Credit Quality and the Allowance for Loan and Lease Losses

6 Months Ended

Jun. 30, 2020

Receivables [Abstract]

Credit Quality and the Allowance for Loan and Lease Losses

Credit Quality and the Allowance for Loan and Lease Losses

The Bancorp disaggregates ALLL balances and transactions in the ALLL by portfolio segment. Credit quality related disclosures for loans and leases are further disaggregated by class.

Allowance for Loan and Lease Losses

The following tables summarize transactions in the ALLL by portfolio segment:

For the three months ended June 30, 2020 ($ in millions)	Commercial		Residential Mortgage	Consumer	Unallocated	Total
Balance, beginning of period	$	1,313	260	775	—	2,348
Losses charged-off(a)	(81)		(2)	(80)	—	(163)
Recoveries of losses previously charged-off(a)	3		1	29	—	33
Provision for loan and lease losses(b)	267		68	143	—	478
Balance, end of period	$	1,502	327	867	—	2,696

(a)The Bancorp recorded $9 in both losses charged-off and recoveries of losses previously charged-off related to customer defaults on point-of-sale consumer loans for which the Bancorp obtained recoveries under third-party credit enhancements.

(b)Includes $1 in Residential Mortgage related to the initial recognition of an ALLL on PCD loans.

For the three months ended June 30, 2019 ($ in millions)	Commercial		Residential Mortgage	Consumer	Unallocated	Total
Balance, beginning of period	$	654	79	270	112	1,115
Losses charged-off(a)	(33)		(1)	(85)	—	(119)
Recoveries of losses previously charged-off(a)	10		2	29	—	41
Provision for (benefit from) loan and lease losses	20		(4)	62	—	78
Balance, end of period	$	651	76	276	112	1,115

(a)The Bancorp recorded $11 in both losses charged-off and recoveries of losses previously charged-off related to customer defaults on point-of-sale consumer loans for which the Bancorp obtained recoveries under third-party credit enhancements.

For the six months ended June 30, 2020 ($ in millions)	Commercial		Residential Mortgage	Consumer	Unallocated	Total
Balance, beginning of period	$	710	73	298	121	1,202
Impact of adoption of ASU 2016-13(a)	160		196	408	(121)	643
Losses charged-off(b)	(142)		(4)	(176)	—	(322)
Recoveries of losses previously charged-off(b)	7		2	61	—	70
Provision for loan and lease losses	767		60	276	—	1,103
Balance, end of period	$	1,502	327	867	—	2,696

(a)Includes $31, $2 and $1 in Commercial, Residential Mortgage and Consumer, respectively, related to the initial recognition of an ALLL on PCD loans.

(b)The Bancorp recorded $22 in both losses charged-off and recoveries of losses previously charged-off related to customer defaults on point-of-sale consumer loans for which the Bancorp obtained recoveries under third-party credit enhancements.

For the six months ended June 30, 2019 ($ in millions)	Commercial		Residential Mortgage	Consumer	Unallocated	Total
Balance, beginning of period	$	645	81	267	110	1,103
Losses charged-off(a)	(53)		(3)	(172)	—	(228)
Recoveries of losses previously charged-off(a)	13		3	56	—	72
Provision for (benefit from) loan and lease losses	46		(5)	125	2	168
Balance, end of period	$	651	76	276	112	1,115

(a)The Bancorp recorded $22 in both losses charged-off and recoveries of losses previously charged-off related to customer defaults on point-of-sale consumer loans for which the Bancorp obtained recoveries under third-party credit enhancements.

The following tables provide a summary of the ALLL and related loans and leases classified by portfolio segment:

As of June 30, 2020 ($ in millions)	Commercial		Residential Mortgage	Consumer	Total
ALLL:(a)
Individually evaluated	$	167	91	50	308
Collectively evaluated	1,335		236	817	2,388
Total ALLL	$	1,502	327	867	2,696
Portfolio loans and leases:(b)
Individually evaluated	$	939	809	294	2,042
Collectively evaluated	74,082		15,336	22,846	112,264
Purchased credit deteriorated(c)	413		127	22	562
Total portfolio loans and leases	$	75,434	16,272	23,162	114,868

(a)Includes $3 related to leveraged leases at June 30, 2020.

(b)Excludes $185 of residential mortgage loans measured at fair value and includes $382 of leveraged leases, net of unearned income at June 30, 2020.

(c)Includes $82 million, as of June 30, 2020, of GNMA loans for which the Bancorp is deemed to have regained effective control over under ASC Topic 860, but did not exercise its option to repurchase. Refer to Note 16 for further information.

