Loans and Allowance for Credit Losses

9 Months Ended

Sep. 30, 2019

Receivables [Abstract]

Loans and Allowance for Credit Losses

 Note 4    Loans and Allowance for Credit Losses

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

	September 30, 2019					December 31, 2018
(Dollars in Millions)	Amount		Percent of Total			Amount		Percent of Total
Commercial
Commercial	$	99,067		33.6	%	$	96,849		33.8	%
Lease financing		5,587		1.9			5,595		1.9
Total commercial		104,654		35.5			102,444		35.7
Commercial Real Estate
Commercial mortgages		28,664		9.7			28,596		10.0
Construction and development		10,604		3.6			10,943		3.8
Total commercial real estate		39,268		13.3			39,539		13.8
Residential Mortgages
Residential mortgages		58,465		19.9			53,034		18.5
Home equity loans, first liens		10,913		3.7			12,000		4.2
Total residential mortgages		69,378		23.6			65,034		22.7
Credit Card		23,890		8.1			23,363		8.1
Other Retail
Retail leasing		8,463		2.9			8,546		3.0
Home equity and second mortgages		15,453		5.2			16,122		5.6
Revolving credit		2,889		1.0			3,088		1.1
Installment		10,827		3.7			9,676		3.4
Automobile		19,583		6.6			18,719		6.5
Student		233		.1			279		.1
Total other retail		57,448		19.5			56,430		19.7
Total loans	$	294,638		100.0	%	$	286,810		100.0	%

The Company had loans of $94.5 billion at September 30, 2019, and $88.7 billion at December 31, 2018, pledged at the Federal Home Loan Bank, and loans of $74.6 billion at September 30, 2019, and $70.1 billion at December 31, 2018, pledged at the Federal Reserve Bank.

Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and costs, and any partial charge-offs recorded. Net unearned interest and deferred fees and costs amounted to $785 million at September 30, 2019 and $872 million at December 31, 2018. All purchased loans are recorded at fair value at the date of purchase. The Company evaluates purchased loans for impairment at the date of purchase in accordance with applicable authoritative accounting guidance. Purchased loans with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are considered “purchased impaired loans.” All other purchased loans are considered “purchased nonimpaired loans.”

The Company offers a broad array of lending products and categorizes its loan portfolio into two segments, which is the level at which it develops and documents a systematic methodology to determine the allowance for credit losses. The Company’s two loan portfolio segments are commercial lending and consumer lending. Previously, the Company categorized loans covered under loss sharing or similar credit protection agreements with the Federal Deposit Insurance Corporation (“FDIC”), along with the related indemnification asset, in a separate covered loans segment. During 2018 the majority of these loans were sold and the loss share coverage expired. Any remaining balances were reclassified to be included in their respective portfolio category.

Allowance for Credit Losses The allowance for credit losses is established for probable and estimable losses incurred in the Company’s loan and lease portfolio, including unfunded credit commitments. The allowance for credit losses is increased through provisions charged to earnings and reduced by net charge-offs. Management evaluates the appropriateness of the allowance for incurred losses on a quarterly basis.

The allowance recorded for loans in the commercial lending segment is based on reviews of individual credit relationships and considers the migration analysis of commercial lending segment loans and actual loss experience. For each loan type, this historical loss experience is adjusted as necessary to consider any relevant changes in portfolio composition, lending policies, underwriting standards, risk management practices or economic conditions. The results of the analysis are evaluated quarterly to confirm the selected loss experience is appropriate for each commercial loan type. The allowance recorded for impaired loans greater than $5 million in the commercial lending segment is based on an individual loan analysis utilizing expected cash flows discounted using the original effective interest rate, the observable market price of the loan, or the fair value of the collateral, less selling costs, for collateral-dependent loans,

rather than the migration analysis. The allowance recorded for all other commercial lending segment loans is determined on a homogenous pool basis and includes consideration of product mix, risk characteristics of the portfolio, delinquency status, bankruptcy experience, portfolio growth and historical losses, adjusted for current trends. The Company also considers the impacts of any loan modifications made to commercial lending segment loans and any subsequent payment defaults to its expectations of cash flows, principal balance, and current expectations about the borrower’s ability to pay in determining the allowance for credit losses.

