Loans and Leases

12 Months Ended

Dec. 31, 2017

Loans and Leases Receivable

Loans and Leases

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 classified based upon product or collateral as of December 31:
($ in millions)			2017	2016
Loans and leases held for sale:
	Commercial and industrial loans	$	-	60
	Commercial mortgage loans		6	5
	Residential mortgage loans		486	686
Total loans and leases held for sale		$	492	751
Portfolio loans and leases:
	Commercial and industrial loans	$	41,170	41,676
	Commercial mortgage loans		6,604	6,899
	Commercial construction loans		4,553	3,903
	Commercial leases		4,068	3,974
Total commercial loans and leases			56,395	56,452
	Residential mortgage loans		15,591	15,051
	Home equity		7,014	7,695
	Automobile loans		9,112	9,983
	Credit card		2,299	2,237
	Other consumer loans		1,559	680
Total consumer loans			35,575	35,646
Total portfolio loans and leases		$	91,970	92,098

Total portfolio loans and leases are recorded net of unearned income, which totaled $523 million as of December 31, 2017 and $503 million as of December 31, 2016. 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 $282 million and $240 million as of December 31, 2017 and 2016, respectively.

The Bancorp’s FHLB and FRB advances are generally secured by loans. The Bancorp had loans of $13.0 billion and $13.1 billion at December 31, 2017 and 2016, respectively, pledged at the FHLB, and loans of $39.8 billion and $40.0 billion at December 31, 2017 and 2016, 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)		2017	2016	2017	2016	2017	2016
Commercial and industrial loans	$	41,170	41,736	3	4	111	172
Commercial mortgage loans		6,610	6,904	-	-	12	15
Commercial construction loans		4,553	3,903	-	-	-	(1)
Commercial leases		4,068	3,974	-	-	2	4
Residential mortgage loans		16,077	15,737	57	49	7	10
Home equity		7,014	7,695	-	-	19	27
Automobile loans		9,112	9,983	10	9	37	35
Credit card		2,299	2,237	27	22	84	80
Other consumer loans		1,559	680	-	-	26	20
Total loans and leases	$	92,462	92,849	97	84	298	362
Less: Loans and leases held for sale	$	492	751
Total portfolio loans and leases	$	91,970	92,098

The Bancorp engages in commercial lease products primarily related to the financing of commercial equipment. The Bancorp had $3.4 billion and $3.3 billion of direct financing leases, net of unearned income, at December 31, 2017 and 2016, respectively, and $674 million and $701 millionofleveraged leases, net of unearned income,at December 31, 2017 and 2016, respectively.

Pre-tax loss from leveraged leases was $11millionduring the year ended December 31, 2017, which included a remeasurement of $27 million related to the tax treatment of leveraged leases resulting from the impact of the TCJA during the fourth quarter of 2017. Excluding the impact of the remeasurement, pre-tax income from leveraged leases was $16 million during the year ended December 31, 2017. 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. The tax effect of this income was an expense of $6 million and a benefit of$10 million duringthe years ended December 31, 2017 and 2016, respectively.

The following table provides the components of the commercial lease financing portfolio as of December 31:
($ in millions)		2017	2016
Rentals receivable, net of principal and interest on nonrecourse debt	$	3,684	3,551
Estimated residual value of leased assets		885	903
Initial direct cost, net of amortization		22	23
Gross investment in lease financing		4,591	4,477
Unearned income		(523)	(503)
Net investment in commercial lease financing(a)	$	4,068	3,974

The accumulated allowance for uncollectible minimum lease payments was $14and $15 at December 31, 2017and 2016, 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 $4 million and $1 millionof residual value write-downs related to commercial leases for the years ended December 31, 2017and 2016, 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, 2017, the minimum future lease payments receivable for each of the years 2018 through 2022 was $865 million, $814 million, $625 million, $463 million and $414 million, respectively.