Credit Quality And Allowance For Credit Losses

9 Months Ended

Sep. 30, 2022

Credit Quality And Allowance For Credit Losses [Abstract]

Credit Quality And Allowance For Credit Losses

CREDIT QUALITY AND ALLOWANCE FOR CREDIT LOSSES

The following table presents an aging analysis of the amortized cost basis of loans.

	Loans Past Due and Still Accruing
(in millions)	30-59 Days		60-89  Days		90 Days or More		Total		Nonaccrual Loans		Current Loans (a)		Total  Loans
September 30, 2022
Business loans:
Commercial	$	247	$	44	$	64	$	355	$	154	$	30,204	$	30,713
Real estate construction:
Commercial Real Estate business line (b)	—		—		—		—		—		2,022		2,022
Other business lines (c)	—		—		2		2		4		589		595
Total real estate construction	—		—		2		2		4		2,611		2,617
Commercial mortgage:
Commercial Real Estate business line (b)	32		—		—		32		1		4,068		4,101
Other business lines (c)	21		7		4		32		24		8,281		8,337
Total commercial mortgage	53		7		4		64		25		12,349		12,438
Lease financing	6		—		—		6		—		707		713
International	6		—		—		6		5		1,205		1,216
Total business loans	312		51		70		433		188		47,076		47,697
Retail loans:
Residential mortgage	9		2		—		11		56		1,686		1,753
Consumer:
Home equity	6		1		—		7		14		1,687		1,708
Other consumer	31		3		2		36		1		517		554
Total consumer	37		4		2		43		15		2,204		2,262
Total retail loans	46		6		2		54		71		3,890		4,015
Total loans	$	358	$	57	$	72	$	487	$	259	$	50,966	$	51,712
December 31, 2021
Business loans:
Commercial	$	35	$	18	$	6	$	59	$	173	$	29,134	$	29,366
Real estate construction:
Commercial Real Estate business line (b)	—		—		—		—		—		2,391		2,391
Other business lines (c)	15		1		—		16		6		535		557
Total real estate construction	15		1		—		16		6		2,926		2,948
Commercial mortgage:
Commercial Real Estate business line (b)	—		—		—		—		1		3,337		3,338
Other business lines (c)	18		4		16		38		31		7,848		7,917
Total commercial mortgage	18		4		16		38		32		11,185		11,255
Lease financing	5		—		—		5		—		635		640
International	5		8		1		14		5		1,189		1,208
Total business loans	78		31		23		132		216		45,069		45,417
Retail loans:
Residential mortgage	4		—		—		4		36		1,731		1,771
Consumer:
Home equity	4		3		—		7		12		1,514		1,533
Other consumer	32		1		4		37		—		527		564
Total consumer	36		4		4		44		12		2,041		2,097
Total retail loans	40		4		4		48		48		3,772		3,868
Total loans	$	118	$	35	$	27	$	180	$	264	$	48,841	$	49,285

(a)Includes $22 million of loans with deferred payments not considered past due in accordance with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) at December 31, 2021.

(b)Primarily loans to real estate developers.

(c)Primarily loans secured by owner-occupied real estate.

The following table presents loans by credit quality indicator (CQI) and vintage year. CQI is based on internal risk ratings assigned to each business loan at the time of approval and subjected to subsequent reviews, generally at least annually, and to pools of retail loans with similar risk characteristics. Vintage year is the year of origination or major modification.

