Loans and Leases

9 Months Ended

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

Commercial construction loans	52		—

Residential mortgage loans	533		934
Total loans and leases held for sale	$	614	1,007
Portfolio loans and leases:
Commercial and industrial loans	$	55,790	57,232
Commercial mortgage loans	11,122		11,020
Commercial construction loans	5,582		5,433
Commercial leases	2,624		2,704
Total commercial loans and leases	$	75,118	76,389
Residential mortgage loans	$	17,293	17,628
Home equity	3,898		4,039
Indirect secured consumer loans	15,434		16,552
Credit card	1,817		1,874
Other consumer loans	6,528		4,998
Total consumer loans	$	44,970	45,091
Total portfolio loans and leases	$	120,088	121,480

Portfolio loans and leases are recorded net of unearned income, which totaled $276 million and $238 million as of September 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 $339 million and net premium of $146 million as of September 30, 2023 and December 31, 2022, respectively. The amortized cost basis of loans and leases excludes accrued interest receivable of $584 million and $518 million at September 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 $14.8 billion and $15.9 billion as of September 30, 2023 and December 31, 2022, respectively, pledged to the FHLB, and loans of $51.5 billion and $57.1 billion at September 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)	September 30, 2023		December 31, 2022	September 30, 2023	December 31, 2022
Commercial and industrial loans	$	55,819	57,305	3	11
Commercial mortgage loans	11,122		11,020	—	—
Commercial construction loans	5,634		5,433	—	—
Commercial leases	2,624		2,704	—	2
Residential mortgage loans	17,826		18,562	6	7
Home equity	3,898		4,039	—	1
Indirect secured consumer loans	15,434		16,552	—	—
Credit card	1,817		1,874	20	18
Other consumer loans	6,528		4,998	—	1
Total loans and leases	$	120,702	122,487	29	40
Less: Loans and leases held for sale	614		1,007
Total portfolio loans and leases	$	120,088	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 September 30,			For the nine months ended September 30,
($ in millions)	2023		2022	2023	2022
Commercial and industrial loans	$	65	34	127	76
Commercial mortgage loans	—		—	—	(1)
Commercial construction loans	—		(1)	1	2
Commercial leases	(1)		(1)	(1)	(1)
Residential mortgage loans	—		(1)	—	(2)
Home equity	—		(1)	1	(2)
Indirect secured consumer loans	19		10	48	23
Credit card	15		12	46	39
Other consumer loans	26		10	70	25
Total net charge-offs	$	124	62	292	159

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


($ in millions)(a)	September 30, 2023		December 31, 2022
Net investment in direct financing leases:
Lease payment receivable (present value)	$	591	570
Unguaranteed residual assets (present value)	99		107

Net investment in sales-type leases:
Lease payment receivable (present value)	1,605		1,704
Unguaranteed residual assets (present value)	81		76

(a)Excludes $248 and $247 of leveraged leases at September 30, 2023 and December 31, 2022, respectively.

Interest income recognized in the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2023 was $7 million and $20 million, respectively, for direct financing leases and $16 million and $47 million, respectively, for sales-type leases. For the three and nine months ended September 30, 2022, interest income recognized was $7 million and $22 million, respectively, for direct financing leases and $13 million and $36 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 September 30, 2023 ($ in millions)	Direct Financing Leases		Sales-Type Leases
Remainder of 2023	$	65	130
2024	170		501
2025	137		438
2026	116		261
2027	73		199
2028	32		126
Thereafter	48		96
Total undiscounted cash flows	$	641	1,751
Less: Difference between undiscounted cash flows and discounted cash flows	50		146
Present value of lease payments (recognized as lease receivables)	$	591	1,605

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 $16 million and $15 million at September 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.