Loans and Allowance for Credit Losses

6 Months Ended

Jun. 30, 2019

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Loans and Allowance for Credit Losses

Note 6: Loans and Allowance for Credit Losses 

Table 6.1 presents total loans outstanding by portfolio segment and class of financing receivable. Outstanding balances include unearned income, net deferred loan fees or costs, and

unamortized discounts and premiums. These amounts were less than 1% of our total loans outstanding at June 30, 2019 and December 31, 2018.

Table 6.1: Loans Outstanding

(in millions)	Jun 30, 2019		Dec 31, 2018
Commercial:
Commercial and industrial	$	348,846	350,199
Real estate mortgage	123,008		121,014
Real estate construction	21,067		22,496
Lease financing	19,324		19,696
Total commercial	512,245		513,405
Consumer:
Real estate 1-4 family first mortgage	286,427		285,065
Real estate 1-4 family junior lien mortgage	32,068		34,398
Credit card	38,820		39,025
Automobile	45,664		45,069
Other revolving credit and installment	34,654		36,148
Total consumer	437,633		439,705
Total loans	$	949,878	953,110

Our foreign loans are reported by respective class of financing receivable in the table above. Substantially all of our foreign loan portfolio is commercial loans. Loans are classified as foreign primarily based on whether the borrower’s primary

address is outside of the United States. Table 6.2 presents total commercial foreign loans outstanding by class of financing receivable.

Table 6.2: Commercial Foreign Loans Outstanding

(in millions)	Jun 30, 2019		Dec 31, 2018
Commercial foreign loans:
Commercial and industrial	$	63,296	62,564
Real estate mortgage	6,801		6,731
Real estate construction	1,287		1,011
Lease financing	1,215		1,159
Total commercial foreign loans	$	72,599	71,465

Loan Purchases, Sales, and Transfers

Table 6.3 summarizes the proceeds paid or received for purchases and sales of loans and transfers from loans held for investment to mortgages/loans held for sale at lower of cost or fair value. This loan activity also includes participating interests, whereby we receive or transfer a portion of a loan. The table excludes PCI

loans, loans for which we have elected the fair value option, and government insured/ guaranteed real estate 1-4 family first mortgage loans because their loan activity normally does not impact the allowance for credit losses. 

Table 6.3: Loan Purchases, Sales, and Transfers

	2019							2018
(in millions)	Commercial			Consumer		Total		Commercial		Consumer		Total
Quarter ended June 30,
Purchases	$	670		5		675		398		7		405
Sales	(535		)	(153	)	(688	)	(294	)	(88	)	(382	)
Transfers (to) from MLHFS/LHFS	(89		)	(1,852	)	(1,941	)	(100	)	(72	)	(172	)
Six months ended June 30,
Purchases	$	999		8		1,007		654		7		661
Sales	(956		)	(332	)	(1,288	)	(754	)	(88	)	(842	)
Transfers (to) from MLHFS/LHFS	(92		)	(1,852	)	(1,944	)	(520	)	(1,625	)	(2,145	)

Commitments to Lend

A commitment to lend is a legally binding agreement to lend funds to a customer, usually at a stated interest rate, if funded, and for specific purposes and time periods. We generally require a fee to extend such commitments. Certain commitments are subject to loan agreements with covenants regarding the financial performance of the customer or borrowing base formulas on an ongoing basis that must be met before we are required to fund the commitment. We may reduce or cancel consumer commitments, including home equity lines and credit card lines, in accordance with the contracts and applicable law.

We may, as a representative for other lenders, advance funds or provide for the issuance of letters of credit under syndicated loan or letter of credit agreements. Any advances are generally repaid in less than a week and would normally require default of both the customer and another lender to expose us to loss. The unfunded amount of these temporary advance arrangements totaled approximately $94 billion and $91 billion at June 30, 2019 and December 31, 2018, respectively.

We issue commercial letters of credit to assist customers in purchasing goods or services, typically for international trade. At June 30, 2019, and December 31, 2018, we had $1.0 billion and $919 million, respectively, of outstanding issued commercial letters of credit. We also originate multipurpose lending commitments under which borrowers have the option to draw on the facility for different purposes in one of several forms, including a standby letter of credit. See Note 13 (Guarantees, Pledged Assets and Collateral, and Other Commitments) for additional information on standby letters of credit. 

When we make commitments, we are exposed to credit risk. The maximum credit risk for these commitments will generally be lower than the contractual amount because a significant portion of these commitments is expected to expire without being used by the customer. In addition, we manage the potential risk in commitments to lend by limiting the total amount of commitments, both by individual customer and in total, by monitoring the size and maturity structure of these commitments and by applying the same credit standards for these commitments as for all of our credit activities.

For loans and commitments to lend, we generally require collateral or a guarantee. We may require various types of collateral, including commercial and consumer real estate, automobiles, other short-term liquid assets such as accounts receivable or inventory and long-lived assets, such as equipment and other business assets. Collateral requirements for each loan or commitment may vary based on the loan product and our assessment of a customer’s credit risk according to the specific credit underwriting, including credit terms and structure.

