The Company had loans of $91.8 billion at March 31, 2022, and $92.1 billion at December 31, 2021, pledged at the Federal Home Loan Bank, and loans of $79.7 billion at March 31, 2022, and $76.9 billion at December 31, 2021, pledged at the Federal Reserve Bank.

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 $394 million at March 31, 2022 and $475 million at December 31, 2021. All purchased loans are recorded at fair value at the date of purchase. The Company evaluates purchased loans for more-than-insignificant deterioration at the date of purchase in accordance with applicable authoritative accounting guidance. Purchased loans that have experienced more-than-insignificant deterioration from origination are considered purchased credit deteriorated loans. All other purchased loans are considered

non-purchased

credit deteriorated loans.

Allowance for Credit Losses

The allowance for credit losses is established for current expected credit losses on the Company’s loan and lease portfolio, including unfunded credit commitments. The allowance considers expected losses for the remaining lives of the applicable assets, inclusive of expected recoveries. The allowance for credit losses is increased through provisions charged to earnings and reduced by net charge-offs. Management evaluates the appropriateness of the allowance for credit losses on a quarterly basis.

Multiple economic scenarios are considered over a three-year reasonable and supportable forecast period, which includes increasing consideration of historical loss experience over years two and three. These economic scenarios are constructed with interrelated projections of multiple economic variables, and loss estimates are produced that consider the historical correlation of those economic variables with credit losses. After the forecast period, the Company fully reverts to long-term historical loss experience, adjusted for prepayments and characteristics of the current loan and lease portfolio, to estimate losses over the remaining life of the portfolio. The economic scenarios are updated at least quarterly and are designed to provide a range of reasonable estimates, from better to worse than current expectations. Scenarios are weighted based on the Company’s expectation of economic conditions for the foreseeable future and reflect significant judgment and consideration of economic forecast uncertainty. Final loss estimates also consider factors affecting credit losses not reflected in the scenarios, due to the unique aspects of current conditions and expectations. These factors may include, but are not limited to, loan servicing practices, regulatory guidance, and/or fiscal and monetary policy actions.

The allowance recorded for credit losses utilizes forward-looking expected loss models to consider a variety of factors affecting lifetime credit losses. These factors include, but are not limited to, macroeconomic variables such as unemployment rates, real estate prices, gross domestic product levels and corporate bonds spreads, as well as loan and borrower characteristics, such as internal risk ratings on commercial loans and consumer credit scores, delinquency status, collateral type and available valuation information, consideration of

end-of-term

losses on lease residuals, and the remaining term of the loan, adjusted for expected prepayments. For each loan portfolio, model estimates are adjusted as necessary to consider any relevant changes in portfolio composition, lending policies, underwriting standards, risk management practices, economic conditions or other factors that would affect the accuracy of the model. Expected credit loss estimates also include consideration of expected cash recoveries on loans previously

charged-off

or expected recoveries on collateral dependent loans where recovery is expected through sale of the collateral. Where loans do not exhibit similar risk characteristics, an individual analysis is performed to consider expected credit losses. The allowance recorded for individually evaluated loans greater than $5 million in the commercial lending segment is based on an analysis utilizing expected cash flows discounted using the original effective interest rate, the observable market price of the loan, or the fair value of the collateral, less selling costs, for collateral-dependent loans as appropriate.

The allowance recorded for Troubled Debt Restructuring (“TDR”) loans in the consumer lending segment is determined on a homogenous pool basis utilizing expected cash flows discounted using the original effective interest rate of the pool. The expected cash flows on TDR loans consider subsequent payment defaults since modification, the borrower’s ability to pay under the restructured terms, and the timing and amount of payments. The allowance for collateral-dependent loans in the consumer lending segment is determined based on the fair value of the collateral less costs to sell. For commercial TDRs individually evaluated for impairment, attributes of the borrower are the primary factors in determining the allowance for credit losses. For smaller commercial loans collectively evaluated for impairment, historical loss experience is also incorporated into the allowance methodology applied to this category of loans.

