v3.6.0.2
Loans and asset quality
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12 Months Ended |
|
|---|
| Receivables [Abstract] |
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| Loans and asset quality |
Loans and asset quality
Loans
The table below provides the details of our loan portfolio and industry concentrations of credit risk at Dec. 31, 2016 and Dec. 31, 2015.
| | | | | | | | Loans | Dec. 31, | (in millions) | 2016 |
| 2015 |
| Domestic: | | | Financial institutions | $ | 6,342 |
| $ | 6,640 |
| Commercial | 2,286 |
| 2,115 |
| Wealth management loans and mortgages | 15,555 |
| 13,247 |
| Commercial real estate | 4,639 |
| 3,899 |
| Lease financings | 989 |
| 1,007 |
| Other residential mortgages | 854 |
| 1,055 |
| Overdrafts | 1,055 |
| 911 |
| Other | 1,202 |
| 1,137 |
| Margin loans | 17,503 |
| 19,340 |
| Total domestic | 50,425 |
| 49,351 |
| Foreign: | | | Financial institutions | 8,347 |
| 9,259 |
| Commercial | 331 |
| 227 |
| Wealth management loans and mortgages | 99 |
| 100 |
| Commercial real estate | 15 |
| 46 |
| Lease financings | 736 |
| 850 |
| Other (primarily overdrafts) | 4,418 |
| 3,637 |
| Margin loans | 87 |
| 233 |
| Total foreign | 14,033 |
| 14,352 |
| Total loans (a) | $ | 64,458 |
| $ | 63,703 |
|
| | (a) | Net of unearned income of $527 million at Dec. 31, 2016 and $674 million at Dec. 31, 2015 primarily on domestic and foreign lease financings. |
Our loan portfolio consists of three portfolio segments: commercial, lease financings and mortgages. We manage our portfolio at the class level which consists of six classes of financing receivables: commercial, commercial real estate, financial institutions, lease financings, wealth management loans and mortgages and other residential mortgages.
The following tables are presented for each class of financing receivable, and provide additional information about our credit risks and the adequacy of our allowance for credit losses. Allowance for credit losses
Transactions in the allowance for credit losses are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for credit losses activity for the year ended Dec. 31, 2016 | Wealth management loans and mortgages |
| Other residential mortgages |
| | | | | (in millions) | Commercial |
| Commercial real estate |
| Financial institutions |
| Lease financings |
| All Other |
| | Foreign |
| Total |
| Beginning balance | $ | 82 |
| $ | 59 |
| $ | 31 |
| $ | 15 |
| $ | 19 |
| $ | 34 |
| $ | — |
| | $ | 35 |
| $ | 275 |
| Charge-offs | — |
| — |
| — |
| — |
| — |
| (2 | ) | — |
| | — |
| (2 | ) | Recoveries | — |
| — |
| 13 |
| — |
| — |
| 5 |
| — |
| | 1 |
| 19 |
| Net recoveries | — |
| — |
| 13 |
| — |
| — |
| 3 |
| — |
| | 1 |
| 17 |
| Provision | — |
| 14 |
| (18 | ) | (2 | ) | 4 |
| (9 | ) | — |
| | — |
| (11 | ) | Ending balance | $ | 82 |
| $ | 73 |
| $ | 26 |
| $ | 13 |
| $ | 23 |
| $ | 28 |
| $ | — |
| | $ | 36 |
| $ | 281 |
| Allowance for: | | | | | | | | | | | Loan losses | $ | 25 |
| $ | 52 |
| $ | 8 |
| $ | 13 |
| $ | 19 |
