Credit Quality and the Allowance for Loan and Lease Losses

9 Months Ended

Sep. 30, 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 September 30, 2023 ($ in millions)	Commercial		Residential Mortgage	Consumer	Total
Balance, beginning of period	$	1,199	173	955	2,327
Losses charged off(a)	(70)		(1)	(87)	(158)
Recoveries of losses previously charged off(a)	6		1	27	34
Provision for (benefit from) loan and lease losses	52		(18)	103	137
Balance, end of period	$	1,187	155	998	2,340

(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.

For the three months ended September 30, 2022 ($ in millions)	Commercial		Residential Mortgage	Consumer	Total
Balance, beginning of period	$	1,165	248	601	2,014
Losses charged off(a)	(47)		(1)	(56)	(104)
Recoveries of losses previously charged off(a)	15		2	25	42
Provision for loan and lease losses	25		5	117	147
Balance, end of period	$	1,158	254	687	2,099

(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.

For the nine months ended September 30, 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)	(140)		(3)	(246)	(389)
Recoveries of losses previously charged off(a)	13		3	81	97
Provision for (benefit from) loan and lease losses	183		(54)	358	487
Balance, end of period	$	1,187	155	998	2,340

(a)The Bancorp recorded $26 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 nine months ended September 30, 2022 ($ in millions)	Commercial		Residential Mortgage	Consumer	Total
Balance, beginning of period	$	1,102	235	555	1,892
Losses charged off(a)	(95)		(2)	(162)	(259)
Recoveries of losses previously charged off(a)	19		4	77	100
Provision for loan and lease losses	132		17	217	366
Balance, end of period	$	1,158	254	687	2,099

(a)The Bancorp recorded $23 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 September 30, 2023 ($ in millions)	Commercial		Residential Mortgage	Consumer	Total
ALLL:(a)
Individually evaluated	$	70	1	6	77
Collectively evaluated	1,117		154	992	2,263
Total ALLL	$	1,187	155	998	2,340
Portfolio loans and leases:(b)
Individually evaluated	$	247	125	69	441
Collectively evaluated	74,871		17,055	27,608	119,534
Total portfolio loans and leases	$	75,118	17,180	27,677	119,975

(a)Includes $2 related to commercial leveraged leases at September 30, 2023.

(b)Excludes $113 of residential mortgage loans measured at fair value and includes $248 of commercial leveraged leases, net of unearned income, at September 30, 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 ratings: 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 with this rating 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 rating:

As of September 30, 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	$	1,881	3,875	2,050	705	315	412	42,533	—	51,771
Special mention	14		90	40	14	16	107	1,465	—	1,746
Substandard	123		101	47	184	50	95	1,673	—	2,273
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial and industrial loans	$	2,018	4,066	2,137	903	381	614	45,671	—	55,790
Commercial mortgage owner-occupied loans:
Pass	$	695	1,004	685	390	205	265	1,693	—	4,937
Special mention	29		10	24	—	—	1	74	—	138
Substandard	39		22	12	17	51	12	123	—	276
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial mortgage owner- occupied loans	$	763	1,036	721	407	256	278	1,890	—	5,351
Commercial mortgage nonowner-occupied loans:
Pass	$	602	908	323	404	312	314	2,617	—	5,480
Special mention	103		15	24	—	—	7	27	—	176
Substandard	23		22	8	5	—	3	54	—	115
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial mortgage nonowner-occupied loans	$	728	945	355	409	312	324	2,698	—	5,771
Commercial construction loans:
Pass	$	150	30	35	42	71	6	4,800	—	5,134
Special mention	—		—	—	—	—	—	190	—	190
Substandard	63		—	33	—	—	—	162	—	258
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial construction loans	$	213	30	68	42	71	6	5,152	—	5,582
Commercial leases:
Pass	$	435	427	525	230	161	754	—	—	2,532
Special mention	—		5	6	3	3	8	—	—	25
Substandard	11		7	12	3	4	30	—	—	67
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial leases	$	446	439	543	236	168	792	—	—	2,624
Total commercial loans and leases:
Pass	$	3,763	6,244	3,618	1,771	1,064	1,751	51,643	—	69,854
Special mention	146		120	94	17	19	123	1,756	—	2,275
Substandard	259		152	112	209	105	140	2,012	—	2,989
Doubtful	—		—	—	—	—	—	—	—	—
Total commercial loans and leases	$	4,168	6,516	3,824	1,997	1,188	2,014	55,411	—	75,118

