Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2020

Receivables [Abstract]

Loans and Allowance for Credit Losses

  NOTE 5   Loans and Allowance for Credit Losses

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

(Dollars in Millions)	2020		2019
Commercial
Commercial	$	97,315	$	98,168
Lease financing		5,556		5,695
Total commercial		102,871		103,863
Commercial Real Estate
Commercial mortgages		28,472		29,404
Construction and development		10,839		10,342
Total commercial real estate		39,311		39,746
Residential Mortgages
Residential mortgages		66,525		59,865
Home equity loans, first liens		9,630		10,721
Total residential mortgages		76,155		70,586
Credit Card		22,346		24,789
Other Retail
Retail leasing		8,150		8,490
Home equity and second mortgages		12,472		15,036
Revolving credit		2,688		2,899
Installment		13,823		11,038
Automobile		19,722		19,435
Student		169		220
Total other retail		57,024		57,118
Total loans	$	297,707	$	296,102

The Company had loans of $96.1 billion at December 31, 2020, and $96.2 billion at December 31, 2019, pledged at the Federal Home Loan Bank, and loans of $67.8 billion at December 31, 2020, and $76.3 billion at December 31, 2019, 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. Net unearned interest and deferred fees and costs amounted to $763 million at December 31, 2020 and $781 million at December 31, 2019. All purchased loans are recorded at fair value at the date of purchase. Beginning January 1, 2020, 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 Beginning January 1, 2020, 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 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			Covered Loans			Total Loans
Balance at December 31, 2019	$	1,484		$	799		$	433		$	1,128		$	647		$	–		$	4,491
Add
Change in accounting principle(a)		378			(122	)		(30	)		872			401			–			1,499
Provision for credit losses		1,074			1,054			158			1,184			336			–			3,806
Deduct
Loans charged-off		575			210			19			975			401			–			2,180
Less recoveries of loans charged-off		(62	)		(23	)		(31	)		(146	)		(132	)		–			(394	)
Net loans charged-off		513			187			(12	)		829			269			–			1,786
Balance at December 31, 2020	$	2,423		$	1,544		$	573		$	2,355		$	1,115		$	–		$	8,010
Balance at December 31, 2018	$	1,454		$	800		$	455		$	1,102		$	630		$	–		$	4,441
Add
Provision for credit losses		315			13			(19	)		919			276			–			1,504
Deduct
Loans charged-off		399			21			34			1,028			385			–			1,867
Less recoveries of loans charged-off		(114	)		(7	)		(31	)		(135	)		(126	)		–			(413	)
Net loans charged-off		285			14			3			893			259			–			1,454
Balance at December 31, 2019	$	1,484		$	799		$	433		$	1,128		$	647		$	–		$	4,491
Balance at December 31, 2017	$	1,372		$	831		$	449		$	1,056		$	678		$	31		$	4,417
Add
Provision for credit losses		333			(50	)		23			892			211			(30	)		1,379
Deduct
Loans charged-off		350			9			48			970			383			–			1,760
Less recoveries of loans charged-off		(99	)		(28	)		(31	)		(124	)		(124	)		–			(406	)
Net loans charged-off		251			(19	)		17			846			259			–			1,354
Other changes		–			–			–			–			–			(1	)		(1	)
Balance at December 31, 2018	$	1,454		$	800		$	455		$	1,102		$	630		$	–		$	4,441

(a) Effective January 1, 2020, the Company adopted accounting guidance which changed impairment recognition of financial instruments to a model that is based on expected losses rather than incurred losses.

The increase in the allowance for credit losses from December 31, 2019 to December 31, 2020 reflected the deteriorating and ongoing effects of adverse economic conditions driven by the impact of COVID-19 on the domestic and global

economies. Expected loss estimates consider both the changes in economic activity, and the mitigating effects of government stimulus and industrywide loan modification efforts designed to limit long term effects of the pandemic.

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, 2020
Commercial	$	102,127	$	314	$	55	$	375	$	102,871
Commercial real estate		38,676		183		2		450		39,311
Residential mortgages(a)		75,529		244		137		245		76,155
Credit card		21,918		231		197		–		22,346
Other retail		56,466		318		86		154		57,024
Total loans	$	294,716	$	1,290	$	477	$	1,224	$	297,707
December 31, 2019
Commercial	$	103,273	$	307	$	79	$	204	$	103,863
Commercial real estate		39,627		34		3		82		39,746
Residential mortgages(a)		70,071		154		120		241		70,586
Credit card		24,162		321		306		–		24,789
Other retail		56,463		393		97		165		57,118
Total loans	$	293,596	$	1,209	$	605	$	692	$	296,102

(a) At December 31, 2020, $1.4 billion of loans 30–89 days past due and $1.8 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 $428 million and $1.7 billion at December 31, 2019, respectively.

