Credit Quality and the Allowance for Loan and Lease Losses

3 Months Ended

Mar. 31, 2023

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 March 31, 2023 ($ in millions)	Commercial		Residential Mortgage	Consumer	Total
Balance, beginning of period	$	1,127	245	822	2,194
Impact of adoption of ASU 2022-02	4		(36)	(17)	(49)
Losses charged off(a)	(33)		(1)	(76)	(110)
Recoveries of losses previously charged off(a)	2		1	29	32
Provision for (benefit from) loan and lease losses	43		(24)	129	148
Balance, end of period	$	1,143	185	887	2,215

(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.

For the three months ended March 31, 2022 ($ in millions)	Commercial		Residential Mortgage	Consumer	Total
Balance, beginning of period	$	1,102	235	555	1,892
Losses charged off(a)	(11)		(1)	(52)	(64)
Recoveries of losses previously charged off(a)	3		2	25	30
Benefit from loan and lease losses	16		3	31	50
Balance, end of period	$	1,110	239	559	1,908

(a)The Bancorp recorded $8 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 March 31, 2023 ($ in millions)	Commercial		Residential Mortgage	Consumer	Total
ALLL:(a)
Individually evaluated	$	78	—	2	80
Collectively evaluated	1,065		185	885	2,135
Total ALLL	$	1,143	185	887	2,215
Portfolio loans and leases:(b)
Individually evaluated	$	319	92	49	460
Collectively evaluated	76,920		17,388	27,961	122,269
Total portfolio loans and leases	$	77,239	17,480	28,010	122,729

(a)Includes $2 related to commercial leveraged leases at March 31, 2023.

(b)Excludes $128 of residential mortgage loans measured at fair value and includes $248 of commercial leveraged leases, net of unearned income at March 31, 2023.

As of December 31, 2022 ($ in millions)	Commercial		Residential Mortgage	Consumer	Total
ALLL:(a)
Individually evaluated	$	30	47	45	122
Collectively evaluated	1,097		198	777	2,072
Total ALLL	$	1,127	245	822	2,194
Portfolio loans and leases:(b)
Individually evaluated	$	531	560	297	1,388
Collectively evaluated	75,858		16,945	27,166	119,969
Total portfolio loans and leases	$	76,389	17,505	27,463	121,357

(a)Includes $2 related to commercial leveraged leases at December 31, 2022.

(b)Excludes $123 of residential mortgage loans measured at fair value and includes $247 of commercial leveraged leases, net of unearned income at December 31, 2022.

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 for an ACL, 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. For more 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, refer to Note 3.

The following tables present the amortized cost basis of the Bancorp’s commercial portfolio segment, by class and vintage, disaggregated by credit risk grade:

As of March 31, 2023 ($ in millions)	Term Loans and Leases by Origination Year							Revolving Loans	Revolving Loans Converted to Term Loans
	2023		2022	2021	2020	2019	Prior			Total
Commercial and industrial loans:
Pass	$	805	4,364	2,673	885	402	648	44,136	—	53,913
Special mention	7		44	11	8	36	36	1,414	—	1,556
Substandard	76		121	58	218	25	108	1,630	—	2,236
Doubtful	—		—	2	—	—	—	13	—	15
Total commercial and industrial loans	$	888	4,529	2,744	1,111	463	792	47,193	—	57,720
Commercial mortgage owner-occupied loans:
Pass	$	240	1,139	754	477	248	369	1,743	—	4,970
Special mention	12		14	29	3	2	12	22	—	94
Substandard	25		20	21	17	71	37	140	—	331
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial mortgage owner- occupied loans	$	277	1,173	804	497	321	418	1,905	—	5,395
Commercial mortgage nonowner-occupied loans:
Pass	$	165	1,087	447	474	393	345	2,508	—	5,419
Special mention	47		—	32	26	—	2	139	—	246
Substandard	27		30	24	18	1	17	51	—	168
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial mortgage nonowner-occupied loans	$	239	1,117	503	518	394	364	2,698	—	5,833
Commercial construction loans:
Pass	$	14	73	31	87	8	34	4,980	—	5,227
Special mention	—		—	33	—	—	—	147	—	180
Substandard	4		49	—	—	—	2	86	—	141
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial construction loans	$	18	122	64	87	8	36	5,213	—	5,548
Commercial leases:
Pass	$	271	495	606	280	186	799	—	—	2,637
Special mention	—		3	9	4	2	16	—	—	34
Substandard	7		5	15	2	3	40	—	—	72
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial leases	$	278	503	630	286	191	855	—	—	2,743
Total commercial loans and leases:
Pass	$	1,495	7,158	4,511	2,203	1,237	2,195	53,367	—	72,166
Special mention	66		61	114	41	40	66	1,722	—	2,110
Substandard	139		225	118	255	100	204	1,907	—	2,948
Doubtful	—		—	2	—	—	—	13	—	15
Total commercial loans and leases	$	1,700	7,444	4,745	2,499	1,377	2,465	57,009	—	77,239