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 nine months ended September 30, 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	$	24	6	12	1	—	5	90	—	138
Commercial mortgage owner-occupied loans	—		—	—	—	—	—	1	—	1
Commercial construction loans	—		—	—	—	—	—	1	—	1
Total commercial loans and leases	$	24	6	12	1	—	5	92	—	140

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 September 30, 2023 ($ in millions)			30-89 Days(a)	90 Days or More(a)	Total Past Due
Commercial loans and leases:
Commercial and industrial loans	$	55,697	48	45	93	55,790	3
Commercial mortgage owner-occupied loans	5,346		2	3	5	5,351	—
Commercial mortgage nonowner-occupied loans	5,771		—	—	—	5,771	—
Commercial construction loans	5,576		6	—	6	5,582	—
Commercial leases	2,601		23	—	23	2,624	—
Total portfolio commercial loans and leases	$	74,991	79	48	127	75,118	3

(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 September 30, 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)	$	889	3,171	5,103	2,768	968	4,129	—	—	17,028
30-89 days past due	—		1	5	1	1	13	—	—	21
90 days or more past due	—		2	1	—	—	3	—	—	6
Total performing	889		3,174	5,109	2,769	969	4,145	—	—	17,055
Nonperforming	—		5	5	5	4	106	—	—	125
Total residential mortgage loans(b)	$	889	3,179	5,114	2,774	973	4,251	—	—	17,180
Home equity:
Performing:
Current	$	58	43	3	6	12	97	3,561	32	3,812
30-89 days past due	—		—	—	—	—	2	23	3	28
90 days or more past due	—		—	—	—	—	—	—	—	—
Total performing	58		43	3	6	12	99	3,584	35	3,840
Nonperforming	—		—	—	—	—	6	51	1	58
Total home equity	$	58	43	3	6	12	105	3,635	36	3,898
Indirect secured consumer loans:
Performing:
Current	$	3,392	4,685	4,363	1,761	727	337	—	—	15,265
30-89 days past due	16		44	38	19	12	9	—	—	138
90 days or more past due	—		—	—	—	—	—	—	—	—
Total performing	3,408		4,729	4,401	1,780	739	346	—	—	15,403
Nonperforming	2		9	8	6	3	3	—	—	31
Total indirect secured consumer loans	$	3,410	4,738	4,409	1,786	742	349	—	—	15,434
Credit card:
Performing:
Current	$	—	—	—	—	—	—	1,744	—	1,744
30-89 days past due	—		—	—	—	—	—	21	—	21
90 days or more past due	—		—	—	—	—	—	20	—	20
Total performing	—		—	—	—	—	—	1,785	—	1,785
Nonperforming	—		—	—	—	—	—	32	—	32
Total credit card	$	—	—	—	—	—	—	1,817	—	1,817
Other consumer loans:
Performing:
Current	$	2,071	2,773	340	173	92	117	847	40	6,453
30-89 days past due	5		16	4	2	2	1	3	1	34
90 days or more past due	—		—	—	—	—	—	—	—	—
Total performing	2,076		2,789	344	175	94	118	850	41	6,487
Nonperforming	4		30	4	1	1	1	—	—	41
Total other consumer loans	$	2,080	2,819	348	176	95	119	850	41	6,528
Total residential mortgage and consumer loans:
Performing:
Current	$	6,410	10,672	9,809	4,708	1,799	4,680	6,152	72	44,302
30-89 days past due	21		61	47	22	15	25	47	4	242
90 days or more past due	—		2	1	—	—	3	20	—	26
Total performing	6,431		10,735	9,857	4,730	1,814	4,708	6,219	76	44,570
Nonperforming	6		44	17	12	8	116	83	1	287
Total residential mortgage and consumer loans(b)	$	6,437	10,779	9,874	4,742	1,822	4,824	6,302	77	44,857