As of December 31, 2019 ($ in millions)	Commercial		Residential Mortgage	Consumer	Unallocated	Total
ALLL:(a)
Individually evaluated for impairment	$	82	55	33	—	170
Collectively evaluated for impairment	628		18	265	—	911
Unallocated	—		—	—	121	121
Total ALLL	$	710	73	298	121	1,202
Portfolio loans and leases:(b)
Individually evaluated for impairment	$	413	814	302	—	1,529
Collectively evaluated for impairment	69,047		15,690	22,558	—	107,295
Purchased credit impaired	498		37	16	—	551
Total portfolio loans and leases	$	69,958	16,541	22,876	—	109,375

(a)Includes $1 related to leveraged leases at December 31, 2019.

(b)Excludes $183 of residential mortgage loans measured at fair value and includes $429 of leveraged leases, net of unearned income at December 31, 2019.

CREDIT RISK PROFILE

Commercial Portfolio Segment

For purposes of monitoring the credit quality and risk characteristics of its commercial portfolio segment, the Bancorp disaggregates the segment into the following classes: commercial and industrial, commercial mortgage owner-occupied, commercial mortgage nonowner-occupied, commercial construction and commercial leases.

To facilitate the monitoring of credit quality within the commercial portfolio segment, the Bancorp utilizes the following categories of credit grades: pass, special mention, substandard, doubtful and loss. The five categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter.

Pass ratings, which are assigned to those borrowers that do not have identified potential or well-defined weaknesses and for which there is a high likelihood of orderly repayment, are updated at least annually based on the size and credit characteristics of the borrower. All other categories are updated on a quarterly basis during the month preceding the end of the calendar quarter.

The Bancorp assigns a special mention rating to loans and leases that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the loan or lease or the Bancorp’s credit position.

The Bancorp assigns a substandard rating to loans and leases that are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. Substandard loans and leases have well-defined weaknesses or weaknesses that could jeopardize the orderly repayment of the debt. Loans and leases in this grade also are characterized by the distinct possibility that the Bancorp will sustain some loss if the deficiencies noted are not addressed and corrected.

The Bancorp assigns a doubtful rating to loans and leases that have all the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors that may work to the advantage of and strengthen the credit quality of the loan or lease, its classification as an estimated loss is deferred until its more exact

status may be determined. Pending factors may include a proposed merger or acquisition, liquidation proceeding, capital injection, perfecting liens on additional collateral or refinancing plans.

Loans and leases classified as loss are considered uncollectible and are charged off in the period in which they are determined to be uncollectible. Because loans and leases in this category are fully charged off, they are not included in the following tables.

For loans and leases that are collectively evaluated, the Bancorp utilizes models to forecast expected credit losses over a reasonable and supportable forecast period based on the probability of a loan or lease defaulting, the expected balance at the estimated date of default and the expected loss percentage given a default. For the commercial portfolio segment, the estimates for probability of default are primarily based on internal ratings assigned to each commercial borrower on a 13-point scale and historical observations of how those ratings migrate to a default over time in the context of macroeconomic conditions. For loans with available credit, the estimate of the expected balance at the time of default considers expected utilization rates, which are primarily based on macroeconomic conditions and the utilization history of similar borrowers under those economic conditions. The estimates for loss severity are primarily based on collateral type and coverage levels and the susceptibility of those characteristics to changes in macroeconomic conditions. Refer to Note 4 for additional information about the Bancorp’s processes for developing these models, estimating credit losses for periods beyond the reasonable and supportable forecast period and for estimating credit losses for individually evaluated loans.

The following table summarizes the credit risk profile of the Bancorp’s commercial portfolio segment, by class and vintage:

