Loans Held-for-Investment (Tables)

6 Months Ended

Jun. 30, 2017

Loans held-for-investment are summarized as follows:



	June 30, 2017		December 31, 2016
	(Dollars in millions)
Consumer loans
Residential first mortgage	$	2,538	$	2,327
Home equity	459		443
Other	27		28
Total consumer loans	3,024		2,798
Commercial loans
Commercial real estate (1)	1,557		1,261
Commercial and industrial	1,040		769
Warehouse lending	1,155		1,237
Total commercial loans	3,752		3,267
Total loans held-for-investment	$	6,776	$	6,065


(1)	Includes $253 million and $245 million of owner occupied commercial real estate loans at June 30, 2017 and December 31, 2016, respectively.

Allowance for Loan Losses

The changes in ALLL, by class of loan, are summarized in the following table:



	Residential First Mortgage (1)			Home Equity			Other Consumer			Commercial Real Estate		Commercial and Industrial			Warehouse Lending			Total
	(Dollars in millions)
Three Months Ended June 30, 2017
Beginning balance ALLL	$	61		$	21		$	1		$	32	$	20		$	6		$	141
Charge-offs (2)	(1		)	(1		)	—			—		—			—			(2		)
Recoveries	1			1			—			—		—			—			2
Provision (benefit)	(5		)	(2		)	—			5		1			—			(1		)
Ending balance ALLL	$	56		$	19		$	1		$	37	$	21		$	6		$	140
Three Months Ended June 30, 2016
Beginning balance ALLL	$	95		$	30		$	2		$	19	$	10		$	6		$	162
Charge-offs (2)	(8		)	(1		)	(1		)	—		—			—			(10		)
Recoveries	1			—			—			—		—			—			1
Provision (benefit)	(7		)	1			—			—		1			2			(3		)
Ending balance ALLL	$	81		$	30		$	1		$	19	$	11		$	8		$	150

Six Months Ended June 30, 2017
Beginning balance ALLL	$	65		$	24		$	1		$	28	$	17		$	7		$	142
Charge-offs (2)	(5		)	(1		)	(1		)	—		—			—			(7		)
Recoveries	1			1			1			—		—			—			3
Provision (benefit)	(5		)	(5		)	—			9		4			(1		)	2
Ending balance ALLL	$	56		$	19		$	1		$	37	$	21		$	6		$	140
Six Months Ended June 30, 2016
Beginning balance ALLL	$	116		$	32		$	2		$	18	$	13		$	6		$	187
Charge-offs (2)	(19		)	(3		)	(2		)	—		—			—			(24		)
Recoveries	1			1			1			—		—			—			3
Provision (benefit)	(17		)	—			—			1		(2		)	2			(16		)
Ending balance ALLL	$	81		$	30		$	1		$	19	$	11		$	8		$	150


(1)	Includes allowance and charge-offs related to loans with government guarantees.

(2)

Includes charge-offs of zero and $2 million related to the transfer and subsequent sale of loans during the three months ended June 30, 2017 and June 30, 2016, respectively, and $1 million and $8 million during the six months ended June 30, 2017 and June 30, 2016, respectively. Also includes charge-offs related to loans with government guarantees of zero and $4 million during the three months ended June 30, 2017 and June 30, 2016, respectively, and $2 million and $7 million during the six months ended June 30, 2017 and June 30, 2016, respectively.

The method of evaluation, by class of loan, is summarized in the following table:



	Residential First Mortgage (1)		Home Equity		Other Consumer		Commercial Real Estate		Commercial and Industrial		Warehouse Lending		Total
	(Dollars in millions)
June 30, 2017
Loans held-for-investment (2)
Individually evaluated	$	35	$	28	$	—	$	—	$	—	$	—	$	63
Collectively evaluated	2,495		426		27		1,557		1,040		1,155		6,700
Total loans	$	2,530	$	454	$	27	$	1,557	$	1,040	$	1,155	$	6,763
Allowance for loan losses (2)
Individually evaluated	$	5	$	8	$	—	$	—	$	—	$	—	$	13
Collectively evaluated	51		11		1		37		21		6		127
Total allowance for loan losses	$	56	$	19	$	1	$	37	$	21	$	6	$	140

