(Amounts in millions)
Property type:
Retail
Office
Industrial
Apartments
Mixed use/other
Total recorded investment
% of total commercial mortgage loans
December 31, 2014 | ||||||||||||||||||||||||
(Amounts in millions) | 31 - 60 days past due | 61 - 90 days past due | Greater than 90 days past due | Total past due | Current | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | — | $ | — | $ | — | $ | — | $ | 2,150 | $ | 2,150 | ||||||||||||
Office | — | — | 6 | 6 | 1,637 | 1,643 | ||||||||||||||||||
Industrial | — | — | 2 | 2 | 1,595 | 1,597 | ||||||||||||||||||
Apartments | — | — | — | — | 494 | 494 | ||||||||||||||||||
Mixed use/other | — | — | — | — | 239 | 239 | ||||||||||||||||||
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Total recorded investment | $ | — | $ | — | $ | 8 | $ | 8 | $ | 6,115 | $ | 6,123 | ||||||||||||
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% of total commercial mortgage loans | — | % | — | % | — | % | — | % | 100 | % | 100 | % | ||||||||||||
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As of March 31, 2015 and December 31, 2014, we had no commercial mortgage loans that were past due for more than 90 days and still accruing interest. We also did not have any commercial mortgage loans that were past due for less than 90 days on non-accrual status as of March 31, 2015 and December 31, 2014.
We evaluate the impairment of commercial mortgage loans on an individual loan basis. As of March 31, 2015, our commercial mortgage loans greater than 90 days past due included loans with appraised values in excess of the recorded investment and the current recorded investment of these loans was expected to be recoverable.
During the three months ended March 31, 2015 and the year ended December 31, 2014, we modified or extended 3 and 28 commercial mortgage loans, respectively, with a total carrying value of $48 million and $254 million, respectively. All of these modifications or extensions were based on current market interest rates, did not result in any forgiveness in the outstanding principal amount owed by the borrower and were not considered troubled debt restructurings.
The following table sets forth the allowance for credit losses and recorded investment in commercial mortgage loans as of or for the periods indicated:
Three months ended March 31, | ||||||||
(Amounts in millions) | 2015 | 2014 | ||||||
Allowance for credit losses: | ||||||||
Beginning balance | $ | 22 | $ | 33 | ||||
Charge-offs | (3 | ) | (1 | ) | ||||
Recoveries | — | — | ||||||
Provision | 1 | (2 | ) | |||||
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Ending balance | $ | 20 | $ | 30 | ||||
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Ending allowance for individually impaired loans | $ | — | $ | — | ||||
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Ending allowance for loans not individually impaired that were evaluated collectively for impairment | $ | 20 | $ | 30 | ||||
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Recorded investment: | ||||||||
Ending balance | $ | 6,170 | $ | 5,924 | ||||
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Ending balance of individually impaired loans | $ | 18 | $ | 17 | ||||
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Ending balance of loans not individually impaired that were evaluated collectively for impairment | $ | 6,152 | $ | 5,907 | ||||
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As of March 31, 2015, we had an individually impaired commercial mortgage loan included within the office property type with a recorded investment of $3 million, an unpaid principal balance of $6 million and charge-offs of $3 million. As of March 31, 2015 and December 31, 2014, we had an individually impaired commercial mortgage loan included within the industrial property type with a recorded investment of $15 million, an unpaid principal balance of $16 million and charge-offs of $1 million, which were recorded in the first quarter of 2014.
In evaluating the credit quality of commercial mortgage loans, we assess the performance of the underlying loans using both quantitative and qualitative criteria. Certain risks associated with commercial mortgage loans can be evaluated by reviewing both the loan-to-value and debt service coverage ratio to understand both the probability of the borrower not being able to make the necessary loan payments as well as the ability to sell the underlying property for an amount that would enable us to recover our unpaid principal balance in the event of default by the borrower. The average loan-to-value ratio is based on our most recent estimate of the fair value for the underlying property which is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A lower loan-to-value indicates that our loan value is more likely to be recovered in the event of default by the borrower if the property was sold. The debt service coverage ratio is based on “normalized” annual net operating income of the property compared to the payments required under the terms of the loan. Normalization allows for the removal of annual one-time events such as capital expenditures, prepaid or late real estate tax payments or non-recurring third-party fees (such as legal, consulting or contract fees). This ratio is evaluated at least annually and updated more frequently if necessary to better indicate risk associated with the loan. A higher debt service coverage ratio indicates the borrower is less likely to default on the loan. The debt service coverage ratio should not be used without considering other factors associated with the borrower, such as the borrower’s liquidity or access to other resources that may result in our expectation that the borrower will continue to make the future scheduled payments.
