Finance Receivables and Loans, Net Finance Receivables and Loans, Net (Notes)

3 Months Ended

Mar. 31, 2020

Loans and Leases Receivable, Net Amount [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure

Finance Receivables and Loans, Net

The composition of finance receivables and loans reported at amortized cost basis was as follows.

($ in millions)	March 31, 2020		December 31, 2019
Consumer automotive (a)	$	72,832	$	72,390
Consumer mortgage
Mortgage Finance (b)	15,949		16,181
Mortgage — Legacy (c)	1,061		1,141
Total consumer mortgage	17,010		17,322
Consumer other (d)	224		212
Total consumer	90,066		89,924
Commercial
Commercial and industrial
Automotive	27,394		28,332
Other	5,878		5,014
Commercial real estate	4,801		4,961
Total commercial	38,073		38,307
Total finance receivables and loans (e) (f)	$	128,139	$	128,231

(a) Certain finance receivables and loans are included in fair value hedging relationships. Refer to Note 18 for additional information.

(b) Includes loans originated as interest-only mortgage loans of $10 million and $11 million at March 31, 2020, and December 31, 2019, respectively, 48% of which are expected to start principal amortization in 2020. The remainder of these loans have exited the interest-only period.

(c) Includes loans originated as interest-only mortgage loans of $190 million and $212 million at March 31, 2020, and December 31, 2019, respectively, of which 99% have exited the interest-only period.

(d) Includes $10 million and $11 million of finance receivables at March 31, 2020, and December 31, 2019, respectively, for which we have elected the fair value option.

(e) Totals include net unearned income, unamortized premiums and discounts, and deferred fees and costs of $2.1 billion at March 31, 2020.

(f) Totals do not include accrued interest receivable, which was $575 million and $488 million at March 31, 2020, and December 31, 2019, respectively. Accrued interest receivable is included in other assets on the Consolidated Balance Sheet.

The following table presents an analysis of the activity in the allowance for loan losses on finance receivables and loans for the three months ended March 31, 2020, and includes the cumulative effect of adopting ASU 2016-13.

Three months ended March 31, 2020 ($ in millions)	Consumer automotive			Consumer mortgage			Consumer other (a)			Commercial			Total
Allowance at December 31, 2019	$	1,075		$	46		$	9		$	133		$	1,263
Cumulative effect of the adoption of Accounting Standards Update 2016-13	1,334			(6		)	16			2			1,346
Allowance at January 1, 2020	2,409			40			25			135			2,609
Charge-offs (b)	(373		)	(3		)	(5		)	(3		)	(384		)
Recoveries	111			5			1			1			118
Net charge-offs	(262		)	2			(4		)	(2		)	(266		)
Provision for credit losses	685			(3		)	25			196			903
Other	1			—			(1		)	(1		)	(1		)
Allowance at March 31, 2020	$	2,833		$	39		$	45		$	328		$	3,245

(a) Excludes $10 million and $11 million of finance receivables at March 31, 2020, and December 31, 2019, respectively, for which we have elected the fair value option.

(b) Represents the amount of the amortized cost basis directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost basis of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for more information regarding our charge-off policies.

During the second half of March 2020, the broader economy experienced a significant deterioration in the macroeconomic environment driven by the COVID-19 pandemic, which impacted our allowance for loan losses. Our qualitatively determined allowance associated with deterioration in the macroeconomic outlook from COVID-19 resulted in $602 million of additional provision expense for credit losses.

The following table presents an analysis of the activity in the allowance for loan losses on finance receivables and loans for the three months ended March 31, 2019, prior to the adoption of ASU 2016-13, as defined by the previous accounting guidance in effect at that time.

Three months ended March 31, 2019 ($ in millions)	Consumer automotive			Consumer mortgage			Commercial			Total
Allowance at January 1, 2019	$	1,048		$	53		$	141		$	1,242
Charge-offs (a)	(352		)	(3		)	(5		)	(360		)
Recoveries	118			5			—			123
Net charge-offs	(234		)	2			(5		)	(237		)
Provision for credit losses	257			(3		)	28			282
Other (b)	(1		)	—			2			1
Allowance at March 31, 2019	$	1,070		$	52		$	166		$	1,288
Allowance for loan losses at March 31, 2019
Individually evaluated for impairment	$	46		$	22		$	58		$	126
Collectively evaluated for impairment	1,024			30			108			1,162
Finance receivables and loans at gross carrying value
Ending balance	$	71,553		$	17,658		$	40,844		$	130,055
Individually evaluated for impairment	501			227			269			997
Collectively evaluated for impairment	71,052			17,431			40,575			129,058

(a) Represents the amount of the amortized cost basis directly written off. For consumer and commercial loans, the loss from a charge-off is measured as the difference between the amortized cost basis of a loan and the fair value of the collateral, less costs to sell. Refer to Note 1 to the Consolidated Financial Statements in our 2019 Annual Report on Form 10-K for more information regarding our charge-off policies.

