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Loans and Related Allowance for Credit Losses

6 Months Ended

Jun. 30, 2020

NOTE 4 Loans and Related Allowance for Credit Losses

Loan Portfolio

Our loan portfolio consists of two portfolio segments – Commercial and Consumer. Each of these segments comprises multiple loan classes. Classes are characterized by similarities in risk attributes and the manner in which we monitor and assess credit risk.



Commercial		Consumer
Commercial		Consumer
• Commercial and industrial		• Home equity
• Commercial real estate		• Residential real estate
• Equipment lease financing		• Automobile
		• Credit card
		• Education
		• Other consumer

See Note 1 Accounting Policies for additional information on our loan related policies.

Credit Quality

We closely monitor economic conditions and loan performance trends to manage and evaluate our exposure to credit risk within the loan portfolio based on our defined loan classes. In doing so, we use several credit quality indicators, including trends in delinquency rates, nonperforming status, analysis of PD and LGD ratings, updated credit scores, and originated and updated LTV ratios.

The measurement of delinquency status is based on the contractual terms of each loan. Loans that are 30 days or more past due in terms of payment are considered delinquent. With the adoption of the CECL standard, accruing loans past due as of June 30, 2020 include PCD loans, while amounts as of December 31, 2019 excluded purchased impaired loans. See Note 1 Accounting Policies for additional information related to the adoption of this standard, including the discontinuation of purchased impaired loan accounting.

The following table presents the composition and delinquency status of our loan portfolio at June 30, 2020 and December 31, 2019. Pursuant to the interagency guidance issued in April 2020 and in connection with the credit reporting rules from the CARES Act, the delinquency status of loans modified due to COVID-19 related hardships are being reported as of June 30, 2020 in alignment with the rules set forth for banks to report delinquency status to the credit agencies. These rules require that COVID-19 related loan modifications be reported as follows: (i) if current at the time of modification, the loan remains current throughout the modification period, (ii) if delinquent at the time of modification and the borrower was not made current as part of the modification, the loan maintains its reported as delinquent status during the modification period, or (iii) if delinquent at the time of modification and the borrower was made current as part of the modification or became current during the modification period, the loan is reported as current. As a result, certain loans modified due to COVID-19 related hardships are not being reported as past due as of June 30, 2020 based on the contractual terms of the loan, even where borrowers may not be making payments on their loans during the modification period.

Table 44: Analysis of Loan Portfolio



	Accruing
Dollars in millions	Current or Less Than 30 Days Past Due			30-59 Days Past Due			60-89 Days Past Due			90 Days Or More Past Due			Total Past Due (c)				Nonperforming Loans			Fair Value Option Nonaccrual Loans (d)			Total Loans (e)(f)
June 30, 2020 (a) (b)
Commercial
Commercial and industrial	$	143,531		$	49		$	28		$	34		$	111			$	693					$	144,335
Commercial real estate	28,665			51			4						55				43						28,763
Equipment lease financing	7,058			8			9						17				22						7,097
Total commercial	179,254			108			41			34			183				758						180,195
Consumer
Home equity	24,089			70			27						97				636			$	57		24,879
Residential real estate	21,141			198			93			264			555			(c)	305			468			22,469
Automobile	15,843			105			34			19			158				156						16,157
Credit card	6,408			53			38			61			152				15						6,575
Education	3,004			39			23			66			128			(c)							3,132
Other consumer	4,786			17			8			12			37				6						4,829
Total consumer	75,271			482			223			422			1,127				1,118			525			78,041
Total	$	254,525		$	590		$	264		$	456		$	1,310			$	1,876		$	525		$	258,236
Percentage of total loans	98.56		%	.23		%	.10		%	.18		%	.51		%		.73		%	.20		%	100.00		%


(a)	Amounts in table represent loans held for investment and do not include any associated valuation allowance.


(b)	The accrued interest associated with our loan portfolio at June 30, 2020 totaled $.7 billion and is included in Other assets on the Consolidated Balance Sheet.


(c)	Past due loan amounts include government insured or guaranteed Residential real estate loans and Education loans totaling $.4 billion and $.1 billion, respectively, at June 30, 2020.


(d)	Consumer loans accounted for under the fair value option for which we do not expect to collect substantially all principal and interest are subject to nonaccrual accounting and classification upon meeting any of our nonaccrual policies. Given that these loans are not accounted for at amortized cost, these loans have been excluded from the nonperforming loan population.