(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 September 30, 2023, $84 of these loans were 30-89 days past due and $143 were 90 days or more past due. The Bancorp recognized $1 and $2 of losses during the three and nine months ended September 30, 2023, respectively, due to claim denials and curtailments associated with these insured or guaranteed loans.

(b)Excludes $113 of residential mortgage loans measured at fair value at September 30, 2023, including $2 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 an immaterial amount and $2 of losses during the three and nine months ended September 30, 2022, respectively, 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 nine months ended September 30, 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	$	—	—	—	—	—	3	—	—	3
Consumer loans:
Home equity	—		—	—	—	—	1	5	—	6
Indirect secured consumer loans	4		28	20	10	7	6	—	—	75
Credit cards	—		—	—	—	—	—	59	—	59
Other consumer loans	6		39	12	9	6	8	25	1	106
Total residential mortgage and consumer loans	$	10	67	32	19	13	18	89	1	249

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)	September 30, 2023		December 31, 2022
Commercial loans and leases:
Commercial and industrial loans	$	228	433
Commercial mortgage owner-occupied loans	6		14
Commercial mortgage nonowner-occupied loans	3		27
Commercial construction loans	—		56
Commercial leases	—		1
Total commercial loans and leases	$	237	531
Residential mortgage loans	125		57
Consumer loans:
Home equity	55		46
Indirect secured consumer loans	14		6
Total consumer loans	$	69	52
Total portfolio loans and leases	$	431	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:

	September 30, 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	$	225	37	262	114	101	215
Commercial mortgage owner-occupied loans	10		6	16	9	7	16
Commercial mortgage nonowner-occupied loans	—		2	2	20	4	24
Commercial construction loans	—		—	—	6	2	8
Commercial leases	—		1	1	—	—	—
Total nonaccrual portfolio commercial loans and leases	$	235	46	281	149	114	263
Residential mortgage loans	39		88	127	81	43	124
Consumer loans:
Home equity	23		35	58	45	22	67
Indirect secured consumer loans	28		3	31	26	3	29
Credit card	32		—	32	27	—	27
Other consumer loans	41		—	41	5	—	5
Total nonaccrual portfolio consumer loans	$	124	38	162	103	25	128
Total nonaccrual portfolio loans and leases(a)(b)	$	398	172	570	333	182	515
OREO and other repossessed property	—		42	42	—	24	24
Total nonperforming portfolio assets(a)(b)	$	398	214	612	333	206	539

(a)Excludes $6 and an immaterial amount of nonaccrual loans held for sale as of September 30, 2023 and December 31, 2022, respectively.

(b)Includes $17 and $15 of nonaccrual government insured commercial loans whose repayments are insured by the SBA as of September 30, 2023 and December 31, 2022, respectively.

The Bancorp recognized an immaterial amount of interest income on nonaccrual loans and leases for both the three and nine months ended September 30, 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 $125 million and $154 million as of September 30, 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 September 30, 2023, portfolio loans with an amortized cost basis of $171 million and $484 million were modified during the three and nine months ended September 30, 2023, respectively, for borrowers experiencing financial difficulty, as further discussed in the following sections. These modifications for the three and nine months ended September 30, 2023 represented 0.14% and 0.40%, respectively, of total portfolio loans and leases as of September 30, 2023. These amounts excluded $6 million and $24 million for the three and nine months ended September 30, 2023, respectively, of consumer and residential mortgage loans 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

