired through business combinations that were recorded at fair value at acquisition and subsequently accounted for based on cash flows expected to be collected, which are referred to as PCI loans. See “Note 1—Summary of Significant Accounting Policies” in our 2016 Form 10-K for additional information on the accounting guidance for these loans.

Credit Quality

We closely monitor economic conditions and loan performance trends to manage and evaluate our exposure to credit risk. Trends in delinquency rates are an indicator, among other considerations, of credit risk within our loan portfolio. The level of nonperforming loans represents another indicator of the potential for future credit losses. Accordingly, key metrics we track and use in evaluating the credit quality of our loan portfolio include delinquency and nonperforming loan rates, as well as net charge-off rates and our internal risk ratings of larger balance commercial loans.

The table below presents the composition and an aging analysis of our loans held for investment portfolio as of June 30, 2017 and December 31, 2016. The delinquency aging includes all past due loans, both performing and nonperforming.

Table 4.1: Loan Portfolio Composition and Aging Analysis



	June 30, 2017
(Dollars in millions)	Current		30-59 Days		60-89 Days		> 90 Days		Total Delinquent Loans			PCI Loans		Total Loans
Credit Card:
Domestic credit card	$	89,493	$	1,105	$	726	$	1,542	$	3,373		$	0	$	92,866
International card businesses	8,415		121		67		121		309			0		8,724
Total credit card	97,908		1,226		793		1,663		3,682			0		101,590
Consumer Banking:
Auto	48,733		1,984		833		215		3,032			0		51,765
Home loan	7,203		34		13		126		173			12,348		19,724
Retail banking	3,421		16		5		19		40			23		3,484
Total consumer banking	59,357		2,034		851		360		3,245			12,371		74,973
Commercial Banking:
Commercial and multifamily real estate	27,334		39		0		29		68			26		27,428
Commercial and industrial	39,000		51		14		238		303			498		39,801
Total commercial lending	66,334		90		14		267		371			524		67,229
Small-ticket commercial real estate	434		2		1		6		9			0		443
Total commercial banking	66,768		92		15		273		380			524		67,672
Other loans	59		3		0		5		8			0		67
Total loans⁽¹⁾	$	224,092	$	3,355	$	1,659	$	2,301	$	7,315		$	12,895	$	244,302
% of Total loans	91.73%		1.37%		0.68%		0.94%		2.99		%	5.28%		100.00		%



	December 31, 2016
(Dollars in millions)	Current		30-59 Days		60-89 Days		> 90 Days		Total Delinquent Loans			PCI Loans		Total Loans
Credit Card:
Domestic credit card	$	93,279	$	1,153	$	846	$	1,840	$	3,839		$	2	$	97,120
International card businesses	8,115		124		72		121		317			0		8,432
Total credit card	101,394		1,277		918		1,961		4,156			2		105,552
Consumer Banking:
Auto	44,762		2,041		890		223		3,154			0		47,916
Home loan	6,951		44		20		141		205			14,428		21,584
Retail banking	3,477		22		7		20		49			28		3,554
Total consumer banking	55,190		2,107		917		384		3,408			14,456		73,054
Commercial Banking:
Commercial and multifamily real estate	26,536		45		0		0		45			28		26,609
Commercial and industrial	38,831		27		84		297		408			585		39,824
Total commercial lending	65,367		72		84		297		453			613		66,433
Small-ticket commercial real estate	473		7		1		2		10			0		483
Total commercial banking	65,840		79		85		299		463			613		66,916
Other loans	56		3		0		5		8			0		64
Total loans⁽¹⁾	$	222,480	$	3,466	$	1,920	$	2,649	$	8,035		$	15,071	$	245,586
% of Total loans	90.59%		1.41%		0.78%		1.08%		3.27		%	6.14%		100.00		%

__________


⁽¹⁾	Loans (other than PCI loans) include unearned income, unamortized premiums and discounts, and unamortized deferred fees and costs totaling $664 million and $558 million as of June 30, 2017 and December 31, 2016, respectively.

We pledge loan collateral at the FHLB to secure borrowing capacity. As of June 30, 2017 and December 31, 2016, we pledged loan collateral of $27.1 billion and $29.3 billion to secure borrowing capacity of $21.7 billion and $24.9 billion, respectively.

The following table presents the outstanding balance of loans 90 days or more past due that continue to accrue interest and loans classified as nonperforming as of June 30, 2017 and December 31, 2016.

Table 4.2: 90+ Day Delinquent Loans Accruing Interest and Nonperforming Loans⁽¹⁾



	June 30, 2017				December 31, 2016
(Dollars in millions)	> 90 Days and Accruing		Nonperforming Loans		> 90 Days and Accruing		Nonperforming Loans
Credit Card:
Domestic credit card	$	1,542	N/A		$	1,840	N/A
International card businesses	108		$	32	96		$	42
Total credit card	1,650		32		1,936		42
Consumer Banking:
Auto	0		273		0		223
Home loan	0		259		0		273
Retail banking	0		33		0		31
Total consumer banking	0		565		0		527



	June 30, 2017				December 31, 2016
(Dollars in millions)	> 90 Days and Accruing		Nonperforming Loans		> 90 Days and Accruing		Nonperforming Loans
Commercial Banking:
Commercial and multifamily real estate	$	0	$	34	$	0	$	30
Commercial and industrial	0		643		0		988
Total commercial lending	0		677		0		1,018
Small-ticket commercial real estate	0		9		0		4
Total commercial banking	0		686		0		1,022
Other loans	0		9		0		8
Total	$	1,650	$	1,292	$	1,936	$	1,599
% of Total loans	0.68%		0.53%		0.79%		0.65%

__________


⁽¹⁾	Nonperforming loans generally include loans that have been placed on nonaccrual status. PCI loans are excluded from loans reported as 90 days or more past due and accruing interest as well as nonperforming loans. See “Note 1—Summary of Significant Accounting Policies” in our 2016 Form 10-K for additional information on our policies for nonperforming loans.

