Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2023


NOTE 6						Loans and Allowance for Credit Losses

The composition of the loan portfolio at December 31, by class and underlying specific portfolio type, was as follows:


(Dollars in Millions)	2023		2022
Commercial
Commercial	$	127,676	$	131,128
Lease financing	4,205		4,562
Total commercial	131,881		135,690
Commercial Real Estate
Commercial mortgages	41,934		43,765
Construction and development	11,521		11,722
Total commercial real estate	53,455		55,487
Residential Mortgages
Residential mortgages	108,605		107,858
Home equity loans, first liens	6,925		7,987
Total residential mortgages	115,530		115,845
Credit Card	28,560		26,295
Other Retail
Retail leasing	4,135		5,519
Home equity and second mortgages	13,056		12,863
Revolving credit	3,668		3,983
Installment	13,889		14,592
Automobile	9,661		17,939
Total other retail	44,409		54,896
Total loans	$	373,835	$	388,213

The Company had loans of $123.1 billion at December 31, 2023, and $134.6 billion at December 31, 2022, pledged at the Federal Home Loan Bank, and loans of $82.8 billion at December 31, 2023, and $85.8 billion at December 31, 2022, pledged at the Federal Reserve Bank.

The Company offers a broad array of lending products to consumer and commercial customers, in various industries, across several geographical locations, predominately in the states in which it has Consumer and Business Banking offices. Collateral for commercial and commercial real estate loans may include marketable securities, accounts receivable, inventory, equipment, real estate, or the related property.

Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and costs, and any partial charge-offs recorded. Purchased loans are recorded at fair value at the date of purchase. Net unearned interest and deferred fees and costs on originated loans and unamortized premiums and discounts on

purchased loans amounted to $2.7 billion at December 31, 2023 and $3.1 billion at December 31, 2022. The Company evaluates purchased loans for more-than-insignificant deterioration at the date of purchase in accordance with applicable authoritative accounting guidance. Purchased loans that have experienced more-than-insignificant deterioration from origination are considered purchased credit deteriorated loans. All other purchased loans are considered non-purchased credit deteriorated loans.

Allowance for Credit Losses The allowance for credit losses is established for current expected credit losses on the Company’s loan and lease portfolio, including unfunded credit commitments. The allowance considers expected losses for the remaining lives of the applicable assets, inclusive of expected recoveries. The allowance for credit losses is increased through provisions charged to earnings and reduced by net charge-offs.

Activity in the allowance for credit losses by portfolio class was as follows:


(Dollars in Millions)	Commercial		Commercial Real Estate		Residential Mortgages		Credit Card		Other Retail		Total Loans
Balance at December 31, 2022	$	2,163	$	1,325	$	926	$	2,020	$	970	$	7,404
Add
Change in accounting principle(a)	—		—		(31)		(27)		(4)		(62)
Allowance for acquired credit losses(b)	—		127		—		—		—		127
Provision for credit losses	270		431		41		1,259		274		2,275
Deduct
Loans charged-off	389		281		129		1,014		478		2,291
Less recoveries of loans charged-off	(75)		(18)		(20)		(165)		(108)		(386)
Net loan charge-offs (recoveries)	314		263		109		849		370		1,905

Balance at December 31, 2023	$	2,119	$	1,620	$	827	$	2,403	$	870	$	7,839
Balance at December 31, 2021	$	1,849	$	1,123	$	565	$	1,673	$	945	$	6,155
Add

Allowance for acquired credit losses(b)	163		87		36		45		5		336
Provision for credit losses(c)	378		152		302		826		319		1,977
Deduct
Loans charged-off(d)	319		54		13		696		418		1,500
Less recoveries of loans charged-off	(92)		(17)		(36)		(172)		(120)		(437)
Net loan charge-offs (recoveries)	227		37		(23)		524		298		1,063
Other Changes	—		—		—		—		(1)		(1)
Balance at December 31, 2022	$	2,163	$	1,325	$	926	$	2,020	$	970	$	7,404
Balance at December 31, 2020	$	2,423	$	1,544	$	573	$	2,355	$	1,115	$	8,010
Add


