Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2019

Receivables [Abstract]

Loans and Allowance for Credit Losses

  NOTE 5   Loans and Allowance for Credit Losses

The composition of the loan portfolio at December 31, disaggregated by class and underlying specific portfolio type, was as follows:

(Dollars in Millions)	2019		2018
Commercial
Commercial	$	98,168	$	96,849
Lease financing		5,695		5,595
Total commercial		103,863		102,444
Commercial Real Estate
Commercial mortgages		29,404		28,596
Construction and development		10,342		10,943
Total commercial real estate		39,746		39,539
Residential Mortgages
Residential mortgages		59,865		53,034
Home equity loans, first liens		10,721		12,000
Total residential mortgages		70,586		65,034
Credit Card		24,789		23,363
Other Retail
Retail leasing		8,490		8,546
Home equity and second mortgages		15,036		16,122
Revolving credit		2,899		3,088
Installment		11,038		9,676
Automobile		19,435		18,719
Student		220		279
Total other retail		57,118		56,430
Total loans	$	296,102	$	286,810

The Company had loans of $96.2 billion at December 31, 2019, and $88.7 billion at December 31, 2018, pledged at the Federal Home Loan Bank, and loans of $76.3 billion at December 31, 2019, and $70.1 billion at December 31, 2018, pledged at the Federal Reserve Bank.

The Company offers a broad array of lending products to consumer and commercial customers, in various industries, across several geographical locations, predominately in the states in which it has Consumer and Business Banking offices. Collateral for commercial and commercial real estate loans may include marketable securities, accounts receivable, inventory, equipment, real estate, or the related property.

Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and

costs, and any partial charge-offs recorded. Net unearned interest and deferred fees and costs amounted to $781 million at December 31, 2019 and $872 million at December 31, 2018. All purchased loans are recorded at fair value at the date of purchase. The Company evaluates purchased loans for impairment at the date of purchase in accordance with applicable authoritative accounting guidance. Purchased loans with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are considered “purchased impaired loans.” All other purchased loans are considered “purchased nonimpaired loans.”

Allowance for Credit Losses The allowance for credit losses is established for probable and estimable losses incurred in the Company’s loan and lease portfolio, including unfunded credit

commitments. The allowance for credit losses is increased through provisions charged to earnings and reduced by net charge-offs.

Activity in the allowance for credit losses by portfolio class was as follows:

(Dollars in Millions)	Commercial			Commercial Real Estate			Residential Mortgages			Credit Card			Other Retail			Covered Loans			Total Loans
Balance at December 31, 2018
Balance at beginning of period	$	1,454		$	800		$	455		$	1,102		$	630		$	–		$	4,441
Add
Provision for credit losses		315			13			(19	)		919			276			–			1,504
Deduct
Loans charged-off		399			21			34			1,028			385			–			1,867
Less recoveries of loans charged-off		(114	)		(7	)		(31	)		(135	)		(126	)		–			(413	)
Net loans charged-off		285			14			3			893			259			–			1,454
Balance at December 31, 2019	$	1,484		$	799		$	433		$	1,128		$	647		$	–		$	4,491
Balance at December 31, 2017
Balance at beginning of period	$	1,372		$	831		$	449		$	1,056		$	678		$	31		$	4,417
Add
Provision for credit losses		333			(50	)		23			892			211			(30	)		1,379
Deduct
Loans charged-off		350			9			48			970			383			–			1,760
Less recoveries of loans charged-off		(99	)		(28	)		(31	)		(124	)		(124	)		–			(406	)
Net loans charged-off		251			(19	)		17			846			259			–			1,354
Other changes(a)		–			–			–			–			–			(1	)		(1	)
Balance at December 31, 2018	$	1,454		$	800		$	455		$	1,102		$	630		$	–		$	4,441
Balance at December 31, 2016
Balance at beginning of period	$	1,450		$	812		$	510		$	934		$	617		$	34		$	4,357
Add
Provision for credit losses		186			19			(24	)		908			304			(3	)		1,390
Deduct
Loans charged-off		414			30			65			887			355			–			1,751
Less recoveries of loans charged-off		(150	)		(30	)		(28	)		(101	)		(112	)		–			(421	)
Net loans charged-off		264			–			37			786			243			–			1,330
Balance at December 31, 2017	$	1,372		$	831		$	449		$	1,056		$	678		$	31		$	4,417

(a) Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales. 