Credit Card

Our credit card loan portfolio is highly diversified across millions of accounts and numerous geographies without significant individual exposure. We therefore generally manage credit risk based on portfolios with common risk characteristics. The risk in our credit card loan portfolio correlates to broad economic trends, such as unemployment rates and home values, as well as consumers’ financial condition, all of which can have a material effect on credit performance. The primary indicators we assess in monitoring the credit quality and risk of our credit card portfolio are delinquency and charge-off trends, including an analysis of loan migration between delinquency categories over time.

The table below displays the geographic profile of our credit card loan portfolio as of June 30, 2017 and December 31, 2016.

Table 4.3: Credit Card Risk Profile by Geographic Region



	June 30, 2017			December 31, 2016
(Dollars in millions)	Amount		% of Total⁽¹⁾	Amount		% of Total⁽¹⁾
Domestic credit card:
California	$	10,629	10.4%	$	11,068	10.5%
Texas	6,980		6.9	7,227		6.8
New York	6,780		6.7	7,090		6.7
Florida	6,269		6.2	6,540		6.2
Illinois	4,271		4.2	4,492		4.3
Pennsylvania	3,822		3.8	4,048		3.8
Ohio	3,436		3.4	3,654		3.5
New Jersey	3,313		3.3	3,488		3.3
Michigan	2,994		2.9	3,164		3.0
Other	44,372		43.6	46,349		43.9
Total domestic credit card	92,866		91.4	97,120		92.0
International card businesses:
Canada	5,750		5.7	5,594		5.3
United Kingdom	2,974		2.9	2,838		2.7
Total international card businesses	8,724		8.6	8,432		8.0
Total credit card	$	101,590	100.0%	$	105,552	100.0	%

__________


⁽¹⁾	Percentages by geographic region are calculated based on period-end amounts.

The table below presents net charge-offs for the three and six months ended June 30, 2017 and 2016.

Table 4.4: Credit Card Net Charge-Offs



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
(Dollars in millions)	Amount		Rate⁽¹⁾	Amount		Rate⁽¹⁾	Amount		Rate⁽¹⁾	Amount		Rate⁽¹⁾
Net charge-offs:⁽¹⁾
Domestic credit card	$	1,172	5.11%	$	874	4.07%	$	2,368	5.12%	$	1,761	4.12%
International card businesses	84		4.08	75		3.54	159		3.88	138		3.39
Total credit card	$	1,256	5.02	$	949	4.02	$	2,527	5.02	$	1,899	4.05

__________

⁽¹⁾

Net charge-offs consist of the unpaid principal balance that we determine to be uncollectible, net of recovered amounts. The net charge-off rate is calculated by dividing annualized net charge-offs by average balance of loans held for investment for the period for each loan category. Net charge-offs and the net charge-off rate are impacted periodically by fluctuations in recoveries, including loan sales.

Consumer Banking

Our consumer banking loan portfolio consists of auto, home and retail banking loans. Similar to our credit card loan portfolio, the risk in our consumer banking loan portfolio correlates to broad economic trends, such as unemployment rates, gross domestic product (“GDP”) and home values, as well as consumers’ financial condition, all of which can have a material effect on credit performance. Delinquency, nonperforming loans and charge-off trends are key indicators we assess in monitoring the credit quality and risk of our consumer banking loan portfolio.

The table below displays the geographic profile of our consumer banking loan portfolio, including PCI loans as of June 30, 2017 and December 31, 2016.

Table 4.5: Consumer Banking Risk Profile by Geographic Region



	June 30, 2017			December 31, 2016
(Dollars in millions)	Amount		% of Total⁽¹⁾	Amount		% of Total⁽¹⁾
Auto:
Texas	$	6,821	9.1%	$	6,304	8.6%
California	5,907		7.9	5,448		7.5
Florida	4,334		5.8	3,985		5.5
Georgia	2,657		3.5	2,506		3.4
Louisiana	2,255		3.0	2,159		3.0
Ohio	2,188		2.9	2,017		2.8
Illinois	2,161		2.9	2,065		2.8
Other	25,442		33.9	23,432		32.0
Total auto	51,765		69.0	47,916		65.6
Home loan:
California	4,398		5.9	4,993		6.8
New York	2,030		2.7	2,036		2.8
Maryland	1,325		1.8	1,409		1.9
Virginia	1,134		1.5	1,204		1.7
Illinois	1,110		1.5	1,218		1.7
New Jersey	1,041		1.4	1,112		1.5
Louisiana	911		1.2	985		1.3
Other	7,775		10.4	8,627		11.8
Total home loan	19,724		26.4	21,584		29.5
Retail banking:
Louisiana	973		1.3	1,010		1.4
New York	936		1.2	941		1.3
Texas	735		1.0	756		1.0
New Jersey	222		0.3	238		0.3
Maryland	185		0.2	190		0.3
Virginia	155		0.2	156		0.2
Other	278		0.4	263		0.4
Total retail banking	3,484		4.6	3,554		4.9
Total consumer banking	$	74,973	100.0%	$	73,054	100.0%

__________


⁽¹⁾	Percentages by geographic region are calculated based on period-end amounts.

