Loans

12 Months Ended

Dec. 31, 2016

Loan accounting framework

The accounting for a loan depends on management’s strategy for the loan, and on whether the loan was credit-impaired at the date of acquisition. The Firm accounts for loans based on the following categories:


•	Originated or purchased loans held-for-investment (i.e., “retained”), other than PCI loans


•	Loans held-for-sale


•	Loans at fair value


•	PCI loans held-for-investment

The following provides a detailed accounting discussion of these loan categories:

Loans held-for-investment (other than PCI loans)

Originated or purchased loans held-for-investment, other than PCI loans, are recorded at the principal amount outstanding, net of the following: charge-offs; interest applied to principal (for loans accounted for on the cost recovery method); unamortized discounts and premiums; and net deferred loan fees or costs. Credit card loans also include billed finance charges and fees net of an allowance for uncollectible amounts.

Interest income

Interest income on performing loans held-for-investment, other than PCI loans, is accrued and recognized as interest income at the contractual rate of interest. Purchase price discounts or premiums, as well as net deferred loan fees or costs, are amortized into interest income over the contractual life of the loan to produce a level rate of return.

Nonaccrual loans

Nonaccrual loans are those on which the accrual of interest has been suspended. Loans (other than credit card loans and certain consumer loans insured by U.S. government agencies) are placed on nonaccrual status and considered nonperforming when full payment of principal and interest is not expected, regardless of delinquency status, or when principal and interest has been in default for a period of 90 days or more, unless the loan is both well-secured and in the process of collection. A loan is determined to be past due when the minimum payment is not received from the borrower by the contractually specified due date or for certain loans (e.g., residential real estate loans), when a monthly payment is due and unpaid for 30 days or more. Finally, collateral-dependent loans are typically maintained on nonaccrual status.

On the date a loan is placed on nonaccrual status, all interest accrued but not collected is reversed against interest income. In addition, the amortization of deferred amounts is suspended. Interest income on nonaccrual loans may be recognized as cash interest payments are received (i.e., on a cash basis) if the recorded loan balance is deemed fully collectible; however, if there is doubt regarding the ultimate collectibility of the recorded loan balance, all interest cash receipts are applied to reduce the carrying value of the loan (the cost recovery method). For consumer loans, application of this policy typically results in the Firm recognizing interest income on nonaccrual consumer loans on a cash basis.

A loan may be returned to accrual status when repayment is reasonably assured and there has been demonstrated performance under the terms of the loan or, if applicable, the terms of the restructured loan.

As permitted by regulatory guidance, credit card loans are generally exempt from being placed on nonaccrual status; accordingly, interest and fees related to credit card loans continue to accrue until the loan is charged off or paid in full. However, the Firm separately establishes an allowance, which is offset against loans and charged to interest income, for the estimated uncollectible portion of accrued and billed interest and fee income on credit card loans. The allowance is established with a charge to interest income and is reported as an offset to loans.

Allowance for loan losses

The allowance for loan losses represents the estimated probable credit losses inherent in the held-for-investment loan portfolio at the balance sheet date and is recognized on the balance sheet as a contra asset, which brings the recorded investment to the net carrying value. Changes in the allowance for loan losses are recorded in the provision for credit losses on the Firm’s Consolidated statements of income. See Note 15 for further information on the Firm’s accounting policies for the allowance for loan losses.

Charge-offs

Consumer loans, other than risk-rated business banking, risk-rated auto and PCI loans, are generally charged off or charged down to the net realizable value of the underlying collateral (i.e., fair value less costs to sell), with an offset to the allowance for loan losses, upon reaching specified stages of delinquency in accordance with standards established by the FFIEC. Residential real estate loans, non-modified credit card loans and scored business banking loans are generally charged off no later than 180 days past due. Auto, student and modified credit card loans are charged off no later than 120 days past due.

Certain consumer loans will be charged off earlier than the FFIEC charge-off standards in certain circumstances as follows:


•	A charge-off is recognized when a loan is modified in a TDR if the loan is determined to be collateral-dependent.

•

Loans to borrowers who have experienced an event (e.g., bankruptcy) that suggests a loss is either known or highly certain are subject to accelerated charge-off standards. Residential real estate and auto loans are charged off when the loan becomes 60 days past due, or sooner if the loan is determined to be collateral-dependent. Credit card, student and scored business banking loans are charged off within 60 days of receiving notification of the bankruptcy filing or other event.


•	Auto loans are written down to net realizable value upon repossession of the automobile and after a redemption period (i.e., the period during which a borrower may cure the loan) has passed.

Other than in certain limited circumstances, the Firm typically does not recognize charge-offs on government-guaranteed loans.

Wholesale loans, risk-rated business banking loans and risk-rated auto loans are charged off when it is highly certain that a loss has been realized, including situations where a loan is determined to be both impaired and collateral-dependent. The determination of whether to recognize a charge-off includes many factors, including the prioritization of the Firm’s claim in bankruptcy, expectations of the workout/restructuring of the loan and valuation of the borrower’s equity or the loan collateral.

When a loan is charged down to the estimated net realizable value, the determination of the fair value of the collateral depends on the type of collateral (e.g., securities, real estate). In cases where the collateral is in the form of liquid securities, the fair value is based on quoted market prices or broker quotes. For illiquid securities or other financial assets, the fair value of the collateral is estimated using a discounted cash flow model.

For residential real estate loans, collateral values are based upon external valuation sources. When it becomes likely that a borrower is either unable or unwilling to pay, the Firm obtains a broker’s price opinion of the home based on an exterior-only valuation (“exterior opinions”), which is then updated at least every six months thereafter. As soon as practicable after the Firm receives the property in satisfaction of a debt (e.g., by taking legal title or physical possession), generally, either through foreclosure or upon the execution of a deed in lieu of foreclosure transaction with the borrower, the Firm obtains an appraisal based on an inspection that includes the interior of the home (“interior appraisals”). Exterior opinions and interior appraisals are discounted based upon the Firm’s experience with actual liquidation values as compared with the estimated values provided by exterior opinions and interior appraisals, considering state- and product-specific factors.

For commercial real estate loans, collateral values are generally based on appraisals from internal and external valuation sources. Collateral values are typically updated every six to twelve months, either by obtaining a new appraisal or by performing an internal analysis, in accordance with the Firm’s policies. The Firm also considers both borrower- and market-specific factors, which may result in obtaining appraisal updates or broker price opinions at more frequent intervals.

Loans held-for-sale

Held-for-sale loans are measured at the lower of cost or fair value, with valuation changes recorded in noninterest revenue. For consumer loans, the valuation is performed on a portfolio basis. For wholesale loans, the valuation is performed on an individual loan basis.

Interest income on loans held-for-sale is accrued and recognized based on the contractual rate of interest.

Loan origination fees or costs and purchase price discounts or premiums are deferred in a contra loan account until the related loan is sold. The deferred fees and discounts or premiums are an adjustment to the basis of the loan and therefore are included in the periodic determination of the lower of cost or fair value adjustments and/or the gain or loss recognized at the time of sale.

Held-for-sale loans are subject to the nonaccrual policies described above.

Because held-for-sale loans are recognized at the lower of cost or fair value, the Firm’s allowance for loan losses and charge-off policies do not apply to these loans.

Loans at fair value

Loans used in a market-making strategy or risk managed on a fair value basis are measured at fair value, with changes in fair value recorded in noninterest revenue.

Interest income on loans is accrued and recognized based on the contractual rate of interest. Changes in fair value are recognized in noninterest revenue. Loan origination fees are recognized upfront in noninterest revenue. Loan origination costs are recognized in the associated expense category as incurred.

Because these loans are recognized at fair value, the Firm’s allowance for loan losses and charge-off policies do not apply to these loans.

See Note 4 for further information on the Firm’s elections of fair value accounting under the fair value option. See Note 3 and Note 4 for further information on loans carried at fair value and classified as trading assets.

PCI loans

PCI loans held-for-investment are initially measured at fair value. PCI loans have evidence of credit deterioration since the loan’s origination date and therefore it is probable, at acquisition, that all contractually required payments will not be collected. Because PCI loans are initially measured at fair value, which includes an estimate of future credit losses, no allowance for loan losses related to PCI loans is recorded at the acquisition date. See page 219 of this Note for information on accounting for PCI loans subsequent to their acquisition.

Loan classification changes

Loans in the held-for-investment portfolio that management decides to sell are transferred to the held-for-sale portfolio at the lower of cost or fair value on the date of transfer. Credit-related losses are charged against the allowance for loan losses; non-credit related losses such as those due to changes in interest rates or foreign currency exchange rates are recognized in noninterest revenue.

In the event that management decides to retain a loan in the held-for-sale portfolio, the loan is transferred to the held-for-investment portfolio at the lower of cost or fair value on the date of transfer. These loans are subsequently assessed for impairment based on the Firm’s allowance methodology. For a further discussion of the methodologies used in establishing the Firm’s allowance for loan losses, see Note 15.