December 31, 2016
Loans held-for-investment (2)
Individually evaluated	$	46	$	29	$	—	$	—	$	—	$	—	$	75
Collectively evaluated	2,274		349		28		1,261		769		1,237		5,918
Total loans	$	2,320	$	378	$	28	$	1,261	$	769	$	1,237	$	5,993
Allowance for loan losses (2)
Individually evaluated	$	5	$	8	$	—	$	—	$	—	$	—	$	13
Collectively evaluated	60		16		1		28		17		7		129
Total allowance for loan losses	$	65	$	24	$	1	$	28	$	17	$	7	$	142


(1)	Includes allowance related to loans with government guarantees.


(2)	Excludes loans carried under the fair value option

Past Due Loans

The following table sets forth the LHFI aging analysis of past due and current loans:



	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due (1)		Total Past Due		Current		Total LHFI
	(Dollars in millions)
June 30, 2017
Consumer loans
Residential first mortgage	$	1	$	3	$	25	$	29	$	2,509	$	2,538
Home equity	1		—		5		6		453		459
Other	—		—		—		—		27		27
Total consumer loans	2		3		30		35		2,989		3,024
Commercial loans
Commercial real estate	1		—		—		1		1,556		1,557
Commercial and industrial	—		—		—		—		1,040		1,040
Warehouse lending	—		—		—		—		1,155		1,155
Total commercial loans	1		—		—		1		3,751		3,752
Total loans (2)	$	3	$	3	$	30	$	36	$	6,740	$	6,776
December 31, 2016
Consumer loans
Residential first mortgage	$	6	$	—	$	29	$	35	$	2,292	$	2,327
Home equity	1		2		11		14		429		443
Other	1		—		—		1		27		28
Total consumer loans	8		2		40		50		2,748		2,798
Commercial loans
Commercial real estate	—		—		—		—		1,261		1,261
Commercial and industrial	—		—		—		—		769		769
Warehouse lending	—		—		—		—		1,237		1,237
Total commercial loans	—		—		—		—		3,267		3,267
Total loans (2)	$	8	$	2	$	40	$	50	$	6,015	$	6,065


(1)	Includes loans 90 days or greater past due and performing nonaccrual loans that are less than 90 days past due.


(2)	Includes $4 million and $13 million of loans 90 days or greater past due, accounted for under the fair value option at June 30, 2017 and December 31, 2016, respectively.

Troubled Debt Restructurings

The following table provides a summary of newly modified TDRs:



	New TDRs
	Number of Accounts	Pre-Modification Unpaid Principal Balance		Post-Modification Unpaid Principal Balance (1)		Increase in Allowance at Modification
		(Dollars in millions)
Three Months Ended June 30, 2017
Residential first mortgages	6	$	1	$	1	$	—
Home equity (2)	21	1		1		—
Other consumer	1	—		—		—
Total TDR loans	28	$	2	$	2	$	—

Three Months Ended June 30, 2016
Residential first mortgages	3	$	1	$	1	$	—
Home equity (2)(3)	25	2		2		—
Total TDR loans	28	$	3	$	3	$	—

Six Months Ended June 30, 2017
Residential first mortgages	8	$	1	$	1	$	—
Home equity (2)	34	2		2		—
Other consumer	1	—		—		—
Total TDR loans	43	$	3	$	3	$	—

Six Months Ended June 30, 2016
Residential first mortgages	16	$	3	$	4	$	—
Home equity (2)(3)	111	7		6		—
Commercial and industrial	1	2		1		—
Total TDR loans	128	$	12	$	11	$	—


(1)	Post-modification balances include past due amounts that are capitalized at modification date.


(2)	Home equity post-modification unpaid principal balance reflects write downs.


(3)	Includes loans carried at the fair value option.

