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Allowance for Credit Losses and Reserve for Unfunded Lending Commitments (Tables)
 6 Months Ended
Jun. 30, 2020
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]  
Allowance for Credit Losses on Financing Receivables
The table below summarizes changes in the allowance for credit losses and reserve for unfunded lending commitments by portfolio segment for the three and six months ended June 30, 2020 and 2019. The allowance balance as of June 30, 2020 reflects the cumulative effects from adoption of the CECL standard and the change to include finance charge and fee reserve in the allowance for credit losses. The reserve for unfunded lending commitments balance as of June 30, 2020 also reflects the cumulative effects from adoption of the CECL standard, including the component of loss sharing agreements with the GSEs on multifamily commercial real estate loans that are within the scope of the CECL standard.
When developing an estimate of expected credit losses, we use both quantitative and qualitative methods in considering all available information relevant to assessing collectability. Management will consider and may make adjustments for qualitative factors, which represent management’s judgment of the imprecision and risks inherent in the processes and assumptions used in establishing the allowance for credit losses. Our allowance for credit losses increased by $9.6 billion to $16.8 billion as of June 30, 2020 from December 31, 2019, primarily driven by the allowance build from expectations of economic worsening and uncertainty as a result of the COVID-19 pandemic as well as the adoption of the CECL standard.
Table 4.1: Allowance for Credit Losses and Reserve for Unfunded Lending Commitments Activity
 
 
Three Months Ended June 30, 2020
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking
 
Total
Allowance for credit losses:
 
 
 
 
 
 
 
 
Balance as of March 31, 2020
 
$
10,346

 
$
2,154

 
$
1,573

 
$
14,073

Charge-offs
 
(1,612
)
 
(416
)
 
(103
)
 
(2,131
)
Recoveries(1)
 
401

 
224

 
1

 
626

Net charge-offs
 
(1,211
)
 
(192
)
 
(102
)
 
(1,505
)
Provision for credit losses
 
2,944

 
876

 
432

 
4,252

Allowance build for credit losses
 
1,733

 
684

 
330

 
2,747

Other changes(2)
 
12

 
0

 
0

 
12

Balance as of June 30, 2020
 
12,091

 
2,838

 
1,903

 
16,832

Reserve for unfunded lending commitments:
 
 
 
 
 
 
 
 
Balance as of March 31, 2020
 
0

 
0

 
223

 
223

Benefit for losses on unfunded lending commitments
 
0

 
0

 
(5
)
 
(5
)
Balance as of June 30, 2020
 
0

 
0

 
218

 
218

Combined allowance and reserve as of June 30, 2020
 
$
12,091

 
$
2,838

 
$
2,121

 
$
17,050

 
 
Six Months Ended June 30, 2020
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking
 
Total
Allowance for credit losses:
 
 
 
 
 
 
 
 
Balance as of December 31, 2019
 
$
5,395

 
$
1,038

 
$
775

 
$
7,208

Cumulative effects from adoption of the CECL standard
 
2,241

 
502

 
102

 
2,845

Finance charge and fee reserve reclassification(3)
 
462

 
0

 
0

 
462

Balance as of January 1, 2020
 
8,098

 
1,540

 
877

 
10,515

Charge-offs
 
(3,461
)
 
(912
)
 
(215
)
 
(4,588
)
Recoveries(1)
 
814

 
474

 
4

 
1,292

Net charge-offs
 
(2,647
)
 
(438
)
 
(211
)
 
(3,296
)
Provision for credit losses
 
6,646

 
1,736

 
1,237

 
9,619

Allowance build for credit losses
 
3,999

 
1,298

 
1,026

 
6,323

Other changes(2)
 
(6
)
 
0

 
0

 
(6
)
Balance as of June 30, 2020
 
12,091

 
2,838

 
1,903

 
16,832

Reserve for unfunded lending commitments:
 
 
 
 
 
 
 
 
Balance as of December 31, 2019
 
0

 
5

 
130

 
135

Cumulative effects from adoption of the CECL standard
 
0

 
(5
)
 
42

 
37

Balance as of January 1, 2020
 
0

 
0

 
172

 
172

Provision for losses on unfunded lending commitments
 
0

 
0

 
46

 
46

Balance as of June 30, 2020
 
0

 
0

 
218

 
218

Combined allowance and reserve as of June 30, 2020
 
$
12,091

 
$
2,838

 
$
2,121

 
$
17,050

 
 
