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Asset Quality
 9 Months Ended
Sep. 30, 2020
Credit Loss [Abstract]  
Asset Quality
4. Asset Quality

ALLL

We estimate the appropriate level of the ALLL on at least a quarterly basis. The methodology is described in Note 1 ("Basis of Presentation and Accounting Policies") under the heading "Allowance for Loan and Lease Losses" of this report.

The ALLL at September 30, 2020, represents our current estimate of lifetime credit losses inherent in the loan portfolio at that date. The changes in the ALLL by loan category for the periods indicated are as follows:

Three months ended September 30, 2020:
in millionsJune 30, 2020ProvisionCharge-offsRecoveriesSeptember 30, 2020
Commercial and Industrial $725 $177 $(101)$9 $810 
Commercial real estate:
Real estate — commercial mortgage292 (2)(13)2 279 
Real estate — construction41 (7)— — 34 
Total commercial real estate loans333 (9)(13)2 313 
Commercial lease financing55 13 (10)— 58 
Total commercial loans1,113 181 (124)11 1,181 
Real estate — residential mortgage101 2 — 1 104 
Home equity loans197 (13)(4)3 183 
Consumer direct loans130 1 (8)2 125 
Credit cards107 (5)(9)2 95 
Consumer indirect loans60 (16)(6)4 42 
Total consumer loans595 (31)(27)12 549 
Total ALLL — continuing operations1,708 150 
(a)
(151)23 1,730 
Discontinued operations43 (1)— — 42 
Total ALLL — including discontinued operations$1,751 $149 $(151)$23 $1,772 
(a)Excludes a provision for losses on lending-related commitments of $10 million.

Three months ended September 30, 2019:
in millionsJune 30, 2019ProvisionCharge-offsRecoveriesSeptember 30, 2019
Commercial and Industrial $549 $175 $(176)$6 $554 
Commercial real estate:
Real estate — commercial mortgage139 (5)— — 134 
Real estate — construction24 (1)— — 23 
Total commercial real estate loans163 (6)— — 157 
Commercial lease financing35 — (1)1 35 
Total commercial loans747 169 (177)7 746 
Real estate — residential mortgage7 1 (1)— 7 
Home equity loans36 1 (6)2 33 
Consumer direct loans32 10 (10)2 34 
Credit cards44 11 (11)2 46 
Consumer indirect loans24 7 (8)4 27 
Total consumer loans143 30 (36)10 147 
Total ALLL — continuing operations890 199 
(a) (b)
(213)
 (b)
17 893 
Discontinued operations12 (1)(1)1 11 
Total ALLL — including discontinued operations$902 $198 $(214)$18 $904 
(a)Excludes a provision for losses on lending-related commitments of $1 million.
(b)Includes the realization of a $123 million loss related to a previously disclosed fraud incident.
Nine months ended September 30, 2020:
in millionsDecember 31, 2019Impact of ASC 326 AdoptionJanuary 1, 2020ProvisionCharge-offsRecoveriesSeptember 30, 2020
Commercial and Industrial $551 $(141)$410 $613 $(232)$19 $810 
Commercial real estate:
Real estate — commercial mortgage143 16 159 135 (18)3 279 
Real estate — construction22 (7)15 19 — — 34 
Total commercial real estate loans165 9 174 154 (18)3 313 
Commercial lease financing35 8 43 30 (16)1 58 
Total commercial loans751 (124)627 797 (266)23 1,181 
Real estate — residential mortgage7 77 84 21 (2)1 104 
Home equity loans31 147 178 9 (10)6 183 
Consumer direct loans34 63 97 52 (30)6 125 
Credit cards47 35 82 39 (32)6 95 
Consumer indirect loans30 6 36 16 (22)12 42 
Total consumer loans149 328 477 137 (96)31 549 
Total ALLL — continuing operations900 204 1,104 934 
(a)
(362)54 1,730 
Discontinued operations10 31 41 2 (4)3 42 
Total ALLL — including discontinued operations$910 $235 $1,145 $936 $(366)$57 $1,772 
(a)Excludes a provision for losses on lending-related commitments of $67 million.