As of December 31, 2022 ($ in millions)	Term Loans and Leases by Origination Year							Revolving Loans	Revolving Loans Converted to Term Loans
	2022		2021	2020	2019	2018	Prior			Total
Commercial and industrial loans:
Pass	$	3,825	3,098	994	445	269	488	44,521	—	53,640
Special mention	65		24	15	36	10	24	1,221	—	1,395
Substandard	150		77	233	26	7	107	1,597	—	2,197
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial and industrial loans	$	4,040	3,199	1,242	507	286	619	47,339	—	57,232
Commercial mortgage owner-occupied loans:
Pass	$	1,177	826	522	257	160	264	1,624	—	4,830
Special mention	17		15	13	12	13	2	56	—	128
Substandard	51		14	20	73	11	25	106	—	300
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial mortgage owner-occupied loans	$	1,245	855	555	342	184	291	1,786	—	5,258
Commercial mortgage nonowner-occupied loans:
Pass	$	1,127	462	490	397	220	170	2,453	—	5,319
Special mention	1		84	26	—	—	23	88	—	222
Substandard	65		19	18	1	1	17	100	—	221
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial mortgage nonowner-occupied loans	$	1,193	565	534	398	221	210	2,641	—	5,762
Commercial construction loans:
Pass	$	82	31	93	8	35	7	4,684	—	4,940
Special mention	—		—	—	—	—	—	293	—	293
Substandard	53		—	—	—	—	2	145	—	200
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial construction loans	$	135	31	93	8	35	9	5,122	—	5,433
Commercial leases:
Pass	$	584	664	306	192	146	696	—	—	2,588
Special mention	—		4	2	4	7	19	—	—	36
Substandard	1		20	2	4	21	32	—	—	80
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial leases	$	585	688	310	200	174	747	—	—	2,704
Total commercial loans and leases:
Pass	$	6,795	5,081	2,405	1,299	830	1,625	53,282	—	71,317
Special mention	83		127	56	52	30	68	1,658	—	2,074
Substandard	320		130	273	104	40	183	1,948	—	2,998
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial loans and leases	$	7,198	5,338	2,734	1,455	900	1,876	56,888	—	76,389

The following table summarizes the Bancorp’s gross charge-offs within the commercial portfolio segment, by class and vintage:

For the three months ended March 31, 2023 ($ in millions)	Term Loans and Leases by Origination Year							Revolving Loans	Revolving Loans Converted to Term Loans
	2023		2022	2021	2020	2019	Prior			Total
Commercial loans and leases:
Commercial and industrial loans	$	—	1	11	—	—	—	20	—	32
Commercial construction loans	—		—	—	—	—	—	1	—	1
Total commercial loans and leases	$	—	1	11	—	—	—	21	—	33

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 March 31, 2023 ($ in millions)			30-89 Days(a)	90 Days or More(a)	Total Past Due
Commercial loans and leases:
Commercial and industrial loans	$	57,549	109	62	171	57,720	17
Commercial mortgage owner-occupied loans	5,386		6	3	9	5,395	—
Commercial mortgage nonowner-occupied loans	5,832		1	—	1	5,833	—
Commercial construction loans	5,541		2	5	7	5,548	—
Commercial leases	2,723		16	4	20	2,743	—
Total portfolio commercial loans and leases	$	77,031	134	74	208	77,239	17

