The allowance recorded for credit losses utilizes forward-looking expected loss models to consider a variety of factors affecting lifetime credit losses. These factors include, but are not limited to, macroeconomic variables such as unemployment rates, real estate prices, gross domestic product levels, inflation, interest rates and corporate bonds spreads, as well as loan and borrower characteristics, such as internal risk ratings on commercial loans and consumer credit scores, delinquency status, collateral type and available valuation information, consideration of end-of-term losses on lease residuals, and the remaining term of the loan, adjusted for expected prepayments. For each loan portfolio, including those loans modified under various loan modification programs, model estimates are adjusted as necessary to consider any relevant changes in portfolio composition, lending policies, underwriting standards, risk management practices, economic conditions or other factors that would affect the accuracy of the model. Expected credit loss estimates also include consideration of expected cash recoveries on loans previously charged-off or expected recoveries on collateral dependent loans where recovery is expected through sale of the collateral at fair value less selling costs. Where loans do not exhibit similar risk characteristics, an individual analysis is performed to consider expected credit losses. The allowance recorded for individually evaluated loans greater than $

million in the commercial lending segment is based on an 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 as appropriate. For smaller commercial loans collectively evaluated for impairment, historical loss experience is also incorporated into the allowance methodology applied to this category of loans.

The Company’s methodology for determining the appropriate allowance for credit losses also considers the imprecision inherent in the methodologies used and allocated to the various loan portfolios. As a result, amounts determined under the methodologies described above, are adjusted by management to consider the potential impact of other qualitative factors not captured in the quantitative model adjustments which include, but are not limited to the following: model imprecision, imprecision in economic scenario assumptions, and emerging risks related to either changes in the environment that are affecting specific portfolios, or changes in portfolio concentrations over time that may affect model performance. The consideration of these items results in adjustments to allowance amounts included in the Company’s allowance for credit losses for each loan portfolio.

The Company also assesses the credit risk associated with off-balance sheet loan commitments, letters of credit, investment securities 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.

The results of the analysis are evaluated quarterly to confirm the estimates are appropriate for each specific loan portfolio, as well as the entire loan portfolio, as the entire allowance for credit losses is available for the entire loan portfolio.

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		64			24			51			294			(6	)		427
Deduct
Loans charged-off		63			123			4			215			64			469
Less recoveries of loans charged-off		(16	)		(6	)		(5	)		(40	)		(29	)		(96	)
Net loan charge-offs (recoveries)		47			117			(1	)		175			35			373
Balance at March 31, 2023		$2,180			$1,359			$947			$2,112			$925			$7,523
Balance at December 31, 2021		$1,849			$1,123			$565			$1,673			$945			$6,155
Add
Provision for credit losses		19			(54	)		29			78			40			112
Deduct
Loans charged-off		55			1			5			158			61			280
Less recoveries of loans charged-off		(23	)		(6	)		(11	)		(46	)		(32	)		(118	)
Net loan charge-offs (recoveries)		32			(5	)		(6	)		112			29			162
Balance at March 31, 2022		$1,836			$1,074			$600			$1,639			$956			$6,105

(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.

The increase in the allowance for credit losses at March 31, 2023, compared with December 31, 2022, was primarily driven by increasing economic uncertainty and normalizing credit losses.

The following table provides a summary of loans charged-off by portfolio class and year of origination:


Three Months Ended March 31, 2023 (Dollars in Millions)	Commercial		Commercial Real Estate (a)		Residential Mortgages		Credit Card		Other Retail		Total Loans

Originated in 2023		$—		$—		$—		$—		$—		$—
Originated in 2022		6		88		—		—		10		104
Originated in 2021		4		—		—		—		11		15
Originated in 2020		4		—		—		—		6		10
Originated in 2019		5		3		1		—		7		16
Originated prior to 2019		11		32		3		—		8		54
Revolving		33		—		—		215		22		270
Total charge-offs	$	63	$	123	$	4	$	215	$	64	$	469

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)	Primarily related to uncollectible amounts on acquired loans.

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 portfolio 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 charged down if unsecured by collateral 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.

