Credit Quality And Allowance For Credit Losses

6 Months Ended

Jun. 30, 2020

Credit Quality And Allowance For Credit Losses [Abstract]

Credit Quality And Allowance For Credit Losses

CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES

The following table presents an aging analysis of the amortized cost basis of loans.

	Loans Past Due and Still Accruing
(in millions)	30-59 Days		60-89  Days		90 Days or More		Total		Nonaccrual Loans		Current Loans (a)		Total  Loans
June 30, 2020
Business loans:
Commercial	$	48	$	53	$	24	$	125	$	200	$	33,501	$	33,826
Real estate construction:
Commercial Real Estate business line (b)	16		—		—		16		$	—	3,531		3,547
Other business lines (c)	—		3		—		3		—		402		405
Total real estate construction	16		3		—		19		—		3,933		3,952
Commercial mortgage:
Commercial Real Estate business line (b)	1		9		—		10		$	3	2,279		2,292
Other business lines (c)	25		2		6		33		18		7,582		7,633
Total commercial mortgage	26		11		6		43		21		9,861		9,925
Lease financing	—		—		—		—		1		588		589
International	—		—		5		5		—		1,099		1,104
Total business loans	90		67		35		192		222		48,982		49,396
Retail loans:
Residential mortgage	27		9		—		36		24		1,826		1,886
Consumer:
Home equity	12		1		—		13		21		1,635		1,669
Other consumer	1		—		6		7		—		488		495
Total consumer	13		1		6		20		21		2,123		2,164
Total retail loans	40		10		6		56		45		3,949		4,050
Total loans	$	130	$	77	$	41	$	248	$	267	$	52,931	$	53,446
December 31, 2019
Business loans:
Commercial	$	27	$	7	$	17	$	51	$	148	$	31,274	$	31,473
Real estate construction:
Commercial Real Estate business line (b)	6		—		—		6		—		3,038		3,044
Other business lines (c)	—		7		—		7		—		404		411
Total real estate construction	6		7		—		13		—		3,442		3,455
Commercial mortgage:
Commercial Real Estate business line (b)	9		—		—		9		2		2,165		2,176
Other business lines (c)	16		18		9		43		12		7,328		7,383
Total commercial mortgage	25		18		9		52		14		9,493		9,559
Lease financing	1		—		—		1		—		587		588
International	—		5		—		5		—		1,004		1,009
Total business loans	59		37		26		122		162		45,800		46,084
Retail loans:
Residential mortgage	15		2		—		17		20		1,808		1,845
Consumer:
Home equity	4		5		—		9		17		1,685		1,711
Other consumer	2		3		—		5		—		724		729
Total consumer	6		8		—		14		17		2,409		2,440
Total retail loans	21		10		—		31		37		4,217		4,285
Total loans	$	80	$	47	$	26	$	153	$	199	$	50,017	$	50,369

(a)Includes $4.5 billion of loans with deferred payments not considered past due in accordance with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) at June 30, 2020.

(b)Primarily loans to real estate developers.

(c)Primarily loans secured by owner-occupied real estate.

The following table presents loans by credit quality indicator (CQI) and vintage year. CQI is based on internal risk ratings assigned to each business loan at the time of approval and subjected to subsequent reviews, generally at least annually, and to pools of retail loans with similar risk characteristics. Vintage year is the year of origination or major modification.

	June 30, 2020																			December 31, 2019
	Vintage Year
(in millions)	2020			2019		2018		2017		2016		Prior		Revolvers		Revolvers Converted to Term		Total		Total
Business loans:
Commercial:
Pass (a)	$	5,029	(b)	$	2,673	$	1,876	$	1,259	$	572	$	966	$	18,708	$	16	$	31,099	$	29,785
Criticized (c)	30			305		239		147		104		205		1,695		2		2,727		1,688
Total commercial	5,059			2,978		2,115		1,406		676		1,171		20,403		18		33,826		31,473
Real estate construction
Pass (a)	127			878		1,293		795		458		218		152		—		3,921		3,424
Criticized (c)	—			2		4		24		—		1		—		—		31		31
Total real estate construction	127			880		1,297		819		458		219		152		—		3,952		3,455
Commercial mortgage
Pass (a)	1,058			1,713		1,220		1,254		915		2,790		499		—		9,449		9,262
Criticized (c)	31			96		32		47		47		215		8		—		476		297
Total commercial mortgage	1,089			1,809		1,252		1,301		962		3,005		507		—		9,925		9,559
Lease financing
Pass (a)	63			131		84		56		17		213		—		—		564		579
Criticized (c)	1			18		3		2		1		—		—		—		25		9
Total lease financing	64			149		87		58		18		213		—		—		589		588
International
Pass (a)	272			185		129		13		3		75		374		—		1,051		972
Criticized (c)	5			—		—		10		8		2		28		—		53		37
Total international	277			185		129		23		11		77		402		—		1,104		1,009
Total business loans	6,616			6,001		4,880		3,607		2,125		4,685		21,464		18		49,396		46,084
Retail loans:
Residential mortgage
Pass (a)	355			251		149		305		255		538		—		—		1,853		1,823
Criticized (c)	—			—		5		4		3		21		—		—		33		22
Total residential mortgage	355			251		154		309		258		559		—		—		1,886		1,845
Consumer:
Home equity
Pass (a)	—			—		—		—		—		19		1,544		82		1,645		1,682
Criticized (c)	—			—		—		—		—		1		17		6		24		29
Total home equity	—			—		—		—		—		20		1,561		88		1,669		1,711
Other consumer
Pass (a)	13			79		19		4		6		58		306		—		485		722
Criticized (c)	—			1		3		—		—		—		6		—		10		7
Total other consumer	13			80		22		4		6		58		312		—		495		729
Total consumer	13			80		22		4		6		78		1,873		88		2,164		2,440
Total retail loans	368			331		176		313		264		637		1,873		88		4,050		4,285
Total loans	$	6,984		$	6,332	$	5,056	$	3,920	$	2,389	$	5,322	$	23,337	$	106	$	53,446	$	50,369