(e)	Net of unearned income, unamortized deferred fees and costs on originated loans, and premiums or discounts on purchased loans totaling $1.6 billion at June 30, 2020.


(f)	Collateral dependent loans totaled $1.1 billion at June 30, 2020. The majority of these loans are within the Home equity and Residential real estate loan classes and are secured by consumer real estate.



	Accruing
Dollars in millions	Current or Less Than 30 Days Past Due			30-59 Days Past Due			60-89 Days Past Due			90 Days Or More Past Due			Total Past Due (h)				Nonperforming Loans			Fair Value Option Nonaccrual Loans (i)			Purchased Impaired Loans			Total Loans (j)
December 31, 2019 (g)
Commercial
Commercial and industrial	$	124,695		$	102		$	30		$	85		$	217			$	425								$	125,337
Commercial real estate	28,061			4			1						5				44									28,110
Equipment lease financing	7,069			49			5						54				32									7,155
Total commercial	159,825			155			36			85			276				501									160,602
Consumer
Home equity	23,791			58			24						82				669						$	543		25,085
Residential real estate	19,640			140			69			315			524			(h)	315			$	166		1,176			21,821
Automobile	16,376			178			47			18			243				135									16,754
Credit card	7,133			60			37			67			164				11									7,308
Education	3,156			55			34			91			180			(h)										3,336
Other consumer	4,898			15			11			9			35				4									4,937
Total consumer	74,994			506			222			500			1,228				1,134			166			1,719			79,241
Total	$	234,819		$	661		$	258		$	585		$	1,504			$	1,635		$	166		$	1,719		$	239,843
Percentage of total loans	97.90		%	.28		%	.11		%	.24		%	.63		%		.68		%	.07		%	.72		%	100.00		%


(g)	Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment does not include any associated valuation allowance.

(h)

Past due loan amounts exclude purchased impaired loans, even if contractually past due (or if we do not expect to receive payment in full based on the original contractual terms), as we accreted interest income over the expected life of the loans. Past due loan amounts include government insured or guaranteed Residential real estate loans totaling $.4 billion and Education loans totaling $.2 billion at December 31, 2019.


(i)	Consumer loans accounted for under the fair value option for which we do not expect to collect substantially all principal and interest are subject to nonaccrual accounting and classification upon meeting any of our nonaccrual policies. Given that these loans are not accounted for at amortized cost, these loans have been excluded from the nonperforming loan population.


(j)	Net of unearned income, unamortized deferred fees and costs on originated loans, and premiums or discounts on purchased loans totaling $1.1 billion at December 31, 2019.

At June 30, 2020, we pledged $34.3 billion of commercial loans to the Federal Reserve Bank and $70.2 billion of residential real estate and other loans to the Federal Home Loan Bank as collateral for the ability to borrow, if necessary. The comparable amounts at December 31, 2019 were $16.9 billion and $68.0 billion, respectively. Amounts pledged reflect the unpaid principal balances.

Nonperforming Assets

Nonperforming assets include nonperforming loans and leases, OREO and foreclosed assets. Nonperforming loans are those loans accounted for at amortized cost whose credit quality has deteriorated to the extent that full collection of contractual principal and interest is not probable. Interest income is not recognized on these loans. Loans accounted for under the fair value option are reported as performing loans, however, when nonaccrual criteria is met interest income is not recognized on these loans. Additionally, certain government insured or guaranteed loans for which we expect to collect substantially all principal and interest are not reported as nonperforming loans and continue to accrue interest.

With the adoption of the CECL standard, nonperforming loans as of June 30, 2020 include PCD loans. Amounts as of December 31, 2019 excluded purchased impaired loans as we were accreting interest income over the expected life of the loans. See Note 1 Accounting Policies for additional information related to the adoption of this standard and our nonperforming loan and lease policies.

The following table presents our nonperforming assets as of June 30, 2020 and December 31, 2019, respectively.