Nine months ended September 30, 2019:
in millionsDecember 31, 2018ProvisionCharge-offsRecoveriesSeptember 30, 2019
Commercial and Industrial $532 $242 $(242)$22 $554 
Commercial real estate:
Real estate — commercial mortgage142 (4)(6)2 134 
Real estate — construction33 (6)(4)— 23 
Total commercial real estate loans175 (10)(10)2 157 
Commercial lease financing36 20 (25)4 35 
Total commercial loans743 252 (277)28 746 
Real estate — residential mortgage7 2 (3)1 7 
Home equity loans35 8 (16)6 33 
Consumer direct loans30 29 (30)5 34 
Credit cards48 26 (34)6 46 
Consumer indirect loans20 18 (24)13 27 
Total consumer loans140 83 (107)31 147 
Total ALLL — continuing operations883 335 
(a) (b)
(384)
 (b)
59 893 
Discontinued operations14 3 (9)3 11 
Total ALLL — including discontinued operations$897 $338 $(393)$62 $904 
(a)Excludes a provision for losses on lending-related commitments of$1 million.
(b)Includes the realization of a $123 million loss related to a previously disclosed fraud incident.

As described in Note 1 ("Basis of Presentation and Accounting Policies"), we estimate the ALLL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. In our estimation of expected credit losses, we use a two year reasonable and supportable period across all products. Following this two year period in which supportable forecasts can be generated, for all modeled loan portfolios, we revert expected credit losses to a level that is consistent with our historical information by reverting the macroeconomic variables (model inputs) to their long run average. We revert to historical loss rates for less complex estimation methods for smaller portfolios. A 20 year fixed length look back period is used to calculate the long run average of the macroeconomic variables. A four quarter reversion period is used where the macroeconomic variables linearly revert to their long run average following the two year reasonable and supportable period.

We develop our reasonable and supportable forecasts using relevant data including, but not limited to, changes in economic output, unemployment rates, property values, and other factors associated with the credit losses on financial assets. Some macroeconomic variables apply to all portfolio segments, while others are more portfolio specific. The following table discloses key macroeconomic variables for each loan portfolio.
SegmentPortfolio
Key Macroeconomic Variables (a)
CommercialCommercial and industrialBBB corporate bond rate (spread), GDP, industrial production, and unemployment rate
Commercial real estateBBB corporate bond rate (spread), property and real estate price indices, and unemployment rate
Commercial lease financingBBB corporate bond rate (spread), GDP, and unemployment rate
ConsumerReal estate — residential mortgageGDP, home price index, unemployment rate, and 30 year mortgage rate
Home equityHome price index, unemployment rate, and 30 year mortgage rate
Consumer directUnemployment rate and U.S. household income
Consumer indirectNew vehicle sales and unemployment rate
Credit cardsUnemployment rate and U.S. household income
Discontinued operationsUnemployment rate
(a)Variables include all transformations and interactions with other risk drivers. Additionally, variables may have varying impacts at different points in the economic cycle.

In addition to macroeconomic drivers, portfolio attributes such as remaining term, outstanding balance, risk ratings, FICO, LTV, and delinquency also drive ALLL changes. Our ALLL models were designed to capture the correlation between economic and portfolio changes. As such, evaluating shifts in individual portfolio attributes and macroeconomic variables in isolation may not be indicative of past or future performance.

Economic Outlook

As of September 30, 2020, the COVID-19 pandemic has continued to create unprecedented economic stress and uncertainty in the U.S. and globally. We utilized the Moody’s August 2020 Consensus forecast to estimate our expected credit losses as of September 30, 2020. This forecast considered the global economic fallout from the ongoing pandemic as well as the potential United States' monetary and fiscal response. We determined such forecast to be a reasonable view of the outlook for the global economy given the available information at current quarter end.