(a)Includes all loans not included in the categories of special mention, substandard or nonaccrual.

(b)Includes $3.8 billion of Small Business Administration Paycheck Protection Program (PPP) loans at June 30, 2020.

(c)Includes loans with an internal rating of special mention, substandard loans for which the accrual of interest has not been discontinued and nonaccrual loans. Special mention loans have potential credit weaknesses that deserve management’s close attention, such as loans to borrowers who may be experiencing financial difficulties that may result in deterioration of repayment prospects from the borrower at some future date. Accruing substandard loans have a well-defined weakness, or weaknesses, such as loans to borrowers who may be experiencing losses from operations or inadequate liquidity of a degree and duration that jeopardizes the orderly repayment of the loan. Substandard loans are also distinguished by the distinct possibility of loss in the future if these weaknesses are not corrected. Nonaccrual loans are loans for which the accrual of interest has been discontinued. For further information regarding nonaccrual loans, refer to the Nonperforming Assets subheading in Note 1 - Basis of Presentation and Accounting Policies - on page F-51 in the Corporation's 2019 Annual Report. These categories are generally consistent with the "special mention" and "substandard" categories as defined by regulatory authorities. A minority of nonaccrual loans are consistent with the "doubtful" category.

Loan interest receivable totaled $132 million and $172 million at June 30, 2020 and December 31, 2019, respectively, and was included in accrued income and other assets on the Consolidated Balance Sheets.

Allowance for Credit Losses

The following table details the changes in the allowance for credit losses.

	2020									2019
(in millions)	Business Loans			Retail Loans			Total			Business Loans			Retail Loans			Total
Three Months Ended June 30
Balance at beginning of period:
Allowance for loan losses	$	861		$	55		$	916		$	608		$	39		$	647
Allowance for credit losses on lending-related commitments	52			10			62			27			3			30
Allowance for credit losses	913			65			978			635			42			677
Loan charge-offs	(56)			(1)			(57)			(43)			(1)			(44)
Recoveries on loans previously charged-off	6			1			7			10			1			11
Net loan charge-offs	(50)			—			(50)			(33)			—			(33)
Provision for credit losses:
Provision for loan losses	132			9			141			43			—			43
Provision for credit losses on lending-related commitments	(2)			(1)			(3)			1			—			1
Provision for credit losses	130			8			138			44			—			44
Balance at end of period:
Allowance for loan losses	943			64			1,007			618			39			657
Allowance for credit losses on lending-related commitments	50			9			59			28			3			31
Allowance for credit losses	$	993		$	73		$	1,066		$	646		$	42		$	688
Six Months Ended June 30
Balance at beginning of period
Allowance for loan losses	$	601		$	36		$	637		$	627		$	44		$	671
Allowance for credit losses on lending-related commitments	28			3			31			26			4			30
Allowance for credit losses	629			39			668			653			48			701
Cumulative effect of change in accounting principle	(42)			25			(17)			—			—			—
Loan charge-offs	(143)			(3)			(146)			(62)			(2)			(64)
Recoveries on loans previously charged-off	11			1			12			18			2			20
Net loan charge-offs	(132)			(2)			(134)			(44)			—			(44)
Provision for credit losses:
Provision for loan losses	516			5			521			35			(5)			30
Provision for credit losses on lending-related commitments	22			6			28			2			(1)			1
Provision for credit losses	538			11			549			37			(6)			31
Balance at end of period:
Allowance for loan losses	943			64			1,007			618			39			657
Allowance for credit losses on lending-related commitments	50			9			59			28			3			31
Allowance for credit losses	$	993		$	73		$	1,066		$	646		$	42		$	688
Allowance for loan losses as a percentage of total loans	1.91		%	1.59		%	1.88		%	1.30		%	0.89		%	1.27		%
Allowance for loan losses as a percentage of total loans excluding PPP loans	2.07		%	n/a			2.03		%	n/a			n/a			n/a
Allowance for credit losses as a percentage of total loans	2.01		%	1.82		%	1.99		%	1.36		%	0.96		%	1.33		%
Allowance for credit losses as a percentage of total loans excluding PPP loans	2.18		%	n/a			2.15		%	n/a			n/a			n/a

