Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2021

Receivables [Abstract]

Loans and Allowance for Credit Losses

  NOTE 6   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)	2021		2020
Commercial
Commercial	$	106,912	$	97,315
Lease financing		5,111		5,556
Total commercial		112,023		102,871
Commercial Real Estate
Commercial mortgages		28,757		28,472
Construction and development		10,296		10,839
Total commercial real estate		39,053		39,311
Residential Mortgages
Residential mortgages		67,546		66,525
Home equity loans, first liens		8,947		9,630
Total residential mortgages		76,493		76,155
Credit Card		22,500		22,346
Other Retail
Retail leasing		7,256		8,150
Home equity and second mortgages		10,446		12,472
Revolving credit		2,750		2,688
Installment		16,514		13,823
Automobile		24,866		19,722
Student		127		169
Total other retail		61,959		57,024
Total loans	$	312,028	$	297,707

The Company had loans of $92.1 billion at December 31, 2021, and $96.1 billion at December 31, 2020, pledged at the Federal Home Loan Bank, and loans of $76.9 billion at December 31, 2021, and $67.8 billion at December 31, 2020, 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 $475 million at December 31, 2021 and $763 million at December 31, 2020. 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 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, 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
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 loan charge-offs (recoveries)		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 loan charge-offs (recoveries)		285			14			3			893			259			1,454
Balance at December 31, 2019	$	1,484		$	799		$	433		$	1,128		$	647		$	4,491

(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 decrease in the allowance for credit losses from December 31, 2020 to December 31, 2021 reflected factors affecting economic conditions during 2021, including the enactment of additional benefits from government stimulus programs and broad vaccine availability in the United States that has reduced the risks associated with COVID-19, contributing to an economic recovery. However, economic uncertainty remains associated with supply chain concerns, rising inflationary concerns and additional virus variants.

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, 2021
Commercial	$	111,270	$	530	$	49	$	174	$	112,023
Commercial real estate		38,678		80		11		284		39,053
Residential mortgages(a)		75,962		124		181		226		76,493
Credit card		22,142		193		165		–		22,500
Other retail		61,468		275		66		150		61,959
Total loans	$	309,520	$	1,202	$	472	$	834	$	312,028
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

(a) At December 31, 2021, $791 million of loans 30–89 days past due and $1.5 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 $1.4 billion and $1.8 billion at December 31, 2020, respectively.

(b) Substantially all nonperforming loans at December 31, 2021 and 2020, had an associated allowance for credit losses. The Company recognized interest income on nonperforming loans of $16 million and $23 million for the years ended December 31, 2021 and 2020, respectively, compared to what would have been recognized at the original contractual terms of the loans of $34 million and $45 million, respectively.

At December 31, 2021, total nonperforming assets held by the Company were $878 million, compared with $1.3 billion at December 31, 2020. Total nonperforming assets included $834 million of nonperforming loans, $22 million of OREO and $22 million of other nonperforming assets owned by the Company at December 31, 2021, compared with $1.2 billion, $24 million and $50 million, respectively at December 31, 2020.