The table below presents nonperforming loans in our consumer banking loan portfolio as of June 30, 2017 and December 31, 2016, as well as net charge-offs for the three and six months ended June 30, 2017 and 2016.

Table 4.6: Consumer Banking Net Charge-Offs and Nonperforming Loans⁽¹⁾



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
(Dollars in millions)	Amount		Rate⁽²⁾	Amount		Rate⁽²⁾	Amount		Rate⁽²⁾	Amount		Rate⁽²⁾
Net charge-offs:
Auto	$	215	1.70%	$	130	1.20%	$	414	1.67%	$	298	1.39%
Home loan⁽³⁾	2		0.04	5		0.09	4		0.03	8		0.07
Retail banking	15		1.71	11		1.26	32		1.81	23		1.31
Total consumer banking⁽³⁾	$	232	1.25	$	146	0.83	$	450	1.22	$	329	0.93



	June 30, 2017			December 31, 2016
(Dollars in millions)	Amount		Rate⁽⁴⁾	Amount		Rate⁽⁴⁾
Nonperforming loans:
Auto	$	273	0.53%	$	223	0.47	%
Home loan⁽⁵⁾	259		1.31	273		1.26
Retail banking	33		0.96	31		0.86
Total consumer banking⁽⁵⁾	$	565	0.75	$	527	0.72

__________

⁽¹⁾

In the second quarter of 2017, we implemented changes in accounting estimate impacting our charge-off practices for the treatment of certain loans within our consumer banking loan portfolio. The Auto net charge-offs amount includes approximately $48 million associated with implementing these changes, with an impact to the net charge-off rate of 38 basis points and 19 basis points for the three and six months ended June 30, 2017, respectively. Excluding this impact, the Auto net charge-off rate in those periods would have been 1.32% and 1.48%, respectively. The impact to the Consumer Banking net charge-off rate was 26 basis points and 13 basis points for the three and six months ended June 30, 2017, respectively. Excluding this impact, the Consumer Banking net charge-off rate in those periods would have been 0.99% and 1.09%, respectively. See “Note 1—Summary of Significant Accounting Policies” in this Report for additional information.


⁽²⁾	The net charge-off rate is calculated by dividing annualized net charge-offs by average balance of loans held for investment for the period for each loan category.

⁽³⁾

Excluding the impact of PCI loans, the net charge-off rates for our home loan and total consumer banking portfolios were 0.10% and 1.50%, respectively, for the three months ended June 30, 2017, compared to 0.31% and 1.09%, respectively, for the three months ended June 30, 2016; and 0.09% and 1.48%, respectively, for the six months ended June 30, 2017, compared to 0.24% and 1.24%, respectively, for the six months ended June 30, 2016.


⁽⁴⁾	Nonperforming loan rates are calculated based on nonperforming loans for each category divided by period-end total loans held for investment for each respective category.


⁽⁵⁾	Excluding the impact of PCI loans, the nonperforming loan rates for our home loan and total consumer banking portfolios were 3.50% and 0.90%, respectively, as of June 30, 2017, compared to 3.81% and 0.90%, respectively, as of December 31, 2016.

Home Loan

Our home loan portfolio consists of both first-lien and second-lien residential mortgage loans. In evaluating the credit quality and risk of our home loan portfolio, we monitor a variety of mortgage loan characteristics that may affect the default experience on this loan portfolio, such as vintage, geographic concentrations, lien priority and product type. Certain loan concentrations have experienced higher delinquency rates as a result of the significant decline in home prices after the peak in 2006 and subsequent rise in unemployment. These loan concentrations include loans originated between 2006 and 2008 in an environment of decreasing home sales, broadly declining home prices and more relaxed underwriting standards.

The following table presents the distribution of our home loan portfolio as of June 30, 2017 and December 31, 2016, based on selected key risk characteristics.

Table 4.7: Home Loan Risk Profile by Vintage, Geography, Lien Priority and Interest Rate Type