The allowance recorded for Troubled Debt Restructuring (“TDR”) loans and purchased impaired loans in the consumer lending segment is determined on a homogenous pool basis utilizing expected cash flows discounted using the original effective interest rate of the pool, or the prior quarter effective rate, respectively. The allowance for collateral-dependent loans in the consumer lending segment is determined based on the fair value of the collateral less costs to sell. The allowance recorded for all other consumer lending segment loans is determined on a homogenous pool basis and includes consideration of product mix, risk characteristics of the portfolio, bankruptcy experience, delinquency status, refreshed loan-to-value ratios when possible, portfolio growth and historical losses, adjusted for current trends. The Company also considers any modifications made to consumer lending segment loans including the impacts of any subsequent payment defaults since modification in determining the allowance for credit losses, such as the borrower’s ability to pay under the restructured terms, and the timing and amount of payments.

In addition, subsequent payment defaults on loan modifications considered TDRs are considered in the underlying factors used in the determination of the appropriateness of the allowance for credit losses. For each loan segment, the Company estimates future loan charge-offs through a variety of analysis, trends and underlying assumptions. With respect to the commercial lending segment, TDRs may be collectively evaluated for impairment where observed performance history, including defaults, is a primary driver of the loss allocation. For commercial TDRs individually ​​​​​​​evaluated for impairment, attributes of the borrower are the primary factors in determining the allowance for credit losses. However, historical loss experience is also incorporated into the allowance methodology applied to this category of loans. With respect to the consumer lending segment, performance of the portfolio, including defaults on TDRs, is considered when estimating future cash flows.

The Company’s methodology for determining the appropriate allowance for credit losses for each loan segment also considers the imprecision inherent in the methodologies used. As a result, in addition to the amounts determined under the methodologies described above, management also considers the potential impact of other qualitative factors which include, but are not limited to, economic factors; geographic and other concentration risks; delinquency and nonaccrual trends; current business conditions; changes in lending policy, underwriting standards and other relevant business practices; results of internal review; and the regulatory environment. The consideration of these items results in adjustments to allowance amounts included in the Company’s allowance for credit losses for each of the above loan segments.

The Company also assesses the credit risk associated with off-balance sheet loan commitments, letters of credit, and derivatives. Credit risk associated with derivatives is reflected in the fair values recorded for those positions. The liability for off-balance sheet credit exposure related to loan commitments and other credit guarantees is included in other liabilities. Because business processes and credit risks associated with unfunded credit commitments are essentially the same as for loans, the Company utilizes similar processes to estimate its liability for unfunded credit commitments.

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

Three Months Ended September 30 (Dollars in Millions)	Commercial			Commercial Real Estate			Residential Mortgages			Credit Card			Other Retail			Covered Loans			Total Loans
2019
Balance at beginning of period	$	1,464		$	794		$	438		$	1,132		$	638		$	–		$	4,466
Add
Provision for credit losses		101			3			(10	)		212			61			–			367
Deduct
Loans charged-off		91			7			8			248			97			–			451
Less recoveries of loans charged-off		(16	)		(1	)		(11	)		(37	)		(34	)		–			(99	)
Net loans charged-off		75			6			(3	)		211			63			–			352
Balance at end of period	$	1,490		$	791		$	431		$	1,133		$	636		$	–		$	4,481
2018
Balance at beginning of period	$	1,391		$	812		$	436		$	1,082		$	667		$	23		$	4,411
Add
Provision for credit losses		88			(12	)		8			221			41			(3	)		343
Deduct
Loans charged-off		88			1			12			231			96			–			428
Less recoveries of loans charged-off		(22	)		(10	)		(8	)		(25	)		(35	)		–			(100	)
Net loans charged-off		66			(9	)		4			206			61			–			328
Balance at end of period	$	1,413		$	809		$	440		$	1,097		$	647		$	20		$	4,426