September 30, 2023, the Bancorp had commitments of $156 million to lend additional funds to borrowers experiencing financial difficulty whose terms have been modified during the nine months ended September 30, 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 tables present the amortized cost basis of the Bancorp’s commercial portfolio loans that were modified for borrowers experiencing financial difficulty, by portfolio class and type of modification:

For the three months ended September 30, 2023 ($ in millions)	Term Extension		Term Extension and Interest Rate Reduction	Term Extension and Payment Deferral	Total	% of Total Class
Commercial and industrial loans	$	92	1	8	101	0.18	%
Commercial mortgage owner-occupied loans	3		—	—	3	0.06
Commercial mortgage nonowner-occupied loans	1		—	—	1	0.02
Commercial construction loans	19		—	—	19	0.34
Total commercial portfolio loans	$	115	1	8	124	0.17	%

For the nine months ended September 30, 2023 ($ in millions)	Term Extension		Interest Rate Reduction	Term Extension and Interest Rate Reduction	Term Extension and Payment Deferral	Payment Deferral	Total	% of Total Class
Commercial and industrial loans	$	176	1	1	8	5	191	0.34	%
Commercial mortgage owner-occupied loans	24		—	—	—	—	24	0.45
Commercial mortgage nonowner-occupied loans	21		—	3	—	—	24	0.42
Commercial construction loans	116		—	—	—	—	116	2.08
Total commercial portfolio loans	$	337	1	4	8	5	355	0.47	%

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 may be 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 tables present the amortized cost basis of the Bancorp’s residential mortgage loans that were modified for borrowers experiencing financial difficulty, by type of modification:

For the three months ended September 30, 2023 ($ in millions)	Total		% of Total Class
Payment delay	$	3	0.02	%
Term extension and payment delay	27		0.15
Term extension, interest rate reduction and payment delay	1		0.01
Total residential mortgage portfolio loans	$	31	0.18	%

For the nine months ended September 30, 2023 ($ in millions)	Total		% of Total Class
Payment delay	$	16	0.09	%
Term extension and payment delay	69		0.40
Term extension, interest rate reduction and payment delay	4		0.02
Total residential mortgage portfolio loans	$	89	0.51	%

The Bancorp had $7 million of in-process modifications to residential mortgage loans outstanding as of September 30, 2023 which are excluded from the completed modification activity in the tables 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 tables present the amortized cost basis of the Bancorp’s consumer portfolio loans that were modified for borrowers experiencing financial difficulty, by portfolio class and type of modification:

For the three months ended September 30, 2023 ($ 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	$	2	—	1	2	5	0.13	%
Credit card	9		—	—	—	9	0.50
Other consumer loans	—		2	—	—	2	0.03
Total consumer portfolio loans	$	11	2	1	2	16	0.06	%

For the nine months ended September 30, 2023 ($ 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	$	3	—	2	7	12	0.31	%
Credit card	23		—	—	—	23	1.27
Other consumer loans	—		5	—	—	5	0.08
Total consumer portfolio loans	$	26	5	2	7	40	0.14	%

Financial effects of loan modifications

The following tables present the financial effects of the Bancorp’s significant types of portfolio loan modifications to borrowers experiencing financial difficulty, by portfolio class:

For the three months ended September 30, 2023	Financial Effects
Commercial loans:
Commercial and industrial loans	Weighted-average length of term extensions was 7 months and the amount of payment delays represented approximately 13% of the related loan balances.
Commercial mortgage owner-occupied loans	Weighted-average length of term extensions was 3 months.
Commercial mortgage nonowner-occupied loans	Weighted-average length of term extensions was 12 months.
Commercial construction loans	Weighted-average length of term extensions was 12 months.
Residential mortgage loans	Weighted-average length of term extensions was 171 months and the amount of payment delays represented approximately 17% of the related loan balances.
Consumer loans:
Home equity	Weighted-average length of term extensions was 24.5 years, the weighted-average interest rate reduction was from 9.0% to 7.2% and the amount of payment deferrals represented approximately 6% of the related loan balances.
Credit card	Weighted-average interest rate reduction was from 23.9% to 3.9%.
Other consumer loans	Amount of payment deferrals represented approximately 5% of the related loan balances.