Loan modifications

The Firm seeks to modify certain loans in conjunction with its loss-mitigation activities. Through the modification, JPMorgan Chase grants one or more concessions to a borrower who is experiencing financial difficulty in order to minimize the Firm’s economic loss, avoid foreclosure or repossession of the collateral, and to ultimately maximize payments received by the Firm from the borrower. The concessions granted vary by program and by borrower-specific characteristics, and may include interest rate reductions, term extensions, payment deferrals, principal forgiveness, or the acceptance of equity or other assets in lieu of payments.

Such modifications are accounted for and reported as TDRs. A loan that has been modified in a TDR is generally considered to be impaired until it matures, is repaid, or is otherwise liquidated, regardless of whether the borrower performs under the modified terms. In certain limited cases, the effective interest rate applicable to the modified loan is at or above the current market rate at the time of the restructuring. In such circumstances, and assuming that the loan subsequently performs under its modified terms and the Firm expects to collect all contractual principal and interest cash flows, the loan is disclosed as impaired and as a TDR only during the year of the modification; in subsequent years, the loan is not disclosed as an impaired loan or as a TDR so long as repayment of the restructured loan under its modified terms is reasonably assured.

Loans, except for credit card loans, modified in a TDR are generally placed on nonaccrual status, although in many cases such loans were already on nonaccrual status prior to modification. These loans may be returned to performing status (the accrual of interest is resumed) if the following criteria are met: (i) the borrower has performed under the modified terms for a minimum of six months and/or six payments, and (ii) the Firm has an expectation that repayment of the modified loan is reasonably assured based on, for example, the borrower’s debt capacity and level of future earnings, collateral values, LTV ratios, and other current market considerations. In certain limited and well-defined circumstances in which the loan is current at the modification date, such loans are not placed on nonaccrual status at the time of modification.

Because loans modified in TDRs are considered to be impaired, these loans are measured for impairment using the Firm’s established asset-specific allowance methodology, which considers the expected re-default rates for the modified loans. A loan modified in a TDR generally remains subject to the asset-specific allowance methodology throughout its remaining life, regardless of whether the loan is performing and has been returned to accrual status and/or the loan has been removed from the impaired loans disclosures (i.e., loans restructured at market rates). For further discussion of the methodology used to estimate the Firm’s asset-specific allowance, see Note 15.

Foreclosed property

The Firm acquires property from borrowers through loan restructurings, workouts, and foreclosures. Property acquired may include real property (e.g., residential real estate, land, and buildings) and commercial and personal property (e.g., automobiles, aircraft, railcars, and ships).

The Firm recognizes foreclosed property upon receiving assets in satisfaction of a loan (e.g., by taking legal title or physical possession). For loans collateralized by real property, the Firm generally recognizes the asset received at foreclosure sale or upon the execution of a deed in lieu of foreclosure transaction with the borrower. Foreclosed assets are reported in other assets on the Consolidated balance sheets and initially recognized at fair value less costs to sell. Each quarter the fair value of the acquired property is reviewed and adjusted, if necessary, to the lower of cost or fair value. Subsequent adjustments to fair value are charged/credited to noninterest revenue. Operating expense, such as real estate taxes and maintenance, are charged to other expense.

Loan portfolio

The Firm’s loan portfolio is divided into three portfolio segments, which are the same segments used by the Firm to determine the allowance for loan losses: Consumer, excluding credit card; Credit card; and Wholesale. Within each portfolio segment the Firm monitors and assesses the credit risk in the following classes of loans, based on the risk characteristics of each loan class.



Consumer, excluding credit card^(a)	Credit card	Wholesale^(f)
Residential real estate – excluding PCI • Home equity^(b) • Residential mortgage^(c) Other consumer loans • Auto^(d) • Business banking^(d)(e) • Student and other Residential real estate – PCI • Home equity • Prime mortgage • Subprime mortgage • Option ARMs	• Credit card loans	• Commercial and industrial • Real estate • Financial institutions • Government agencies • Other^(g)


(a)	Includes loans held in CCB, prime mortgage and home equity loans held in AWM and prime mortgage loans held in Corporate.


(b)	Includes senior and junior lien home equity loans.


(c)	Includes prime (including option ARMs) and subprime loans.


(d)	Includes certain business banking and auto dealer risk-rated loans that apply the wholesale methodology for determining the allowance for loan losses; these loans are managed by CCB, and therefore, for consistency in presentation, are included with the other consumer loan classes.


(e)	Predominantly includes Business Banking loans as well as deposit overdrafts.


(f)	Includes loans held in CIB, CB, AWM and Corporate. Excludes prime mortgage and home equity loans held in AWM and prime mortgage loans held in Corporate. Classes are internally defined and may not align with regulatory definitions.


(g)	Includes loans to: individuals; SPEs; holding companies; and private education and civic organizations. For more information on exposures to SPEs, see Note 16.

The following tables summarize the Firm’s loan balances by portfolio segment.



December 31, 2016	Consumer, excluding credit card			Credit card^(a)			Wholesale			Total
(in millions)	Consumer, excluding credit card			Credit card^(a)			Wholesale			Total
Retained		$	364,406		$	141,711		$	383,790		$	889,907	^(b)
Held-for-sale		238			105			2,285			2,628
At fair value		—			—			2,230			2,230
Total		$	364,644		$	141,816		$	388,305		$	894,765

December 31, 2015	Consumer, excluding credit card				Credit card^(a)			Wholesale			Total
(in millions)	Consumer, excluding credit card				Credit card^(a)			Wholesale			Total
Retained		$	344,355		$	131,387		$	357,050		$	832,792	^(b)
Held-for-sale		466			76			1,104			1,646
At fair value		—			—			2,861			2,861
Total		$	344,821		$	131,463		$	361,015		$	837,299


(a)	Includes billed interest and fees net of an allowance for uncollectible interest and fees.


(b)	Loans (other than PCI loans and those for which the fair value option has been elected) are presented net of unearned income, unamortized discounts and premiums, and net deferred loan costs. These amounts were not material as of December 31, 2016 and 2015.

The following tables provide information about the carrying value of retained loans purchased, sold and reclassified to held-for-sale during the periods indicated. These tables exclude loans recorded at fair value. The Firm manages its exposure to credit risk on an ongoing basis. Selling loans is one way that the Firm reduces its credit exposures.



		2016
Year ended December 31, (in millions)	Consumer, excluding credit card				Credit card			Wholesale			Total
Purchases		$	4,116	^(a)(b)		$	—		$	1,448		$	5,564
Sales		6,368				—			8,739			15,107
Retained loans reclassified to held-for-sale		321				—			2,381			2,702



		2015
Year ended December 31, (in millions)	Consumer, excluding credit card				Credit card			Wholesale			Total
Purchases		$	5,279	^(a)(b)		$	—		$	2,154		$	7,433
Sales		5,099				—			9,188			14,287
Retained loans reclassified to held-for-sale		1,514				79			642			2,235



		2014
Year ended December 31, (in millions)	Consumer, excluding credit card				Credit card			Wholesale			Total
Purchases		$	7,434	^(a)(b)		$	—		$	885		$	8,319
Sales		6,655				—			7,381			14,036
Retained loans reclassified to held-for-sale		1,190				3,039			581			4,810

(a)

Purchases predominantly represent the Firm’s voluntary repurchase of certain delinquent loans from loan pools as permitted by Government National Mortgage Association (“Ginnie Mae”) guidelines. The Firm typically elects to repurchase these delinquent loans as it continues to service them and/or manage the foreclosure process in accordance with applicable requirements of Ginnie Mae, FHA, RHS, and/or VA.


(b)	Excludes purchases of retained loans sourced through the correspondent origination channel and underwritten in accordance with the Firm’s standards. Such purchases were $30.4 billion, $50.3 billion and $15.1 billion for the years ended December 31, 2016, 2015 and 2014, respectively.

The following table provides information about gains and losses, including lower of cost or fair value adjustments, on loan sales by portfolio segment.



Year ended December 31, (in millions)	2016			2015		2014
Net gains/(losses) on sales of loans (including lower of cost or fair value adjustments)^(a)
Consumer, excluding credit card	$	231		$	305	$	341
Credit card	(12		)	1		(241		)
Wholesale	26			34		101
Total net gains on sales of loans (including lower of cost or fair value adjustments)	$	245		$	340	$	201


(a)	Excludes sales related to loans accounted for at fair value.

Loans

Loan accounting framework


•	Originated or purchased loans held-for-investment (i.e., “retained”), other than PCI loans


•	Loans held-for-sale


•	Loans at fair value


•	PCI loans held-for-investment

The following provides a detailed accounting discussion of these loan categories:

Loans held-for-investment (other than PCI loans)

Interest income

Nonaccrual loans

Allowance for loan losses

Charge-offs

Certain consumer loans will be charged off earlier than the FFIEC charge-off standards in certain circumstances as follows:


•	A charge-off is recognized when a loan is modified in a TDR if the loan is determined to be collateral-dependent.

•


•	Auto loans are written down to net realizable value upon repossession of the automobile and after a redemption period (i.e., the period during which a borrower may cure the loan) has passed.

Other than in certain limited circumstances, the Firm typically does not recognize charge-offs on government-guaranteed loans.

Loans held-for-sale

Interest income on loans held-for-sale is accrued and recognized based on the contractual rate of interest.

Held-for-sale loans are subject to the nonaccrual policies described above.