Provision for credit losses	(471)		(419)		(40)		(170)		(73)		(1,173)
Deduct
Loans charged-off	222		29		18		686		253		1,208
Less recoveries of loans charged-off	(119)		(27)		(50)		(174)		(156)		(526)
Net loan charge-offs (recoveries)	103		2		(32)		512		97		682

Balance at December 31, 2021	$	1,849	$	1,123	$	565	$	1,673	$	945	$	6,155

(a)Effective January 1, 2023, the Company adopted accounting guidance which removed the separate recognition and measurement of troubled debt restructurings.

(b)Represents allowance for credit deteriorated and charged-off loans acquired from MUB.

(c)Includes $662 million of provision for credit losses related to the acquisition of MUB.

(d)Includes $179 million of total charge-offs primarily on loans previously charged-off by MUB, which were written up upon acquisition to unpaid principal balance as required by purchase accounting.

The increase in the allowance for credit losses from December 31, 2022 to December 31, 2023 was primarily driven by normalizing credit losses, credit card balance growth and commercial real estate credit quality.

The following table provides a summary of loans charged-off during the year ended December 31, 2023, by portfolio class and year of origination:


(Dollars in Millions)	Commercial		Commercial Real Estate(a)		Residential Mortgages(b)		Credit Card(c)		Other Retail(d)		Total Loans
Originated in 2023	$	48	$	63	$	—	$	—	$	57	$	168
Originated in 2022	63		88		1		—		130		282
Originated in 2021	30		69		6		—		83		188
Originated in 2020	17		2		8		—		38		65
Originated in 2019	15		3		16		—		31		65
Originated prior to 2019	53		56		98		—		31		238
Revolving	163		—		—		1,014		80		1,257
Revolving converted to term	—		—		—		—		28		28
Total charge-offs	$	389	$	281	$	129	$	1,014	$	478	$	2,291

Note: Year of origination is based on the origination date of a loan, or for existing loans the date when the maturity date, pricing or commitment amount is amended.

(a)Includes $91 million in charge-offs related to uncollectible amounts on acquired loans.

(b)Includes $117 million of charge-offs related to balance sheet repositioning and capital management actions.

(c)Predominantly all credit card loans are considered revolving loans. Includes an immaterial amount of charge-offs related to revolving converted to term loans.

(d)Includes $192 million of charge-offs related to balance sheet repositioning and capital management actions.

Credit Quality The credit quality of the Company’s loan portfolios is assessed as a function of net credit losses, levels of nonperforming assets and delinquencies, and credit quality ratings as defined by the Company. These credit quality ratings are an important part of the Company’s overall credit risk management process and evaluation of the allowance for credit losses.

The following table provides a summary of loans by portfolio class, including the delinquency status of those that continue to accrue interest, and those that are nonperforming:


	Accruing
(Dollars in Millions)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonperforming(b)		Total
December 31, 2023
Commercial	$	130,925	$	464	$	116	$	376	$	131,881
Commercial real estate	52,619		55		4		777		53,455
Residential mortgages(a)	115,067		169		136		158		115,530
Credit card	27,779		406		375		—		28,560
Other retail	43,926		278		67		138		44,409
Total loans	$	370,316	$	1,372	$	698	$	1,449	$	373,835
December 31, 2022
Commercial	$	135,077	$	350	$	94	$	169	$	135,690
Commercial real estate	55,057		87		5		338		55,487
Residential mortgages(a)	115,224		201		95		325		115,845
Credit card	25,780		283		231		1		26,295
Other retail	54,382		309		66		139		54,896
Total loans	$	385,520	$	1,230	$	491	$	972	$	388,213

(a)At December 31, 2023, $595 million of loans 30–89 days past due and $2.0 billion of loans 90 days or more past due purchased and that could be purchased from Government National Mortgage Association (“GNMA”) mortgage pools under delinquent loan repurchase options whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current, compared with $647 million and $2.2 billion at December 31, 2022, respectively.