The contractual amount of our unfunded credit commitments, including unissued standby and commercial letters of credit, is summarized by portfolio segment and class of financing receivable in Table 6.4. The table excludes the issued standby and commercial letters of credit and temporary advance arrangements described above.

Table 6.4: Unfunded Credit Commitments

(in millions)	Jun 30, 2019		Dec 31, 2018
Commercial:
Commercial and industrial	$	329,751	330,492
Real estate mortgage	7,905		6,984
Real estate construction	15,459		16,400
Total commercial	353,115		353,876
Consumer:
Real estate 1-4 family first mortgage	43,427		29,736
Real estate 1-4 family junior lien mortgage	37,454		37,719
Credit card	113,306		109,840
Other revolving credit and installment	26,676		27,530
Total consumer	220,863		204,825
Total unfunded credit commitments	$	573,978	558,701

Allowance for Credit Losses

Table 6.5 presents the allowance for credit losses, which consists of the allowance for loan losses and the allowance for unfunded credit commitments.

Table 6.5: Allowance for Credit Losses

	Quarter ended June 30,					Six months ended June 30,
(in millions)	2019			2018		2019		2018
Balance, beginning of period	$	10,821		11,313		10,707		11,960
Provision for credit losses	503			452		1,348		643
Interest income on certain impaired loans (1)	(39		)	(43	)	(78	)	(86	)
Loan charge-offs:
Commercial:
Commercial and industrial	(205		)	(134	)	(381	)	(298	)
Real estate mortgage	(14		)	(19	)	(26	)	(21	)
Real estate construction	—			—		(1	)	—
Lease financing	(12		)	(20	)	(23	)	(37	)
Total commercial	(231		)	(173	)	(431	)	(356	)
Consumer:
Real estate 1-4 family first mortgage	(27		)	(55	)	(70	)	(96	)
Real estate 1-4 family junior lien mortgage	(29		)	(47	)	(63	)	(94	)
Credit card	(437		)	(404	)	(874	)	(809	)
Automobile	(142		)	(216	)	(329	)	(516	)
Other revolving credit and installment	(167		)	(164	)	(329	)	(344	)
Total consumer	(802		)	(886	)	(1,665	)	(1,859	)
Total loan charge-offs	(1,033		)	(1,059	)	(2,096	)	(2,215	)
Loan recoveries:
Commercial:
Commercial and industrial	46			76		89		155
Real estate mortgage	10			19		16		36
Real estate construction	2			6		5		10
Lease financing	8			5		11		10
Total commercial	66			106		121		211
Consumer:
Real estate 1-4 family first mortgage	57			78		112		137
Real estate 1-4 family junior lien mortgage	48			60		91		115
Credit card	88			81		173		154
Automobile	90			103		186		195
Other revolving credit and installment	31			29		65		60
Total consumer	314			351		627		661
Total loan recoveries	380			457		748		872
Net loan charge-offs	(653		)	(602	)	(1,348	)	(1,343	)
Other	(29		)	(10	)	(26	)	(64	)
Balance, end of period	$	10,603		11,110		10,603		11,110
Components:
Allowance for loan losses	$	9,692		10,193		9,692		10,193
Allowance for unfunded credit commitments	911			917		911		917
Allowance for credit losses	$	10,603		11,110		10,603		11,110
Net loan charge-offs (annualized) as a percentage of average total loans	0.28		%	0.26		0.29		0.29
Allowance for loan losses as a percentage of total loans	1.02			1.08		1.02		1.08
Allowance for credit losses as a percentage of total loans	1.12			1.18		1.12		1.18

(1) Certain impaired loans with an allowance calculated by discounting expected cash flows using the loan’s effective interest rate over the remaining life of the loan recognize changes in allowance attributable to the passage of time as interest income.

Table 6.6 summarizes the activity in the allowance for credit losses by our commercial and consumer portfolio segments.

Table 6.6: Allowance Activity by Portfolio Segment

						2019						2018
(in millions)	Commercial			Consumer		Total		Commercial		Consumer		Total
Quarter ended June 30,
Balance, beginning of period	$	6,428		4,393		10,821		6,708		4,605		11,313
Provision for credit losses	46			457		503		89		363		452
Interest income on certain impaired loans	(14		)	(25	)	(39	)	(14	)	(29	)	(43	)
Loan charge-offs	(231		)	(802	)	(1,033	)	(173	)	(886	)	(1,059	)
Loan recoveries	66			314		380		106		351		457
Net loan charge-offs	(165		)	(488	)	(653	)	(67	)	(535	)	(602	)
Other	3			(32	)	(29	)	(5	)	(5	)	(10	)
Balance, end of period	$	6,298		4,305		10,603		6,711		4,399		11,110
Six months ended June 30,
Balance, beginning of period	$	6,417		4,290		10,707		6,632		5,328		11,960
Provision for credit losses	210			1,138		1,348		258		385		643
Interest income on certain impaired loans	(25		)	(53	)	(78	)	(25	)	(61	)	(86	)
Loan charge-offs	(431		)	(1,665	)	(2,096	)	(356	)	(1,859	)	(2,215	)
Loan recoveries	121			627		748		211		661		872
Net loan charge-offs	(310		)	(1,038	)	(1,348	)	(145	)	(1,198	)	(1,343	)
Other	6			(32	)	(26	)	(9	)	(55	)	(64	)
Balance, end of period	$	6,298		4,305		10,603		6,711		4,399		11,110

Table 6.7 disaggregates our allowance for credit losses and recorded investment in loans by impairment methodology.