	June 30, 2017
	Loans			PCI Loans⁽¹⁾			Total Home Loans
(Dollars in millions)	Amount		% of Total⁽²⁾	Amount		% of Total⁽²⁾	Amount		% of Total⁽²⁾
Origination year:⁽³⁾
< = 2008	$	1,895	9.6%	$	8,410	42.6%	$	10,305	52.2%
2009	70		0.4	907		4.6	977		5.0
2010	72		0.4	1,280		6.5	1,352		6.9
2011	127		0.6	1,390		7.1	1,517		7.7
2012	795		4.0	209		1.1	1,004		5.1
2013	418		2.1	51		0.3	469		2.4
2014	513		2.6	29		0.1	542		2.7
2015	968		4.9	28		0.1	996		5.0
2016	1,680		8.5	23		0.1	1,703		8.6
2017	838		4.3	21		0.1	859		4.4
Total	$	7,376	37.4%	$	12,348	62.6%	$	19,724	100.0%
Geographic concentration:⁽⁴⁾
California	$	992	5.0%	$	3,406	17.3%	$	4,398	22.3%
New York	1,412		7.2	618		3.1	2,030		10.3
Maryland	610		3.1	715		3.6	1,325		6.7
Virginia	531		2.7	603		3.1	1,134		5.8
Illinois	136		0.7	974		4.9	1,110		5.6
New Jersey	393		2.0	648		3.3	1,041		5.3
Louisiana	891		4.5	20		0.1	911		4.6
Texas	788		4.0	87		0.4	875		4.4
Florida	169		0.8	661		3.4	830		4.2
Arizona	93		0.5	684		3.5	777		4.0
Other	1,361		6.9	3,932		19.9	5,293		26.8
Total	$	7,376	37.4%	$	12,348	62.6%	$	19,724	100.0	%
Lien type:
1^st lien	$	6,411	32.5%	$	12,102	61.4%	$	18,513	93.9%
2^nd lien	965		4.9	246		1.2	1,211		6.1
Total	$	7,376	37.4%	$	12,348	62.6%	$	19,724	100.0%
Interest rate type:
Fixed rate	$	3,645	18.5%	$	1,700	8.6%	$	5,345	27.1%
Adjustable rate	3,731		18.9	10,648		54.0	14,379		72.9
Total	$	7,376	37.4%	$	12,348	62.6%	$	19,724	100.0%



	December 31, 2016
	Loans			PCI Loans⁽¹⁾			Total Home Loans
(Dollars in millions)	Amount		% of Total⁽²⁾	Amount		% of Total⁽²⁾	Amount		% of Total⁽²⁾
Origination year:⁽³⁾
< = 2008	$	2,166	10.0%	$	9,684	44.9%	$	11,850	54.9%
2009	80		0.4	1,088		5.0	1,168		5.4
2010	82		0.4	1,562		7.2	1,644		7.6
2011	139		0.6	1,683		7.8	1,822		8.4
2012	969		4.5	268		1.2	1,237		5.7
2013	465		2.2	59		0.2	524		2.4
2014	557		2.6	31		0.2	588		2.8
2015	1,024		4.7	30		0.2	1,054		4.9
2016	1,674		7.8	23		0.1	1,697		7.9
Total	$	7,156	33.2%	$	14,428	66.8%	$	21,584	100.0%
Geographic concentration:⁽⁴⁾
California	$	976	4.5%	$	4,017	18.6%	$	4,993	23.1%
New York	1,343		6.2	693		3.2	2,036		9.4
Maryland	585		2.7	824		3.9	1,409		6.6
Illinois	108		0.5	1,110		5.1	1,218		5.6
Virginia	490		2.3	714		3.3	1,204		5.6
New Jersey	379		1.8	733		3.4	1,112		5.2
Louisiana	962		4.5	23		0.1	985		4.6
Florida	159		0.7	772		3.6	931		4.3
Arizona	89		0.4	799		3.7	888		4.1
Texas	725		3.4	98		0.4	823		3.8
Other	1,340		6.2	4,645		21.5	5,985		27.7
Total	$	7,156	33.2%	$	14,428	66.8%	$	21,584	100.0	%
Lien type:
1^st lien	$	6,182	28.7%	$	14,159	65.5%	$	20,341	94.2%
2^nd lien	974		4.5	269		1.3	1,243		5.8
Total	$	7,156	33.2%	$	14,428	66.8%	$	21,584	100.0%
Interest rate type:
Fixed rate	$	3,394	15.8%	$	1,822	8.4%	$	5,216	24.2%
Adjustable rate	3,762		17.4	12,606		58.4	16,368		75.8
Total	$	7,156	33.2%	$	14,428	66.8%	$	21,584	100.0%

__________


⁽¹⁾	The PCI loan balances with an origination date in the years subsequent to 2012 represent refinancing of previously acquired home loans.


⁽²⁾	Percentages within each risk category are calculated based on period-end amounts.


⁽³⁾	Modified loans are reported in the origination year of the initial borrowing.


⁽⁴⁾	States listed represent those that have the highest individual concentration of home loans.

Our recorded investment in home loans that are in process of foreclosure was $384 million and $382 million as of June 30, 2017 and December 31, 2016, respectively. We commence the foreclosure process on home loans when a borrower becomes at least 120 days delinquent in accordance with Consumer Financial Protection Bureau regulations. Foreclosure procedures and timelines vary according to state laws. As of June 30, 2017 and December 31, 2016, the carrying value of the foreclosed residential real estate properties we hold and report as other assets on our consolidated balance sheets totaled $48 million and $69 million, respectively.

Commercial Banking

We evaluate the credit risk of commercial loans using a dual risk rating system. We assign internal risk ratings to loans based on relevant information about the ability of the borrowers to repay their debt. In determining the risk rating of a particular loan, some of the factors considered are the borrower’s current financial condition, historical and projected future credit performance, prospects for support from financially responsible guarantors, the estimated realizable value of any collateral and current economic trends. The scale based on our internal risk rating system is as follows:


•	Noncriticized: Loans that have not been designated as criticized, frequently referred to as “pass” loans.


•	Criticized performing: Loans in which the financial condition of the obligor is stressed, affecting earnings, cash flows or collateral values. The borrower currently has adequate capacity to meet near-term obligations; however, the stress, left unabated, may result in deterioration of the repayment prospects at some future date.

