Bank of America 2015 Annual Report Download - page 178

176 Bank of America 2015
The table below presents the December 31, 2015, 2014 and
2013 unpaid principal balance and carrying value of commercial
loans that were modified as TDRs during 2015, 2014 and 2013,
and net charge-offs that were 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 2015, 2014 and
2013
December 31, 2015 2015
(Dollars in millions)
Unpaid
Principal
Balance
Carrying
Value
Net
Charge-offs
U.S. commercial $ 853 $ 779 $ 28
Commercial real estate 42 42 —
Non-U.S. commercial 329 326 —
U.S. small business commercial (1) 14 11 3
Total $ 1,238 $ 1,158 $ 31
December 31, 2014 2014
U.S. commercial $ 818 $ 785 $ 49
Commercial real estate 346 346 8
Non-U.S. commercial 44 43 —
U.S. small business commercial (1) 3 3 —
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
(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 $105 million, $103 million and $55
million for U.S. commercial and $25 million, $211 million and
$128 million for commercial real estate at December 31, 2015,
2014 and 2013, 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 shows activity for the accretable yield on
PCI loans, which include the Countrywide Financial Corporation
(Countrywide) portfolio and loans repurchased in connection with
the 2013 settlement with FNMA. 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 2015 and 2014 were primarily due to lower
expected loss rates and a decrease in the 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, 2014 $ 6,694
Accretion (1,061)
Disposals/transfers (506)
Reclassifications from nonaccretable difference 481
Accretable yield, December 31, 2014 5,608
Accretion (861)
Disposals/transfers (465)
Reclassifications from nonaccretable difference 287
Accretable yield, December 31, 2015 $ 4,569
During 2015, the Corporation sold PCI loans with a carrying
value of $1.4 billion, which excludes the related allowance of $234
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 $7.5 billion and $12.8 billion at
December 31, 2015 and 2014. Cash and non-cash proceeds from
sales and paydowns of loans originally classified as LHFS were
$41.2 billion, $40.1 billion and $81.0 billion for 2015, 2014 and
2013, respectively. Cash used for originations and purchases of
LHFS totaled $38.7 billion, $40.1 billion and $65.7 billion for
2015, 2014 and 2013, respectively.