Because held-for-sale loans are recognized at the lower of cost or fair value, the Firm’s allowance for loan losses and charge-off policies do not apply to these loans.

Loans at fair value

Loans used in a market-making strategy or risk managed on a fair value basis are measured at fair value, with changes in fair value recorded in noninterest revenue.

Because these loans are recognized at fair value, the Firm’s allowance for loan losses and charge-off policies do not apply to these loans.

PCI loans

Loan classification changes

Loan modifications

Foreclosed property

Loan portfolio



Consumer, excluding credit card^(a)	Credit card	Wholesale^(f)
Residential real estate – excluding PCI • Home equity^(b) • Residential mortgage^(c) Other consumer loans • Auto^(d) • Business banking^(d)(e) • Student and other Residential real estate – PCI • Home equity • Prime mortgage • Subprime mortgage • Option ARMs	• Credit card loans	• Commercial and industrial • Real estate • Financial institutions • Government agencies • Other^(g)


(a)	Includes loans held in CCB, prime mortgage and home equity loans held in AWM and prime mortgage loans held in Corporate.


(b)	Includes senior and junior lien home equity loans.


(c)	Includes prime (including option ARMs) and subprime loans.


(d)	Includes certain business banking and auto dealer risk-rated loans that apply the wholesale methodology for determining the allowance for loan losses; these loans are managed by CCB, and therefore, for consistency in presentation, are included with the other consumer loan classes.


(e)	Predominantly includes Business Banking loans as well as deposit overdrafts.


(f)	Includes loans held in CIB, CB, AWM and Corporate. Excludes prime mortgage and home equity loans held in AWM and prime mortgage loans held in Corporate. Classes are internally defined and may not align with regulatory definitions.


(g)	Includes loans to: individuals; SPEs; holding companies; and private education and civic organizations. For more information on exposures to SPEs, see Note 16.

The following tables summarize the Firm’s loan balances by portfolio segment.



December 31, 2016	Consumer, excluding credit card			Credit card^(a)			Wholesale			Total
(in millions)	Consumer, excluding credit card			Credit card^(a)			Wholesale			Total
Retained		$	364,406		$	141,711		$	383,790		$	889,907	^(b)
Held-for-sale		238			105			2,285			2,628
At fair value		—			—			2,230			2,230
Total		$	364,644		$	141,816		$	388,305		$	894,765

December 31, 2015	Consumer, excluding credit card				Credit card^(a)			Wholesale			Total
(in millions)	Consumer, excluding credit card				Credit card^(a)			Wholesale			Total
Retained		$	344,355		$	131,387		$	357,050		$	832,792	^(b)
Held-for-sale		466			76			1,104			1,646
At fair value		—			—			2,861			2,861
Total		$	344,821		$	131,463		$	361,015		$	837,299


(a)	Includes billed interest and fees net of an allowance for uncollectible interest and fees.


(b)	Loans (other than PCI loans and those for which the fair value option has been elected) are presented net of unearned income, unamortized discounts and premiums, and net deferred loan costs. These amounts were not material as of December 31, 2016 and 2015.



		2016
Year ended December 31, (in millions)	Consumer, excluding credit card				Credit card			Wholesale			Total
Purchases		$	4,116	^(a)(b)		$	—		$	1,448		$	5,564
Sales		6,368				—			8,739			15,107
Retained loans reclassified to held-for-sale		321				—			2,381			2,702



		2015
Year ended December 31, (in millions)	Consumer, excluding credit card				Credit card			Wholesale			Total
Purchases		$	5,279	^(a)(b)		$	—		$	2,154		$	7,433
Sales		5,099				—			9,188			14,287
Retained loans reclassified to held-for-sale		1,514				79			642			2,235



		2014
Year ended December 31, (in millions)	Consumer, excluding credit card				Credit card			Wholesale			Total
Purchases		$	7,434	^(a)(b)		$	—		$	885		$	8,319
Sales		6,655				—			7,381			14,036
Retained loans reclassified to held-for-sale		1,190				3,039			581			4,810

(a)


(b)	Excludes purchases of retained loans sourced through the correspondent origination channel and underwritten in accordance with the Firm’s standards. Such purchases were $30.4 billion, $50.3 billion and $15.1 billion for the years ended December 31, 2016, 2015 and 2014, respectively.

The following table provides information about gains and losses, including lower of cost or fair value adjustments, on loan sales by portfolio segment.



Year ended December 31, (in millions)	2016			2015		2014
Net gains/(losses) on sales of loans (including lower of cost or fair value adjustments)^(a)
Consumer, excluding credit card	$	231		$	305	$	341
Credit card	(12		)	1		(241		)
Wholesale	26			34		101
Total net gains on sales of loans (including lower of cost or fair value adjustments)	$	245		$	340	$	201


(a)	Excludes sales related to loans accounted for at fair value.

Consumer, excluding credit card, loan portfolio

Consumer loans, excluding credit card loans, consist primarily of residential mortgages, home equity loans and lines of credit, auto loans, business banking loans, and student and other loans, with a focus on serving the prime consumer credit market. The portfolio also includes home equity loans secured by junior liens, prime mortgage loans with an interest-only payment period, and certain payment-option loans that may result in negative amortization.

The table below provides information about retained consumer loans, excluding credit card, by class.



December 31, (in millions)	2016		2015
Residential real estate – excluding PCI
Home equity	$	39,063	$	45,559
Residential mortgage	192,163		166,239
Other consumer loans
Auto	65,814		60,255
Business banking	22,698		21,208
Student and other	8,989		10,096
Residential real estate – PCI
Home equity	12,902		14,989
Prime mortgage	7,602		8,893
Subprime mortgage	2,941		3,263
Option ARMs	12,234		13,853
Total retained loans	$	364,406	$	344,355

Delinquency rates are a primary credit quality indicator for consumer loans. Loans that are more than 30 days past due provide an early warning of borrowers who may be experiencing financial difficulties and/or who may be unable or unwilling to repay the loan. As the loan continues to age, it becomes more clear that the borrower is likely either unable or unwilling to pay. In the case of residential real estate loans, late-stage delinquencies (greater than 150 days past due) are a strong indicator of loans that will ultimately result in a foreclosure or similar liquidation transaction. In addition to delinquency rates, other credit quality indicators for consumer loans vary based on the class of loan, as follows:

•

For residential real estate loans, including both non-PCI and PCI portfolios, the current estimated LTV ratio, or the combined LTV ratio in the case of junior lien loans, is an indicator of the potential loss severity in the event of default. Additionally, LTV or combined LTV ratios can provide insight into a borrower’s continued willingness to pay, as the delinquency rate of high-LTV loans tends to be greater than that for loans where the borrower has equity in the collateral. The geographic distribution of the loan collateral also provides insight as to the credit quality of the portfolio, as factors such as the regional economy, home price changes and specific events such as natural disasters, will affect credit quality. The borrower’s current or “refreshed” FICO score is a secondary credit-quality indicator for certain loans, as FICO scores are an indication of the borrower’s credit payment history. Thus, a loan to a borrower with a low FICO score (660 or below) is considered to be of higher risk than a loan to a borrower with a high FICO score. Further, a loan to a borrower with a high LTV ratio and a low FICO score is at greater risk of default than a loan to a borrower that has both a high LTV ratio and a high FICO score.


•	For scored auto, scored business banking and student loans, geographic distribution is an indicator of the credit performance of the portfolio. Similar to residential real estate loans, geographic distribution provides insights into the portfolio performance based on regional economic activity and events.

•

Risk-rated business banking and auto loans are similar to wholesale loans in that the primary credit quality indicators are the risk rating that is assigned to the loan and whether the loans are considered to be criticized and/or nonaccrual. Risk ratings are reviewed on a regular and ongoing basis by Credit Risk Management and are adjusted as necessary for updated information about borrowers’ ability to fulfill their obligations. For further information about risk-rated wholesale loan credit quality indicators, see pages 224–225 of this Note.

Residential real estate — excluding PCI loans

The following table provides information by class for residential real estate — excluding retained PCI loans in the consumer, excluding credit card, portfolio segment.

The following factors should be considered in analyzing certain credit statistics applicable to the Firm’s residential real estate — excluding PCI loans portfolio: (i) junior lien home equity loans may be fully charged off when the loan becomes 180 days past due, and the value of the collateral does not support the repayment of the loan, resulting in relatively high charge-off rates for this product class; and (ii) the lengthening of loss-mitigation timelines may result in higher delinquency rates for loans carried at the net realizable value of the collateral that remain on the Firm’s Consolidated balance sheets.