•

Criticized nonperforming: Loans that are not adequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Loans classified as criticized nonperforming have a well-defined weakness, or weaknesses, which jeopardize the full repayment of the debt. These loans are characterized by the distinct possibility that we will sustain a credit loss if the deficiencies are not corrected and are generally placed on nonaccrual status.

We use our internal risk rating system for regulatory reporting, determining the frequency of credit exposure reviews, and evaluating and determining the allowance for loan and lease losses for commercial loans. Loans of $1 million or more that are designated as criticized performing and criticized nonperforming are reviewed quarterly by management to determine if they are appropriately classified/rated and whether any impairment exists. Noncriticized loans greater than $1 million are specifically reviewed, at least annually, to determine the appropriate risk rating. In addition, we evaluate the risk rating during the renewal process of any loan or if a loan becomes past due.

The following table presents the geographic distribution and internal risk ratings of our commercial loan portfolio as of June 30, 2017 and December 31, 2016.

Table 4.8: Commercial Banking Risk Profile by Geographic Region and Internal Risk Rating



	June 30, 2017
(Dollars in millions)	Commercial and Multifamily Real Estate		% of Total⁽¹⁾	Commercial and Industrial		% of Total⁽¹⁾		Small-Ticket Commercial Real Estate		% of Total⁽¹⁾	Total Commercial Banking		% of Total⁽¹⁾
Geographic concentration:⁽²⁾
Northeast	$	15,636	57.0%	$	8,863	22.3%		$	274	61.9%	$	24,773	36.6%
Mid-Atlantic	3,212		11.7	3,896		9.8		16		3.6	7,124		10.5
South	3,924		14.3	15,100		37.9		28		6.3	19,052		28.2
Other	4,656		17.0	11,942		30.0		125		28.2	16,723		24.7
Total	$	27,428	100.0%	$	39,801	100.0%		$	443	100.0%	$	67,672	100.0%
Internal risk rating:⁽³⁾
Noncriticized	$	26,930	98.2%	$	36,439	91.5%		$	433	97.8%	$	63,802	94.3%
Criticized performing	438		1.6	2,221		5.6		1		0.2	2,660		3.9
Criticized nonperforming	34		0.1	643		1.6		9		2.0	686		1.0
PCI loans	26		0.1	498		1.3		0		0.0	524		0.8
Total	$	27,428	100.0%	$	39,801	100.0	%	$	443	100.0%	$	67,672	100.0%



	December 31, 2016
(Dollars in millions)	Commercial and Multifamily Real Estate		% of Total⁽¹⁾	Commercial and Industrial		% of Total⁽¹⁾	Small-Ticket Commercial Real Estate		% of Total⁽¹⁾	Total Commercial Banking		% of Total⁽¹⁾
Geographic concentration:⁽²⁾
Northeast	$	15,714	59.0%	$	9,628	24.2%	$	298	61.7%	$	25,640	38.3%
Mid-Atlantic	3,024		11.4	3,450		8.7	16		3.3	6,490		9.7
South	4,032		15.2	15,193		38.1	34		7.0	19,259		28.8
Other	3,839		14.4	11,553		29.0	135		28.0	15,527		23.2
Total	$	26,609	100.0%	$	39,824	100.0%	$	483	100.0%	$	66,916	100.0%
Internal risk rating:⁽³⁾
Noncriticized	$	26,309	98.9%	$	36,046	90.5%	$	473	97.9%	$	62,828	93.9%
Criticized performing	242		0.9	2,205		5.5	6		1.3	2,453		3.7
Criticized nonperforming	30		0.1	988		2.5	4		0.8	1,022		1.5
PCI loans	28		0.1	585		1.5	0		0.0	613		0.9
Total	$	26,609	100.0%	$	39,824	100.0%	$	483	100.0%	$	66,916	100.0%

__________


⁽¹⁾	Percentages calculated based on total loans held for investment in each respective loan category using period-end amounts.


⁽²⁾	Geographic concentration is generally determined by the location of the borrower’s business or the location of the collateral associated with the loan. Northeast consists of CT, MA, ME, NH, NJ, NY, PA and VT. Mid-Atlantic consists of DC, DE, MD, VA and WV. South consists of AL, AR, FL, GA, KY, LA, MO, MS, NC, SC, TN and TX.


⁽³⁾	Criticized exposures correspond to the “Special Mention,” “Substandard” and “Doubtful” asset categories defined by banking regulatory authorities.

Impaired Loans

The following table presents information about our impaired loans, excluding PCI loans, which are reported separately as of June 30, 2017, and December 31, 2016, and for the three and six months ended June 30, 2017 and 2016.

