Loans and Allowance for Loan Losses

The following table provides the outstanding balances of loans held for investment at September 30, 2020 and December 31, 2019.



(Dollars in millions)	September 30, 2020			December 31, 2019
Loans held for investment:
Commercial and industrial	$	30,870		$	26,338
Commercial mortgage	16,600			16,895
Construction	1,550			1,511
Lease financing	961			1,001
Total commercial portfolio	49,981			45,745
Residential mortgage and home equity⁽¹⁾	31,619			38,018
Other consumer⁽²⁾	3,374			4,450
Total consumer portfolio	34,993			42,468
Total loans held for investment⁽³⁾	84,974			88,213
Allowance for loan losses	(1,371		)	(538		)
Loans held for investment, net	$	83,603		$	87,675


(1)	Includes home equity loans of $1,732 million and $2,049 million at September 30, 2020 and December 31, 2019, respectively.


(2)	Other consumer loans substantially include unsecured consumer loans and consumer credit cards.


(3)	Includes $153 million and $320 million at September 30, 2020 and December 31, 2019, respectively, for net unamortized (discounts) and premiums and deferred (fees) and costs.

Accrued interest receivable on loans held for investment totaled $240 million at September 30, 2020 and is included in other assets on the consolidated balance sheet. For certain COVID-19 related loan modifications, which were largely payment deferrals, the Company recorded an allowance for uncollectible accrued interest of $5 million at September 30, 2020.

Allowance for Loan Losses

The provision for loan losses was $52 million and $590 million for the commercial loan segment and a reversal of $3 million and a provision of $260 million for the consumer loan segment for the three and nine months ended September 30, 2020, respectively, largely due to the impact of COVID-19 and the corresponding deterioration in the economic environment on the allowance for loan losses. The economic forecast incorporated management's expectations at September 30, 2020, which included a modest recovery during the remainder of 2020 and continuing into subsequent years. The September 30, 2020 forecast was stable compared with the June 30, 2020 forecast. Losses on individually assessed commercial loans, primarily commercial mortgage loans, also contributed to the commercial segment provision. The collectively-assessed allowance for credit losses estimate also incorporated management’s qualitatively-determined model input adjustments and overlays that reflect the anticipated loss mitigating impact of monetary and fiscal stimulus policies and loan modification programs as a result of COVID-19 that are not otherwise incorporated into the collectively-assessed modeling methodology. The following tables provide a reconciliation of changes in the allowance for loan losses by portfolio segment.



	For the Three Months Ended September 30, 2020
(Dollars in millions)	Commercial			Consumer			Unallocated		Total
Allowance for loan losses, beginning of period	$	932		$	520		$	—	$	1,452
Provision for loan losses	52			(3		)	—		49
Loans charged-off	(108		)	(32		)	—		(140		)
Recoveries of loans previously charged-off	5			5			—		10
Allowance for loan losses, end of period	$	881		$	490		$	—	$	1,371




	For the Three Months Ended September 30, 2019
(Dollars in millions)	Commercial			Consumer			Unallocated		Total
Allowance for loan losses, beginning of period	$	407		$	155		$	—	$	562
Provision for loan losses	50			42			—		92
Loans charged-off	(59		)	(26		)	—		(85		)
Recoveries of loans previously charged-off	2			2			—		4
Allowance for loan losses, end of period	$	400		$	173		$	—	$	573




	For the Nine Months Ended September 30, 2020
(Dollars in millions)	Commercial			Consumer			Unallocated		Total
Allowance for loan losses, beginning of period	$	354		$	184		$	—	$	538
Cumulative effect adjustment from adoption of ASC 326 ⁽¹⁾	76			153			—		229
Allowance for loan losses, beginning of period, adjusted for adoption of ASC 326 ⁽¹⁾	430			337			—		767
Provision for loan losses	590			260			—		850
Loans charged-off	(154		)	(118		)	—		(272		)
Recoveries of loans previously charged-off	15			11			—		26
Allowance for loan losses, end of period	$	881		$	490		$	—	$	1,371


(1)	For further information see Note 1 to these Consolidated Financial Statements.