Table 45: Nonperforming Assets



Dollars in millions	June 30 2020			December 31 2019
Nonperforming loans
Commercial	$	758		$	501
Consumer (a)	1,118			1,134
Total nonperforming loans (b)	1,876			1,635
OREO and foreclosed assets	79			117
Total nonperforming assets	$	1,955		$	1,752
Nonperforming loans to total loans	.73		%	.68		%
Nonperforming assets to total loans, OREO and foreclosed assets	.76		%	.73		%
Nonperforming assets to total assets	.43		%	.43		%


(a)	Excludes most unsecured consumer loans and lines of credit, which are charged off after 120 to 180 days past due and are not placed on nonperforming status.


(b)	Nonperforming loans for which there is no related ALLL totaled $.6 billion at June 30, 2020, and is primarily comprised of loans with a valuation that exceeds the amortized cost basis.

Nonperforming loans also include certain loans whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. In accordance with applicable accounting guidance, these loans are considered TDRs. See Note 1 Accounting Policies and the TDR section of this Note 4 for additional information on TDRs.

Total nonperforming loans in Table 45 include TDRs of $.9 billion at both June 30, 2020 and December 31, 2019. TDRs that are performing, including consumer credit card TDR loans, totaled $.7 billion and $.8 billion at June 30, 2020 and December 31, 2019, respectively, and are excluded from nonperforming loans.

Additional Credit Quality Indicators by Loan Class

Commercial and Industrial

For commercial and industrial loans, we monitor the performance of the borrower in a disciplined and regular manner based upon the level of credit risk inherent in the loan. To evaluate the level of credit risk, we assign an internal risk rating reflecting the borrower’s PD and LGD. This two-dimensional credit risk rating methodology provides granularity in the risk monitoring process. These ratings are reviewed and updated, generally at least once per year. For small balance homogeneous pools of commercial and industrial loans, mortgages and leases, we apply scoring techniques to assist in determining the PD. Further, on a periodic basis, we update our LGD estimates associated with each rating grade based upon historical data. The combination of the PD and LGD ratings assigned to commercial and industrial loans, capturing both the combination of expectations of default and loss severity in event of default, reflects credit quality characteristics as of the reporting date and are used as inputs into our loss forecasting process.

Based upon the amount of the lending arrangement and our risk rating assessment, we follow a formal schedule of written periodic review. Quarterly, we conduct formal reviews of a market’s or business unit’s loan portfolio, focusing on those loans which we perceive to be of higher risk, based upon PDs and LGDs, or loans for which credit quality is weakening. If circumstances warrant, it is our practice to review any customer obligation and its level of credit risk more frequently. We attempt to proactively manage our loans by using various procedures that are customized to the risk of a given loan, including ongoing outreach, contact, and assessment of obligor financial conditions, collateral inspection and appraisal.

Commercial Real Estate

We manage credit risk associated with our commercial real estate projects and commercial mortgages similar to commercial and industrial loans by evaluating PD and LGD. Risks associated with commercial real estate projects and commercial mortgage activities tend to be correlated to the loan structure and collateral location, project progress and business environment. As a result, these attributes are also monitored and utilized in assessing credit risk.

As with the commercial and industrial loan class, a formal schedule of periodic review is also performed to assess market/geographic risk and business unit/industry risk. Often as a result of these overviews, more in-depth reviews and increased scrutiny are placed on areas of higher risk, such as adverse changes in risk ratings, deteriorating operating trends, and/or areas that concern management. These reviews are designed to assess risk and facilitate actions to mitigate such risks.

Equipment Lease Financing

We manage credit risk associated with our equipment lease financing loan class similar to commercial and industrial loans by analyzing PD and LGD.

Based upon the dollar amount of the lease and the level of credit risk, we follow a formal schedule of periodic review. Generally, this occurs quarterly, although we have established practices to review such credit risk more frequently if circumstances warrant. Our review process entails analysis of the following factors: equipment value/residual value, exposure levels, jurisdiction risk, industry risk, guarantor requirements, and regulatory compliance as applicable.