(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, 2022 ($ in millions)			30-89 Days(a)	90 Days or More(a)	Total Past Due
Commercial loans and leases:
Commercial and industrial loans	$	57,092	98	42	140	57,232	11
Commercial mortgage owner-occupied loans	5,241		14	3	17	5,258	—
Commercial mortgage nonowner-occupied loans	5,756		6	—	6	5,762	—
Commercial construction loans	5,424		7	2	9	5,433	—
Commercial leases	2,698		4	2	6	2,704	2
Total portfolio commercial loans and leases	$	76,211	129	49	178	76,389	13

(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 are presented in the following tables.

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 especially impactful in the expected credit loss models 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 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 3 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 tables present the amortized cost basis of the Bancorp’s residential mortgage and consumer portfolio segments, by class and vintage, disaggregated by both age and performing versus nonperforming status:

As of March 31, 2023 ($ in millions)	Term Loans by Origination Year							Revolving Loans	Revolving Loans Converted to Term Loans
	2023		2022	2021	2020	2019	Prior			Total
Residential mortgage loans:
Performing:
Current(a)	$	249	3,222	5,355	2,931	1,028	4,543	—	—	17,328
30-89 days past due	—		1	2	3	1	10	—	—	17
90 days or more past due	—		1	2	—	1	5	—	—	9
Total performing	249		3,224	5,359	2,934	1,030	4,558	—	—	17,354
Nonperforming	—		1	3	4	4	114	—	—	126
Total residential mortgage loans(b)	$	249	3,225	5,362	2,938	1,034	4,672	—	—	17,480
Home equity:
Performing:
Current	$	14	45	3	7	14	106	3,663	14	3,866
30-89 days past due	—		—	—	—	—	2	21	—	23
90 days or more past due	—		—	—	—	—	1	—	—	1
Total performing	14		45	3	7	14	109	3,684	14	3,890
Nonperforming	—		—	—	—	—	7	60	1	68
Total home equity	$	14	45	3	7	14	116	3,744	15	3,958
Indirect secured consumer loans:
Performing:
Current	$	1,595	5,526	5,355	2,302	1,041	528	—	—	16,347
30-89 days past due	2		32	33	19	14	10	—	—	110
90 days or more past due	—		—	—	—	—	—	—	—	—
Total performing	1,597		5,558	5,388	2,321	1,055	538	—	—	16,457
Nonperforming	—		5	5	7	5	5	—	—	27
Total indirect secured consumer loans	$	1,597	5,563	5,393	2,328	1,060	543	—	—	16,484
Credit card:
Performing:
Current	$	—	—	—	—	—	—	1,696	—	1,696
30-89 days past due	—		—	—	—	—	—	18	—	18
90 days or more past due	—		—	—	—	—	—	18	—	18
Total performing	—		—	—	—	—	—	1,732	—	1,732
Nonperforming	—		—	—	—	—	—	29	—	29
Total credit card	$	—	—	—	—	—	—	1,761	—	1,761
Other consumer loans:
Performing:
Current	$	722	2,928	481	323	149	229	903	31	5,766
30-89 days past due	—		19	5	2	2	3	3	—	34
90 days or more past due	—		1	—	—	—	—	—	—	1
Total performing	722		2,948	486	325	151	232	906	31	5,801
Nonperforming	—		3	1	—	—	1	1	—	6
Total other consumer loans	$	722	2,951	487	325	151	233	907	31	5,807
Total residential mortgage and consumer loans:
Performing:
Current	$	2,580	11,721	11,194	5,563	2,232	5,406	6,262	45	45,003
30-89 days past due	2		52	40	24	17	25	42	—	202
90 days or more past due	—		2	2	—	1	6	18	—	29
Total performing	2,582		11,775	11,236	5,587	2,250	5,437	6,322	45	45,234
Nonperforming	—		9	9	11	9	127	90	1	256
Total residential mortgage and consumer loans(b)	$	2,582	11,784	11,245	5,598	2,259	5,564	6,412	46	45,490

(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 March 31, 2023, $76 of these loans were 30-89 days past due and $154 were 90 days or more past due. The Bancorp recognized an immaterial amount of losses during the three months ended March 31, 2023, due to claim denials and curtailments associated with these insured or guaranteed loans.