The Company’s methodology for determining the appropriate allowance for credit losses also considers the imprecision inherent in the methodologies used and allocated to the various loan portfolios. As a result, amounts determined under the methodologies described above, are adjusted by management to consider the potential impact of other qualitative factors not captured in the quantitative model adjustments which include, but are not limited to the following: model imprecision, imprecision in economic scenario assumptions, and emerging risks related to either changes in the environment that are affecting specific portfolios, or changes in portfolio concentrations over time that may affect model performance. The consideration of these items results in adjustments to allowance amounts included in the Company’s allowance for credit losses for each loan portfolio.

The Company also assesses the credit risk associated with

off-balance

sheet loan commitments, letters of credit, investment securities and derivatives. Credit risk associated with derivatives is reflected in the fair values recorded for those positions. The liability for

off-balance

sheet credit exposure related to loan commitments and other credit guarantees is included in other liabilities. Because business processes and credit risks associated with unfunded credit commitments are essentially the same as for loans, the Company utilizes similar processes to estimate its liability for unfunded credit commitments.

The results of the analysis are evaluated quarterly to confirm the estimates are appropriate for each specific loan portfolio, as well as the entire loan portfolio, as the entire allowance for credit losses is available for the entire loan portfolio.

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			Total Loans
Balance at December 31, 2021		$1,849			$1,123			$565			$1,673			$ 945			$6,155
Add
Provision for credit losses		19			(54	)		29			78			40			112
Deduct
Loans charged-off		55			1			5			158			61			280
Less recoveries of loans charged-off		(23	)		(6	)		(11	)		(46	)		(32	)		(118	)
Net loan charge-offs (recoveries)		32			(5	)		(6	)		112			29			162
Balance at March 31, 2022		$1,836			$1,074			$600			$1,639			$956			$6,105
Balance at December 31, 2020		$2,423			$1,544			$573			$2,355			$1,115			$8,010
Add
Provision for credit losses		(435	)		(19	)		(39	)		(259	)		(75	)		(827	)
Deduct
Loans charged-off		86			10			5			190			83			374
Less recoveries of loans charged-off		(30	)		(17	)		(10	)		(46	)		(48	)		(151	)
Net loan charge-offs (recoveries)		56			(7	)		(5	)		144			35			223
Balance at March 31, 2021		$1,932			$1,532			$539			$1,952			$1,005			$6,960

The decrease in the allowance for credit losses from December 31, 2021 to March 31, 2022 reflected continued strong credit quality, partially offset by loan growth and increasing economic uncertainty.

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 quality ratings as defined by the Company.

For all loan portfolio classes, loans are considered past due based on the number of days delinquent except for monthly amortizing loans which are classified delinquent based upon the number of contractually required payments not made (for example, two missed payments is considered 30 days delinquent). When a loan is placed on nonaccrual status, unpaid accrued interest is reversed, reducing interest income in the current period.

Commercial lending segment loans are generally placed on nonaccrual status when the collection of principal and interest has become 90 days past due or is otherwise considered doubtful. Commercial lending segment loans are generally fully charged down if unsecured by collateral or partially charged down to the fair value of the collateral securing the loan, less costs to sell, when the loan is placed on nonaccrual.

Consumer lending segment loans are generally

charged-off

at a specific number of days or payments past due. Residential mortgages and other retail loans secured by

1-4

family properties are generally charged down to the fair value of the collateral securing the loan, less costs to sell, at 180 days past due. Residential mortgage loans and lines in a first lien position are placed on nonaccrual status in instances where a partial

charge-off

occurs unless the loan is well secured and in the process of collection. Residential mortgage loans and lines in a junior lien position secured by

1-4

family properties are placed on nonaccrual status at 120 days past due or when they are behind a first lien that has become 180 days or greater past due or placed on nonaccrual status. Any secured consumer lending segment loan whose borrower has had debt discharged through bankruptcy, for which the loan amount exceeds the fair value of the collateral, is charged down to the fair value of the related collateral and the remaining balance is placed on nonaccrual status. Credit card loans continue to accrue interest until the account is

charged-off.

