The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $10.3 billion and $10.5 billion at March 31, 2022 and December 31, 2021, providing full credit protection on residential mortgage loans that become severely delinquent. All of these loans are individually insured, and therefore the Corporation does not record an allowance for credit losses related to these loans.

Nonperforming Loans and Leases

Commercial nonperforming loans decreased to $1.5 billion at March 31, 2022 from $1.6 billion at December 31, 2021. Consumer nonperforming loans increased to $3.1 billion at March 31, 2022 from $3.0 billion at December 31, 2021

primarily due to loans with expired payment deferrals that were modified in TDRs during the quarter.

The following table presents the Corporation’s nonperforming loans and leases, including nonperforming TDRs, and loans accruing past due 90 days or more at March 31, 2022 and December 31, 2021. Nonperforming loans held-for-sale (LHFS) are excluded from nonperforming loans and leases as they are recorded at either fair value or the lower of cost or fair value. For more information on the criteria for classification as nonperforming, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2021 Annual Report on Form 10-K.



Credit Quality


	Nonperforming Loans and Leases						Accruing Past Due 90 Days or More

(Dollars in millions)	March 31 2022			December 31 2021			March 31 2022			December 31 2021
Residential mortgage (1)	$	2,422		$	2,284		$	574		$	634
With no related allowance (2)	1,840			1,950			—			—
Home equity (1)	615			630			—			—
With no related allowance (2)	375			414			—			—
Credit Card	n/a			n/a			492			487
Direct/indirect consumer	67			75			11			11

Total consumer	3,104			2,989			1,077			1,132
U.S. commercial	818			825			195			171
Non-U.S. commercial	268			268			49			19
Commercial real estate	361			382			17			40
Commercial lease financing	54			80			14			8
U.S. small business commercial	20			23			321			87
Total commercial	1,521			1,578			596			325
Total nonperforming loans	$	4,625		$	4,567		$	1,673		$	1,457
Percentage of outstanding loans and leases	0.47		%	0.47		%	0.17		%	0.15		%

(1)Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At March 31, 2022 and December 31, 2021 residential mortgage includes $468 million and $444 million of loans on which interest had been curtailed by the Federal Housing Administration (FHA), and therefore were no longer accruing interest, although principal was still insured, and $106 million and $190 million of loans on which interest was still accruing.

(2)Primarily relates to loans for which the estimated fair value of the underlying collateral less any costs to sell is greater than the amortized cost of the loans as of the reporting date.

n/a = not applicable

Credit Quality Indicators

The Corporation monitors credit quality within its Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments based on primary credit quality indicators. For more information on the portfolio segments, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2021 Annual Report on Form 10-K. Within the Consumer Real Estate portfolio segment, the primary credit quality indicators are refreshed loan-to-value (LTV) and refreshed Fair Isaac Corporation (FICO) score. Refreshed LTV measures the carrying value of the loan as a percentage of the value of the property securing the loan, refreshed quarterly. Home equity loans are evaluated using combined loan-to-value (CLTV), which measures the carrying value of the Corporation’s loan and available line of credit combined with any outstanding senior liens against the property as a percentage of the value of the property securing the loan, refreshed quarterly. FICO score measures the creditworthiness of the borrower based on the financial obligations of the borrower and the borrower’s credit history. FICO scores are typically refreshed quarterly or more frequently. Certain borrowers (e.g., borrowers that have had debts discharged in a bankruptcy proceeding) may not have their FICO scores updated.

FICO scores are also a primary credit quality indicator for the Credit Card and Other Consumer portfolio segment and the business card portfolio within U.S. small business commercial. Within the Commercial portfolio segment, loans are evaluated using the internal classifications of pass rated or reservable criticized as the primary credit quality indicators. The term reservable criticized refers to those commercial loans that are internally classified or listed by the Corporation as Special Mention, Substandard or Doubtful, which are asset quality categories defined by regulatory authorities. These assets have an elevated level of risk and may have a high probability of default or total loss. Pass rated refers to all loans not considered reservable criticized. In addition to these primary credit quality indicators, the Corporation uses other credit quality indicators for certain types of loans.

The following tables present certain credit quality indicators for the Corporation's Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments by class of financing receivables and year of origination for term loan balances at March 31, 2022, including revolving loans that converted to term loans without an additional credit decision after origination or through a TDR.