(b)Excludes $128 of residential mortgage loans measured at fair value at March 31, 2023, including $3 of nonperforming loans.

As of December 31, 2022 ($ in millions)	Term Loans by Origination Year							Revolving Loans	Revolving Loans Converted to Term Loans
	2022		2021	2020	2019	2018	Prior			Total
Residential mortgage loans:
Performing:
Current(a)	$	3,195	5,440	2,981	1,051	344	4,336	—	—	17,347
30-89 days past due	4		4	3	1	2	15	—	—	29
90 days or more past due	—		—	1	—	1	5	—	—	7
Total performing	3,199		5,444	2,985	1,052	347	4,356	—	—	17,383
Nonperforming	—		3	4	4	7	104	—	—	122
Total residential mortgage loans(b)	$	3,199	5,447	2,989	1,056	354	4,460	—	—	17,505
Home equity:
Performing:
Current	$	46	3	7	15	17	94	3,741	18	3,941
30-89 days past due	—		—	—	—	—	2	28	—	30
90 days or more past due	—		—	—	—	—	1	—	—	1
Total performing	46		3	7	15	17	97	3,769	18	3,972
Nonperforming	—		—	—	—	—	8	58	1	67
Total home equity	$	46	3	7	15	17	105	3,827	19	4,039
Indirect secured consumer loans:
Performing:
Current	$	6,034	5,875	2,600	1,217	416	239	—	—	16,381
30-89 days past due	34		42	28	22	11	5	—	—	142
90 days or more past due	—		—	—	—	—	—	—	—	—
Total performing	6,068		5,917	2,628	1,239	427	244	—	—	16,523
Nonperforming	4		6	7	6	4	2	—	—	29
Total indirect secured consumer loans	$	6,072	5,923	2,635	1,245	431	246	—	—	16,552
Credit card:
Performing:
Current	$	—	—	—	—	—	—	1,808	—	1,808
30-89 days past due	—		—	—	—	—	—	21	—	21
90 days or more past due	—		—	—	—	—	—	18	—	18
Total performing	—		—	—	—	—	—	1,847	—	1,847
Nonperforming	—		—	—	—	—	—	27	—	27
Total credit card	$	—	—	—	—	—	—	1,874	—	1,874
Other consumer loans:
Performing:
Current	$	2,704	540	355	169	112	146	908	26	4,960
30-89 days past due	14		6	3	2	2	2	3	—	32
90 days or more past due	—		—	—	—	—	—	1	—	1
Total performing	2,718		546	358	171	114	148	912	26	4,993
Nonperforming	2		1	—	—	—	1	1	—	5
Total other consumer loans	$	2,720	547	358	171	114	149	913	26	4,998
Total residential mortgage and consumer loans:
Performing:
Current	$	11,979	11,858	5,943	2,452	889	4,815	6,457	44	44,437
30-89 days past due	52		52	34	25	15	24	52	—	254
90 days or more past due	—		—	1	—	1	6	19	—	27
Total performing	12,031		11,910	5,978	2,477	905	4,845	6,528	44	44,718
Nonperforming	6		10	11	10	11	115	86	1	250
Total residential mortgage and consumer loans(b)	$	12,037	11,920	5,989	2,487	916	4,960	6,614	45	44,968

(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 December 31, 2022, $81 of these loans were 30-89 days past due and $147 were 90 days or more past due. The Bancorp recognized $1 of losses during the three months ended March 31, 2022 due to claim denials and curtailments associated with these insured or guaranteed loans.

(b)Excludes $123 of residential mortgage loans measured at fair value at December 31, 2022, including $1 of 30-89 days past due loans and $2 of nonperforming loans.