Credit cards are

charged-off

at 180 days past due. Other retail loans not secured by

1-4

family properties are

charged-off

at 120 days past due; and revolving consumer lines are

charged-off

at 180 days past due. Similar to credit cards, other retail loans are generally not placed on nonaccrual status because of the relative short period of time to

charge-off.

Certain retail customers having financial difficulties may have the terms of their credit card and other loan agreements modified to require only principal payments and, as such, are reported as nonaccrual.

For all loan classes, interest payments received on nonaccrual loans are generally recorded as a reduction to a loan’s carrying amount while a loan is on nonaccrual and are recognized as interest income upon payoff of the loan. However, interest income may be recognized for interest payments if the remaining carrying amount of the loan is believed to be collectible. In certain circumstances, loans in any class may be restored to accrual status, such as when a loan has demonstrated sustained repayment performance or no amounts are past due and prospects for future payment are no longer in doubt; or when the loan becomes well secured and is in the process of collection. Loans where there has been a partial

charge-off

may be returned to accrual status if all principal and interest (including amounts previously

charged-off)

is expected to be collected and the loan is current.

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 (b)		Total
March 31, 2022
Commercial	$	116,986		$ 234		$ 76		$ 174		$117,470
Commercial real estate		38,888		86		1		216		39,191
Residential mortgages (a)		78,028		105		140		214		78,487
Credit card		21,804		194		165		—		22,163
Other retail		61,157		237		68		161		61,623
Total loans	$	316,863		$ 856		$450		$ 765		$318,934
December 31, 2021
Commercial	$	111,270		$530		$49		$ 174		$112,023
Commercial real estate		38,678		80		11		284		39,053
Residential mortgages (a)		75,962		124		181		226		76,493
Credit card		22,142		193		165		—		22,500
Other retail		61,468		275		66		150		61,959
Total loans	$	309,520		$1,202		$472		$ 834		$312,028

(a)

At March 31, 2022, $662 million of loans 30–89 days past due and $1.3 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 $791 million and $1.5 billion at December 31, 2021, respectively.

(b)	Substantially all nonperforming loans at March 31, 2022 and December 31, 2021, had an associated allowance for credit losses. The Company recognized interest income on nonperforming loans of $3 million for the three months ended March 31, 2022 and 2021.

At March 31, 2022, the amount of foreclosed residential real estate held by the Company, and included in other real estate owned (“OREO”), was $23 million, compared with $22 million at December 31, 2021. These amounts excluded $27 million and $22 million at March 31, 2022 and December 31, 2021, 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 at March 31, 2022 and December 31, 2021, was $1.1 billion and $696 million, respectively, of which $876 million and $555 million, respectively, 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 Company classifies its loan portfolio classes using internal credit quality ratings on a quarterly basis. These ratings include pass, special mention and classified, and are an important part of the Company’s overall credit risk management process and evaluation of the allowance for credit losses. Loans with a pass rating represent those loans not classified on the Company’s rating scale for problem credits, as minimal credit risk has been identified. Special mention loans are those loans that have a potential weakness deserving management’s close attention. Classified loans are those loans where a well-defined weakness has been identified that may put full collection of contractual cash flows at risk. It is possible that others, given the same information, may reach different reasonable conclusions regarding the credit quality rating classification of specific loans.

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


	March 31, 2022										December 31, 2021
			Criticized										Criticized
(Dollars in Millions)	Pass		Special Mention		Classified (a)		Total Criticized		Total		Pass		Special Mention		Classified (a)		Total Criticized		Total
Commercial
Originated in 2022		$ 13,554		$ 8		$ 45		$ 53		$ 13,607		$ –		$ –		$ –		$ –		$ –
Originated in 2021		47,131		378		283		661		47,792		51,155		387		287		674		51,829
Originated in 2020		11,779		38		312		350		12,129		14,091		304		133		437		14,528
Originated in 2019		8,761		24		99		123		8,884		10,159		151		54		205		10,364
Originated in 2018		4,475		11		44		55		4,530		5,122		3		36		39		5,161
Originated prior to 2018		4,251		17		49		66		4,317		4,923		30		81		111		5,034
Revolving		25,756		261		194		455		26,211		24,722		268		117		385		25,107
Total commercial		115,707		737		1,026		1,763		117,470		110,172		1,143		708		1,851		112,023