(b)Substantially all nonperforming loans at December 31, 2023 and 2022, had an associated allowance for credit losses. The Company recognized interest income on nonperforming loans of $22 million and $19 million for the years ended December 31, 2023 and 2022, respectively, compared to what would have been recognized at the original contractual terms of the loans of $49 million and $34 million, respectively.

At December 31, 2023, total nonperforming assets held by the Company were $1.5 billion, compared with $1.0 billion at December 31, 2022. Total nonperforming assets included $1.4 billion of nonperforming loans, $26 million of OREO and $19 million of other nonperforming assets owned by the Company at December 31, 2023, compared with $972 million, $23 million and $21 million, respectively, at December 31, 2022.

At December 31, 2023, the amount of foreclosed residential real estate held by the Company, and included in OREO, was $26 million, compared with $23 million at December 31, 2022. These amounts excluded $47 million and $54 million at December 31, 2023 and December 31, 2022, respectively, of foreclosed residential real estate

related to mortgage loans whose payments are primarily insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs. In addition, the amount of residential mortgage loans secured by residential real estate in the process of foreclosure at December 31, 2023 and December 31, 2022, was $728 million and $1.1 billion, respectively, of which $487 million and $830 million, respectively, related to loans purchased and that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.

The following table provides a summary of loans by portfolio class and the Company’s internal credit quality rating:


	December 31, 2023										December 31, 2022
			Criticized										Criticized
(Dollars in Millions)	Pass		Special Mention		Classified(a)		Total Criticized		Total		Pass		Special Mention		Classified(a)		Total Criticized		Total
Commercial
Originated in 2023	$	43,023	$	827	$	856	$	1,683	$	44,706	$	—	$	—	$	—	$	—	$	—
Originated in 2022	40,076		274		632		906		40,982		61,229		245		315		560		61,789
Originated in 2021	9,219		117		154		271		9,490		26,411		159		78		237		26,648
Originated in 2020	3,169		92		71		163		3,332		7,049		68		138		206		7,255
Originated in 2019	1,340		18		103		121		1,461		3,962		51		210		261		4,223
Originated prior to 2019	3,963		12		106		118		4,081		8,986		64		129		193		9,179
Revolving(b)	26,213		362		1,254		1,616		27,829		25,888		344		364		708		26,596
Total commercial	127,003		1,702		3,176		4,878		131,881		133,525		931		1,234		2,165		135,690
Commercial real estate
Originated in 2023	8,848		465		2,206		2,671		11,519		—		—		—		—		—
Originated in 2022	11,831		382		1,141		1,523		13,354		14,527		206		519		725		15,252
Originated in 2021	9,235		500		385		885		10,120		13,565		171		99		270		13,835
Originated in 2020	3,797		51		87		138		3,935		6,489		97		117		214		6,703
Originated in 2019	4,749		336		359		695		5,444		6,991		251		304		555		7,546
Originated prior to 2019	6,010		122		260		382		6,392		9,639		138		875		1,013		10,652
Revolving	2,613		6		70		76		2,689		1,489		—		10		10		1,499
Revolving converted to term	2		—		—		—		2		—		—		—		—		—
Total commercial real estate	47,085		1,862		4,508		6,370		53,455		52,700		863		1,924		2,787		55,487
Residential mortgages(c)
Originated in 2023	9,734		—		5		5		9,739		—		—		—		—		—
Originated in 2022	29,146		—		17		17		29,163		28,452		—		—		—		28,452
Originated in 2021	36,365		—		16		16		36,381		39,527		—		7		7		39,534
Originated in 2020	14,773		—		9		9		14,782		16,556		—		8		8		16,564
Originated in 2019	5,876		—		16		16		5,892		7,222		—		18		18		7,240
Originated prior to 2019	19,326		—		246		246		19,572		23,658		—		397		397		24,055
Revolving	1		—		—		—		1		—		—		—		—		—
Total residential mortgages	115,221		—		309		309		115,530		115,415		—		430		430		115,845
Credit card(d)	28,185		—		375		375		28,560		26,063		—		232		232		26,295
Other retail
Originated in 2023	5,184		—		4		4		5,188		—		—		—		—		—
Originated in 2022	5,607		—		12		12		5,619		9,563		—		6		6		9,569
Originated in 2021	10,398		—		15		15		10,413		15,352		—		12		12		15,364
Originated in 2020	4,541		—		9		9		4,550		7,828		—		11		11		7,839
Originated in 2019	1,793		—		7		7		1,800		3,418		—		13		13		3,431
Originated prior to 2019	2,215		—		13		13		2,228		3,689		—		31		31		3,720
Revolving	13,720		—		104		104		13,824		14,029		—		98		98		14,127
Revolving converted to term	735		—		52		52		787		800		—		46		46		846
Total other retail	44,193		—		216		216		44,409		54,679		—		217		217		54,896
Total loans	$	361,687	$	3,564	$	8,584	$	12,148	$	373,835	$	382,382	$	1,794	$	4,037	$	5,831	$	388,213
Total outstanding commitments	$	762,869	$	5,053	$	10,470	$	15,523	$	778,392	$	772,804	$	2,825	$	5,041	$	7,866	$	780,670

