Citizens Q3 2014 - 10Q
 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended
September 30, 2014

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From
(Not Applicable)
Commission File Number 001-36636
CITIZENS FINANCIAL GROUP, INC.
(Exact name of the registrant as specified in its charter)

Delaware
 
05-0412693
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification Number)
One Citizens Plaza, Providence, RI 02903
(Address of principal executive offices, including zip code)

(401) 456-7000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.
[] Yes [X] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
[X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer                     [ ]          Accelerated filer      [ ]
Non-accelerated filer (Do not check if a smaller reporting company) [X]         Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

There were 545,700,563 shares of Registrant's common stock ($.01 par value) outstanding on November 1, 2014.


 
 
 
 
 
 
 
 
 
 
Table of Contents
 
 
 
 
 
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



GLOSSARY OF ACRONYMS AND TERMS
The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:
AFS
 
Available For Sale
ALLL
 
Allowance for Loan and Lease Losses
AOCI
 
Accumulated Other Comprehensive Income
ATM
 
Automatic Teller Machine
BHC
 
Bank Holding Company
bps
 
Basis Points
C&I
 
Commercial and Industrial
Capital Plan Rule
 
Federal Reserve’s Regulation Y Capital Plan Rule
CBNA
 
Citizens Bank, National Association
CBPA
 
Citizens Bank of Pennsylvania
CCAR
 
Comprehensive Capital Analysis and Review
CCO
 
Chief Credit Officer
CEO
 
Chief Executive Officer
Citizens or CFG or the Company
 
Citizens Financial Group, Inc. and its Subsidiaries
CLTV
 
Combined Loan-to-Value
CMO
 
Collateralized Mortgage Obligation
CRE
 
Commercial Real Estate
CRO
 
Chief Risk Officer
CSA
 
Credit Support Annex
DFAST
 
Dodd-Frank Act Stress Test
Dodd-Frank Act (DFA)
 
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
EPS
 
Earnings Per Share
ESPP
 
Employee Stock Purchase Program
ERISA
 
Employee Retirement Income Security Act of 1974
Fannie Mae (FNMA)
 
The Federal National Mortgage Association


FASB
 
The Financial Accounting Standards Board
FDIC
 
Federal Deposit Insurance Corporation
FDICIA
 
Federal Deposit Insurance Corporation Improvement Act of 1991
FHC
 
Financial Holding Company
FHLB
 
Federal Home Loan Bank
FICO
 
Fair Isaac Corporation (credit rating)
FRB
 
Federal Reserve Bank
FRBG
 
Federal Reserve Board of Governors
Freddie Mac (FHLMC)
 
The Federal Home Loan Mortgage Corporation
FTP
 
Funds Transfer Pricing
GAAP
 
Accounting Principles Generally Accepted in the United States of America
GDP
 
Gross Domestic Product
Ginnie Mae (GNMA)
 
The Government National Mortgage Association
GRG
 
Global Recovery Group
HELOC
 
Home Equity Line of Credit
HTM
 
Held To Maturity
ILP
 
Incurred Loss Period

1

IPO
 
Initial Public Offering
IST
 
Integrated Stress Testing
IT
 
Information Technology
LCR
 
Liquidity Coverage Ratio
LGD
 
Loss Given Default
LIBOR
 
London Interbank Offered Rate
LOB
 
Line of Business
LTV
 
Loan-to-Value
MBS
 
Mortgage-Backed Securities
MD&A
 
Management's Discussion and Analysis of Financial Condition and Results of Operations
MSR
 
Mortgage Servicing Right
NSFR
 
Net Stable Funding Ratio
OCC
 
Office of the Comptroller of the Currency
OCI
 
Other Comprehensive Income
OIS
 
Overnight Index Swap
PD
 
Probability of Default
peers or peer banks or peer regional banks
 
BB&T, Comerica, Fifth Third, KeyCorp. M&T, PNC, Regions, SunTrust and U.S. Bancorp
RBS
 
The Royal Bank of Scotland plc
RBS CBFM
 
The Royal Bank of Scotland plc Corporate Banking and Financial Markets
RBS Group
 
The Royal Bank of Scotland Group plc and its subsidiaries
RBSG
 
The Royal Bank of Scotland Group plc
ROTCE
 
Return on Tangible Common Equity
RPA
 
Risk Participation Agreement
SBO
 
Serviced by Others loan portfolio
SVaR
 
Stress Value-at-Risk
TDR
 
Troubled Debt Restructuring
VaR
 
Value-at-Risk

2

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in millions, except share data)
September 30, 2014
December 31, 2013
ASSETS:
 
 
Cash and due from banks

$993


$1,406

Interest-bearing cash and due from banks
1,896

1,351

Interest-bearing deposits in banks
292

233

Securities available for sale, at fair value
18,666

15,995

Securities held to maturity (fair value of $5,278 and $4,257, respectively)
5,289

4,315

Other investment securities
893

935

Loans held for sale, at fair value
205

176

Other loans held for sale
3

1,078

Loans and leases
90,749

85,859

Less: Allowance for loan and lease losses
1,201

1,221

Net loans and leases
89,548

84,638

Derivative assets
547

650

Premises and equipment, net
541

592

Bank-owned life insurance
1,370

1,339

Goodwill
6,876

6,876

Due from broker
2,067

446

Other branch assets held for sale
—

46

Other assets (related party balances of $8 and $63, respectively)
2,155

2,078

TOTAL ASSETS

$131,341


$122,154

LIABILITIES AND STOCKHOLDERS' EQUITY:
 
 
LIABILITIES:
 
 
Deposits:
 
 
      Noninterest-bearing

$25,877


$24,931

      Interest-bearing (related party balances of $5 and $5, respectively)
67,586

61,972

          Total deposits
93,463

86,903

Deposits held for sale
—

5,277

Federal funds purchased and securities sold under agreements to repurchase
5,184

4,791

Other short-term borrowed funds
6,715

2,251

Derivative liabilities (related party balances of $485 and $835, respectively)
638