The baseline scenario reflects a moderate economic slowdown over the next two years in markets in which we operate. U.S. GDP rebounds with a 20% annualized growth rate in the third quarter of 2020, but due to the unprecedented decline in the second quarter of 2020 is expected to decline approximately 5% in all of 2020. GDP continues to grow throughout 2021, but at a declining rate and is not expected to return to pre-pandemic levels until early 2022. The national unemployment rate forecast is 10.7% in the third quarter of 2020 and 9.3% in the fourth quarter of 2020, and is forecast to remain in the upper-single digits throughout 2021.

To the extent we identified credit risk considerations that were not captured by the third-party economic forecast, we addressed the risk through management’s qualitative adjustments to the ALLL.

As a result of the unprecedented economic uncertainty caused by the COVID-19 pandemic, our future loss estimates may vary considerably from our September 30, 2020, assumptions.

Commercial Loan Portfolio

The ALLL from continuing operations for the commercial segment increased by $68 million, or 6.1%, from June 30, 2020. The overall increase in the allowance is driven by updated economic forecasts and downward portfolio migration, which are partially offset by a decline in loan balances.

The primary changes to the economic forecast include modest deterioration in the unemployment and GDP growth outlook, which contributes to the ALLL increase for the overall commercial segment. Improvements in real estate price indices contributed to a modest reduction in reserve in our commercial real estate book. Risk rating migrations are also driving higher ALLL levels for the commercial and industrial segment. We continue to closely monitor the oil & gas exposure and the ALLL results reflect incremental risk considerations for this segment.

As of September 30, 2020, we concluded that no ALLL is necessary for $8.0 billion in outstanding PPP loans as they are 100% guaranteed by the SBA.
Consumer Loan Portfolio

The ALLL from continuing operations for the consumer segment decreased by $46 million, or 7.7%, from June 30, 2020. The overall decrease in the allowance is driven by updated economic forecasts that capture an improving outlook for several drivers and strong portfolio performance.

The most meaningful changes to the economic forecast contributing to the reduction in reserves include improvement in the Manheim Used Vehicle Value Index forecast, which impacts the indirect loan portfolio, as well as improvement in the HPI outlook as the housing market continues to display strength, which impacts the residential mortgage and home equity segments. As it relates to the decline in the ALLL due to portfolio factors, shifts are largely driven by attrition activity, targeted portfolio growth and overall strong credit drivers. The ALLL results also reflect incremental credit risk considerations as a result of the economic stress and related borrower assistance programs, which are addressed through qualitative adjustments.

Credit Risk Profile

The prevalent risk characteristic for both commercial and consumer loans is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Evaluation of this risk is stratified and monitored by the loan risk rating grades assigned for the commercial loan portfolios and the refreshed FICO score assigned for the consumer loan portfolios. The internal risk grades assigned to loans follow our definitions of Pass and Criticized, which are consistent with published definitions of regulatory risk classifications. Loans with a pass rating represent those loans not classified on our rating scale for problem credits, as minimal credit risk has been identified. Criticized loans are those loans that either have a potential weakness deserving management's close attention or have a well-defined weakness that may put full collection of contractual cash flows at risk. Borrower FICO scores provide information about the credit quality of our consumer loan portfolio as they provide an indication as to the likelihood that a debtor will repay its debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the tables below at the dates indicated.

