NEW ACCOUNTING STANDARDS (Tables)

9 Months Ended

Sep. 30, 2020

Accounting Changes and Error Corrections [Abstract]

Schedule of New Accounting Pronouncements and Changes in Accounting Principles

The following table illustrates the impact of the adoption of ASC 326:

TABLE 1.1

	January 1, 2020
(in millions)	As Reported Under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Assets:
Allowance for credit losses on debt securities held-to-maturity
States of the U.S. and political subdivisions (municipals)	$	—	$	—	$	—
Loans
Commercial real estate	$	138	$	60	$	78
Commercial and industrial	65		53		12
Commercial leases	11		11		—
Commercial other	—		9		(9)
Direct installment	24		13		11
Residential mortgages	32		22		10
Indirect installment	21		19		2
Consumer lines of credit	10		9		1
Allowance for credit losses on loans	$	301	$	196	$	105
Liabilities:
Allowance for credit losses on off-balance sheet credit exposures	$	13	$	3	$	10

The following table summarizes accounting pronouncements issued by the FASB that we recently adopted.

TABLE 2.1

Standard	Description	Financial Statements Impact
Credit Losses
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments ASU 2019-05, Financial Instruments-Credit Losses, (Topic 326): Targeted Transition Relief ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses	These Updates replace the current long-standing incurred loss impairment methodology with a methodology that reflects current expected credit losses (commonly referred to as CECL) for most financial assets measured at amortized cost and certain other instruments, including loans, HTM debt securities, net investments in leases and off-balance sheet credit exposures except for unconditionally cancellable commitments. CECL requires loss estimates for the remaining life of the financial asset at the time the asset is originated or acquired, considering historical experience, current conditions and reasonable and supportable forecasts. In addition, the Update will require the use of a modified AFS debt security impairment model and eliminate the current accounting for PCI loans and debt securities.	On January 1, 2020, we adopted CECL using the modified retrospective method for financial assets measured at amortized cost, net investments in leases and off-balance sheet credit exposures. While these Updates change the measurement of the ACL, it does not change the credit risk of our lending portfolios or the ultimate losses in those portfolios. However, the CECL ACL methodology will produce higher volatility in the quarterly provision for credit losses than our prior reserve process. We created a cross-functional management steering group to govern implementation and the Audit and Risk Committees and the Board of Directors received regular updates. For financial assets measured at amortized cost we have implemented a new modeling platform and integrated other auxiliary models to support a calculation of expected credit losses under CECL. We have made decisions on segmentation, a reasonable and supportable forecast period, a reversion method and period and a historical loss forecast covering the remaining contractual life, adjusted for prepayments as well as other criteria. Based on our portfolio composition and forecasts of relatively stable macroeconomic conditions over the next two years at the adoption date, we recorded an overall ACL of $301 million. This reflected an increase on the originated portfolio of $55 million, primarily driven by our longer duration commercial and consumer real estate loans and a "gross-up" for PCI loans of $50 million. There is no capital impact related to the PCI loans at adoption. The impact for the adoption of CECL was a reduction to retained earnings of $51 million, which included a $10 million increase to the AULC. The impact upon adoption was dependent on the portfolio composition and credit quality, as well as historical experience, current conditions and forecasts of economic conditions and interest rates at the time of adoption. The impact to our AFS and HTM debt securities was immaterial. Model development, as well as the development of policies and procedures and, internal controls were complete at the time of adoption.