Nine Months Ended September 30 (Dollars in Millions)	Commercial			Commercial Real Estate			Residential Mortgages			Credit Card			Other Retail			Covered Loans			Total Loans
2019
Balance at beginning of period	$	1,454		$	800		$	455		$	1,102		$	630		$	–		$	4,441
Add
Provision for credit losses		243			(2	)		(20	)		694			194			–			1,109
Deduct
Loans charged-off		300			11			27			767			283			–			1,388
Less recoveries of loans charged-off		(93	)		(4	)		(23	)		(104	)		(95	)		–			(319	)
Net loans charged-off		207			7			4			663			188			–			1,069
Balance at end of period	$	1,490		$	791		$	431		$	1,133		$	636		$	–		$	4,481
2018
Balance at beginning of period	$	1,372		$	831		$	449		$	1,056		$	678		$	31		$	4,417
Add
Provision for credit losses		225			(34	)		6			668			156			(10	)		1,011
Deduct
Loans charged-off		265			6			37			727			283			–			1,318
Less recoveries of loans charged-off		(81	)		(18	)		(22	)		(100	)		(96	)		–			(317	)
Net loans charged-off		184			(12	)		15			627			187			–			1,001
Other changes (a)		–			–			–			–			–			(1	)		(1	)
Balance at end of period	$	1,413		$	809		$	440		$	1,097		$	647		$	20		$	4,426

(a) Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales.

Additional detail of 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
Allowance Balance at September 30, 2019 Related to
Loans individually evaluated for impairment (a)	$	19	$	3	$	–	$	–	$	–	$	22
TDRs collectively evaluated for impairment		20		4		107		80		12		223
Other loans collectively evaluated for impairment		1,451		784		309		1,053		624		4,221
Loans acquired with deteriorated credit quality		–		–		15		–		–		15
Total allowance for credit losses	$	1,490	$	791	$	431	$	1,133	$	636	$	4,481
Allowance Balance at December 31, 2018 Related to
Loans individually evaluated for impairment (a)	$	16	$	8	$	–	$	–	$	–	$	24
TDRs collectively evaluated for impairment		15		3		126		69		12		225
Other loans collectively evaluated for impairment		1,423		788		314		1,033		618		4,176
Loans acquired with deteriorated credit quality		–		1		15		–		–		16
Total allowance for credit losses	$	1,454	$	800	$	455	$	1,102	$	630	$	4,441

(a) Represents the allowance for credit losses related to loans greater than $5 million classified as nonperforming or TDRs.

Additional detail of loan balances by portfolio class was as follows:

(Dollars in Millions)	Commercial		Commercial Real Estate		Residential Mortgages		Credit Card		Other Retail		Total Loans
September 30, 2019
Loans individually evaluated for impairment (a)	$	340	$	40	$	–	$	–	$	–	$	380
TDRs collectively evaluated for impairment		178		142		3,168		262		190		3,940
Other loans collectively evaluated for impairment		104,136		39,052		65,950		23,628		57,258		290,024
Loans acquired with deteriorated credit quality		–		34		260		–		–		294
Total loans	$	104,654	$	39,268	$	69,378	$	23,890	$	57,448	$	294,638
December 31, 2018
Loans individually evaluated for impairment (a)	$	262	$	86	$	–	$	–	$	–	$	348
TDRs collectively evaluated for impairment		151		129		3,252		245		183		3,960
Other loans collectively evaluated for impairment		102,031		39,297		61,465		23,118		56,247		282,158
Loans acquired with deteriorated credit quality		–		27		317		–		–		344
Total loans	$	102,444	$	39,539	$	65,034	$	23,363	$	56,430	$	286,810

(a) Represents loans greater than $5 million classified as nonperforming or TDRs.

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.