| $ | 28 |
| $ | — |
| | $ | 24 |
| $ | 169 |
| Lending-related commitments | 57 |
| 21 |
| 18 |
| — |
| 4 |
| — |
| — |
| | 12 |
| 112 |
| Individually evaluated for impairment: | | | | | | | | | | | Loan balance | $ | — |
| $ | — |
| $ | — |
| $ | 4 |
| $ | 5 |
| $ | — |
| $ | — |
| | $ | — |
| $ | 9 |
| Allowance for loan losses | — |
| — |
| — |
| 2 |
| 3 |
| — |
| — |
| | — |
| 5 |
| Collectively evaluated for impairment: | | | | | | | | | | | Loan balance | $ | 2,286 |
| $ | 4,639 |
| $ | 6,342 |
| $ | 985 |
| $ | 15,550 |
| $ | 854 |
| $ | 19,760 |
| (a) | $ | 14,033 |
| $ | 64,449 |
| Allowance for loan losses | 25 |
| 52 |
| 8 |
| 11 |
| 16 |
| 28 |
| — |
| | 24 |
| 164 |
|
| | (a) | Includes $1,055 million of domestic overdrafts, $17,503 million of margin loans and $1,202 million of other loans at Dec. 31, 2016. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for credit losses activity for the year ended Dec. 31, 2015 | Wealth management loans and mortgages |
| Other residential mortgages |
| | | | | (in millions) | Commercial |
| Commercial real estate |
| Financial institutions |
| Lease financings |
| All Other |
| | Foreign |
| Total |
| Beginning balance | $ | 60 |
| $ | 50 |
| $ | 31 |
| $ | 32 |
| $ | 22 |
| $ | 41 |
| $ | — |
| | $ | 44 |
| $ | 280 |
| Charge-offs | — |
| — |
| (170 | ) | — |
| — |
| (2 | ) | — |
| | — |
| (172 | ) | Recoveries | — |
| — |
| 1 |
| — |
| — |
| 6 |
| — |
| | — |
| 7 |
| Net (charge-offs) recoveries | — |
| — |
| (169 | ) | — |
| — |
| 4 |
| — |
| | — |
| (165 | ) | Provision | 22 |
| 9 |
| 169 |
| (17 | ) | (3 | ) | (11 | ) | — |
| | (9 | ) | 160 |
| Ending balance | $ | 82 |
| $ | 59 |
| $ | 31 |
| $ | 15 |
| $ | 19 |
| $ | 34 |
| $ | — |
| | $ | 35 |
| $ | 275 |
| Allowance for: | | | | | | | | | | | Loan losses | $ | 24 |
| $ | 37 |
| $ | 9 |
| $ | 15 |
| $ | 15 |
| $ | 34 |
| $ | — |
|
| $ | 23 |
| $ | 157 |
| Lending-related commitments | 58 |
| 22 |
| 22 |
| — |
| 4 |
| — |
| — |
|
| 12 |
| 118 |
| Individually evaluated for impairment: | | | | | | | | | | | Loan balance | $ | — |
| $ | 1 |
| $ | 171 |
| $ | — |
| $ | 8 |
| $ | — |
| $ | — |
|
| $ | — |
| $ | 180 |
| Allowance for loan losses | — |
| 1 |
| — |
| — |
| 1 |
| — |
| — |
|
| — |
| 2 |
| Collectively evaluated for impairment: | | | | | | | | | | | Loan balance | $ | 2,115 |
| $ | 3,496 |
| $ | 6,469 |
| $ | 1,007 |
| $ | 13,239 |
| $ | 1,035 |
| $ | 21,388 |
| (a) | $ | 14,352 |
| $ | 63,101 |
| Allowance for loan losses | 24 |
| 36 |
| 9 |
| 15 |
| 14 |
| 34 |
| — |
|
| 23 |
| 155 |
|
| | (a) | Includes $911 million of domestic overdrafts, $19,340 million of margin loans and $1,137 million of other loans at Dec. 31, 2015. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Allowance for credit losses activity for the year ended Dec. 31, 2014 | Wealth management loans and mortgages |
| Other residential mortgages |
| All Other |
| | Foreign |
| Total |
| (in millions) | Commercial |
| Commercial real estate |
| Financial institutions |
| Lease financings |
