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Allowance for Loan and Lease Losses
 3 Months Ended
Mar. 31, 2019
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]  
Allowance for Loans and Lease Losses
NOTE 5—ALLOWANCE FOR LOAN AND LEASE LOSSES AND RESERVE FOR UNFUNDED LENDING COMMITMENTS
Our allowance for loan and lease losses represents management’s best estimate of incurred loan and lease losses inherent in our loans held for investment portfolio as of each balance sheet date. In addition to the allowance for loan and lease losses, we also estimate probable losses related to unfunded lending commitments, such as letters of credit, financial guarantees and binding unfunded loan commitments. The provision for losses on unfunded lending commitments is included in the provision for credit losses in our consolidated statements of income and the related reserve for unfunded lending commitments is included in other liabilities on our consolidated balance sheets. See “Note 1—Summary of Significant Accounting Policies” in our 2018 Form 10-K for further discussion of the methodology and policy for determining our allowance for loan and lease losses for each of our loan portfolio segments, as well as information on our reserve for unfunded lending commitments.
Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments Activity
The table below summarizes changes in the allowance for loan and lease losses and reserve for unfunded lending commitments by portfolio segment for the three months ended March 31, 2019 and 2018.
Table 5.1: Allowance for Loan and Lease Losses and Reserve for Unfunded Lending Commitments Activity
(Dollars in millions)
 
Credit Card
 
Consumer
Banking
 
Commercial Banking
 
Total
Allowance for loan and lease losses:
 
 
 
 
 
 
 
 
Balance as of December 31, 2018
 
$
5,535

 
$
1,048

 
$
637

 
$
7,220

Charge-offs
 
(1,782
)
 
(471
)
 
(20
)
 
(2,273
)
Recoveries(1)
 
418

 
250

 
6

 
674

Net charge-offs
 
(1,364
)
 
(221
)
 
(14
)
 
(1,599
)
Provision for loan and lease losses
 
1,389

 
235

 
60

 
1,684

Allowance build for loan and lease losses
 
25

 
14

 
46

 
85

Other changes(2)
 
8

 
0

 
0

 
8

Balance as of March 31, 2019
 
5,568

 
1,062

 
683

 
7,313

Reserve for unfunded lending commitments:
 
 
 
 
 
 
 
 
Balance as of December 31, 2018
 
0

 
4

 
118

 
122

Provision for losses on unfunded lending commitments
 
0

 
0

 
9

 
9

Balance as of March 31, 2019
 
0

 
4

 
127

 
131

Combined allowance and reserve as of March 31, 2019
 
$
5,568

 
$
1,066

 
$
810

 
$
7,444

(Dollars in millions)
 
Credit Card
 
Consumer
Banking
 
Commercial Banking
 
Other(3)
 
Total
Allowance for loan and lease losses:
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2017
 
$
5,648

 
$
1,242

 
$
611

 
$
1

 
$
7,502

Charge-offs
 
(1,825
)
 
(431
)
 
(21
)
 
1

 
(2,276
)
Recoveries(1)
 
448

 
208

 
2

 
0

 
658

Net charge-offs
 
(1,377
)
 
(223
)
 
(19
)
 
1

 
(1,618
)
Provision (benefit) for loan and lease losses
 
1,456

 
234

 
(5
)
 
(1
)
 
1,684

Allowance build (release) for loan and lease losses
 
79

 
11

 
(24
)
 
0

 
66

Other changes(2)
 
(1
)
 
0

 
0

 
0

 
(1
)
Balance as of March 31, 2018
 
5,726

 
1,253

 
587

 
1

 
7,567

Reserve for unfunded lending commitments:
 
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2017
 
0

 
7

 
117

 
0

 
124

Benefit for losses on unfunded lending commitments
 
0

 
(1
)
 
(9
)
 