Most extensions of credit are subject to loan grading or scoring. Loan grades are assigned at the time of origination, verified by credit risk management, and periodically re-evaluated thereafter. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected recovery rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk in the context of the general economic outlook. Types of exposure, transaction structure, and collateral, including credit risk mitigants, affect the expected recovery assessment.
Commercial Credit Exposure
Credit Risk Profile by Creditworthiness Category and Vintage (a)
As of September 30, 2020Term LoansRevolving Loans Amortized Cost BasisRevolving Loans Converted to Term Loans Amortized Cost Basis
Amortized Cost Basis by Origination Year and Internal Risk Rating
in millions20202019201820172016PriorTotal
Commercial and Industrial
Risk Rating:
Pass$13,328 $5,936 $4,512 $3,141 $2,223 $3,018 $19,876 $153 $52,187 
Criticized (Accruing)39 131 164 201 137 251 1,434 22 2,379 
Criticized (Nonaccruing)6 14 63 31 20 41 283 1 459 
Total commercial and industrial13,373 6,081 4,739 3,373 2,380 3,310 21,593 176 55,025 
Real estate — commercial mortgage
Risk Rating:
Pass1,341 3,186 1,877 918 879 3,267 807 46 12,321 
Criticized (Accruing)3 40 65 113 85 246 80 2 634 
Criticized (Nonaccruing)— 1 4 3 1 90 5 — 104 
Total real estate — commercial mortgage
1,344 3,227 1,946 1,034 965 3,603 892 48 13,059 
Real estate — construction
Risk Rating:
Pass242 701 624 226 34 25 24 5 1,881 
Criticized (Accruing)— 3 18 — 41 2 1 — 65 
Criticized (Nonaccruing)— — — — 1 — — 1 
Total real estate — construction242 704 642 226 75 28 25 5 1,947 
Commercial lease financing
Risk Rating:
Pass793 1,180 620 561 273 939 — — 4,366 
Criticized (Accruing)9 14 18 19 9 9 — — 78 
Criticized (Nonaccruing)— — 1 2 3 — — — 6 
Total commercial lease financing802 1,194 639 582 285 948 — 4,450 
Total commercial loans$15,761 $11,206 $7,966 $5,215 $3,705 $7,889 $22,510 $229 $74,481 
(a)Accrued interest of $133 million, presented in Other Assets on the Consolidated Balance Sheets, was excluded from the amortized cost basis disclosed in this table.
Consumer Credit Exposure
Credit Risk Profile by FICO Score and Vintage (a)
As of September 30, 2020Term LoansRevolving Loans Amortized Cost BasisRevolving Loans Converted to Term Loans Amortized Cost Basis
Amortized Cost Basis by Origination Year and FICO Score
in millions20202019201820172016PriorTotal
Real estate — residential mortgage
FICO Score:
750 and above$2,561 $1,774 $242 $286 $604 $1,372 — — $6,839 
660 to 749550 350 88 58 108 362 — — 1,516 
Less than 66015 34 24 11 23 183 — — 290 
No Score— 2 4 6 2 55 1 — 70 
Total real estate — residential mortgage3,126 2,160 358 361 737 1,972 1 — 8,715 
Home equity loans
FICO Score:
750 and above644 417 166 192 185 815 $2,874 $639 5,932 
660 to 749213 249 115 119 96 380 1,308 229 2,709 
Less than 66022 50 29 29 34 155 450 65 834 
No Score2 2 1 — — 2 5 1 13 
Total home equity loans881 718 311 340 315 1,352 4,637 934 9,488 
Consumer direct loans
FICO Score:
750 and above1,426 1,008 131 39 21 65 127 — 2,817 
660 to 749367 295 91 26 16 33 263 — 1,091 
Less than 66017 38 22 9 5 12 86 — 189 
No Score34 39 22 17 10 12 164 — 298 
Total consumer direct loans1,844 1,380 266 91 52 122 640 — 4,395 
Credit cards
FICO Score:
750 and above— — — — — — 469 — 469 
660 to 749— — — — — — 405 — 405 
Less than 660— — — — — — 95 — 95 
No Score— — — — — — 1 — 1 
Total credit cards— — — — — — 970 — 970 
Consumer indirect loans
FICO Score:
750 and above944 991 415 221 87 80 — — 2,738 
660 to 749595 633 264 115 46 57 — — 1,710 
Less than 660125 184 113 62 30 33 — — 547 
No Score37 — — — — — — — 37 
Total consumer indirect loans1,701 1,808 792 398 163 170 — — 5,032 
Total consumer loans$7,552 $6,066 $1,727 $1,190 $1,267 $3,616 $6,248 $934 $28,600 
(a)Accrued interest of $102 million, presented in Other Assets on the Consolidated Balance Sheets, was excluded from the amortized cost basis disclosed in this table.
Nonperforming and Past Due Loans

Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest for our commercial and consumer loan portfolios are disclosed in Note 1 (”Basis of Presentation and Accounting Policies”) and Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” beginning on page 101 of our 2019 Form 10-K.