The following table provides a summary of TDRs by type and performing status:



	TDRs
	Performing		Nonperforming		Total
	(Dollars in millions)
June 30, 2017
Consumer loans (1)
Residential first mortgage	$	19	$	10	$	29
Home equity	27		2		29
Total TDRs (2)	$	46	$	12	$	58
December 31, 2016
Consumer loans (1)
Residential first mortgage	$	22	$	11	$	33
Home equity	45		7		52
Total TDRs (2)	$	67	$	18	$	85


(1)	The ALLL on consumer TDR loans totaled $11 million and $9 million at June 30, 2017 and December 31, 2016, respectively.


(2)	Includes $3 million and $25 million of TDR loans accounted for under the fair value option at June 30, 2017 and December 31, 2016, respectively.

Impaired Loans

The following table presents individually evaluated impaired loans and the associated allowance:



	June 30, 2017						December 31, 2016
	Recorded Investment		Net Unpaid Principal Balance		Related Allowance		Recorded Investment		Unpaid Principal Balance		Related Allowance
	(Dollars in millions)
With no related allowance recorded
Consumer loans
Residential first mortgage	$	15	$	16	$	—	$	6	$	6	$	—
Total consumer loans with no related allowance recorded	$	15	$	16	$	—	$	6	$	6	$	—
With an allowance recorded
Consumer loans
Residential first mortgage	$	20	$	19	$	5	$	40	$	40	$	5
Home equity	28		28		8		29		29		8
Total consumer loans with an allowance recorded	$	48	$	47	$	13	$	69	$	69	$	13

Total Impaired Consumer loans
Residential first mortgage	$	35	$	35	$	5	$	46	$	46	$	5
Home equity	28		28		8		29		29		8
Total impaired loans	$	63	$	63	$	13	$	75	$	75	$	13

The following table presents average impaired loans and the interest income recognized:



	Three Months Ended June 30,								Six Months Ended June 30,
	2017				2016				2017				2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(Dollars in millions)
Consumer loans
Residential first mortgage	$	36	$	—	$	47	$	—	$	39	$	—	$	60	$	1
Home equity	27		—		32		1		27		1		32		1
Commercial loans
Commercial and industrial	—		—		1		—		—		—		3		—
Total impaired loans	$	63	$	—	$	80	$	1	$	66	$	1	$	95	$	2

Loan Credit Quality Indicators

In accordance with regulatory guidance, we assign risk ratings to consumer loans in the following manner:

•Consumer loans are classified as Watch once the loan becomes 60 days past due.

•Open and closed-end consumer loans 90 days or more past due are classified Substandard.



	June 30, 2017
	Pass		Watch		Special Mention		Substandard		Total Loans
	(Dollars in millions)
Consumer Loans
Residential First Mortgage	$	2,486	$	26	$	—	$	26	$	2,538
Home equity	428		26		—		5		459
Other Consumer	27		—		—		—		27
Total Consumer Loans	$	2,941	$	52	$	—	$	31	$	3,024

Commercial Loans
Commercial Real Estate	$	1,525	$	24	$	—	$	8	$	1,557
Commercial and Industrial	967		61		—		12		1,040
Warehouse	1,115		40		—		—		1,155
Total Commercial Loans	$	3,607	$	125	$	—	$	20	$	3,752



	December 31, 2016
	Pass		Watch		Special Mention		Substandard		Total Loans
	(Dollars in millions)
Consumer Loans
Residential First Mortgage	$	2,273	$	23	$	—	$	31	$	2,327
Home equity	386		46		—		11		443
Other Consumer	28		—		—		—		28
Total Consumer Loans	$	2,687	$	69	$	—	$	42	$	2,798

Commercial Loans
Commercial Real Estate	$	1,225	$	27	$	3	$	6	$	1,261
Commercial and Industrial	678		59		21		11		769
Warehouse	1,168		16		53		—		1,237
Total Commercial Loans	$	3,071	$	102	$	77	$	17	$	3,267