Additional detail of the allowance for credit losses by portfolio class was as follows:

(Dollars in Millions)	Commercial		Commercial Real Estate		Residential Mortgages		Credit Card		Other Retail		Total Loans
Allowance Balance at December 31, 2019 Related to
Loans individually evaluated for impairment(a)	$	16	$	3	$	–	$	–	$	–	$	19
TDRs collectively evaluated for impairment		20		3		109		81		10		223
Other loans collectively evaluated for impairment		1,448		793		309		1,047		637		4,234
Loans acquired with deteriorated credit quality		–		–		15		–		–		15
Total allowance for credit losses	$	1,484	$	799	$	433	$	1,128	$	647	$	4,491
Allowance Balance at December 31, 2018 Related to
Loans individually evaluated for impairment(a)	$	16	$	8	$	–	$	–	$	–	$	24
TDRs collectively evaluated for impairment		15		3		126		69		12		225
Other loans collectively evaluated for impairment		1,423		788		314		1,033		618		4,176
Loans acquired with deteriorated credit quality		–		1		15		–		–		16
Total allowance for credit losses	$	1,454	$	800	$	455	$	1,102	$	630	$	4,441

(a) Represents the allowance for credit losses related to loans greater than $5 million classified as nonperforming or TDRs.

Additional detail of loan balances by portfolio class was as follows:

(Dollars in Millions)	Commercial		Commercial Real Estate		Residential Mortgages		Credit Card		Other Retail		Total Loans
December 31, 2019
Loans individually evaluated for impairment(a)	$	253	$	61	$	–	$	–	$	–	$	314
TDRs collectively evaluated for impairment		163		138		3,044		263		185		3,793
Other loans collectively evaluated for impairment		103,447		39,513		67,315		24,526		56,933		291,734
Loans acquired with deteriorated credit quality		–		34		227		–		–		261
Total loans	$	103,863	$	39,746	$	70,586	$	24,789	$	57,118	$	296,102
December 31, 2018
Loans individually evaluated for impairment(a)	$	262	$	86	$	–	$	–	$	–	$	348
TDRs collectively evaluated for impairment		151		129		3,252		245		183		3,960
Other loans collectively evaluated for impairment		102,031		39,297		61,465		23,118		56,247		282,158
Loans acquired with deteriorated credit quality		–		27		317		–		–		344
Total loans	$	102,444	$	39,539	$	65,034	$	23,363	$	56,430	$	286,810

(a) Represents loans greater than $5 million classified as nonperforming or TDRs.

Credit Quality The credit quality of the Company’s loan portfolios is assessed as a function of net credit losses, levels of nonperforming assets and delinquencies, and credit qualityratings as defined by the Company. These credit quality ratings are an important part of the Company’s overall credit risk management and evaluation of its allowance for credit losses.

The following table provides a summary of loans by portfolio class, including the delinquency status of those that continue to accrue interest, and those that are nonperforming:

	Accruing
(Dollars in Millions)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonperforming		Total
December 31, 2019
Commercial	$	103,273	$	307	$	79	$	204	$	103,863
Commercial real estate		39,627		34		3		82		39,746
Residential mortgages(a)		70,071		154		120		241		70,586
Credit card		24,162		321		306		–		24,789
Other retail		56,463		393		97		165		57,118
Total loans	$	293,596	$	1,209	$	605	$	692	$	296,102
December 31, 2018
Commercial	$	101,844	$	322	$	69	$	209	$	102,444
Commercial real estate		39,354		70		–		115		39,539
Residential mortgages(a)		64,443		181		114		296		65,034
Credit card		22,746		324		293		–		23,363
Other retail		55,722		403		108		197		56,430
Total loans	$	284,109	$	1,300	$	584	$	817	$	286,810

(a) At December 31, 2019, $428 million of loans 30–89 days past due and $1.7 billion of loans 90 days or more past due purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current, compared with $430 million and $1.7 billion at December 31, 2018, respectively.

At December 31, 2019, total nonperforming assets held by the Company were $829 million, compared with $989 million at December 31, 2018. Total nonperforming assets included $692 million of nonperforming loans, $78 million of OREO and $59 million of other nonperforming assets owned by the Company at December 31, 2019, compared with $817 million, $111 million and $61 million, respectively, at December 31, 2018.

