US Bank 2015 Annual Report Download - page 52

Restructured Loans In certain circumstances, the Company
may modify the terms of a loan to maximize the collection of
amounts due when a borrower is experiencing financial
difficulties or is expected to experience difficulties in the near-
term. In most cases the modification is either a concessionary
reduction in interest rate, extension of the maturity date or
reduction in the principal balance that would otherwise not be
considered.
Troubled Debt Restructurings Concessionary
modifications are classified as TDRs unless the modification
results in only an insignificant delay in the payments to be
received. TDRs accrue interest if the borrower complies with
the revised terms and conditions and has demonstrated
repayment performance at a level commensurate with the
modified terms over several payment cycles, which is
generally six months or greater. At December 31, 2015,
performing TDRs were $4.7 billion, compared with $5.1
billion, $6.0 billion, $5.6 billion and $4.9 billion at
December 31, 2014, 2013, 2012 and 2011, respectively.
Loans classified as TDRs are considered impaired loans for
reporting and measurement purposes.
The Company continues to work with customers to modify
loans for borrowers who are experiencing financial difficulties,
including those acquired through FDIC-assisted acquisitions.
Many of the Company’s TDRs are determined on a case-by-
case basis in connection with ongoing loan collection
processes. The modifications vary within each of the
Company’s loan classes. Commercial lending segment TDRs
generally include extensions of the maturity date and may be
accompanied by an increase or decrease to the interest rate.
The Company may also work with the borrower to make other
changes to the loan to mitigate losses, such as obtaining
additional collateral and/or guarantees to support the loan.
The Company has also implemented certain residential
mortgage loan restructuring programs that may result in
TDRs. The Company participates in the U.S. Department of
the Treasury Home Affordable Modification Program
(“HAMP”). HAMP gives qualifying homeowners an opportunity
to permanently modify their loan and achieve more affordable
monthly payments, with the U.S. Department of the Treasury
compensating the Company for a portion of the reduction in
monthly amounts due from borrowers participating in this
program. The Company also modifies residential mortgage
loans under Federal Housing Administration, Department of
Veterans Affairs, and its own internal programs. Under these
programs, the Company provides concessions to qualifying
borrowers experiencing financial difficulties. The concessions
may include adjustments to interest rates, conversion of
adjustable rates to fixed rates, extensions of maturity dates or
deferrals of payments, capitalization of accrued interest and/
or outstanding advances, or in limited situations, partial
forgiveness of loan principal. In most instances, participation
in residential mortgage loan restructuring programs requires
the customer to complete a short-term trial period. A
permanent loan modification is contingent on the customer
successfully completing the trial period arrangement and the
loan documents are not modified until that time. The
Company reports loans in a trial period arrangement as TDRs
and continues to report them as TDRs after the trial period.
Credit card and other retail loan TDRs are generally part of
distinct restructuring programs providing customers
modification solutions over a specified time period, generally
up to 60 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 covered 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.
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