939

Deferred taxes, net
354

199

Long-term borrowed funds (related party balances of $1,666 and $1,000, respectively)
2,062

1,405

Due to broker
2,087

—

Other liabilities (related party balances of $42 and $27, respectively)
1,455

1,193

TOTAL LIABILITIES

$111,958


$102,958

Contingencies (refer to Note 12)



STOCKHOLDERS' EQUITY:
 
 
Preferred stock:
 
 
$25.00 par value, 100,000,000 shares authorized, no shares outstanding at September 30, 2014 and $1.00 par value, 30,000 shares authorized, no shares outstanding at December 31, 2013

$—


$—

Common stock:
 
 
$.01 par value, 1,000,000,000 shares authorized, 559,998,324 shares issued and outstanding at September 30, 2014 and December 31, 2013
6

6

Additional paid-in capital
18,660

18,603

Retained earnings
1,152

1,235

Accumulated other comprehensive loss
(435
)
(648
)
TOTAL STOCKHOLDERS' EQUITY

$19,383


$19,196

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$131,341


$122,154

The accompanying Notes to unaudited interim Consolidated Financial Statements are an integral part of these statements.

3


CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 
Three Months Ended September 30,
Nine Months Ended September 30,
 (in millions, except share data)
2014
2013
2014
2013
INTEREST INCOME:
 
 


Interest and fees on loans and leases (related party balances of $18, $17, $54 and $38, respectively)

$754


$748


$2,235


$2,258

Interest and fees on loans held for sale
2

3

4

10

Interest and fees on other loans held for sale
—

—

22

—

Investment securities
155

120

458

348

Interest-bearing deposits in banks
2

2

4

9

Total interest income
913

873

2,723

2,625

INTEREST EXPENSE:
 
 


Deposits (related party balances of $0, $12, $0 and $15, respectively)
41

58

108

176

Deposits held for sale
—

—

4

—

Federal funds purchased and securities sold under agreement to repurchase (related party balances of $3, $33, $16 and $143, respectively)
9

35

25

150

Other short-term borrowed funds (related party balances of $16, $3, $60 and $3, respectively)
21

2

70

4

Long-term borrowed funds (related party balances of $17, $4, $42 and $6, respectively)
22

8

55

16

Total interest expense
93

103

262

346

Net interest income
820

770

2,461

2,279

Provision for credit losses
77

145

247

347

Net interest income after provision for credit losses
743

625

2,214

1,932

NONINTEREST INCOME:
 
 


Service charges and fees (related party balances of $1, $4, $4 and $13, respectively)
144

163

430

488

Card fees
58

63

175

176

Trust and investment services fees
39

39

120

109

Foreign exchange and trade finance fees (related party balances of $59, ($33), $52 and ($20), respectively)
26

25

70

73

Capital markets fees (related party balances of $4, $4, $9 and $9, respectively)
22

11

66

35

Mortgage banking fees
21

20

55

133

Bank-owned life insurance income
13

12

36

37

Securities gains, net
2

25

27

119

Other-than-temporary impairment:
 
 


Total other-than-temporary impairment losses
(3
)
(1
)
(42
)
(61
)
Portions of loss recognized in other comprehensive income (before taxes)
2

(2
)
35

54

Net impairment losses recognized in earnings
(1
)
(3
)
(7
)
(7
)
Other income (related party balances of $5, ($44), ($130) and $132, respectively)
17

28

367

90

Total noninterest income
341

383

1,339

1,253

NONINTEREST EXPENSE:
 
 


Salaries and employee benefits
409

403

1,281

1,261

Outside services
106

87

314

259

Occupancy (related party balances of $0, $1, $0 and $3, respectively)
77

80

245

244

Equipment expense
58

69

187

207

Amortization of software
38

26

102

71

Goodwill impairment
—

—

—

4,435

Other operating expense
122

123

439

384

Total noninterest expense
810

788

2,568

6,861

Income (loss) before income tax expense (benefit)
274

220

985

(3,676
)
Income tax expense (benefit)
85

76

317

(98
)
NET INCOME (LOSS)

$189


$144


$668


($3,578
)
Weighted-average number of shares outstanding:
 
 
 
 
Basic
559,998,324

559,998,324

559,998,324

559,998,324

Diluted
560,243,747

559,998,324

560,081,031

559,998,324

Per common share information:
 
 
 
 
Basic earnings (loss)

$0.34


$0.26


$1.19


($6.39
)
Diluted earnings (loss)
0.34

0.26

1.19

(6.39
)
   Dividends declared and paid to parent
0.68

0.68

1.34

1.45

The accompanying Notes to unaudited interim Consolidated Financial Statements are an integral part of these statements.

4


CONSOLIDATED STATEMENTS OF OTHER COMPREHENSIVE INCOME (UNAUDITED)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(in millions)
2014
2013
 
2014
2013
Net income (loss)

$189


$144

 

$668


($3,578
)
Other comprehensive income (loss):
 
 
 
 
 
Net unrealized derivative instrument gains (losses) arising during the periods, net of income taxes of $10, $1, $80 and ($70), respectively
17

1

 
137

(121
)
Reclassification adjustment for net derivative losses included in net income, net of income taxes of $2, $11, $9 and $45, respectively
3

19

 
16

79

Net unrealized securities gains (losses) arising during the periods, net of income taxes of ($36), $19, $73 and ($107), respectively
(61
)
35

 
127

(184
)
Other-than-temporary impairment not recognized in earnings on securities, net of income taxes of $0, $0, ($12) and ($21), respectively
(1
)
—

 
(22
)
(35
)
Reclassification of net securities gains to net income, net of income taxes of $0, ($7), ($7) and ($41), respectively
(1
)
(15
)
 
(13
)
(71
)
Defined benefit pension plans:
 
 
 
 
 
Actuarial loss, net of taxes of ($35), $0, ($35) and $0, respectively
(59
)
—

 
(59
)
—

Net prior service credit, net of income taxes of $3, $0, $3 and $0, respectively
4

—

 
4

—

Amortization of actuarial loss, net of taxes of $1, $1, $2 and $4, respectively
2

2

 
4

5

Divestitures effective 9/1/14, net of taxes of $13, $0, $13 and $0, respectively
19

—

 
19

—

Total other comprehensive income (loss), net of income taxes
(77
)
42

 
213

(327
)
Total comprehensive income (loss)

$112


$186

 

$881


($3,905
)
The accompanying Notes to unaudited interim Consolidated Financial Statements are an integral part of these statements.