	Terms Loans and Leases Amortized Cost Basis by Origination Year							Revolving Loans Amortized Cost Basis	Revolving Loans Converted to Term Loans Amortized Cost Basis
As of June 30, 2020 ($ in millions)	2020		2019	2018	2017	2016	Prior			Total
Commercial and industrial loans:
Pass	$	7,238	2,849	1,404	966	612	944	34,809	—	48,822
Special mention	62		155	213	72	42	21	3,300	—	3,865
Substandard	96		70	195	89	52	119	2,287	—	2,908
Doubtful	10		15	34	6	1	—	—	—	66
Total commercial and industrial loans	$	7,406	3,089	1,846	1,133	707	1,084	40,396	—	55,661
Commercial mortgage owner-occupied loans:
Pass	$	828	757	473	340	278	568	1,069	—	4,313
Special mention	27		23	24	27	13	23	38	—	175
Substandard	131		52	52	52	9	45	85	—	426
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial mortgage owner-occupied loans	$	986	832	549	419	300	636	1,192	—	4,914
Commercial mortgage nonowner-occupied loans:
Pass	$	757	1,006	584	299	294	444	2,106	—	5,490
Special mention	86		4	71	17	18	39	369	—	604
Substandard	66		7	12	11	—	41	88	—	225
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial mortgage nonowner-occupied loans	$	909	1,017	667	327	312	524	2,563	—	6,319
Commercial construction loans:
Pass	$	19	58	28	—	10	12	4,912	—	5,039
Special mention	40		—	—	—	—	—	337	—	377
Substandard	6		—	—	—	—	—	57	—	63
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial construction loans	$	65	58	28	—	10	12	5,306	—	5,479
Commercial leases:
Pass	$	9	111	345	443	361	1,604	—	—	2,873
Special mention	—		4	32	19	16	25	—	—	96
Substandard	—		3	19	31	5	34	—	—	92
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial leases	$	9	118	396	493	382	1,663	—	—	3,061
Total commercial loans and leases:
Pass	$	8,851	4,781	2,834	2,048	1,555	3,572	42,896	—	66,537
Special mention	215		186	340	135	89	108	4,044	—	5,117
Substandard	299		132	278	183	66	239	2,517	—	3,714
Doubtful	10		15	34	6	1	—	—	—	66
Total commercial loans and leases	$	9,375	5,114	3,486	2,372	1,711	3,919	49,457	—	75,434

The following table summarizes the credit risk profile of the Bancorp’s commercial portfolio segment, by class:

As of December 31, 2019 ($ in millions)	Pass		Special Mention	Substandard	Doubtful	Total
Commercial and industrial loans	$	47,671	1,423	1,406	42	50,542
Commercial mortgage owner-occupied loans	4,421		162	293	4	4,880
Commercial mortgage nonowner-occupied loans	5,866		135	82	—	6,083
Commercial construction loans	4,963		52	75	—	5,090
Commercial leases	3,222		53	88	—	3,363
Total commercial loans and leases	$	66,143	1,825	1,944	46	69,958

Age Analysis of Past Due Commercial Loans and Leases

The following tables summarize the Bancorp’s amortized cost basis in portfolio commercial loans and leases, by age and class:

	Current Loans and Leases(a)		Past Due			Total Loans and Leases	90 Days Past Due and Still Accruing
As of June 30, 2020 ($ in millions)			30-89 Days(a)	90 Days or More(a)	Total Past Due
Commercial loans and leases:
Commercial and industrial loans	$	55,377	162	122	284	55,661	10
Commercial mortgage owner-occupied loans	4,866		21	27	48	4,914	13
Commercial mortgage nonowner-occupied loans	6,229		12	78	90	6,319	10
Commercial construction loans	5,469		10	—	10	5,479	—
Commercial leases	3,037		5	19	24	3,061	—
Total portfolio commercial loans and leases	$	74,978	210	246	456	75,434	33

(a)Includes accrual and nonaccrual loans and leases.

	Current Loans and Leases(a)		Past Due			Total Loans and Leases	90 Days Past Due and Still Accruing
As of December 31, 2019 ($ in millions)			30-89 Days(a)	90 Days or More(a)	Total Past Due
Commercial loans and leases:
Commercial and industrial loans	$	50,305	133	104	237	50,542	11
Commercial mortgage owner-occupied loans	4,853		4	23	27	4,880	9
Commercial mortgage nonowner-occupied loans	6,072		5	6	11	6,083	6
Commercial construction loans	5,089		1	—	1	5,090	—
Commercial leases	3,338		11	14	25	3,363	—
Total portfolio commercial loans and leases	$	69,657	154	147	301	69,958	26

(a)Includes accrual and nonaccrual loans and leases.

Residential Mortgage and Consumer Portfolio Segments

For purposes of monitoring the credit quality and risk characteristics of its consumer portfolio segment, the Bancorp disaggregates the segment into the following classes: home equity, indirect secured consumer loans, credit card and other consumer loans. The Bancorp’s residential mortgage portfolio segment is also a separate class.

