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ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES
 9 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASES ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASESBeginning January 1, 2020, the former incurred loss method was replaced with the CECL method to calculate estimated loan loss. The ACL addresses credit losses expected in the existing loan and lease portfolio and is presented as a reserve against loans and leases on the Consolidated Balance Sheets. Loan and lease losses are charged off against the ACL, with recoveries of amounts previously charged off credited to the ACL. Provisions for credit losses are charged to operations based on management’s periodic evaluation of the appropriate level of the ACL. Included in Table 5.1 is the impact to the ACL from our CECL (ASC 326) adoption on January 1, 2020. All prior periods are presented using the incurred loss method which was the accounting method in place at the time of the respective financial statements.
Following is a summary of changes in the ACL, by loan and lease class:
TABLE 5.1

(in millions)Balance at
Beginning of
Period		Charge-
Offs		RecoveriesNet
Charge-
Offs		Provision for Credit LossesBalance at
End of
Period
Three Months Ended September 30, 2020
Commercial real estate$163 $(3)$1 $(2)$23 $184 
Commercial and industrial98 (17)1 (16)11 93 
Commercial leases17 — — — — 17 
Other1 (1)— (1)1 1 
Total commercial loans and leases279 (21)2 (19)35 295 
Direct installment25 — — — (1)24 
Residential mortgages33 (1)1 — (2)31 
Indirect installment17 (1)1 — (5)12 
Consumer lines of credit11 — — — — 11 
Total consumer loans86 (2)2 — (8)78 
Total allowance for credit losses on loans and leases$365 $(23)$4 $(19)$27 $373 

(in millions)Balance at
Beginning of
Period		Charge-
Offs		RecoveriesNet
Charge-
Offs		Provision for Credit LossesASC 326 Adoption ImpactInitial ACL on PCD LoansBalance at
End of
Period
Nine Months Ended September 30, 2020
Commercial real estate$60 $(8)$6 $(2)$48 $38 $40 $184 
Commercial and industrial53 (25)3 (22)50 8 4 93 
Commercial leases11 — — — 6 — — 17 
Other9 (3)— (3)4 (9)— 1 
Total commercial loans and leases133 (36)9 (27)108 37 44 295 
Direct installment13 (1)— (1)1 10 1 24 
Residential mortgages22 (1)1 — (1)6 4 31 
Indirect installment19 (6)3 (3)(6)2 — 12 
Consumer lines of credit9 (2)— (2)3 — 1 11 
Total consumer loans63 (10)4 (6)(3)18 6 78 
Total allowance on loans and leases$196 $(46)$13 $(33)$105 $55 $50 $373 
This expected loss model takes into consideration the expected losses over the expected life of the loan compared to the incurred loss model under the prior standard. At the time of CECL adoption, we recorded a one-time cumulative-effect adjustment of $50.6 million as a reduction to Retained Earnings. The ACL balance increased by $105 million and included a “gross-up" to PCI loan balances and the ACL of $50 million. Included in the CECL adoption impact was an increase to our AULC of $10 million. The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates. Specifically, the following considerations are incorporated into the ACL calculation:
•a third-party macroeconomic forecast scenario;
•a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and
•the historical through-the-cycle mean was calculated using an expanded period to include a prior recessionary period.
COVID-19 Impacts
Beginning in March 2020, the broader economy experienced a significant deterioration in the macroeconomic environment driven by the COVID-19 pandemic resulting in notable adverse changes to forecasted economic variables utilized in our ACL modeling process. Based on these changes, we are utilizing a third-party recessionary macroeconomic forecast scenario for ACL modeling purposes. This scenario captures forecasted macroeconomic variables as of mid-September to ensure our ACL calculation considers the most recently available macroeconomic data in a quickly evolving environment at quarter-end. Macroeconomic variables that we utilized from this scenario include but are not limited to: (i) gross domestic product, which reflects a contraction of up to 7.0% from the beginning of 2020 with average annual increases not occurring until mid-2021, (ii) the Dow Jones Industrial Average, which remains below peak levels throughout the R&S forecast period, (iii) unemployment, which averages 10% over the R&S forecast period and (iv) the Volatility Index, which remains elevated in the fourth quarter of 2020 before declining to pre-pandemic levels in mid-2021.