5


CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)

(in millions)
Preferred Stock
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Total

Balance at December 31, 2012

$—


$6


$18,589


$5,846


($312
)

$24,129

Dividend to parent
—

—

—

(145
)
—

(145
)
Dividends to parent — exchange transactions
—

—

—

(666
)
—

(666
)
Total comprehensive loss:
 
 
 
 
 
 
Net loss
—

—

—

(3,578
)
—

(3,578
)
Other comprehensive loss
—

—

—

—

(327
)
(327
)
Total comprehensive loss
—

—

—

(3,578
)
(327
)
(3,905
)
Balance at September 30, 2013

$—


$6


$18,589


$1,457


($639
)

$19,413

 
 
 
 
 
 
 
Balance at December 31, 2013

$—


$6


$18,603


$1,235


($648
)

$19,196

Dividend to parent
—

—

—

(85
)
—

(85
)
Dividends to parent — exchange transactions
—

—

—

(666
)
—

(666
)
Share-based compensation plans
—

—

57

—

—

57

Total comprehensive income:
 
 
 
 
 
 
Net income
—

—

—

668

—

668

Other comprehensive income
—

—

—

—

213

213

Total comprehensive income
—

—

—

668

213

881

Balance at September 30, 2014

$—


$6


$18,660


$1,152


($435
)

$19,383

The accompanying Notes to unaudited interim Consolidated Financial Statements are an integral part of these statements.

6


CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 
Nine Months Ended September 30,
(in millions)
2014
2013
OPERATING ACTIVITIES
 
 
Net income (loss)

$668


($3,578
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
Provision for credit losses
247

347

Originations of mortgage loans held for sale
(1,131
)
(3,310
)
Proceeds from sales of mortgage loans held for sale
1,089

3,649

Amortization of terminated cash flow hedges (related party balances of $13 and $53, respectively)
36

57

Depreciation, amortization and accretion
313

304

Recovery of mortgage servicing rights
(8
)
(42
)
Securities impairment
7

7

Goodwill impairment
—

4,435

Deferred income taxes
31

(110
)
Share-based compensation
29

24

Loss on disposal/impairment of premises and equipment
18

15

Loss on sale of other branch assets held for sale
9

—

Gain on sales of:
 
 
Securities available for sale
(27
)
(119
)
Other loans held for sale
(11
)
—

Deposits held for sale
(286
)
—

(Increase) decrease in other assets (related party balances of $53 and $1, respectively)
(2,040
)
530

Increase (decrease) in other liabilities (related party balances of ($151) and $23, respectively)
2,256

(573
)
Net cash provided by operating activities
1,200

1,636

INVESTING ACTIVITIES
 
 
Investment securities:
 
 
Purchases of securities available for sale
(5,642
)
(8,830
)
Proceeds from maturities and paydowns of securities available for sale
2,238

3,931

Proceeds from sales of securities available for sale
1,265

3,014

Purchases of other investment securities
(72
)
(1
)
Proceeds from sales of other investment securities
114

101

Purchases of securities held to maturity
(1,174
)
—

Proceeds from maturities and paydowns of securities held to maturity
216

—

Net (increase) decrease in interest-bearing deposits in banks
(59
)
990

Net (increase) decrease in loans and leases
(4,120
)
1,289

Net increase in bank-owned life insurance
(31
)
(29
)
Premises and equipment:
 
 
Purchases
(48
)
(118
)
Proceeds from sales
29

—

Capitalization of software
(116
)
(129
)
Net cash (used in) provided by investing activities
(7,400
)
218

FINANCING ACTIVITIES
 
 
Net increase (decrease) in deposits
1,569

(1,218
)
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase
393

(742
)
Net increase in other short-term borrowed funds
4,462

64

Proceeds from issuance of long-term borrowed funds (related party balances of $666 and $666, respectively)
666

666

Repayments of long-term borrowed funds (related party balances of $0 and $280, respectively)
(7
)
(294
)
Dividends declared and paid to parent
(751
)
(811
)
Net cash provided by (used in) financing activities
6,332

(2,335
)
Increase (decrease) in cash and cash equivalents
132

(481
)
Cash and cash equivalents at beginning of period
2,757

3,063

Cash and cash equivalents at end of period

$2,889


$2,582

Supplemental disclosures:
 
 
Interest paid

$248


$354

Income taxes paid
201

19

Non-cash items:
 
 
Due from broker for securities sold but not settled

$1,621


$4

Due to broker for securities purchased but not settled
(2,110
)
(2
)
The accompanying Notes to unaudited interim Consolidated Financial Statements are an integral part of these statements.

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION
Basis of Presentation

The unaudited interim Consolidated Financial Statements, including the Notes thereto of Citizens Financial Group, Inc. (formerly RBS Citizens Financial Group, Inc., prior to April 16, 2014), have been prepared in accordance with GAAP interim reporting requirements, and therefore do not include all information and Notes included in the audited Consolidated Financial Statements in conformity with GAAP. These interim Consolidated Financial Statements and Notes thereto should be read in conjunction with the Company’s audited Consolidated Financial Statements and accompanying Notes included in the Company's Registration Statement on Form S-1/A, declared effective by the United States Securities and Exchange Commission on September 23, 2014 (the "Registration Statement"). The Company is a majority-owned subsidiary of The Royal Bank of Scotland Group plc. The Company’s principal business activity is banking, conducted through its subsidiaries, Citizens Bank, N.A. (formerly RBS Citizens, N.A., prior to April 16, 2014) and Citizens Bank of Pennsylvania.

The unaudited interim Consolidated Financial Statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the interim periods. The results for interim periods are not necessarily indicative of results for a full year.