	For the Nine Months Ended September 30, 2019
(Dollars in millions)	Commercial			Consumer			Unallocated			Total
Allowance for loan losses, beginning of period	$	359		$	110		$	5		$	474
Provision for loan losses	102			120			(5		)	217
Loans charged-off	(84		)	(64		)	—			(148		)
Recoveries of loans previously charged-off	23			7			—			30
Allowance for loan losses, end of period	$	400		$	173		$	—		$	573

The following table shows the allowance for loan losses and related loan balances by portfolio segment as of December 31, 2019.



	December 31, 2019
(Dollars in millions)	Commercial		Consumer		Unallocated		Total
Allowance for loan losses:
Individually evaluated for impairment	$	43	$	12	$	—	$	55
Collectively evaluated for impairment	311		172		—		483
Total allowance for loan losses	$	354	$	184	$	—	$	538

Loans held for investment:
Individually evaluated for impairment	$	436	$	246	$	—	$	682
Collectively evaluated for impairment	45,309		42,222		—		87,531
Total loans held for investment	$	45,745	$	42,468	$	—	$	88,213

Nonaccrual and Past Due Loans

The following table presents nonaccrual loans as of September 30, 2020 and December 31, 2019. The nonaccrual loans all have related allowance for credit losses accrued as of September 30, 2020.



(Dollars in millions)	September 30, 2020		December 31, 2019
Commercial and industrial	$	176	$	175
Commercial mortgage	178		15
Construction	44		—
Total commercial portfolio	398		190
Residential mortgage and home equity	191		137
Other consumer	2		1
Total consumer portfolio	193		138
Total nonaccrual loans	$	591	$	328
Troubled debt restructured loans that continue to accrue interest	$	322	$	392
Troubled debt restructured nonaccrual loans (included in total nonaccrual loans above)	$	198	$	171

The following tables show the aging of the balance of loans held for investment by class as of September 30, 2020 and December 31, 2019.



	September 30, 2020
	Aging Analysis of Loans
(Dollars in millions)	Current		30 to 89 Days Past Due		90 Days or More Past Due		Total Past Due		Total
Commercial and industrial	$	31,616	$	163	$	52	$	215	$	31,831
Commercial mortgage	16,393		134		73		207		16,600
Construction	1,546		4		—		4		1,550
Total commercial portfolio	49,555		301		125		426		49,981
Residential mortgage and home equity	31,352		180		87		267		31,619
Other consumer	3,330		28		16		44		3,374
Total consumer portfolio	34,682		208		103		311		34,993
Total loans held for investment	$	84,237	$	509	$	228	$	737	$	84,974



	December 31, 2019
	Aging Analysis of Loans
(Dollars in millions)	Current		30 to 89 Days Past Due		90 Days or More Past Due		Total Past Due		Total
Commercial and industrial	$	27,241	$	37	$	61	$	98	$	27,339
Commercial mortgage	16,858		34		3		37		16,895
Construction	1,511		—		—		—		1,511
Total commercial portfolio	45,610		71		64		135		45,745
Residential mortgage and home equity	37,788		179		51		230		38,018
Other consumer	4,400		33		17		50		4,450
Total consumer portfolio	42,188		212		68		280		42,468
Total loans held for investment	$	87,798	$	283	$	132	$	415	$	88,213

Loans held for investment 90 days or more past due and still accruing interest totaled $21 million at September 30, 2020 and $20 million at December 31, 2019. The following table presents the loans that are 90 days or more past due, but are not on nonaccrual status, by loan class.



(Dollars in millions)	September 30, 2020		December 31, 2019
Commercial and industrial	$	3	$	3
Commercial mortgage	3		—
Total commercial portfolio	6		3
Residential mortgage and home equity	—		—
Other consumer	15		17
Total consumer portfolio	15		17
Total loans that are 90 days or more past due and still accruing	$	21	$	20

Credit Quality Indicators

Management analyzes the Company's loan portfolios by applying specific monitoring policies and procedures that vary according to the relative risk profile and other characteristics within the various loan portfolios. Loans within the commercial portfolio segment are classified as either pass or criticized. Criticized credits are those that have regulatory risk ratings of special mention, substandard or doubtful; classified credits are those that have regulatory risk ratings of substandard or doubtful. Special mention credits are potentially weak, as the borrower has begun to exhibit deteriorating trends, which, if not corrected, may jeopardize repayment of the loan and result in further downgrade. Substandard credits have well-defined weaknesses, which, if not corrected, could jeopardize the full satisfaction of the debt. A credit classified as doubtful has critical weaknesses that make full collection improbable on the basis of currently existing facts and conditions.

