Loans

6 Months Ended

Jun. 30, 2022

Receivables [Abstract]

Loans

NOTE 3—LOANS

Our loan portfolio consists of loans held for investment, including loans held in our consolidated trusts, and loans held for sale. We further divide our loans held for investment 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 and retail banking loans. Commercial banking loans consist of commercial and multifamily real estate as well as commercial and industrial loans. The information presented in this section excludes loans held for sale, which are carried at either fair value (if we elect the fair value option) or at the lower of cost or fair value.

Accrued interest receivable of $1.4 billion and $1.2 billion as of June 30, 2022 and December 31, 2021, respectively, is not included in the tables in this note. The table below presents the composition and aging analysis of our loans held for investment portfolio as of June 30, 2022 and December 31, 2021. The delinquency aging includes all past due loans, both performing and nonperforming.

Table 3.1: Loan Portfolio Composition and Aging Analysis

	June 30, 2022
				Delinquent Loans
(Dollars in millions)	Current			30-59 Days			60-89 Days			> 90 Days			Total Delinquent Loans			Total Loans
Credit Card:
Domestic credit card	$	112,297		$	896		$	615		$	1,196		$	2,707		$	115,004
International card businesses	5,655			82			48			91			221			5,876
Total credit card	117,952			978			663			1,287			2,928			120,880
Consumer Banking:
Auto	76,030			2,566			1,084			246			3,896			79,926
Retail banking	1,576			10			1			18			29			1,605
Total consumer banking	77,606			2,576			1,085			264			3,925			81,531
Commercial Banking:
Commercial and multifamily real estate	37,507			212			70			56			338			37,845
Commercial and industrial	55,780			225			44			79			348			56,128
Total commercial banking	93,287			437			114			135			686			93,973
Total loans(1)	$	288,845		$	3,991		$	1,862		$	1,686		$	7,539		$	296,384
% of Total loans	97.46		%	1.34		%	0.63		%	0.57		%	2.54		%	100.00		%

	December 31, 2021
			Delinquent Loans
(Dollars in millions)	Current		30-59 Days		60-89 Days		> 90 Days		Total Delinquent Loans		Total Loans
Credit Card:
Domestic credit card	$	106,312	$	773	$	528	$	1,110	$	2,411	$	108,723
International card businesses	5,836		77		50		86		213		6,049
Total credit card	112,148		850		578		1,196		2,624		114,772
Consumer Banking:
Auto	72,221		2,385		933		240		3,558		75,779
Retail banking	1,807		35		7		18		60		1,867
Total consumer banking	74,028		2,420		940		258		3,618		77,646

	December 31, 2021
				Delinquent Loans
(Dollars in millions)	Current			30-59 Days			60-89 Days			> 90 Days			Total Delinquent Loans			Total Loans
Commercial Banking:
Commercial and multifamily real estate	35,100			92			35			35			162			35,262
Commercial and industrial	49,379			139			103			39			281			49,660
Total commercial banking	84,479			231			138			74			443			84,922
Total loans(1)	$	270,655		$	3,501		$	1,656		$	1,528		$	6,685		$	277,340
% of Total loans	97.59		%	1.26		%	0.60		%	0.55		%	2.41		%	100.00		%

__________

(1)Loans include unamortized premiums and discounts, and unamortized deferred fees and costs totaling $1.4 billion as of both June 30, 2022 and December 31, 2021.

The following table presents our loans held for investment that are 90 days or more past due that continue to accrue interest, loans that are classified as nonperforming and loans that are classified as nonperforming without an allowance as of June 30, 2022 and December 31, 2021. Nonperforming loans generally include loans that have been placed on nonaccrual status.

