US Bank 2012 Annual Report Download - page 48

Company offers a workout program providing customers
modification solutions over a specified time period, generally
up to 60 months. The Company also provides modification
programs to qualifying customers experiencing a temporary
financial hardship in which reductions are made to monthly
required minimum payments for up to 12 months.
In accordance with regulatory guidance, the Company
considers secured consumer loans that have had debt
discharged through bankruptcy where the borrower has not
reaffirmed the debt to be TDRs. If the loan amount exceeds
the collateral value, the loan is charged down to collateral
value and the remaining amount is reported as
nonperforming.
Modifications to loans in the covered segment are similar
in nature to that described above for non-covered loans, and
the evaluation and determination of TDR status is similar,
except that acquired loans restructured after acquisition are
not considered TDRs for purposes of the Company’s
accounting and disclosure if the loans evidenced credit
deterioration as of the acquisition date and are accounted for
in pools. Losses associated with modifications on covered
loans, including the economic impact of interest rate
reductions, are generally eligible for reimbursement under the
loss sharing agreements.
The following table provides a summary of TDRs by loan class, including the delinquency status for TDRs that continue to
accrue interest and TDRs included in nonperforming assets:
At December 31, 2012
(Dollars in Millions)
As a Percent of Performing TDRs
Performing
TDRs
30-89 Days
Past Due
90 Days or More
Past Due
Nonperforming
TDRs
Total
TDRs
Commercial ............................................... $ 281 6.0% 1.2% $ 64 (a) $ 345
Commercial real estate .................................... 531 3.7 – 208 (b) 739
Residential mortgages ..................................... 2,087 6.1 5.2 334 2,421 (d)
Credit card ................................................ 296 11.0 7.0 146 (c) 442
Other retail................................................. 226 8.1 4.0 87 (c) 313 (e)
TDRs, excluding GNMA and covered loans ............ 3,421 6.3 4.1 839 4,260
Loans purchased from GNMA mortgage pools ............ 1,778 8.7 53.0 – 1,778 (f)
Covered loans ............................................. 381 4.5 7.4 105 486
Total .................................................... $5,580 6.9% 19.9% $944 $6,524
(a) Primarily represents loans less than six months from the modification date that have not met the performance period required to return to accrual status (generally six months) and small
business credit cards with a modified rate equal to 0 percent.
(b) Primarily represents loans less than six months from the modification date that have not met the performance period required to return to accrual status (generally six months).
(c) Primarily represents loans with a modified rate equal to 0 percent.
(d) Includes $236 million of residential mortgage loans to borrowers that have had debt discharged through bankruptcy and $55 million in trial period arrangements.
(e) Includes $159 million of other retail loans to borrowers that have had debt discharged through bankruptcy and $4 million in trial period arrangements.
(f) Includes $224 million of Federal Housing Administration and Department of Veterans Affairs residential mortgage loans to borrowers that have had debt discharged through bankruptcy and
$353 million in trial period arrangements.
Short-term Modifications The Company makes short-term
modifications that it does not consider to be TDRs, in limited
circumstances, to assist borrowers experiencing temporary
hardships. Consumer lending programs include payment
reductions, deferrals of up to three past due payments, and the
ability to return to current status if the borrower makes
required payments. The Company may also make short-term
modifications to commercial lending loans, with the most
common modification being an extension of the maturity date
of three months or less. Such extensions generally are used
when the maturity date is imminent and the borrower is
experiencing some level of financial stress, but the Company
believes the borrower will pay all contractual amounts owed.
Short-term modifications were not material at December 31,
2012.
Nonperforming Assets The level of nonperforming assets
represents another indicator of the potential for future credit
losses. Nonperforming assets include nonaccrual loans,
restructured loans not performing in accordance with
modified terms and not accruing interest, restructured loans
that have not met the performance period required to return
to accrual status, other real estate owned and other
nonperforming assets owned by the Company.
Nonperforming assets are generally either originated by the
Company or acquired under FDIC loss sharing agreements
that substantially reduce the risk of credit losses to the
Company. Interest payments collected from assets on
nonaccrual status are generally applied against the principal
balance and not recorded as income.
At December 31, 2012, total nonperforming assets were
$2.7 billion, compared with $3.8 billion at December 31,
2011 and $5.0 billion at December 31, 2010. Excluding
covered assets, nonperforming assets were $2.1 billion at
December 31, 2012, compared with $2.6 billion at
December 31, 2011 and $3.4 billion at December 31, 2010.
The $486 million (18.9 percent) decrease in nonperforming
assets, excluding covered assets, from December 31, 2011 to
December 31, 2012, was primarily driven by reductions in
construction and development loans, as the Company
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