Residential Mortgage – Credit Quality Indicators By Vintage

















			Term Loans by Origination Year
(Dollars in millions)	Total as of March 31, 2022		2022		2021		2020		2019		2018		Prior
Residential Mortgage
Refreshed LTV
Less than or equal to 90 percent	$	210,901	$	15,809	$	85,059	$	40,815	$	21,330	$	6,728	$	41,160
Greater than 90 percent but less than or equal to 100 percent	1,920		377		1,107		299		50		15		72
Greater than 100 percent	798		172		384		123		31		9		79
Fully-insured loans	12,411		128		3,906		3,361		1,072		193		3,751
Total Residential Mortgage	$	226,030	$	16,486	$	90,456	$	44,598	$	22,483	$	6,945	$	45,062

Residential Mortgage
Refreshed FICO score
Less than 620	$	2,347	$	144	$	555	$	415	$	135	$	99	$	999
Greater than or equal to 620 and less than 680	5,252		394		1,470		994		449		285		1,660
Greater than or equal to 680 and less than 740	24,057		1,595		8,401		4,967		2,415		963		5,716
Greater than or equal to 740	181,963		14,225		76,124		34,861		18,412		5,405		32,936
Fully-insured loans	12,411		128		3,906		3,361		1,072		193		3,751
Total Residential Mortgage	$	226,030	$	16,486	$	90,456	$	44,598	$	22,483	$	6,945	$	45,062



Home Equity - Credit Quality Indicators

	Total		Home Equity Loans and Reverse Mortgages (1)		Revolving Loans		Revolving Loans Converted to Term Loans
(Dollars in millions)	March 31, 2022
Home Equity
Refreshed LTV
Less than or equal to 90 percent	$	26,616	$	1,635	$	18,736	$	6,245
Greater than 90 percent but less than or equal to 100 percent	125		55		33		37
Greater than 100 percent	195		81		55		59
Total Home Equity	$	26,936	$	1,771	$	18,824	$	6,341

Home Equity
Refreshed FICO score
Less than 620	$	814	$	223	$	190	$	401
Greater than or equal to 620 and less than 680	1,350		202		471		677
Greater than or equal to 680 and less than 740	4,362		441		2,401		1,520
Greater than or equal to 740	20,410		905		15,762		3,743
Total Home Equity	$	26,936	$	1,771	$	18,824	$	6,341

(1)Includes reverse mortgages of $1.2 billion and home equity loans of $531 million, which are no longer originated.



Credit Card and Direct/Indirect Consumer – Credit Quality Indicators By Vintage










	Direct/Indirect
					Term Loans by Origination Year												Credit Card
(Dollars in millions)	Total Direct/ Indirect as of March 31, 2022		Revolving Loans		2022		2021		2020		2019		2018		Prior		Total Credit Card as of March 31, 2022		Revolving Loans		Revolving Loans Converted to Term Loans (1)
Refreshed FICO score
Less than 620	$	697	$	12	$	27	$	222	$	115	$	117	$	67	$	137	$	3,006	$	2,848	$	158
Greater than or equal to 620 and less than 680	2,331		13		273		1,077		373		269		121		205		9,070		8,881		189
Greater than or equal to 680 and less than 740	8,582		56		1,313		3,929		1,443		924		373		544		27,436		27,256		180
Greater than or equal to 740	38,247		88		5,145		14,606		7,812		5,496		2,195		2,905		39,844		39,799		45
Other internal credit metrics (2,3)	55,897		55,121		83		315		52		75		44		207		—		—		—
Total credit card and other consumer	$	105,754	$	55,290	$	6,841	$	20,149	$	9,795	$	6,881	$	2,800	$	3,998	$	79,356	$	78,784	$	572

(1)Represents TDRs that were modified into term loans.

(2)Other internal credit metrics may include delinquency status, geography or other factors.

(3)Direct/indirect consumer includes $55.1 billion of securities-based lending which is typically supported by highly liquid collateral with market value greater than or equal to the outstanding loan balance and therefore has minimal credit risk at March 31, 2022.



Commercial – Credit Quality Indicators By Vintage (1)
			Term Loans
			Amortized Cost Basis by Origination Year

(Dollars in millions)	Total as of March 31, 2022		2022		2021		2020		2019		2018		Prior		Revolving Loans
U.S. Commercial
Risk ratings
Pass rated	$	321,428	$	12,007	$	52,543	$	23,219	$	21,446	$	10,728	$	34,128	$	167,357
Reservable criticized	9,545		19		658		710		1,150		1,471		1,206		4,331
Total U.S. Commercial	$	330,973	$	12,026	$	53,201	$	23,929	$	22,596	$	12,199	$	35,334	$	171,688

Non-U.S. Commercial
Risk ratings
Pass rated	$	119,178	$	5,923	$	24,744	$	7,734	$	6,085	$	3,821	$	5,428	$	65,443
Reservable criticized	3,089		60		407		528		431		180		718		765
Total Non-U.S. Commercial	$	122,267	$	5,983	$	25,151	$	8,262	$	6,516	$	4,001	$	6,146	$	66,208