Table 46: Commercial Credit Quality Indicators (a)



	Term Loans by Origination Year
June 30, 2020 - In millions	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Commercial and industrial
Pass Rated	$	24,271	$	17,179	$	10,823	$	7,171	$	5,013	$	11,039	$	60,961	$	59	$	136,516
Criticized	218		524		656		463		247		517		5,177		17		7,819
Total commercial and industrial	24,489		17,703		11,479		7,634		5,260		11,556		66,138		76		144,335
Commercial real estate
Pass Rated	1,797		7,027		4,054		3,652		2,734		8,347		216				27,827
Criticized	3		73		26		64		252		422		96				936
Total commercial real estate	1,800		7,100		4,080		3,716		2,986		8,769		312				28,763
Equipment lease financing
Pass Rated	736		1,385		1,179		969		631		1,909						6,809
Criticized	15		87		97		39		19		31						288
Total equipment lease financing	751		1,472		1,276		1,008		650		1,940						7,097
Total commercial	$	27,040	$	26,275	$	16,835	$	12,358	$	8,896	$	22,265	$	66,450	$	76	$	180,195



December 31, 2019 - In millions	Pass Rated		Criticized		Total Loans
Commercial and industrial	$	119,761	$	5,576	$	125,337
Commercial real estate	27,424		686		28,110
Equipment lease financing	6,891		264		7,155
Total commercial	$	154,076	$	6,526	$	160,602


(a)	Loans in our commercial portfolio are classified as Pass Rated or Criticized based on the regulatory definitions, which are driven by the PD and LGD ratings that we assign. The Criticized classification includes loans that were rated special mention, substandard or doubtful as of June 30, 2020 and December 31, 2019.

Home Equity and Residential Real Estate

We use several credit quality indicators, including delinquency information, nonperforming loan information, updated credit scores, originated and updated LTV ratios to monitor and manage credit risk within the home equity and residential real estate loan classes. A summary of credit quality indicators follows:

Delinquency/Delinquency Rates: We monitor trending of delinquency/delinquency rates for home equity and residential real estate loans. See Table 44 for additional information.

Nonperforming Loans: We monitor trending of nonperforming loans for home equity and residential real estate loans. See Table 44 for additional information.

Credit Scores: We use a national third-party provider to update FICO credit scores for home equity and residential real estate loans at least quarterly. The updated scores are incorporated into a series of credit management reports, which are utilized to monitor the risk in the loan classes.

LTV (inclusive of combined loan-to-value (CLTV) for first and subordinate lien positions): At least annually, we update the property values of real estate collateral and calculate an updated LTV ratio. For open-end credit lines secured by real estate in regions experiencing significant declines in property values, more frequent valuations may occur. We examine LTV migration and stratify LTV into categories to monitor the risk in the loan classes.

We use a combination of original LTV and updated LTV for internal risk management and reporting purposes (e.g., line management, loss mitigation strategies). In addition to the fact that estimated property values by their nature are estimates, given certain data limitations it is important to note that updated LTVs may be based upon management’s assumptions (i.e., if an updated LTV is not provided by the third-party service provider, HPI changes will be incorporated in arriving at management’s estimate of updated LTV).

Updated LTV is estimated using modeled property values. The related estimates and inputs are based upon an approach that uses a combination of third-party automated valuation models, broker price opinions, HPI indices, property location, internal and external balance information, origination data and management assumptions. We generally utilize origination lien balances provided by a third-party, where applicable, which do not include an amortization assumption when calculating updated LTV. Accordingly, the results of the calculations do not represent actual appraised loan level collateral or updated LTV based upon lien balances held by others, and as such, are necessarily imprecise and subject to change as we refine our methodology.

The following table presents credit quality indicators for the home equity and residential real estate loan classes.

Table 47: Home Equity and Residential Real Estate Credit Quality Indicators



	Term Loans by Origination Year
June 30, 2020 – In millions	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Home equity
Current estimated LTV ratios																	.
Greater than or equal to 100%			$	33	$	26	$	24	$	14	$	127	$	677	$	365	$	1,266
Greater than or equal to 90% to less than 100%	$	4	77		32		16		12		82		693		247		1,163
Less than 90%	1,779		2,363		688		972		818		4,563		8,177		3,090		22,450
Total home equity	$	1,783	$	2,473	$	746	$	1,012	$	844	$	4,772	$	9,547	$	3,702	$	24,879
Updated FICO scores
Greater than 660	$	1,738	$	2,353	$	685	$	949	$	792	$	4,287	$	9,085	$	2,832	$	22,721
Less than or equal to 660	45		120		61		62		51		475		449		780		2,043
No FICO score available							1		1		10		13		90		115
Total home equity	$	1,783	$	2,473	$	746	$	1,012	$	844	$	4,772	$	9,547	$	3,702	$	24,879
Residential real estate
Current estimated LTV ratios
Greater than or equal to 100%			$	19	$	44	$	68	$	52	$	226					$	409
Greater than or equal to 90% to less than 100%	$	7	54		57		55		43		131						347
Less than 90%	3,872		5,526		1,598		2,475		2,535		5,128						21,134
Government insured or guaranteed loans	1		10		13		17		26		512						579
Total residential real estate	$	3,880	$	5,609	$	1,712	$	2,615	$	2,656	$	5,997					$	22,469
Updated FICO scores
Greater than 660	$	3,858	$	5,530	$	1,655	$	2,538	$	2,548	$	4,704					$	20,833
Less than or equal to 660	20		64		36		39		68		632						859
No FICO score available	1		5		8		21		14		149						198
Government insured or guaranteed loans	1		10		13		17		26		512						579
Total residential real estate	$	3,880	$	5,609	$	1,712	$	2,615	$	2,656	$	5,997					$	22,469