(b) Substantially all nonperforming loans at December 31, 2020 and 2019, had an associated allowance for credit losses. The Company recognized interest income on nonperforming loans of $23 million and $24 million for the years ended December 31, 2020 and 2019, respectively, compared to what would have been recognized at the original contractual terms of the loans of $45 million and $43 million, respectively.

At December 31, 2020, total nonperforming assets held by the company were $1.3 billion, compared with $829 million at December 31, 2019. Total nonperforming assets included $1.2 billion of nonperforming loans, $24 million of OREO and $50 million of other nonperforming assets owned by the Company at December 31, 2020, compared with $692 million, $78 million and $59 million, respectively at December 31, 2019.

At December 31, 2020, the amount of foreclosed residential real estate held by the Company, and included in OREO, was $23 million, compared with $74 million at December 31, 2019. These amounts excluded $33 million and $155 million at December 31, 2020 and 2019, 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, 2020 and 2019, was $1.0 billion and $1.5 billion, respectively, of which $812 million and $1.2 billion, respectively, 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 following table provides a summary of loans by portfolio class and the Company’s internal credit quality rating:

	December 31, 2020										December 31, 2019
			Criticized										Criticized
(Dollars in Millions)	Pass		Special Mention		Classified(a)		Total Criticized		Total		Pass		Special Mention		Classified(a)		Total Criticized		Total
Commercial
Originated in 2020	$	34,557	$	1,335	$	1,753	$	3,088	$	37,645	$	–	$	–	$	–	$	–	$	–
Originated in 2019		17,867		269		349		618		18,485		33,550		174		222		396		33,946
Originated in 2018		12,349		351		176		527		12,876		21,394		420		136		556		21,950
Originated in 2017		5,257		117		270		387		5,644		10,464		165		97		262		10,726
Originated in 2016		2,070		81		26		107		2,177		4,984		10		37		47		5,031
Originated prior to 2016		2,884		47		89		136		3,020		5,151		86		96		182		5,333
Revolving		22,445		299		280		579		23,024		26,307		292		278		570		26,877
Total commercial		97,429		2,499		2,943		5,442		102,871		101,850		1,147		866		2,013		103,863
Commercial real estate
Originated in 2020		9,446		461		1,137		1,598		11,044		–		–		–		–		–
Originated in 2019		9,514		454		1,005		1,459		10,973		12,976		108		108		216		13,192
Originated in 2018		6,053		411		639		1,050		7,103		9,455		71		56		127		9,582
Originated in 2017		2,650		198		340		538		3,188		5,863		99		64		163		6,026
Originated in 2016		2,005		132		140		272		2,277		3,706		117		60		177		3,883
Originated prior to 2016		2,757		108		169		277		3,034		4,907		78		101		179		5,086
Revolving		1,445		9		238		247		1,692		1,965		11		1		12		1,977
Total commercial real estate		33,870		1,773		3,668		5,441		39,311		38,872		484		390		874		39,746
Residential mortgages(b)
Originated in 2020		23,262		1		3		4		23,266		–		–		–		–		–
Originated in 2019		13,969		1		17		18		13,987		18,819		2		1		3		18,822
Originated in 2018		5,670		1		22		23		5,693		9,204		–		11		11		9,215
Originated in 2017		6,918		1		24		25		6,943		9,605		–		21		21		9,626
Originated in 2016		8,487		2		32		34		8,521		11,378		–		29		29		11,407
Originated prior to 2016		17,434		–		310		310		17,744		21,168		–		348		348		21,516
Revolving		1		–		–		–		1		–		–		–		–		–
Total residential mortgages		75,741		6		408		414		76,155		70,174		2		410		412		70,586
Credit card(c)		22,149		–		197		197		22,346		24,483		–		306		306		24,789
Other retail
Originated in 2020		17,589		–		7		7		17,596		–		–		–		–		–
Originated in 2019		11,605		–		23		23		11,628		15,907		–		11		11		15,918
Originated in 2018		6,814		–		27		27		6,841		10,131		–		23		23		10,154
Originated in 2017		3,879		–		22		22		3,901		7,907		–		28		28		7,935
Originated in 2016		1,825		–		11		11		1,836		3,679		–		20		20		3,699
Originated prior to 2016		1,906		–		18		18		1,924		3,274		–		28		28		3,302
Revolving		12,647		–		110		110		12,757		15,509		10		138		148		15,657
Revolving converted to term		503		–		38		38		541		418		–		35		35		453
Total other retail		56,768		–		256		256		57,024		56,825		10		283		293		57,118
Total loans	$	285,957	$	4,278	$	7,472	$	11,750	$	297,707	$	292,204	$	1,643	$	2,255	$	3,898	$	296,102
Total outstanding commitments	$	627,606	$	8,772	$	9,374	$	18,146	$	645,752	$	619,224	$	2,451	$	2,873	$	5,324	$	624,548