On August 22, 2014, the Company's Board of Directors declared a 165,582-for-1 stock split. Except for the amount of authorized shares and par value, all references to share and per share amounts in the unaudited interim Consolidated Financial Statements and accompanying Notes have been retroactively adjusted to reflect the stock split.

Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications are immaterial and have no effect on net income, total comprehensive income, total assets or total stockholders’ equity as previously reported.

Recent Accounting Pronouncements

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern.” The new standard provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if “conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.” The amendment is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted and is not expected to have a material impact on the Company’s unaudited interim Consolidated Financial Statements.

In August 2014, the FASB issued Accounting Standards Update No. 2014-14, “Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure.” This update amends the guidance in Accounting Standards Codification 310 and requires that a mortgage loan be derecognized and that a separate other receivable be recognized upon foreclosure if the following conditions are met: (1) The loan has a government guarantee that is not separable from the loan before foreclosure; (2) At the time of foreclosure, the creditor has the intent to convey the real estate property to the guarantor and make a claim on the guarantee, and the creditor has the ability to recover under that claim; and (3) At the time of foreclosure, any amount of the claim that is determined on the basis of the fair value of the real estate is fixed. Upon foreclosure, the separate other receivable should be measured based on the amount of the loan balance (principal and interest) expected to be recovered from the guarantor. The amendment is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2014 and is not expected to have a material impact on the Company’s unaudited interim Consolidated Financial Statements.

In August 2014, the FASB issued Accounting Standards Update No. 2014-13, “Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity.” This update amends the guidance in Accounting Standards Codification 820 and clarifies that a reporting entity that consolidates a collateralized financing entity within the scope of this update may elect to measure the financial assets and the financial liabilities of that collateralized financing entity using either the measurement alternative included in this update or Topic 820 on fair value measurement. When the measurement alternative is not elected for a consolidated collateralized financing entity within the scope of this update, the amendments clarify that (1) the fair value of the financial assets and the fair value of the financial liabilities of the consolidated collateralized financing entity should be measured using the requirements of Topic 820 and (2) any differences in the fair value of the financial assets and the fair value of the financial liabilities of that consolidated collateralized financing entity should be reflected in earnings and attributed to the reporting entity in the consolidated statement of income (loss). The amendment is effective for annual reporting periods,

8

including interim reporting periods within those periods, beginning after December 15, 2015 and is not expected to have a material impact on the Company’s unaudited interim Consolidated Financial Statements.

In June 2014, the FASB issued Accounting Standards Update No. 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” This update amends the guidance on stock compensation and clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. Accordingly, an entity should not record compensation expense (measured as of the grant date without taking into account the effect of the performance target) related to an award for which a transfer to the employee is contingent on the entity’s satisfaction of a performance target until it becomes probable that the performance target will be met. The amendment is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2015, and is not expected to have a material impact on the Company’s unaudited interim Consolidated Financial Statements.

In June 2014, the FASB issued Accounting Standards Update No. 2014-11, “Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures,” which makes limited amendments to the guidance on accounting for certain repurchase agreements. This update requires entities to account for repurchase-to maturity transactions as secured borrowings (rather than as sales with forward repurchase agreements); eliminates accounting guidance on linked repurchase financing transactions; and expands disclosure requirements related to certain transfers of financial assets that are accounted for as sales and certain transfers accounted for as secured borrowings. This update also amends the existing guidance to clarify that repos and securities lending transactions that do not meet all of the de-recognition criteria in the existing guidance should be accounted for as secured borrowings. This amendment is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2014, and is not expected to have a material impact on the Company’s unaudited interim Consolidated Financial Statements.

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue From Contracts With Customers.” This amendment outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The new guidance applies to all contracts with customers except those that are within the scope of other topics in GAAP. This amendment is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2016, and is not expected to have a material impact on the Company’s unaudited interim Consolidated Financial Statements.

In April 2014, the FASB issued Accounting Standards Update No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” This amendment modifies the requirements for reporting a discontinued operation. The amended definition of “discontinued operations” includes only disposals, held-for-sale classifications of components, or groups of components of an entity that represent “strategic shift” that either has or will have a major effect on the entity’s operations and financial results, such as geographic area, line of business, equity method investment or other parts of an entity. This amendment also provides disclosure guidance for situations where an entity has continuing involvement with a discontinued operation or retains an equity method investment in a component after disposal. This amendment is effective for all disposals or classifications as held for sale (including businesses or nonprofit activities that, on acquisition, are classified as held for sale) that occur in annual periods, and in interim periods within those annual periods, beginning after December 15, 2014, and is not expected to have a material impact on the Company’s unaudited interim Consolidated Financial Statements.

In January 2014, the FASB issued Accounting Standards Update No. 2014-04, “Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure.” This amendment clarifies that an in-substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The amendment requires disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. This amendment is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014, and is not expected to have a material impact on the Company’s unaudited interim Consolidated Financial Statements.

In January 2014, the FASB issued Accounting Standards Update No. 2014-01, “Accounting for Investments in Qualified Affordable Housing Projects.” This amendment permits reporting entities to make an accounting policy election to account for

9

their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense (benefit). Qualified affordable housing project investments that are not accounted for using the proportional amortization method must be accounted for as an equity method or cost method investment. This amendment is effective for annual periods and interim reporting periods within those annual periods, beginning after December 15, 2014, and is not expected to have a material impact on the Company’s unaudited interim Consolidated Financial Statements.


