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 6.

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:


($ in millions)	September 30, 2021		December 31, 2020
Loans and leases held for sale:
Commercial and industrial loans	$	2	230
Commercial mortgage loans	—		7

Commercial leases	—		39
Residential mortgage loans	5,201		4,465
Total loans and leases held for sale	$	5,203	4,741
Portfolio loans and leases:
Commercial and industrial loans(a)	$	47,834	49,665
Commercial mortgage loans	10,300		10,602
Commercial construction loans	5,456		5,815
Commercial leases	3,130		2,915
Total commercial loans and leases	$	66,720	68,997
Residential mortgage loans(b)	$	16,158	15,928
Home equity	4,276		5,183
Indirect secured consumer loans	16,004		13,653
Credit card	1,744		2,007
Other consumer loans	3,009		3,014
Total consumer loans	$	41,191	39,785
Total portfolio loans and leases	$	107,911	108,782

(b)Includes $39 as of December 31, 2020 of residential mortgage loans previously sold to GNMA for which the Bancorp was deemed to have regained effective control over under ASC Topic 860, but did not exercise its option to repurchase. Refer to Note 15 for further information.

Portfolio loans and leases are recorded net of unearned income, which totaled $253 million as of September 30, 2021 and $280 million as of December 31, 2020. 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 $444 million and $251 million as of September 30, 2021 and December 31, 2020, respectively. The amortized cost basis of loans and leases excludes accrued interest receivable of $358 million and $350 million at September 30, 2021 and December 31, 2020, respectively, which is presented as a component of other assets in the Condensed Consolidated Balance Sheets.

The Bancorp’s FHLB and FRB borrowings are primarily secured by loans. The Bancorp had loans of $15.5 billion at both September 30, 2021 and December 31, 2020 pledged at the FHLB, and loans of $45.1 billion and $37.8 billion at September 30, 2021 and December 31, 2020, respectively, pledged at the FRB.


	Carrying Value			90 Days Past Due and Still Accruing
($ in millions)	September 30, 2021		December 31, 2020	September 30, 2021	December 31, 2020
Commercial and industrial loans	$	47,836	49,895	4	39
Commercial mortgage loans	10,300		10,609	2	8
Commercial construction loans	5,456		5,815	—	—
Commercial leases	3,130		2,954	1	1
Residential mortgage loans	21,359		20,393	61	70
Home equity	4,276		5,183	1	2
Indirect secured consumer loans	16,004		13,653	8	10
Credit card	1,744		2,007	14	31
Other consumer loans	3,009		3,014	1	2
Total loans and leases	$	113,114	113,523	92	163
Less: Loans and leases held for sale	$	5,203	4,741
Total portfolio loans and leases	$	107,911	108,782


	For the three months ended September 30,			For the nine months ended September 30,
($ in millions)	2021		2020	2021	2020
Commercial and industrial loans	$	5	42	45	157
Commercial mortgage loans	(1)		11	8	14
Commercial leases	—		8	(2)	24
Residential mortgage loans	(1)		(1)	(2)	1
Home equity	(1)		1	(2)	5
Indirect secured consumer loans	(1)		3	8	23
Credit card	12		29	57	100
Other consumer loans	8		8	24	29
Total net charge-offs	$	21	101	136	353

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.


($ in millions)(a)	September 30, 2021		December 31, 2020
Net investment in direct financing leases:
Lease payment receivable (present value)	$	1,036	1,400
Unguaranteed residual assets (present value)	158		181
Net premium (discount) on acquired leases	1		(1)
Net investment in sales-type leases:
Lease payment receivable (present value)	1,592		976
Unguaranteed residual assets (present value)	50		36

Interest income recognized in the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2021 was $10 million and $33 million, respectively, for direct financing leases and $11 million and $31 million, respectively, for sales-type leases. For the three and nine months ended September 30, 2020, interest income recognized was $16 million and $50 million, respectively, for direct financing leases and $7 million and $20 million, respectively, for sales-type leases.

The following table presents undiscounted cash flows for both direct financing and sales-type leases for the remainder of 2021 through 2026 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease receivables as follows:


As of September 30, 2021 ($ in millions)	Direct Financing Leases		Sales-Type Leases
Remainder of 2021	$	98	145
2022	346		515
2023	221		326
2024	159		249
2025	113		199
2026	82		95
Thereafter	87		173
Total undiscounted cash flows	$	1,106	1,702
Less: Difference between undiscounted cash flows and discounted cash flows	70		110
Present value of lease payments (recognized as lease receivables)	$	1,036	1,592

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 $21 million and $29 million at September 30, 2021 and December 31, 2020, respectively, 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. Refer to Note 6 for additional information on credit quality and the ALLL.