Bank of America 2010 Annual Report Download - page 173

Nonperforming Loans and Leases
The table below includes the Corporation’s nonperforming loans and leases,
including nonperforming TDRs, and loans accruing past due 90 days or more
at December 31, 2010 and 2009. Nonperforming loans and leases exclude
performing TDRs and loans accounted for under the fair value option. Non-
performing LHFS are excluded from nonperforming loans and leases as they
are recorded at either fair value or the lower of cost or fair value. In addition,
PCI, consumer credit card, business card loans and in general, consumer
loans not secured by real estate, including renegotiated loans, are not
considered nonperforming and are therefore excluded from nonperforming
loans and leases in the table. See Note 1 – Summary of Significant Account-
ing Principles for further information on the criteria to determine if a loan is
classified as nonperforming. Real estate-secured past due consumer loans
insured by the FHA are reported as performing since the principal repayment
is insured by the FHA.
(Dollars in millions) 2010 2009 2010 2009
December 31 December 31
Nonperforming Loans
and Leases
Accruing Past Due
90 Days or More
Home loans
Residential mortgage
(1)
$17,691 $16,596 $16,768 $11,680
Home equity
2,694 3,804 – –
Discontinued real estate
331 249 – –
Credit card and other consumer
U.S. credit card n/a n/a 3,320 2,158
Non-U.S. credit card
n/a n/a 599 515
Direct/Indirect consumer
90 86 1,058 1,488
Other consumer
48 104 2 3
Total consumer 20,854 20,839 21,747 15,844
Commercial
U.S. commercial 3,453 4,925 236 213
Commercial real estate
5,829 7,286 47 80
Commercial lease financing
117 115 18 32
Non-U.S. commercial
233 177 6 67
U.S. small business commercial
204 200 325 624
Total commercial 9,836 12,703 632 1,016
Total consumer and commercial $30,690 $33,542 $22,379 $16,860
(1)
Residential mortgage loans accruing past due 90 days or more represent loans insured by the FHA. At December 31, 2010 and 2009, residential mortgage includes $8.3 billion and $2.2 billion of loans that are no longer accruing
interest as interest has been curtailed by the FHA although principal is still insured.
n/a = not applicable
Included in certain loan categories in nonperforming loans and leases in
the table above are TDRs that were classified as nonperforming. At Decem-
ber 31, 2010 and 2009, the Corporation had $3.0 billion and $2.9 billion of
residential mortgages, $535 million and $1.7 billion of home equity, $75 mil-
lion and $43 million of discontinued real estate, $175 million and $227 million
of U.S. commercial, $770 million and $246 million of commercial real estate
and $7 million and $13 million of non-U.S. commercial loans that were TDRs
and classified as nonperforming.
As a result of new accounting guidance on PCI loans, beginning January 1,
2010, modification of a PCI loan no longer results in removal of the loan from
the PCI loan pool. TDRs in the consumer real estate portfolio that were
removed from the PCI loan portfolio prior to the adoption of the new account-
ing guidance were $2.1 billion and $2.3 billion at December 31, 2010 and
2009, of which $426 million and $395 million were nonperforming. These
nonperforming loans are excluded from the table above.
Credit Quality Indicators
The Corporation monitors credit quality within its three portfolio segments
based on primary credit quality indicators. Within the home loans portfolio
segment, the primary credit quality indicators used are refreshed LTV and
refreshed FICO score. Refreshed LTV measures the carrying value of the loan
as a percentage of the value of property securing the loan, refreshed quar-
terly. Home equity loans are measured using combined LTV which measures
the carrying value of the combined loans that have liens against the property
and the available line of credit as a percentage of the appraised value of the
property securing the loan, refreshed quarterly. Refreshed FICO score mea-
sures the creditworthiness of the borrower based on the financial obligations
of the borrower and the borrower’s credit history. At a minimum, FICO scores
are refreshed quarterly, and in many cases, more frequently. Refreshed FICO
score is also a primary credit quality indicator for the credit card and other
consumer portfolio segment and the business card portfolio within U.S. small
business commercial. The Corporation’s commercial loans are evaluated
using pass rated or reservable criticized as the primary credit quality indicator.
The term reservable criticized refers to those commercial loans that are
internally classified or listed by the Corporation as special mention, substan-
dard or doubtful. These assets pose an elevated risk and may have a high
probability of default or total loss. Pass rated refers to all loans not considered
criticized. In addition to these primary credit quality indicators, the Corporation
uses other credit quality indicators for certain types of loans.
See Note 1 – Summary of Significant Accounting Principles for additional
information.
Bank of America 2010 171