	Home equity		Residential real estate
December 31, 2019 - In millions	Home equity		Residential real estate
Current estimated LTV ratios
Greater than or equal to 100%	$	1,243	$	333
Greater than or equal to 90% to less than 100%	1,047		340
Less than 90%	22,068		19,305
No LTV ratio available	184		83
Government insured or guaranteed loans			584
Purchased impaired loans	543		1,176
Total loans	$	25,085	$	21,821
Updated FICO Scores
Greater than 660	$	22,245	$	19,341
Less than or equal to 660	2,019		569
No FICO score available	278		151
Government insured or guaranteed loans			584
Purchased impaired loans	543		1,176
Total loans	$	25,085	$	21,821

Automobile, Credit Card, Education and Other Consumer

We monitor a variety of credit quality information in the management of these consumer loan classes. For all loan types, we generally use a combination of internal loan parameters as well as an updated FICO score. We use FICO scores as a primary credit quality indicator for automobile and credit card loans, as well as non-government guaranteed or non-insured education loans and other secured and unsecured lines and loans. Internal credit metrics, such as delinquency status, are heavily relied upon as credit quality indicators for government guaranteed or insured education loans and consumer loans to high net worth individuals, as internal credit metrics are more relevant than FICO scores for these types of loans.

Along with the monitoring of delinquency trends and losses for each class, FICO credit score updates are obtained at least quarterly along with a variety of credit bureau attributes. Loans with high FICO scores tend to have a lower likelihood of loss. Conversely, loans with low FICO scores tend to have a higher likelihood of loss.

The following table presents credit quality indicators for the automobile, credit card, education and other consumer loan classes.

Table 48: Credit Quality Indicators for Automobile, Credit Card, Education and Other Consumer Loan Classes



	Term Loans by Origination Year
June 30, 2020 - In millions	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Automobile
FICO score greater than 719	$	1,816	$	3,802	$	1,814	$	1,042	$	606	$	201					$	9,281
650 to 719	561		1,868		1,062		481		207		75						4,254
620 to 649	73		445		257		104		39		15						933
Less than 620	58		653		579		252		102		45						1,689
Total automobile	$	2,508	$	6,768	$	3,712	$	1,879	$	954	$	336					$	16,157
Credit card
FICO score greater than 719													$	3,395	$	11	$	3,406
650 to 719													2,152		30		2,182
620 to 649													378		12		390
Less than 620													462		46		508
No FICO score available or required (a)													86		3		89
Total credit card													$	6,473	$	102	$	6,575
Education
FICO score greater than 719	$	13	$	90	$	119	$	92	$	75	$	674					$	1,063
650 to 719	3		12		16		10		7		112						160
620 to 649			1		2		1				18						22
Less than 620					1		1		1		22						25
No FICO score available or required (a)	2		10		7		6		1		1						27
Total loans using FICO credit metric	18		113		145		110		84		827						1,297
Other internal credit metrics	18		59								1,758						1,835
Total education	$	36	$	172	$	145	$	110	$	84	$	2,585					$	3,132
Other consumer
FICO score greater than 719	$	297	$	545	$	188	$	60	$	19	$	80	$	212	$	1	$	1,402
650 to 719	117		313		134		31		9		23		143		1		771
620 to 649	13		51		24		5		1		4		22				120
Less than 620	8		48		33		10		3		7		36		1		146
No FICO score available or required (a)											2		6				8
Total loans using FICO credit metric	435		957		379		106		32		116		419		3		2,447
Other internal credit metrics	20		73		46		32		67		81		2,059		4		2,382
Total other consumer	$	455	$	1,030	$	425	$	138	$	99	$	197	$	2,478	$	7	$	4,829