	September 30, 2022
	Vintage Year
(in millions)	2022			2021			2020			2019		2018		Prior		Revolvers		Revolvers Converted to Term		Total
Business loans:
Commercial:
Pass (a)	$	3,311	(b)	$	3,786	(b)	$	1,060	(b)	$	1,111	$	631	$	1,108	$	18,410	$	8	$	29,425
Criticized (c)	36			223			112			81		55		85		694		2		1,288
Total commercial	3,347			4,009			1,172			1,192		686		1,193		19,104		10		30,713
Real estate construction
Pass (a)	448			969			748			230		66		30		122		—		2,613
Criticized (c)	—			—			3			—		1		—		—		—		4
Total real estate construction	448			969			751			230		67		30		122		—		2,617
Commercial mortgage
Pass (a)	2,425			2,480			1,770			1,445		1,136		2,435		575		—		12,266
Criticized (c)	6			16			11			36		30		73		—		—		172
Total commercial mortgage	2,431			2,496			1,781			1,481		1,166		2,508		575		—		12,438
Lease financing
Pass (a)	236			148			70			51		39		141		—		—		685
Criticized (c)	10			—			2			8		7		1		—		—		28
Total lease financing	246			148			72			59		46		142		—		—		713
International
Pass (a)	287			206			59			72		21		15		499		—		1,159
Criticized (c)	7			5			3			—		5		10		27		—		57
Total international	294			211			62			72		26		25		526		—		1,216
Total business loans	6,766			7,833			3,838			3,034		1,991		3,898		20,327		10		47,697
Retail loans:
Residential mortgage
Pass (a)	242			398			484			135		70		366		—		—		1,695
Criticized (c)	1			4			1			8		3		41		—		—		58
Total residential mortgage	243			402			485			143		73		407		—		—		1,753
Consumer:
Home equity
Pass (a)	—			—			—			—		—		10		1,642		39		1,691
Criticized (c)	—			—			—			—		—		—		14		3		17
Total home equity	—			—			—			—		—		10		1,656		42		1,708
Other consumer
Pass (a)	75			39			59			8		1		10		360		—		552
Criticized (c)	—			—			—			2		—		—		—		—		2
Total other consumer	75			39			59			10		1		10		360		—		554
Total consumer	75			39			59			10		1		20		2,016		42		2,262
Total retail loans	318			441			544			153		74		427		2,016		42		4,015
Total loans	$	7,084		$	8,274		$	4,382		$	3,187	$	2,065	$	4,325	$	22,343	$	52	$	51,712
Table continues on the following page.

	December 31, 2021
	Vintage Year
	2021			2020			2019		2018		2017		Prior		Revolvers		Revolvers Converted to Term		Total
Business loans:
Commercial:
Pass (a)	$	5,270	(b)	$	1,740	(b)	$	1,528	$	947	$	713	$	763	$	17,241	$	10	$	28,212
Criticized (c)	101			120			105		86		26		94		620		2		1,154
Total commercial	5,371			1,860			1,633		1,033		739		857		17,861		12		29,366
Real estate construction:
Pass (a)	458			858			849		424		158		34		132		—		2,913
Criticized (c)	—			3			—		13		8		8		3		—		35
Total real estate construction	458			861			849		437		166		42		135		—		2,948
Commercial mortgage:
Pass (a)	2,491			1,932			1,444		1,343		1,018		2,298		481		—		11,007
Criticized (c)	17			44			50		22		23		87		5		—		248
Total commercial mortgage	2,508			1,976			1,494		1,365		1,041		2,385		486		—		11,255
Lease financing
Pass (a)	166			88			97		50		38		179		—		—		618
Criticized (c)	—			2			10		8		1		1		—		—		22
Total lease financing	166			90			107		58		39		180		—		—		640
International
Pass (a)	381			141			103		29		1		16		480		—		1,151
Criticized (c)	20			10			3		5		4		8		7		—		57
Total international	401			151			106		34		5		24		487		—		1,208
Total business loans	8,904			4,938			4,189		2,927		1,990		3,488		18,969		12		45,417
Retail loans:
Residential mortgage
Pass (a)	443			527			164		83		111		407		—		—		1,735
Criticized (c)	5			—			1		2		7		21		—		—		36
Total residential mortgage	448			527			165		85		118		428		—		—		1,771
Consumer:
Home equity
Pass (a)	—			—			—		—		—		11		1,460		45		1,516
Criticized (c)	—			—			—		—		—		1		12		4		17
Total home equity	—			—			—		—		—		12		1,472		49		1,533
Other consumer
Pass (a)	101			68			13		9		1		31		337		—		560
Criticized (c)	—			—			—		—		—		—		4		—		4
Total other consumer	101			68			13		9		1		31		341		—		564
Total consumer	101			68			13		9		1		43		1,813		49		2,097
Total retail loans	549			595			178		94		119		471		1,813		49		3,868
Total loans	$	9,453		$	5,533		$	4,367	$	3,021	$	2,109	$	3,959	$	20,782	$	61	$	49,285

(a)Includes all loans not included in the categories of special mention, substandard or nonaccrual.

(b)Includes Small Business Administration Paycheck Protection Program (PPP) loans of $46 million and $458 million at September 30, 2022 and December 31, 2021, respectively.