Table 3.2: 90+ Day Delinquent Loans Accruing Interest and Nonperforming Loans

	June 30, 2022									December 31, 2021
(Dollars in millions)	> 90 Days and Accruing			Nonperforming Loans(1)			Nonperforming  Loans Without an Allowance			> 90 Days and Accruing			Nonperforming Loans(1)			Nonperforming  Loans Without an Allowance
Credit Card:
Domestic credit card	$	1,196		N/A			$	0		$	1,110		N/A			$	0
International card businesses	88			$	8		0			82			$	10		0
Total credit card	1,284			8			0			1,192			10			0
Consumer Banking:
Auto	0			398			0			0			344			0
Retail banking	0			42			8			0			47			4
Total consumer banking	0			440			8			0			391			4
Commercial Banking:
Commercial and multifamily real estate	20			294			266			3			383			268
Commercial and industrial	0			361			214			0			316			257
Total commercial banking	20			655			480			3			699			525
Total	$	1,304		$	1,103		$	488		$	1,195		$	1,100		$	529
% of Total loans held for investment	0.44		%	0.37		%	0.16		%	0.43		%	0.40		%	0.19		%

__________

(1)We recognized interest income for loans classified as nonperforming of $1 million and $11 million for the three and six months ended June 30, 2022, respectively, and $3 million and $8 million for the three and six months ended June 30, 2021, respectivel

Credit Quality Indicators

We closely monitor economic conditions and loan performance trends to assess and manage our exposure to credit risk. We discuss these risks and our credit quality indicator for each portfolio segment below.

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 the U.S. Real Gross

Domestic Product (“GDP”) Rate, as well as consumers’ financial condition, all of which can have a material effect on credit performance. The key indicator we assess in monitoring the credit quality and risk of our credit card loan portfolio is delinquency trends, including an analysis of loan migration between delinquency categories over time.

The table below presents our credit card portfolio by delinquency status as of June 30, 2022 and December 31, 2021.

Table 3.3: Credit Card Delinquency Status

	June 30, 2022						December 31, 2021
(Dollars in millions)	Revolving Loans		Revolving Loans Converted to Term		Total		Revolving Loans		Revolving Loans Converted to Term		Total
Credit Card:
Domestic credit card:
Current	$	112,027	$	270	$	112,297	$	105,985	$	327	$	106,312
30-59 days	884		12		896		760		13		773
60-89 days	607		8		615		519		9		528
Greater than 90 days	1,186		10		1,196		1,100		10		1,110
Total domestic credit card	114,704		300		115,004		108,364		359		108,723
International card businesses:
Current	5,621		34		5,655		5,795		41		5,836
30-59 days	79		3		82		73		4		77
60-89 days	45		3		48		47		3		50
Greater than 90 days	88		3		91		82		4		86
Total international card businesses	5,833		43		5,876		5,997		52		6,049
Total credit card	$	120,537	$	343	$	120,880	$	114,361	$	411	$	114,772

Consumer Banking

Our consumer banking loan portfolio consists of auto and retail banking loans. Similar to our credit card loan portfolio, the risk in our consumer banking loan portfolio correlates to broad economic trends as well as consumers’ financial condition, all of which can have a material effect on credit performance. The key indicator we monitor when assessing the credit quality and risk of our auto loan portfolio is borrower credit scores as they measure the creditworthiness of borrowers. Delinquency trends are the key indicator we assess in monitoring the credit quality and risk of our retail banking loan portfolio.

The table below presents our consumer banking portfolio of loans held for investment by credit quality indicator as of June 30, 2022 and December 31, 2021. We present our auto loan portfolio by FICO scores at origination and our retail banking loan portfolio by delinquency status, which includes all past due loans, both performing and nonperforming.

Table 3.4: Consumer Banking Portfolio by Credit Quality Indicator

	June 30, 2022
	Term Loans by Vintage Year
(Dollars in millions)	2022		2021		2020		2019		2018		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total
Auto—At origination FICO scores:(1)
Greater than 660	$	12,004	$	17,114	$	6,768	$	3,519	$	1,615	$	740	$	41,760	$	0	$	0	$	41,760
621-660	3,982		6,134		2,874		1,566		757		381		15,694		0		0		15,694
620 or below	4,799		7,877		4,927		2,831		1,312		726		22,472		0		0		22,472
Total auto	20,785		31,125		14,569		7,916		3,684		1,847		79,926		0		0		79,926
Retail banking—Delinquency status:
Current	126		173		99		150		141		555		1,244		326		6		1,576
30-59 days	0		0		0		0		0		1		1		9		0		10
60-89 days	0		0		0		0		0		0		0		1		0		1
Greater than 90 days	0		0		1		0		3		9		13		4		1		18
Total retail banking(2)	126		173		100		150		144		565		1,258		340		7		1,605
Total consumer banking	$	20,911	$	31,298	$	14,669	$	8,066	$	3,828	$	2,412	$	81,184	$	340	$	7	$	81,531