Table 6.7: Allowance by Impairment Methodology

	Allowance for credit losses				Recorded investment in loans
(in millions)	Commercial		Consumer	Total	Commercial	Consumer	Total
June 30, 2019
Collectively evaluated (1)	$	5,831	3,436	9,267	508,798	425,818	934,616
Individually evaluated (2)	467		869	1,336	3,447	10,641	14,088
PCI (3)	—		—	—	—	1,174	1,174
Total	$	6,298	4,305	10,603	512,245	437,633	949,878
December 31, 2018
Collectively evaluated (1)	$	5,903	3,361	9,264	510,180	421,574	931,754
Individually evaluated (2)	514		929	1,443	3,221	13,126	16,347
PCI (3)	—		—	—	4	5,005	5,009
Total	$	6,417	4,290	10,707	513,405	439,705	953,110

(1) Represents loans collectively evaluated for impairment in accordance with Accounting Standards Codification (ASC) 450-20, Loss Contingencies, and pursuant to amendments by ASU 2010-20 regarding allowance for non-impaired loans.

(2) Represents loans individually evaluated for impairment in accordance with ASC 310-10, Receivables, and pursuant to amendments by ASU 2010-20 regarding allowance for impaired loans.

(3)

Represents the allowance and related loan carrying value determined in accordance with ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality and pursuant to amendments by ASU 2010-20 regarding allowance for PCI loans.

Credit Quality

We monitor credit quality by evaluating various attributes and utilize such information in our evaluation of the appropriateness of the allowance for credit losses. The following sections provide the credit quality indicators we most closely monitor. The credit quality indicators are generally based on information as of our financial statement date, with the exception of updated Fair Isaac Corporation (FICO) scores and updated loan-to-value (LTV)/combined LTV (CLTV). We obtain FICO scores at loan

origination and the scores are generally updated at least quarterly, except in limited circumstances, including compliance with the Fair Credit Reporting Act (FCRA). Generally, the LTV and CLTV indicators are updated in the second month of each quarter, with updates no older than March 31, 2019.

COMMERCIAL CREDIT QUALITY INDICATORS  In addition to monitoring commercial loan concentration risk, we manage a consistent process for assessing commercial loan credit quality. Generally, commercial loans are subject to individual risk assessment using our internal borrower and collateral quality ratings. Our ratings are aligned to Pass and Criticized categories. The Criticized category includes Special Mention, Substandard, and Doubtful categories which are defined by bank regulatory

agencies.

Table 6.8 provides a breakdown of outstanding commercial loans by risk category. Criticized commercial loans at June 30, 2019, included $2.5 billion on nonaccrual status that have been written down to net realizable value. For additional information on nonaccrual loans, see Table 6.13.

Table 6.8: Commercial Loans by Risk Category

(in millions)	Commercial and industrial		Real estate mortgage	Real estate construction	Lease financing	Total
June 30, 2019
By risk category:
Pass	$	334,034	118,768	20,883	18,225	491,910
Criticized	14,812		4,240	184	1,099	20,335
Total commercial loans (excluding PCI)	348,846		123,008	21,067	19,324	512,245
Total commercial PCI loans (carrying value)	—		—	—	—	—
Total commercial loans	$	348,846	123,008	21,067	19,324	512,245
December 31, 2018
By risk category:
Pass	$	335,412	116,514	22,207	18,671	492,804
Criticized	14,783		4,500	289	1,025	20,597
Total commercial loans (excluding PCI)	350,195		121,014	22,496	19,696	513,401
Total commercial PCI loans (carrying value)	4		—	—	—	4
Total commercial loans	$	350,199	121,014	22,496	19,696	513,405

Table 6.9 provides past due information for commercial loans, which we monitor as part of our credit risk management practices.

Table 6.9: Commercial Loans by Delinquency Status

(in millions)	Commercial and industrial		Real estate mortgage	Real estate construction	Lease financing	Total
June 30, 2019
By delinquency status:
Current-29 days past due (DPD) and still accruing	$	346,688	122,101	20,854	19,101	508,744
30-89 DPD and still accruing	507		146	177	160	990
90+ DPD and still accruing	17		24	—	—	41
Nonaccrual loans	1,634		737	36	63	2,470
Total commercial loans (excluding PCI)	348,846		123,008	21,067	19,324	512,245
Total commercial PCI loans (carrying value)	—		—	—	—	—
Total commercial loans	$	348,846	123,008	21,067	19,324	512,245
December 31, 2018
By delinquency status:
Current-29 DPD and still accruing	$	348,158	120,176	22,411	19,443	510,188
30-89 DPD and still accruing	508		207	53	163	931
90+ DPD and still accruing	43		51	—	—	94
Nonaccrual loans	1,486		580	32	90	2,188
Total commercial loans (excluding PCI)	350,195		121,014	22,496	19,696	513,401
Total commercial PCI loans (carrying value)	4		—	—	—	4
Total commercial loans	$	350,199	121,014	22,496	19,696	513,405

CONSUMER CREDIT QUALITY INDICATORS  We have various classes of consumer loans that present unique risks. Loan delinquency, FICO credit scores and LTV for loan types are common credit quality indicators that we monitor and utilize in our evaluation of the appropriateness of the allowance for credit losses for the consumer portfolio segment.