Commercial real estate
Originated in 2022		3,170		110		185		295		3,465		–		–		–		–		–
Originated in 2021		12,419		17		705		722		13,141		13,364		6		990		996		14,360
Originated in 2020		6,907		78		241		319		7,226		7,459		198		263		461		7,920
Originated in 2019		5,750		310		556		866		6,616		6,368		251		610		861		7,229
Originated in 2018		2,847		42		213		255		3,102		2,996		29		229		258		3,254
Originated prior to 2018		3,898		19		152		171		4,069		4,473		55		224		279		4,752
Revolving		1,530		–		42		42		1,572		1,494		1		43		44		1,538
Total commercial real estate		36,521		576		2,094		2,670		39,191		36,154		540		2,359		2,899		39,053

Residential mortgages (b)
Originated in 2022		6,431		–		–		–		6,431		–		–		–		–		–
Originated in 2021		29,721		–		4		4		29,725		29,882		–		3		3		29,885
Originated in 2020		14,850		–		10		10		14,860		15,948		1		8		9		15,957
Originated in 2019		6,154		–		23		23		6,177		6,938		–		36		36		6,974
Originated in 2018		2,553		–		20		20		2,573		2,889		–		30		30		2,919
Originated prior to 2018		18,407		–		313		313		18,720		20,415		–		342		342		20,757
Revolving		1		–		–		–		1		1		–		–		–		1
Total residential mortgages		78,117		–		370		370		78,487		76,073		1		419		420		76,493

Credit card (c)		21,998		–		165		165		22,163		22,335		–		165		165		22,500

Other retail
Originated in 2022		4,644		–		–		–		4,644		–		–		–		–		–
Originated in 2021		20,495		–		7		7		20,502		22,455		–		6		6		22,461
Originated in 2020		10,972		–		9		9		10,981		12,071		–		9		9		12,080
Originated in 2019		6,327		–		14		14		6,341		7,223		–		17		17		7,240
Originated in 2018		2,675		–		12		12		2,687		3,285		–		14		14		3,299
Originated prior to 2018		3,174		–		20		20		3,194		3,699		–		24		24		3,723
Revolving		12,644		–		127		127		12,771		12,532		–		112		112		12,644
Revolving converted to term		460		–		43		43		503		472		–		40		40		512
Total other retail		61,391		–		232		232		61,623		61,737		–		222		222		61,959
Total loans		$313,734		$1,313		$3,887		$ 5,200		$318,934		$306,471		$1,684		$3,873		$ 5,557		$312,028
Total outstanding commitments		$678,366		$2,372		$5,684		$8,056		$686,422		$662,363		$3,372		$5,684		$ 9,056		$671,419

Note:

Year of origination is based on the origination date of a loan, or for existing loans the date when the maturity date, pricing or commitment amount is amended.

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

(b)

At March 31, 2022, $1.3 billion of GNMA loans 90 days or more past due and $978 million 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, compared with $1.5 billion and $1.1 billion at December 31, 2021, respectively.

(c)	All credit card loans are considered revolving loans.

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. Concessionary modifications are classified as TDRs unless the modification results in only an insignificant delay in payments to be received. The Company recognizes interest on TDRs if the borrower complies with the revised terms and conditions as agreed upon with the Company and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles, which is generally six months or greater. To the extent a previous restructuring was insignificant, the Company considers the cumulative effect of past restructurings related to the receivable when determining whether a current restructuring is a TDR.