NOTE 2 - SECURITIES
The following table provides the major components of securities at amortized cost and fair value:
 
September 30, 2014
 
December 31, 2013
(in millions)
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
 
Amortized Cost
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value
Securities Available for Sale
 
 
 
 
 




U.S. Treasury

$15


$—


$—


$15

 

$15


$—


$—


$15

State and political subdivisions
10

—

—

10

 
11

—

(1
)
10

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Federal agencies and U.S. government sponsored entities
17,759

207

(68
)
17,898

 
14,970

151

(128
)
14,993

Other/non-agency
747

6

(35
)
718

 
992

5

(45
)
952

Total mortgage-backed securities
18,506

213

(103
)
18,616

 
15,962

156

(173
)
15,945

Total debt securities available for sale
18,531

213

(103
)
18,641

 
15,988

156

(174
)
15,970

Marketable equity securities
10

3

—

13

 
10

3

—

13

Other equity securities
12

—

—

12

 
12

—

—

12

Total equity securities available for sale
22

3

—

25

 
22

3

—

25

Total securities available for sale

$18,553


$216


($103
)

$18,666

 

$16,010


$159


($174
)

$15,995

Securities Held to Maturity
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Federal agencies and U.S. government sponsored entities

$3,833


$9


($46
)

$3,796

 

$2,940


$—


($33
)

$2,907

Other/non-agency
1,456

26

—

1,482

 
1,375

—

(25
)
1,350

Total securities held to maturity

$5,289


$35


($46
)

$5,278

 

$4,315


$—


($58
)

$4,257

Other Investment Securities
 
 
 
 
 
 
 
 
 
Federal Reserve Bank stock

$470


$—


$—


$470

 

$462


$—


$—


$462

Federal Home Loan Bank stock
417

—

—

417

 
468

—

—

468

Venture capital and other investments
6

—

—

6

 
5

—

—

5

Total other investment securities

$893


$—


$—


$893

 

$935


$—


$—


$935


10


The Company has reviewed its securities portfolio for other-than-temporary impairments. The following tables summarize those securities whose fair values are below carrying values, segregated by those that have been in a continuous unrealized loss position for less than twelve months and those that have been in a continuous unrealized loss position for twelve months or longer:
 
September 30, 2014
 
Less than 12 Months
 
12 Months or Longer
 
Total
(dollars in millions)
Number of Issues
Fair Value
Gross Unrealized Losses
 
Number of Issues
Fair Value
Gross Unrealized Losses
 
Number of Issues
Fair Value
Gross Unrealized Losses
U.S. Treasury
—


$—


$—

 
—


$—


$—

 
—


$—


$—

State and political subdivisions
—

—

—

 
1

10

—

 
1

10

—

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Federal agencies and U.S. government sponsored entities
121

7,178

(63
)
 
45

1,213

(51
)
 
166

8,391

(114
)
Other/non-agency
5

112

(1
)
 
17

414

(34
)
 
22

526

(35
)
Total mortgage-backed securities
126

7,290

(64
)
 
62

1,627

(85
)
 
188

8,917

(149
)
Total
126


$7,290


($64
)
 
63


$1,637


($85
)
 
189


$8,927


($149
)

 
December 31, 2013
 
Less than 12 Months
 
12 Months or Longer
 
Total
(dollars in millions)
Number of Issues
Fair Value
Gross Unrealized Losses
 
Number of Issues
Fair Value
Gross Unrealized Losses
 
Number of Issues
Fair Value
Gross Unrealized Losses
State and political subdivisions
1


$10


($1
)
 
—


$—


$—

 
1


$10


($1
)
Mortgage-backed securities:






 






 






Federal agencies and U.S. government sponsored entities
263

12,067

(158
)
 
7

20

(2
)
 
270

12,087

(160
)
Other/non-agency
22

1,452

(34
)
 
19

490

(37
)
 
41

1,942

(71
)
Total mortgage-backed securities
285

13,519

(192
)
 
26

510

(39
)
 
311

14,029

(231
)
Total
286


$13,529


($193
)
 
26


$510


($39
)
 
312


$14,039


($232
)

For each debt security identified with an unrealized loss, the Company reviews the expected cash flows to determine if the impairment in value is temporary or other-than-temporary. If the Company has determined that the present value of the debt security’s expected cash flows is less than its amortized cost basis, an other-than-temporary impairment is deemed to have occurred. The amount of impairment loss that is recognized in current period earnings is dependent on the Company’s intent to sell (or not sell) the debt security.
If the Company intends to sell the impaired debt security, the impairment loss recognized in current period earnings equals the difference between the debt security’s fair value and its amortized cost. If the Company does not intend to sell the impaired debt security, and it is not likely that the Company will be required to sell the impaired security, the credit-related impairment loss is recognized in current period earnings and equals the difference between the amortized cost of the debt security and the present value of the expected cash flows that have currently been projected.
In addition to these cash flow projections, several other characteristics of each debt security are reviewed when determining whether a credit loss exists and the period over which the debt security is expected to recover. These characteristics include: (1) the type of investment, (2) various market factors affecting the fair value of the security (e.g., interest rates, spread levels, liquidity in the sector, etc.), (3) the length and severity of impairment, and (4) the public credit rating of the instrument.
The Company estimates the portion of loss attributable to credit using a cash flow model. The inputs to this model include prepayment, default and loss severity assumptions that are based on industry research and observed data. The loss projections

11

generated by the model are reviewed on a quarterly basis by a cross-functional governance committee. This governance committee determines whether security impairments are other-than-temporary based on this review.
The following table presents the cumulative credit related losses recognized in earnings on debt securities held by the Company as of:
 
Three Months Ended   September 30,
 
Nine Months Ended September 30,
(in millions)
2014
2013
 
2014
2013
Cumulative balance at beginning of period

$60


$56

 

$56


$55

Credit impairments recognized in earnings on debt securities that have been previously impaired
1

3

 
7

7

Reductions due to increases in cash flow expectations on impaired securities
(1
)
(3
)
 
(3
)
(6
)
Cumulative balance at end of period

$60


$56

 