	December 31, 2021
	Term Loans by Vintage Year
(Dollars in millions)	2021		2020		2019		2018		2017		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total
Auto—At origination FICO scores:(1)
Greater than 660	$	20,758	$	8,630	$	4,739	$	2,394	$	1,153	$	301	$	37,975	$	0	$	0	$	37,975
621-660	7,456		3,721		2,109		1,084		537		157		15,064		0		0		15,064
620 or below	9,522		6,336		3,767		1,840		949		326		22,740		0		0		22,740
Total auto	37,736		18,687		10,615		5,318		2,639		784		75,779		0		0		75,779
Retail banking—Delinquency status:
Current	285		171		172		161		176		491		1,456		345		6		1,807
30-59 days	0		2		2		7		0		1		12		23		0		35
60-89 days	0		4		0		0		0		2		6		1		0		7
Greater than 90 days	0		1		0		1		1		9		12		4		2		18
Total retail banking(2)	285		178		174		169		177		503		1,486		373		8		1,867
Total consumer banking	$	38,021	$	18,865	$	10,789	$	5,487	$	2,816	$	1,287	$	77,265	$	373	$	8	$	77,646

__________

(1)Amounts represent period-end loans held for investment in each credit score category. Auto credit scores generally represent average FICO scores obtained from three credit bureaus at the time of application and are not refreshed thereafter. Balances for which no credit score is available or the credit score is invalid are included in the 620 or below category.

(2)Includes Paycheck Protection Program (“PPP”) loans of $73 million and $232 million as of June 30, 2022 and December 31, 2021, respectively.

Commercial Banking

The key credit quality indicator for our commercial loan portfolios is our internal risk ratings. 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 credit losses for commercial loans. Generally, loans 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 are also generally 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 our commercial banking portfolio of loans held for investment by internal risk ratings as of June 30, 2022 and December 31, 2021. The internal risk rating status includes all past due loans, both performing and nonperforming.

Table 3.5: Commercial Banking Portfolio by Internal Risk Ratings

	June 30, 2022
	Term Loans by Vintage Year
(Dollars in millions)	2022		2021		2020		2019		2018		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total
Internal risk rating:(1)
Commercial and multifamily real estate
Noncriticized	$	5,997	$	4,866	$	1,769	$	2,602	$	1,825	$	3,443	$	20,502	$	14,144	$	25	$	34,671
Criticized performing	289		241		271		385		269		1,374		2,829		51		0		2,880
Criticized nonperforming	103		0		5		7		19		160		294		0		0		294
Total commercial and multifamily real estate	6,389		5,107		2,045		2,994		2,113		4,977		23,625		14,195		25		37,845
Commercial and industrial
Noncriticized	11,980		8,692		5,339		4,115		2,244		4,046		36,416		17,229		33		53,678
Criticized performing	518		227		276		381		172		97		1,671		418		0		2,089
Criticized nonperforming	95		40		20		93		42		18		308		53		0		361
Total commercial and industrial	12,593		8,959		5,635		4,589		2,458		4,161		38,395		17,700		33		56,128
Total commercial banking(2)	$	18,982	$	14,066	$	7,680	$	7,583	$	4,571	$	9,138	$	62,020	$	31,895	$	58	$	93,973