Many of our loss estimation techniques used for the allowance for credit losses rely on delinquency-based models; therefore, delinquency is an important indicator of credit quality and the establishment of our allowance for credit losses. Table 6.10 provides the outstanding balances of our consumer portfolio by delinquency status.

Table 6.10: Consumer Loans by Delinquency Status

(in millions)	Real estate 1-4 family first mortgage	Real estate 1-4 family junior lien mortgage	Credit card	Automobile	Other revolving credit and installment	Total
June 30, 2019
By delinquency status:
Current-29 DPD	271,144	31,374	37,925	44,554	34,383	419,380
30-59 DPD	1,311	250	258	808	97	2,724
60-89 DPD	436	115	188	232	70	1,041
90-119 DPD	196	63	152	69	68	548
120-179 DPD	177	70	297	1	22	567
180+ DPD	630	181	—	—	14	825
Government insured/guaranteed loans (1)	11,172	—	—	—	—	11,172
Loans held at fair value	202	—	—	—	—	202
Total consumer loans (excluding PCI)	285,268	32,053	38,820	45,664	34,654	436,459
Total consumer PCI loans (carrying value) (2)	1,159	15	—	—	—	1,174
Total consumer loans	286,427	32,068	38,820	45,664	34,654	437,633
December 31, 2018
By delinquency status:
Current-29 DPD	263,881	33,644	38,008	43,604	35,794	414,931
30-59 DPD	1,411	247	292	1,040	140	3,130
60-89 DPD	549	126	212	314	87	1,288
90-119 DPD	257	74	192	109	80	712
120-179 DPD	225	77	320	2	27	651
180+ DPD	822	213	1	—	20	1,056
Government insured/guaranteed loans (1)	12,688	—	—	—	—	12,688
Loans held at fair value	244	—	—	—	—	244
Total consumer loans (excluding PCI)	280,077	34,381	39,025	45,069	36,148	434,700
Total consumer PCI loans (carrying value) (2)	4,988	17	—	—	—	5,005
Total consumer loans	285,065	34,398	39,025	45,069	36,148	439,705

(1) Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA. Loans insured/guaranteed by the FHA/VA and 90+ DPD totaled $6.5 billion at June 30, 2019, compared with $7.7 billion at December 31, 2018.

(2) 23% of the adjusted unpaid principal balance for consumer PCI loans are 30+ DPD at June 30, 2019, compared with 18% at December 31, 2018.

Of the $1.9 billion of consumer loans not government insured/guaranteed that are 90 days or more past due at June 30, 2019, $739 million was accruing, compared with $2.4 billion past due and $885 million accruing at December 31, 2018.

Real estate 1-4 family first mortgage loans 180 days or more past due totaled $630 million, or 0.2% of total first mortgages (excluding PCI), at June 30, 2019, compared with $822 million, or 0.3%, at December 31, 2018.

Table 6.11 provides a breakdown of our consumer portfolio by FICO. Substantially all of the scored consumer portfolio has an updated FICO of 680 and above, reflecting a strong current borrower credit profile. FICO is not available for certain loan types, or may not be required if we deem it unnecessary due to

strong collateral and other borrower attributes. Substantially all loans not requiring a FICO score are securities-based loans originated through retail brokerage, and totaled $8.6 billion at June 30, 2019, and $8.9 billion at December 31, 2018.

Table 6.11: Consumer Loans by FICO

(in millions)	Real estate 1-4 family first mortgage	Real estate 1-4 family junior lien mortgage	Credit card	Automobile	Other revolving credit and installment	Total
June 30, 2019
By FICO:
< 600	3,539	1,297	3,064	6,442	707	15,049
600-639	2,559	897	2,670	4,498	677	11,301
640-679	5,276	1,720	6,313	6,386	1,757	21,452
680-719	12,898	3,620	9,415	7,475	3,283	36,691
720-759	27,807	4,947	8,022	7,051	4,164	51,991
760-799	61,007	6,001	5,323	6,240	4,999	83,570
800+	157,049	12,346	3,879	7,464	8,011	188,749
No FICO available	3,759	1,225	134	108	2,434	7,660
FICO not required	—	—	—	—	8,622	8,622
Government insured/guaranteed loans (1)	11,374	—	—	—	—	11,374
Total consumer loans (excluding PCI)	285,268	32,053	38,820	45,664	34,654	436,459
Total consumer PCI loans (carrying value) (2)	1,159	15	—	—	—	1,174
Total consumer loans	286,427	32,068	38,820	45,664	34,654	437,633
December 31, 2018
By FICO:
< 600	4,273	1,454	3,292	7,071	697	16,787
600-639	2,974	994	2,777	4,431	725	11,901
640-679	5,810	1,898	6,464	6,225	1,822	22,219
680-719	13,568	3,908	9,445	7,354	3,384	37,659
720-759	27,258	5,323	7,949	6,853	4,395	51,778
760-799	57,193	6,315	5,227	5,947	5,322	80,004
800+	151,465	13,190	3,794	7,099	8,411	183,959
No FICO available	4,604	1,299	77	89	2,507	8,576
FICO not required	—	—	—	—	8,885	8,885
Government insured/guaranteed loans (1)	12,932	—	—	—	—	12,932
Total consumer loans (excluding PCI)	280,077	34,381	39,025	45,069	36,148	434,700
Total consumer PCI loans (carrying value) (2)	4,988	17	—	—	—	5,005
Total consumer loans	285,065	34,398	39,025	45,069	36,148	439,705

