Portfolio loans and leases are recorded net of unearned income, which totaled $354 million as of December 31, 2019 and $479 million as of December 31, 2018. Additionally, portfolio loans and leases, excluding PCI loans, 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 $249 million and $296 million as of December 31, 2019 and 2018, respectively.

The Bancorp’s FHLB and FRB borrowings are generally secured by loans. The Bancorp had loans of $16.7 billion and $13.1 billion at December 31, 2019 and 2018, respectively, pledged at the FHLB, and loans of $47.3 billion and $42.6 billion at December 31, 2019 and 2018, 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)		2019		2018		2019		2018		2019		2018

Commercial and industrial loans	$		50,677		44,407		11		4		103		132
Commercial mortgage loans			10,964		6,977		15		2		(2)		(1)
Commercial construction loans			5,090		4,657		-		-		-		-
Commercial leases			3,363		3,600		-		-		7		1
Residential mortgage loans			17,988		16,041		50		38		4		7
Home equity			6,083		6,402		1		-		18		12
Indirect secured consumer loans			11,538		8,976		10		12		50		40
Credit card			2,532		2,470		42		37		134		101
Other consumer loans			2,723		2,342		1		-		55		38

Total loans and leases	$		110,958		95,872		130		93		369		330

Less: Loans and leases held for sale	$		1,400		607

Total portfolio loans and leases	$		109,558		95,265

The Bancorp engages in commercial lease products primarily related to the financing of commercial equipment. Leases are classified as sales-type if the Bancorp transfers control of the underlying asset to the lessee. The Bancorp classifies leases that do not meet any of the criteria for a sales-type lease as a direct financing lease if the present value of the sum of the lease payments and

any residual value guaranteed by the lessee and/or any other third party equals or exceeds substantially all of the fair value of the underlying asset and the collection of the lease payments and residual value guarantee is probable.

The following table presents the components of the net investment in leases as of:



($ in millions)	December 31, 2019 (a)

Net investment in direct financing leases:
Lease payment receivable (present value)	$	2,196
Unguaranteed residual assets (present value)		220
Net discount on acquired leases		(7)
Deferred selling profits		-
Net investment in sales-type leases:
Lease payment receivable (present value)		510
Unguaranteed residual assets (present value)		15
Net discount on acquired leases		-

(a)

Excludes $429 of leveraged leases at December 31, 2019.

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



($ in millions)	December 31, 2018

Rentals receivable, net of principal and interest on nonrecourse debt	$	3,256
Estimated residual value of leased assets		804
Initial direct cost, net of amortization		19

Gross investment in commercial lease financing		4,079
Unearned income		(479)

Net investment in commercial lease financing	$	3,600

Interest income recognized in the Consolidated Statements of Income for the year ended December 31, 2019 was $88 million for direct financing leases and $13 million for sales-type leases.

The following table presents undiscounted cash flows for both direct financing and sales-type leases for 2020 through 2024 and thereafter as well as a reconciliation of the undiscounted cash flows to the total lease receivables as follows:



As of December 31, 2019 ($ in millions)	Direct Financing Leases	Sales-Type Leases

2020	$ 679		121
2021	523		133
2022	428		112
2023	257		70
2024	184		63
Thereafter	273		75

Total undiscounted cash flows	$ 2,344		574
Less: Difference between undiscounted cash flows and discounted cash flows	148		64

Present value of lease payments (recognized as lease receivables)	$ 2,196		510

The lease residual value represents the present value of the estimated fair value of the leased equipment at the end of the lease. The Bancorp performs quarterly reviews of residual values associated with its leasing portfolio considering factors such as the subject equipment, structure of the transaction, industry, prior experience with the lessee and other factors that impact the residual value to assess for impairment. At December 31, 2019, the Bancorp maintained an allowance of $17 million to cover the inherent losses, including the potential losses related to the residual value, in the net investment in leases. Refer to Note 7 for additional information on credit quality and the ALLL.

At December 31, 2018, the Bancorp maintained an allowance of $18 million to cover the losses related to the minimum lease payments. Any declines in residual value that were deemed to be other-than-temporary were recognized as a loss and included as a component of corporate banking revenue in the Consolidated Statements of Income.