Residential real estate – excluding PCI loans
December 31, (in millions, except ratios)	Home equity^(g)						Residential mortgage^(g)						Total residential real estate – excluding PCI
	2016			2015			2016			2015			2016			2015
Loan delinquency^(a)
Current	$	37,941		$	44,299		$	183,819		$	156,463		$	221,760		$	200,762
30–149 days past due	646			708			3,824			4,042			4,470			4,750
150 or more days past due	476			552			4,520			5,734			4,996			6,286
Total retained loans	$	39,063		$	45,559		$	192,163		$	166,239		$	231,226		$	211,798
% of 30+ days past due to total retained loans^(b)	2.87		%	2.77		%	0.75		%	1.03		%	1.11		%	1.40		%
90 or more days past due and government guaranteed^(c)	$	—		$	—		$	4,858		$	6,056		$	4,858		$	6,056
Nonaccrual loans	1,845			2,191			2,247			2,503			4,092			4,694
Current estimated LTV ratios^(d)(e)
Greater than 125% and refreshed FICO scores:
Equal to or greater than 660	$	70		$	165		$	30		$	58		$	100		$	223
Less than 660	15			32			48			77			63			109
101% to 125% and refreshed FICO scores:
Equal to or greater than 660	668			1,344			135			274			803			1,618
Less than 660	221			434			177			291			398			725
80% to 100% and refreshed FICO scores:
Equal to or greater than 660	2,961			4,537			4,026			3,159			6,987			7,696
Less than 660	945			1,409			718			996			1,663			2,405
Less than 80% and refreshed FICO scores:
Equal to or greater than 660	27,317			29,648			169,579			142,241			196,896			171,889
Less than 660	4,380			4,934			6,759			6,797			11,139			11,731
No FICO/LTV available	2,486			3,056			1,327			1,658			3,813			4,714
U.S. government-guaranteed	—			—			9,364			10,688			9,364			10,688
Total retained loans	$	39,063		$	45,559		$	192,163		$	166,239		$	231,226		$	211,798
Geographic region
California	$	7,644		$	8,945		$	59,785		$	47,263		$	67,429		$	56,208
New York	7,978			9,147			24,813			21,462			32,791			30,609
Illinois	2,947			3,420			13,115			11,524			16,062			14,944
Texas	2,225			2,532			10,717			9,128			12,942			11,660
Florida	2,133			2,409			8,387			7,177			10,520			9,586
New Jersey	2,253			2,590			6,371			5,567			8,624			8,157
Colorado	677			807			6,304			5,409			6,981			6,216
Washington	1,229			1,451			5,443			4,176			6,672			5,627
Massachusetts	371			459			5,833			5,340			6,204			5,799
Arizona	1,772			2,143			3,577			3,155			5,349			5,298
All other^(f)	9,834			11,656			47,818			46,038			57,652			57,694
Total retained loans	$	39,063		$	45,559		$	192,163		$	166,239		$	231,226		$	211,798


(a)	Individual delinquency classifications include mortgage loans insured by U.S. government agencies as follows: current included $2.5 billion and $2.6 billion; 30–149 days past due included $3.1 billion and $3.2 billion; and 150 or more days past due included $3.8 billion and $4.9 billion at December 31, 2016 and 2015, respectively.


(b)	At December 31, 2016 and 2015, residential mortgage loans excluded mortgage loans insured by U.S. government agencies of $6.9 billion and $8.1 billion, respectively, that are 30 or more days past due. These amounts have been excluded based upon the government guarantee.

(c)

These balances, which are 90 days or more past due, were excluded from nonaccrual loans as the loans are guaranteed by U.S government agencies. Typically the principal balance of the loans is insured and interest is guaranteed at a specified reimbursement rate subject to meeting agreed-upon servicing guidelines. At December 31, 2016 and 2015, these balances included $2.2 billion and $3.4 billion, respectively, of loans that are no longer accruing interest based on the agreed-upon servicing guidelines. For the remaining balance, interest is being accrued at the guaranteed reimbursement rate. There were no loans that were not guaranteed by U.S. government agencies that are 90 or more days past due and still accruing interest at December 31, 2016 and 2015.

(d)

Represents the aggregate unpaid principal balance of loans divided by the estimated current property value. Current property values are estimated, at a minimum, quarterly, based on home valuation models using nationally recognized home price index valuation estimates incorporating actual data to the extent available and forecasted data where actual data is not available. These property values do not represent actual appraised loan level collateral values; as such, the resulting ratios are necessarily imprecise and should be viewed as estimates. Current estimated combined LTV for junior lien home equity loans considers all available lien positions, as well as unused lines, related to the property.


(e)	Refreshed FICO scores represent each borrower’s most recent credit score, which is obtained by the Firm on at least a quarterly basis.


(f)	At December 31, 2016 and 2015, included mortgage loans insured by U.S. government agencies of $9.4 billion and $10.7 billion, respectively.


(g)	Includes residential real estate loans to private banking clients in AWM, for which the primary credit quality indicators are the borrower’s financial position and LTV.

The following table represents the Firm’s delinquency statistics for junior lien home equity loans and lines as of December 31, 2016 and 2015.



	Total loans				Total 30+ day delinquency rate
December 31, (in millions except ratios)	2016		2015		2016		2015
HELOCs:^(a)
Within the revolving period^(b)	$	10,304	$	17,050	1.27	%	1.57	%
Beyond the revolving period	13,272		11,252		3.05		3.10
HELOANs	1,861		2,409		2.85		3.03
Total	$	25,437	$	30,711	2.32	%	2.25	%

(a) These HELOCs are predominantly revolving loans for a 10-year period, after which time the HELOC converts to a loan with a 20-year amortization period, but also include HELOCs that allow interest-only payments beyond the revolving period.

(b) The Firm manages the risk of HELOCs during their revolving period by closing or reducing the undrawn line to the extent permitted by law when borrowers are experiencing financial difficulty or when the collateral does not support the loan amount.

HELOCs beyond the revolving period and HELOANs have higher delinquency rates than HELOCs within the revolving period. That is primarily because the fully-amortizing payment that is generally required for those products is higher than the minimum payment options available for HELOCs within the revolving period. The higher delinquency rates associated with amortizing HELOCs and HELOANs are factored into the Firm’s allowance for loan losses.

Impaired loans

The table below sets forth information about the Firm’s residential real estate impaired loans, excluding PCI loans. These loans are considered to be impaired as they have been modified in a TDR. All impaired loans are evaluated for an asset-specific allowance as described in Note 15.



December 31, (in millions)	Home equity				Residential mortgage				Total residential real estate – excluding PCI
December 31, (in millions)	2016		2015		2016		2015		2016		2015
Impaired loans
With an allowance	$	1,266	$	1,293	$	4,689	$	5,243	$	5,955	$	6,536
Without an allowance^(a)	998		1,065		1,343		1,447		2,341		2,512
Total impaired loans^(b)(c)	$	2,264	$	2,358	$	6,032	$	6,690	$	8,296	$	9,048
Allowance for loan losses related to impaired loans	$	121	$	138	$	68	$	108	$	189	$	246
Unpaid principal balance of impaired loans^(d)	3,847		3,960		8,285		9,082		12,132		13,042
Impaired loans on nonaccrual status^(e)	1,116		1,220		1,755		1,957		2,871		3,177

(a)

Represents collateral-dependent residential real estate loans that are charged off to the fair value of the underlying collateral less cost to sell. The Firm reports, in accordance with regulatory guidance, residential real estate loans that have been discharged under Chapter 7 bankruptcy and not reaffirmed by the borrower (“Chapter 7 loans”) as collateral-dependent nonaccrual TDRs, regardless of their delinquency status. At December 31, 2016, Chapter 7 residential real estate loans included approximately 12% home equity and 16% of residential mortgages that were 30 days or more past due.

(b)

At December 31, 2016 and 2015, $3.4 billion and $3.8 billion, respectively, of loans modified subsequent to repurchase from Ginnie Mae in accordance with the standards of the appropriate government agency (i.e., FHA, VA, RHS) are not included in the table above. When such loans perform subsequent to modification in accordance with Ginnie Mae guidelines, they are generally sold back into Ginnie Mae loan pools. Modified loans that do not re-perform become subject to foreclosure.


(c)	Predominantly all residential real estate impaired loans, excluding PCI loans, are in the U.S.


(d)	Represents the contractual amount of principal owed at December 31, 2016 and 2015. The unpaid principal balance differs from the impaired loan balances due to various factors including charge-offs, net deferred loan fees or costs, and unamortized discounts or premiums on purchased loans.


(e)	As of December 31, 2016 and 2015, nonaccrual loans included $2.3 billion and $2.5 billion, respectively, of TDRs for which the borrowers were less than 90 days past due. For additional information about loans modified in a TDR that are on nonaccrual status refer, to the Loan accounting framework on pages 208–210 of this Note.

The following table presents average impaired loans and the related interest income reported by the Firm.



Year ended December 31,	Average impaired loans						Interest income on impaired loans^(a)						Interest income on impaired loans on a cash basis^(a)
(in millions)	2016		2015		2014		2016		2015		2014		2016		2015		2014
Home equity	$	2,311	$	2,369	$	2,435	$	125	$	128	$	137	$	80	$	85	$	90
Residential mortgage	6,376		7,697		10,174		305		348		444		77		87		105
Total residential real estate – excluding PCI	$	8,687	$	10,066	$	12,609	$	430	$	476	$	581	$	157	$	172	$	195


(a)	Generally, interest income on loans modified in TDRs is recognized on a cash basis until such time as the borrower has made a minimum of six payments under the new terms, unless the loan is deemed to be collateral-dependent.

Loan modifications

Modifications of residential real estate loans, excluding PCI loans, are generally accounted for and reported as TDRs. There were no additional commitments to lend to borrowers whose residential real estate loans, excluding PCI loans, have been modified in TDRs.