| | Beginning balance | $ | 83 |
| $ | 41 |
| $ | 49 |
| $ | 37 |
| $ | 24 |
| $ | 54 |
| $ | — |
| | $ | 56 |
| $ | 344 |
| Charge-offs | (12 | ) | (2 | ) | — |
| — |
| (1 | ) | (2 | ) | — |
| | (3 | ) | (20 | ) | Recoveries | 1 |
| — |
| 1 |
| — |
| — |
| 2 |
| — |
| | — |
| 4 |
| Net (charge-offs) recoveries | (11 | ) | (2 | ) | 1 |
| — |
| (1 | ) | — |
| — |
| | (3 | ) | (16 | ) | Provision | (12 | ) | 11 |
| (19 | ) | (5 | ) | (1 | ) | (13 | ) | — |
| | (9 | ) | (48 | ) | Ending balance | $ | 60 |
| $ | 50 |
| $ | 31 |
| $ | 32 |
| $ | 22 |
| $ | 41 |
| $ | — |
| | $ | 44 |
| $ | 280 |
| Allowance for: | | | | | | | | | | | Loan losses | $ | 17 |
| $ | 32 |
| $ | 17 |
| $ | 32 |
| $ | 17 |
| $ | 41 |
| $ | — |
| | $ | 35 |
| $ | 191 |
| Lending-related commitments | 43 |
| 18 |
| 14 |
| — |
| 5 |
| — |
| — |
| | 9 |
| 89 |
| Individually evaluated for impairment: | | | | | | | | | | | Loan balance | $ | — |
| $ | — |
| $ | — |
| $ | — |
| $ | 8 |
| $ | — |
| $ | — |
| | $ | — |
| $ | 8 |
| Allowance for loan losses | — |
| — |
| — |
| — |
| 1 |
| — |
| — |
| | — |
| 1 |
| Collectively evaluated for impairment: | | | | | | | | | | | Loan balance | $ | 1,390 |
| $ | 2,503 |
| $ | 5,603 |
| $ | 1,282 |
| $ | 11,087 |
| $ | 1,222 |
| $ | 22,495 |
| (a) | $ | 13,521 |
| $ | 59,103 |
| Allowance for loan losses | 17 |
| 32 |
| 17 |
| 32 |
| 16 |
| 41 |
| — |
| | 35 |
| 190 |
|
| | (a) | Includes $1,348 million of domestic overdrafts, $20,034 million of margin loans and $1,113 million of other loans at Dec. 31, 2014. |
Nonperforming assets
The table below presents the distribution of our nonperforming assets.
| | | | | | | | Nonperforming assets (in millions) | | 2016 |
| 2015 |
| Nonperforming loans: | | | Other residential mortgages | $ | 91 |
| $ | 102 |
| Wealth management loans and mortgages | 8 |
| 11 |
| Lease financings | 4 |
| — |
| Commercial real estate | — |
| 2 |
| Financial institutions | — |
| 171 |
| Total nonperforming loans | 103 |
| 286 |
| Other assets owned | 4 |
| 6 |
| Total nonperforming assets | $ | 107 |
| $ | 292 |
|
At Dec. 31, 2016, undrawn commitments to borrowers whose loans were classified as nonaccrual or reduced rate were not material. Nonperforming loans decreased primarily reflecting the settlement agreement in the bankruptcy proceedings of Sentinel. Lost interest
The table below presents the amount of lost interest income.
| | | | | | | | | | | Lost interest | | | | (in millions) | 2016 |
| 2015 |
| 2014 |
| Amount by which interest income recognized on nonperforming loans exceeded reversals | | | | Total | $ | — |
| $ | — |
| $ | 1 |
| Foreign | — |
| — |
| — |
| Amount by which interest income would have increased if nonperforming loans at year-end had been performing for the entire year | | | | Total | $ | 6 |
| $ | 6 |
| $ | 7 |
| Foreign | — |
| — |
| — |
|
Impaired loans
The tables below provide information about our impaired loans. We use the discounted cash flow method as the primary method for valuing impaired loans.
