Loans and Leases

6 Months Ended

Jun. 30, 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)	June 30, 2023		December 31, 2022
Loans and leases held for sale:
Commercial and industrial loans	$	29	73


Commercial leases	3		—
Residential mortgage loans	728		934
Total loans and leases held for sale	$	760	1,007
Portfolio loans and leases:
Commercial and industrial loans	$	56,897	57,232
Commercial mortgage loans	11,310		11,020
Commercial construction loans	5,475		5,433
Commercial leases	2,670		2,704
Total commercial loans and leases	$	76,352	76,389
Residential mortgage loans	$	17,503	17,628
Home equity	3,911		4,039
Indirect secured consumer loans	16,097		16,552
Credit card	1,818		1,874
Other consumer loans	6,210		4,998
Total consumer loans	$	45,539	45,091
Total portfolio loans and leases	$	121,891	121,480

Portfolio loans and leases are recorded net of unearned income, which totaled $262 million and $238 million as of June 30, 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 $226 million and net premium of $146 million as of June 30, 2023 and December 31, 2022, respectively. The amortized cost basis of loans and leases excludes accrued interest receivable of $566 million and $518 million at June 30, 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 June 30, 2023 and December 31, 2022, respectively, pledged to the FHLB, and loans of $55.4 billion and $57.1 billion at June 30, 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)	June 30, 2023		December 31, 2022	June 30, 2023	December 31, 2022
Commercial and industrial loans	$	56,926	57,305	6	11
Commercial mortgage loans	11,310		11,020	20	—
Commercial construction loans	5,475		5,433	—	—
Commercial leases	2,673		2,704	—	2
Residential mortgage loans	18,231		18,562	7	7
Home equity	3,911		4,039	1	1
Indirect secured consumer loans	16,097		16,552	—	—
Credit card	1,818		1,874	17	18
Other consumer loans	6,210		4,998	—	1
Total loans and leases	$	122,651	122,487	51	40
Less: Loans and leases held for sale	760		1,007
Total portfolio loans and leases	$	121,891	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 June 30,			For the six months ended June 30,
($ in millions)	2023		2022	2023	2022
Commercial and industrial loans	$	32	33	62	42
Commercial mortgage loans	—		—	—	(1)
Commercial construction loans	—		3	1	3

Residential mortgage loans	—		(1)	—	(1)
Home equity	1		—	—	(1)
Indirect secured consumer loans	16		5	29	13
Credit card	16		14	31	27
Other consumer loans	25		8	45	14
Total net charge-offs	$	90	62	168	96

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


($ in millions)(a)	June 30, 2023		December 31, 2022
Net investment in direct financing leases:
Lease payment receivable (present value)	$	594	570
Unguaranteed residual assets (present value)	111		107

Net investment in sales-type leases:
Lease payment receivable (present value)	1,638		1,704
Unguaranteed residual assets (present value)	78		76

(a)Excludes $249 and $247 of leveraged leases at June 30, 2023 and December 31, 2022, respectively.

Interest income recognized in the Condensed Consolidated Statements of Income for the three and six months ended June 30, 2023 was $7 million and $13 million, respectively, for direct financing leases and $16 million and $31 million, respectively, for sales-type leases. For the three and six months ended June 30, 2022, interest income recognized was $7 million and $15 million, respectively, for direct financing leases and $12 million and $23 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 June 30, 2023 ($ in millions)	Direct Financing Leases		Sales-Type Leases
Remainder of 2023	$	110	250
2024	169		480
2025	124		419
2026	106		247
2027	66		185
2028	25		113
Thereafter	40		84
Total undiscounted cash flows	$	640	1,778
Less: Difference between undiscounted cash flows and discounted cash flows	46		140
Present value of lease payments (recognized as lease receivables)	$	594	1,638

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 $19 million and $15 million at June 30, 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.