The following table summarizes the Bancorp’s gross charge-offs within the residential mortgage and consumer portfolio segments, by class and vintage:

For the three months ended March 31, 2023 ($ in millions)	Term Loans by Origination Year							Revolving Loans	Revolving Loans Converted to Term Loans
	2023		2022	2021	2020	2019	Prior			Total
Residential mortgage loans	$	—	—	—	—	—	1	—	—	1
Consumer loans:
Home equity	—		—	—	—	—	—	1	—	1
Indirect secured consumer loans	—		8	6	4	3	2	—	—	23
Credit cards	—		—	—	—	—	20	—	—	20
Other consumer loans	—		10	5	3	2	3	8	1	32
Total residential mortgage and consumer loans	$	—	18	11	7	5	26	9	1	77

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 and leases, by portfolio class, as of:

($ in millions)	March 31, 2023		December 31, 2022
Commercial loans and leases:
Commercial and industrial loans	$	276	433
Commercial mortgage owner-occupied loans	12		14
Commercial mortgage nonowner-occupied loans	21		27
Commercial construction loans	5		56
Commercial leases	5		1
Total commercial loans and leases	$	319	531
Residential mortgage loans	92		57
Consumer loans:
Home equity	43		46
Indirect secured consumer loans	6		6
Total consumer loans	$	49	52
Total portfolio loans and leases	$	460	640

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 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:

	March 31, 2023				December 31, 2022
($ in millions)	With an ALLL		No Related ALLL	Total	With an ALLL	No Related ALLL	Total
Commercial loans and leases:
Commercial and industrial loans	$	239	41	280	114	101	215
Commercial mortgage owner-occupied loans	11		11	22	9	7	16
Commercial mortgage nonowner-occupied loans	18		4	22	20	4	24
Commercial construction loans	3		2	5	6	2	8
Commercial leases	4		1	5	—	—	—
Total nonaccrual portfolio commercial loans and leases	$	275	59	334	149	114	263
Residential mortgage loans	92		37	129	81	43	124
Consumer loans:
Home equity	55		13	68	45	22	67
Indirect secured consumer loans	26		1	27	26	3	29
Credit card	29		—	29	27	—	27
Other consumer loans	6		—	6	5	—	5
Total nonaccrual portfolio consumer loans	$	116	14	130	103	25	128
Total nonaccrual portfolio loans and leases(a)(b)	$	483	110	593	333	182	515
OREO and other repossessed property	—		30	30	—	24	24
Total nonperforming portfolio assets(a)(b)	$	483	140	623	333	206	539

(a)Excludes an immaterial amount of nonaccrual loans held for sale as of both March 31, 2023 and December 31, 2022.

(b)Includes $17 and $15 of nonaccrual government insured commercial loans whose repayments are insured by the SBA as of March 31, 2023 and December 31, 2022, respectively.

The Bancorp recognized an immaterial amount of interest income on nonaccrual loans and leases for both the three months ended March 31, 2023 and 2022.

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 $175 million and $154 million as of March 31, 2023 and December 31, 2022, respectively.

Modifications to Borrowers Experiencing Financial Difficulty

On January 1, 2023, the Bancorp adopted ASU 2022-02, which eliminated the recognition and measurement guidance for TDRs. The amended accounting and disclosure requirements are applicable to loan modifications to borrowers experiencing financial difficulty which are completed on or after the adoption date. For further information on the adoption of ASU 2022-02, refer to Note 3.

In the course of servicing its loans, the Bancorp works with borrowers who are experiencing financial difficulty to identify solutions that are mutually beneficial to both parties with the objective of mitigating the risk of losses on the loan. These efforts often result in modifications to the payment terms of the loan. The types of modifications offered to borrowers vary by type of loan and may include term extensions, interest rate reductions, payment delays (other than those that are insignificant) or combinations thereof. The Bancorp typically does not provide principal forgiveness except in circumstances where the loan has already been fully or partially charged off.

The Bancorp applies its expected credit loss models consistently to both modified and non-modified loans when estimating the ALLL. For loans which are modified for borrowers experiencing financial difficulty, there is generally not a significant change to the ALLL upon modification because the Bancorp’s ALLL estimation methodologies already consider those borrowers’ financial difficulties and the resulting effects of potential modifications when estimating expected credit losses.