(1) Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.

(2) 44% of the adjusted unpaid principal balance for consumer PCI loans have FICO scores less than 680 and 16% where no FICO is available to us at June 30, 2019, compared with 45% and 15%, respectively, at December 31, 2018.

LTV refers to the ratio comparing the loan’s unpaid principal balance to the property’s collateral value. CLTV refers to the combination of first mortgage and junior lien mortgage (including unused line amounts for credit line products) ratios. LTVs and CLTVs are updated quarterly using a cascade approach which first uses values provided by automated valuation models (AVMs) for the property. If an AVM is not available, then the value is estimated using the original appraised value adjusted by the change in Home Price Index (HPI) for the property location. If an HPI is not available, the original appraised value is used. The HPI value is normally the only method considered for high value properties, generally with an original value of $1 million or more, as the AVM values have proven less accurate for these properties.

Table 6.12 shows the most updated LTV and CLTV distribution of the real estate 1-4 family first and junior lien mortgage loan portfolios. We consider the trends in residential real estate markets as we monitor credit risk and establish our allowance for credit losses. In the event of a default, any loss should be limited to the portion of the loan amount in excess of the net realizable value of the underlying real estate collateral value. Certain loans do not have an LTV or CLTV due to industry data availability and portfolios acquired from or serviced by other institutions.

Table 6.12: Consumer Loans by LTV/CLTV

	June 30, 2019				December 31, 2018
(in millions)	Real estate 1-4 family first mortgage by LTV		Real estate 1-4 family junior lien mortgage by CLTV	Total	Real estate 1-4 family first mortgage by LTV	Real estate 1-4 family junior lien mortgage by CLTV	Total
By LTV/CLTV:
0-60%	$	145,884	15,004	160,888	147,666	15,753	163,419
60.01-80%	110,919		10,452	121,371	104,477	11,183	115,660
80.01-100%	14,763		4,387	19,150	12,372	4,874	17,246
100.01-120% (1)	1,052		1,350	2,402	1,211	1,596	2,807
> 120% (1)	412		480	892	484	578	1,062
No LTV/CLTV available	864		380	1,244	935	397	1,332
Government insured/guaranteed loans (2)	11,374		—	11,374	12,932	—	12,932
Total consumer loans (excluding PCI)	285,268		32,053	317,321	280,077	34,381	314,458
Total consumer PCI loans (carrying value) (3)	1,159		15	1,174	4,988	17	5,005
Total consumer loans	$	286,427	32,068	318,495	285,065	34,398	319,463

(1) Reflects total loan balances with LTV/CLTV amounts in excess of 100%. In the event of default, the loss content would generally be limited to only the amount in excess of 100% LTV/CLTV.

(2) Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.

(3) 12% of the adjusted unpaid principal balance for consumer PCI loans have LTV/CLTV amounts greater than 80% at June 30, 2019, compared with 10% at December 31, 2018.

NONACCRUAL LOANS  Table 6.13 provides loans on nonaccrual status. PCI loans are excluded from this table because they continue to earn interest from accretable yield, independent of performance in accordance with their contractual terms.

Table 6.13: Nonaccrual Loans

(in millions)	Jun 30, 2019		Dec 31, 2018
Commercial:
Commercial and industrial	$	1,634	1,486
Real estate mortgage	737		580
Real estate construction	36		32
Lease financing	63		90
Total commercial	2,470		2,188
Consumer:
Real estate 1-4 family first mortgage	2,425		3,183
Real estate 1-4 family junior lien mortgage	868		945
Automobile	115		130
Other revolving credit and installment	44		50
Total consumer	3,452		4,308
Total nonaccrual loans (excluding PCI)	$	5,922	6,496

LOANS IN PROCESS OF FORECLOSURE  Our recorded investment in consumer mortgage loans collateralized by residential real estate property that are in process of foreclosure was $3.7 billion and $4.6 billion at June 30, 2019, and December 31, 2018, respectively, which included $2.9 billion and $3.2 billion, respectively, of loans that are government insured/guaranteed. Under the Consumer Financial Protection Bureau guidelines, we do not commence the foreclosure process on consumer real estate loans until after the loan is 120 days delinquent. Foreclosure procedures and timelines vary depending on whether the property address resides in a judicial or non-judicial state. Judicial states require the foreclosure to be processed through the state’s courts while non-judicial states are processed without court intervention. Foreclosure timelines vary according to state law.

