Bank of America 2014 Annual Report Download - page 188

186 Bank of America 2014
The table below presents the December 31, 2014, 2013 and
2012 unpaid principal balance and carrying value of commercial
loans that were modified as TDRs during 2014, 2013 and 2012,
and net charge-offs recorded during the period in which the
modification occurred. The table below includes loans that were
initially classified as TDRs during the period and also loans that
had previously been classified as TDRs and were modified again
during the period.
Commercial – TDRs Entered into During 2014, 2013 and
2012
December 31, 2014 2014
(Dollars in millions)
Unpaid
Principal
Balance
Carrying
Value
Net
Charge-offs
U.S. commercial $ 818 $ 785 $ 49
Commercial real estate 346 346 8
Non-U.S. commercial 44 43 —
U.S. small business commercial (1) 33—
Total $ 1,211 $ 1,177 $ 57
December 31, 2013 2013
U.S. commercial $ 926 $ 910 $ 33
Commercial real estate 483 425 3
Non-U.S. commercial 61 44 7
U.S. small business commercial (1) 891
Total $ 1,478 $ 1,388 $ 44
December 31, 2012 2012
U.S. commercial $ 590 $ 558 $ 34
Commercial real estate 793 721 20
Non-U.S. commercial 90 89 1
U.S. small business commercial (1) 22 22 5
Total $ 1,495 $ 1,390 $ 60
(1) U.S. small business commercial TDRs are comprised of renegotiated small business card loans.
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 and lease losses. TDRs that were in payment
default had a carrying value of $103 million, $55 million and $130
million for U.S. commercial and $211 million, $128 million and
$455 million for commercial real estate at December 31, 2014,
2013 and 2012, respectively.
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. The following table presents PCI loans
acquired in connection with the 2013 settlement with FNMA.
Purchased Loans at Acquisition Date
(Dollars in millions)
Contractually required payments including interest $ 8,274
Less: Nonaccretable difference 2,159
Cash flows expected to be collected (1) 6,115
Less: Accretable yield 1,125
Fair value of loans acquired $ 4,990
(1) Represents undiscounted expected principal and interest cash flows at acquisition.
The table below shows activity for the accretable yield on PCI
loans, which includes the Countrywide Financial Corporation
(Countrywide) portfolio and loans repurchased in connection with
the settlement with FNMA. For more information on the settlement
with FNMA, see Note 7 – Representations and Warranties
Obligations and Corporate Guarantees. The amount of accretable
yield is affected by changes in credit outlooks, including metrics
such as default rates and loss severities, prepayment speeds,
which can change the amount and period of time over which
interest payments are expected to be received, and the interest
rates on variable rate loans. The reclassifications from
nonaccretable difference during 2014 and 2013 were due to lower
expected loss rates and a decrease in forecasted prepayment
speeds. Changes in the prepayment assumption affect the
expected remaining life of the portfolio which results in a change
to the amount of future interest cash flows.
Rollforward of Accretable Yield
(Dollars in millions)
Accretable yield, January 1, 2013 $ 4,644
Accretion (1,194)
Loans Purchased 1,125
Disposals/transfers (361)
Reclassifications from nonaccretable difference 2,480
Accretable yield, December 31, 2013 6,694
Accretion (1,061)
Disposals/transfers (506)
Reclassifications from nonaccretable difference 481
Accretable yield, December 31, 2014 $ 5,608
During 2014, the Corporation sold PCI loans with a carrying
value of $1.9 billion, which excludes the related allowance of $317
million. For more information on PCI loans, see Note 1 – Summary
of Significant Accounting Principles, and for the carrying value and
valuation allowance for PCI loans, see Note 5 – Allowance for Credit
Losses.
Loans Held-for-sale
The Corporation had LHFS of $12.8 billion and $11.4 billion at
December 31, 2014 and 2013. Cash and non-cash proceeds from
sales and paydowns of loans originally classified as LHFS were
$40.1 billion, $81.0 billion and $58.0 billion for 2014, 2013 and
2012, respectively. Cash used for originations and purchases of
LHFS totaled $40.1 billion, $65.7 billion and $59.5 billion for
2014, 2013 and 2012, respectively.