0

 
(10
)
Balance as of March 31, 2018
 
0

 
6

 
108

 
0

 
114

Combined allowance and reserve as of March 31, 2018
 
$
5,726

 
$
1,259

 
$
695

 
$
1

 
$
7,681


__________
(1) 
The amount and timing of recoveries is impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications, repossession of collateral, the periodic sale of charged-off loans as well as additional strategies, such as litigation.
(2) 
Represents foreign currency translation adjustments and the net impact of loan transfers and sales where applicable.  
(3) 
Includes the legacy loan portfolio of our discontinued GreenPoint mortgage operations.  
Components of Allowance for Loan and Lease Losses by Impairment Methodology
The table below presents the components of our allowance for loan and lease losses by portfolio segment and impairment methodology as of March 31, 2019 and December 31, 2018. See “Note 1—Summary of Significant Accounting Policies” in our 2018 Form 10-K for further discussion of allowance methodologies for each of the loan portfolios.
Table 5.2: Components of Allowance for Loan and Lease Losses by Impairment Methodology
 
 
March 31, 2019
(Dollars in millions)
 
Credit
Card
 
Consumer Banking
 
Commercial Banking
 
Total
Allowance for loan and lease losses:
 
 
 
 
 
 
 
 
Collectively evaluated
 
$
5,298

 
$
1,030

 
$
615

 
$
6,943

Asset-specific
 
270

 
32

 
68

 
370

Total allowance for loan and lease losses
 
$
5,568

 
$
1,062

 
$
683

 
$
7,313

Loans held for investment:
 
 
 
 
 
 
 
 
Collectively evaluated
 
$
108,979

 
$
58,847

 
$
70,383

 
$
238,209

Asset-specific
 
857

 
398

 
683

 
1,938

PCI loans
 
0

 
3

 
123

 
126

Total loans held for investment
 
$
109,836

 
$
59,248

 
$
71,189

 
$
240,273

Allowance coverage ratio(1)
 
5.07
%
 
1.79
%
 
0.96
%
 
3.04
%
 
 
December 31, 2018
(Dollars in millions)
 
Credit
Card
 
Consumer Banking
 
Commercial Banking
 
Total
Allowance for loan and lease losses:
 
 
 
 
 
 
 
 
Collectively evaluated
 
$
5,258

 
$
1,021

 
$
603

 
$
6,882

Asset-specific
 
277

 
27

 
34

 
338

Total allowance for loan and lease losses
 
$
5,535

 
$
1,048

 
$
637

 
$
7,220

Loans held for investment:
 
 
 
 
 
 
 
 
Collectively evaluated
 
$
115,505

 
$
58,808

 
$
69,607

 
$
243,920

Asset-specific
 
855

 
393

 
596

 
1,844

PCI loans
 
1

 
4

 
130

 
135

Total loans held for investment
 
$
116,361

 
$
59,205

 
$
70,333

 
$
245,899

Allowance coverage ratio(1)
 
4.76
%
 
1.77
%
 
0.91
%
 
2.94
%
__________
(1) 
Allowance coverage ratio is calculated by dividing the period-end allowance for loan and lease losses by period-end loans held for investment within the specified loan category.




We have certain credit card partnership agreements that are presented within our consolidated financial statements on a net basis, in which our partner agrees to share a portion of the credit losses on the underlying loan portfolio. The expected reimbursements from these partners, which are netted against our allowance for loan and lease losses, result in reductions to net charge-offs and provision for credit losses. See “Note 1—Summary of Significant Accounting Policies” in our 2018 Form 10-K for further discussion of our credit card partnership agreements.
The table below summarizes the changes in the estimated reimbursements from these partners for the three months ended March 31, 2019 and 2018.
Table 5.3: Summary of Loss Sharing Arrangements Impacts
 
 
Three Months Ended March 31,
(Dollars in millions)
 
2019
 
2018
Estimated reimbursements from partners, beginning of period
 
$
379

 
380

Amounts due from partners which reduced net charge-offs
 
(108
)
 
(97
)
Amounts estimated to be charged to partners which reduced provision for credit losses
 
171

 
105

Estimated reimbursements from partners, end of period
 
$
442

 
$
388