Commercial Real Estate
Risk ratings
Pass rated	$	56,247	$	3,355	$	13,667	$	6,787	$	10,000	$	5,456	$	9,285	$	7,697
Reservable criticized	6,286		7		379		715		2,034		1,465		1,521		165
Total Commercial Real Estate	$	62,533	$	3,362	$	14,046	$	7,502	$	12,034	$	6,921	$	10,806	$	7,862

Commercial Lease Financing
Risk ratings
Pass rated	$	13,643	$	464	$	3,016	$	2,232	$	2,220	$	1,815	$	3,896	$	—
Reservable criticized	365		—		28		30		104		59		144		—
Total Commercial Lease Financing	$	14,008	$	464	$	3,044	$	2,262	$	2,324	$	1,874	$	4,040	$	—

U.S. Small Business Commercial (2)
Risk ratings
Pass rated	$	10,008	$	383	$	3,089	$	2,353	$	994	$	734	$	2,316	$	139
Reservable criticized	388		—		16		30		94		75		171		2
Total U.S. Small Business Commercial	$	10,396	$	383	$	3,105	$	2,383	$	1,088	$	809	$	2,487	$	141
Total	$	540,177	$	22,218	$	98,547	$	44,338	$	44,558	$	25,804	$	58,813	$	245,899

(1) Excludes $6.5 billion of loans accounted for under the fair value option at March 31, 2022.

(2) Excludes U.S. Small Business Card loans of $7.6 billion. Refreshed FICO scores for this portfolio are $198 million for less than 620; $658 million for greater than or equal to 620 and less than 680; $2.0 billion for greater than or equal to 680 and less than 740; and $4.7 billion greater than or equal to 740.

The following tables present certain credit quality indicators for the Corporation's Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments by class of financing receivables and year of origination for term loan balances at December 31, 2021, including revolving loans that converted to term loans without an additional credit decision after origination or through a TDR.



Residential Mortgage – Credit Quality Indicators By Vintage




































			Term Loans by Origination Year
(Dollars in millions)	Total as of December 31, 2021		2021		2020		2019		2018		2017		Prior
Residential Mortgage
Refreshed LTV
Less than or equal to 90 percent	$	206,562	$	87,051	$	43,597	$	23,205	$	7,392	$	10,956	$	34,361
Greater than 90 percent but less than or equal to 100 percent	1,938		1,401		331		81		17		14		94
Greater than 100 percent	759		520		112		29		11		12		75
Fully-insured loans	12,704		3,845		3,486		1,150		216		235		3,772
Total Residential Mortgage	$	221,963	$	92,817	$	47,526	$	24,465	$	7,636	$	11,217	$	38,302

Residential Mortgage
Refreshed FICO score
Less than 620	$	2,451	$	636	$	442	$	140	$	120	$	104	$	1,009
Greater than or equal to 620 and less than 680	5,199		1,511		1,123		477		294		307		1,487
Greater than or equal to 680 and less than 740	24,532		8,822		5,454		2,785		1,057		1,434		4,980
Greater than or equal to 740	177,077		78,003		37,021		19,913		5,949		9,137		27,054
Fully-insured loans	12,704		3,845		3,486		1,150		216		235		3,772
Total Residential Mortgage	$	221,963	$	92,817	$	47,526	$	24,465	$	7,636	$	11,217	$	38,302



Home Equity - Credit Quality Indicators

		Total		Home Equity Loans and Reverse Mortgages (1)		Revolving Loans		Revolving Loans Converted to Term Loans
(Dollars in millions)	December 31, 2021
Home Equity
Refreshed LTV
Less than or equal to 90 percent		$	27,594	$	1,773	$	19,095	$	6,726
Greater than 90 percent but less than or equal to 100 percent		130		55		34		41
Greater than 100 percent		211		85		54		72
Total Home Equity		$	27,935	$	1,913	$	19,183	$	6,839

Home Equity
Refreshed FICO score
Less than 620		$	893	$	244	$	209	$	440
Greater than or equal to 620 and less than 680		1,434		222		495		717
Greater than or equal to 680 and less than 740		4,625		468		2,493		1,664
Greater than or equal to 740		20,983		979		15,986		4,018
Total Home Equity		$	27,935	$	1,913	$	19,183	$	6,839

(1)Includes reverse mortgages of $1.3 billion and home equity loans of $582 million, which are no longer originated.