December 31, 2019 - In millions	Automobile		Credit Card		Education		Other Consumer
FICO score greater than 719	$	9,232	$	3,867	$	1,139	$	1,421
650 to 719	4,577		2,326		197		843
620 to 649	1,001		419		25		132
Less than 620	1,603		544		27		143
No FICO score available or required (a)	341		152		15		27
Total loans using FICO credit metric	16,754		7,308		1,403		2,566
Consumer loans using other internal credit metrics					1,933		2,371
Total loans	$	16,754	$	7,308	$	3,336	$	4,937
Weighted-average updated FICO score (b)	726		724		773		727

(a)

Loans with no FICO score available or required generally refers to new accounts issued to borrowers with limited credit history, accounts for which we cannot obtain an updated FICO score (e.g., recent profile changes), cards issued with a business name and/or cards secured by collateral. Management proactively assesses the risk and size of this loan category and, when necessary, takes actions to mitigate the credit risk.


(b)	Weighted-average updated FICO score excludes accounts with no FICO score available or required.

Troubled Debt Restructurings (TDRs)

A TDR is a loan whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulty. Loans that have been restructured for COVID-19 related hardships and meet certain criteria under the CARES Act are not categorized as TDRs. See Note 1 Accounting Policies for additional information related to TDRs.

Table 49 quantifies the number of loans that were classified as TDRs as well as the change in the loans’ balance as a result of becoming a TDR during the three and six months ended June 30, 2020 and June 30, 2019. Additionally, the table provides information about the types of TDR concessions. See Note 3 Asset Quality in our 2019 Form 10-K for additional details on these TDR concessions.

Table 49: Financial Impact and TDRs by Concession Type



			Pre-TDR Amortized Cost Basis (b)		Post-TDR Amortized Cost Basis (c)
During the three months ended June 30, 2020 (a) Dollars in millions	Number of Loans		Pre-TDR Amortized Cost Basis (b)		Principal Forgiveness		Rate Reduction		Other		Total
Commercial		29	$	147	$	33			$	125	$	158
Consumer		3,589	57				$	19	35		54
Total TDRs		3,618	$	204	$	33	$	19	$	160	$	212
During the six months ended June 30, 2020 Dollars in millions
Commercial		42	$	209	$	39			$	162	$	201
Consumer		7,156	93				$	41	45		86
Total TDRs		7,198	$	302	$	39	$	41	$	207	$	287

(a) Impact of partial charge-offs at TDR date are included in this table.

(b) Represents the amortized cost basis of the loans as of the quarter end prior to TDR designation.



			Pre-TDR Recorded Investment (e)		Post-TDR Recorded Investment (f)
During the three months ended June 30, 2019 (d) Dollars in millions	Number of Loans		Pre-TDR Recorded Investment (e)		Principal Forgiveness	Rate Reduction		Other		Total
Commercial		15	$	31		$	1	$	27	$	28
Consumer		3,539	44			24		16		40
Total TDRs		3,554	$	75		$	25	$	43	$	68
During the six months ended June 30, 2019 Dollars in millions
Commercial		37	$	136		$	1	$	136	$	137
Consumer		7,353	86			48		32		80
Total TDRs		7,390	$	222		$	49	$	168	$	217

(d) Impact of partial charge-offs at TDR date are included in this table.

(e) Represents the recorded investment of the loans as of the quarter end prior to TDR designation, and excludes immaterial amounts of accrued interest receivable.

(f) Represents the recorded investment of the TDRs as of the end of the quarter in which the TDR occurs, and excludes immaterial amounts of accrued interest receivable.

After a loan is determined to be a TDR, we continue to track its performance under its most recent restructured terms. We consider a TDR to have subsequently defaulted when it becomes 60 days past due after the most recent date the loan was restructured. The following table provides a summary of TDRs that subsequently defaulted during the periods presented and were classified as

TDRs during the applicable 12-month period preceding June 30, 2020 and June 30, 2019.