	December 31, 2021
	Term Loans by Vintage Year
(Dollars in millions)	2021		2020		2019		2018		2017		Prior		Total Term Loans		Revolving Loans		Revolving Loans Converted to Term		Total
Internal risk rating:(1)
Commercial and multifamily real estate
Noncriticized	$	6,590	$	2,924	$	3,393	$	2,401	$	793	$	3,538	$	19,639	$	12,286	$	0	$	31,925
Criticized performing	248		195		329		317		261		1,478		2,828		101		25		2,954
Criticized nonperforming	0		0		88		20		9		266		383		0		0		383
Total commercial and multifamily real estate	6,838		3,119		3,810		2,738		1,063		5,282		22,850		12,387		25		35,262
Commercial and industrial
Noncriticized	12,662		7,039		5,506		2,750		1,730		3,033		32,720		14,310		59		47,089
Criticized performing	279		188		838		207		120		167		1,799		456		0		2,255
Criticized nonperforming	32		52		85		93		6		10		278		38		0		316
Total commercial and industrial	12,973		7,279		6,429		3,050		1,856		3,210		34,797		14,804		59		49,660
Total commercial banking(2)	$	19,811	$	10,398	$	10,239	$	5,788	$	2,919	$	8,492	$	57,647	$	27,191	$	84	$	84,922

__________

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

(2)Includes PPP loans of $37 million and $102 million as of June 30, 2022 and December 31, 2021, respectively.

Troubled Debt Restructurings

As part of our loss mitigation efforts, we may provide short-term (one to twelve months) or long-term (greater than twelve months) modifications to a borrower experiencing financial difficulty to improve long-term collectability of the loan and to avoid the need for repossession or foreclosure of collateral.

We consider the impact of all loan modifications, whether or not that modification is classified as a troubled debt restructuring (“TDR”), when estimating the credit quality of our loan portfolio and establishing allowance levels. For our Commercial Banking customers, loan modifications are also considered in the assignment of an internal risk rating.

Additional guidance issued by the Federal Banking Agencies and contained in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provided banking organizations with TDR relief for loan modifications to certain qualifying borrowers impacted by the COVID-19 pandemic. The guidance in the CARES Act expired on January 1, 2022 at which time we also concurrently ceased applying the additional guidance issued by the Federal Banking Agencies.

Total recorded TDRs were $2.2 billion and $1.6 billion as of June 30, 2022 and December 31, 2021, respectively. TDRs classified as performing in our credit card and consumer banking loan portfolios totaled $1.3 billion and $1.1 billion as of June 30, 2022 and December 31, 2021, respectively. TDRs classified as performing in our commercial banking loan portfolio totaled $333 million and $192 million as of June 30, 2022 and December 31, 2021, respectively. Commitments to lend additional funds on loans modified in a TDR totaled $166 million and $168 million as of June 30, 2022 and December 31, 2021, respectively.

The following tables present the major modification types, amortized cost amounts and financial effects of loans modified in a TDR during the three and six months ended June 30, 2022 and 2021.

Table 3.6: Troubled Debt Restructurings

			Three Months Ended June 30, 2022
			Reduced Interest Rate				Term Extension
(Dollars in millions)	Total Loans Modified(1)		% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)
Credit Card:
Domestic credit card	$	57	100	%	15.56	%	N/A		N/A
International card businesses	30		100		27.65		N/A		N/A
Total credit card	87		100		19.70		N/A		N/A
Consumer Banking:
Auto	280		49		8.56		97	%	4
Total consumer banking	280		49		8.56		97		4
Commercial Banking:
Commercial and multifamily real estate	133		N/A		N/A		91		14
Commercial and industrial	129		N/A		N/A		33		13
Total commercial banking	262		N/A		N/A		62		14
Total	$	629

			Six Months Ended June 30, 2022
			Reduced Interest Rate				Term Extension
(Dollars in millions)	Total Loans Modified(1)		% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)
Credit Card:
Domestic credit card	$	119	100	%	15.09	%	N/A		N/A
International card businesses	64		100		27.83		N/A		N/A
Total credit card	183		100		19.54		N/A		N/A
Consumer Banking:
Auto	519		52		8.68		97	%	4
Retail banking	1		N/A		N/A		100		12
Total consumer banking	520		52		8.68		97		4
Commercial Banking:
Commercial and multifamily real estate	264		4		0.29		77		13
Commercial and industrial	167		N/A		N/A		45		12
Total commercial banking	431		2		0.29		64		13
Total	$	1,134