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
March 31, 2023
Commercial	$	136,619		$ 457		$ 72		$ 178		$137,326
Commercial real estate		54,544		74		5		535		55,158
Residential mortgages (a)		116,411		148		97		292		116,948
Credit card		24,952		280		256		1		25,489
Other retail		52,494		254		64		133		52,945
Total loans	$	385,020		$1,213		$494		$1,139		$387,866
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 March 31, 2023, $542 million of loans 30–89 days past due and $2.2 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 March 31, 2023 and December 31, 2022, had an associated allowance for credit losses. The Company recognized interest income on nonperforming loans of $4 million and $3 million for the three months ended March 31, 2023 and 2022, respectively.

At March 31, 2023 and December 31, 2022, the amount of foreclosed residential real estate held by the Company, and included in other real estate owned (“OREO”), was $23 million. These amounts excluded $57 million and $54 million at March 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 March 31, 2023 and December 31, 2022, was $1.1 billion, of which $861 million and $830 million, respectively, related to loans 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.

The Company classifies its loan portfolio classes 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 the Company’s internal credit quality rating of loans by portfolio class and year of origination:


	March 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		$ 14,029		$ 74		$ 135		$ 209		$ 14,238		$ —		$ —		$ —		$ —		$ —
Originated in 2022		58,723		334		433		767		59,490		61,229		245		315		560		61,789
Originated in 2021		21,541		480		254		734		22,275		26,411		159		78		237		26,648
Originated in 2020		5,226		66		123		189		5,415		7,049		68		138		206		7,255
Originated in 2019		2,859		26		203		229		3,088		3,962		51		210		261		4,223
Originated prior to 2019		5,201		44		48		92		5,293		8,986		64		129		193		9,179
Revolving (b)		26,919		147		461		608		27,527		25,888		344		364		708		26,596
Total commercial		134,498		1,171		1,657		2,828		137,326		133,525		931		1,234		2,165		135,690

Commercial real estate
Originated in 2023		2,868		131		160		291		3,159		—		—		—		—		—
Originated in 2022		15,229		261		640		901		16,130		14,527		206		519		725		15,252
Originated in 2021		12,809		358		186		544		13,353		13,565		171		99		270		13,835
Originated in 2020		5,441		49		131		180		5,621		6,489		97		117		214		6,703
Originated in 2019		6,317		220		282		502		6,819		6,991		251		304		555		7,546
Originated prior to 2019		7.959		130		566		696		8,655		9,639		138		875		1,013		10,652
Revolving		1,405		—		16		16		1,421		1,489		—		10		10		1,499
Total commercial real estate		52,028		1,149		1,981		3,130		55,158		52,700		863		1,924		2,787		55,487

Residential mortgages (c)
Originated in 2023		2,581		—		—		—		2,581		—		—		—		—		—
Originated in 2022		29,297		—		6		6		29,303		28,452		—		—		—		28,452
Originated in 2021		37,494		—		10		10		37,504		39,527		—		7		7		39,534
Originated in 2020		15,832		—		10		10		15,842		16,556		—		8		8		16,564
Originated in 2019		6,832		—		16		16		6,848		7,222		—		18		18		7,240
Originated prior to 2019		24,522		—		348		348		24,870		23,658		—		397		397		24,055
Total residential mortgages		116,558		—		390		390		116,948		115,415		—		430		430		115,845

Credit card (d)		25,232		—		257		257		25,489		26,063		—		232		232		26,295

Other retail
Originated in 2023		1,958		—		—		—		1,958		—		—		—		—		—
Originated in 2022		8,903		—		6		6		8,909		9,563		—		6		6		9,569
Originated in 2021		14,208		—		12		12		14,220		15,352		—		12		12		15,364
Originated in 2020		7,083		—		10		10		7,093		7,828		—		11		11		7,839
Originated in 2019		2,886		—		10		10		2,896		3,418		—		13		13		3,431
Originated prior to 2019		3,063		—		18		18		3,081		3,689		—		31		31		3,720
Revolving		13,846		—		99		99		13,945		14,029		—		98		98		14,127
Revolving converted to term		788		—		55		55		843		800		—		46		46		846
Total other retail		52,735		—		210		210		52,945		54,679		—		217		217		54,896
Total loans		$381,051		$2,320		$4,495		$6,815		$387,866		$382,382		$ 1,794		$4,037		$5,831		$388,213
Total outstanding commitments		$778,269		$3,209		$6,240		$9,449		$787,718		$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.

