LOANS AND LEASES

12 Months Ended

Dec. 31, 2025

NOTE 3 - LOANS AND LEASES

Loans are classified as held for investment when management has the intent and ability to hold the loan for the foreseeable future, or until maturity or payoff. Loans held for investment are reported at the amount of their outstanding principal, net of charge-offs, unearned income, deferred loan origination fees and costs, and unamortized premiums or discounts on purchased loans. Deferred loan origination fees and costs and premiums and discounts on purchased loans are amortized as an adjustment of yield over the life of the loan using the effective interest method. Unamortized amounts are recorded as interest income or gain (loss) on sale, respectively, when a loan is prepaid or sold. Credit card receivables include billed and uncollected interest and fees.

Interest income on loans is determined using the effective interest method, which calculates periodic interest income at a constant effective yield on the net investment in the loan, providing a constant rate of return over the loan term. Loans accounted for using the fair value option are measured at fair value with corresponding changes reported in Mortgage banking fees and Capital markets fees, respectively, in the Consolidated Statements of Operations for residential mortgage LHFS and commercial LHFS.

Commitment fees for loans that are likely to be drawn down, along with other credit-related fees, are deferred and recognized as an adjustment to the effective interest rate over the loan term. Commitment fees are recognized over the commitment period on a straight-line basis if it is unlikely that a loan will be drawn down and are reported in Letter of credit and loan fees in the Consolidated Statements of Operations.

Loans and leases are disclosed in portfolio segments and classes. The Company’s loan and lease portfolio segments are commercial and retail with the following classes: commercial and industrial, commercial real estate, residential mortgages, home equity, automobile, education, and other retail.

The following table presents loans and leases, excluding LHFS:


	December 31,
(dollars in millions)	2025	2024
Commercial and industrial	$49,232	$42,551
Commercial real estate	24,580	27,225
Total commercial	73,812	69,776
Residential mortgages	35,024	32,726
Home equity	19,069	16,495
Automobile	2,310	4,744
Education	8,416	10,812
Other retail	4,061	4,650
Total retail	68,880	69,427
Total loans and leases	$142,692	$139,203

Accrued interest receivable on loans and leases held for investment totaled $825 million and $816 million as of December 31, 2025 and 2024, respectively, and is included in Other assets in the Consolidated Balance Sheets.

Loans pledged as collateral for FHLB borrowing capacity, primarily residential mortgages and home equity products, totaled $40.8 billion and $37.5 billion at December 31, 2025 and 2024, respectively. Loans pledged as collateral to support the contingent ability to borrow at the FRB discount window, if necessary, were primarily comprised of education, commercial and industrial, and commercial real estate loans, and totaled $19.0 billion and $22.9 billion at December 31, 2025 and 2024, respectively.

Loans are classified as held for sale when management does not have the intent and ability to hold the loan for the foreseeable future. LHFS for which the fair value option is not elected are carried at the lower of amortized cost or fair value less costs to sell, with any write-downs or subsequent recoveries recognized in Other income in the Consolidated Statements of Operations. The Company has elected to account for residential mortgage LHFS and certain commercial LHFS at fair value. See Note 18 for additional information.

The following table presents the composition of LHFS:


	December 31, 2025			December 31, 2024
(dollars in millions)	Residential Mortgages(1)	Commercial(2)	Total	Residential Mortgages(1)	Commercial(2)	Total
Loans held for sale at fair value	$895	$170	$1,065	$633	$192	$825
Other loans held for sale	—	133	133	—	33	33
Total loans held for sale	$895	$303	$1,198	$633	$225	$858

(1) Residential mortgage LHFS at fair value are originated for sale.

(2) Commercial LHFS at fair value consist of loans managed by the Company’s commercial secondary loan desk. Other commercial LHFS primarily consist of loans associated with the Company’s syndication business.

The Company leases equipment for commercial use with a primary focus on middle-market and mid-corporate clients for large capital equipment acquisitions including railcars, trucks and trailers, and other equipment. The determination of whether an arrangement is a lease and the related lease classification are made at lease inception. Lease terms predominantly range from three to ten years and may include options to purchase the leased property prior to the end of the lease term. The Company does not have lease agreements that contain both lease and non-lease components.

A lessee is evaluated from a credit perspective using the same underwriting standards and procedures for a loan borrower. A lessee is expected to make rental payments based on its cash flows and the viability of its operations. Leases are not typically evaluated as collateral-based transactions and, therefore, the lessee’s overall financial strength is the most important credit evaluation factor.

The components of the net investment in direct financing and sales-type leases, before ALLL, are presented below:


	December 31,
(dollars in millions)	2025	2024
Total future minimum lease rentals	$1,005	$916
Estimated residual value of leased equipment (non-guaranteed)	225	231
Initial direct costs	4	4
Unearned income	(154)	(124)
Total leases	$1,080	$1,027

Interest income on direct financing and sales-type leases for the years ended December 31, 2025, 2024, and 2023 was $45 million, $41 million, and $46 million, respectively, and is reported within Interest and fees on loans and leases in the Consolidated Statements of Operations.

A maturity analysis of direct financing and sales-type lease receivables at December 31, 2025 is presented below:


Year			(dollars in millions)
2026			$237
2027			231
2028			180
2029			120
2030			107
Thereafter			130
Total undiscounted future minimum lease rentals			$1,005