Loans and Leases

12 Months Ended

Dec. 31, 2016

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 U.S. 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)			2016	2015
Loans held for sale:
	Commercial and industrial loans	$	60	20
	Commercial mortgage loans		5	34
	Residential mortgage loans		686	708
	Home equity		-	35
	Automobile loans		-	4
	Credit card		-	101
	Other consumer loans		-	1
Total loans held for sale		$	751	903
Portfolio loans and leases:
	Commercial and industrial loans	$	41,676	42,131
	Commercial mortgage loans		6,899	6,957
	Commercial construction loans		3,903	3,214
	Commercial leases		3,974	3,854
Total commercial loans and leases			56,452	56,156
	Residential mortgage loans		15,051	13,716
	Home equity		7,695	8,301
	Automobile loans		9,983	11,493
	Credit card		2,237	2,259
	Other consumer loans and leases		680	657
Total consumer loans and leases			35,646	36,426
Total portfolio loans and leases		$	92,098	92,582

Total portfolio loans and leases are recorded net of unearned income, which totaled $503 million as of December 31, 2016 and $624 million as of December 31, 2015. 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 premium of $240 million and $220 million as of December 31, 2016 and 2015, respectively.

The Bancorp’s FHLB and FRB advances are generally secured by loans. The Bancorp had loans of $13.1 billion and $11.9 billion at December 31, 2016 and 2015, respectively, pledged at the FHLB, and loans of $40.0 billion and $33.7 billion at December 31, 2016 and 2015, 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 (recoveries) as of and for the years ended December 31:

				90 Days Past Due		Net
		Carrying Value		and Still Accruing		Charge-Offs (Recoveries)
($ in millions)		2016	2015	2016	2015	2016	2015
Commercial and industrial loans	$	41,736	42,151	4	7	172	229
Commercial mortgage loans		6,904	6,991	-	-	15	27
Commercial construction loans		3,903	3,214	-	-	(1)	3
Commercial leases		3,974	3,854	-	-	4	2
Residential mortgage loans		15,737	14,424	49	40	10	17
Home equity		7,695	8,336	-	-	27	39
Automobile loans		9,983	11,497	9	10	35	28
Credit card		2,237	2,360	22	18	80	82
Other consumer loans and leases		680	658	-	-	20	19
Total loans and leases	$	92,849	93,485	84	75	362	446
Less: Loans held for sale	$	751	903
Total portfolio loans and leases	$	92,098	92,582

The Bancorp engages in commercial lease products primarily related to the financing of commercial equipment. The Bancorp had $3.3 billion and $3.1 billion of direct financing leases, net of unearned income, at December 31, 2016 and 2015, respectively, and $701 million and $801 million of leveraged leases, net of unearned income, at December 31, 2016 and 2015, respectively.

Pre-tax income from leveraged leases was $38 million and included $16 million of gains on early terminations during the year ended December 31, 2016. Pre-tax income from leveraged leases was $27 million and included $7 million of gains on early terminations during the year ended December 31, 2015. The tax effect of this income was a benefit of $10 million and an expense $1 million during the years ended December 31, 2016 and 2015, respectively.


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

($ in millions)		2016	2015
Rentals receivable, net of principal and interest on nonrecourse debt	$	3,551	3,550
Estimated residual value of leased assets		903	906
Initial direct cost, net of amortization		23	22
Gross investment in lease financing		4,477	4,478
Unearned income		(503)	(624)
Net investment in commercial lease financing^(a)	$	3,974	3,854

The accumulated allowance for uncollectible minimum lease payments was $15 and $47 at December 31, 2016 and 2015, 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 $1 million and $8 million of residual value write-downs related to commercial leases for the years ended December 31, 2016 and 2015, 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, 2016, the minimum future lease payments receivable for each of the years 2017 through 2021 was $813 million, $716 million, $611 million, $482 million and $361 million, respectively.

- Definition

The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses.

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