$60


$56


Cumulative credit losses recognized in earnings for impaired AFS debt securities held as of September 30, 2014 and 2013 were $60 million and $56 million, respectively. There were no credit losses recognized in earnings for the Company's HTM portfolio as of September 30, 2014 and 2013. In the three months ended September 30, 2014 and 2013, the Company recognized credit related other-than-temporary impairment losses in earnings of $1 million and $3 million, respectively, related to non-agency MBS in the AFS portfolio. For the nine months ended September 30, 2014 and 2013, $7 million of credit related other-than-temporary impairment losses was recognized in earnings. No impaired debt securities were sold during the three or nine month periods ended September 30, 2014 and 2013. Reductions in credit losses due to increases in cash flow expectations were $1 million and $3 million in the three months ended September 30, 2014 and 2013, and were $3 million and $6 million for the nine months ended September 30, 2014 and 2013, respectively, and were presented in investment securities interest income on the Consolidated Statements of Operations. The Company does not currently have the intent to sell these debt securities, and it is not likely that the Company will be required to sell these debt securities prior to the recovery of their amortized cost bases. As of September 30, 2014 and 2013, $35 million and $54 million, respectively, of pre-tax non-credit related losses were deferred in OCI.
The Company has determined that credit losses are not expected to be incurred on the remaining agency and non-agency MBS identified with unrealized losses as of the current reporting date. The unrealized losses on these debt securities reflect the reduced liquidity in the MBS market and the increased risk spreads due to the uncertainty of the U.S. macroeconomic environment. Therefore, the Company has determined that these debt securities are not other-than-temporarily impaired because the Company does not currently have the intent to sell these debt securities, and it is not likely that the Company will be required to sell these debt securities prior to the recovery of their amortized cost bases. Additionally, any subsequent increases in the valuation of impaired debt securities do not impact their recorded cost bases.

12

The amortized cost and fair value of debt securities at September 30, 2014 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Distribution of Maturities
(in millions)
1 Year or Less
1-5 Years
5-10 Years
After 10 Years
Total
Amortized Cost:
 
 
 
 
 
Debt securities available for sale
 
 
 
 
 
U.S. Treasury

$15


$—


$—


$—


$15

State and political subdivisions
—

—

—

10

10

Mortgage-backed securities:
 
 
 
 
 
Federal agencies and U.S. government sponsored entities
4

56

2,438

15,261

17,759

Other/non-agency
—

61

62

624

747

Total debt securities available for sale
19

117

2,500

15,895

18,531

Debt securities held to maturity
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
Federal agencies and U.S. government sponsored entities
—

—

—

3,833

3,833

Other/non-agency
—

—

—

1,456

1,456

Total debt securities held to maturity
—

—

—

5,289

5,289

Total amortized cost of debt securities

$19


$117


$2,500


$21,184


$23,820

 
 
 
 
 
 
Fair Value:
 
 
 
 
 
Debt securities available for sale
 
 
 
 
 
U.S. Treasury

$15


$—


$—


$—


$15

State and political subdivisions
—

—

—

10

10

Mortgage-backed securities:
 
 
 
 
 
Federal agencies and U.S. government sponsored entities
4

60

2,441

15,393

17,898

Other/non-agency
—

61

64

593

718

Total debt securities available for sale
19

121

2,505

15,996

18,641

Debt securities held to maturity
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
Federal agencies and U.S. government sponsored entities
—

—

—

3,796

3,796

Other/non-agency
—

—

—

1,482

1,482

Total debt securities held to maturity
—

—

—

5,278

5,278

Total fair value of debt securities

$19


$121


$2,505


$21,274


$23,919


    

13

The following table reports the amounts recognized in interest income from investment securities on the Consolidated Statement of Operations:
 
Three Months Ended   September 30,
 
Nine Months Ended September 30,
(in millions)
2014
2013
 
2014
2013
Taxable

$155


$120

 

$458


$348

Non-taxable
—

—

 
—

—

Total interest income from investment securities

$155


$120

 

$458


$348

The Company recognized gains on sale of debt securities in earnings of $2 million and $25 million for the three months ended September 30, 2014 and 2013, respectively, and $27 million and $119 million for the nine months ended September 30, 2014 and 2013, respectively.
The amortized cost and fair value of securities pledged are shown below:
 
September 30, 2014
 
December 31, 2013
(in millions)
Amortized Cost
Fair Value
 
Amortized Cost
Fair Value
Pledged against repurchase agreements

$5,129


$5,165

 

$5,016


$4,998

Pledged against FHLB borrowed funds
1,390

1,416

 
1

1

Pledged against derivatives to qualify for fiduciary powers, and to secure public and other deposits as required by law
3,463

3,514

 
2,818

2,853

    
The Company regularly enters into security repurchase agreements with unrelated counterparties. Repurchase agreements are financial transactions that involve the transfer of a security from one party to another and a subsequent transfer of the same (or "substantially the same") security back to the original party. The Company’s repurchase agreements are typically short-term transactions (e.g., overnight), but they may be extended to longer terms to maturity. Such transactions are accounted for as secured borrowed funds on the Company’s financial statements. When permitted by GAAP, the Company offsets the short-term receivables associated with its reverse repurchase agreements with the short-term payables associated with its repurchase agreements.

The effects of this offsetting on the Consolidated Balance Sheets are presented in the following table:
 
September 30, 2014
 
December 31, 2013
(in millions)
Gross Assets (Liabilities)
Gross Assets (Liabilities) Offset
Net Amounts of Assets (Liabilities)
 
Gross Assets (Liabilities)
Gross Assets (Liabilities) Offset
Net Amounts of Assets (Liabilities)
Securities purchased under agreements to resell

$—


$—


$—

 

$—


$—


$—

Securities sold under agreements to repurchase
(4,100
)
—

(4,100
)
 
(3,000
)
—

(3,000
)

Note: The Company also offsets certain derivative assets and derivative liabilities on the Consolidated Balance Sheets. See Note 11 "Derivatives" to the Company's unaudited interim Consolidated Financial Statements included in Part I, Item 1 — Financial Information for further information.
    