At December 31, 2019, the amount of foreclosed residential real estate held by the Company, and included in OREO, was $74 million, compared with $106 million at December 31, 2018. These amounts exclude $155 million and $235 million at December 31, 2019 and 2018, respectively, of foreclosed

residential real estate related to mortgage loans whose payments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. In addition, the amount of residential mortgage loans secured by residential real estate in the process of foreclosure was $1.5 billion at December 31, 2019 and 2018, of which $1.2 billion at December 31, 2019 and 2018, related to loans purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.

The following table provides a summary of loans by portfolio class and the Company’s internal credit quality rating:

			Criticized
(Dollars in Millions)	Pass		Special Mention		Classified(a)		Total Criticized		Total
December 31, 2019
Commercial	$	101,850	$	1,147	$	866	$	2,013	$	103,863
Commercial real estate		38,872		484		390		874		39,746
Residential mortgages(b)		70,174		2		410		412		70,586
Credit card		24,483		–		306		306		24,789
Other retail		56,825		10		283		293		57,118
Total loans	$	292,204	$	1,643	$	2,255	$	3,898	$	296,102
Total outstanding commitments	$	619,224	$	2,451	$	2,873	$	5,324	$	624,548
December 31, 2018
Commercial	$	100,014	$	1,149	$	1,281	$	2,430	$	102,444
Commercial real estate		38,473		584		482		1,066		39,539
Residential mortgages(b)		64,570		1		463		464		65,034
Credit card		23,070		–		293		293		23,363
Other retail		56,101		6		323		329		56,430
Total loans	$	282,228	$	1,740	$	2,842	$	4,582	$	286,810
Total outstanding commitments	$	600,407	$	2,801	$	3,448	$	6,249	$	606,656

(a) Classified rating on consumer loans primarily based on delinquency status.

(b) At December 31, 2019, $1.7 billion of GNMA loans 90 days or more past due and $1.6 billion of restructured GNMA loans whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs were classified with a pass rating, unchanged from December 31, 2018.

For all loan classes, a loan is considered to be impaired when, based on current events or information, it is probable the Company will be unable to collect all amounts due per the contractual terms of the loan agreement. A summary of impaired loans, which include all nonaccrual and TDR loans, by portfolio class was as follows:

(Dollars in Millions)	Period-end Recorded Investment(a)		Unpaid Principal Balance		Valuation Allowance		Commitments to Lend Additional Funds
December 31, 2019
Commercial	$	483	$	1,048	$	39	$	158
Commercial real estate		242		603		7		–
Residential mortgages		1,515		1,827		71		–
Credit card		263		263		81		–
Other retail		318		417		12		2
Total loans, excluding loans purchased from GNMA mortgage pools		2,821		4,158		210		160
Loans purchased from GNMA mortgage pools		1,622		1,622		39		–
Total	$	4,443	$	5,780	$	249	$	160
December 31, 2018
Commercial	$	467	$	1,006	$	32	$	106
Commercial real estate		279		511		12		2
Residential mortgages		1,709		1,879		86		–
Credit card		245		245		69		–
Other retail		335		418		14		5
Total loans, excluding loans purchased from GNMA mortgage pools		3,035		4,059		213		113
Loans purchased from GNMA mortgage pools		1,639		1,639		41		–
Total	$	4,674	$	5,698	$	254	$	113

(a) Substantially all loans classified as impaired at December 31, 2019 and 2018, had an associated allowance for credit losses. The total amount of interest income recognized during 2019 on loans classified as impaired at December 31, 2019, excluding those acquired with deteriorated credit quality, was $194 million, compared to what would have been recognized at the original contractual terms of the loans of $246 million.

Additional information on impaired loans follows for the years ended December 31 follows:

(Dollars in Millions)	Average Recorded Investment		Interest Income Recognized
2019
Commercial	$	520	$	9
Commercial real estate		248		11
Residential mortgages		1,622		92
Credit card		257		–
Other retail		323		12
Total loans, excluding loans purchased from GNMA mortgage pools		2,970		124
Loans purchased from GNMA mortgage pools		1,638		70
Total	$	4,608	$	194
2018
Commercial	$	497	$	8
Commercial real estate		273		13
Residential mortgages		1,817		76
Credit card		236		3
Other retail		309		16
Covered Loans		25		1
Total loans, excluding loans purchased from GNMA mortgage pools		3,157		117
Loans purchased from GNMA mortgage pools		1,640		47
Total	$	4,797	$	164
2017
Commercial	$	683	$	7
Commercial real estate		273		11
Residential mortgages		2,135		103
Credit card		229		3
Other retail		287		14
Covered Loans		37		1
Total loans, excluding loans purchased from GNMA mortgage pools		3,644		139
Loans purchased from GNMA mortgage pools		1,672		65
Total	$	5,316	$	204