n/a - not applicable

Nonaccrual Loans

The following table presents additional information regarding nonaccrual loans. No interest income was recognized on nonaccrual loans for the three- and six-month periods ended June 30, 2020 and 2019, respectively.

(in millions)	Nonaccrual Loans with No Related Allowance		Nonaccrual Loans with Related Allowance		Total Nonaccrual Loans
June 30, 2020
Business loans:
Commercial	$	32	$	168	$	200
Commercial mortgage:
Commercial Real Estate business line (a)	2		1		3
Other business lines (b)	6		12		18
Total commercial mortgage	8		13		21
Lease financing	—		1		1
Total business loans	40		182		222
Retail loans:
Residential mortgage	24		—		24
Consumer:
Home equity	21		—		21
Total retail loans	45		—		45
Total nonaccrual loans	$	85	$	182	$	267
December 31, 2019
Business loans:
Commercial	$	29	$	119	$	148
Commercial mortgage:
Commercial Real Estate business line (a)	2		—		2
Other business lines (b)	1		11		12
Total commercial mortgage	3		11		14
Total business loans	32		130		162
Retail loans:
Residential mortgage	20		—		20
Consumer:
Home equity	17		—		17
Total retail loans	37		—		37
Total nonaccrual loans	$	69	$	130	$	199

(a)Primarily loans to real estate developers.

(b)Primarily loans secured by owner-occupied real estate.

Foreclosed Properties

Foreclosed properties totaled $11 million at both June 30, 2020 and December 31, 2019. There were no retail loans secured by residential real estate properties in process of foreclosure included in nonaccrual loans at June 30, 2020 and December 31, 2019.

Troubled Debt Restructurings

The following table details the amortized cost basis at June 30, 2020 and 2019 of loans considered to be TDRs that were restructured during the three- and six-month periods ended June 30, 2020 and 2019, by type of modification. In cases of loans with more than one type of modification, the loans were categorized based on the most significant modification.

	2020						2019
	Type of Modification						Type of Modification
(in millions)	Principal Deferrals (a)		Interest Rate Reductions		Total Modifications		Principal Deferrals (a)		Interest Rate Reductions		Total Modifications
Three Months Ended June 30,
Home equity (b)	$	—	$	—	$	—	$	—	$	1	$	1
Total loans	$	—	$	—	$	—	$	—	$	1	$	1
Six Months Ended June 30,
Business loans:
Commercial	$	16	$	—	$	16	$	11	$	—	$	11
Commercial mortgage:
Other business lines (c)	1		—		$	1	1		—		1
Total business loans	17		—		17		12		—		12
Retail loans:
Consumer:
Home equity (b)	—		—		—		—		1		1
Total loans	$	17	$	—	$	17	$	12	$	1	$	13

(a)Primarily represents loan balances where terms were extended by more than an insignificant time period, typically more than 180 days, at or above contractual interest rates. Also includes commercial loans restructured in bankruptcy.

(b)Includes bankruptcy loans for which the court has discharged the borrower's obligation and the borrower has not reaffirmed the debt.

(c)Primarily loans secured by owner-occupied real estate.

The Corporation charges interest on principal balances outstanding during deferral periods. Additionally, none of the modifications involved forgiveness of principal. At June 30, 2020 and December 31, 2019, commitments to lend additional funds to borrowers whose terms have been modified in TDRs totaled $2 million and $3 million, respectively. On an ongoing basis, the Corporation monitors the performance of modified loans to their restructured terms. The allowance for loan losses continues to be reassessed on the basis of an individual evaluation of the loan.

For principal deferrals, incremental deterioration in the credit quality of the loan, represented by a downgrade in the risk rating of the loan, for example, due to missed interest payments or a reduction of collateral value, is considered a subsequent default. For interest rate reductions, a subsequent payment default is defined in terms of delinquency, when a principal or interest payment is 90 days past due. Of the TDRs modified during the twelve-month periods ended June 30, 2020 and 2019, principal deferrals totaled $6 million and $15 million in the three- and six-month periods ended June 30, 2020, respectively compared to none in the comparable periods in 2019. There were no subsequent defaults of interest rate reductions during either of the three- and six-month periods ended June 30, 2020 and 2019.