The following tables set forth the loan-to-value of commercial mortgage loans by property type as of the dates indicated:
March 31, 2015 | ||||||||||||||||||||||||
(Amounts in millions) | 0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% (1) | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 715 | $ | 428 | $ | 958 | $ | 74 | $ | 18 | $ | 2,193 | ||||||||||||
Office | 464 | 261 | 798 | 116 | 21 | 1,660 | ||||||||||||||||||
Industrial | 426 | 282 | 766 | 56 | 23 | 1,553 | ||||||||||||||||||
Apartments | 215 | 74 | 197 | 8 | — | 494 | ||||||||||||||||||
Mixed use/other | 59 | 36 | 169 | 6 | — | 270 | ||||||||||||||||||
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Total recorded investment | $ | 1,879 | $ | 1,081 | $ | 2,888 | $ | 260 | $ | 62 | $ | 6,170 | ||||||||||||
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% of total | 30 | % | 18 | % | 47 | % | 4 | % | 1 | % | 100 | % | ||||||||||||
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Weighted-average debt service coverage ratio | 2.14 | 1.76 | 1.61 | 0.98 | 0.56 | 1.76 | ||||||||||||||||||
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(1) | Included $15 million of impaired loans and $47 million of loans in good standing, where borrowers continued to make timely payments, with a total weighted-average loan-to-value of 118%. |
December 31, 2014 | ||||||||||||||||||||||||
(Amounts in millions) | 0% - 50% | 51% - 60% | 61% - 75% | 76% - 100% | Greater than 100% (1) | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 671 | $ | 419 | $ | 967 | $ | 75 | $ | 18 | $ | 2,150 | ||||||||||||
Office | 383 | 278 | 782 | 164 | 36 | 1,643 | ||||||||||||||||||
Industrial | 451 | 285 | 778 | 60 | 23 | 1,597 | ||||||||||||||||||
Apartments | 211 | 76 | 199 | 8 | — | 494 | ||||||||||||||||||
Mixed use/other | 45 | 43 | 145 | 6 | — | 239 | ||||||||||||||||||
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Total recorded investment | $ | 1,761 | $ | 1,101 | $ | 2,871 | $ | 313 | $ | 77 | $ | 6,123 | ||||||||||||
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% of total | 29 | % | 18 | % | 47 | % | 5 | % | 1 | % | 100 | % | ||||||||||||
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Weighted-average debt service coverage ratio | 2.27 | 1.75 | 1.61 | 1.02 | 0.72 | 1.78 | ||||||||||||||||||
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(1) | Included $15 million of impaired loans, $6 million of loans past due and not individually impaired and $56 million of loans in good standing, where borrowers continued to make timely payments, with a total weighted-average loan-to-value of 120%. |
The following tables set forth the debt service coverage ratio for fixed rate commercial mortgage loans by property type as of the dates indicated:
March 31, 2015 | ||||||||||||||||||||||||
(Amounts in millions) | Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 76 | $ | 248 | $ | 553 | $ | 901 | $ | 415 | $ | 2,193 | ||||||||||||
Office | 115 | 94 | 298 | 768 | 378 | 1,653 | ||||||||||||||||||
Industrial | 160 | 143 | 240 | 675 | 333 | 1,551 | ||||||||||||||||||
Apartments | 1 | 48 | 91 | 185 | 169 | 494 | ||||||||||||||||||
Mixed use/other | 6 | 1 | 86 | 137 | 40 | 270 | ||||||||||||||||||
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Total recorded investment | $ | 358 | $ | 534 | $ | 1,268 | $ | 2,666 | $ | 1,335 | $ | 6,161 | ||||||||||||
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% of total | 6 | % | 9 | % | 20 | % | 43 | % | 22 | % | 100 | % | ||||||||||||
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Weighted-average loan-to-value | 75 | % | 63 | % | 60 | % | 60 | % | 44 | % | 58 | % | ||||||||||||
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December 31, 2014 | ||||||||||||||||||||||||
(Amounts in millions) | Less than 1.00 | 1.00 - 1.25 | 1.26 - 1.50 | 1.51 - 2.00 | Greater than 2.00 | Total | ||||||||||||||||||
Property type: | ||||||||||||||||||||||||
Retail | $ | 80 | $ | 253 | $ | 524 | $ | 870 | $ | 423 | $ | 2,150 | ||||||||||||
Office | 119 | 101 | 247 | 780 | 389 | 1,636 | ||||||||||||||||||
Industrial | 158 | 142 | 246 | 706 | 343 | 1,595 | ||||||||||||||||||
Apartments | 1 | 48 | 88 | 186 | 171 | 494 | ||||||||||||||||||
Mixed use/other | 6 | 1 | 61 | 135 | 36 | 239 | ||||||||||||||||||
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Total recorded investment | $ | 364 | $ | 545 | $ | 1,166 | $ | 2,677 | $ | 1,362 | $ | 6,114 | ||||||||||||
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% of total | 6 | % | 9 | % | 19 | % | 44 | % | 22 | % | 100 | % | ||||||||||||
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Weighted-average loan-to-value | 77 | % | 64 | % | 64 | % | 59 | % | 45 | % | 59 | % | ||||||||||||
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As of March 31, 2015 and December 31, 2014, we had floating rate commercial mortgage loans of $9 million.
(f) Restricted Commercial Mortgage Loans Related To Securitization Entities
We have a consolidated securitization entity that holds commercial mortgage loans that are recorded as restricted commercial mortgage loans related to securitization entities.
(g) Restricted Other Invested Assets Related To Securitization Entities
We have consolidated securitization entities that hold certain investments that are recorded as restricted other invested assets related to securitization entities. The consolidated securitization entities hold certain investments as trading securities and whereby the changes in fair value are recorded in current period income (loss). The trading securities comprise asset-backed securities, including residual interest in certain policy loan securitization entities and highly rated bonds that are primarily backed by credit card receivables.