For all loan classes, loans are considered past due based on the number of days delinquent except for monthly amortizing loans which are classified delinquent based upon the number of contractually required payments not made (for example, two missed payments is considered 30 days delinquent). When a loan is placed on nonaccrual status, unpaid accrued interest is reversed, reducing interest income in the current period.

Commercial lending segment loans are generally placed on nonaccrual status when the collection of principal and interest has become 90 days past due or is otherwise considered doubtful. Commercial lending segment loans are generally fully or partially charged down to the fair value of the collateral securing the loan, less costs to sell, when the loan is placed on nonaccrual.

Consumer lending segment loans are generally charged-off at a specific number of days or payments past due. Residential mortgages and other retail loans secured by 1-4 family properties are generally charged down to the fair value of the collateral securing the loan, less costs to sell, at 180 days past due. Residential mortgage loans and lines in a first lien position are placed on nonaccrual status in instances where a partial charge-off occurs unless the loan is well secured and in the process of collection. Residential mortgage loans and lines in a junior lien position secured by 1-4 family properties are placed on nonaccrual status at 120 days past due or when they are behind a first lien that has become 180 days or greater past due or placed on nonaccrual status. Any secured consumer lending segment loan whose borrower has had debt discharged through bankruptcy, for which the loan amount exceeds the fair value of the collateral, is charged down to the fair value of the related collateral and the remaining balance is placed on nonaccrual status. Credit card loans continue to accrue interest until the account is charged-off. Credit cards are charged-off at 180 days past due. Other retail loans not secured by 1-4 family properties are charged-off at 120 days past due; and revolving consumer lines are charged-off at 180 days past due. Similar to credit cards, other retail loans are generally not placed on nonaccrual status because of the relative short period of time to charge-off. Certain retail customers having financial difficulties may have the terms of their credit card and other loan agreements modified to require only principal payments and, as such, are reported as nonaccrual.

For all loan classes, interest payments received on nonaccrual loans are generally recorded as a reduction to a loan’s carrying amount while a loan is on nonaccrual and are recognized as interest income upon payoff of the loan. However, interest income may be recognized for interest payments if the remaining carrying amount of the loan is believed to be collectible. In certain circumstances, loans in any class may be restored to accrual status, such as when a loan has demonstrated sustained repayment performance or no amounts are past due and prospects for future payment are no longer in doubt; or when the loan becomes well secured and is in the process of collection. Loans where there has been a partial charge-off may be returned to accrual status if all principal and interest (including amounts previously charged-off) is expected to be collected and the loan is current. Generally, purchased impaired loans are considered accruing loans. However, the timing and amount of future cash flows for some loans is not reasonably estimable, and those loans are classified as nonaccrual loans with interest income not recognized until the timing and amount of the future cash flows can be reasonably estimated.

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		Total
September 30, 2019
Commercial	$	103,782	$	450	$	103	$	319	$	104,654
Commercial real estate		39,126		51		2		89		39,268
Residential mortgages (a)		68,845		167		115		251		69,378
Credit card		23,296		316		278		—		23,890
Other retail		56,785		391		102		170		57,448
Total loans	$	291,834	$	1,375	$	600	$	829	$	294,638
December 31, 2018
Commercial	$	101,844	$	322	$	69	$	209	$	102,444
Commercial real estate		39,354		70		—		115		39,539
Residential mortgages (a)		64,443		181		114		296		65,034
Credit card		22,746		324		293		—		23,363
Other retail		55,722		403		108		197		56,430
Total loans	$	284,109	$	1,300	$	584	$	817	$	286,810

(a) At September 30, 2019, $391 million of loans 30–89 days past due and $1.7 billion of loans 90 days or more past due purchased from Government National Mortgage Association (“GNMA”) mortgage pools 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 $430 million and $1.7 billion at December 31, 2018, respectively.

At September 30, 2019, the amount of foreclosed residential real estate held by the Company, and included in other real estate owned (“OREO”), was $80 million, compared with $106 million at December 31, 2018. These amounts exclude $177 million and $235 million at September 30, 2019 and December 31, 2018, 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 was $1.5 billion at September 30, 2019 and December 31, 2018, of which $1.2 billion related to loans purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs.