The following table presents new TDRs reported by the Firm.



Year ended December 31, (in millions)	2016		2015		2014
Home equity	$	385	$	401	$	321
Residential mortgage	254		267		411
Total residential real estate – excluding PCI	$	639	$	668	$	732

Nature and extent of modifications

The U.S. Treasury’s Making Home Affordable programs, as well as the Firm’s proprietary modification programs, generally provide various concessions to financially troubled borrowers including, but not limited to, interest rate reductions, term or payment extensions and deferral of principal and/or interest payments that would otherwise have been required under the terms of the original agreement.

The following table provides information about how residential real estate loans, excluding PCI loans, were modified under the Firm’s loss mitigation programs described above during the periods presented. This table excludes Chapter 7 loans where the sole concession granted is the discharge of debt.



Year ended December 31,	Home equity						Residential mortgage						Total residential real estate – excluding PCI
Year ended December 31,	2016		2015		2014		2016		2015		2014		2016		2015		2014
Number of loans approved for a trial modification	3,760		3,933		1,565		1,945		2,711		3,108		5,705		6,644		4,673
Number of loans permanently modified	4,824		4,296		3,984		3,338		3,145		5,648		8,162		7,441		9,632
Concession granted:^(a)
Interest rate reduction	75	%	66	%	75	%	76	%	71	%	45	%	76	%	68	%	58	%
Term or payment extension	83		89		78		90		81		52		86		86		63
Principal and/or interest deferred	19		23		21		16		27		15		18		24		18
Principal forgiveness	9		7		26		26		28		52		16		16		41
Other^(b)	6		—		—		25		11		10		14		5		6


(a)	Represents concessions granted in permanent modifications as a percentage of the number of loans permanently modified. The sum of the percentages exceeds 100% because predominantly all of the modifications include more than one type of concession. A significant portion of trial modifications include interest rate reductions and/or term or payment extensions.


(b)	Represents variable interest rate to fixed interest rate modifications.

Financial effects of modifications and redefaults

The following table provides information about the financial effects of the various concessions granted in modifications of residential real estate loans, excluding PCI, under the loss mitigation programs described above and about redefaults of certain loans modified in TDRs for the periods presented. Because the specific types and amounts of concessions offered to borrowers frequently change between the trial modification and the permanent modification, the following table presents only the financial effects of permanent modifications. This table also excludes Chapter 7 loans where the sole concession granted is the discharge of debt.



Year ended December 31, (in millions, except weighted-average data and number of loans)																			Total residential real estate – excluding PCI
	Home equity									Residential mortgage									Total residential real estate – excluding PCI
	2016			2015			2014			2016			2015			2014			2016			2015			2014
Weighted-average interest rate of loans with interest rate reductions – before TDR	4.99		%	5.20		%	5.27		%	5.59		%	5.67		%	5.74		%	5.36		%	5.51		%	5.61		%
Weighted-average interest rate of loans with interest rate reductions – after TDR	2.34			2.35			2.30			2.93			2.79			2.96			2.70			2.64			2.78
Weighted-average remaining contractual term (in years) of loans with term or payment extensions – before TDR	18			18			19			24			25			24			22			22			23
Weighted-average remaining contractual term (in years) of loans with term or payment extensions – after TDR	38			35			33			38			37			36			38			36			36
Charge-offs recognized upon permanent modification	$	1		$	4		$	27		$	4		$	11		$	12		$	5		$	15		$	39
Principal deferred	23			27			16			30			58			58			53			85			74
Principal forgiven	7			6			35			44			66			172			51			72			207
Balance of loans that redefaulted within one year of permanent modification^(a)	$	40		$	21		$	29		$	98		$	133		$	214		$	138		$	154		$	243

(a)

Represents loans permanently modified in TDRs that experienced a payment default in the periods presented, and for which the payment default occurred within one year of the modification. The dollar amounts presented represent the balance of such loans at the end of the reporting period in which such loans defaulted. For residential real estate loans modified in TDRs, payment default is deemed to occur when the loan becomes two contractual payments past due. In the event that a modified loan redefaults, it is probable that the loan will ultimately be liquidated through foreclosure or another similar type of liquidation transaction. Redefaults of loans modified within the last 12 months may not be representative of ultimate redefault levels.

At December 31, 2016, the weighted-average estimated remaining lives of residential real estate loans, excluding PCI loans, permanently modified in TDRs were 9 years for home equity and 10 years for residential mortgage. The estimated remaining lives of these loans reflect estimated prepayments, both voluntary and involuntary (i.e., foreclosures and other forced liquidations).

Active and suspended foreclosure

At December 31, 2016 and 2015, the Firm had non-PCI residential real estate loans, excluding those insured by U.S. government agencies, with a carrying value of $932 million and $1.2 billion, respectively, that were not included in REO, but were in the process of active or suspended foreclosure.

Other consumer loans

The table below provides information for other consumer retained loan classes, including auto, business banking and student loans.



December 31, (in millions, except ratios)	Auto						Business banking						Student and other								Total other consumer
December 31, (in millions, except ratios)	2016			2015			2016			2015			2016				2015				2016				2015
Loan delinquency^(a)
Current	$	65,029		$	59,442		$	22,312		$	20,887		$	8,397			$	9,405			$	95,738			$	89,734
30–119 days past due	773			804			247			215			374				445				1,394				1,464
120 or more days past due	12			9			139			106			218				246				369				361
Total retained loans	$	65,814		$	60,255		$	22,698		$	21,208		$	8,989			$	10,096			$	97,501			$	91,559
% of 30+ days past due to total retained loans	1.19		%	1.35		%	1.70		%	1.51		%	1.38		%	^(d)	1.63		%	^(d)	1.33		%	^(d)	1.42		%	^(d)
90 or more days past due and still accruing^(b)	$	—		$	—		$	—		$	—		$	263			$	290			$	263			$	290
Nonaccrual loans	214			116			286			263			175				242				675				621
Geographic region
California	$	7,975		$	7,186		$	4,158		$	3,530		$	935			$	1,051			$	13,068			$	11,767
Texas	7,041			6,457			2,769			2,622			739				839				10,549				9,918
New York	4,078			3,874			3,510			3,359			1,187				1,224				8,775				8,457
Illinois	3,984			3,678			1,627			1,459			582				679				6,193				5,816
Florida	3,374			2,843			1,068			941			475				516				4,917				4,300
Ohio	2,194			2,340			1,366			1,363			490				559				4,050				4,262
Arizona	2,209			2,033			1,270			1,205			202				236				3,681				3,474
Michigan	1,567			1,550			1,308			1,361			355				415				3,230				3,326
New Jersey	2,031			1,998			546			500			320				366				2,897				2,864
Louisiana	1,814			1,713			961			997			120				134				2,895				2,844
All other	29,547			26,583			4,115			3,871			3,584				4,077				37,246				34,531
Total retained loans	$	65,814		$	60,255		$	22,698		$	21,208		$	8,989			$	10,096			$	97,501			$	91,559
Loans by risk ratings^(c)
Noncriticized	$	13,899		$	11,277		$	16,858		$	15,505		NA				NA				$	30,757			$	26,782
Criticized performing	201			76			816			815			NA				NA				1,017				891
Criticized nonaccrual	94			—			217			210			NA				NA				311				210


(a)	Student loan delinquency classifications included loans insured by U.S. government agencies under the FFELP as follows: current included $3.3 billion and $3.8 billion; 30-119 days past due included $257 million and $299 million; and 120 or more days past due included $211 million and $227 million at December 31, 2016 and 2015, respectively.


(b)	These amounts represent student loans, insured by U.S. government agencies under the FFELP. These amounts were accruing as reimbursement of insured amounts is proceeding normally.


(c)	For risk-rated business banking and auto loans, the primary credit quality indicator is the risk rating of the loan, including whether the loans are considered to be criticized and/or nonaccrual.


(d)	December 31, 2016 and 2015, excluded loans 30 days or more past due and still accruing, that are insured by U.S. government agencies under the FFELP, of $468 million and $526 million, respectively. These amounts were excluded as reimbursement of insured amounts is proceeding normally.

Other consumer impaired loans and loan modifications

The following table sets forth information about the Firm’s other consumer impaired loans, including risk-rated business banking and auto loans that have been placed on nonaccrual status, and loans that have been modified in TDRs.



December 31, (in millions)	2016		2015
Impaired loans
With an allowance	$	614	$	527
Without an allowance^(a)	30		31
Total impaired loans^(b)(c)	$	644	$	558
Allowance for loan losses related to impaired loans	$	119	$	118
Unpaid principal balance of impaired loans^(d)	753		668
Impaired loans on nonaccrual status	508		449


(a)	When discounted cash flows, collateral value or market price equals or exceeds the recorded investment in the loan, the loan does not require an allowance. This typically occurs when the impaired loans have been partially charged off and/or there have been interest payments received and applied to the loan balance.


(b)	Predominantly all other consumer impaired loans are in the U.S.


(c)	Other consumer average impaired loans were $635 million, $566 million and $599 million for the years ended December 31, 2016, 2015 and 2014, respectively. The related interest income on impaired loans, including those on a cash basis, was not material for the years ended December 31, 2016, 2015 and 2014.