The Bancorp considers repayment performance as the best indicator of credit quality for residential mortgage and consumer loans, which includes both the delinquency status and performing versus nonperforming status of the loans. The delinquency status of all residential mortgage and consumer loans and the performing versus nonperforming status is presented in the following table. Refer to the nonaccrual loans and leases section of Note 1 of the Notes to Consolidated Financial Statements included in the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2019 for additional delinquency and nonperforming information.

For collectively evaluated loans in the consumer and residential mortgage portfolio segments, the Bancorp’s expected credit loss models primarily utilize the borrower’s FICO score and delinquency history in combination with macroeconomic conditions when estimating the probability of default. The estimates for loss severity are primarily based on collateral type and coverage levels and the susceptibility of those characteristics to changes in macroeconomic conditions. The expected balance at the estimated date of default is also particularly significant for portfolio classes which generally have longer terms (such as residential mortgage loans and home equity) and portfolio classes containing a high concentration of loans with revolving privileges (such as credit card and home equity). The estimate of the expected balance at the time of default considers expected prepayment and utilization rates where applicable, which are primarily based on macroeconomic conditions and the utilization history of similar borrowers under those economic conditions. Refer to Note 4 for additional information about the Bancorp’s process for developing these models and its process for estimating credit losses for periods beyond the reasonable and supportable forecast period.

The following table presents a summary of the Bancorp’s residential mortgage and consumer portfolio segments, by class and vintage, disaggregated by both age and performing versus nonperforming status:

	Terms Loans Amortized Cost Basis by Origination Year							Revolving Loans Amortized Cost Basis	Revolving Loans Converted to Term Loans Amortized Cost Basis
As of June 30, 2020 ($ in millions)	2020		2019	2018	2017	2016	Prior			Total
Residential mortgage loans:
Performing:
Current(a)	$	1,666	2,570	1,160	2,137	2,897	5,677	—	—	16,107
30-89 days past due	—		4	3	5	3	17	—	—	32
90 days or more past due	—		1	2	5	4	42	—	—	54
Total performing	1,666		2,575	1,165	2,147	2,904	5,736	—	—	16,193
Nonperforming	—		—	—	2	3	74	—	—	79
Total residential mortgage loans(b)	$	1,666	2,575	1,165	2,149	2,907	5,810	—	—	16,272
Home equity:
Performing:
Current	$	9	30	37	3	1	150	5,317	8	5,555
30-89 days past due	—		—	—	—	—	2	30	1	33
90 days or more past due	—		—	—	—	—	—	—	—	—
Total performing	9		30	37	3	1	152	5,347	9	5,588
Nonperforming	—		—	—	—	—	10	83	—	93
Total home equity	$	9	30	37	3	1	162	5,430	9	5,681
Indirect secured consumer loans:
Performing:
Current	$	3,328	4,673	2,160	1,173	565	392	—	—	12,291
30-89 days past due	4		25	23	14	7	6	—	—	79
90 days or more past due	1		3	3	2	1	2	—	—	12
Total performing	3,333		4,701	2,186	1,189	573	400	—	—	12,382
Nonperforming	—		3	2	3	2	3	—	—	13
Total indirect secured consumer loans	$	3,333	4,704	2,188	1,192	575	403	—	—	12,395
Credit card:
Performing:
Current	$	—	—	—	—	—	—	2,119	—	2,119
30-89 days past due	—		—	—	—	—	—	30	—	30
90 days or more past due	—		—	—	—	—	—	36	—	36
Total performing	—		—	—	—	—	—	2,185	—	2,185
Nonperforming	—		—	—	—	—	—	26	—	26
Total credit card	$	—	—	—	—	—	—	2,211	—	2,211
Other consumer loans
Performing:
Current	$	481	727	538	221	41	37	814	1	2,860
30-89 days past due	1		4	3	2	—	—	2	—	12
90 days or more past due	—		1	—	—	—	—	—	—	1
Total performing	482		732	541	223	41	37	816	1	2,873
Nonperforming	—		—	—	—	—	—	2	—	2
Total other consumer loans	$	482	732	541	223	41	37	818	1	2,875
Total consumer loans(b)	$	5,490	8,041	3,931	3,567	3,524	6,412	8,459	10	39,434

(a)Information includes advances made pursuant to servicing agreements for GNMA mortgage pools whose repayments are insured by the FHA or guaranteed by the VA. As of June 30, 2020, $89 of these loans were 30-89 days past due and $223 were 90 days or more past due. The Bancorp recognized $1 and $2 of losses during the three and six months ended June 30, 2020, respectively, due to claim denials and curtailments associated with these insured or guaranteed loans.