The Company classifies its loan portfolios using internal credit quality ratings ​​​​​​​on a quarterly basis. These ratings include pass, special mention and classified, and are an important part of the Company’s overall credit risk management process and evaluation of the allowance for credit losses. Loans with a pass rating represent those loans not classified on the Company’s rating scale for problem credits, as minimal credit risk has been identified. Special mention loans are those loans that have a potential weakness deserving management’s close attention. Classified loans are those loans where a well-defined weakness has been identified that may put full collection of contractual cash flows at risk. It is possible that others, given the same information, may reach different reasonable conclusions regarding the credit quality rating classification of specific loans.

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

			Criticized
(Dollars in Millions)	Pass		Special Mention		Classified (a)		Total Criticized		Total
September 30, 2019
Commercial	$	102,543	$	1,022	$	1,089	$	2,111	$	104,654
Commercial real estate		38,287		625		356		981		39,268
Residential mortgages (b)		68,960		3		415		418		69,378
Credit card		23,612		–		278		278		23,890
Other retail		57,142		12		294		306		57,448
Total loans	$	290,544	$	1,662	$	2,432	$	4,094	$	294,638
Total outstanding commitments	$	614,479	$	2,297	$	3,076	$	5,373	$	619,852
December 31, 2018
Commercial	$	100,014	$	1,149	$	1,281	$	2,430	$	102,444
Commercial real estate		38,473		584		482		1,066		39,539
Residential mortgages (b)		64,570		1		463		464		65,034
Credit card		23,070		–		293		293		23,363
Other retail		56,101		6		323		329		56,430
Total loans	$	282,228	$	1,740	$	2,842	$	4,582	$	286,810
Total outstanding commitments	$	600,407	$	2,801	$	3,448	$	6,249	$	606,656

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

(b) At September 30, 2019, $1.7 billion of GNMA loans 90 days or more past due and $1.7 billion of restructured 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 $1.7 billion and $1.6 billion at December 31, 2018, respectively.

For all loan classes, a loan is considered to be impaired when, based on current events or information, it is probable the Company will be unable to collect all amounts due per the contractual terms of the loan agreement. Impaired loans include all nonaccrual and TDR loans. For all loan classes, interest income on TDR loans is recognized under the modified terms and conditions if the borrower has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles. Interest income is generally not recognized on other impaired loans until the loan is paid off. However, interest income may be recognized for interest payments if the remaining carrying amount of the loan is believed to be collectible.

Factors used by the Company in determining whether all principal and interest payments due on commercial and commercial real estate loans will be collected and, therefore, whether those loans are impaired include, but are not limited to, the financial condition of the borrower, collateral and/or guarantees on the loan, and the borrower’s estimated future ability to pay based on industry, geographic location and certain financial ratios. The evaluation of impairment on residential mortgages, credit card loans and other retail loans is primarily driven by delinquency status of individual loans or whether a loan has been modified, and considers any government guarantee where applicable.

A summary of impaired loans, which include all nonaccrual and TDR loans, by portfolio class was as follows:

(Dollars in Millions)	Period-end Recorded Investment (a)		Unpaid Principal Balance		Valuation Allowance		Commitments to Lend Additional Funds
September 30, 2019
Commercial	$	583	$	1,183	$	41	$	197
Commercial real estate		234		587		8		–
Residential mortgages		1,573		1,891		74		–
Credit card		262		262		80		–
Other retail		322		412		14		2
Total loans, excluding loans purchased from GNMA mortgage pools		2,974		4,335		217		199
Loans purchased from GNMA mortgage pools		1,690		1,690		34		–
Total	$	4,664	$	6,025	$	251	$	199
December 31, 2018
Commercial	$	467	$	1,006	$	32	$	106
Commercial real estate		279		511		12		2
Residential mortgages		1,709		1,879		86		–
Credit card		245		245		69		–
Other retail		335		418		14		5
Total loans, excluding loans purchased from GNMA mortgage pools		3,035		4,059		213		113
Loans purchased from GNMA mortgage pools		1,639		1,639		41		–
Total	$	4,674	$	5,698	$	254	$	113

(a) Substantially all loans classified as impaired at September 30, 2019 and December 31, 2018, had an associated allowance for credit losses.