As of March 31, 2023, portfolio loans with an amortized cost basis of $202 million, or 0.16% of total portfolio loans and leases, were modified during the three months ended March 31, 2023 for borrowers experiencing financial difficulty, as further discussed in the following sections. This amount excludes $13 million of consumer and residential mortgage loans as of March 31, 2023 which have been granted a concession under provisions of the Federal Bankruptcy Act and are monitored separately from loans modified under the Bancorp’s loan

modification programs. As of March 31, 2023, the Bancorp had commitments of $109 million to lend additional funds to borrowers experiencing financial difficulty whose terms have been modified during the three months ended March 31, 2023.

Commercial portfolio segment

Commercial loan modifications are individually negotiated and may vary depending on the borrower’s financial situation, but the Bancorp most commonly utilizes term extensions for periods of 3 to 12 months. In less common situations and when specifically warranted by the borrower’s situation, the Bancorp may also consider offering commercial borrowers interest rate reductions or payment deferrals, which may be combined with a term extension.

The following table presents the amortized cost basis of the Bancorp’s commercial portfolio loans that were modified for borrowers experiencing financial difficulty during the three months ended March 31, 2023, by portfolio class and type of modification:

($ in millions)	Term Extension		Interest Rate Reduction	Term Extension and Interest Rate Reduction	Total	% of Total Class
Commercial and industrial loans	$	105	1	—	106	0.18	%
Commercial mortgage owner-occupied loans	1		—	—	1	0.02
Commercial mortgage nonowner-occupied loans	22		—	3	25	0.43
Commercial construction loans	31		—	—	31	0.56
Total commercial portfolio loans	$	159	1	3	163	0.21	%

Residential mortgage portfolio segment

The Bancorp has established residential mortgage loan modification programs which define the type of modifications available as well as the eligibility criteria for borrowers. The designs of the Bancorp’s modification programs for residential mortgage loans are similar to those utilized by the various GSEs. The most common modification program utilized for residential mortgage loans is a term extension for up to 480 months from the modification date, combined with a change in interest rate to a fixed rate (which may be an increase or decrease from the rate in the original loan). As part of these modifications, the Bancorp may capitalize delinquent amounts due at the time of the modification into the principal balance of the loan when determining its modified payment structure. For loans where the modification results in a new monthly payment amount, borrowers are generally required to complete a trial period of three to four months before the loan is permanently modified. The Bancorp also offers payment delay modifications to qualified borrowers which allow either the deferral of repayment for delinquent amounts due until maturity or capitalization of delinquent amounts due into the principal balance of the loan. The number of monthly payments delayed varies by borrower but is most commonly within a range of 6 to 12 months.

The following table presents the amortized cost basis of the Bancorp’s residential mortgage loans that were modified for borrowers experiencing financial difficulty during the three months ended March 31, 2023, by type of modification:

($ in millions)	Total		% of Total Class
Payment delay	$	8	0.05	%
Term extension and payment delay	14		0.08
Term extension, interest rate reduction and payment delay	2		0.01
Total residential mortgage portfolio loans	$	24	0.14	%

The Bancorp had $18 million of in-process modifications to residential mortgage loans outstanding as of March 31, 2023 which are excluded from the completed modification activity in the table above. These in-process modifications will be reported as completed modifications once the borrower satisfies the applicable contingencies in the modification agreement and the loan is contractually modified to make the modified terms permanent.

Consumer portfolio segment

The Bancorp’s modification programs for consumer loans vary based on type of loan. The most common modification program for home equity is a term extension for up to 360 months combined with a deferral of delinquent amounts due until maturity, which may also be combined with an interest rate reduction. Modification programs for credit card typically involve an interest rate reduction and an increase to the minimum monthly payment in order to repay a larger portion of outstanding balances. Modifications for indirect secured consumer loans and other consumer loans are less commonly utilized as part of the Bancorp’s loss mitigation activities and programs vary by specific product type.