LOANS 90 DAYS OR MORE PAST DUE AND STILL ACCRUING  Certain loans 90 days or more past due as to interest or principal are still accruing, because they are (1) well-secured and in the process of collection or (2) real estate 1-4 family mortgage loans or consumer loans exempt under regulatory rules from being classified as nonaccrual until later delinquency, usually 120 days past due. PCI loans of $156 million at June 30, 2019, and $370 million at December 31, 2018, are not included in past due and still accruing loans even when they are 90 days or more contractually past due. PCI loans are considered to be accruing because they continue to earn interest from accretable yield, independent of performance in accordance with their contractual terms.

Table 6.14 shows non-PCI loans 90 days or more past due and still accruing by class for loans not government insured/guaranteed.

Table 6.14: Loans 90 Days or More Past Due and Still Accruing (1)

(in millions)	Jun 30, 2019		Dec 31, 2018
Total (excluding PCI):	$	7,258	8,704
Less: FHA insured/VA guaranteed (1)	6,478		7,725
Total, not government insured/guaranteed	$	780	979
By segment and class, not government insured/guaranteed:
Commercial:
Commercial and industrial	$	17	43
Real estate mortgage	24		51
Real estate construction	—		—
Total commercial	41		94
Consumer:
Real estate 1-4 family first mortgage	108		124
Real estate 1-4 family junior lien mortgage	27		32
Credit card	449		513
Automobile	63		114
Other revolving credit and installment	92		102
Total consumer	739		885
Total, not government insured/guaranteed	$	780	979

(1)

Represents loans whose repayments are predominantly insured by the FHA or guaranteed by the VA.

IMPAIRED LOANS Table 6.15 summarizes key information for impaired loans. Our impaired loans predominantly include loans on nonaccrual status in the commercial portfolio segment and loans modified in a TDR, whether on accrual or nonaccrual status. These impaired loans generally have estimated losses which are included in the allowance for credit losses. We have impaired loans with no allowance for credit losses when loss content has been previously recognized through charge-offs and we do not anticipate additional charge-offs or losses, or certain

loans are currently performing in accordance with their terms and for which no loss has been estimated. Impaired loans exclude PCI loans. Table 6.15 includes trial modifications that totaled $127 million at June 30, 2019, and $149 million at December 31, 2018.

For additional information on our impaired loans and allowance for credit losses, see Note 1 (Summary of Significant Accounting Policies) in our 2018 Form 10-K.

Table 6.15: Impaired Loans Summary

			Recorded investment
(in millions)	Unpaid principal balance (1)		Impaired loans	Impaired loans with related allowance for credit losses	Related allowance for credit losses
June 30, 2019
Commercial:
Commercial and industrial	$	2,963	2,169	1,991	303
Real estate mortgage	1,297		1,142	1,078	134
Real estate construction	82		54	53	10
Lease financing	91		82	82	20
Total commercial	4,433		3,447	3,204	467
Consumer:
Real estate 1-4 family first mortgage (2)	8,803		8,307	3,782	451
Real estate 1-4 family junior lien mortgage	1,781		1,603	1,040	174
Credit card	487		486	486	194
Automobile	144		85	45	9
Other revolving credit and installment	166		160	142	41
Total consumer (3)	11,381		10,641	5,495	869
Total impaired loans (excluding PCI)	$	15,814	14,088	8,699	1,336
December 31, 2018
Commercial:
Commercial and industrial	$	3,057	2,030	1,730	319
Real estate mortgage	1,228		1,032	1,009	154
Real estate construction	74		47	46	9
Lease financing	146		112	112	32
Total commercial	4,505		3,221	2,897	514
Consumer:
Real estate 1-4 family first mortgage	12,309		10,738	4,420	525
Real estate 1-4 family junior lien mortgage	1,886		1,694	1,133	183
Credit card	449		449	449	172
Automobile	153		89	43	8
Other revolving credit and installment	162		156	136	41
Total consumer (3)	14,959		13,126	6,181	929
Total impaired loans (excluding PCI)	$	19,464	16,347	9,078	1,443

(1) Excludes the unpaid principal balance for loans that have been fully charged off or otherwise have zero recorded investment.

(2) Impaired loans includes reduction of $1.7 billion reclassified to MLHFS.

(3) Includes the recorded investment of $1.2 billion at June 30, 2019, and $1.3 billion at December 31, 2018, of government insured/guaranteed loans that are predominantly insured by the FHA or guaranteed by the VA and generally do not have an allowance. Impaired loans may also have limited, if any, allowance when the recorded investment of the loan approximates estimated net realizable value as a result of charge-offs prior to a TDR modification.

Commitments to lend additional funds on loans whose terms have been modified in a TDR amounted to $478 million and $513 million at June 30, 2019 and December 31, 2018, respectively.

Table 6.16 provides the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans by portfolio segment and class.