(d)	Represents the contractual amount of principal owed at December 31, 2016 and 2015. The unpaid principal balance differs from the impaired loan balances due to various factors, including charge-offs, interest payments received and applied to the principal balance, net deferred loan fees or costs and unamortized discounts or premiums on purchased loans.

Loan modifications

Certain other consumer loan modifications are considered to be TDRs as they provide various concessions to borrowers who are experiencing financial difficulty. All of these TDRs are reported as impaired loans in the table above.The following table provides information about the Firm’s other consumer loans modified in TDRs. New TDRs were not material for the years ended December 31, 2016 and 2015.



December 31, (in millions)	2016		2015
Loans modified in TDRs^(a)(b)	$	362	$	384
TDRs on nonaccrual status	226		275


(a)	The impact of these modifications was not material to the Firm for the years ended December 31, 2016 and 2015.


(b)	Additional commitments to lend to borrowers whose loans have been modified in TDRs as of December 31, 2016 and 2015 were immaterial.

Purchased credit-impaired loans

PCI loans are initially recorded at fair value at acquisition. PCI loans acquired in the same fiscal quarter may be aggregated into one or more pools, provided that the loans have common risk characteristics. A pool is then accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. With respect to the Washington Mutual transaction, all of the consumer PCI loans were aggregated into pools of loans with common risk characteristics.

On a quarterly basis, the Firm estimates the total cash flows (both principal and interest) expected to be collected over the remaining life of each pool. These estimates incorporate assumptions regarding default rates, loss severities, the amounts and timing of prepayments and other factors that reflect then-current market conditions. Probable decreases in expected cash flows (i.e., increased credit losses) trigger the recognition of impairment, which is then measured as the present value of the expected principal loss plus any related forgone interest cash flows, discounted at the pool’s effective interest rate. Impairments are recognized through the provision for credit losses and an increase in the allowance for loan losses. Probable and significant increases in expected cash flows (e.g., decreased credit losses, the net benefit of modifications) would first reverse any previously recorded allowance for loan losses with any remaining increases recognized prospectively as a yield adjustment over the remaining estimated lives of the underlying loans. The impacts of (i) prepayments, (ii) changes in variable interest rates, and (iii) any other changes in the timing of expected cash flows are recognized prospectively as adjustments to interest income.

The Firm continues to modify certain PCI loans. The impact of these modifications is incorporated into the Firm’s quarterly assessment of whether a probable and significant change in expected cash flows has occurred, and the loans continue to be accounted for and reported as PCI loans. In evaluating the effect of modifications on expected cash flows, the Firm incorporates the effect of any forgone interest and also considers the potential for redefault. The Firm develops product-specific probability of default estimates, which are used to compute expected credit losses. In developing these probabilities of default, the Firm considers the relationship between the credit quality characteristics of the underlying loans and certain assumptions about home prices and unemployment based upon industry-wide data. The Firm also considers its own historical loss experience to-date based on actual redefaulted modified PCI loans.

The excess of cash flows expected to be collected over the carrying value of the underlying loans is referred to as the accretable yield. This amount is not reported on the Firm’s Consolidated balance sheets but is accreted into interest income at a level rate of return over the remaining estimated lives of the underlying pools of loans.

If the timing and/or amounts of expected cash flows on PCI loan pools were determined not to be reasonably estimable, no interest would be accreted and the loan pools would be reported as nonaccrual loans; however, since the timing and amounts of expected cash flows for the Firm’s PCI consumer loan pools are reasonably estimable, interest is being accreted and the loan pools are being reported as performing loans.

The liquidation of PCI loans, which may include sales of loans, receipt of payment in full from the borrower, or foreclosure, results in removal of the loans from the underlying PCI pool. When the amount of the liquidation proceeds (e.g., cash, real estate), if any, is less than the unpaid principal balance of the loan, the difference is first applied against the PCI pool’s nonaccretable difference for principal losses (i.e., the lifetime credit loss estimate established as a purchase accounting adjustment at the acquisition date). When the nonaccretable difference for a particular loan pool has been fully depleted, any excess of the unpaid principal balance of the loan over the liquidation proceeds is written off against the PCI pool’s allowance for loan losses. Beginning in 2014, write-offs of PCI loans also include other adjustments, primarily related to interest forgiveness modifications. Because the Firm’s PCI loans are accounted for at a pool level, the Firm does not recognize charge-offs of PCI loans when they reach specified stages of delinquency (i.e., unlike non-PCI consumer loans, these loans are not charged off based on FFIEC standards).

The PCI portfolio affects the Firm’s results of operations primarily through: (i) contribution to net interest margin; (ii) expense related to defaults and servicing resulting from the liquidation of the loans; and (iii) any provision for loan losses. The PCI loans acquired in the Washington Mutual transaction were funded based on the interest rate characteristics of the loans. For example, variable-rate loans were funded with variable-rate liabilities and fixed-rate loans were funded with fixed-rate liabilities with a similar maturity profile. A net spread will be earned on the declining balance of the portfolio, which is estimated as of December 31, 2016, to have a remaining weighted-average life of 8 years.

Residential real estate – PCI loans

The table below sets forth information about the Firm’s consumer, excluding credit card, PCI loans.



December 31, (in millions, except ratios)	Home equity						Prime mortgage						Subprime mortgage						Option ARMs						Total PCI
	2016			2015			2016			2015			2016			2015			2016			2015			2016			2015
Carrying value^(a)	$	12,902		$	14,989		$	7,602		$	8,893		$	2,941		$	3,263		$	12,234		$	13,853		$	35,679		$	40,998
Related allowance for loan losses^(b)	1,433			1,708			829			985			—			—			49			49			2,311			2,742
Loan delinquency (based on unpaid principal balance)
Current	$	12,423		$	14,387		$	6,840		$	7,894		$	3,005		$	3,232		$	11,074		$	12,370		$	33,342		$	37,883
30–149 days past due	291			322			336			424			361			439			555			711			1,543			1,896
150 or more days past due	478			633			451			601			240			380			917			1,272			2,086			2,886
Total loans	$	13,192		$	15,342		$	7,627		$	8,919		$	3,606		$	4,051		$	12,546		$	14,353		$	36,971		$	42,665
% of 30+ days past due to total loans	5.83		%	6.22		%	10.32		%	11.49		%	16.67		%	20.22		%	11.73		%	13.82		%	9.82		%	11.21		%

Current estimated LTV ratios (based on unpaid principal balance)^(c)(d)
Greater than 125% and refreshed FICO scores:
Equal to or greater than 660	$	69		$	153		$	6		$	10		$	7		$	10		$	12		$	19		$	94		$	192
Less than 660	39			80			17			28			31			55			18			36			105			199
101% to 125% and refreshed FICO scores:
Equal to or greater than 660	555			942			52			120			39			77			83			166			729			1,305
Less than 660	256			444			84			152			135			220			144			239			619			1,055
80% to 100% and refreshed FICO scores:
Equal to or greater than 660	1,860			2,709			442			816			214			331			558			977			3,074			4,833
Less than 660	804			1,136			381			614			439			643			609			1,050			2,233			3,443
Lower than 80% and refreshed FICO scores:
Equal to or greater than 660	6,676			6,724			3,967			4,243			919			863			6,754			7,073			18,316			18,903
Less than 660	2,183			2,265			2,287			2,438			1,645			1,642			3,783			4,065			9,898			10,410
No FICO/LTV available	750			889			391			498			177			210			585			728			1,903			2,325
Total unpaid principal balance	$	13,192		$	15,342		$	7,627		$	8,919		$	3,606		$	4,051		$	12,546		$	14,353		$	36,971		$	42,665

Geographic region (based on unpaid principal balance)
California	$	7,899		$	9,205		$	4,396		$	5,172		$	899		$	1,005		$	7,128		$	8,108		$	20,322		$	23,490
Florida	1,306			1,479			501			586			332			373			1,026			1,183			3,165			3,621
New York	697			788			515			580			363			400			711			813			2,286			2,581
Washington	673			819			167			194			68			81			290			339			1,198			1,433
New Jersey	280			310			210			238			125			139			401			470			1,016			1,157
Illinois	314			358			226			263			178			196			282			333			1,000			1,150
Massachusetts	94			112			173			199			110			125			346			398			723			834
Maryland	64			73			144			159			145			161			267			297			620			690
Arizona	241			281			124			143			68			76			181			203			614			703
Virginia	77			88			142			170			56			62			314			354			589			674
All other	1,547			1,829			1,029			1,215			1,262			1,433			1,600			1,855			5,438			6,332
Total unpaid principal balance	$	13,192		$	15,342		$	7,627		$	8,919		$	3,606		$	4,051		$	12,546		$	14,353		$	36,971		$	42,665


(a)	Carrying value includes the effect of fair value adjustments that were applied to the consumer PCI portfolio at the date of acquisition.


(b)	Management concluded as part of the Firm’s regular assessment of the PCI loan pools that it was probable that higher expected credit losses would result in a decrease in expected cash flows. As a result, an allowance for loan losses for impairment of these pools has been recognized.

(c)


(d)	Refreshed FICO scores represent each borrower’s most recent credit score, which is obtained by the Firm on at least a quarterly basis.