(b) Primarily related to the transfer of finance receivables and loans from held-for-investment to held-for-sale.

The following table presents information about significant sales of finance receivables and loans and transfers of finance receivables and loans from held-for-investment to held-for-sale based on net carrying value.

	Three months ended March 31,
($ in millions)	2020		2019
Consumer automotive	$	—	$	20
Total sales and transfers (a)	$	—	$	20

(a) During the three months ended March 31, 2019, we also sold $128 million of loans held-for-sale that were initially classified as finance receivables and loans held-for-investment and were transferred to held-for-sale during 2018, and transferred $63 million of finance receivables from held-for-sale to held-for-investment, both relating to equipment finance receivables from our commercial automotive business.

The following table presents information about significant purchases of finance receivables and loans based on unpaid principal balance at the time of purchase.

	Three months ended March 31,
($ in millions)	2020		2019
Consumer automotive	$	360	$	99
Consumer mortgage	484		1,235
Total purchases of finance receivables and loans	$	844	$	1,334

Nonaccrual and Impaired Loans

Following the adoption of CECL as of January 1, 2020, the definitions of impairment and related impaired loan disclosures were removed. Under CECL, we present the amortized cost of our finance receivables and loans on nonaccrual status including such loans with no allowance. The following table presents the amortized cost of our finance receivables and loans on nonaccrual status as of the beginning or end of the three months ended March 31, 2020. All consumer or commercial finance receivables and loans that were 90 days or more past due were on nonaccrual status as of March 31, 2020, and December 31, 2019.

	Three months ended March 31, 2020
	Nonaccrual status at beginning of period		End of period
($ in millions)			Nonaccrual status		Nonaccrual with no allowance (a)
Consumer automotive	$	762	$	1,077	$	599
Consumer mortgage
Mortgage Finance	17		22		6
Mortgage — Legacy	40		40		28
Total consumer mortgage	57		62		34
Consumer other	2		1		—
Total consumer	821		1,140		633
Commercial
Commercial and industrial
Automotive	73		86		1
Other	138		162		65
Commercial real estate	4		8		4
Total commercial	215		256		70
Total consumer and commercial finance receivables and loans	$	1,036	$	1,396	$	703

(a) Represents a component of nonaccrual status at end of period.

During the three months ended March 31, 2020, we recorded interest income from cash payments of $2 million associated with finance receivables and loans in nonaccrual status.

The following table presents information about our impaired finance receivables and loans at December 31, 2019, prior to the date of adoption of the amendments to the credit loss standard and as defined by the previous accounting guidance in effect at that time.

December 31, 2019 ($ in millions)	Unpaid principal balance (a)		Gross carrying value		Impaired with no allowance		Impaired with an allowance		Allowance for impaired loans
Consumer automotive	$	553	$	538	$	113	$	425	$	38
Consumer mortgage
Mortgage Finance	14		14		6		8		—
Mortgage — Legacy	199		194		64		130		18
Total consumer mortgage	213		208		70		138		18
Total consumer	766		746		183		563		56
Commercial
Commercial and industrial
Automotive	73		73		1		72		12
Other	170		138		73		65		21
Commercial real estate	4		4		4		—		—
Total commercial	247		215		78		137		33
Total consumer and commercial finance receivables and loans	$	1,013	$	961	$	261	$	700	$	89

(a) Adjusted for charge-offs.

The following table presents average balance and interest income for our impaired finance receivables and loans for the three months ended March 31, 2019, prior to the date of adoption of the amendments to the credit loss standard and as defined by the previous accounting guidance in effect at that time.

Three months ended March 31, 2019 ($ in millions)	Average balance		Interest income
Consumer automotive	$	499	$	8
Consumer mortgage
Mortgage Finance	15		—
Mortgage — Legacy	214		3
Total consumer mortgage	229		3
Total consumer	728		11
Commercial
Commercial and industrial
Automotive	170		1
Other	130		—
Commercial real estate	5		—
Total commercial	305		1
Total consumer and commercial finance receivables and loans	$	1,033	$	12

Credit Quality Indicators

We evaluate the credit quality of our consumer loan portfolio based on the aging status of the loan and by payment activity. Loan delinquency reporting is based upon borrower payment activity, relative to the contractual terms of the loan. During the three months ended March 31, 2020, in response to the COVID-19 pandemic, we began to offer several programs to help support our customers and manage credit risk.