Table 6.16: Average Recorded Investment in Impaired Loans

	Quarter ended June 30,						Six months ended June 30,
	2019				2018		2019		2018
(in millions)	Average recorded investment		Recognized interest income		Average recorded investment	Recognized interest income	Average recorded investment	Recognized interest income	Average recorded investment	Recognized interest income
Commercial:
Commercial and industrial	$	2,285	50		2,212	43	2,249	73	2,318	79
Real estate mortgage	1,116		16		1,299	22	1,079	31	1,266	50
Real estate construction	55		—		62	1	53	2	60	2
Lease financing	88		—		138	1	98	—	132	1
Total commercial	3,544		66		3,711	67	3,479	106	3,776	132
Consumer:
Real estate 1-4 family first mortgage	9,398		128		11,772	167	9,950	281	11,921	339
Real estate 1-4 family junior lien mortgage	1,630		26		1,832	29	1,654	52	1,861	58
Credit card	480		16		398	12	470	31	384	22
Automobile	86		3		82	3	87	7	83	6
Other revolving credit and installment	158		3		140	3	157	7	136	5
Total consumer	11,752		176		14,224	214	12,318	378	14,385	430
Total impaired loans (excluding PCI)	$	15,296	242		17,935	281	15,797	484	18,161	562
Interest income:
Cash basis of accounting			$	76		84		135		165
Other (1)			166			197		349		397
Total interest income			$	242		281		484		562

(1) Includes interest recognized on accruing TDRs, interest recognized related to certain impaired loans which have an allowance calculated using discounting, and amortization of purchase accounting adjustments related to certain impaired loans.

TROUBLED DEBT RESTRUCTURINGS (TDRs)  When, for economic or legal reasons related to a borrower’s financial difficulties, we grant a concession for other than an insignificant period of time to a borrower that we would not otherwise consider, the related loan is classified as a TDR, the balance of which totaled $12.6 billion and $15.5 billion at June 30, 2019 and December 31, 2018, respectively. We do not consider loan resolutions such as foreclosure or short sale to be a TDR.

We may require some consumer borrowers experiencing financial difficulty to make trial payments generally for a period of three to four months, according to the terms of a planned permanent modification, to determine if they can perform according to those terms. These arrangements represent trial modifications, which we classify and account for as TDRs. While loans are in trial payment programs, their original terms are not considered modified and they continue to advance through delinquency status and accrue interest according to their original terms.

Table 6.17 summarizes our TDR modifications for the periods presented by primary modification type and includes the financial effects of these modifications. For those loans that modify more than once, the table reflects each modification that occurred during the period. Loans that both modify and pay off

within the period, as well as changes in recorded investment during the period for loans modified in prior periods, are not included in the table.

Table 6.17: TDR Modifications

	Primary modification type (1)					Financial effects of modifications
(in millions)	Principal (2)		Interest rate reduction	Other concessions (3)	Total	Charge- offs (4)	Weighted average interest rate reduction		Recorded investment related to interest rate reduction (5)
Quarter ended June 30, 2019
Commercial:
Commercial and industrial	$	—	34	180	214	26	0.34	%	$	34
Real estate mortgage	—		24	95	119	—	0.49		24
Real estate construction	13		—	13	26	—	—		—
Lease financing	—		—	—	—	—	—		—
Total commercial	13		58	288	359	26	0.40		58
Consumer:
Real estate 1-4 family first mortgage	28		2	181	211	—	1.83		19
Real estate 1-4 family junior lien mortgage	1		11	21	33	1	2.39		11
Credit card	—		89	—	89	—	13.35		89
Automobile	2		3	14	19	8	4.13		3
Other revolving credit and installment	—		12	1	13	—	7.67		12
Trial modifications (6)	—		—	5	5	—	—		—
Total consumer	31		117	222	370	9	10.06		134
Total	$	44	175	510	729	35	7.17	%	$	192
Quarter ended June 30, 2018
Commercial:
Commercial and industrial	$	3	5	449	457	14	0.58	%	$	5
Real estate mortgage	—		11	121	132	—	0.67		11
Real estate construction	—		—	1	1	—	—		—
Lease financing	—		—	—	—	—	—		—
Total commercial	3		16	571	590	14	0.64		16
Consumer:
Real estate 1-4 family first mortgage	64		8	286	358	2	2.26		31
Real estate 1-4 family junior lien mortgage	2		12	30	44	2	1.66		13
Credit card	—		83	—	83	—	13.19		83
Automobile	2		4	11	17	5	6.49		4
Other revolving credit and installment	—		10	2	12	—	7.95		10
Trial modifications (6)	—		—	17	17	—	—		—
Total consumer	68		117	346	531	9	9.17		141
Total	$	71	133	917	1,121	23	8.30	%	$	157