Approximately 24% of the PCI home equity portfolio are senior lien loans; the remaining balance are junior lien HELOANs or HELOCs. The following table sets forth delinquency statistics for PCI junior lien home equity loans and lines of credit based on the unpaid principal balance as of December 31, 2016 and 2015.



	Total loans				Total 30+ day delinquency rate
December 31,	2016		2015		2016		2015
(in millions, except ratios)
HELOCs:^(a)
Within the revolving period^(b)	$	2,126	$	5,000	3.67	%	4.10	%
Beyond the revolving period^(c)	7,452		6,252		4.03		4.46
HELOANs	465		582		5.38		5.33
Total	$	10,043	$	11,834	4.01	%	4.35	%


(a)	In general, these HELOCs are revolving loans for a 10-year period, after which time the HELOC converts to an interest-only loan with a balloon payment at the end of the loan’s term.


(b)	Substantially all undrawn HELOCs within the revolving period have been closed.


(c)	Includes loans modified into fixed rate amortizing loans.

The table below sets forth the accretable yield activity for the Firm’s PCI consumer loans for the years ended December 31, 2016, 2015 and 2014, and represents the Firm’s estimate of gross interest income expected to be earned over the remaining life of the PCI loan portfolios. The table excludes the cost to fund the PCI portfolios, and therefore the accretable yield does not represent net interest income expected to be earned on these portfolios.



Year ended December 31, (in millions, except ratios)	Total PCI
Year ended December 31, (in millions, except ratios)	2016			2015			2014
Beginning balance	$	13,491		$	14,592		$	16,167
Accretion into interest income	(1,555		)	(1,700		)	(1,934		)
Changes in interest rates on variable-rate loans	260			279			(174		)
Other changes in expected cash flows^(a)	(428		)	230			533
Reclassification from nonaccretable difference^(b)	—			90			—
Balance at December 31	$	11,768		$	13,491		$	14,592
Accretable yield percentage	4.35		%	4.20		%	4.19		%


(a)	Other changes in expected cash flows may vary from period to period as the Firm continues to refine its cash flow model, for example cash flows expected to be collected due to the impact of modifications and changes in prepayment assumptions.


(b)	Reclassifications from the nonaccretable difference in the year ended December 31, 2015 were driven by continued improvement in home prices and delinquencies, as well as increased granularity in the impairment estimates.

Active and suspended foreclosure

At December 31, 2016 and 2015, the Firm had PCI residential real estate loans with an unpaid principal balance of $1.7 billion and $2.3 billion, respectively, that were not included in REO, but were in the process of active or suspended foreclosure.

Credit card loan portfolio

The credit card portfolio segment includes credit card loans originated and purchased by the Firm. Delinquency rates are the primary credit quality indicator for credit card loans as they provide an early warning that borrowers may be experiencing difficulties (30 days past due); information on those borrowers that have been delinquent for a longer period of time (90 days past due) is also considered. In addition to delinquency rates, the geographic distribution of the loans provides insight as to the credit quality of the portfolio based on the regional economy.

While the borrower’s credit score is another general indicator of credit quality, the Firm does not view credit scores as a primary indicator of credit quality because the borrower’s credit score tends to be a lagging indicator. However, the distribution of such scores provides a general indicator of credit quality trends within the portfolio. Refreshed FICO score information, which is obtained at least quarterly, for a statistically significant random sample of the credit card portfolio is indicated in the following table; FICO is considered to be the industry benchmark for credit scores.

The Firm generally originates new card accounts to prime consumer borrowers. However, certain cardholders’ FICO scores may decrease over time, depending on the performance of the cardholder and changes in credit score technology.

The table below sets forth information about the Firm’s credit card loans.



As of or for the year ended December 31, (in millions, except ratios)	2016			2015
Net charge-offs	$	3,442		$	3,122
% of net charge-offs to retained loans	2.63		%	2.51		%
Loan delinquency
Current and less than 30 days past due and still accruing	$	139,434		$	129,502
30–89 days past due and still accruing	1,134			941
90 or more days past due and still accruing	1,143			944
Total retained credit card loans	$	141,711		$	131,387
Loan delinquency ratios
% of 30+ days past due to total retained loans	1.61		%	1.43		%
% of 90+ days past due to total retained loans	0.81			0.72
Credit card loans by geographic region
California	$	20,571		$	18,802
Texas	13,220			11,847
New York	12,249			11,360
Florida	8,585			7,806
Illinois	8,189			7,655
New Jersey	6,271			5,879
Ohio	4,906			4,700
Pennsylvania	4,787			4,533
Michigan	3,741			3,562
Colorado	3,699			3,399
All other	55,493			51,844
Total retained credit card loans	$	141,711		$	131,387
Percentage of portfolio based on carrying value with estimated refreshed FICO scores^(a)
Equal to or greater than 660	84.4		%	84.4		%
Less than 660	14.2			13.1
No FICO available	1.4			2.5


(a)	The current period percentage of portfolio based on carrying value with estimated refreshed FICO scores disclosures have been updated to reflect where the FICO score is unavailable. The prior period amounts have been revised to conform with the current presentation.

Credit card impaired loans and loan modifications

The table below sets forth information about the Firm’s impaired credit card loans. All of these loans are considered to be impaired as they have been modified in TDRs.



December 31, (in millions)	2016		2015
Impaired credit card loans with an allowance^(a)(b)
Credit card loans with modified payment terms^(c)	$	1,098	$	1,286
Modified credit card loans that have reverted to pre-modification payment terms^(d)	142		179
Total impaired credit card loans^(e)	$	1,240	$	1,465
Allowance for loan losses related to impaired credit card loans	$	358	$	460


(a)	The carrying value and the unpaid principal balance are the same for credit card impaired loans.


(b)	There were no impaired loans without an allowance.


(c)	Represents credit card loans outstanding to borrowers enrolled in a credit card modification program as of the date presented.

(d)

Represents credit card loans that were modified in TDRs but that have subsequently reverted back to the loans’ pre-modification payment terms. At December 31, 2016 and 2015, $94 million and $113 million, respectively, of loans have reverted back to the pre-modification payment terms of the loans due to noncompliance with the terms of the modified loans. The remaining $48 million and $66 million at December 31, 2016 and 2015, respectively, of these loans are to borrowers who have successfully completed a short-term modification program. The Firm continues to report these loans as TDRs since the borrowers’ credit lines remain closed.


(e)	Predominantly all impaired credit card loans are in the U.S.

The following table presents average balances of impaired credit card loans and interest income recognized on those loans.



Year ended December 31, (in millions)	2016		2015		2014
Average impaired credit card loans	$	1,325	$	1,710	$	2,503
Interest income on impaired credit card loans	63		82		123

Loan modifications

JPMorgan Chase may offer one of a number of loan modification programs to credit card borrowers who are experiencing financial difficulty. Most of the credit card loans have been modified under long-term programs for borrowers who are experiencing financial difficulties. Modifications under long-term programs involve placing the customer on a fixed payment plan, generally for 60 months. The Firm may also offer short-term programs for borrowers who may be in need of temporary relief; however, none are currently being offered. Modifications under all short- and long-term programs typically include reducing the interest rate on the credit card. Substantially all modifications are considered to be TDRs.

If the cardholder does not comply with the modified payment terms, then the credit card loan agreement reverts back to its pre-modification payment terms. Assuming that the cardholder does not begin to perform in accordance with those payment terms, the loan continues to age and will ultimately be charged-off in accordance with the Firm’s standard charge-off policy. In addition, if a borrower successfully completes a short-term modification program, then the loan reverts back to its pre-modification payment terms. However, in most cases, the Firm does not reinstate the borrower’s line of credit.

New enrollments in these loan modification programs for the years ended December 31, 2016, 2015 and 2014, were $636 million, $638 million and $807 million, respectively.

Financial effects of modifications and redefaults

The following table provides information about the financial effects of the concessions granted on credit card loans modified in TDRs and redefaults for the periods presented.



Year ended December 31, (in millions, except weighted-average data)	2016			2015			2014
Weighted-average interest rate of loans – before TDR	15.56		%	15.08		%	14.96		%
Weighted-average interest rate of loans – after TDR	4.76			4.40			4.40
Loans that redefaulted within one year of modification^(a)	$	79		$	85		$	119


(a)	Represents loans modified in TDRs that experienced a payment default in the periods presented, and for which the payment default occurred within one year of the modification. The amounts presented represent the balance of such loans as of the end of the quarter in which they defaulted.

For credit card loans modified in TDRs, payment default is deemed to have occurred when the loans become two payments past due. A substantial portion of these loans is expected to be charged-off in accordance with the Firm’s standard charge-off policy. Based on historical experience, the estimated weighted-average default rate for modified credit card loans was expected to be 28.87%, 25.61% and 27.91% as of December 31, 2016, 2015 and 2014, respectively.

Wholesale loan portfolio

Wholesale loans include loans made to a variety of customers, ranging from large corporate and institutional clients to high-net-worth individuals.

The primary credit quality indicator for wholesale loans is the risk rating assigned to each loan. Risk ratings are used to identify the credit quality of loans and differentiate risk within the portfolio. Risk ratings on loans consider the PD and the LGD. The PD is the likelihood that a loan will default. The LGD is the estimated loss on the loan that would be realized upon the default of the borrower and takes into consideration collateral and structural support for each credit facility.