			Three Months Ended June 30, 2021
			Reduced Interest Rate				Term Extension
(Dollars in millions)	Total Loans Modified(1)		% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)
Credit Card:
Domestic credit card	$	33	100	%	16.07	%	N/A		N/A
International card businesses	27		100		27.45		N/A		N/A
Total credit card	60		100		21.22		N/A		N/A
Consumer Banking:
Auto	65		39		8.62		91	%	4
Retail banking	1		N/A		N/A		100		41
Total consumer banking	66		38		8.62		91		4
Commercial Banking:
Commercial and industrial	34		N/A		N/A		56		17
Total commercial banking	34		N/A		N/A		56		17
Total	$	160

			Six Months Ended June 30, 2021
			Reduced Interest Rate				Term Extension
(Dollars in millions)	Total Loans Modified(1)		% of TDR Activity(2)		Average Rate Reduction		% of TDR Activity(2)		Average Term Extension (Months)
Credit Card:
Domestic credit card	$	77	100	%	16.10	%	N/A		N/A
International card businesses	66		100		27.62		N/A		N/A
Total credit card	143		100		21.43		N/A		N/A
Consumer Banking:
Auto	180		36		8.87		94	%	3
Retail banking	1		31		3.77		69		28
Total consumer banking	181		36		8.85		94		3
Commercial Banking:
Commercial and multifamily real estate	20		N/A		N/A		100		14
Commercial and industrial	78		N/A		N/A		38		8
Total commercial banking	98		N/A		N/A		51		11
Total	$	422

__________

(1)Represents the amortized cost of total loans modified in TDR at the end of the period in which they were modified. 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 modification.

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

Subsequent Defaults of Completed TDR Modifications

The following table presents the type, number and amortized cost of loans modified in a TDR 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 3.7: TDR—Subsequent Defaults

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
(Dollars in millions)	Number of Contracts	Amount		Number of Contracts	Amount		Number of Contracts	Amount		Number of Contracts	Amount
Credit Card:
Domestic credit card	8,012	$	17	4,226	$	8	14,024	$	28	9,360	$	18
International card businesses	19,611	20		14,827	23		36,118	39		32,029	51
Total credit card	27,623	37		19,053	31		50,142	67		41,389	69
Consumer Banking:
Auto	3,539	63		2,271	35		5,510	96		4,302	64
Retail banking	0	0		3	0		0	0		8	0
Total consumer banking	3,539	63		2,274	35		5,510	96		4,310	64
Commercial Banking:
Commercial and multifamily real estate	0	0		1	50		0	0		1	50
Commercial and industrial	2	4		6	82		3	35		6	82
Total commercial banking	2	4		7	132		3	35		7	132
Total	31,164	$	104	21,334	$	198	55,655	$	198	45,706	$	265

Loans Pledged

We pledged loan collateral of $10.2 billion and $10.3 billion to secure a portion of of our FHLB borrowing capacity of $18.7 billion and $19.7 billion as of June 30, 2022 and December 31, 2021, respectively. We also pledged loan collateral of $34.5 billion and $26.5 billion to secure our Federal Reserve Discount Window borrowing capacity of $22.1 billion and $19.6 billion as of June 30, 2022 and December 31, 2021, respectively. In addition to loans pledged, we have securitized a portion of our credit card and auto loan portfolios. See “Note 5—Variable Interest Entities and Securitizations” for additional information.

Revolving Loans Converted to Term Loans

For the three and six months ended June 30, 2022, we converted $41 million and $332 million of revolving loans to term loans, respectively, primarily in our domestic credit card and commercial banking loan portfolios. For the three and six months ended June 30, 2021, we converted $38 million and $135 million of revolving loans to term loans, respectively, primarily in our domestic credit card and commercial banking loan portfolios.