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

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

(b) At December 31, 2020, $1.8 billion of GNMA loans 90 days or more past due and $1.4 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, 2019, respectively.

(c) All credit card loans are considered revolving loans.

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. The following table provides a summary of loans modified as TDRs 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
2020
Commercial		3,423	$	628	$	493
Commercial real estate		149		262		218
Residential mortgages		1,176		402		401
Credit card		23,549		135		136
Other retail		4,027		117		114
Total loans, excluding loans purchased from GNMA mortgage pools		32,324		1,544		1,362
Loans purchased from GNMA mortgage pools		4,630		667		659
Total loans		36,954	$	2,211	$	2,021
2019
Commercial		3,445	$	376	$	359
Commercial real estate		136		129		125
Residential mortgages		417		55		54
Credit card		34,247		185		186
Other retail		2,952		63		61
Total loans, excluding loans purchased from GNMA mortgage pools		41,197		808		785
Loans purchased from GNMA mortgage pools		6,257		856		827
Total loans		47,454	$	1,664	$	1,612
2018
Commercial		2,824	$	336	$	311
Commercial real estate		127		168		169
Residential mortgages		526		73		69
Credit card		33,318		169		171
Other retail		2,462		58		55
Covered Loans		3		1		1
Total loans, excluding loans purchased from GNMA mortgage pools		39,260		805		776
Loans purchased from GNMA mortgage pools		6,268		821		803
Total loans		45,528	$	1,626	$	1,579

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.  At December 31, 2020, 44 residential mortgages, 9 home equity and second mortgage loans and 423 loans purchased from GNMA mortgage pools with outstanding balances of $12 million, less than $1 million and

$64 million, respectively, were in a trial period and have estimated post-modification balances of $13 million, less than $1 million and $65 million, respectively, assuming permanent modification occurs at the end of the trial period.

Loan modifications or concessions granted to borrowers resulting directly from the effects of the COVID-19 pandemic, who were otherwise in current payment status, are generally not considered to be TDRs. As of December 31, 2020, approximately $10.1 billion of loan modifications included on the Company’s consolidated balance sheet related to borrowers impacted by the COVID-19 pandemic, consisting primarily of payment deferrals.

The following table provides a summary of TDR 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 TDRs within 12 months previous to default:

(Dollars in Millions)	Number of Loans		Amount Defaulted
2020
Commercial		1,148	$	80
Commercial real estate		50		30
Residential mortgages		38		5
Credit card		6,688		35
Other retail		307		4
Total loans, excluding loans purchased from GNMA mortgage pools		8,231		154
Loans purchased from GNMA mortgage pools		498		66
Total loans		8,729	$	220
2019
Commercial		1,040	$	46
Commercial real estate		36		24
Residential mortgages		137		15
Credit card		8,273		40
Other retail		380		10
Total loans, excluding loans purchased from GNMA mortgage pools		9,866		135
Loans purchased from GNMA mortgage pools		997		131
Total loans		10,863	$	266
2018
Commercial		836	$	71
Commercial real estate		39		15
Residential mortgages		191		18
Credit card		8,012		35
Other retail		334		5
Covered loans		1		–
Total loans, excluding loans purchased from GNMA mortgage pools		9,413		144
Loans purchased from GNMA mortgage pools		1,447		187
Total loans		10,860	$	331

In addition to the defaults in the table above, the Company had a total of 115 residential mortgage loans, home equity and second mortgage loans and loans purchased from GNMA mortgage pools for the year ended December 31, 2020, 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 $14 million for the year ended December 31, 2020.

As of December 31, 2020, the Company had $128 million of commitments to lend additional funds to borrowers whose terms of their outstanding owed balances have been modified in TDRs.