The following tables summarize the loans in the commercial portfolio segment monitored for credit quality based on regulatory risk ratings.



	September 30, 2020
	Non-Revolving Loans at Amortized Cost by Origination Year																		Revolving Loans			Total
(Dollars in millions)	2020			2019			2018			2017			2016			Prior
Commercial and industrial:
Pass	$	5,125		$	2,374		$	1,806		$	1,273		$	764		$	1,669		$	15,647		$	28,658
Criticized:
Special Mention	49			239			203			72			28			114			680			1,385
Classified	41			39			136			39			7			66			499			827
Total	5,215			2,652			2,145			1,384			799			1,849			16,826			30,870
Commercial mortgage:
Pass	1,254			3,812			3,032			1,864			1,637			3,543			74			15,216
Criticized:
Special Mention	18			168			336			35			111			196			15			879
Classified	1			8			58			8			6			424			—			505
Total	1,273			3,988			3,426			1,907			1,754			4,163			89			16,600
Construction:
Pass	162			668			380			152			—			2			11			1,375
Criticized:
Special Mention	—			3			80			—			8			—			7			98
Classified	—			—			44			13			—			20			—			77
Total	162			671			504			165			8			22			18			1,550
Lease financing:
Pass	299			140			1			—			49			472			—			961
Criticized:
Special Mention	—			—			—			—			—			—			—			—
Classified	—			—			—			—			—			—			—			—
Total	299			140			1			—			49			472			—			961
Total commercial portfolio	$	6,949		$	7,451		$	6,076		$	3,456		$	2,610		$	6,506		$	16,933		$	49,981
Percentage of total	14		%	15		%	12		%	7		%	5		%	13		%	34		%	100		%



	December 31, 2019
			Criticized
(Dollars in millions)	Pass		Special Mention		Classified		Total
Commercial and industrial	$	26,210	$	636	$	493	$	27,339
Commercial mortgage	16,569		114		212		16,895
Construction	1,399		50		62		1,511
Total commercial portfolio	$	44,178	$	800	$	767	$	45,745

The Company monitors the credit quality of its consumer portfolio segment based primarily on payment status. The following tables summarize the loans in the consumer portfolio segment, which exclude $3 million of loans covered by FDIC loss share agreements at December 31, 2019.



Payment Status	September 30, 2020
	Non-Revolving Loans at Amortized Cost by Origination Year																		Revolving Loans			Total
(Dollars in millions)	2020			2019			2018			2017			2016			Prior			Revolving Loans			Total
Residential mortgage and home equity:
Accrual	$	3,006		$	4,848		$	3,251		$	6,298		$	5,750		$	7,167		$	1,108		$	31,428
Nonaccrual	1			14			5			8			14			144			5			191
Total	3,007			4,862			3,256			6,306			5,764			7,311			1,113			31,619
Other consumer:
Accrual	542			1,945			554			39			6			29			257			3,372
Nonaccrual	—			—			—			—			—			2			—			2
Total	542			1,945			554			39			6			31			257			3,374
Total consumer portfolio	$	3,549		$	6,807		$	3,810		$	6,345		$	5,770		$	7,342		$	1,370		$	34,993
Percentage of total	10		%	20		%	11		%	18		%	16		%	21		%	4		%	100		%



	December 31, 2019
(Dollars in millions)	Accrual		Nonaccrual		Total
Residential mortgage and home equity	$	37,878	$	137	$	38,015
Other consumer	4,449		1		4,450
Total consumer portfolio	$	42,327	$	138	$	42,465

The Company also monitors the credit quality for substantially all of its consumer portfolio segment using credit scores provided by FICO and refreshed LTV ratios. FICO credit scores are refreshed at least quarterly to monitor the quality of the portfolio. Refreshed LTV measures the principal balance of the loan as a percentage of the estimated current value of the property securing the loan. Home equity loans are evaluated using combined LTV, which measures the principal balance of the combined loans that have liens against the property (including unused credit lines for home equity products) as a percentage of the estimated current value of the property securing the loans. The LTV ratios are refreshed on a quarterly basis, using the most recent home pricing index data available for the property location.