In our automotive finance business, existing customers may elect to defer their loan payments for up to 120 days without late fees being incurred but with finance charges continuing to accrue. As of March 31, 2020, approximately 716,000 or approximately 18% of our existing consumer automotive customers had enrolled in this loan modification program, and approximately 71% of these enrolled customers had requested a 120-day deferral. Approximately 92% of these enrolled customers were considered current on their loans at the time of enrollment. For new consumer automotive loans, customers are provided with the option to defer their first payment for 90 days without late fees being incurred but with finance charges accruing.

In our mortgage-lending business, existing customers experiencing financial hardship due to an interruption of income related to the COVID-19 pandemic may elect to defer their loan payments for up to 120 days without late fees being incurred but with interest continuing to accrue. As of March 31, 2020, approximately 1,200 or approximately 3% of our existing mortgage-lending customers had enrolled in this program. Approximately 92% of these enrolled customers were considered current on their loans at the time of enrollment.

In our personal-lending business, existing customers experiencing financial hardship due to the COVID-19 pandemic may elect to defer their loan payments for up to 120 days without late fees being incurred or finance charges continuing to accrue. As of March 31, 2020, approximately 900 or approximately 1% of our existing personal-lending customers had enrolled in this loan modification program. In addition to this program, we have temporarily suspended late fees for all customers with current accounts.

In accordance with regulatory guidance, if borrowers are less than 30 days past due on their loans and enter into loan modifications offered as a result of COVID-19, their loans generally continue to be considered performing loans and continue to accrue interest during the period of the loan modification. For borrowers who are 30 days or more past due when entering into loan modifications offered as a result of COVID-19, we evaluate the loan modifications under our existing troubled debt restructuring framework, and where such a loan modification would result in a concession to a borrower experiencing financial difficulty, the loan will be accounted for as a TDR and will generally not accrue interest. For all borrowers who enroll in these loan modification programs offered as a result of COVID-19, the delinquency status of the borrowers is frozen, resulting in a static delinquency metric during the deferral period. Upon exiting the deferral program, the measurement of loan delinquency will resume where it had left off upon entry into the program.

The following table presents the amortized cost basis of our consumer finance receivables and loans by credit quality indicator based on delinquency status at March 31, 2020, and origination year.

	Origination year														Revolving loans converted to term
March 31, 2020 ($ in millions)	2020		2019		2018		2017		2016		2015 and prior		Revolving loans				Total
Consumer automotive
Current	$	8,101	$	25,291	$	16,702	$	10,336	$	5,784	$	3,499	$	—	$	—	$	69,713
30–59 days past due	20		539		563		443		319		234		—		—		2,118
60–89 days past due	1		136		160		125		88		63		—		—		573
90 or more days past due	—		84		120		95		73		56		—		—		428
Total consumer automotive	8,122		26,050		17,545		10,999		6,264		3,852		—		—		72,832
Consumer mortgage
Mortgage Finance
Current	536		3,245		2,757		3,498		1,329		4,496		—		—		15,861
30–59 days past due	2		8		8		13		5		31		—		—		67
60–89 days past due	—		—		2		1		1		6		—		—		10
90 or more days past due	—		—		2		3		1		5		—		—		11
Total Mortgage Finance	538		3,253		2,769		3,515		1,336		4,538		—		—		15,949
Mortgage — Legacy
Current	—		—		—		—		—		518		360		130		1,008
30–59 days past due	—		—		—		—		—		16		4		1		21
60–89 days past due	—		—		—		—		—		4		1		1		6
90 or more days past due	—		—		—		—		—		18		7		1		26
Total Mortgage — Legacy	—		—		—		—		—		556		372		133		1,061
Total consumer mortgage	538		3,253		2,769		3,515		1,336		5,094		372		133		17,010
Consumer other
Current	58		108		32		8		2		—		—		—		208
30–59 days past due	—		1		1		1		—		—		—		—		3
60–89 days past due	—		1		1		—		—		—		—		—		2
90 or more days past due	—		1		—		—		—		—		—		—		1
Total consumer other (a)	58		111		34		9		2		—		—		—		214
Total consumer	$	8,718	$	29,414	$	20,348	$	14,523	$	7,602	$	8,946	$	372	$	133	$	90,056

(a) Excludes $10 million of finance receivables at March 31, 2020, for which we have elected the fair value option.

