
	December 31, 2020		December 31, 2019
	(Dollars in millions)
Consumer loans
Residential first mortgage	$	2,266	$	3,154
Home equity	856		1,024
Other	1,004		729
Total consumer loans	4,126		4,907
Commercial loans
Commercial real estate	3,061		2,828
Commercial and industrial	1,382		1,634
Warehouse lending	7,658		2,760
Total commercial loans	12,101		7,222
Total loans held-for-investment	$	16,227	$	12,129


	For the Year Ended December 31,
	2020		2019		2018
	(Dollars in millions)
Loans Sold (1)
Performing loans	$	492	$	217	$	158
Total loans sold	$	492	$	217	$	158
Net gain associated with loan sales (2)	$	3	$	2	$	2
Loans Purchased
Residential	$	—	$	—	$	3
Home equity	—		249		—
Other consumer (3)	63		51		34
Total loans purchased	$	63	$	300	$	37
Premium associated with loans purchased	$	—	$	11	$	—

We have pledged certain LHFI, LHFS, and LGG to collateralize lines of credit and/or borrowings with the FRB of Chicago and the FHLB of Indianapolis. At December 31, 2020 and 2019, we pledged loans of $11.6 billion and $9.1 billion, respectively.

As of December 31, 2020, we estimated losses over a two-year reasonable and supportable forecast period using macroeconomic scenarios before reverting economic variances over a one-year period to their long-term historical averages on a straight-line basis. As of December 31, 2020, we utilized the Moody's December scenarios in our forecast: a growth forecast, weighted at 30 percent; a baseline forecast, weighted at 40 percent; and an adverse forecast, weighted at 30 percent. The resulting composite forecast for the fourth quarter 2020 was slightly better than the composite forecast used in the third quarter 2020. Unemployment increases slightly in 2021 and begins recovering in 2022. GDP recovers slightly by the end of the year from current levels and does not return to near pre-COVID level until 2024. HPI decreases 1 percent from late 2020 through 2021.


	Residential First Mortgage (1)		Home Equity		Other Consumer		Commercial Real Estate		Commercial and Industrial		Warehouse Lending		Total
	(Dollars in millions)
Year Ended December 31, 2020
Beginning balance, prior to adoption of ASC 326	$	22	$	14	$	6	$	38	$	22	$	5	$	107
Impact of adopting ASC 326	25		12		10		(14)		(6)		(4)		23
Provision (benefit)	8		(2)		26		60		36		3		131
Charge-offs	(6)		(3)		(5)		—		(1)		—		(15)
Recoveries	—		4		2		—		—		—		6
Ending allowance balance	$	49	$	25	$	39	$	84	$	51	$	4	$	252
Year Ended December 31, 2019
Beginning balance	$	38	$	15	$	3	$	48	$	18	$	6	$	128
Provision (benefit)	(14)		(1)		10		(10)		34		(1)		18
Charge-offs	(3)		(2)		(7)		—		(31)		—		(43)
Recoveries	1		2		—		—		1		—		4
Ending allowance balance	$	22	$	14	$	6	$	38	$	22	$	5	$	107
Year Ended December 31, 2018
Beginning balance	$	47	$	22	$	1	$	45	$	19	$	6	$	140
Provision (benefit)	(7)		(6)		3		3		(1)		—		(8)
Charge-offs	(4)		(2)		(2)		—		—		—		(8)
Recoveries	2		1		1		—		—		—		4
Ending allowance balance	$	38	$	15	$	3	$	48	$	18	$	6	$	128

The following table sets forth the LHFI aging analysis of past due and current loans (for further information on our policy for past due and impaired loans, see Note 1 - Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies):