(b)Excludes $185 of residential mortgage loans measured at fair value at June 30, 2020.

The following table presents a summary of the Bancorp’s residential mortgage and consumer portfolio segments, by class, disaggregated into performing versus nonperforming status as of:

December 31, 2019 ($ in millions)	Performing		Nonperforming
Residential mortgage loans(a)	$	16,450	91
Home equity	5,989		94
Indirect secured consumer loans	11,531		7
Credit card	2,505		27
Other consumer loans	2,721		2
Total residential mortgage and consumer loans(a)	$	39,196	221

(a) Excludes $183 of residential mortgage loans measured at fair value at December 31, 2019.

Age Analysis of Past Due Consumer Loans

The following tables summarize the Bancorp’s amortized cost basis in portfolio consumer loans, by age and class:

	Current Loans and Leases(b)(c)		Past Due			Total Loans and Leases	90 Days Past Due and Still Accruing
December 31, 2019 ($ in millions)			30-89 Days(c)	90 Days or More(c)	Total Past Due
Residential mortgage loans(a)	$	16,372	27	142	169	16,541	50
Consumer loans:
Home equity	5,965		61	57	118	6,083	1
Indirect secured consumer loans	11,389		132	17	149	11,538	10
Credit card	2,434		50	48	98	2,532	42
Other consumer loans	2,702		18	3	21	2,723	1
Total portfolio consumer loans(a)	$	38,862	288	267	555	39,417	104

(a)Excludes $183 of residential mortgage loans measured at fair value at December 31, 2019.

(b)Information includes advances made pursuant to servicing agreements for GNMA mortgage pools whose repayments are insured by the FHA or guaranteed by the VA. As of December 31, 2019, $94 of these loans were 30-89 days past due and $261 were 90 days or more past due. The Bancorp recognized an immaterial amount of losses during both the three and six months ended June 30, 2019 due to claim denials and curtailments associated with these insured or guaranteed loans.

(c)Includes accrual and nonaccrual loans and leases.

Collateral-Dependent Loans and Leases

The Bancorp considers a loan or lease to be collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. When a loan or lease is collateral-dependent, its fair value is generally based on the fair value less cost to sell of the underlying collateral.

The following table presents the amortized cost basis of the Bancorp’s collateral-dependent loans, by portfolio class:

As of June 30, 2020 ($ in millions)	Amortized Cost Basis
Commercial loans and leases:
Commercial and industrial loans	$	796
Commercial mortgage owner-occupied loans	46
Commercial mortgage nonowner-occupied loans	83
Commercial construction loans	20
Commercial leases	24
Total commercial loans and leases	969
Residential mortgage loans	107
Consumer loans:
Home equity	72
Indirect secured consumer loans	8
Other consumer loans	—
Total consumer loans	80
Total loans and leases	$	1,156

Nonperforming Assets

Nonperforming assets include nonaccrual loans and leases for which ultimate collectability of the full amount of the principal and/or interest is uncertain; restructured loans which have not yet met the requirements to be returned to accrual status; certain restructured consumer and

residential mortgage loans which are 90 days past due based on the restructured terms unless the loan is both well-secured and in the process of collection; and certain other assets, including OREO and other repossessed property.

The following table presents the amortized cost basis of the Bancorp’s nonaccrual loans and leases, by class, and OREO and other repossessed property:

As of June 30, 2020 ($ in millions)					For the three months ended June 30, 2020	For the six months ended June 30, 2020
	With an ALLL		No Related ALLL	Total	Interest Income Recognized	Interest Income Recognized
Commercial loans and leases:
Commercial and industrial loans	$	261	91	352	3	4
Commercial mortgage owner-occupied loans	25		14	39	—	—
Commercial mortgage nonowner-occupied loans	68		4	72	—	—
Commercial construction loans	1		—	1	—	—
Commercial leases	21		2	23	—	1
Total nonaccrual portfolio commercial loans and leases	376		111	487	3	5
Residential mortgage loans	14		65	79	7	15
Consumer loans:
Home equity	64		29	93	2	5
Indirect secured consumer loans	5		8	13	—	—
Credit card	26		—	26	1	2
Other consumer loans	2		—	2	—	—
Total nonaccrual portfolio consumer loans	97		37	134	3	7
Total nonaccrual portfolio loans and leases(a)(b)	$	487	213	700	13	27
OREO and other repossessed property	—		47	47	—	—
Total nonperforming portfolio assets(a)(b)	$	487	260	747	13	27

(a)Excludes $1 of nonaccrual loans held for sale and $1 of nonaccrual restructured loans held for sale.