Table 4.9: Impaired Loans⁽¹⁾



	June 30, 2017
(Dollars in millions)	With an Allowance		Without an Allowance		Total Recorded Investment		Related Allowance		Net Recorded Investment		Unpaid Principal Balance
Credit Card:
Domestic credit card	$	589	$	0	$	589	$	189	$	400	$	575
International card businesses	156		0		156		76		80		151
Total credit card⁽²⁾	745		0		745		265		480		726
Consumer Banking:
Auto⁽³⁾	311		172		483		28		455		766
Home loan	235		114		349		18		331		444
Retail banking	48		10		58		10		48		62
Total consumer banking	594		296		890		56		834		1,272
Commercial Banking:
Commercial and multifamily real estate	107		30		137		8		129		140
Commercial and industrial	928		192		1,120		133		987		1,551
Total commercial lending	1,035		222		1,257		141		1,116		1,691
Small-ticket commercial real estate	8		0		8		0		8		10
Total commercial banking	1,043		222		1,265		141		1,124		1,701
Total	$	2,382	$	518	$	2,900	$	462	$	2,438	$	3,699



	December 31, 2016
(Dollars in millions)	With an Allowance		Without an Allowance		Total Recorded Investment		Related Allowance		Net Recorded Investment		Unpaid Principal Balance
Credit Card:
Domestic credit card	$	581	$	0	$	581	$	174	$	407	$	566
International card businesses	134		0		134		65		69		129
Total credit card⁽²⁾	715		0		715		239		476		695
Consumer Banking:
Auto⁽³⁾	316		207		523		24		499		807
Home loan	241		117		358		19		339		464
Retail banking	52		10		62		14		48		65
Total consumer banking	609		334		943		57		886		1,336
Commercial Banking:
Commercial and multifamily real estate	83		29		112		7		105		112
Commercial and industrial	1,249		144		1,393		162		1,231		1,444
Total commercial lending	1,332		173		1,505		169		1,336		1,556
Small-ticket commercial real estate	4		0		4		0		4		4
Total commercial banking	1,336		173		1,509		169		1,340		1,560
Total	$	2,660	$	507	$	3,167	$	465	$	2,702	$	3,591



	Three Months Ended				Six Months Ended
	June 30, 2017				June 30, 2017
(Dollars in millions)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Credit Card:
Domestic credit card	$	588	$	16	$	586	$	31
International card businesses	152		2		146		5
Total credit card⁽²⁾	740		18		732		36
Consumer Banking:
Auto⁽³⁾	491		11		501		26
Home loan	342		1		346		2
Retail banking	56		0		58		1
Total consumer banking	889		12		905		29
Commercial Banking:
Commercial and multifamily real estate	125		1		121		2
Commercial and industrial	1,173		5		1,246		8
Total commercial lending	1,298		6		1,367		10
Small-ticket commercial real estate	8		0		7		0
Total commercial banking	1,306		6		1,374		10
Total	$	2,935	$	36	$	3,011	$	75



	Three Months Ended				Six Months Ended
	June 30, 2016				June 30, 2016
(Dollars in millions)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Credit Card:
Domestic credit card	$	521	$	14	$	528	$	28
International card businesses	135		2		132		5
Total credit card⁽²⁾	656		16		660		33
Consumer Banking:
Auto⁽³⁾	494		21		492		43
Home loan	364		1		364		2
Retail banking	60		1		61		1
Total consumer banking	918		23		917		46
Commercial Banking:
Commercial and multifamily real estate	128		1		113		2
Commercial and industrial	1,277		3		1,116		5
Total commercial lending	1,405		4		1,229		7
Small-ticket commercial real estate	8		0		7		0
Total commercial banking	1,413		4		1,236		7
Total	$	2,987	$	43	$	2,813	$	86

__________

⁽¹⁾

Impaired loans include loans modified in troubled debt restructurings (“TDRs”), all nonperforming commercial loans and nonperforming home loans with a specific impairment. Impaired loans without an allowance generally represent loans that have been charged down to the fair value of the underlying collateral for which we believe no additional losses have been incurred, or where the fair value of the underlying collateral meets or exceeds the loan’s amortized cost.


⁽²⁾	The period-end and average recorded investments of credit card loans include finance charges and fees.


⁽³⁾	Although certain assets from loan recovery inventory are not reported in our loans held for investment, they are included as impaired loans above since they are reported as TDRs.

The total recorded investment of loans modified in TDRs represents $2.4 billion and $2.5 billion of the impaired loans presented above as of June 30, 2017 and December 31, 2016, respectively. Consumer TDRs classified as performing totaled $1.2 billion and $1.1 billion as of June 30, 2017 and December 31, 2016, respectively. Commercial TDRs classified as performing totaled $580 million and $487 million as of June 30, 2017 and December 31, 2016, respectively. Commitments to lend additional funds on loans modified in TDRs totaled $280 million and $208 million as of June 30, 2017 and December 31, 2016, respectively.

As part of our loan modification programs to borrowers experiencing financial difficulty, we may provide multiple concessions to minimize our economic loss and improve long-term loan performance and collectability. The following tables present the major modification types, recorded investment amounts and financial effects of loans modified in TDRs during the three and six months ended June 30, 2017 and 2016.