The following table presents the amortized cost basis of the Bancorp’s consumer portfolio loans that were modified for borrowers experiencing financial difficulty during the three months ended March 31, 2023, by portfolio class and type of modification:

($ in millions)	Interest Rate Reduction		Payment Deferral	Term Extension and Payment Deferral	Term Extension, Interest Rate Reduction and Payment Deferral	Total	% of Total Class
Home equity	$	—	—	1	3	4	0.10	%
Credit card	10		—	—	—	10	0.57
Other consumer loans	—		1	—	—	1	0.02
Total consumer portfolio loans	$	10	1	1	3	15	0.05	%

Financial effects of loan modifications

The following table presents the financial effects of the Bancorp’s portfolio loan modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2023, by portfolio class:

	Financial Effects
Commercial loans:
Commercial and industrial loans	Weighted-average length of term extensions was 5 months.
Commercial mortgage owner-occupied loans	Weighted-average length of term extensions was 4 months.
Commercial mortgage nonowner-occupied loans	Weighted-average length of term extensions was 8 months and the weighted-average interest rate reduction was from 9.1% to 8.9%.
Commercial construction loans	Weighted-average length of term extensions was 12 months.
Residential mortgage loans	Weighted-average length of term extensions was 130 months and the amount of payment delays represented approximately 16% of the related loan balances.
Consumer loans:
Home equity	Weighted-average length of term extensions was 24.8 years, the weighted-average interest rate reduction was from 8.0% to 6.5% and the amount of payment deferrals represented approximately 6% of the related loan balances.
Credit card	Weighted-average interest rate reduction was from 23.2% to 3.9%.
Other consumer loans	Amount of payment deferrals represented approximately 6% of the related loan balances.

Credit quality of modified loans

The Bancorp closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

The following table presents the Bancorp’s portfolio loans that were modified to borrowers experiencing financial difficulty during the three months ended March 31, 2023, by age and portfolio class:

			Past Due
($ in millions)	Current		30-89 Days	90 Days or More	Total
Commercial loans:
Commercial and industrial loans	$	106	—	—	106
Commercial mortgage owner-occupied loans	1		—	—	1
Commercial mortgage nonowner-occupied loans	25		—	—	25
Commercial construction loans	31		—	—	31
Residential mortgage loans	23		1	—	24
Consumer loans:
Home equity	4		—	—	4
Credit card(a)	6		3	1	10
Other consumer loans	1		—	—	1
Total portfolio loans	$	197	4	1	202

(a)Credit card loans continue to be reported as delinquent after modification as they are not returned to current status until the borrower demonstrates a willingness and ability to repay the loan according to its modified terms.

The Bancorp considers modifications to borrowers experiencing financial difficulty that subsequently become 90 days or more past due under the modified terms as subsequently defaulted. Since the adoption of ASU 2022-02 on January 1, 2023, there were no modifications to borrowers experiencing financial difficulty that had become 90 days or more past due under the modified terms at March 31, 2023.

Troubled Debt Restructurings

Prior to the adoption of ASU 2022-02 on January 1, 2023, loans were accounted for as TDRs if the Bancorp, for economic or legal reasons related to the borrower’s financial difficulties, granted a concession to the borrower that it would not otherwise consider. Refer to Note 1 and Note 6 of the Notes to Consolidated Financial Statements included in the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2022 for additional information on the Bancorp’s accounting policies for the identification and measurement of TDRs and the related impact on the ALLL.

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 $130 million and $60 million, respectively, as of December 31, 2022.

The following table provides a summary of portfolio loans, by class, modified in a TDR by the Bancorp during the three months ended:

March 31, 2022 ($ in millions)	Number of Loans Modified in a TDR During the Period(a)	Amortized Cost Basis in 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	30	$	91	13	—
Commercial mortgage owner-occupied loans	5	4		(1)	—
Residential mortgage loans	260	42		3	—
Consumer loans:
Home equity	52	7		(1)	—
Indirect secured consumer loans	1,274	27		—	—
Credit card	1,121	6		2	—
Total portfolio loans	2,742	$	177	16	—

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

The Bancorp considered TDRs that became 90 days or more past due under the modified terms as subsequently defaulted. The following table provides a summary of TDRs that subsequently defaulted during the three months ended March 31, 2022 and were within 12 months of the restructuring date:

March 31, 2022 ($ in millions)(a)	Number of Contracts	Amortized Cost
Commercial loans:
Commercial and industrial loans	6	$	—
Residential mortgage loans	29	3
Consumer loans:
Home equity	10	1
Indirect secured consumer loans	25	—
Credit card	105	1
Total portfolio loans	175	$	5

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