Additional information on impaired loans follows:

	2019				2018
(Dollars in Millions)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Three Months Ended September 30
Commercial	$	552	$	4	$	470	$	3
Commercial real estate		232		3		279		4
Residential mortgages		1,597		23		1,779		18
Credit card		260		–		236		1
Other retail		319		3		309		4
Covered Loans		–		–		23		–
Total loans, excluding loans purchased from GNMA mortgage pools		2,960		33		3,096		30
Loans purchased from GNMA mortgage pools		1,644		18		1,666		12
Total	$	4,604	$	51	$	4,762	$	42
Nine Months Ended September 30
Commercial	$	516	$	7	$	510	$	5
Commercial real estate		251		8		263		8
Residential mortgages		1,649		70		1,846		57
Credit card		255		–		234		3
Other retail		323		9		304		12
Covered Loans		–		–		33		1
Total loans, excluding loans purchased from GNMA mortgage pools		2,994		94		3,190		86
Loans purchased from GNMA mortgage pools		1,613		52		1,635		36
Total	$	4,607	$	146	$	4,825	$	122

Troubled Debt Restructurings 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. Concessionary modifications are classified as TDRs unless the modification results in only an insignificant delay in payments to be received. The Company recognizes interest on TDRs if the borrower complies with the revised terms and conditions as agreed upon with the Company and has demonstrated repayment performance at a level commensurate with the modified terms over several payment cycles, which is generally six months or greater. To the extent a previous restructuring was insignificant, the Company considers the cumulative effect of past restructurings related to the receivable when determining whether a current restructuring is a TDR. Loans classified as TDRs are considered impaired loans for reporting and measurement purposes.

The following table provides a summary of loans modified as TDRs during the periods presented by portfolio class:

	2019						2018
(Dollars in Millions)	Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance		Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance
Three Months Ended September 30
Commercial		886	$	116	$	100		700	$	42	$	33
Commercial real estate		32		23		23		38		123		125
Residential mortgages		117		17		15		144		19		17
Credit card		8,429		46		46		8,450		42		43
Other retail		814		20		19		763		17		16
Covered Loans		–		–		–		3		1		1
Total loans, excluding loans purchased from GNMA mortgage pools		10,278		222		203		10,098		244		235
Loans purchased from GNMA mortgage pools		1,524		211		203		1,649		216		211
Total loans		11,802	$	433	$	406		11,747	$	460	$	446
Nine Months Ended September 30
Commercial		2,622	$	242	$	215		2,047	$	255	$	234
Commercial real estate		76		95		93		97		154		155
Residential mortgages		318		43		41		397		56		53
Credit card		26,018		140		141		24,457		122		124
Other retail		2,029		44		42		1,857		45		43
Covered Loans		–		–		–		3		1		1
Total loans, excluding loans purchased from GNMA mortgage pools		31,063		564		532		28,858		633		610
Loans purchased from GNMA mortgage pools		4,617		629		606		4,785		631		619
Total loans		35,680	$	1,193	$	1,138		33,643	$	1,264	$	1,229

Residential mortgages, home equity and second mortgages, and loans purchased from GNMA mortgage pools in the table above include trial period arrangements offered to customers during the periods presented. The post-modification balances for these loans reflect the current outstanding balance until a permanent modification is made. In addition, the post-modification balances typically include capitalization of unpaid accrued interest and/or fees under the various modification programs. For those loans modified as TDRs during the third quarter of 2019, at September 30, 2019, 68 residential mortgages, 34 home equity and second mortgage loans and 1,046 loans purchased from GNMA mortgage pools with outstanding balances of $11 million, $3 million and $144 million, respectively, were in a trial period and have estimated post-modification balances of $10 million, $3 million and $141 million, respectively, assuming permanent modification occurs at the end of the trial period.