 

14

NOTE 3 - LOANS AND LEASES
A summary of the loans and leases portfolio follows:
(in millions)
September 30, 2014
 
December 31, 2013
Commercial

$30,356

 

$28,667

Commercial real estate
7,239

 
6,948

Leases
3,875

 
3,780

Total commercial
41,470

 
39,395

Residential, including originated home equity products
30,458

 
29,694

Home equity products serviced by others
1,870

 
2,171

Other secured retail
13,206

 
10,700

Unsecured retail
3,745

 
3,899

Total retail
49,279

 
46,464

Total loans and leases (1) (2)

$90,749

 

$85,859


(1) Excluded from the table above are loans held for sale totaling $208 million as of September 30, 2014 and $1.3 billion as of December 31, 2013. The December 31, 2013 loans held for sale balance primarily related to the Company's sale of certain assets and liabilities associated with its Chicago-area retail branches. For further discussion, see Note 13 "Divestitures and Branch Assets and Liabilities Held for Sale" to the Company's unaudited interim Consolidated Financial Statements included in Part I, Item 1 — Financial Information.

(2)  Mortgage loans serviced for others by the Company's subsidiaries are not included above, and amounted to $18.1 billion and $18.7 billion at September 30, 2014 and December 31, 2013, respectively.

Loans held for sale totaled $205 million and $176 million at September 30, 2014 and December 31, 2013, respectively, and consisted of residential mortgages originated for sale. Other loans held for sale totaled $3 million and $1.1 billion at September 30, 2014 and December 31, 2013, respectively. The other loans held for sale balance at December 31, 2013 primarily related to the Company's sale of certain assets and liabilities associated with its Chicago-area retail branches (the "Chicago Divestiture"). See Note 13 "Divestitures and Branch Assets and Liabilities Held for Sale" to the Company's unaudited interim Consolidated Financial Statements included in Part I, Item 1 — Financial Information for further details.
Loans pledged as collateral for FHLB borrowed funds totaled $19.5 billion and $19.0 billion at September 30, 2014 and December 31, 2013, respectively. This collateral consists primarily of residential mortgages and home equity loans. Loans pledged as collateral to support the contingent ability to borrow at the FRB discount window, if necessary, totaled $13.4 billion and $13.9 billion at September 30, 2014 and December 31, 2013, respectively.
During the nine months ended September 30, 2014, the Company purchased a portfolio of residential loans with an outstanding principal balance of $1.5 billion, a portfolio of auto loans with an outstanding principal balance of $1.3 billion and a portfolio of student loans with an outstanding principal balance of $59 million. In addition to the $1.0 billion loans sold as part of the Chicago Divestiture, the Company sold portfolios of residential mortgage loans with outstanding principal balances of $126 million and student loans of $357 million as well as commercial loans with an outstanding principal balance of $165 million during the nine months ended September 30, 2014. The Company had no loan portfolio purchase or sale transactions during the nine months ended September 30, 2013.    

NOTE 4 - ALLOWANCE FOR CREDIT LOSSES, NONPERFORMING ASSETS, AND CONCENTRATIONS OF CREDIT RISK
The ALLL is increased through a provision for credit losses that is charged to earnings, based on the Company’s quarterly evaluation of the loan portfolio, and is reduced by net charge-offs and the ALLL associated with sold loans. See Note 1 “Significant Accounting Policies” of the Company’s audited Consolidated Financial Statements, for a detailed discussion of ALLL methodologies and estimation techniques.
On a quarterly basis, the Company reviews and refines its estimate of the allowance for credit losses, taking into consideration changes in portfolio size and composition, historical loss experience, internal risk ratings, current economic conditions, industry performance trends and other pertinent information. Changes in these factors since September 30, 2013, led to an increase in the allowance for credit losses as of September 30, 2014. ALLL decreased over the same period reflecting asset quality improvements and lower charge-offs.

15

            During 2013, the Company modified the way that it establishes the ALLL. The ALLL is reviewed separately for commercial and retail loan portfolios, and the ALLL for each includes an adjustment for qualitative reserves that includes certain risks, factors and events that might not be measured in the statistical analysis. As a result of this change, the unallocated reserve was absorbed into the separately measured commercial and retail qualitative reserves.
            There were no other material changes in assumptions or estimation techniques compared with prior periods that impacted the determination of the current period’s ALLL and the reserve for unfunded lending commitments.

The following is a summary of changes in the allowance for credit losses:

Nine Months Ended September 30, 2014
(in millions)
Commercial
Retail
Total
Allowance for loan and lease losses as of January 1, 2014

$498


$723


$1,221

Charge-offs
(30
)
(344
)
(374
)
Recoveries
47

84

131

Net recoveries (charge-offs)
17

(260
)
(243
)
Provision charged to income
27

196

223

Allowance for loan and lease losses as of September 30, 2014
542

659

1,201

Reserve for unfunded lending commitments as of January 1, 2014
39

—

39

Provision for unfunded lending commitments
24

—

24

Reserve for unfunded lending commitments as of September 30, 2014
63

—

63

Total allowance for credit losses as of September 30, 2014

$605


$659


$1,264

 
Nine Months Ended September 30, 2013
(in millions)
Commercial
Retail
Unallocated
Total
Allowance for loan and lease losses as of January 1, 2013

$509


$657


$89


$1,255

Charge-offs
(72
)
(470
)
—

(542
)
Recoveries
69

87

—

156

Net charge-offs
(3
)
(383
)
—

(386
)
Provision charged to income
(51
)
329

72

350

Allowance for loan and lease losses as of September 30, 2013
455

603

161

1,219

Reserve for unfunded lending commitments as of January 1, 2013
40

—

—

40

Provision for unfunded lending commitments
(3
)
—

—

(3
)
Reserve for unfunded lending commitments as of September 30, 2013
37

—

—

37

Total allowance for credit losses as of September 30, 2013

$492


$603


$161


$1,256


The recorded investment in loans and leases based on the Company’s evaluation methodology is as follows:
 
September 30, 2014
 
December 31, 2013
(in millions)
Commercial
Retail
Total
 
Commercial
Retail
Total
Individually evaluated

$191


$1,214


$1,405

 

$239


$1,200


$1,439

Formula-based evaluation
41,279

48,065

89,344

 
39,156

45,264

84,420

Total

$41,470


$49,279


$90,749

 

$39,395


$46,464


$85,859


The following is a summary of the allowance for credit losses by evaluation method:
 
September 30, 2014
 
December 31, 2013
(in millions)
Commercial
Retail
Total
 
Commercial
Retail
Total
Individually evaluated

$14


$116


$130

 