	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due (1)		Total Past Due		Current		Total LHFI (3)(4)(5)
	(Dollars in millions)
December 31, 2020
Consumer loans
Residential first mortgage	$	4	$	4	$	31	$	39	$	2,227	$	2,266
Home equity	1		1		5		7		849		856
Other	4		1		2		7		997		1,004
Total consumer loans	9		6		38		53		4,073		4,126
Commercial loans
Commercial real estate	20		—		3		23		3,038		3,061
Commercial and industrial	1		—		15		16		1,366		1,382
Warehouse lending	—		—		—		—		7,658		7,658
Total commercial loans	21		—		18		39		12,062		12,101
Total loans (2)	$	30	$	6	$	56	$	92	$	16,135	$	16,227
December 31, 2019
Consumer loans
Residential first mortgage	$	5	$	4	$	21	$	30	$	3,124	$	3,154
Home equity	1		—		4		5		1,019		1,024
Other	3		1		1		5		724		729
Total consumer loans	9		5		26		40		4,867		4,907
Commercial loans
Commercial real estate	—		—		—		—		2,828		2,828
Commercial and industrial	—		—		—		—		1,634		1,634
Warehouse lending	—		—		—		—		2,760		2,760
Total commercial loans	—		—		—		—		7,222		7,222
Total loans (2)	$	9	$	5	$	26	$	40	$	12,089	$	12,129

Interest income is recognized on nonaccrual loans using a cash basis method. Interest that would have been accrued was $1 million in each of the years ended December 31, 2020, 2019 and 2018, respectively. At December 31, 2020 and 2019, we had no loans 90 days or greater past due and still accruing interest.

We may modify certain loans in both our consumer and commercial loan portfolios to retain customers or to maximize collection of the outstanding loan balance. Troubled debt restructurings ("TDRs") are modified loans in which a borrower demonstrates financial difficulties and for which a concession has been granted as a result. Nonperforming TDRs are included in nonaccrual loans. TDRs remain in nonperforming status until a borrower has made payments and is current for at least six consecutive months. Performing TDRs are not considered to be nonaccrual so long as we believe that all contractual principal and interest due under the restructured terms will be collected. Performing and nonperforming TDRs remain impaired as interest and principal will not be received in accordance with the original contractual terms of the loan agreement. Refer to Note 1- Description of Business, Basis of Presentation, and Summary of Significant Accounting Standards for a description of the methodology used to determine TDRs.

Some loan modifications classified as TDRs may not ultimately result in the full collection of principal and interest, as modified, but may give rise to potential incremental losses. We measure impairments using a discounted cash flow method for performing TDRs and measure impairment based on collateral values for nonperforming TDRs.

Beginning in March 2020, as a response to COVID-19, we offered our consumer and commercial customers principal and interest payment deferrals and extensions. We considered these programs in the context of whether or not the short-term modifications of these loans would constitute a TDR. We considered the CARES Act, interagency guidance and related guidance from the FASB, which provided that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief are not required to be accounted for as TDRs. As a result, we have determined that loan forbearance, modifications, deferrals and extensions made under these COVID-19 programs are not TDRs.


	TDRs
	Performing		Nonperforming		Total
	(Dollars in millions)
December 31, 2020
Consumer loans
Residential first mortgage	$	19	$	8	$	27
Home equity	12		2		14
Total consumer TDR loans	31		10		41
Commercial Loans
Commercial real estate	5		—		5
Commercial and industrial	—		—		—
Total commercial TDR loans	5		—		5
Total TDRs (1)(2)	$	36	$	10	$	46
December 31, 2019
Consumer loans
Residential first mortgage	$	20	$	8	$	28
Home equity	18		2		20
Total TDRs (1)(2)	$	38	$	10	$	48


	New TDRs
	Number of Accounts	Pre-Modification Unpaid Principal Balance		Post-Modification Unpaid Principal Balance (1)		Increase (Decrease) in Allowance at Modification
	(Dollars in millions)
Year Ended December 31, 2020
Residential first mortgages	9	$	2	$	2	$	—
Home equity (2)(3)	3	—		—		—
Other consumer	1	—		—		$	—
Commercial real estate	1	5		5		$	—
Total TDR loans	14	$	7	$	7	$	—
Year Ended December 31, 2019
Residential first mortgages	8	$	1	$	1	$	—
Home equity (2)(3)	6	—		—		—
Total TDR loans	14	$	1	$	1	$	—
Year Ended December 31, 2018
Residential first mortgages	14	$	3	$	3	$	—
Home equity (2)(3)	17	1		1		—
Total TDR loans	31	$	4	$	4	$	—

There were no loans modified in the previous 12 months that subsequently defaulted during the years ended December 31, 2020, 2019, and 2018. All TDR classes within the consumer and commercial loan portfolios are considered subsequently defaulted when they are greater than 90 days past due within 12 months of the restructuring date.

