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ALLOWANCE FOR CREDIT LOSSES
 6 Months Ended
Jun. 30, 2020
Receivables [Abstract]  
ALLOWANCE FOR CREDIT LOSSES ALLOWANCE FOR CREDIT LOSSESBeginning January 1, 2020, the former incurred loss method was replaced with the CECL method to calculate the estimated loan loss. The ACL addresses credit losses expected in the existing loan and lease portfolio and is presented as a reserve against loans and leases on the Consolidated Balance Sheets. Loan and lease losses are charged off against the ACL, with recoveries of amounts previously charged off credited to the ACL. Provisions for credit losses are charged to operations based on management’s periodic evaluation of the appropriate level of the ACL. Included in Table 5.1 is the impact to the ACL from our CECL (ASC 326) adoption on January 1, 2020. All prior periods are presented using the incurred loss method which was the accounting method in place at the time of the respective financial statements.
Following is a summary of changes in the ACL, by loan and lease class:
TABLE 5.1

(in millions)Balance at
Beginning of
Period		Charge-
Offs		RecoveriesNet
Charge-
Offs		Provision for Credit LossesBalance at
End of
Period
Three Months Ended June 30, 2020
Commercial real estate$152  $(3) $1  $(2) $13  $163  
Commercial and industrial88  (4) 1  (3) 13  98  
Commercial leases13  —  —  —  4  17  
Other1  (1) —  (1) 1  1  
Total commercial loans and leases254  (8) 2  (6) 31  279  
Direct installment26  —  —  —  (1) 25  
Residential mortgages31  —  —  —  2  33  
Indirect installment21  (2) 1  (1) (3) 17  
Consumer lines of credit11  (1) —  (1) 1  11  
Total consumer loans89  (3) 1  (2) (1) 86  
Total allowance for credit losses on loans and leases$343  $(11) $3  $(8) $30  $365  

(in millions)Balance at
Beginning of
Period		Charge-
Offs		RecoveriesNet
Charge-
Offs		Provision for Credit LossesASC 326 Adoption ImpactInitial ACL on PCD LoansBalance at
End of
Period
Six Months Ended June 30, 2020
Commercial real estate$60  $(5) $5  $—  $25  $38  $40  $163  
Commercial and industrial53  (8) 2  (6) 39  8  4  98  
Commercial leases11  —  —  —  6  —  —  17  
Other9  (2) (2) 3  (9) —  1  
Total commercial loans and leases133  (15) 7  (8) 73  37  44  279  
Direct installment13  (1) —  (1) 2  10  1  25  
Residential mortgages22  —  —  —  1  6  4  33  
Indirect installment19  (5) 2  (3) (1) 2  —  17  
Consumer lines of credit9  (2) —  (2) 3  —  1  11  
Total consumer loans63  (8) 2  (6) 5  18  6  86  
Total allowance on loans and leases$196  $(23) $9  $(14) $78  $55  $50  $365  

This expected loss model takes into consideration the expected losses over the life of the loan at the time the loan is originated versus the incurred loss model under the prior standard. At the time of CECL adoption, we recorded a one-time cumulative-effect adjustment of $50.6 million as a reduction to Retained Earnings. The ACL balance increased by $105 million and included a “gross-up" to PCI loan balances and the ACL of $50 million. Included in the CECL adoption impact was an increase to our AULC of $10 million. The model used to calculate the ACL is dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates. Specifically, the following considerations are incorporated into the ACL calculation:
•a third-party macroeconomic forecast scenario;
•a 24-month R&S forecast period for macroeconomic factors with a reversion to the historical mean on a straight-line basis over a 12-month period; and
•the historical through the cycle mean was calculated using an expanded period to include a prior recessionary period.
COVID-19 Impacts
Starting in March 2020, the broader economy experienced a significant deterioration in the macroeconomic environment driven by the COVID-19 pandemic resulting in notable adverse changes to forecasted economic variables utilized in our ACL modeling process. Based on these changes, we are utilizing a third-party recessionary macroeconomic forecast scenario for ACL modeling purposes. This scenario captures forecasted macroeconomic variables as of June 11, 2020 to ensure our ACL calculation considers the most recently available macroeconomic data in a quickly evolving environment at quarter-end. Macroeconomic variables that we utilized from this scenario include but are not limited to: (i) GDP, which reflects a contraction of up to 12.0% from the beginning of 2020 with average annual increases not occurring until mid-2021, (ii) the Dow Jones Industrial Average, which remains below peak levels throughout the R&S forecast period, (iii) unemployment, which averages 11% over the R&S forecast period and (iv) the Volatility Index, which remains elevated in 2020 before declining to pre-pandemic levels in 2021.