	Primary modification type (1)					Financial effects of modifications
(in millions)	Principal (2)		Interest rate reduction	Other concessions (3)	Total	Charge- offs (4)	Weighted average interest rate reduction		Recorded investment related to interest rate reduction (5)
Six months ended June 30, 2019
Commercial:
Commercial and industrial	$	—	45	734	779	39	0.42	%	$	45
Real estate mortgage	—		26	168	194	—	0.54		26
Real estate construction	13		—	16	29	—	—		—
Lease financing	—		—	—	—	—	—		—
Total commercial	13		71	918	1,002	39	0.47		71
Consumer:
Real estate 1-4 family first mortgage	63		5	475	543	1	1.89		38
Real estate 1-4 family junior lien mortgage	3		22	46	71	2	2.34		23
Credit card	—		186	—	186	—	13.27		186
Automobile	4		4	26	34	14	4.55		4
Other revolving credit and installment	—		23	4	27	—	7.63		23
Trial modifications (6)	—		—	5	5	—	—		—
Total consumer	70		240	556	866	17	10.17		274
Total	$	83	311	1,474	1,868	56	8.18	%	$	345
Six months ended June 30, 2018
Commercial:
Commercial and industrial	$	3	14	937	954	20	0.88	%	$	14
Real estate mortgage	—		17	219	236	—	0.89		17
Real estate construction	—		—	4	4	—	—		—
Lease financing	—		—	39	39	—	—		—
Total commercial	3		31	1,199	1,233	20	0.88		31
Consumer:
Real estate 1-4 family first mortgage	110		18	592	720	3	2.33		66
Real estate 1-4 family junior lien mortgage	3		20	58	81	3	1.89		22
Credit card	—		169	—	169	—	12.24		169
Automobile	3		8	25	36	14	6.48		8
Other revolving credit and installment	—		25	4	29	—	7.95		25
Trial modifications (6)	—		—	32	32	—	—		—
Total consumer	116		240	711	1,067	20	8.67		290
Total	$	119	271	1,910	2,300	40	7.92	%	$	321

(1) Amounts represent the recorded investment in loans after recognizing the effects of the TDR, if any. TDRs may have multiple types of concessions, but are presented only once in the first modification type based on the order presented in the table above. The reported amounts include loans remodified of $323 million and $381 million for the quarters ended June 30, 2019 and 2018, respectively, and $683 million and $884 million for the first half of 2019 and 2018, respectively.

(2) Principal modifications include principal forgiveness at the time of the modification, contingent principal forgiveness granted over the life of the loan based on borrower performance, and principal that has been legally separated and deferred to the end of the loan, with a zero percent contractual interest rate.

(3) Other concessions include loans discharged in bankruptcy, loan renewals, term extensions and other interest and noninterest adjustments, but exclude modifications that also forgive principal and/or reduce the contractual interest rate.

(4) Charge-offs include write-downs of the investment in the loan in the period it is contractually modified. The amount of charge-off will differ from the modification terms if the loan has been charged down prior to the modification based on our policies. In addition, there may be cases where we have a charge-off/down with no legal principal modification. Modifications resulted in legally forgiving principal (actual, contingent or deferred) of $3 million and $14 million for the quarters ended June 30, 2019 and 2018, and $6 million and $17 million for the first half of 2019 and 2018, respectively.

(5) Reflects the effect of reduced interest rates on loans with an interest rate concession as one of its concession types, which includes loans reported as a principal primary modification type that also have an interest rate concession.

(6) Trial modifications are granted a delay in payments due under the original terms during the trial payment period. However, these loans continue to advance through delinquency status and accrue interest according to their original terms. Any subsequent permanent modification generally includes interest rate related concessions; however, the exact concession type and resulting financial effect are usually not known until the loan is permanently modified. Trial modifications for the period are presented net of previously reported trial modifications that became permanent in the current period.

Table 6.18 summarizes permanent modification TDRs that have defaulted in the current period within 12 months of their permanent modification date. We are reporting these defaulted TDRs based on a payment default definition of 90 days past due for the commercial portfolio segment and 60 days past due for the consumer portfolio segment.

Table 6.18: Defaulted TDRs

	Recorded investment of defaults
	Quarter ended June 30,			Six months ended June 30,
(in millions)	2019		2018	2019	2018
Commercial:
Commercial and industrial	$	25	7	48	93
Real estate mortgage	5		14	33	40
Real estate construction	—		16	3	16
Total commercial	30		37	84	149
Consumer:
Real estate 1-4 family first mortgage	13		15	24	33
Real estate 1-4 family junior lien mortgage	4		2	9	7
Credit card	21		24	42	37
Automobile	4		4	7	7
Other revolving credit and installment	1		1	3	2
Total consumer	43		46	85	86
Total	$	73	83	169	235

Purchased Credit-Impaired Loans

Table 6.19 presents PCI loans net of any remaining purchase accounting adjustments. Real estate 1-4 family first mortgage PCI loans are predominantly Pick-a-Pay loans.

Table 6.19: PCI Loans

(in millions)	Jun 30, 2019		Dec 31, 2018
Total commercial	$	—	4
Consumer:
Real estate 1-4 family first mortgage	1,159		4,988
Real estate 1-4 family junior lien mortgage	15		17
Total consumer	1,174		5,005
Total PCI loans (carrying value)	$	1,174	5,009
Total PCI loans (unpaid principal balance)	$	1,952	7,348