Note: Year of origination is based on the origination date of a loan, or for existing loans the date when the maturity date, pricing or commitment amount is amended. Predominantly all current year and nearer term loan origination years for criticized loans relate to existing loans that have had recent maturity date, pricing or commitment amount amendments.

(a)Classified rating on consumer loans primarily based on delinquency status.

(b)Includes an immaterial amount of revolving converted to term loans.

(c)At December 31, 2023, $2.0 billion of GNMA loans 90 days or more past due and $1.2 billion of modified GNMA loans whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs were classified with a pass rating, compared with $2.2 billion and $1.0 billion at December 31, 2022, respectively.

(d)Predominately all credit card loans are considered revolving loans. Includes an immaterial amount of revolving converted to term loans.

Loan Modifications In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term. The following table provides a summary of loan balances at December 31, 2023, which were modified during the year ended December 31, 2023, by portfolio class and modification granted:


(Dollars in Millions)	Interest Rate Reduction		Payment Delay		Term Extension		Multiple Modifications(a)		Total Modifications		Percent of Class Total
Commercial	$	46	$	—	$	286	$	33	$	365	.3	%
Commercial real estate	—		—		645		72		717		1.3
Residential mortgages(b)	—		234		26		20		280		.2
Credit card	349		1		—		—		350		1.2
Other retail	7		21		144		3		175		.4
Total loans, excluding loans purchased from GNMA mortgage pools	402		256		1,101		128		1,887		.5
Loans purchased from GNMA mortgage pools(b)	—		1,263		255		321		1,839		1.6
Total loans	$	402	$	1,519	$	1,356	$	449	$	3,726	1.0	%

(a)Includes $329 million of total loans receiving a payment delay and term extension, $112 million of total loans receiving an interest rate reduction and term extension and $8 million of total loans receiving an interest rate reduction, payment delay and term extension for the year ended December 31, 2023.

(b)Percent of class total amounts expressed as a percent of total residential mortgage loan balances.

Loan modifications included in the table above exclude trial period arrangements offered to customers and secured loans to consumer borrowers that have had debt discharged through bankruptcy where the borrower has not reaffirmed the debt during the periods presented. At December 31,

2023, the balance of loans modified in trial period arrangements was $39 million, while the balance of secured loans to consumer borrowers that have had debt discharged through bankruptcy was not material.

The following table summarizes the effects of loan modifications made to borrowers on loans modified during the year ended December 31, 2023:


(Dollars in Millions)	Weighted-Average Interest Rate Reduction		Weighted-Average Months of Term Extension
Commercial	13.0	%	12
Commercial real estate	3.5		11
Residential mortgages	1.2		98
Credit card	15.4		—
Other retail	7.9		4
Loans purchased from GNMA mortgage pools	.6		103

Note: The weighted-average payment deferral for all portfolio classes was less than $1 million for the year ended December 31, 2023. Forbearance payments are required to be paid at the end of the original term loan.