Troubled Debt Restructurings 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. The following table provides a summary of loans modified as TDRs for the years ended December 31, by portfolio class:

(Dollars in Millions)	Number of Loans		Pre-Modification Outstanding Loan Balance		Post- Modification Outstanding Loan Balance
2019
Commercial		3,445	$	376	$	359
Commercial real estate		136		129		125
Residential mortgages		417		55		54
Credit card		34,247		185		186
Other retail		2,952		63		61
Total loans, excluding loans purchased from GNMA mortgage pools		41,197		808		785
Loans purchased from GNMA mortgage pools		6,257		856		827
Total loans		47,454	$	1,664	$	1,612
2018
Commercial		2,824	$	336	$	311
Commercial real estate		127		168		169
Residential mortgages		526		73		69
Credit card		33,318		169		171
Other retail		2,462		58		55
Covered Loans		3		1		1
Total loans, excluding loans purchased from GNMA mortgage pools		39,260		805		776
Loans purchased from GNMA mortgage pools		6,268		821		803
Total loans		45,528	$	1,626	$	1,579
2017
Commercial		2,758	$	380	$	328
Commercial real estate		128		82		78
Residential mortgages		800		90		88
Credit card		33,615		161		162
Other retail		3,881		79		68
Covered Loans		11		2		2
Total loans, excluding loans purchased from GNMA mortgage pools		41,193		794		726
Loans purchased from GNMA mortgage pools		6,791		881		867
Total loans		47,984	$	1,675	$	1,593

Residential mortgages, home equity and second mortgages, and loans purchased from GNMA mortgage pools in the table above include trial period arrangements offered to customers during the periods presented. The post-modification balances for these loans reflect the current outstanding balance until a permanent modification is made. In addition, the post-modification balances typically include capitalization of unpaid accrued interest and/or fees under the various modification programs. For those loans modified as TDRs during the fourthquarter of 2019, at December 31, 2019, 41 residential mortgages, 17 home equity and second mortgage loans and 990 loans purchased from GNMA mortgage pools with outstanding balances of $6 million, $1 million and $136 million, respectively, were in a trial period and have estimated post-modification balances of $6 million, $1 million and $135 million, respectively, assuming permanent modification occurs at the end of the trial period.

The following table provides a summary of TDR loans that defaulted (fully or partially charged-off or became 90 days or more past due) for the years ended December 31, that were modified as TDRs within 12 months previous to default:

(Dollars in Millions)	Number of Loans		Amount Defaulted
2019
Commercial		1,040	$	46
Commercial real estate		36		24
Residential mortgages		137		15
Credit card		8,273		40
Other retail		380		10
Total loans, excluding loans purchased from GNMA mortgage pools		9,866		135
Loans purchased from GNMA mortgage pools		997		131
Total loans		10,863	$	266
2018
Commercial		836	$	71
Commercial real estate		39		15
Residential mortgages		191		18
Credit card		8,012		35
Other retail		334		5
Covered loans		1		–
Total loans, excluding loans purchased from GNMA mortgage pools		9,413		144
Loans purchased from GNMA mortgage pools		1,447		187
Total loans		10,860	$	331
2017
Commercial		724	$	53
Commercial real estate		36		9
Residential mortgages		374		41
Credit card		8,372		36
Other retail		415		5
Covered loans		4		–
Total loans, excluding loans purchased from GNMA mortgage pools		9,925		144
Loans purchased from GNMA mortgage pools		1,369		177
Total loans		11,294	$	321

In addition to the defaults in the table above, the Company had a total of 826 residential mortgage loans, home equity and second mortgage loans and loans purchased from GNMA mortgage pools for the year ended December 31, 2019, where borrowers did not successfully complete the trial periodarrangement and, therefore, are no longer eligible for a permanent modification under the applicable modification program. These loans had aggregate outstanding balances of $111 million for the year ended December 31, 2019.