(c)Includes loans with an internal rating of special mention, substandard loans for which the accrual of interest has not been discontinued and nonaccrual loans. Special mention loans have potential credit weaknesses that deserve management’s close attention, such as loans to borrowers who may be experiencing financial difficulties that may result in deterioration of repayment prospects from the borrower at some future date. Accruing substandard loans have a well-defined weakness, or weaknesses, such as loans to borrowers who may be experiencing losses from operations or inadequate liquidity of a degree and duration that jeopardizes the orderly repayment of the loan. Substandard loans are also distinguished by the distinct possibility of loss in the future if these weaknesses are not corrected. Nonaccrual loans are loans for which the accrual of interest has been discontinued. For further information regarding nonaccrual loans, refer to the Nonperforming Assets subheading in Note 1 - Basis of Presentation and Accounting Policies on page F-52 in the Corporation's 2021 Annual Report. These categories are generally consistent with the "special mention" and "substandard" categories as defined by regulatory authorities. A minority of nonaccrual loans are consistent with the "doubtful" category.

Loan interest receivable totaled $202 million and $120 million at September 30, 2022 and December 31, 2021, respectively and was included in accrued income and other assets on the Consolidated Balance Sheets.

Allowance for Credit Losses

The following table details the changes in the allowance for credit losses.

	2022									2021
(in millions)	Business Loans			Retail Loans			Total			Business Loans			Retail Loans			Total
Three Months Ended September 30
Balance at beginning of period:
Allowance for loan losses	$	502		$	61		$	563		$	589		$	63		$	652
Allowance for credit losses on lending-related commitments	34			12			46			24			7			31
Allowance for credit losses	536			73			609			613			70			683
Loan charge-offs	(25)			(1)			(26)			(26)			—			(26)
Recoveries on loans previously charged-off	12			1			13			22			2			24
Net loan (charge-offs) recoveries	(13)			—			(13)			(4)			2			(2)
Provision for credit losses:
Provision for loan losses	24			2			26			(31)			(10)			(41)
Provision for credit losses on lending-related commitments	2			—			2			—			(1)			(1)
Provision for credit losses	26			2			28			(31)			(11)			(42)
Balance at end of period:
Allowance for loan losses	513			63			576			554			55			609
Allowance for credit losses on lending-related commitments	36			12			48			24			6			30
Allowance for credit losses	$	549		$	75		$	624		$	578		$	61		$	639
Nine Months Ended September 30
Balance at beginning of period
Allowance for loan losses	$	531		$	57		$	588		$	895		$	53		$	948
Allowance for credit losses on lending-related commitments	24			6			30			35			9			44
Allowance for credit losses	555			63			618			930			62			992
Loan charge-offs	(55)			(2)			(57)			(48)			(2)			(50)
Recoveries on loans previously charged-off	33			3			36			53			3			56
Net loan (charge-offs) recoveries	(22)			1			(21)			5			1			6
Provision for credit losses:
Provision for loan losses	4			5			9			(346)			1			(345)
Provision for credit losses on lending-related commitments	12			6			18			(11)			(3)			(14)
Provision for credit losses	16			11			27			(357)			(2)			(359)
Balance at end of period:
Allowance for loan losses	513			63			576			554			55			609
Allowance for credit losses on lending-related commitments	36			12			48			24			6			30
Allowance for credit losses	$	549		$	75		$	624		$	578		$	61		$	639
Allowance for loan losses as a percentage of total loans	1.07		%	1.58		%	1.11		%	1.25		%	1.42		%	1.26		%
Allowance for credit losses as a percentage of total loans	1.15			1.88			1.21			1.30			1.57			1.33

Nonaccrual Loans

The following table presents additional information regarding nonaccrual loans. Interest income of $3 million and $4 million was recognized on nonaccrual loans for the three months ended September 30, 2022 and 2021, respectively, and $7 million and $8 million for the nine months ended September 30, 2022 and 2021, respectively.