Table 50: Subsequently Defaulted TDRs



In millions	2020		2019
Three months ended June 30	$	22	$	28
Six months ended June 30	$	37	$	39

Allowance for Credit Losses

We maintain the ACL related to loans at levels that we believe to be appropriate to absorb expected credit losses in the portfolios as of the balance sheet date. See Note 1 Accounting Policies for a discussion of the methodologies used to determine this allowance. A rollforward of the ACL related to loans follows.

Table 51: Rollforward of Allowance for Credit Losses



	Six months ended June 30, 2020
In millions	Commercial			Consumer			Total
Allowance for loan and lease losses
December 31, 2019	$	1,812		$	930		$	2,742
Adoption of ASU 2016-13 (a)	(304		)	767			463
January 1, 2020	1,508			1,697			3,205
Charge-offs	(205		)	(413		)	(618		)
Recoveries	39			131			170
Net (charge-offs)	(166		)	(282		)	(448		)
Provision for credit losses	2,039			1,133			3,172
Other	(1		)				(1		)
June 30, 2020	$	3,380		$	2,548		$	5,928
Allowance for unfunded lending related commitments (b)
December 31, 2019	$	316		$	2		$	318
Adoption of ASU 2016-13 (a)	53			126			179
January 1, 2020	369			128			497
Provision for (recapture of) credit losses	179			(14		)	165
June 30, 2020	$	548		$	114		$	662
Allowance for credit losses at June 30	$	3,928		$	2,662		$	6,590


(a)	Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020 and our transition from an incurred loss methodology for our reserves to an expected credit loss methodology.

(b)

See Note 9 Commitments for additional information about the underlying commitments related to this allowance.

The following presents an analysis of changes impacting the ACL related to loans for the six months ended June 30, 2020.

Table 52: Analysis of Changes in the Allowance for Credit Losses (a)

In millions

(a) Excludes allowances for investment securities and other financial assets.

(b) Represents changes in the portfolio such as the impact of increases/decreases in loan balances, age and mix due to new originations/purchases, as well as credit quality and net charge-off activity.

The $2.9 billion increase in the ACL since January 1, 2020 was driven by the following factors in the commercial and consumer portfolios:


•	Commercial reserves increased $2.1 billion attributable to the significantly adverse economic impact of the pandemic and its resulting effects on credit quality and loan growth.


•	Consumer reserves increased $.8 billion primarily reflecting the significantly adverse economic impact of the pandemic.

Allowance for Loan and Lease Losses

Prior to January 1, 2020, we maintained our ALLL at levels we believed to be appropriate to absorb estimated probable credit losses incurred in the portfolios as of the balance sheet date. We used the two main portfolio segments - Commercial and Consumer, and developed and documented the ALLL under separate methodologies for each of these portfolio segments. See Note 1 Accounting Policies in our 2019 Form 10-K for a description of the accounting policies for ALLL.

A rollforward of the ALLL and associated loan data follows:

Table 53: Rollforward of Allowance for Loan and Lease Losses and Associated Loan Data



At or for the six months ended June 30, 2019 Dollars in millions	Commercial			Consumer			Total
Allowance for loan and lease losses
January 1, 2019	$	1,663		$	966		$	2,629
Charge-offs	(84		)	(358		)	(442		)
Recoveries	40			124			164
Net (charge-offs)	(44		)	(234		)	(278		)
Provision for credit losses	187			182			369
Net decrease in allowance for unfunded loan commitments and letters of credit	(7		)	1			(6		)
Other				7			7
June 30, 2019	$	1,799		$	922		$	2,721
TDRs individually evaluated for impairment	$	33		$	123		$	156
Other loans individually evaluated for impairment	53						53
Loans collectively evaluated for impairment	1,713			517			2,230
Purchased impaired loans				282			282
June 30, 2019	$	1,799		$	922		$	2,721
Loan portfolio
TDRs individually evaluated for impairment	$	396		$	1,381		$	1,777
Other loans individually evaluated for impairment	287						287
Loans collectively evaluated for impairment	160,920			71,605			232,525
Fair value option loans (a)				755			755
Purchased impaired loans				1,871			1,871
June 30, 2019	$	161,603		$	75,612		$	237,215

(a) Loans accounted for under the fair value option were not evaluated for impairment as these loans are accounted for at fair value. Accordingly, there was no allowance recorded on those loans.