The following table provides a summary of loans modified as TDRs for the periods presented by portfolio class:


	2022						2021
Three Months Ended March 31 (Dollars in Millions)	Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance		Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance
Commercial		509		$ 38		$ 32		704		$ 75		$ 60
Commercial real estate		9		11		10		56		86		71
Residential mortgages		840		228		226		336		104		104
Credit card		9,339		50		50		5,786		33		34
Other retail		728		37		37		1,325		37		32
Total loans, excluding loans purchased from GNMA mortgage pools		11,425		364		355		8,207		335		301
Loans purchased from GNMA mortgage pools		390		55		55		559		87		89
Total loans		11,815		$ 419		$410		8,766		$ 422		$ 390

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. At March 31, 2022, 6 residential mortgages, 1 home equity and second mortgage loan and 99 loans purchased from GNMA mortgage pools with outstanding balances of less than $1 million, less than $1 million and $14 million, respectively, were in a trial period and have estimated post-modification balances of less than $1 million, less than $1 million and $15 million, respectively, assuming permanent modification occurs at the end of the trial period.

The Company has implemented certain restructuring programs that may result in TDRs. However, many of the Company’s TDRs are also determined on a

case-by-case

basis in connection with ongoing loan collection processes.

For the commercial lending segment, modifications generally result in the Company working with borrowers on a

case-by-case

basis. Commercial and commercial real estate modifications generally include extensions of the maturity date and may be accompanied by an increase or decrease to the interest rate, which may not be deemed a market interest rate. In addition, the Company may work with the borrower in identifying other changes that mitigate loss to the Company, which may include additional collateral or guarantees to support the loan. To a lesser extent, the Company may waive contractual principal. The Company classifies all of the above concessions as TDRs to the extent the Company determines that the borrower is experiencing financial difficulty.

Modifications for the consumer lending segment are generally part of programs the Company has initiated. The Company modifies residential mortgage loans under Federal Housing Administration, United States Department of Veterans Affairs, or its own internal programs. Under these programs, the Company offers qualifying homeowners the opportunity to permanently modify their loan and achieve more affordable monthly payments by providing loan concessions. These concessions may include adjustments to interest rates, conversion of adjustable rates to fixed rates, extension of maturity dates or deferrals of payments, capitalization of accrued interest and/or outstanding advances, or in limited situations, partial forgiveness of loan principal. In most instances, participation in residential mortgage loan restructuring programs requires the customer to complete a short-term trial period. A permanent loan modification is contingent on the customer successfully completing the trial period arrangement, and the loan documents are not modified until that time. The Company reports loans in a trial period arrangement as TDRs and continues to report them as TDRs after the trial period.

Credit card and other retail loan TDRs are generally part of distinct restructuring programs providing customers experiencing financial difficulty with modifications whereby balances may be amortized up to 60 months, and generally include waiver of fees and reduced interest rates.

In addition, the Company considers secured loans to consumer borrowers that have debt discharged through bankruptcy where the borrower has not reaffirmed the debt to be TDRs.

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 periods presented, that were modified as TDRs within 12 months previous to default:


Three Months Ended March 31 (Dollars in Millions)	2022				2021
Three Months Ended March 31 (Dollars in Millions)	Number of Loans		Amount Defaulted		Number of Loans		Amount Defaulted
Commercial		214		$ 3		285		$ 16
Commercial real estate		3		1		7		5
Residential mortgages		34		3		15		2
Credit card		1,634		9		1,764		9
Other retail		83		1		280		5
Total loans, excluding loans purchased from GNMA mortgage pools		1,968		17		2,351		37
Loans purchased from GNMA mortgage pools		49		8		30		4
Total loans		2,017		$25		2,381		$ 41

In addition to the defaults in the table above, the Company had a total of 16 residential mortgage loans, home equity and second mortgage loans and loans purchased from GNMA mortgage pools for the three months ended March 31, 2022, where borrowers did not successfully complete the trial period arrangement and, therefore, are no longer eligible for a permanent modification under the applicable modification program. These loans had aggregate outstanding balances of $2 million for the three months ended March 31, 2022.

As of March 31, 2022, the Company had $105 million of commitments to lend additional funds to borrowers whose terms of their outstanding owed balances have been modified in TDRs.