Under the CARES Act as well as banking regulator interagency guidance, certain loan modifications to borrowers experiencing financial distress as a result of the economic impacts created by the COVID-19 pandemic may not be required to be reported as past due and nonperforming. For COVID-19 related loan modifications which occurred from March 1, 2020, through September 30, 2020, and met the loan modification criteria under either the CARES Act or the criteria specified by the regulatory agencies, we have elected to re-age to current status all commercial loans and consumer loans that are not secured by real-estate and freeze the delinquency status of consumer real estate secured loans as of the modification or forbearance grant date. At September 30, 2020, $4.5 billion of loan modifications and forbearances made under the criteria of either the CARES Act or banking regulator interagency guidance were not reported as nonperforming.

The following aging analysis of past due and current loans as of September 30, 2020, and December 31, 2019, provides further information regarding Key’s credit exposure.
Aging Analysis of Loan Portfolio(a)
September 30, 2020Current
30-59
Days Past
Due (b)
60-89
Days Past
Due (b)
90 and
Greater
Days Past
Due (b)
Non-performing
Loans (c)
Total Past
Due and
Non-performing
Loans (c)
Total
Loans (d)
in millions
LOAN TYPE
Commercial and industrial$54,385 $104 $53 $24 $459 $640 $55,025 
Commercial real estate:
Commercial mortgage12,900 23 14 18 104 159 13,059 
Construction1,942 1 2 1 1 5 1,947 
Total commercial real estate loans14,842 24 16 19 105 164 15,006 
Commercial lease financing4,418 21 3 2 6 32 4,450 
Total commercial loans$73,645 $149 $72 $45 $570 $836 $74,481 
Real estate — residential mortgage$8,594 $17 $5 $3 $96 $121 $8,715 
Home equity loans9,275 42 12 13 146 213 9,488 
Consumer direct loans4,377 7 4 4 3 18 4,395 
Credit cards956 4 2 6 2 14 970 
Consumer indirect loans4,991 18 4 2 17 41 5,032 
Total consumer loans$28,193 $88 $27 $28 $264 $407 $28,600 
Total loans$101,838 $237 $99 $73 $834 $1,243 $103,081 
(a)Amounts in table represent amortized cost and exclude loans held for sale.
(b)Accrued interest of $235 million presented in “other assets” on the Consolidated Balance Sheets is excluded from the amortized cost basis disclosed in this table.
(c)PCI loans meeting nonperforming criteria were historically excluded from Key's nonperforming disclosures. As a result of CECL implementation on January 1, 2020, PCI loans became PCD loans. PCD loans that met the definition of nonperforming are now included in nonperforming disclosures.
(d)Net of unearned income, net of deferred fees and costs, and unamortized discounts and premiums.
December 31, 2019Current
30-59
Days Past
Due (b)
60-89
Days Past
Due (b)
90 and
Greater
Days Past
Due (b)
Non-performing
Loans
Total Past
Due and
Non-performing
Loans
Purchased
Credit
Impaired
Total
Loans
in millions
LOAN TYPE
Commercial and industrial$47,768 $110 $52 $53 $264 $479 48 $48,295 
Commercial real estate:
Commercial mortgage13,258 8 5 13 83 109 124 13,491 
Construction1,551 3 — 1 2 6 1 1,558 
Total commercial real estate loans14,809 11 5 14 85 115 125 15,049 
Commercial lease financing4,647 22 11 2 6 41 — 4,688 
Total commercial loans$67,224 $143 $68 $69 $355 $635 173 $68,032 
Real estate — residential mortgage$6,705 $7 $5 $1 $48 $61 $257 $7,023 
Home equity loans10,071 30 10 5 145 190 13 10,274 
Consumer direct loans3,484 10 5 7 4 26 3 3,513 
Credit cards1,104 6 5 12 3 26 — 1,130 
Consumer indirect loans4,609 32 8 3 22 65 — 4,674 
Total consumer loans$25,973 $85 $33 $28 $222 $368 $273 $26,614 
Total loans$93,197 $228 $101 $97 $577 $1,003 $446 $94,646 
(a)Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment represents the principal amount of the loan increased or decreased by net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs.
(b)Past due loan amounts exclude PCI, even if contractually past due (or if we do not expect to collect principal or interest in full based on the original contractual terms), as we are currently accreting income over the remaining term of the loans.