Table 4.10: Troubled Debt Restructurings



	Total Loans Modified⁽¹⁾⁽²⁾		Three Months Ended June 30, 2017
			Reduced Interest Rate		Term Extension		Balance Reduction
(Dollars in millions)			% of TDR Activity⁽³⁾⁽⁴⁾	Average Rate Reduction⁽⁵⁾	% of TDR Activity⁽⁴⁾⁽⁶⁾	Average Term Extension (Months)⁽⁷⁾	% of TDR Activity⁽⁴⁾⁽⁸⁾	Gross Balance Reduction⁽⁹⁾
Credit Card:
Domestic credit card	$	87	100%	14.36%	0%	0	0%	$	0
International card businesses	39		100	26.50	0	0	0	0
Total credit card	126		100	18.12	0	0	0	0
Consumer Banking:
Auto	61		52	3.65	99	7	0	0
Home loan	6		47	3.14	87	233	5	0
Retail banking	4		18	0.10	59	13	0	0
Total consumer banking	71		49	3.54	96	25	0	0
Commercial Banking:
Commercial and multifamily real estate	24		0	0.00	10	4	0	0
Commercial and industrial	134		18	2.23	47	9	0	0
Total commercial lending	158		15	2.23	41	9	0	0
Small-ticket commercial real estate	1		0	0.00	0	0	0	0
Total commercial banking	159		15	2.23	41	9	0	0
Total	$	356	52	13.35	37	17	0	$	0



	Total Loans Modified⁽¹⁾⁽²⁾		Six Months Ended June 30, 2017
			Reduced Interest Rate		Term Extension		Balance Reduction
(Dollars in millions)			% of TDR Activity⁽³⁾⁽⁴⁾	Average Rate Reduction⁽⁵⁾	% of TDR Activity⁽⁴⁾⁽⁶⁾	Average Term Extension (Months)⁽⁷⁾	% of TDR Activity⁽⁴⁾⁽⁸⁾	Gross Balance Reduction⁽⁹⁾
Credit Card:
Domestic credit card	$	184	100%	14.09%	0%	0	0%	$	0
International card businesses	83		100	26.33	0	0	0	0
Total credit card	267		100	17.92	0	0	0	0
Consumer Banking:
Auto	136		52	3.85	93	7	6	7
Home loan	14		54	2.49	83	227	2	0
Retail banking	6		30	1.19	62	11	0	0
Total consumer banking	156		51	3.66	91	25	5	7
Commercial Banking:
Commercial and multifamily real estate	26		8	0.02	17	5	0	0
Commercial and industrial	281		9	1.23	32	18	0	0
Total commercial lending	307		9	1.13	31	17	0	0
Small-ticket commercial real estate	1		0	0.00	0	0	0	0
Total commercial banking	308		9	1.13	31	17	0	0
Total	$	731	51	13.68	32	22	0	$	7



	Total Loans Modified⁽¹⁾⁽²⁾		Three Months Ended June 30, 2016
			Reduced Interest Rate		Term Extension		Balance Reduction
(Dollars in millions)			% of TDR Activity⁽³⁾⁽⁴⁾	Average Rate Reduction⁽⁵⁾	% of TDR Activity⁽⁴⁾⁽⁶⁾	Average Term Extension (Months)⁽⁷⁾	% of TDR Activity⁽⁴⁾⁽⁸⁾	Gross Balance Reduction⁽⁹⁾
Credit Card:
Domestic credit card	$	62	100%	12.81%	0%	0	0%	$	0
International card businesses	33		100	26.01	0	0	0	0
Total credit card	95		100	17.47	0	0	0	0
Consumer Banking:
Auto	77		46	3.86	75	7	25	15
Home loan	12		52	2.29	95	252	2	0
Retail banking	4		47	4.10	58	10	35	1
Total consumer banking	93		47	3.64	77	46	22	16
Commercial Banking:
Commercial and multifamily real estate	0		0	0.00	0	0	0	0
Commercial and industrial	254		12	0.06	64	25	0	0
Total commercial lending	254		12	0.00	64	25	0	0
Small-ticket commercial real estate	0		0	0.00	0	0	0	0
Total commercial banking	254		12	0.00	64	25	0	0
Total	$	442	38	10.82	53	32	5	$	16



	Total Loans Modified⁽¹⁾⁽²⁾		Six Months Ended June 30, 2016
			Reduced Interest Rate		Term Extension		Balance Reduction
(Dollars in millions)			% of TDR Activity⁽³⁾⁽⁴⁾	Average Rate Reduction⁽⁵⁾	% of TDR Activity⁽⁴⁾⁽⁶⁾	Average Term Extension (Months)⁽⁷⁾	% of TDR Activity⁽⁴⁾⁽⁸⁾	Gross Balance Reduction⁽⁹⁾
Credit Card:
Domestic credit card	$	124	100%	12.83%	0%	0	0%	$	0
International card businesses	69		100	25.83	0	0	0	0
Total credit card	193		100	17.50	0	0	0	0
Consumer Banking:
Auto	163		44	3.89	74	7	26	36
Home loan	25		57	2.47	85	250	2	0
Retail banking	7		36	5.02	70	10	20	1
Total consumer banking	195		45	3.69	75	43	22	37
Commercial Banking:
Commercial and multifamily real estate	25		0	0.00	100	8	0	0
Commercial and industrial	301		10	0.05	58	23	0	0
Total commercial lending	326		9	0.05	62	21	0	0
Small-ticket commercial real estate	0		0	0.00	0	0	0	0
Total commercial banking	326		9	0.05	61	21	0	0
Total	$	714	43	11.93	49	30	6	$	37

__________


⁽¹⁾	Represents the recorded investment of total loans modified in TDRs at the end of the quarter in which they were modified.


⁽²⁾	We present the modification types utilized most prevalently across our loan portfolios. As not every modification type is included in the table above, the total percentage of TDR activity may not add up to 100%. Some loans may receive more than one type of concession as part of the modification.


⁽³⁾	Represents percentage of loans modified in TDRs during the period that were granted a reduced interest rate.


