Bank of America 2011 Annual Report Download - page 190

188 Bank of America 2011
The Commercial table below presents the December 31, 2011
unpaid principal balance and carrying value of commercial loans
that were modified as TDRs during 2011, along with charge-offs
that were recorded during 2011. As a result of the retrospective
application of new accounting guidance on TDRs, the Corporation
classified as TDRs $1.1 billion of commercial loan modifications.
See Note 1 – Summary of Significant Accounting Principles for
additional information.
Commercial - TDRs Entered into During 2011
(Dollars in millions)
U.S commercial
Commercial real estate
Non-U.S. commercial
U.S. small business commercial
Total
December 31, 2011
Unpaid
Principal
Balance
$ 1,381
1,604
44
58
$ 3,087
Carrying
Value
$ 1,211
1,333
44
59
$ 2,647
2011
Net
Charge-
offs
$74
152
—
10
$ 236
A commercial TDR is generally deemed to be in payment default
when the loan is 90 days or more past due, including delinquencies
that were not resolved as part of the modification. U.S. small
business commercial TDRs are deemed to be in payment default
during the quarter in which a borrower misses the second of two
consecutive payments. Payment defaults are one of the factors
considered when projecting future cash flows, along with
observable market prices or fair value of collateral when measuring
the allowance for loan losses. TDRs that were in payment default
at December 31, 2011 had a carrying value of $164 million for
U.S. commercial, $446 million for commercial real estate and $68
million for U.S. small business commercial.
Purchased Credit-impaired Loans
PCI loans are acquired loans with evidence of credit quality
deterioration since origination for which it is probable at purchase
date that the Corporation will be unable to collect all contractually
required payments. PCI loans are pooled based on similar
characteristics and evaluated for impairment on a pool basis. The
Corporation estimates impairment on its PCI loan portfolio in
accordance with applicable accounting guidance on contingencies
which involves estimating the expected cash flows of each pool
using internal credit risk, interest rate and prepayment risk models.
The key assumptions used in the models include the Corporation’s
estimate of default rates, loss severity and prepayment speeds.
The carrying value and valuation allowance for Countrywide
consumer PCI loans are presented together with the allowance for
loan and lease losses. See Note 7 – Allowance for Credit Losses
for additional information.
The table below shows activity for the accretable yield on
Countrywide consumer PCI loans. The $912 million
reclassification from nonaccretable difference during 2011 is
primarily due to an increase in the expected life of the PCI loans.
The reclassification did not increase the annual yield but, as a
result of estimated slower prepayment speeds, added additional
interest periods to the expected cash flows.
Rollforward of Accretable Yield
(Dollars in millions)
Accretable yield, January 1, 2010
Accretion
Disposals/transfers
Reclassifications to nonaccretable difference
Accretable yield, December 31, 2010
Accretion
Disposals/transfers
Reclassifications from nonaccretable difference
Accretable yield, December 31, 2011
$ 7,317
(1,704)
(124)
(8)
5,481
(1,285)
(118)
912
$ 4,990
Loans Held-for-Sale
The Corporation had LHFS of $13.8 billion and $35.1 billion at
December 31, 2011 and 2010. Proceeds from sales,
securitizations and paydowns of LHFS were $147.5 billion, $281.7
billion and $365.1 billion for 2011, 2010 and 2009. Proceeds
used for originations and purchases of LHFS were $118.2 billion,
$263.0 billion and $369.4 billion for 2011, 2010 and 2009.