The ACL of $365.0 million at June 30, 2020 increased $169.1 million, or 86.3%, from December 31, 2019 and reflects the Day 1 CECL adoption increase to the ACL of $105.3 million on January 1, 2020. Our ending ACL coverage ratio at June 30, 2020 was 1.40%. Total provision for credit losses for the three months ended June 30, 2020 was $30.2 million and included an estimated $17.1 million of incremental provision due to the COVID-19 related impacts on our ACL modeling results. Net charge-offs were $8.5 million during the three months ended June 30, 2020, compared to $9.0 million during the three months ended June 30, 2019, with the decrease primarily due to lower consumer charge-offs. Total provision for credit losses for the six months ended June 30, 2020 was $78.0 million and included an estimated $55.0 million of incremental provision due to the COVID-19 related impacts on our ACL modeling results. Net charge-offs were $14.2 million during the six months ended June 30, 2020, compared to $16.6 million during the six months ended June 30, 2019, with the decrease primarily due to higher commercial recoveries in the current period.
Following is a summary of changes in the ACL, by loan and lease class:

TABLE 5.2
(in millions)Balance at
Beginning of
Period		Charge-
Offs		RecoveriesNet
Charge-
Offs		Provision
for Credit
Losses		Balance at
End of
Period
Three Months Ended June 30, 2019
Commercial real estate$57  $(1) $1  $—  $4  $61  
Commercial and industrial52  (3) 1  (2) 2  52  
Commercial leases8  —  —  —  1  9  
Other2  (1) —  (1) —  1  
Total commercial loans and leases119  (5) 2  (3) 7  123  
Direct installment12  —  —  —  1  13  
Residential mortgages19  (1) —  (1) 2  20  
Indirect installment17  (2) 1  (1) 2  18  
Consumer lines of credit10  (1) —  (1) —  9  
Total consumer loans58  (4) 1  (3) 5  60  
Total allowance for credit losses on originated loans and leases177  (9) 3  (6) 12  183  
Purchased credit-impaired loans1  —  —  —  —  1  
Other acquired loans8  (4) 1  (3) (1) 4  
Total allowance for credit losses on acquired loans9  (4) 1  (3) (1) 5  
Total allowance for credit losses$186  $(13) $4  $(9) $11  $188  
Six Months Ended June 30, 2019
Commercial real estate$55  $(2) $1  $(1) $7  $61  
Commercial and industrial49  (4) 2  (2) 5  52  
Commercial leases8  —  —  —  1  9  
Other2  (2) —  (2) 1  1  
Total commercial loans and leases114  (8) 3  (5) 14  123  
Direct installment14  (1) —  (1) —  13  
Residential mortgages20  (1) —  (1) 1  20  
Indirect installment15  (5) 2  (3) 6  18  
Consumer lines of credit10  (1) —  (1) —  9  
Total consumer loans59  (8) 2  (6) 7  60  
Total allowance on originated loans and leases173  (16) 5  (11) 21  183  
Purchased credit-impaired loans1  —  —  —  —  1  
Other loans acquired in a business combination6  (7) 1  (6) 4  4  
Total allowance on loans acquired in a business combination7  (7) 1  (6) 4  5  
Total allowance for credit losses$180  $(23) $6  $(17) $25  $188  
Following is a summary of the individual and collective ACL and corresponding loan and lease balances by class:
TABLE 5.3
 Allowance for Credit LossesLoans and Leases Outstanding
(in millions)Individually
Evaluated for
Impairment		Collectively
Evaluated for
Impairment		Loans and
Leases		Individually
Evaluated for
Impairment		Collectively
Evaluated for
Impairment
December 31, 2019
Commercial real estate$2  $58  $7,114  $13  $7,101  
Commercial and industrial2  51  5,063  17  5,046  
Commercial leases—  11  432  —  432  
Other—  2  21  —  21  
Total commercial loans and leases4  122  12,630  30  12,600  
Direct installment—  13  1,758  —  1,758  
Residential mortgages—  22  2,995  —  2,995  
Indirect installment—  19  1,922  —  1,922  
Consumer lines of credit—  9  1,092  —  1,092  
Total consumer loans—  63  7,767  —  7,767  
Total$4  $185  $20,397  $30  $20,367  

The above table excludes loans acquired in a business combination that were pooled into groups of loans for evaluating impairment.