(b)Includes $23 of nonaccrual government insured commercial loans whose repayments are insured by the SBA, of which $14 are restructured nonaccrual government insured commercial loans.

The following table presents the Bancorp’s nonaccrual loans and leases, by class, and OREO and other repossessed property as of:

($ in millions)	December 31, 2019
Commercial loans and leases:
Commercial and industrial loans	$	338
Commercial mortgage owner-occupied loans	29
Commercial mortgage nonowner-occupied loans	1
Commercial construction loans	1
Commercial leases	28
Total nonaccrual portfolio commercial loans and leases	397
Residential mortgage loans	91
Consumer loans:
Home equity	94
Indirect secured consumer loans	7
Credit card	27
Other consumer loans	2
Total nonaccrual portfolio consumer loans	130
Total nonaccrual portfolio loans and leases(a)(b)	$	618
OREO and other repossessed property	62
Total nonperforming portfolio assets(a)(b)	$	680

(a)Excludes $7 of nonaccrual loans and leases held for sale.

(b)Includes $16 of nonaccrual government insured commercial loans whose repayments are insured by the SBA, of which $11 are restructured nonaccrual government insured commercial loans.

The Bancorp’s amortized cost basis of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction was $156 million and $212 million as of June 30, 2020 and December 31, 2019, respectively.

Troubled Debt Restructurings

A loan is accounted for as a TDR if the Bancorp, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. TDRs include concessions granted under reorganization, arrangement or other provisions of the Federal Bankruptcy Act. Within each of the Bancorp’s loan classes, TDRs typically involve either a reduction of the stated interest rate of the loan, an extension of the loan’s maturity date with a stated rate lower than the current market rate for a new loan with similar risk, or in limited circumstances, a reduction of the principal balance of the loan or the loan’s accrued interest. Modifying the terms of a loan may result in an increase or decrease to the ALLL depending upon the terms modified, the method used to measure the ALLL for a loan prior to modification, the extent of collateral, and whether any charge-offs were recorded on the loan before or at the time of modification. Refer to the ALLL section of Note 4 for information on the Bancorp’s ALLL methodology. Upon modification of a loan, the Bancorp measures the expected credit loss as either the difference between the amortized cost of the loan and the fair value of collateral less cost to sell or the difference between the estimated future cash flows expected to be collected on the modified loan, discounted at the original effective yield of the loan, and the carrying value of the loan. The resulting measurement may result in the need for minimal or no allowance regardless of which is used because it is probable that all cash flows will be collected under the modified terms of the loan. In addition, if the stated interest rate was increased in a TDR that is not collateral-dependent, the cash flows on the modified loan, using the pre-modification interest rate as the discount rate, often exceed the amortized cost basis of the loan. Conversely, upon a modification that reduces the stated interest rate on a loan that is not collateral-dependent, the Bancorp recognizes an increase to the ALLL. If a TDR involves a reduction of the principal balance of the loan or the loan’s accrued interest, that amount is charged off to the ALLL. Loans discharged in a Chapter 7 bankruptcy and not reaffirmed by the borrower are treated as nonaccrual collateral-dependent loans with a charge-off recognized to reduce the carrying values of such loans to the fair value of the related collateral less costs to sell.

The Bancorp had commitments to lend additional funds to borrowers whose terms have been modified in a TDR, consisting of line of credit and letter of credit commitments of $76 million and $66 million, respectively, as of June 30, 2020 compared with $41 million and $58 million, respectively, as of December 31, 2019.

The following tables provide a summary of loans and leases, by class, modified in a TDR by the Bancorp during the three months ended:

June 30, 2020 ($ in millions)(a)	Number of Loans Modified in a TDR During the Period(b)	Amortized Cost Basis of Loans Modified in a TDR During the Period		Increase to ALLL Upon Modification	Charge-offs Recognized Upon Modification
Commercial loans:
Commercial and industrial loans	33	$	107	14	—
Commercial mortgage owner-occupied loans	17	12		—	—
Commercial mortgage nonowner-occupied loans	9	14		—	—
Commercial construction	2	21		1	—
Residential mortgage loans	109	13		1	—
Consumer loans:
Home equity	21	2		—	—
Indirect secured consumer loans	20	—		—	—
Credit card	973	5		2	—
Total portfolio loans	1,184	$	174	18	—

(a)Excludes all loans and leases held for sale.