At December 31, 2021, the amount of foreclosed residential real estate held by the Company, and included in OREO, was $22 million, compared with $23 million at December 31, 2020. These amounts excluded $22 million and $33 million at December 31, 2021 and December 31, 2020, 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, 2021 and December 31, 2020, was $696 million and $1.0 billion, respectively, of which $555 million and $812 million, 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, 2021										December 31, 2020
			Criticized										Criticized
(Dollars in Millions)	Pass		Special Mention		Classified(a)		Total Criticized		Total		Pass		Special Mention		Classified(a)		Total Criticized		Total
Commercial
Originated in 2021	$	51,155	$	387	$	287	$	674	$	51,829	$	–	$	–	$	–	$	–	$	–
Originated in 2020		14,091		304		133		437		14,528		34,557		1,335		1,753		3,088		37,645
Originated in 2019		10,159		151		54		205		10,364		17,867		269		349		618		18,485
Originated in 2018		5,122		3		36		39		5,161		12,349		351		176		527		12,876
Originated in 2017		2,149		2		38		40		2,189		5,257		117		270		387		5,644
Originated prior to 2017		2,774		28		43		71		2,845		4,954		128		115		243		5,197
Revolving		24,722		268		117		385		25,107		22,445		299		280		579		23,024
Total commercial		110,172		1,143		708		1,851		112,023		97,429		2,499		2,943		5,442		102,871
Commercial real estate
Originated in 2021		13,364		6		990		996		14,360		–		–		–		–		–
Originated in 2020		7,459		198		263		461		7,920		9,446		461		1,137		1,598		11,044
Originated in 2019		6,368		251		610		861		7,229		9,514		454		1,005		1,459		10,973
Originated in 2018		2,996		29		229		258		3,254		6,053		411		639		1,050		7,103
Originated in 2017		1,662		38		113		151		1,813		2,650		198		340		538		3,188
Originated prior to 2017		2,811		17		111		128		2,939		4,762		240		309		549		5,311
Revolving		1,494		1		43		44		1,538		1,445		9		238		247		1,692
Total commercial real estate		36,154		540		2,359		2,899		39,053		33,870		1,773		3,668		5,441		39,311
Residential mortgages(b)
Originated in 2021		29,882		–		3		3		29,885		–		–		–		–		–
Originated in 2020		15,948		1		8		9		15,957		23,262		1		3		4		23,266
Originated in 2019		6,938		–		36		36		6,974		13,969		1		17		18		13,987
Originated in 2018		2,889		–		30		30		2,919		5,670		1		22		23		5,693
Originated in 2017		3,796		–		30		30		3,826		6,918		1		24		25		6,943
Originated prior to 2017		16,619		–		312		312		16,931		25,921		2		342		344		26,265
Revolving		1		–		–		–		1		1		–		–		–		1
Total residential mortgages		76,073		1		419		420		76,493		75,741		6		408		414		76,155
Credit card(c)		22,335		–		165		165		22,500		22,149		–		197		197		22,346
Other retail
Originated in 2021		22,455		–		6		6		22,461		–		–		–		–		–
Originated in 2020		12,071		–		9		9		12,080		17,589		–		7		7		17,596
Originated in 2019		7,223		–		17		17		7,240		11,605		–		23		23		11,628
Originated in 2018		3,285		–		14		14		3,299		6,814		–		27		27		6,841
Originated in 2017		1,726		–		9		9		1,735		3,879		–		22		22		3,901
Originated prior to 2017		1,973		–		15		15		1,988		3,731		–		29		29		3,760
Revolving		12,532		–		112		112		12,644		12,647		–		110		110		12,757
Revolving converted to term		472		–		40		40		512		503		–		38		38		541
Total other retail		61,737		–		222		222		61,959		56,768		–		256		256		57,024
Total loans	$	306,471	$	1,684	$	3,873	$	5,557	$	312,028	$	285,957	$	4,278	$	7,472	$	11,750	$	297,707
Total outstanding commitments	$	662,363	$	3,372	$	5,684	$	9,056	$	671,419	$	627,606	$	8,772	$	9,374	$	18,146	$	645,752

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

(b) At December 31, 2021, $1.5 billion of GNMA loans 90 days or more past due and $1.1 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 $1.8 billion and $1.4 billion at December 31, 2020, 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
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
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

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, 2021, 7 residential mortgages, 2 home equity and second mortgage loans and 34 loans purchased from GNMA mortgage pools with outstanding balances of $1 million, less than $1 million and $4 million, respectively, were in a trial period and have estimated post-modification balances of $1 million, less than $1 million and $5 million, respectively, assuming permanent modification occurs at the end of the trial period.​​​​​​​

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
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
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

In addition to the defaults in the table above, the Company had a total of 17 residential mortgage loans, home equity and second mortgage loans and loans purchased from GNMA mortgage pools for the year ended December 31, 2021, 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 $2 million for the year ended December 31, 2021.

As of December 31, 2021, the Company had $132 million of commitments to lend additional funds to borrowers whose terms of their outstanding owed balances have been modified in TDRs.