We utilize a combination of internal and external risk rating systems which are applied to all consumer and commercial loans which are used as loan-level inputs to our ACL models. Descriptions of our risk ratings as they relate to credit quality follow the ratings used by the U.S. bank regulatory agencies as listed below.

Watch. Watch assets are defined as pass-rated assets that exhibit elevated risk characteristics or other factors that deserve Management’s close attention and increased monitoring. However, the asset does not exhibit a potential or well-defined weakness that would warrant a downgrade to criticized or adverse classification.

Special mention. Assets identified as special mention possess credit deficiencies or potential weaknesses deserving Management's close attention. Special mention assets have a potential weakness or pose an unwarranted financial risk that, if not corrected, could weaken the assets and increase risk in the future. Special mention assets are criticized, but do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Assets identified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the full collection or liquidation of the debt. Substandard assets are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. For home equity loans and other consumer loans, we evaluate credit quality based on the aging and status of payment activity and any other known credit characteristics that call into question full repayment of the asset. Substandard loans may be placed on either accrual or nonaccrual status.

Doubtful. An asset classified as doubtful has all the weaknesses inherent in one classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. A doubtful asset has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Doubtful borrowers are usually in default, lack adequate liquidity or capital and lack the resources necessary to remain an operating entity. Pending events can

include mergers, acquisitions, liquidations, capital injections, the perfection of liens on additional collateral, the valuation of collateral and refinancing. Generally, pending events should be resolved within a relatively short period and the ratings will be adjusted based on the new information. Due to the high probability of loss, doubtful assets are placed on nonaccrual.

Loss. An asset classified as loss is considered uncollectible and of such little value that the continuance as a bankable asset is not warranted. This classification does not mean that an asset has absolutely no recovery or salvage value, rather that it is not practical or desirable to defer writing off the asset even though partial recovery may be affected in the future.

Consumer loans consist of open and closed-end loans extended to individuals for household, family, and other personal expenditures. Consumer loans includes other consumer product loans and loans to individuals secured by their personal residence, including first mortgage, home equity, and home improvement loans. Because consumer loans are usually relatively small-balance, homogeneous exposures, consumer loans are rated based primarily on payment performance. Payment performance is a proxy for the strength of repayment capacity and loans are generally classified based on their payment status rather than by an individual review of each loan.

Payment activity, credit rating and loan-to-value ratios have the most significant impact on the ACL for consumer loans. The following table presents the amortized cost in residential and consumer loans based on payment activity:



													Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis		Total		December 31, 2019
	Term Loans
	Amortized Cost Basis by Closing Year
As of December 31, 2020	2020		2019		2018		2017		2016		Prior
Consumer Loans	(Dollars in millions)
Residential First Mortgage
Pass	$	362	$	544	$	231	$	289	$	252	$	420	$	92	$	15	$	2,205	$	3,107
Watch	—		1		1		1		—		17		1		—		21		23
Substandard	—		3		5		2		—		15		—		—		25		15
Home Equity
Pass	7		31		13		6		2		11		720		48		838		1,002
Watch	—		—		—		—		—		11		2		—		13		16
Substandard	—		—		—		—		—		1		1		1		3		3
Other Consumer
Pass	292		321		145		3		1		6		227		5		1,000		727
Watch	—		—		—		—		—		—		—		1		1		1
Substandard	1		1		1		—		—		—		—		—		3		1
Total Consumer Loans (1)(2)	$	662	$	901	$	396	$	301	$	255	$	481	$	1,043	$	70	$	4,109	$	4,895