The following tables summarize the loans in the consumer portfolio segment based on refreshed FICO scores and refreshed LTV ratios at September 30, 2020 and December 31, 2019. The December 31, 2019 amounts presented reflect unpaid principal balances less partial charge-offs.



FICO Scores	September 30, 2020
	Non-Revolving Loans by Origination Year																		Revolving Loans			Total
(Dollars in millions)	2020			2019			2018			2017			2016			Prior			Revolving Loans			Total
Residential mortgage and home equity:
720 and Above	$	2,661		$	4,311		$	2,717		$	5,379		$	5,061		$	5,727		$	884		$	26,740
Below 720	322			533			522			851			664			1,260			212			4,364
No FICO Available⁽¹⁾	24			18			17			76			39			324			17			515
Total	3,007			4,862			3,256			6,306			5,764			7,311			1,113			31,619
Other consumer loans:
720 and Above	349			1,155			340			24			4			5			118			1,995
Below 720	193			790			214			15			2			3			137			1,354
No FICO Available⁽¹⁾	—			—			—			—			—			23			2			25
Total	542			1,945			554			39			6			31			257			3,374
Total consumer portfolio	$	3,549		$	6,807		$	3,810		$	6,345		$	5,770		$	7,342		$	1,370		$	34,993
Percentage of total	10		%	20		%	11		%	18		%	16		%	21		%	4		%	100		%


(1)	Represents loans for which management was not able to obtain an updated FICO score (e.g., due to recent profile changes).



	December 31, 2019
	FICO scores
(Dollars in millions)	720 and Above			Below 720			No FICO Available⁽¹⁾			Total
Residential mortgage and home equity	$	31,441		$	5,742		$	454		$	37,637
Other consumer	2,567			1,841			3			4,411
Total consumer portfolio	$	34,008		$	7,583		$	457		$	42,048
Percentage of total	81		%	18		%	1		%	100		%


(1)	Represents loans for which management was not able to obtain an updated FICO score (e.g., due to recent profile changes).



LTV Ratios	September 30, 2020
	Non-Revolving Loans by Origination Year																		Revolving Loans			Total
(Dollars in millions)	2020			2019			2018			2017			2016			Prior			Revolving Loans			Total
Residential mortgage and home equity:
80% or below	$	2,884		$	4,560		$	3,064		$	6,254		$	5,757		$	7,246		$	1,007		$	30,772
80% to 100%	121			299			188			49			6			34			101			798
100% or more	—			—			2			—			—			3			1			6
No LTV Available⁽¹⁾	2			3			2			3			1			28			4			43
Total	3,007			4,862			3,256			6,306			5,764			7,311			1,113			31,619
Total consumer portfolio	$	3,007		$	4,862		$	3,256		$	6,306		$	5,764		$	7,311		$	1,113		$	31,619
Percentage of total	10		%	15		%	10		%	20		%	18		%	23		%	4		%	100		%


(1)	Represents loans for which management was not able to obtain refreshed property values.



	December 31, 2019
	LTV ratios
(Dollars in millions)	Less than or Equal to 80 Percent			Greater than 80 and Less than 100 Percent			Greater than or Equal to 100 Percent			No LTV Available⁽¹⁾			Total
Residential mortgage and home equity	$	35,893		$	1,689		$	12		$	43		$	37,637
Total consumer portfolio	$	35,893		$	1,689		$	12		$	43		$	37,637
Percentage of total	95		%	5		%	—		%	—		%	100		%


(1)	Represents loans for which management was not able to obtain refreshed property values.

Troubled Debt Restructurings

The following table provides a summary of the Company’s recorded investment in TDRs as of September 30, 2020 and December 31, 2019. The summary includes those TDRs that are on nonaccrual status and those that continue to accrue interest. The Company had $38 million and $61 million in commitments to lend additional funds to borrowers with loan modifications classified as TDRs as of September 30, 2020 and December 31, 2019, respectively.