| | | | | | | | | | | | | | | | | | | | | | Impaired loans | 2016 | | 2015 | | 2014 | (in millions) | Average
recorded
investment |
| Interest
income
recognized |
| | Average recorded investment |
| Interest income recognized |
| | Average recorded investment |
| Interest income recognized |
| Impaired loans with an allowance: | | | | | | | | | Commercial | $ | — |
| $ | — |
| | $ | — |
| $ | — |
| | $ | 11 |
| $ | — |
| Commercial real estate | 1 |
| — |
| | 1 |
| — |
| | 2 |
| — |
| Wealth management loans and mortgages | 5 |
| — |
| | 6 |
| — |
| | 8 |
| — |
| Lease financings | 3 |
| — |
| | — |
| — |
| | — |
| — |
| Foreign | — |
| — |
| | — |
| — |
| | 3 |
| — |
| Total impaired loans with an allowance | 9 |
| — |
| | 7 |
| — |
| | 24 |
| — |
| Impaired loans without an allowance: | | | | | | | | | Commercial real estate | 1 |
| — |
| | — |
| — |
| | 1 |
| — |
| Financial institutions | 102 |
| — |
| | — |
| — |
| | — |
| — |
| Wealth management loans and mortgages | 2 |
| — |
| | 2 |
| — |
| | 2 |
| — |
| Total impaired loans without an allowance (a) | 105 |
| — |
| | 2 |
| — |
| | 3 |
| — |
| Total impaired loans | $ | 114 |
| $ | — |
| | $ | 9 |
| $ | — |
| | $ | 27 |
| $ | — |
|
| | (a) | When the discounted cash flows, collateral value or market price equals or exceeds the carrying value of the loan, then the loan does not require an allowance under the accounting standard related to impaired loans. |
| | | | | | | | | | | | | | | | | | | | | Impaired loans | | | | (in millions) | Recorded investment |
| Unpaid principal balance |
| Related allowance (a) |
| | Recorded investment |
| Unpaid principal balance |
| Related allowance (a) |
| Impaired loans with an allowance: | | | | | | | | Commercial real estate | $ | — |
| $ | 3 |
| $ | — |
| | $ | 1 |
| $ | 3 |
| $ | 1 |
| Wealth management loans and mortgages | 3 |
| 3 |
| 3 |
| | 6 |
| 7 |
| 1 |
| Lease financings | 4 |
| 4 |
| 2 |
| | — |
| — |
| — |
| Total impaired loans with an allowance | 7 |
| 10 |
| 5 |
| | 7 |
| 10 |
| 2 |
| Impaired loans without an allowance: | | | | | | | | Financial institutions | — |
| — |
| N/A |
| | 171 |
| 312 |
| N/A |
| Wealth management loans and mortgages | 2 |
| 2 |
| N/A |
| | 2 |
| 2 |
| N/A |
| Total impaired loans without an allowance (b) | 2 |
| 2 |
| N/A |
| | 173 |
| 314 |
| N/A |
| Total impaired loans (c) | $ | 9 |
| $ | 12 |
| $ | 5 |
| | $ | 180 |
| $ | 324 |
| $ | 2 |
|
| | (a) | The allowance for impaired loans is included in the allowance for loan losses. |
| | (b) | When the discounted cash flows, collateral value or market price equals or exceeds the carrying value of the loan, then the loan does not require an allowance under the accounting standard related to impaired loans. |
| | (c) | Excludes an aggregate of less than $1 million and $2 million of impaired loans in amounts individually less than $1 million at Dec. 31, 2016 and Dec. 31, 2015, respectively. The allowance for loan loss associated with these loans totaled less than $1 million at both Dec. 31, 2016 and Dec. 31, 2015, respectively. |
Past due loans
The table below sets forth information about our past due loans.