(b)Represents number of loans post-modification and excludes loans previously modified in a TDR.

June 30, 2019 ($ in millions)(a)	Number of Loans Modified in a TDR During the Period(b)	Recorded Investment in Loans Modified in a TDR During the Period		(Decrease) Increase to ALLL Upon Modification	Charge-offs Recognized Upon Modification
Commercial loans:
Commercial and industrial loans	25	$	62	(9)	5
Commercial mortgage owner-occupied loans	6	5		—	—
Residential mortgage loans	139	17		—	—
Consumer loans:
Home equity	16	1		—	—
Indirect secured consumer loans	9	—		—	—
Credit card	1,374	8		2	1
Total portfolio loans	1,569	$	93	(7)	6

(a)Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality which were accounted for within a pool.

(b)Represents number of loans post-modification and excludes loans previously modified in a TDR.

The following tables provide a summary of loans and leases, by class, modified in a TDR by the Bancorp during the six months ended:

June 30, 2020 ($ in millions)(a)	Number of Loans Modified in a TDR During the Period(b)	Amortized Cost Basis of Loans Modified in a TDR During the Period		Increase (Decrease) to ALLL Upon Modification	Charge-offs Recognized Upon Modification
Commercial loans:
Commercial and industrial loans	63	$	176	24	—
Commercial mortgage owner-occupied loans	28	19		—	—
Commercial mortgage nonowner-occupied loans	12	22		—	—
Commercial construction	3	21		1	—
Residential mortgage loans	293	37		1	—
Consumer loans:
Home equity	42	4		(1)	—
Indirect secured consumer loans	42	—		—	—
Credit card	2,857	15		6	—
Total portfolio loans	3,340	$	294	31	—

(a)Excludes all loans and leases held for sale.

(b)Represents number of loans post-modification and excludes loans previously modified in a TDR.

June 30, 2019 ($ in millions)(a)	Number of Loans Modified in a TDR During the Period(b)	Recorded Investment in Loans Modified in a TDR During the Period		(Decrease) Increase to ALLL Upon Modification	Charge-offs Recognized Upon Modification
Commercial loans:
Commercial and industrial loans	38	$	96	(14)	5
Commercial mortgage owner-occupied loans	9	9		—	—
Residential mortgage loans	275	35		—	—
Consumer loans:
Home equity	37	2		—	—
Indirect secured consumer loans	38	—		—	—
Credit card	2,783	16		4	2
Total portfolio loans	3,180	$	158	(10)	7

(a)Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality which were accounted for within a pool.

(b)Represents number of loans post-modification and excludes loans previously modified in a TDR.

The Bancorp considers TDRs that become 90 days or more past due under the modified terms as subsequently defaulted. For commercial loans not subject to individual evaluation for an ALLL, the applicable commercial models are applied for purposes of determining the ALLL as well as qualitatively assessing whether those loans are reasonably expected to be further restructured prior to their maturity date and, if so, the impact such a restructuring would have on the remaining contractual life of the loans. When a residential mortgage, home equity, indirect secured consumer or other consumer loan that has been modified in a TDR subsequently defaults, the present value of expected cash flows used in the measurement of the expected credit loss is generally limited to the expected net proceeds from the sale of the loan’s underlying

collateral and any resulting collateral shortfall is reflected as a charge-off or an increase in ALLL. The Bancorp recognizes an ALLL for the entire balance of the credit card loans modified in a TDR that subsequently default.

The following tables provide a summary of TDRs that subsequently defaulted during the three months ended June 30, 2020 and 2019 and were within 12 months of the restructuring date:

June 30, 2020 ($ in millions)(a)	Number of Contracts	Amortized Cost
Commercial loans:
Commercial and industrial loans	6	$	4
Commercial mortgage owner-occupied loans	5	1
Commercial mortgage nonowner-occupied loans	1	4
Residential mortgage loans	25	4
Consumer loans:
Home equity	2	—
Indirect secured consumer loans	3	—
Credit card	16	—
Total portfolio loans	58	$	13

(a)Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality which were accounted for within a pool.

June 30, 2019 ($ in millions)(a)	Number of Contracts	Recorded Investment
Commercial loans:
Commercial and industrial loans	5	$	1
Commercial mortgage owner-occupied loans	2	1
Residential mortgage loans	53	8
Consumer loans:
Home equity	1	—
Credit card	253	1
Total portfolio loans	314	$	11

(a)Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality which were accounted for within a pool.