(Dollars in millions)	September 30, 2020		December 31, 2019
Commercial and industrial	$	86	$	140
Commercial mortgage	141		168
Construction	52		62
Total commercial portfolio	279		370
Residential mortgage and home equity	239		192
Other consumer	2		1
Total consumer portfolio	241		193
Total restructured loans	$	520	$	563

For the third quarter of 2020, TDR modifications in the commercial portfolio segment were primarily composed of forbearance and covenant amendment. In the consumer portfolio segment, modifications were composed of maturity extensions and interest rate reductions. There were no charge-offs related to TDR modifications for the nine months ended September 30, 2020 and September 30, 2019. For the commercial and consumer portfolio segments, the allowance for loan losses for TDRs was measured on an individual loan basis or in pools with similar risk characteristics.

On March 22, 2020, the federal bank regulatory agencies issued joint guidance advising that the agencies have confirmed with the staff of the FASB that short-term modifications due to COVID-19 made on a good faith basis to borrowers who were current prior to relief, are not TDRs. On March 27, 2020, the CARES Act, which provides relief from TDR classification for certain COVID-19 related loan modifications, was signed into law. The Company did not classify loan modifications, which were largely payment deferrals, that met the criteria under either the CARES Act or the criteria specified by the regulatory agencies as TDRs. At September 30, 2020, $1.9 billion of modified commercial loans and $2.4 billion of modified consumer loans were still in deferral and not classified as TDRs. For loan modifications that include a payment deferral and are not TDRs, the borrower’s past due and nonaccrual status will not be impacted during the deferral period. Interest income will continue to be recognized over the contractual life of the loan.

The following tables provide the pre- and post-modification outstanding recorded investment amounts of TDRs as of the date of the restructuring that occurred during the three and nine months ended September 30, 2020 and 2019.



	For the Three Months Ended September 30, 2020				For the Nine Months Ended September 30, 2020
(Dollars in millions)	Pre-Modification Outstanding Recorded Investment⁽¹⁾		Post-Modification Outstanding Recorded Investment⁽²⁾		Pre-Modification Outstanding Recorded Investment⁽¹⁾		Post-Modification Outstanding Recorded Investment⁽²⁾
Commercial and industrial	$	3	$	3	$	104	$	104
Commercial mortgage	—		—		3		3
Total commercial portfolio	3		3		107		107
Residential mortgage and home equity	48		48		72		72
Total consumer portfolio	48		48		72		72
Total	$	51	$	51	$	179	$	179


(1)	Represents the recorded investment in the loan immediately prior to the restructuring event.


(2)	Represents the recorded investment in the loan immediately following the restructuring event. It includes the effect of paydowns that were required as part of the restructuring terms.



	For the Three Months Ended September 30, 2019				For the Nine Months Ended September 30, 2019
(Dollars in millions)	Pre-Modification Outstanding Recorded Investment⁽¹⁾		Post-Modification Outstanding Recorded Investment⁽²⁾		Pre-Modification Outstanding Recorded Investment⁽¹⁾		Post-Modification Outstanding Recorded Investment⁽²⁾
Commercial and industrial	$	11	$	11	$	114	$	114
Commercial mortgage	66		63		128		124
Total commercial portfolio	77		74		242		238
Residential mortgage and home equity	4		4		10		10
Total consumer portfolio	4		4		10		10
Total	$	81	$	78	$	252	$	248


(1)	Represents the recorded investment in the loan immediately prior to the restructuring event.


(2)	Represents the recorded investment in the loan immediately following the restructuring event. It includes the effect of paydowns that were required as part of the restructuring terms.

The following tables provide the recorded investment amounts of TDRs at the date of default, for which there was a payment default during the three and nine months ended September 30, 2020 and 2019, and where the default occurred within the first twelve months after modification into a TDR. A payment default is defined as the loan being 60 days or more past due.



(Dollars in millions)	For the Three Months Ended September 30, 2020		For the Nine Months Ended September 30, 2020
Commercial and industrial	$	—	$	28
Total commercial portfolio	—		28
Residential mortgage and home equity	3		3
Total consumer portfolio	3		3
Total	$	3	$	31



(Dollars in millions)	For the Three Months Ended September 30, 2019		For the Nine Months Ended September 30, 2019
Commercial and industrial	$	—	$	40
Commercial mortgage	—		1
Total commercial portfolio	—		41
Total	$	—	$	41

For loans in the consumer portfolio in which allowance for loan losses is measured using the present value of expected future cash flows discounted at the loan’s effective interest rate, historical payment defaults and the propensity to redefault are some of the factors considered when determining the allowance for loan losses.