Three Months Ended June 30, 2019
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking
 
Total
Allowance for loan and lease losses:
 
 
 
 
 
 
 
 
Balance as of March 31, 2019
 
$
5,568

 
$
1,062

 
$
683

 
$
7,313

Charge-offs
 
(1,711
)
 
(423
)
 
(23
)
 
(2,157
)
Recoveries(1)
 
391

 
251

 
7

 
649

Net charge-offs
 
(1,320
)
 
(172
)
 
(16
)
 
(1,508
)
Provision for loan and lease losses
 
1,095

 
165

 
69

 
1,329

Allowance build (release) for loan and lease losses
 
(225
)
 
(7
)
 
53

 
(179
)
Other changes(2)
 
(1
)
 
0

 
0

 
(1
)
Balance as of June 30, 2019
 
5,342

 
1,055

 
736

 
7,133

Reserve for unfunded lending commitments:
 
 
 
 
 
 
 
 
Balance as of March 31, 2019
 
0

 
4

 
127

 
131

Provision for losses on unfunded lending commitments
 
0

 
0

 
13

 
13

Balance as of June 30, 2019
 
0

 
4

 
140

 
144

Combined allowance and reserve as of June 30, 2019
 
$
5,342

 
$
1,059

 
$
876

 
$
7,277

 
 
Six Months Ended June 30, 2019
(Dollars in millions)
 
Credit Card
 
Consumer Banking
 
Commercial Banking
 
Total
Allowance for loan and lease losses:
 
 
 
 
 
 
 
 
Balance as of December 31, 2018
 
$
5,535

 
$
1,048

 
$
637

 
$
7,220

Charge-offs
 
(3,493
)
 
(894
)
 
(43
)
 
(4,430
)
Recoveries(1)
 
809

 
501

 
13

 
1,323

Net charge-offs
 
(2,684
)
 
(393
)
 
(30
)
 
(3,107
)
Provision for loan and lease losses
 
2,484

 
400

 
129

 
3,013

Allowance build (release) for loan and lease losses
 
(200
)
 
7

 
99

 
(94
)
Other changes(2)
 
7

 
0

 
0

 
7

Balance as of June 30, 2019
 
5,342

 
1,055

 
736

 
7,133

Reserve for unfunded lending commitments:
 
 
 
 
 
 
 
 
Balance as of December 31, 2018
 
0

 
4

 
118

 
122

Provision for losses on unfunded lending commitments
 
0

 
0

 
22

 
22

Balance as of June 30, 2019
 
0

 
4

 
140

 
144

Combined allowance and reserve as of June 30, 2019
 
$
5,342

 
$
1,059

 
$
876

 
$
7,277

________
(1) 
The amount and timing of recoveries is impacted by our collection strategies, which are based on customer behavior and risk profile and include direct customer communications, repossession of collateral, the periodic sale of charged off loans as well as additional strategies, such as litigation.
(2) 
Represents foreign currency translation adjustments.
(3) 
Concurrent with our adoption of the CECL standard in the first quarter of 2020, we reclassified our finance charge and fee reserve to our allowance for credit losses, with a corresponding increase to credit card loans held for investment.
Schedule of Loss Sharing Arrangement Impact
The table below summarizes the changes in the estimated reimbursements from these partners for the three and six months ended June 30, 2020 and 2019.
Table 4.2: Summary of Credit Card Partnership Loss Sharing Arrangements Impacts
 
 
Three Months Ended June 30,
(Dollars in millions)
 
2020
 
2019
Estimated reimbursements from partners, beginning of period
 
$
2,653

 
$
442

Amounts due from partners which reduced net charge-offs
 
(293
)
 
(105
)
Amounts estimated to be charged to partners which reduced provision for credit losses
 
73

 
77

Estimated reimbursements from partners, end of period
 
$
2,433

 
$
414

 
 
Six Months Ended June 30,
(Dollars in millions)
 
2020
 
2019
Estimated reimbursements from partners, beginning of period(1)
 
$
2,166

 
$
379

Amounts due from partners which reduced net charge-offs
 
(595
)
 
(213
)
Amounts estimated to be charged to partners which reduced provision for credit losses
 
862

 
248

Estimated reimbursements from partners, end of period
 
$
2,433

 
$
414

_________
(1) 
Includes effects from adoption of the CECL standard in the first quarter of 2020.