For the nine months ended September 30, 2023	Financial Effects
Commercial loans:
Commercial and industrial loans	Weighted-average length of term extensions was 6 months and the amount of payment delays represented approximately 13% of the related loan balances.
Commercial mortgage owner-occupied loans	Weighted-average length of term extensions was 18 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 150 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 8.6% to 6.9% and the amount of payment deferrals represented approximately 5% of the related loan balances.
Credit card	Weighted-average interest rate reduction was from 23.6% to 3.8%.
Other consumer loans	Amount of payment deferrals represented approximately 5% 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 tables present the Bancorp’s portfolio loans that were modified to borrowers experiencing financial difficulty, by age and portfolio class:

For the three months ended September 30, 2023 ($ in millions)			Past Due
	Current		30-89 Days	90 Days or More	Total
Commercial loans:
Commercial and industrial loans	$	101	—	—	101
Commercial mortgage owner-occupied loans	3		—	—	3
Commercial mortgage nonowner-occupied loans	1		—	—	1
Commercial construction loans	19		—	—	19
Residential mortgage loans	27		4	—	31
Consumer loans:
Home equity	5		—	—	5
Credit card(a)	5		3	1	9
Other consumer loans	2		—	—	2
Total portfolio loans	$	163	7	1	171

(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.

For the nine months ended September 30, 2023 ($ in millions)			Past Due
	Current		30-89 Days	90 Days or More	Total
Commercial loans:
Commercial and industrial loans	$	191	—	—	191
Commercial mortgage owner-occupied loans	23		1	—	24
Commercial mortgage nonowner-occupied loans	24		—	—	24
Commercial construction loans	116		—	—	116
Residential mortgage loans	74		12	3	89
Consumer loans:
Home equity	12		—	—	12
Credit card(a)	16		4	3	23
Other consumer loans	5		—	—	5
Total portfolio loans	$	461	17	6	484

(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.

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:

September 30, 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	19	$	31	—	—
Commercial mortgage owner-occupied loans	2	1		—	—
Residential mortgage loans	190	28		—	—
Consumer loans:
Home equity	54	3		(1)	—
Indirect secured consumer loans	448	7		—	—
Credit card	1,380	7		3	—
Total portfolio loans	2,093	$	77	2	—

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

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

September 30, 2022 ($ in millions)(a)	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	69	$	196	13	—
Commercial mortgage owner-occupied loans	8	5		(1)	—
Commercial mortgage nonowner-occupied loans	3	23		—	—
Commercial construction loans	2	4		(3)	—
Residential mortgage loans	928	143		7	—
Consumer loans:
Home equity	178	13		(3)	—
Indirect secured consumer loans	2,499	48		1	—
Credit card	3,694	19		8	—
Total portfolio loans	7,381	$	451	22	—

(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 September 30, 2022 and were within 12 months of the restructuring date:

September 30, 2022 ($ in millions)(a)	Number of Contracts	Amortized Cost Basis
Commercial loans:
Commercial and industrial loans	1	$	—
Residential mortgage loans	70	11
Consumer loans:
Home equity	6	—
Indirect secured consumer loans	43	—
Credit card	83	—
Total portfolio loans	203	$	11

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

The following table provides a summary of TDRs that subsequently defaulted during the nine months ended September 30, 2022 and were within 12 months of the restructuring date:

September 30, 2022 ($ in millions)(a)	Number of Contracts	Amortized Cost Basis
Commercial loans:
Commercial and industrial loans	8	$	—
Commercial construction loans	1	2
Residential mortgage loans	176	24
Consumer loans:
Home equity	21	1
Indirect secured consumer loans	102	1
Credit card	255	1
Total portfolio loans	563	$	29

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