															Revolving Loans Converted to Term Loans Amortized Cost Basis
	FICO Band												Revolving Loans Amortized Cost Basis				Total
	Amortized Cost Basis by Closing Year
As of December 31, 2020	2020		2019		2018		2017		2016		Prior
Consumer Loans	(Dollars in millions)
Residential First Mortgage
>750	$	195	$	272	$	118	$	193	$	181	$	231	$	55	$	6	$	1,251
700-750	119		180		90		85		64		130		25		7		700
<700	48		96		29		14		7		91		13		2		300
Home Equity
>750	2		9		6		2		1		7		324		13		364
700-750	3		12		4		3		1		8		289		20		340
<700	2		10		3		1		—		8		110		16		150
Other Consumer
>750	209		205		80		2		1		5		213		6		721
700-750	79		107		55		1		—		1		9		—		252
<700	5		10		11		—		—		—		5		—		31
Total Consumer Loans (1)	$	662	$	901	$	396	$	301	$	255	$	481	$	1,043	$	70	$	4,109

Loan-to-value ratios primarily impact the allowance on mortgages within the consumer loan portfolio. The following table presents the amortized cost in residential first mortgages and home equity based on loan-to-value ratios:


															Revolving Loans Converted to Term Loans Amortized Cost Basis
	LTV Band												Revolving Loans Amortized Cost Basis				Total
	Amortized Cost Basis by Closing Year
As of December 31, 2020	2020		2019		2018		2017		2016		Prior
Consumer Loans	(Dollars in millions)
Residential first mortgage
>90	$	84	$	260	$	123	$	35	$	3	$	19	$	—	$	—	$	524
71-90	169		180		66		99		72		238		—		—		824
55-70	83		60		22		82		96		122		—		—		465
<55	26		48		26		76		81		73		93		15		438
Home Equity
>90	—		—		—		1		1		10		—		—		12
71-90	5		24		10		4		1		9		548		33		634
<=70	2		7		3		1		—		4		175		16		208
Total (1)	$	369	$	579	$	250	$	298	$	254	$	475	$	816	$	64	$	3,105

Risk rating and the average loan duration have the most significant impact on the ACL for commercial loans. Additional factors which impact the ACL are debt-service-coverage ratio, loan-to-value ratio, interest-coverage ratio and leverage ratio.

Internal audit conducts periodic examinations which serve as an independent verification of the accuracy of the ratings assigned. All loans are examined on at least an annual basis. Loan grades are based on different factors within the borrowing relationship: entity sales, debt service coverage, debt/total net worth, liquidity, balance sheet and income statement trends, management experience, business stability, financing structure and financial reporting requirements. The underlying collateral is also rated based on the specific type of collateral and corresponding LTV. The combination of the borrower and collateral risk ratings results in the final risk rating for the borrowing relationship.



	Term Loans												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term Loans Amortized Cost Basis		Total		December 31, 2019
	Amortized Cost Basis by Closing Year
As of December 31, 2020	2020		2019		2018		2017		2016		Prior
Commercial Loans	(Dollars in million)
Commercial real estate
Pass	$	347	$	993	$	439	$	438	$	308	$	280	$	—	$	—	$	2,805	$	2,794
Watch	21		19		35		51		21		19		—		—		166		24
Special mention	5		1		16		—		17		14		—		—		53		5
Substandard	—		11		1		25		—		—		—		—		37		5
Commercial and industrial
Pass	319		425		163		149		54		71		19		—		1,200		1,533
Watch	3		48		28		25		—		2		—		—		106		72
Special mention	1		—		14		9		—		—		—		—		24		24
Substandard	22		11		15		4		—		—		—		—		52		5
Warehouse
Pass	7,398		—		—		—		—		—		—		—		7,398		2,556
Watch	260		—		—		—		—		—		—		—		260		189
Special mention	—		—		—		—		—		—		—		—		—		15
Substandard	—		—		—		—		—		—		—		—		—		—
Total commercial loans	$	8,376	$	1,508	$	711	$	701	$	400	$	386	$	19	$	—	$	12,101	$	7,222