Credit Card and Direct/Indirect Consumer – Credit Quality Indicators By Vintage





















	Direct/Indirect
					Term Loans by Origination Year												Credit Card
(Dollars in millions)	Total Direct/Indirect as of December 31, 2021		Revolving Loans		2021		2020		2019		2018		2017		Prior		Total Credit Card as of December 31, 2021		Revolving Loans		Revolving Loans Converted to Term Loans (1)
Refreshed FICO score
Less than 620	$	685	$	13	$	179	$	115	$	129	$	79	$	101	$	69	$	3,017	$	2,857	$	160
Greater than or equal to 620 and less than 680	2,313		14		1,170		414		313		148		134		120		9,264		9,064		200
Greater than or equal to 680 and less than 740	8,530		60		4,552		1,659		1,126		466		314		353		28,347		28,155		192
Greater than or equal to 740	37,164		94		15,876		8,642		6,465		2,679		1,573		1,835		40,810		40,762		48
Other internal credit metrics (2, 3)	54,868		54,173		283		53		77		75		63		144		—		—		—
Total credit card and other consumer	$	103,560	$	54,354	$	22,060	$	10,883	$	8,110	$	3,447	$	2,185	$	2,521	$	81,438	$	80,838	$	600

(1)Represents TDRs that were modified into term loans.

(2)Other internal credit metrics may include delinquency status, geography or other factors.

(3)Direct/indirect consumer includes $54.2 billion of securities-based lending which is typically supported by highly liquid collateral with market value greater than or equal to the outstanding loan balance and therefore has minimal credit risk at December 31, 2021.



Commercial – Credit Quality Indicators By Vintage (1)
			Term Loans
			Amortized Cost Basis by Origination Year

(Dollars in millions)	Total as of December 31, 2021		2021		2020		2019		2018		2017		Prior		Revolving Loans
U.S. Commercial
Risk ratings
Pass rated	$	315,618	$	55,862	$	25,012	$	23,373	$	11,439	$	10,426	$	23,877	$	165,629
Reservable criticized	10,318		598		687		1,308		1,615		514		1,072		4,524
Total U.S. Commercial	$	325,936	$	56,460	$	25,699	$	24,681	$	13,054	$	10,940	$	24,949	$	170,153

Non-U.S. Commercial
Risk ratings
Pass rated	$	110,787	$	25,749	$	8,703	$	7,133	$	4,521	$	3,016	$	3,062	$	58,603
Reservable criticized	2,479		223		324		487		275		257		216		697
Total Non-U.S. Commercial	$	113,266	$	25,972	$	9,027	$	7,620	$	4,796	$	3,273	$	3,278	$	59,300

Commercial Real Estate
Risk ratings
Pass rated	$	55,511	$	14,402	$	7,244	$	11,237	$	5,710	$	3,326	$	6,831	$	6,761
Reservable criticized	7,498		277		990		2,237		1,710		596		1,464		224
Total Commercial Real Estate	$	63,009	$	14,679	$	8,234	$	13,474	$	7,420	$	3,922	$	8,295	$	6,985

Commercial Lease Financing
Risk ratings
Pass rated	$	14,438	$	3,280	$	2,485	$	2,427	$	2,030	$	1,741	$	2,475	$	—
Reservable criticized	387		25		18		91		67		48		138		—
Total Commercial Lease Financing	$	14,825	$	3,305	$	2,503	$	2,518	$	2,097	$	1,789	$	2,613	$	—

U.S. Small Business Commercial (2)
Risk ratings
Pass rated	$	11,618	$	4,257	$	2,922	$	1,059	$	763	$	623	$	1,853	$	141
Reservable criticized	433		12		29		91		87		64		147		3
Total U.S. Small Business Commercial	$	12,051	$	4,269	$	2,951	$	1,150	$	850	$	687	$	2,000	$	144
Total	$	529,087	$	104,685	$	48,414	$	49,443	$	28,217	$	20,611	$	41,135	$	236,582

(1) Excludes $7.2 billion of loans accounted for under the fair value option at December 31, 2021.

(2) Excludes U.S. Small Business Card loans of $7.1 billion. Refreshed FICO scores for this portfolio are $192 million for less than 620; $618 million for greater than or equal to 620 and less than 680; $1.9 billion for greater than or equal to 680 and less than 740; and $4.4 billion greater than or equal to 740.

During the three months ended March 31, 2022, commercial credit quality showed signs of stabilization as the economy continued to improve. Commercial reservable criticized utilized exposure decreased to $20.7 billion at March 31, 2022 from $22.4 billion (to 3.54 percent from 3.91 percent of total commercial reservable utilized exposure) at December 31, 2021, which was broad-based across industries.