| | | | | | | | | | | | | | | | | | | | | | | | | | | Past due loans and still accruing interest | | | | | Days past due | Total past due |
| | Days past due | Total past due |
| (in millions) | 30-59 |
| 60-89 |
| >90 |
| 30-59 |
| 60-89 |
| >90 |
| Commercial real estate | $ | 78 |
| $ | — |
| $ | — |
| $ | 78 |
| | $ | 57 |
| $ | 11 |
| $ | — |
| $ | 68 |
| Other residential mortgages | 20 |
| 6 |
| 7 |
| 33 |
| | 22 |
| 5 |
| 4 |
| 31 |
| Financial institutions | 1 |
| 27 |
| — |
| 28 |
| | — |
| — |
| — |
| — |
| Wealth management loans and mortgages | 21 |
| 2 |
| — |
| 23 |
| | 69 |
| 2 |
| 1 |
| 72 |
| Total past due loans | $ | 120 |
| $ | 35 |
| $ | 7 |
| $ | 162 |
|
| $ | 148 |
| $ | 18 |
| $ | 5 |
| $ | 171 |
|
Troubled debt restructurings (“TDRs”)
A modified loan is considered a TDR if the debtor is experiencing financial difficulties and the creditor grants a concession to the debtor that would not otherwise be considered. A TDR may include a transfer of real estate or other assets from the debtor to the creditor, or a modification of the term of the loan. Not all modified loans are considered TDRs.
The following table presents TDRs that occurred in 2016 and 2015.
| | | | | | | | | | | | | | | | | | | | | | | TDRs | 2016 | | 2015 | | | Outstanding recorded investment | | | Outstanding recorded investment | (dollars in millions) | Number of |
| Pre-modification | | Post-modification | | | |
| Pre-modification | | Post-modification | | Other residential mortgages | 70 |
| | $ | 14 |
| | $ | 16 |
| | 68 |
| | $ | 13 |
| | $ | 16 |
| Wealth management loans and mortgages | 2 |
| | — |
| | — |
| | 4 |
| | — |
| | — |
| Total TDRs | 72 |
| | $ | 14 |
| | $ | 16 |
| | 72 |
| | $ | 13 |
| | $ | 16 |
|
Other residential mortgages
The modifications of the other residential mortgage loans in 2016 and 2015 consisted of reducing the stated interest rates and, in certain cases, a forbearance of default and extending the maturity dates. The modified loans are primarily collateral dependent for which the value is based on the fair value of the collateral.
TDRs that subsequently defaulted
There were 34 residential mortgage loans and one wealth management loan that had been restructured in a TDR during the previous 12 months and have subsequently defaulted in 2016. The total recorded investment of these loans was $8 million. Credit quality indicators
Our credit strategy is to focus on investment grade clients that are active users of our non-credit services. Each customer is assigned an internal credit rating which is mapped to an external rating agency grade equivalent, if possible, based upon a number of dimensions which are continually evaluated and may change over time.
The following tables set forth information about credit quality indicators.
Commercial loan portfolio
| | | | | | | | | | | | | | | | | | | | | | Commercial loan portfolio – Credit risk profile by creditworthiness category | Commercial | | Commercial real estate | | Financial institutions | |
| |
| | |
| |
| | |
| |
| (in millions) | | | Investment grade | $ | 2,397 |
| $ | 2,026 |
| | $ | 3,823 |
| $ | 2,678 |
| | $ | 11,459 |
| $ | 13,965 |
| Non-investment grade | 220 |
| 316 |
| | 831 |
| 1,267 |
| | 3,230 |
| 1,934 |
| Total | $ | 2,617 |
| $ | 2,342 |
| | $ | 4,654 |
| $ | 3,945 |
| | $ | 14,689 |
| $ | 15,899 |
|
The commercial loan portfolio is divided into investment grade and non-investment grade categories based on rating criteria largely consistent with those of the public rating agencies. Each customer in the portfolio is assigned an internal credit rating. These internal credit ratings are generally consistent with the ratings categories of the public rating agencies. Customers with ratings consistent with BBB- (S&P)/Baa3 (Moody’s) or better are considered to be investment grade. Those clients with ratings lower than this threshold are considered to be non-investment grade.