At September 30, 2020, the approximate carrying amount of our commercial nonperforming loans outstanding represented 77% of their original contractual amount owed, total nonperforming loans outstanding represented 80% of their original contractual amount owed, and nonperforming assets in total were carried at 87% of their original contractual amount owed.

Nonperforming loans reduced expected interest income by $7 million and $20 million for the three and nine months ended September 30, 2020, respectively, and $7 million and $24 million for the three and nine months ended September 30, 2019, respectively.

The amortized cost basis of nonperforming loans on nonaccrual status for which there is no related allowance for credit losses was $456 million at September 30, 2020.

Collateral-dependent Financial Assets

We classify financial assets as collateral-dependent when our borrower is experiencing financial difficulty, and we expect repayment to be provided substantially through the operation or sale of the collateral. Our commercial loans have collateral that includes commercial machinery, commercial properties, and commercial real estate construction projects. Our consumer loans have collateral that includes residential real estate, automobiles, boats, and RVs.
There were no significant changes in the extent to which collateral secures our collateral-dependent financial assets during the three months ended September 30, 2020.

TDRs

We classify loan modifications as TDRs when a borrower is experiencing financial difficulties and we have granted a concession without commensurate financial, structural, or legal consideration. Our loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. Under the CARES Act as well as banking regulator interagency guidance, certain loan modifications to borrowers experiencing financial distress as a result of the economic impacts created by the COVID-19 pandemic may not be required to be treated as TDRs under U.S. GAAP.  We elected to suspend TDR accounting for $4.5 billion of COVID-19 related loan modifications as of September 30, 2020 as such loan modifications met the criteria under either the CARES Act or banking regulator interagency guidance. 

Commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs were $1 million and $5 million at September 30, 2020, and December 31, 2019, respectively.

The consumer TDR other concession category in the table below primarily includes those borrowers’ debts that are discharged through Chapter 7 bankruptcy and have not been formally re-affirmed. At September 30, 2020, and December 31, 2019, the recorded investment of consumer residential mortgage loans in the process of foreclosure was approximately $99 million and $97 million, respectively.

The following table shows the post-modification outstanding recorded investment by concession type for our commercial and consumer accruing and nonaccruing TDRs that occurred during the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
in millions2020201920202019
Commercial loans:
Extension of Maturity Date— $6 $8 $11 
Payment or Covenant Modification/Deferment— — — 1 
Bankruptcy Plan Modification— — — — 
Increase in new commitment or new money— 2 — 12 
Total— $8 $8 $24 
Consumer loans:
Interest rate reduction$13 $4 $22 $12 
Other6 8 18 21 
Total$19 $12 $40 $33 
Total TDRs$19 $20 $48 $57 

The following table summarizes the change in the post-modification outstanding recorded investment of our accruing and nonaccruing TDRs during the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
in millions2020201920202019
Balance at beginning of the period$310 $395 $347 $399 
Additions26 20 65 88 
Payments(22)(65)(75)(123)
Charge-offs(8)(3)(31)(17)
Balance at end of period$306 $347 $306 $347 