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

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

(c)

At March 31, 2023, $2.2 billion of GNMA loans 90 days or more past due and $268

million 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 Company recognizes interest on modified loans if full collection of contractual principal and interest is expected. The effects of modifications on credit loss expectations, such as improved payment capacity, longer expected lives and other factors, are considered when measuring the allowance for credit losses. Modification performance, including redefault rates and how these compare to historical losses, are also considered. Modifications generally do not result in significant changes to the Company’s allowance for credit losses.

The following table provides a summary of loan balances at March 31, 2023, which were modified during the three months ended March 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	$	114	$	—	$	68	$	—	$	182		.1	%
Commercial real estate		—		—		12		28		40		.1
Residential mortgages (b)		—		130		10		12		152		.1
Credit card		94		—		—		—		94		.4
Other retail		2		11		63		2		78		.1
Total loans, excluding loans purchased from GNMA mortgage pools		210		141		153		42		546		.1
Loans purchased from GNMA mortgage pools (b)		—		243		63		47		353		.3

Total loans	$	210	$	384	$	216	$	89	$	899		.2	%

(a)	Includes $52 million of total loans receiving a payment delay and term extension, $32 million of total loans receiving an interest rate reduction and term extension and $5 million of total loans receiving an interest rate reduction, payment delay and term extension.

(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 March 31, 2023, the balance of loans modified in trial period arrangements during the three months ended March 31, 2023, was $183 million, while the balance of secured loans to consumer borrowers that have had debt discharged through bankruptcy during this same period was not material.

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


(Dollars in Millions)	Weighted-Average Interest Rate Reduction			Weighted-Average Months of Term Extension

Commercial		2.4	%		5
Commercial real estate		5.0			6
Residential mortgages		1.2			120
Credit card		16.0			—
Other retail		6.6			151
Loans purchased from GNMA mortgage pools		.7			66

Note: The weighted-average payment deferral for all portfolio classes was less than $1 million.

Forbearance payments are required to be paid at the end of the original term loan.

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. 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 provide an interest rate reduction.

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. These modifications 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 modification 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.

Credit card and other retail loan modifications are generally part of distinct modification 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.

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 March 31, 2023, which were modified during the three months ended March 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	$	146	$	6	$	30	$	182
Commercial real estate		6		—		34		40
Residential mortgages (a)		319		3		10		332
Credit card		56		28		10		94
Other retail		64		3		2		69

Total loans	$	591	$	40	$	86	$	717

(a)

At March 31, 2023, $32 million of loans 30-89 days past due and $1

llion 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.

As of March 31, 2023 there were no loans that defaulted (fully or partially charged-off or became 90 days or more past due) that were modified within the first three months of 2023.

As of March 31, 2023, the Company had $133 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 period presented by portfolio class:


Three Months Ended March 31, 2022 (Dollars in Millions)	Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance
Commercial		509	$	38	$	32
Commercial real estate		9		11		10
Residential mortgages		840		228		226
Credit card		9,339		50		50
Other retail		728		37		37
Total loans, excluding loans purchased from GNMA mortgage pools		11,425		364		355
Loans purchased from GNMA mortgage pools		390		55		55

Total loans		11,815	$	419	$	410

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 period presented, that were modified as troubled debt restructurings within 12 months previous to default:


Three Months Ended March 31, 2022 (Dollars in Millions)	Number of Loans		Amount Defaulted
Commercial		214	$	3
Commercial real estate		3		1
Residential mortgages		34		3
Credit card		1,634		9
Other retail		83		1
Total loans, excluding loans purchased from GNMA mortgage pools		1,968		17
Loans purchased from GNMA mortgage pools		49		8

Total loans		2,017	$	25