The following table presents an analysis of our past-due finance receivables and loans recorded at amortized cost basis at December 31, 2019.

($ in millions)	30–59 days past due		60–89 days past due		90 days or more past due		Total past due		Current		Total finance receivables and loans
December 31, 2019
Consumer automotive	$	2,185	$	590	$	367	$	3,142	$	69,248	$	72,390
Consumer mortgage
Mortgage Finance	56		11		9		76		16,105		16,181
Mortgage — Legacy	25		8		28		61		1,080		1,141
Total consumer mortgage	81		19		37		137		17,185		17,322
Consumer other (a)	3		2		2		7		194		201
Total consumer	$	2,269	$	611	$	406	$	3,286	$	86,627	$	89,913

(a) Excludes $11 million of finance receivables at December 31, 2019, for which we have elected the fair value option.

We evaluate the credit quality of our commercial loan portfolio using regulatory risk ratings, which are based on relevant information about the borrower’s financial condition, including current financial information, historical payment experience, credit documentation, and current economic trends, among other factors. We use the following definitions for risk rankings.

Special mention Loans that have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

Substandard Loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. These loans have a well-defined weakness or weakness that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful Loans that have all the weaknesses inherent in those classified as substandard, with the additional characteristic that the weaknesses make collection or liquidation in full, based on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The regulatory risk classification utilized is influenced by internal credit risk ratings, which are based on a variety of factors. A borrower’s internal credit risk rating is updated at least annually, or more frequently when a borrower’s credit profile changes, which includes consideration of any potential of credit deterioration. The following table presents the amortized cost basis of our commercial finance receivables and loans by credit quality indicator based on risk rating at March 31, 2020, and origination year.

	Origination year														Revolving loans converted to term
March 31, 2020 ($ in millions)	2020		2019		2018		2017		2016		2015 and prior		Revolving loans				Total
Commercial and industrial
Automotive
Pass	$	105	$	302	$	128	$	121	$	81	$	83	$	22,885	$	—	$	23,705
Special mention	1		16		45		58		32		16		3,399		—		3,567
Substandard	—		—		—		—		—		—		85		—		85
Doubtful	—		—		1		2		—		—		34		—		37
Total automotive	106		318		174		181		113		99		26,403		—		27,394
Other
Pass	178		808		440		310		118		150		2,605		118		4,727
Special mention	—		47		202		246		96		97		230		35		953
Substandard	—		—		—		21		—		134		10		9		174
Doubtful	—		—		—		—		—		22		2		—		24
Total other	178		855		642		577		214		403		2,847		162		5,878
Commercial real estate
Pass	204		1,046		951		647		769		864		—		1		4,482
Special mention	15		59		58		55		79		43		—		—		309
Substandard	—		—		—		3		—		3		—		—		6
Doubtful	—		—		—		—		2		2		—		—		4
Total commercial real estate	219		1,105		1,009		705		850		912		—		1		4,801
Total commercial	$	503	$	2,278	$	1,825	$	1,463	$	1,177	$	1,414	$	29,250	$	163	$	38,073

The following table presents historical credit quality indicators for our commercial finance receivables and loans at December 31, 2019, prior to the date of adoption of the amendments to the credit loss standard and as defined by the previous accounting guidance in effect at that time.

	December 31, 2019
($ in millions)	Pass		Criticized (a)		Total
Commercial and industrial
Automotive	$	25,235	$	3,097	$	28,332
Other	4,225		789		5,014
Commercial real estate	4,620		341		4,961
Total commercial	$	34,080	$	4,227	$	38,307

(a) Includes loans classified as special mention, substandard, or doubtful. These classifications are based on regulatory definitions and generally represent loans within our portfolio that have a higher default risk or have already defaulted.

As a result of the COVID-19 pandemic, we announced a series of actions to support our automotive-dealer customers and help manage credit risk within our lending portfolios. For dealers with current accounts, we have offered for up to four months a waiver of curtailments on wholesale floorplan loans, an increase in floorplan advance rates, a deferral of interest and insurance charges on wholesale borrowings, and a deferral of term loan payments. As of March 31, 2020, approximately 2,270 or approximately 72% of eligible dealers had requested at least one form of this assistance. These accounts will remain current and continue to accrue interest in accordance with recently issued guidance from regulators.

