Loans and Leases

12 Months Ended

Dec. 31, 2018

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. 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)			2018	2017
Loans and leases held for sale:
	Commercial and industrial loans	$	67	-
	Commercial mortgage loans		3	6
	Residential mortgage loans		537	486
Total loans and leases held for sale		$	607	492
Portfolio loans and leases:
	Commercial and industrial loans	$	44,340	41,170
	Commercial mortgage loans		6,974	6,604
	Commercial construction loans		4,657	4,553
	Commercial leases		3,600	4,068
Total commercial loans and leases			59,571	56,395
	Residential mortgage loans		15,504	15,591
	Home equity		6,402	7,014
	Automobile loans		8,976	9,112
	Credit card		2,470	2,299
	Other consumer loans		2,342	1,559
Total consumer loans			35,694	35,575
Total portfolio loans and leases		$	95,265	91,970

Total portfolio loans and leases are recorded net of unearned income, which totaled $479 million as of December 31, 2018 and $523 million as of December 31, 2017. 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 $296 million and $282 million as of December 31, 2018 and 2017, respectively.

The Bancorp’s FHLB and FRB advances are generally secured by loans. The Bancorp had loans of $13.1 billion and $13.0 billion at December 31, 2018 and 2017, respectively, pledged at the FHLB, and loans of $42.6 billion and $39.8 billion at December 31, 2018 and 2017, 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)		2018	2017	2018	2017	2018	2017
Commercial and industrial loans	$	44,407	41,170	4	3	132	111
Commercial mortgage loans		6,977	6,610	2	-	(1)	12
Commercial construction loans		4,657	4,553	-	-	-	-
Commercial leases		3,600	4,068	-	-	1	2
Residential mortgage loans		16,041	16,077	38	57	7	7
Home equity		6,402	7,014	-	-	12	19
Automobile loans		8,976	9,112	12	10	40	37
Credit card		2,470	2,299	37	27	101	84
Other consumer loans		2,342	1,559	-	-	38	26
Total loans and leases	$	95,872	92,462	93	97	330	298
Less: Loans and leases held for sale	$	607	492
Total portfolio loans and leases	$	95,265	91,970

The Bancorp engages in commercial lease products primarily related to the financing of commercial equipment. The Bancorp had $3.0 billion and $3.4 billion of direct financing leases, net of unearned income, at December 31, 2018 and 2017, respectively, and $624 million and $674 million of leveraged leases, net of unearned income, at December 31, 2018 and 2017, respectively.

Pre-tax income from leveraged leases was $34 million and included $15 million of gains on early terminations during the year ended December 31, 2018. Pre-tax loss from leveraged leases was $11 million during 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 year ended December 31, 2017. Excluding the impact of the remeasurement, pre-tax income from leveraged leases was $16 million during the year ended December 31, 2017. The tax effect of this income was an expense of $8 million and $6 million during the years ended December 31, 2018 and 2017, respectively.

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

($ in millions)		2018	2017
Rentals receivable, net of principal and interest on nonrecourse debt	$	3,256	3,684
Estimated residual value of leased assets		804	885
Initial direct cost, net of amortization		19	22
Gross investment in commercial lease financing		4,079	4,591
Unearned income		(479)	(523)
Net investment in commercial lease financing^(a)	$	3,600	4,068

The accumulated allowance for uncollectible minimum lease payments was $18 and $14 at December 31, 2018 and 2017, 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 of residual value write-downs related to commercial leases for both the years ended December 31, 2018 and 2017. The residual value write-downs related to commercial leases are recorded in corporate banking revenue in the Consolidated Statements of Income. At December 31, 2018, the future minimum lease payments receivable for each of the years 2019 through 2023 was $815 million, $666 million, $528 million, $430 million and $350 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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