Management considers several factors to determine an appropriate risk rating, including the obligor’s debt capacity and financial flexibility, the level of the obligor’s earnings, the amount and sources for repayment, the level and nature of contingencies, management strength, and the industry and geography in which the obligor operates. The Firm’s definition of criticized aligns with the banking regulatory definition of criticized exposures, which consist of special mention, substandard and doubtful categories. Risk ratings generally represent ratings profiles similar to those defined by S&P and Moody’s. Investment-grade ratings range from “AAA/Aaa” to “BBB-/Baa3.” Noninvestment-grade ratings are classified as noncriticized (“BB+/Ba1 and B-/B3”) and criticized (“CCC+”/“Caa1 and below”), and the criticized portion is further subdivided into performing and nonaccrual loans, representing management’s assessment of the collectibility of principal and interest. Criticized loans have a higher probability of default than noncriticized loans.

Risk ratings are reviewed on a regular and ongoing basis by Credit Risk Management and are adjusted as necessary for updated information affecting the obligor’s ability to fulfill its obligations.

As noted above, the risk rating of a loan considers the industry in which the obligor conducts its operations. As part of the overall credit risk management framework, the Firm focuses on the management and diversification of its industry and client exposures, with particular attention paid to industries with actual or potential credit concern. See Note 5 for further detail on industry concentrations.

The table below provides information by class of receivable for the retained loans in the Wholesale portfolio segment.



As of or for the year ended December 31, (in millions, except ratios)	Commercial and industrial						Real estate						Financial institutions						Government agencies						Other^(d)					Total retained loans
	2016			2015			2016			2015			2016			2015			2016			2015			2016			2015		2016			2015
Loans by risk ratings
Investment grade	$	64,949		$	62,150		$	88,434		$	74,330		$	23,562		$	21,786		$	15,935		$	11,363		$	97,043		$	98,107	$	289,923		$	267,736
Noninvestment grade:
Noncriticized	47,149			45,632			16,883			17,008			8,317			7,667			439			256			11,772			11,390		84,560			81,953
Criticized performing	6,161			4,542			798			1,251			200			320			6			7			188			253		7,353			6,373
Criticized nonaccrual	1,482			608			200			231			9			10			—			—			263			139		1,954			988
Total noninvestment grade	54,792			50,782			17,881			18,490			8,526			7,997			445			263			12,223			11,782		93,867			89,314
Total retained loans	$	119,741		$	112,932		$	106,315		$	92,820		$	32,088		$	29,783		$	16,380		$	11,626		$	109,266		$	109,889	$	383,790		$	357,050
% of total criticized to total retained loans	6.38		%	4.56		%	0.94%			1.60%			0.65%			1.11%			0.04%			0.06%			0.41		%	0.36%		2.43		%	2.06		%
% of nonaccrual loans to total retained loans	1.24			0.54			0.19			0.25			0.03			0.03			—			—			0.24			0.13		0.51			0.28
Loans by geographic distribution^(a)
Total non-U.S.	$	30,259		$	30,063		$	3,292		$	3,003		$	14,741		$	17,166		$	3,726		$	1,788		$	39,496		$	42,031	$	91,514		$	94,051
Total U.S.	89,482			82,869			103,023			89,817			17,347			12,617			12,654			9,838			69,770			67,858		292,276			262,999
Total retained loans	$	119,741		$	112,932		$	106,315		$	92,820		$	32,088		$	29,783		$	16,380		$	11,626		$	109,266		$	109,889	$	383,790		$	357,050

Net charge-offs/(recoveries)	$	335		$	26		$	(7	)	$	(14	)	$	(2	)	$	(5	)	$	(1	)	$	(8	)	$	16		$	11	$	341		$	10
% of net charge-offs/(recoveries) to end-of-period retained loans	0.28		%	0.02		%	(0.01		)%	(0.02		)%	(0.01		)%	(0.02)%			(0.01		)%	(0.07		)%	0.01		%	0.01%		0.09		%	—		%

Loan delinquency^(b)
Current and less than 30 days past due and still accruing	$	117,905		$	112,058		$	105,958		$	92,381		$	32,036		$	29,713		$	16,269		$	11,565		$	108,350		$	108,734	$	380,518		$	354,451
30–89 days past due and still accruing	268			259			155			193			22			49			107			55			634			988		1,186			1,544
90 or more days past due and still accruing^(c)	86			7			2			15			21			11			4			6			19			28		132			67
Criticized nonaccrual	1,482			608			200			231			9			10			—			—			263			139		1,954			988
Total retained loans	$	119,741		$	112,932		$	106,315		$	92,820		$	32,088		$	29,783		$	16,380		$	11,626		$	109,266		$	109,889	$	383,790		$	357,050


(a)	The U.S. and non-U.S. distribution is determined based predominantly on the domicile of the borrower.


(b)	The credit quality of wholesale loans is assessed primarily through ongoing review and monitoring of an obligor’s ability to meet contractual obligations rather than relying on the past due status, which is generally a lagging indicator of credit quality.


(c)	Represents loans that are considered well-collateralized and therefore still accruing interest.


(d)	Other includes individuals, SPEs, holding companies, and private education and civic organizations. For more information on exposures to SPEs, see Note 16.

The following table presents additional information on the real estate class of loans within the Wholesale portfolio for the periods indicated. Exposure consists primarily of secured commercial loans, of which multifamily is the largest segment. Multifamily lending finances acquisition, leasing and construction of apartment buildings, and includes exposure to real estate investment trusts (“REITs”). Other commercial lending largely includes financing for acquisition, leasing and construction, largely for office, retail and industrial real estate, and includes exposure to REITs. Included in real estate loans is $9.2 billion and $7.3 billion as of December 31, 2016 and 2015, respectively, of construction and development exposure consisting of loans originally purposed for construction and development, general purpose loans for builders, as well as loans for land subdivision and pre-development.



December 31, (in millions, except ratios)	Multifamily						Other Commercial						Total real estate loans
December 31, (in millions, except ratios)	2016			2015			2016			2015			2016			2015
Real estate retained loans	$	71,978		$	64,271		$	34,337		$	28,549		$	106,315		$	92,820
Criticized	539			562			459			920			998			1,482
% of criticized to total real estate retained loans	0.75		%	0.87		%	1.34		%	3.22		%	0.94		%	1.60		%
Criticized nonaccrual	$	57		$	85		$	143		$	146		$	200		$	231
% of criticized nonaccrual to total real estate retained loans	0.08		%	0.13		%	0.42		%	0.51		%	0.19		%	0.25		%

Wholesale impaired loans and loan modifications

Wholesale impaired loans consist of loans that have been placed on nonaccrual status and/or that have been modified in a TDR. All impaired loans are evaluated for an asset-specific allowance as described in Note 15.

The table below sets forth information about the Firm’s wholesale impaired loans.



December 31, (in millions)	Commercial and industrial				Real estate				Financial institutions				Government agencies				Other				Total retained loans
December 31, (in millions)	2016		2015		2016		2015		2016		2015		2016		2015		2016		2015		2016			2015
Impaired loans
With an allowance	$	1,119	$	522	$	125	$	148	$	9	$	10	$	—	$	—	$	187	$	46	$	1,440		$	726
Without an allowance^(a)	414		98		87		106		—		—		—		—		76		94		577			298
Total impaired loans	$	1,533	$	620	$	212	$	254	$	9	$	10	$	—	$	—	$	263	$	140	$	2,017	^(c)	$	1,024	^(c)
Allowance for loan losses related to impaired loans	$	258	$	220	$	18	$	27	$	3	$	3	$	—	$	—	$	63	$	24	$	342		$	274
Unpaid principal balance of impaired loans^(b)	1,754		669		295		363		12		13		—		—		284		164		2,345			1,209


(a)	When the discounted cash flows, collateral value or market price equals or exceeds the recorded investment in the loan, the loan does not require an allowance. This typically occurs when the impaired loans have been partially charged-off and/or there have been interest payments received and applied to the loan balance.


(b)	Represents the contractual amount of principal owed at December 31, 2016 and 2015. The unpaid principal balance differs from the impaired loan balances due to various factors, including charge-offs; interest payments received and applied to the carrying value; net deferred loan fees or costs; and unamortized discount or premiums on purchased loans.


(c)	Based upon the domicile of the borrower, largely consists of loans in the U.S.

The following table presents the Firm’s average impaired loans for the years ended 2016, 2015 and 2014.



Year ended December 31, (in millions)	2016		2015		2014
Commercial and industrial	$	1,480	$	453	$	243
Real estate	217		250		297
Financial institutions	13		13		20
Government agencies	—		—		—
Other	213		129		155
Total^(a)	$	1,923	$	845	$	715


(a)	The related interest income on accruing impaired loans and interest income recognized on a cash basis were not material for the years ended December 31, 2016, 2015 and 2014.

Certain loan modifications are considered to be TDRs as they provide various concessions to borrowers who are experiencing financial difficulty. All TDRs are reported as impaired loans in the tables above. TDRs were $733 million and $208 million as of December 31, 2016 and 2015.