A further breakdown of TDRs included in nonperforming loans by loan category for the periods indicated are as follows:
September 30, 2020December 31, 2019
Number of
Loans
Pre-modification
Outstanding
Recorded
Investment
Post-modification
Outstanding
Recorded
Investment
Number of
Loans
Pre-modification
Outstanding
Recorded
Investment
Post-modification
Outstanding
Recorded
Investment
dollars in millions
LOAN TYPE
Nonperforming:
Commercial and industrial51 $51 $39 51 $72 $53 
Commercial real estate:
Commercial mortgage7 62 50 6 64 58 
Total commercial real estate loans7 62 50 6 64 58 
Total commercial loans58 113 89 57 136 111 
Real estate — residential mortgage271 28 27 181 13 11 
Home equity loans629 40 37 713 42 41 
Consumer direct loans153 2 2 172 2 2 
Credit cards279 2 1 368 2 2 
Consumer indirect loans867 15 12 1,131 19 16 
Total consumer loans2,199 87 79 2,565 78 72 
Total nonperforming TDRs2,257 200 168 2,622 214 183 
Prior-year accruing:(a)
Commercial and industrial4 5 2 6 30 25 
Commercial real estate
Commercial mortgage1 — — 1 — — 
Total commercial real estate loans1 — — 1 — — 
Total commercial loans5 5 2 7 30 25 
Real estate — residential mortgage472 35 29 493 37 31 
Home equity loans1,829 108 87 1,751 104 84 
Consumer direct loans178 4 2 139 4 3 
Credit cards584 4 1 486 3 1 
Consumer indirect loans813 31 17 714 33 20 
Total consumer loans3,876 182 136 3,583 181 139 
Total prior-year accruing TDRs3,881 187 138 3,590 211 164 
Total TDRs6,138 $387 $306 6,212 $425 $347 
(a)All TDRs that were restructured prior to January 1, 2020, and January 1, 2019, and are fully accruing.

Commercial loan TDRs are considered defaulted when principal and interest payments are 90 days past due. Consumer loan TDRs are considered defaulted when principal and interest payments are more than 60 days past due. During the three months ended September 30, 2020, there were no commercial loan TDRs and 33 consumer loan TDRs with a combined recorded investment of $1 million that experienced payment defaults after modifications resulting in TDR status during 2019. During the three months ended September 30, 2019, there were no commercial loan TDRs and 79 consumer loan TDRs with a combined recorded investment of $1 million that experienced payment defaults after modifications resulting in TDR status during 2018.

During the nine months ended September 30, 2020, there were no commercial loan TDRs and 160 consumer loan TDRs with a combined recorded investment of $4 million that experienced payment defaults after modifications resulting in TDR status during 2019. During the nine months ended September 30, 2019, there were no commercial loan TDRs and 255 consumer loan TDRs with a combined recorded investment of $5 million that experienced payment defaults after modifications resulting in TDR status during 2018.

Liability for Credit Losses on Off Balance Sheet Exposures

The liability for credit losses inherent in unfunded lending-related commitments, such as letters of credit and unfunded loan commitments, and certain financial guarantees is included in “accrued expense and other liabilities” on the balance sheet.

Changes in the liability for credit losses on off balance sheet exposures are summarized as follows:
 Three months ended September 30,Nine months ended September 30,
in millions2020201920202019
Balance at the end of the prior period$198 $64 $68 $64 
Liability for credit losses on contingent guarantees at the end of the prior period— — 7 — 
Cumulative effect from change in accounting principle (a), (b)
— — 66 — 
Balance at beginning of period198 64 141 64 
Provision (credit) for losses on off balance sheet exposures10 1 67 1 
Balance at end of period$208 $65 $208 $65 
(a)The cumulative effect from change in accounting principle relates to the January 1, 2020, adoption of ASU 2016-13.
(b)Excludes $4 million related to the provision for other financial assets.