The ACL of $373.0 million at September 30, 2020 increased $177.1 million, or 90.4%, from December 31, 2019 and reflects the Day 1 CECL adoption increase to the ACL of $105.3 million on January 1, 2020. Our ending ACL coverage ratio at September 30, 2020 was 1.45%. Total provision for credit losses for the three months ended September 30, 2020 was $27.2 million. Net charge-offs were $19.3 million during the three months ended September 30, 2020, compared to $6.4 million during the three months ended September 30, 2019, with the increase primarily due to commercial charge-offs taken against credits that were somewhat impacted by COVID-19. Total provision for credit losses for the nine months ended September 30, 2020 was $105.2 million. Net charge-offs were $33.4 million during the nine months ended September 30, 2020, compared to $23.0 million during the nine months ended September 30, 2019, with the increase primarily due to the aforementioned commercial charge-offs that occurred during the third quarter, which was partially offset by higher commercial recoveries in the current period as compared to the prior year.
Following is a summary of changes in the ACL, by loan and lease class:

TABLE 5.2
(in millions)Balance at
Beginning of
Period		Charge-
Offs		RecoveriesNet
Charge-
Offs		Provision
for Credit
Losses		Balance at
End of
Period
Three Months Ended September 30, 2019
Commercial real estate$61 $(1)$— $(1)$(2)$58 
Commercial and industrial52 (3)1 (2)7 57 
Commercial leases9 — — — 1 10 
Other1 — — — 1 2 
Total commercial loans and leases123 (4)1 (3)7 127 
Direct installment13 — — — (1)12 
Residential mortgages20 — — — 3 23 
Indirect installment18 (3)1 (2)2 18 
Consumer lines of credit9 — — — — 9 
Total consumer loans60 (3)1 (2)4 62 
Total allowance for credit losses on originated loans and leases183 (7)2 (5)11 189 
Purchased credit-impaired loans1 — — — — 1 
Other acquired loans4 (2)1 (1)1 4 
Total allowance for credit losses on acquired loans5 (2)1 (1)1 5 
Total allowance for credit losses$188 $(9)$3 $(6)$12 $194 
Nine Months Ended September 30, 2019
Commercial real estate$55 $(3)$1 $(2)$5 $58 
Commercial and industrial49 (7)3 (4)12 57 
Commercial leases8 — — — 2 10 
Other2 (2)— (2)2 2 
Total commercial loans and leases114 (12)4 (8)21 127 
Direct installment14 (1)— (1)(1)12 
Residential mortgages20 (1)— (1)4 23 
Indirect installment15 (8)3 (5)8 18 
Consumer lines of credit10 (1)— (1)— 9 
Total consumer loans59 (11)3 (8)11 62 
Total allowance on originated loans and leases173 (23)7 (16)32 189 
Purchased credit-impaired loans1 — — — — 1 
Other loans acquired in a business combination6 (9)2 (7)5 4 
Total allowance on loans acquired in a business combination7 (9)2 (7)5 5 
Total allowance for credit losses$180 $(32)$9 $(23)$37 $194 
Following is a summary of the individual and collective ACL and corresponding loan and lease balances by class:
TABLE 5.3
 Allowance for Credit LossesLoans and Leases Outstanding
(in millions)Individually
Evaluated for
Impairment		Collectively
Evaluated for
Impairment		Loans and
Leases		Individually
Evaluated for
Impairment		Collectively
Evaluated for
Impairment
December 31, 2019
Commercial real estate$2 $58 $7,114 $13 $7,101 
Commercial and industrial2 51 5,063 17 5,046 
Commercial leases— 11 432 — 432 
Other— 2 21 — 21 
Total commercial loans and leases4 122 12,630 30 12,600 
Direct installment— 13 1,758 — 1,758 
Residential mortgages— 22 2,995 — 2,995 
Indirect installment— 19 1,922 — 1,922 
Consumer lines of credit— 9 1,092 — 1,092 
Total consumer loans— 63 7,767 — 7,767 
Total$4 $185 $20,397 $30 $20,367 

The above table excludes loans acquired in a business combination that were pooled into groups of loans for evaluating impairment.