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Allowance for Credit Losses on Loans and Leases
 12 Months Ended
Dec. 31, 2020
Receivables [Abstract]  
Allowance for Credit Losses on Loans and Leases ALLOWANCE FOR CREDIT LOSSES ON LOANS AND LEASESBeginning January 1, 2020, the former incurred loss method was replaced with the CECL method to calculate 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 6.1 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 6.1
(in millions)Balance at
Beginning
of Year		Charge-
Offs		RecoveriesNet
Charge-
Offs		Provision
for Credit
Losses		ASC 326 Adoption ImpactInitial ACL on PCD LoansBalance at
End of
Year
Year Ended December 31, 2020
Commercial real estate$60 $(31)$7 $(24)$67 $38 $40 $181 
Commercial and industrial53 (32)7 (25)41 8 4 81 
Commercial leases11 (1)— (1)7 — — 17 
Other9 (4)1 (3)4 (9)— 1 
Total commercial loans and leases133 (68)15 (53)119 37 44 280 
Direct installment13 (1)1 — 2 10 1 26 
Residential mortgages22 (2)1 (1)3 6 4 34 
Indirect installment19 (8)4 (4)(6)2 — 11 
Consumer lines of credit9 (2)— (2)4 — 1 12 
Total consumer loans63 (13)6 (7)3 18 6 83 
Total allowance for credit losses on loans and leases$196 $(81)$21 $(60)$122 $55 $50 $363 
Allowance for unfunded loan commitments3 — — — 1 10 — 14 
Total allowance for credit losses on loans and leases and allowance for unfunded loan commitments$199 $(81)$21 $(60)$123 $65 $50 $377 

Following is a summary of changes in the AULC by portfolio segment:
TABLE 6.2
Year Ended December 312020
(in millions)
Balance at beginning of period$3 
Provision for unfunded loan commitments and letters of credit:
Commercial portfolio1 
Consumer portfolio— 
ASC 326 adoption impact:
Commercial portfolio8 
Consumer portfolio2 
Balance at end of period$14 
This expected loss model takes into consideration the expected credit losses over the expected life of the loan compared to 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 a Day 1 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 on the ACL

Beginning 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 utilized a third-party pandemic recessionary scenario through September 30, 2020 for ACL modeling purposes. For December 31, 2020, we utilized a third-party consensus macroeconomic forecast due to the improving macroeconomic environment. This scenario captures forecasted macroeconomic variables as of mid-December 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 for our ACL calculation as of December 31, 2020 included but were not limited to: (i) gross domestic product, which reflects growth of 4% in 2021, (ii) the Dow Jones Total Stock Market Index, which grows steadily throughout the R&S forecast period, (iii) unemployment, which steadily declines and averages 6% over the R&S forecast period and (iv) the Volatility Index, which remains stable over the R&S.
The ACL of $363.1 million at December 31, 2020 increased $167.2 million, or 85.4%, from December 31, 2019 and reflects the Day 1 CECL adoption increase to the ACL of $105.3 million on January 1, 2020. The additional increase was primarily attributed to qualitative adjustments such as economic modeling uncertainty given the COVID-related environment and loan deferral activity as prescribed in the CARES Act and by the banking regulators. Our ending ACL coverage ratio at December 31, 2020 was 1.43%. Total provision for credit losses for the year ended December 31, 2020 was $122.8 million. Net charge-offs were $59.8 million during 2020, compared to $28.3 million during 2019, with the increase primarily due to commercial charge-offs within portfolios and industries most impacted by COVID-19 such as retail or hospitality-related commercial real estate. While elevated from 2019, net charge-offs of 24 basis points of average loans for 2020 remained at historically reasonable levels.
Following is a summary of changes in the ACL, by loan and lease class:

TABLE 6.3
(in millions)Balance at
Beginning of
Period		Charge-
Offs		RecoveriesNet
Charge-
Offs		Provision
for Credit
Losses		Balance at
End of
Period
Year Ended December 31, 2019
Commercial real estate$55 $(4)$4 $— $5 $60 
Commercial and industrial49 (10)4 (6)10 53 
Commercial leases8 — — — 3 11 
Other2 (3)— (3)3 2 
Total commercial loans and leases114 (17)8 (9)21 126 
Direct installment14 (1)— (1)— 13 
Residential mortgages20 (2)— (2)4 22 
Indirect installment15 (11)4 (7)11 19 
Consumer lines of credit10 (2)— (2)1 9 
Total consumer loans59 (16)4 (12)16 63 
Total allowance on originated loans and leases173 (33)12 (21)37 189 
Loans acquired in a business combination7 (9)2 (7)7 7 
Total allowance for credit losses$180 $(42)$14 $(28)$44 $196 
Year Ended December 31, 2018
Commercial real estate$50 $(7)$3 $(4)$9 $55 
Commercial and industrial52 (20)2 (18)15 49 
Commercial leases5 (3)— (3)6 8 
Other2 (4)— (4)4 2 
Total commercial loans and leases109 (34)5 (29)34 114 
Direct installment21 (17)2 (15)8 14 
Residential mortgages16 — — — 4 20 
Indirect installment12 (9)4 (5)8 15 
Consumer lines of credit10 (3)— (3)3 10 
Total consumer loans59 (29)6 (23)23 59 
Total allowance on originated loans and leases168 (63)11 (52)57 173 
Loans acquired in a business combination7 (7)3 (4)4 7 
Total allowance for credit losses$175 $(70)$14 $(56)$61 $180 
Following is a summary of the individual and collective ACL and corresponding loan and lease balances by class:
TABLE 6.4
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.