Bank of America 2012 Annual Report Download - page 93

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Table 38 presents TDRs for the home loans portfolio. Performing TDR balances are excluded from nonperforming loans in Table
37.
Table 38 Home Loans Troubled Debt Restructurings
December 31
2012 2011
(Dollars in millions) Total Nonperforming Performing Total Nonperforming Performing
Residential mortgage (1, 2) $ 27,758 $ 8,806 $ 18,952 $ 19,287 $ 5,034 $ 14,253
Home equity (3) 2,125 1,242 883 1,776 543 1,233
Discontinued real estate (4) 367 234 133 399 214 185
Total home loans troubled debt restructurings $ 30,250 $ 10,282 $ 19,968 $ 21,462 $ 5,791 $ 15,671
(1) Residential mortgage TDRs deemed collateral dependent totaled $9.1 billion and $5.3 billion, and included $6.2 billion and $2.2 billion of loans classified as nonperforming and $2.9 billion and
$3.1 billion of loans classified as performing at December 31, 2012 and 2011.
(2) Residential mortgage performing TDRs included $11.9 billion and $7.0 billion of loans that were fully-insured at December 31, 2012 and 2011.
(3) Home equity TDRs deemed collateral dependent totaled $1.4 billion and $824 million, and included $1.0 billion and $282 million of loans classified as nonperforming and $348 million and $542
million of loans classified as performing at December 31, 2012 and 2011.
(4) Discontinued real estate TDRs deemed collateral dependent totaled $253 million and $230 million, and included $170 million and $118 million of loans classified as nonperforming and $83 million
and $112 million as performing at December 31, 2012 and 2011.
We work with customers that are experiencing financial difficulty
by modifying credit card and other consumer loans, while complying
with Federal Financial Institutions Examination Council (FFIEC)
guidelines. Substantially all of our credit card and other consumer
loan modifications involve a reduction in the customer’s interest
rate on the account and placing the customer on a fixed payment
plan not exceeding 60 months, both of which are considered to
be TDRs (the renegotiated TDR portfolio). We make modifications
primarily through internal renegotiation programs utilizing direct
customer contact, but may also utilize external renegotiation
programs. The renegotiated TDR portfolio is generally excluded
from Table 37 as substantially all of the loans remain on accrual
status until either charged off or paid in full. The renegotiated TDR
portfolio included $58 million of non-real estate-secured loans at
December 31, 2012 that were discharged in Chapter 7 bankruptcy
as a result of new regulatory guidance and classified as
nonperforming loans. At December 31, 2012 and 2011, our
renegotiated TDR portfolio was $3.9 billion and $7.1 billion, of
which $3.1 billion and $5.5 billion were current or less than
30 days past due under the modified terms. The decline in the
renegotiated TDR portfolio was primarily driven by paydowns and
charge-offs as well as lower new program enrollments. For more
information on the renegotiated TDR portfolio, see Note 5 –
Outstanding Loans and Leases to the Consolidated Financial
Statements.
Commercial Portfolio Credit Risk Management
Credit risk management for the commercial portfolio begins with
an assessment of the credit risk profile of the borrower or
counterparty based on an analysis of its financial position. As part
of the overall credit risk assessment, our commercial credit
exposures are assigned a risk rating and are subject to approval
based on defined credit approval standards. Subsequent to loan
origination, risk ratings are monitored on an ongoing basis, and if
necessary, adjusted to reflect changes in the financial condition,
cash flow, risk profile or outlook of a borrower or counterparty. In
making credit decisions, we consider risk rating, collateral, country,
industry and single name concentration limits while also balancing
the total borrower or counterparty relationship. Our business and
risk management personnel use a variety of tools to continuously
monitor the ability of a borrower or counterparty to perform under
its obligations. We use risk rating aggregations to measure and
evaluate concentrations within portfolios. In addition, risk ratings
are a factor in determining the level of assigned economic capital
and the allowance for credit losses.
For information on our accounting policies regarding
delinquencies, nonperforming status and net charge-offs for the
commercial portfolio, see Note 1 – Summary of Significant
Accounting Principles to the Consolidated Financial Statements.
Management of Commercial Credit Risk
Concentrations
Commercial credit risk is evaluated and managed with the goal
that concentrations of credit exposure do not result in undesirable
levels of risk. We review, measure and manage concentrations of
credit exposure by industry, product, geography, customer
relationship and loan size. We also review, measure and manage
commercial real estate loans by geographic location and property
type. In addition, within our international portfolio, we evaluate
exposures by region and by country. Tables 43, 48, 56 and 57
summarize our concentrations. We also utilize syndications of
exposure to third parties, loan sales, hedging and other risk
mitigation techniques to manage the size and risk profile of the
commercial credit portfolio.
As part of our ongoing risk mitigation initiatives, we attempt to
work with clients experiencing financial difficulty to modify their
loans to terms that better align with their current ability to pay. In
situations where an economic concession has been granted to a
borrower experiencing financial difficulty, we identify these loans
as TDRs.