The Company has implemented certain restructuring programs that may result in TDRs. However, many of the Company’s TDRs are also determined on a case-by-case basis in connection with ongoing loan collection processes.

For the commercial lending segment, modifications generally result in the Company working with borrowers on a case-by-case basis. Commercial and commercial real estate modifications generally include extensions of the maturity date and may be accompanied by an increase or decrease to the interest rate, which may not be deemed a market interest rate. In addition, the Company may work with the borrower in identifying other changes that mitigate loss to the Company, which may include additional collateral or guarantees to support the loan. To a lesser extent, the Company may waive contractual principal. The Company classifies all of the above concessions as TDRs to the extent the Company determines that the borrower is experiencing financial difficulty.

Modifications for the consumer lending segment are generally part of programs the Company has initiated. The Company modifies residential mortgage loans under Federal Housing Administration, United States Department of Veterans Affairs, or its own internal programs. Under these programs, the Company offers qualifying homeowners the opportunity to permanently modify their loan and achieve more affordable monthly payments by providing loan concessions. These concessions may include adjustments to interest rates, conversion of adjustable rates to fixed rates, extension of maturity dates or deferrals of payments, capitalization of accrued interest and/or outstanding advances, or in limited situations, partial forgiveness of loan principal. In most instances, participation in residential mortgage loan restructuring programs requires the customer to complete a short-term trial period. A permanent loan modification is contingent on the customer successfully completing the trial period arrangement, and the loan documents are not modified until that time. The Company reports loans in a trial period arrangement as TDRs and continues to report them as TDRs after the trial period.

Credit card and other retail loan TDRs are generally part of distinct restructuring programs providing customers experiencing financial difficulty with modifications whereby balances may be amortized up to 60 months, and generally include waiver of fees and reduced interest rates.

In addition, the Company considers secured loans to consumer borrowers that have debt discharged through bankruptcy where the borrower has not reaffirmed the debt to be TDRs.

Acquired loans restructured after acquisition are not considered TDRs for accounting and disclosure purposes if the loans evidenced credit deterioration as of the acquisition date and are accounted for in pools.

The following table provides a summary of TDR loans that defaulted (fully or partially charged-off or became 90 days or more past due) during the periods presented that were modified as TDRs within 12 months previous to default:

	2019				2018
(Dollars in Millions)	Number of Loans		Amount Defaulted		Number of Loans		Amount Defaulted
Three Months Ended September 30
Commercial		263	$	9		207	$	51
Commercial real estate		8		7		10		2
Residential mortgages		13		1		34		4
Credit card		2,025		10		1,924		9
Other retail		72		1		93		1
Total loans, excluding loans purchased from GNMA mortgage pools		2,381		28		2,268		67
Loans purchased from GNMA mortgage pools		263		33		380		50
Total loans		2,644	$	61		2,648	$	117
Nine Months Ended September 30
Commercial		749	$	18		623	$	63
Commercial real estate		23		17		26		8
Residential mortgages		124		14		148		15
Credit card		6,001		29		5,893		26
Other retail		299		9		240		3
Covered loans		–		–		1		–
Total loans, excluding loans purchased from GNMA mortgage pools		7,196		87		6,931		115
Loans purchased from GNMA mortgage pools		697		93		1,129		148
Total loans		7,893	$	180		8,060	$	263

In addition to the defaults in the table above, the Company had a total of 185 and 600 residential mortgage loans, home equity and second mortgage loans and loans purchased from GNMA mortgage pools for the three months and nine months ended September 30, 2019, respectively, where borrowers did not successfully complete the trial period arrangement and, therefore, are no longer eligible for a permanent modification under the applicable modification program. These loans had aggregate outstanding balances of $25 million and $81 million for the three months and nine months ended September 30, 2019, respectively.