Wealth management loans and mortgages
| | | | | | | | Wealth management loans and mortgages – Credit risk profile by internally assigned grade | (in millions) | |
| |
| Wealth management loans: | | | Investment grade | $ | 7,127 |
| $ | 6,529 |
| Non-investment grade | 260 |
| 171 |
| Wealth management mortgages | 8,267 |
| 6,647 |
| Total | $ | 15,654 |
| $ | 13,347 |
|
Wealth management non-mortgage loans are not typically rated by external rating agencies. A majority of the wealth management loans are secured by the customers’ investment management accounts or custody accounts. Eligible assets pledged for these loans are typically investment grade fixed-income securities, equities and/or mutual funds. Internal ratings for this portion of the wealth management portfolio, therefore, would equate to investment grade external ratings. Wealth management loans are provided to select customers based on the pledge of other types of assets, including business assets, fixed assets or a modest amount of commercial real estate. For the loans collateralized by other assets, the credit quality of the obligor is carefully analyzed, but we do not consider this portfolio of loans to be investment grade.
Credit quality indicators for wealth management mortgages are not correlated to external ratings. Wealth management mortgages are typically loans to high net worth individuals, which are secured primarily by residential property. These loans are primarily interest-only, adjustable rate mortgages with a weighted-average loan-to-value ratio of 61% at origination. In the wealth management portfolio, less than 1% of the mortgages were past due at Dec. 31, 2016.
At Dec. 31, 2016, the wealth management mortgage portfolio consisted of the following geographic concentrations: California - 24%; New York - 19%; Massachusetts - 12%; Florida - 7%; and other - 38%.
Other residential mortgages
The other residential mortgage portfolio primarily consists of 1-4 family residential mortgage loans and totaled $854 million at Dec. 31, 2016 and $1,055 million at Dec. 31, 2015. These loans are not typically correlated to external ratings. Included in this portfolio at Dec. 31, 2016 are $221 million of mortgage loans purchased in 2005, 2006 and the first quarter of 2007 that are predominantly prime mortgage loans, with a small portion of Alt-A loans. As of Dec. 31, 2016, the purchased loans in this portfolio had a weighted-average loan-to-value ratio of 76% at origination and 14% of the serviced loan balance was at least 60 days delinquent. The properties securing the prime and Alt-A mortgage loans were located (in order of concentration) in California, Florida, Virginia, the tri-state area (New York, New Jersey and Connecticut) and Maryland.
Overdrafts
Overdrafts primarily relate to custody and securities clearance clients and totaled $5,461 million at Dec. 31, 2016 and $4,483 million at Dec. 31, 2015. Overdrafts occur on a daily basis in the custody and securities clearance business and are generally repaid within two business days.
Other loans
Other loans primarily include loans to consumers that are fully collateralized with equities, mutual funds and fixed income securities.
Margin loans
We had $17,590 million of secured margin loans on our balance sheet at Dec. 31, 2016 compared with $19,573 million at Dec. 31, 2015. Margin loans are collateralized with marketable securities and borrowers are required to maintain a daily collateral margin in excess of 100% of the value of the loan. We have rarely suffered a loss on these types of loans and do not allocate any of our allowance for credit losses to margin loans.
Reverse repurchase agreements
Reverse repurchase agreements are transactions fully collateralized with high-quality liquid securities. These transactions carry minimal credit risk and therefore are not allocated an allowance for credit losses. |
| X |
- DefinitionThe entire disclosure for financing receivables. Examples of financing receivables include, but are not limited to, loans, trade accounts receivables, notes receivable, credit cards, and receivables relating to a lessor's right(s) to payment(s) from a lease other than an operating lease that is recognized as assets.
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