Loans that receive a forbearance plan generally remain in default until they are no longer delinquent as the result of the payment of all past due amounts or the borrower

receiving a term extension or modification. Therefore, loans only receiving forbearance plans are not included in the table below.

The following table provides a summary of loan balances at December 31, 2023, which were modified during the year ended December 31, 2023, by portfolio class and delinquency status:


(Dollars in Millions)	Current		30-89 Days Past Due		90 Days or More Past Due		Total
Commercial	$	255	$	12	$	98	$	365
Commercial real estate	524		—		193		717
Residential mortgages(a)	1,385		24		16		1,425
Credit card	251		67		32		350
Other retail	133		21		8		162
Total loans	$	2,548	$	124	$	347	$	3,019

(a)At December 31, 2023, $372 million of loans 30-89 days past due and $175 million of loans 90 days or more past due purchased and that could be purchased from GNMA mortgage pools under delinquent loan repurchase options whose payments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs, were classified as current.

The following table provides a summary of loans that defaulted (fully or partially charged-off or became 90 days or more past due) that were modified during the year ended December 31, 2023.


(Dollars in Millions)	Interest Rate Reduction		Payment Delay		Term Extension		Multiple Modifications(a)
Commercial	$	7	$	—	$	—	$	—
Commercial real estate	—		—		1		—
Residential mortgages	—		8		2		1
Credit card	35		—		—		—
Other retail	1		1		11		—
Total loans, excluding loans purchased from GNMA mortgage pools	43		9		14		1
Loans purchased from GNMA mortgage pools	—		67		30		37
Total loans	$	43	$	76	$	44	$	38

(a)Represents loans receiving a payment delay and term extension.

As of December 31, 2023, the Company had $283 million of commitments to lend additional funds to borrowers whose terms of their outstanding owed balances have been modified.

Prior Period Troubled Debt Restructuring Information

The following table provides a summary of loans modified as troubled debt restructurings for the years ended December 31, by portfolio class:


(Dollars in Millions)	Number of Loans	Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance
2022
Commercial	2,259	$	148	$	134
Commercial real estate	75	50		47
Residential mortgages	1,699	475		476
Credit card	44,470	243		246
Other retail	2,514	89		85
Total loans, excluding loans purchased from GNMA mortgage pools	51,017	1,005		988
Loans purchased from GNMA mortgage pools	1,640	226		230
Total loans	52,657	$	1,231	$	1,218
2021
Commercial	2,156	$	140	$	127
Commercial real estate	112	193		179
Residential mortgages	977	329		328
Credit card	25,297	144		146
Other retail	2,576	74		67
Total loans, excluding loans purchased from GNMA mortgage pools	31,118	880		847
Loans purchased from GNMA mortgage pools	2,311	334		346
Total loans	33,429	$	1,214	$	1,193

The following table provides a summary of troubled debt restructured loans that defaulted (fully or partially charged-off or became 90 days or more past due) for the years ended December 31, that were modified as troubled debt restructurings within 12 months previous to default:


(Dollars in Millions)	Number of Loans	Amount Defaulted
2022
Commercial	767	$	24
Commercial real estate	20	11
Residential mortgages	235	28
Credit card	7,904	42
Other retail	307	5
Total loans, excluding loans purchased from GNMA mortgage pools	9,233	110
Loans purchased from GNMA mortgage pools	282	59
Total loans	9,515	$	169
2021
Commercial	1,084	$	32
Commercial real estate	16	7
Residential mortgages	81	9
Credit card	7,700	43
Other retail	714	11
Total loans, excluding loans purchased from GNMA mortgage pools	9,595	102
Loans purchased from GNMA mortgage pools	176	26
Total loans	9,771	$	128