The following tables provide a summary of TDRs that subsequently defaulted during the six months ended June 30, 2020 and 2019 and were within 12 months of the restructuring date:

June 30, 2020 ($ in millions)(a)	Number of Contracts	Amortized Cost
Commercial loans:
Commercial and industrial loans	6	$	4
Commercial mortgage owner-occupied loans	7	2
Commercial mortgage nonowner-occupied loans	2	9
Residential mortgage loans	72	10
Consumer loans:
Home equity	3	—
Indirect secured consumer loans	6	—
Credit card	217	1
Total portfolio loans	313	$	26

(a)Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality which were accounted for within a pool.

June 30, 2019 ($ in millions)(a)	Number of Contracts	Recorded Investment
Commercial loans:
Commercial and industrial loans	7	$	17
Commercial mortgage owner-occupied loans	2	1
Residential mortgage loans	129	20
Consumer loans:
Home equity	5	—
Credit card	536	3
Total portfolio loans	679	$	41

(a)Excludes all loans and leases held for sale and loans acquired with deteriorated credit quality which were accounted for within a pool.

COVID-19 Hardship Relief Programs

In response to the COVID-19 pandemic, beginning in March 2020, the Bancorp began providing financial hardship relief in the form of payment deferrals and forbearances to consumer and business customers across a wide array of lending products, as well as the suspension of vehicle repossessions and home foreclosures. The payment deferrals and forbearances are currently expected to cover periods of three to six months. In most cases, these offers are not classified as troubled debt restructurings (TDRs) and do not result in loans being placed on nonaccrual status.

For loans that receive a payment deferral or forbearance under these hardship relief programs, the Bancorp continues to accrue interest and recognize interest income during the period of the deferral. Depending on the terms of each program, all or a portion of this accrued interest may be paid directly by the borrower (either during the relief period, at the end of the relief period or at maturity of the loan) or added to the customer’s outstanding balance. For certain programs, the maturity date of the loan may also be extended by the number of payments deferred. Interest income will continue to be recognized at the original contractual interest rate unless that rate is concurrently modified upon entering the relief program (in which case, the modified rate would be used to recognize interest).

For commercial leases that receive payment deferrals under the Bancorp’s COVID-19 pandemic hardship relief programs, the Bancorp will continue to recognize interest income during the deferral period, but the yield will be recalculated based on the timing and amount of remaining payments over the remaining lease term. The revised yield will be used for prospectively recognizing interest income and adjusting the net investment in the lease. The Bancorp’s hardship relief programs for commercial leases affect the timing of payments but do not generally result in an increase in the rights of the lessor or the obligations of the lessee. Therefore, the Bancorp has elected to forego certain requirements that would typically apply for lease modifications when accounting for the effects of the hardship relief programs. Refer to the Regulatory Developments Related to the COVID-19 Pandemic section of Note 4 for further information.

Since announcing its COVID-19 hardship relief programs and through June 30, 2020, the Bancorp has provided payment relief assistance to over 150,000 customers, including providing payment deferrals or forbearances on over 4,000 commercial loans and leases, over 115,000 consumer and owned residential mortgage loans and over 36,000 residential mortgage loans serviced for others.

The following table provides a summary of portfolio loans and leases as of June 30, 2020, by class, that have received payment deferrals or forbearances as part of the Bancorp’s COVID-19 pandemic hardship relief programs:

	Number of Loans Enrolled in Programs(a)	Principal Balance of Loans Enrolled in Programs(b)		Balances of Accounts Enrolled in Programs that Were Past Due Prior to Pandemic
June 30, 2020 ($ in millions)				30-89 Days	90 Days or More
Commercial loans:
Commercial and industrial loans	3,240	$	1,442	1	—
Commercial mortgage owner-occupied loans	605	612		—	—
Commercial mortgage nonowner-occupied loans	187	1,021		—	—
Commercial construction loans	31	365		1	—
Commercial leases	93	111		—	—
Residential mortgage loans	7,290	1,472		55	112
Consumer loans:
Home equity	3,409	231		10	10
Indirect secured consumer loans	58,716	1,179		40	1
Credit card	35,616	164		7	2
Other consumer loans	10,174	113		3	—
Total portfolio loans and leases	119,361	$	6,710	117	125

(a)Excludes portfolio loans and leases which have been fully repaid or as of June 30, 2020 and loans and leases which were withdrawn from the programs at the borrower's request.

(b)Includes $28 of commercial loans and $12 of home equity loans that were classified as a TDR due to having financial difficulty prior to the COVID-19 pandemic.