The following table presents an analysis of our past-due commercial finance receivables and loans recorded at amortized cost basis.

($ in millions)	30–59 days past due		60–89 days past due		90 days or more past due		Total past due		Current		Total finance receivables and loans
March 31, 2020
Commercial
Commercial and industrial
Automotive	$	—	$	—	$	38	$	38	$	27,356	$	27,394
Other	—		—		—		—		5,878		5,878
Commercial real estate	—		—		4		4		4,797		4,801
Total commercial	$	—	$	—	$	42	$	42	$	38,031	$	38,073
December 31, 2019
Commercial
Commercial and industrial
Automotive	$	34	$	—	$	28	$	62	$	28,270	$	28,332
Other	—		—		17		17		4,997		5,014
Commercial real estate	—		—		4		4		4,957		4,961
Total commercial	$	34	$	—	$	49	$	83	$	38,224	$	38,307

Troubled Debt Restructurings

TDRs are loan modifications where concessions were granted to borrowers experiencing financial difficulties. For consumer automotive loans, we may offer several types of assistance to aid our customers, including payment extensions and rewrites of the loan terms. Additionally, for mortgage loans, as part of certain programs, we offer mortgage loan modifications to qualified borrowers. These programs are in place to provide support to our mortgage customers in financial distress, including principal forgiveness, maturity extensions, delinquent interest capitalization, and changes to contractual interest rates. Total TDRs recorded at amortized cost were $1.1 billion and $867 million at March 31, 2020, and December 31, 2019, respectively.

In March 2020, a joint statement was issued by federal and state regulatory agencies, after consultation with the FASB, to clarify that short-term loan modifications are not TDRs if made on a good-faith basis in response to COVID-19 to borrowers who were current prior to any relief. Under this guidance, six months is provided as an example of short-term, and current is defined as less than 30 days past due at the time the modification program is implemented. The guidance also provides that these modified loans generally will not be classified as nonaccrual during the term of the modification. For borrowers who are 30 days or more past due when enrolling in a loan modification program related to the COVID-19 pandemic, we evaluate the loan modifications under our existing TDR framework, and where such a loan modification would result in a concession to a borrower experiencing financial difficulty, the loan will be accounted for as a TDR and will generally not accrue interest.

Total commitments to lend additional funds to borrowers whose terms had been modified in a TDR were $10 million and $17 million at March 31, 2020, and December 31, 2019, respectively. Refer to Note 1 for additional information.

The following table presents information related to finance receivables and loans recorded at amortized cost modified in connection with a TDR during the period.

	2020					2019
Three months ended March 31, ($ in millions)	Number of loans	Pre-modification amortized cost basis		Post-modification amortized cost basis		Number of loans	Pre-modification amortized cost basis		Post-modification amortized cost basis
Consumer automotive (a)	22,800	$	340	$	318	7,427	$	129	$	111
Consumer mortgage
Mortgage Finance (b)	10	4		4		1	—		—
Mortgage — Legacy (c)	32	4		4		20	3		3
Total consumer mortgage	42	8		8		21	3		3
Total consumer	22,842	348		326		7,448	132		114
Commercial
Commercial and industrial
Automotive	1	7		7		6	41		41
Total commercial	1	7		7		6	41		41
Total consumer and commercial finance receivables and loans	22,843	$	355	$	333	7,454	$	173	$	155

(a) Includes 16,767 loans modified as a result of COVID-19 with both a pre-modification and post-modification amount of $238 million at March 31, 2020.

(b) Includes 8 loans modified as a result of COVID-19 with both a pre-modification and post-modification amount of $3 million at March 31, 2020.

(c) Includes 15 loans modified as a result of COVID-19 with both a pre-modification and post-modification amount of $2 million at March 31, 2020.

The following table presents information about finance receivables and loans recorded at amortized cost that have redefaulted during the reporting period and were within 12 months or less of being modified as a TDR. Redefault is when finance receivables and loans meet the requirements for evaluation under our charge-off policy (refer to Note 1 for additional information) except for commercial finance receivables and loans, where redefault is defined as 90 days past due.

	2020					2019
Three months ended March 31, ($ in millions)	Number of loans	Amortized cost		Charge-off amount		Number of loans	Amortized cost		Charge-off amount
Consumer automotive	1,164	$	13	$	9	2,209	$	26	$	16
Total consumer finance receivables and loans	1,164	$	13	$	9	2,209	$	26	$	16