Loans and Leases

12 Months Ended

Dec. 31, 2015

5. Loans and leases

The Bancorp diversifies its loan and lease portfolio by offering a variety of loan and lease products with various payment terms and rate structures. Lending activities are generally concentrated within those states in which the Bancorp has banking centers and are primarily located in the Midwestern and Southeastern regions of the United States. The Bancorp's commercial loan 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 inherent in the portfolio. 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 and leases classified based upon product or collateral as of December 31:

($ in millions)			2015	2014
Loans and leases held for sale:
	Commercial and industrial loans	$	20	36
	Commercial mortgage loans		34	11
	Commercial construction loans		0	2
	Commercial leases		0	1
	Residential mortgage loans		708	1,193
	Home equity		35	0
	Automobile loans		4	0
	Credit card		101	0
	Other consumer loans and leases		1	18
Total loans and leases held for sale		$	903	1,261
Portfolio loans and leases:
	Commercial and industrial loans	$	42,131	40,765
	Commercial mortgage loans		6,957	7,399
	Commercial construction loans		3,214	2,069
	Commercial leases		3,854	3,720
Total commercial loans and leases			56,156	53,953
	Residential mortgage loans		13,716	12,389
	Home equity		8,301	8,886
	Automobile loans		11,493	12,037
	Credit card		2,259	2,401
	Other consumer loans and leases		657	418
Total consumer loans and leases			36,426	36,131
Total portfolio loans and leases		$	92,582	90,084

Total portfolio loans and leases are recorded net of unearned income, which totaled $624 million as of December 31, 2015 and $665 million as of December 31, 2014. Additionally, portfolio loans and leases are recorded net of unamortized premiums and discounts, deferred loan fees and costs and fair value adjustments (associated with acquired loans or loans designated as fair value upon origination) which totaled a net premium of $220 million and $169 million as of December 31, 2015 and 2014, respectively.

The Bancorp's FHLB and FRB advances are generally secured by loans. The Bancorp had loans of $11.9 billion and $11.1 billion at December 31, 2015 and 2014, respectively, pledged at the FHLB, and loans of $33.7 billion and $33.9 billion at December 31, 2015 and 2014, respectively, pledged at the FRB.


The following table presents a summary of the total loans and leases owned by the Bancorp and net charge-offs as of and for the years ended December 31:

				90 Days Past Due		Net
		Balance		and Still Accruing		Charge-Offs
($ in millions)		2015	2014	2015	2014	2015	2014
Commercial and industrial loans	$	42,151	40,801	7	-	229	222
Commercial mortgage loans		6,991	7,410	-	-	27	26
Commercial construction loans		3,214	2,071	-	-	3	12
Commercial leases		3,854	3,721	-	-	2	1
Residential mortgage loans		14,424	13,582	40	56	17	126
Home equity		8,336	8,886	-	-	39	59
Automobile loans		11,497	12,037	10	8	28	27
Credit card		2,360	2,401	18	23	82	82
Other consumer loans and leases		658	436	-	-	19	20
Total loans and leases	$	93,485	91,345	75	87	446	575
Less: Loans and leases held for sale	$	903	1,261
Total portfolio loans and leases	$	92,582	90,084

The Bancorp engages in commercial lease products primarily related to the financing of commercial equipment. The Bancorp had $3.1 billion and $2.8 billion of direct financing leases, net of unearned income, at December 31, 2015 and 2014, respectively, and $801 million and $874 million of leveraged leases, net of unearned income, at December 31, 2015 and 2014, respectively.

Pre-tax income from leveraged leases was $27 million during the year ended December 31, 2015 and $25 million during both the years ended December 31, 2014 and 2013 and the tax effect of this income was an expense of $1 million for the year ended December 31, 2015 and $9 million during both the years ended December 31, 2014 and 2013.


The following table provides the components of the commercial lease financing portfolio as of December 31:

($ in millions)		2015	2014
Rentals receivable, net of principal and interest on nonrecourse debt	$	3,550	3,589
Estimated residual value of leased assets		906	779
Initial direct cost, net of amortization		22	17
Gross investment in lease financing		4,478	4,385
Unearned income		(624)	(665)
Net investment in commercial lease financing^(a)	$	3,854	3,720

The accumulated allowance for uncollectible minimum lease payments was $47 and $45 at December 31, 2015 and 2014, respectively.

The Bancorp periodically reviews residual values associated with its leasing portfolio. Declines in residual values that are deemed to be other-than-temporary are recognized as a loss. The Bancorp recognized $8 million and $4 million of residual value write-downs related to commercial leases for the years ended December 31, 2015 and 2014, respectively. The residual value write-downs related to commercial leases are recorded in corporate banking revenue in the Consolidated Statements of Income. At December 31, 2015, the minimum future lease payments receivable for each of the years 2016 through 2020 was $715 million, $632 million, $532 million, $449 million and $333 million, respectively.