Loans and Leases

3 Months Ended

Mar. 31, 2023

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)	March 31, 2023		December 31, 2022
Loans and leases held for sale:
Commercial and industrial loans	$	21	73


Commercial leases	3		—
Residential mortgage loans	725		934
Total loans and leases held for sale	$	749	1,007
Portfolio loans and leases:
Commercial and industrial loans	$	57,720	57,232
Commercial mortgage loans	11,228		11,020
Commercial construction loans	5,548		5,433
Commercial leases	2,743		2,704
Total commercial loans and leases	$	77,239	76,389
Residential mortgage loans	$	17,608	17,628
Home equity	3,958		4,039
Indirect secured consumer loans	16,484		16,552
Credit card	1,761		1,874
Other consumer loans	5,807		4,998
Total consumer loans	$	45,618	45,091
Total portfolio loans and leases	$	122,857	121,480

Portfolio loans and leases are recorded net of unearned income, which totaled $262 million and $238 million as of March 31, 2023 and December 31, 2022, respectively. 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 discount of $51 million and net premium of $146 million as of March 31, 2023 and December 31, 2022, respectively. The amortized cost basis of loans and leases excludes accrued interest receivable of $548 million and $518 million at March 31, 2023 and December 31, 2022, 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 $15.8 billion and $15.9 billion as of March 31, 2023 and December 31, 2022, respectively, pledged to the FHLB, and loans of $56.1 billion and $57.1 billion at March 31, 2023 and December 31, 2022, respectively, pledged to the FRB.

The following table presents a summary of the total loans and leases owned by the Bancorp as of:


	Carrying Value			90 Days Past Due and Still Accruing(a)
($ in millions)	March 31, 2023		December 31, 2022	March 31, 2023	December 31, 2022
Commercial and industrial loans	$	57,741	57,305	17	11
Commercial mortgage loans	11,228		11,020	—	—
Commercial construction loans	5,548		5,433	—	—
Commercial leases	2,746		2,704	—	2
Residential mortgage loans	18,333		18,562	9	7
Home equity	3,958		4,039	1	1
Indirect secured consumer loans	16,484		16,552	—	—
Credit card	1,761		1,874	18	18
Other consumer loans	5,807		4,998	1	1
Total loans and leases	$	123,606	122,487	46	40
Less: Loans and leases held for sale	749		1,007
Total portfolio loans and leases	$	122,857	121,480

(a)Excludes government guaranteed residential mortgage loans.

The following table presents a summary of net charge-offs (recoveries):


	For the three months ended March 31,
($ in millions)	2023		2022
Commercial and industrial loans	$	30	9
Commercial mortgage loans	—		(1)
Commercial construction loans	1		—

Residential mortgage loans	—		(1)
Home equity	—		(1)
Indirect secured consumer loans	14		7
Credit card	15		13
Other consumer loans	18		8
Total net charge-offs	$	78	34

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


($ in millions)(a)	March 31, 2023		December 31, 2022
Net investment in direct financing leases:
Lease payment receivable (present value)	$	582	570
Unguaranteed residual assets (present value)	109		107

Net investment in sales-type leases:
Lease payment receivable (present value)	1,728		1,704
Unguaranteed residual assets (present value)	76		76

(a)Excludes $248 and $247 of leveraged leases at March 31, 2023 and December 31, 2022, respectively.

Interest income recognized in the Condensed Consolidated Statements of Income for the three months ended March 31, 2023 and 2022 was $6 million and $8 million, respectively, for direct financing leases and $15 million and $11 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 2023 through 2028 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease receivables as follows:


As of March 31, 2023 ($ in millions)	Direct Financing Leases		Sales-Type Leases
Remainder of 2023	$	145	388
2024	159		471
2025	113		409
2026	95		239
2027	58		177
2028	18		108
Thereafter	37		82
Total undiscounted cash flows	$	625	1,874
Less: Difference between undiscounted cash flows and discounted cash flows	43		146
Present value of lease payments (recognized as lease receivables)	$	582	1,728

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 $18 million and $15 million at March 31, 2023 and December 31, 2022, 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 lease residual value. Refer to Note 6 for additional information on credit quality and the ALLL.