⁽⁴⁾	Due to multiple concessions granted to some troubled borrowers, percentages may total more than 100% for certain loan types.


⁽⁵⁾	Represents weighted average interest rate reduction for those loans that received an interest rate concession.


⁽⁶⁾	Represents percentage of loans modified in TDRs during the period that were granted a maturity date extension.


⁽⁷⁾	Represents weighted average change in maturity date for those loans that received a maturity date extension.


⁽⁸⁾	Represents percentage of loans modified in TDRs during the period that were granted forgiveness or forbearance of a portion of their balance.


⁽⁹⁾	Represents the gross balance forgiven. For loans modified in bankruptcy, the gross balance reduction represents collateral value write-downs associated with the discharge of the borrower’s obligations.

TDR—Subsequent Defaults of Completed TDR Modifications

The following table presents the type, number and recorded investment amount of loans modified in TDRs that experienced a default during the period and had completed a modification event in the twelve months prior to the default. A default occurs if the loan is either 90 days or more delinquent, has been charged off as of the end of the period presented or has been reclassified from accrual to nonaccrual status.

Table 4.11: TDR—Subsequent Defaults



	Three Months Ended			Six Months Ended
	June 30, 2017			June 30, 2017
(Dollars in millions)	Number of Contracts	Amount		Number of Contracts	Amount
Credit Card:
Domestic credit card	13,222	$	25	26,027	$	51
International card businesses⁽¹⁾	13,761	27		25,186	43
Total credit card	26,983	52		51,213	94
Consumer Banking:
Auto	2,533	30		4,712	55
Home loan	8	3		19	6
Retail banking	9	2		20	3
Total consumer banking	2,550	35		4,751	64
Commercial Banking:
Commercial and multifamily real estate	0	0		0	0
Commercial and industrial	21	89		35	108
Total commercial lending	21	89		35	108
Small-ticket commercial real estate	1	0		2	1
Total commercial banking	22	89		37	109
Total	29,555	$	176	56,001	$	267



	Three Months Ended			Six Months Ended
	June 30, 2016			June 30, 2016
(Dollars in millions)	Number of Contracts	Amount		Number of Contracts	Amount
Credit Card:
Domestic credit card	10,231	$	16	20,825	$	34
International card businesses⁽¹⁾	9,972	21		18,785	41
Total credit card	20,203	37		39,610	75
Consumer Banking:
Auto	2,061	22		3,913	43
Home loan	13	2		23	3
Retail banking	10	1		25	3
Total consumer banking	2,084	25		3,961	49
Commercial Banking:
Commercial and multifamily real estate	0	0		0	0
Commercial and industrial	3	14		20	37
Total commercial lending	3	14		20	37
Small-ticket commercial real estate	2	0		2	0
Total commercial banking	5	14		22	37
Total	22,292	$	76	43,593	$	161

__________


⁽¹⁾	In the U.K., regulators require the acceptance of payment plan proposals in which the modified payments may be less than the contractual minimum amount. As a result, loans entering long-term TDR payment programs in the U.K. typically continue to age and ultimately charge off even when fully in compliance with the TDR program terms.

PCI Loans

Outstanding Balance and Carrying Value of PCI Loans

The table below presents the outstanding balance and the carrying value of PCI loans as of June 30, 2017 and December 31, 2016. The table also displays loans which would have otherwise been considered impaired at acquisition based on our applicable accounting policies. See “Note 1—Summary of Significant Accounting Policies” in our 2016 Form 10-K for information related to our accounting policies for impaired loans.

Table 4.12: PCI Loans



	June 30, 2017						December 31, 2016
(Dollars in millions)	Total PCI Loans		Impaired Loans		Non-Impaired Loans		Total PCI Loans		Impaired Loans		Non-Impaired Loans
Outstanding balance	$	14,184	$	2,930	$	11,254	$	16,506	$	3,272	$	13,234
Carrying value⁽¹⁾	12,898		2,052		10,846		15,074		2,263		12,811

__________


⁽¹⁾	Includes $31 million of allowance for loan and lease losses for these loans as of both June 30, 2017 and December 31, 2016. We recorded a $9 million release for credit losses for the six months ended June 30, 2016.

Changes in Accretable Yield

The following table presents changes in the accretable yield on PCI loans:

Table 4.13: Changes in Accretable Yield on PCI Loans



	Three Months Ended June 30, 2017									Six Months Ended June 30, 2017
(Dollars in millions)	Total PCI Loans			Impaired Loans			Non-Impaired Loans			Total PCI Loans			Impaired Loans			Non-Impaired Loans
Accretable yield, beginning of period	$	2,903		$	988		$	1,915		$	3,177		$	1,064		$	2,113
Accretion recognized in earnings	(155		)	(54		)	(101		)	(321		)	(110		)	(211		)
Reclassifications from/(to) nonaccretable differences⁽¹⁾	2			(6		)	8			8			(10		)	18
Changes in accretable yield for non-credit related changes in expected cash flows⁽²⁾	(59		)	64			(123		)	(173		)	48			(221		)
Accretable yield, end of period	$	2,691		$	992		$	1,699		$	2,691		$	992		$	1,699

__________


⁽¹⁾	Represents changes in accretable yield for those loans in pools that are driven primarily by credit performance.


⁽²⁾	Represents changes in accretable yield for those loans in pools that are driven primarily by actual prepayments and changes in estimated prepayments.