$23


$108


$131

Formula-based evaluation
591

543

1,134

 
514

615

1,129

Allowance for credit losses

$605


$659


$1,264

 

$537


$723


$1,260



16

For commercial loans and leases, the Company utilizes regulatory classification ratings to monitor credit quality. Loans with a “pass” rating are those that the Company believes will be fully repaid in accordance with the contractual loan terms. Commercial loans and leases that are “criticized” are those that have some weakness that indicates an increased probability of future loss. For retail loans, the Company primarily uses the loan’s payment and delinquency status to monitor credit quality. The further a loan is past due, the greater the likelihood of future credit loss. These credit quality indicators for both commercial and retail loans are continually updated and monitored.
The recorded investment in classes of commercial loans and leases based on regulatory classification ratings is as follows:
 
September 30, 2014
 
 
Criticized
 
(in millions)
Pass
Special Mention
Substandard
Doubtful
Total
Commercial

$28,857


$861


$517


$121


$30,356

Commercial real estate
6,869

207

97

66

7,239

Leases
3,814

15

46

—

3,875

Total

$39,540


$1,083


$660


$187


$41,470


 
December 31, 2013
 
 
Criticized
 
(in millions)
Pass
Special Mention
Substandard
Doubtful
Total
Commercial

$27,433


$588


$541


$105


$28,667

Commercial real estate
6,366

339

116

127

6,948

Leases
3,679

40

61

—

3,780

Total

$37,478


$967


$718


$232


$39,395


The recorded investment in classes of retail loans, categorized by delinquency status is as follows:
 
September 30, 2014
(in millions)
Current
1-29 Days Past Due
30-89 Days Past Due
90 Days or More Past Due
Total
Residential, including originated home equity products

$28,852


$811


$227


$568


$30,458

Home equity products serviced by others
1,638

138

42

52

1,870

Other secured retail
12,438

673

79

16

13,206

Unsecured retail
3,548

118

49

30

3,745

Total

$46,476


$1,740


$397


$666


$49,279

 
December 31, 2013
(in millions)
Current
1-29 Days Past Due
30-89 Days Past Due
90 Days or More Past Due
Total
Residential, including originated home equity products

$27,912


$861


$259


$662


$29,694

Home equity products serviced by others
1,901

167

43

60

2,171

Other secured retail
10,068

550

66

16

10,700

Unsecured retail
3,593

185

67

54

3,899

Total

$43,474


$1,763


$435


$792


$46,464


    

17

Nonperforming Assets
A summary of nonperforming loans and leases by class is as follows:
 
September 30, 2014
 
December 31, 2013
(in millions)
Nonaccruing
Accruing and 90 Days or More Delinquent
Total Nonperforming Loans and Leases
 
Nonaccruing
Accruing and 90 Days or More Delinquent
Total Nonperforming Loans and Leases
Commercial

$93


$—


$93

 

$96


$—


$96

Commercial real estate
82

1

83

 
169

—

169

Leases
—

—

—

 
—

—

—

Total commercial
175

1

176

 
265

—

265

Residential, including originated home equity products
770

—

770

 
981

—

981

Home equity products serviced by others
81

—

81

 
89

—

89

Other secured retail
22

—

22

 
26

—

26

Unsecured retail
23

7

30

 
22

33

55

Total retail
896

7

903

 
1,118

33

1,151

Total

$1,071


$8


$1,079

 

$1,383


$33


$1,416


A summary of other nonperforming assets is as follows:
(in millions)
September 30, 2014
 
December 31, 2013
Nonperforming assets, net of valuation allowance:
 
 
 
Commercial

$3

 

$10

Retail
39

 
40

Nonperforming assets, net of valuation allowance

$42

 

$50


Nonperforming assets consists primarily of other real estate owned and is presented in other assets on the Consolidated Balance Sheets.

A summary of key performance indicators is as follows:

September 30, 2014
 
December 31, 2013
Nonperforming commercial loans and leases as a percentage of total loans and leases
0.19
%
 
0.31
%
Nonperforming retail loans as a percentage of total loans and leases
1.00

 
1.34

Total nonperforming loans and leases as a percentage of total loans and leases
1.19

 
1.65

 
 
 
 
Nonperforming commercial assets as a percentage of total assets
0.13

 
0.23

Nonperforming retail assets as a percentage of total assets
0.72

 
0.97

Total nonperforming assets as a percentage of total assets
0.85
%
 
1.20
%


18

The following is an analysis of the age of the past due amounts (accruing and nonaccruing):
 
September 30, 2014
 
December 31, 2013
(in millions)
 30-89 Days Past Due
 90 Days or More Past Due
 Total Past Due
 
 30-89 Days Past Due
 90 Days or More Past Due
 Total Past Due
Commercial

$30


$93


$123

 

$61


$96


$157

Commercial real estate
42

83

125

 
34

169

203

Leases
2

—

2

 
24

—

24

Total commercial
74

176

250

 
119

265

384

Residential, including originated home equity products
227

568

795

 
259

662

921

Home equity products serviced by others
42

52

94

 
43

60

103

Other secured retail
79

16

95

 
66

16

82

Unsecured retail
49

30

79

 
67

54

121

Total retail
397

666

1,063

 
435

792

1,227

Total

$471


$842


$1,313

 

$554


$1,057


$1,611


Impaired loans include: (1) nonaccruing larger balance commercial loans (greater than $3 million carrying value); and (2) commercial and retail TDRs. The following is a summary of impaired loan information by class:

September 30, 2014
(in millions)
Impaired Loans With a Related Allowance
Allowance on Impaired Loans
Impaired Loans Without a Related Allowance
Unpaid Contractual Balance
Total Recorded Investment in Impaired Loans
Commercial

$116


$14


$53


$195


$169

Commercial real estate
—

—

34

72

34

Total commercial
116

14

87

267

203

Residential, including originated home equity products
361

57

518

1,131

879

Home equity products serviced by others
83

14

23

120

106

Other secured retail
21

4

10

39

31

Unsecured retail
198