Loans and Leases

12 Months Ended

Dec. 31, 2020

The Bancorp diversifies its loan and lease portfolio by offering a variety of loan and lease products with various payment terms and rate structures. The Bancorp’s commercial loan and lease portfolio consists of lending to various industry types. Management periodically reviews the performance of its loan and lease products to evaluate whether they are performing within acceptable interest rate and credit risk levels and changes are made to underwriting policies and procedures as needed. The Bancorp maintains an allowance to absorb loan and lease losses that are expected to be incurred over the remaining contractual terms of the related loans and leases. For further information on credit quality and the ALLL, refer to Note 7.

The following table provides a summary of commercial loans and leases classified by primary purpose and consumer loans classified based upon product or collateral as of December 31:


($ in millions)	2020		2019
Loans and leases held for sale:
Commercial and industrial loans	$	230	135
Commercial mortgage loans	7		1
Commercial leases	39		—
Residential mortgage loans	4,465		1,264
Total loans and leases held for sale	$	4,741	1,400
Portfolio loans and leases:
Commercial and industrial loans(a)	$	49,665	50,542
Commercial mortgage loans	10,602		10,963
Commercial construction loans	5,815		5,090
Commercial leases	2,915		3,363
Total commercial loans and leases	68,997		69,958
Residential mortgage loans(b)	15,928		16,724
Home equity	5,183		6,083
Indirect secured consumer loans	13,653		11,538
Credit card	2,007		2,532
Other consumer loans	3,014		2,723
Total consumer loans	39,785		39,600
Total portfolio loans and leases	$	108,782	109,558

(a)Includes $4.8 billion, as of December 31, 2020, related to the SBA’s Paycheck Protection Program.

(b)Includes $39, as of December 31, 2020, of residential mortgage loans previously sold to GNMA 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 17 for further information.

Portfolio loans and leases are recorded net of unearned income, which totaled $280 million as of December 31, 2020 and $354 million as of December 31, 2019. Additionally, portfolio loans and leases are recorded net of unamortized premiums and discounts, deferred direct loan origination fees and costs and fair value adjustments (associated with acquired loans or loans designated as fair value upon origination) which totaled a net premium of $251 million and $249 million as of December 31, 2020 and 2019, respectively. The amortized cost basis of loans and leases excludes accrued interest receivable of $350 million at December 31, 2020, which is presented as a component of other assets in the Consolidated Balance Sheets.

The Bancorp’s FHLB and FRB borrowings are primarily secured by loans. The Bancorp had loans of $15.5 billion and $16.7 billion at December 31, 2020 and 2019, respectively, pledged at the FHLB, and loans of $37.8 billion and $47.3 billion at December 31, 2020 and 2019, respectively, pledged at the FRB.

The following table presents a summary of the total loans and leases owned by the Bancorp and net charge-offs (recoveries) as of and for the years ended December 31:


	Carrying Value			90 Days Past Due and Still Accruing		Net Charge-Offs (Recoveries)
($ in millions)	2020		2019	2020	2019	2020	2019
Commercial and industrial loans	$	49,895	50,677	39	11	198	103
Commercial mortgage loans	10,609		10,964	8	15	45	(2)
Commercial construction loans	5,815		5,090	—	—	—	—
Commercial leases	2,954		3,363	1	—	23	7
Residential mortgage loans	20,393		17,988	70	50	2	4
Home equity	5,183		6,083	2	1	5	18
Indirect secured consumer loans	13,653		11,538	10	10	32	50
Credit card	2,007		2,532	31	42	126	134
Other consumer loans	3,014		2,723	2	1	40	55
Total loans and leases	$	113,523	110,958	163	130	471	369
Less: Loans and leases held for sale	$	4,741	1,400
Total portfolio loans and leases	$	108,782	109,558

The Bancorp engages in commercial lease products primarily related to the financing of commercial equipment. Leases are classified as sales-type if the Bancorp transfers control of the underlying asset to the lessee. The Bancorp classifies leases that do not meet any of the criteria for a sales-type lease as a direct financing lease if the present value of the sum of the lease payments and any residual value guaranteed by the lessee and/or any other third party equals or exceeds substantially all of the fair value of the underlying asset and the collection of the lease payments and residual value guarantee is probable.

The following table presents the components of the net investment in leases as of December 31:


($ in millions)(a)	2020		2019
Net investment in direct financing leases:
Lease payment receivable (present value)	$	1,400	2,196
Unguaranteed residual assets (present value)	181		220
Net discount on acquired leases	(1)		(7)
Net investment in sales-type leases:
Lease payment receivable (present value)	976		510
Unguaranteed residual assets (present value)	36		15

(a)Excludes $323 and $429 of leveraged leases at December 31, 2020 and 2019, respectively.

Interest income recognized in the Consolidated Statements of Income for the years ended December 31, 2020 and 2019 was $64 million and $88 million, respectively, for direct financing leases and $28 million and $13 million, respectively, for sales-type leases.

The following table presents undiscounted cash flows for both direct financing and sales-type leases for 2021 through 2025 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease receivables as follows:


As of December 31, 2020 ($ in millions)	Direct Financing Leases		Sales-Type Leases
2021	$	470	297
2022	360		253
2023	227		183
2024	161		132
2025	115		69
Thereafter	164		129
Total undiscounted cash flows	$	1,497	1,063
Less: Difference between undiscounted cash flows and discounted cash flows	97		87
Present value of lease payments (recognized as lease receivables)	$	1,400	976

The lease residual value represents the present value of the estimated fair value of the leased equipment at the end of the lease. The Bancorp performs quarterly reviews of residual values associated with its leasing portfolio considering factors such as the subject equipment, structure of the transaction, industry, prior experience with the lessee and other factors that impact the residual value to assess for impairment. The Bancorp maintained an allowance of $29 million at December 31, 2020 to cover the losses that are expected to be incurred over the remaining contractual terms of the related leases, including the potential losses related to the residual value, in the net investment in leases. The Bancorp maintained an allowance of $17 million at December 31, 2019 to cover the inherent losses, including the potential losses related to the residual value, in the net investment in leases. Refer to Note 7 for additional information on credit quality and the ALLL.