(in millions)	Nonaccrual Loans with No Related Allowance		Nonaccrual Loans with Related Allowance		Total Nonaccrual Loans
September 30, 2022
Business loans:
Commercial	$	74	$	80	$	154
Real estate construction:
Other business lines (a)	—		4		4
Commercial mortgage:
Commercial Real Estate business line (b)	—		1		1
Other business lines (a)	4		20		24
Total commercial mortgage	4		21		25
International	5		—		5
Total business loans	83		105		188
Retail loans:
Residential mortgage	56		—		56
Consumer:
Home equity	14		—		14
Other consumer	1		—		1
Total consumer	15		—		15
Total retail loans	71		—		71
Total nonaccrual loans	$	154	$	105	$	259
December 31, 2021
Business loans:
Commercial	$	8	$	165	$	173
Real estate construction:
Other business lines (a)	—		6		6
Commercial mortgage:
Commercial Real Estate business line (b)	—		1		1
Other business lines (a)	4		27		31
Total commercial mortgage	4		28		32
International	—		5		5
Total business loans	12		204		216
Retail loans:
Residential mortgage	36		—		36
Consumer:
Home equity	12		—		12
Total retail loans	48		—		48
Total nonaccrual loans	$	60	$	204	$	264

(a)Primarily loans secured by owner-occupied real estate.

(b)Primarily loans to real estate developers.

Foreclosed Properties

Foreclosed properties were insignificant at September 30, 2022, compared to $1 million at December 31, 2021. Retail loans secured by residential real estate properties in process of foreclosure included in nonaccrual loans were insignificant at September 30, 2022, compared to none at December 31, 2021.

Troubled Debt Restructurings

The following table details the amortized cost basis at September 30, 2022 and 2021 of loans considered to be TDRs that were restructured during the three- and nine-month periods ended September 30, 2022 and 2021, by type of modification. In cases of loans with more than one type of modification, the loans were categorized based on the most significant modification.

	2022						2021 (a)
	Type of Modification						Type of Modification
(in millions)	Principal Deferrals (b)		Interest Rate Reductions		Total Modifications		Principal Deferrals (b)		Interest Rate Reductions		Total Modifications
Three Months Ended September 30,
Business loans:
Commercial	$	27	$	—	$	27	$	—	$	—	$	—
Commercial mortgage:
Other business lines (c)	7		—		7		—		—		—
Total business loans	34		—		34		—		—		—
Retail loans:
Residential mortgage	—		5		5		—		—		—
Total loans	$	34	$	5	$	39	$	—	$	—	$	—
Nine Months Ended September 30,
Business loans:
Commercial	$	34	$	—	$	34	$	—	$	—	$	—
Real estate construction:
Other business lines (c)	3		—		$	3	—		—		—
Commercial mortgage:
Other business lines (c)	15		—		15		—		—		—
Total business loans	52		—		52		—		—		—
Retail loans:
Residential mortgage	—		5		5		—		—		—
Consumer:
Home equity (d)	1		—		1		—		1		1
Total loans	$	53	$	5	$	58	$	—	$	1	$	1

(a)Under the provisions of the CARES Act, qualifying COVID-19-related modifications, primarily principal deferrals, were not considered TDRs during the nine months ended September 30, 2021.

(b)Primarily represents loan balances where terms were extended by more than an insignificant time period, typically more than 180 days, at or above contractual interest rates. Also includes commercial loans restructured in bankruptcy.

(c)Primarily loans secured by owner-occupied real estate.

(d)Includes bankruptcy loans for which the court has discharged the borrower's obligation and the borrower has not reaffirmed the debt.

The Corporation charges interest on principal balances outstanding during deferral periods. Additionally, none of the modifications involved forgiveness of principal. Commitments to lend additional funds to borrowers whose terms have been modified in TDRs were $1 million at September 30, 2022 compared to none at December 31, 2021, respectively. On an ongoing basis, the Corporation monitors the performance of modified loans to their restructured terms. The allowance for loan losses continues to be reassessed on the basis of an individual evaluation of the loan.

For principal deferrals, incremental deterioration in the credit quality of the loan, represented by a downgrade in the risk rating of the loan, for example, due to missed interest payments or a reduction of collateral value, is considered a subsequent default. For interest rate reductions, a subsequent payment default is defined in terms of delinquency, when a principal or interest payment is 90 days past due. Of the TDRs modified during the twelve-month periods ended September 30, 2022 and 2021, there were $6 million subsequent defaults of principal deferrals and no interest rate reductions for the three- and nine-month periods ended September 30, 2022, compared to insignificant subsequent defaults of principal deferrals or interest rate reductions in the comparable period in 2021.