Troubled Debt Restructurings

Consumer Real Estate

Modifications of consumer real estate loans are classified as TDRs when the borrower is experiencing financial difficulties and a concession has been granted. Concessions may include reductions in interest rates, capitalization of past due amounts, principal and/or interest forbearance, payment extensions, principal and/or interest forgiveness, or combinations thereof. Prior to permanently modifying a loan, the Corporation may enter into trial modifications with certain borrowers under both government and proprietary programs. Trial modifications generally represent a three- to four-month period during which the borrower makes monthly payments under the anticipated modified payment terms. Upon successful completion of the trial period, the Corporation and the borrower enter into a permanent modification. Binding trial modifications are classified as TDRs when the trial offer is made and continue to be classified as TDRs regardless of whether the borrower enters into a permanent modification.

Consumer real estate loans of $280 million that have been discharged in Chapter 7 bankruptcy with no change in repayment terms and not reaffirmed by the borrower were

included in TDRs at March 31, 2022, of which $78 million were classified as nonperforming and $49 million were loans fully insured.

At March 31, 2022 and December 31, 2021, remaining commitments to lend additional funds to debtors whose terms have been modified in a consumer real estate TDR were not significant. Consumer real estate foreclosed properties totaled $118 million and $101 million at March 31, 2022 and December 31, 2021. The carrying value of consumer real estate loans, including fully-insured loans, for which formal foreclosure proceedings were in process at March 31, 2022 and December 31, 2021 was $1.0 billion and $1.1 billion. During the three months ended March 31, 2022 and 2021, the Corporation reclassified $56 million and $10 million of consumer real estate loans to foreclosed properties or, for properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans), to other assets. The reclassifications represent non-cash investing activities and, accordingly, are not reflected in the Consolidated Statement of Cash Flows.

The table below presents the March 31, 2022 and 2021 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of consumer real estate loans that were modified in TDRs during the three months ended March 31, 2022 and 2021. The following Consumer Real Estate portfolio segment tables include loans that were initially classified as TDRs during the period and also loans that had previously been classified as TDRs and were modified again during the period.



Consumer Real Estate – TDRs Entered into During the Three Months Ended March 31, 2022 and 2021

		Unpaid Principal Balance		Carrying Value		Pre-Modification Interest Rate		Post-Modification Interest Rate (1)

(Dollars in millions)	March 31, 2022
Residential mortgage		$	585	$	539	3.50	%	3.33	%
Home equity		92		75		3.62		3.63
Total		$	677	$	614	3.52		3.37


	March 31, 2021
Residential mortgage		$	519	$	464	3.50	%	3.48	%
Home equity		62		49		3.43		3.44
Total		$	581	$	513	3.49		3.48

(1)The post-modification interest rate reflects the interest rate applicable only to permanently completed modifications, which exclude loans that are in a trial modification period.

The table below presents the March 31, 2022 and 2021 carrying value for consumer real estate loans that were modified in a TDR during the three months ended March 31, 2022 and 2021, by type of modification.



Consumer Real Estate – Modification Programs

	TDRs Entered into During the Three Months Ended March 31

(Dollars in millions)	2022		2021
Modifications under government programs	$	—	$	1




Modifications under proprietary programs	552		472





Loans discharged in Chapter 7 bankruptcy (1)	5		11
Trial modifications	57		29
Total modifications	$	614	$	513

(1)Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.

The table below presents the carrying value of consumer real estate loans that entered into payment default during the three months ended March 31, 2022 and 2021 that were modified in a TDR during the 12 months preceding payment default. A payment default for consumer real estate TDRs is recognized when a borrower has missed three monthly payments (not necessarily consecutively) since modification.



Consumer Real Estate – TDRs Entering Payment Default that were Modified During the Preceding 12 Months

	Three Months Ended March 31
(Dollars in millions)		2022		2021
Modifications under government programs		$	—	$	1
Modifications under proprietary programs		40		12
Loans discharged in Chapter 7 bankruptcy (1)		1		3
Trial modifications (2)		4		6
Total modifications		$	45	$	22

(1)Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs.

(2)Includes trial modification offers to which the customer did not respond.

Credit Card and Other Consumer

The Corporation seeks to assist customers who are experiencing financial difficulty by modifying loans while ensuring compliance with federal and local laws and guidelines. Credit card and other consumer loan modifications generally involve reducing the interest rate on the account, placing the customer on a fixed payment plan not exceeding 60 months and canceling the customer’s available line of credit, all of which are considered TDRs. The Corporation makes loan modifications directly with borrowers for debt held only by the Corporation (internal programs). Additionally, the Corporation makes loan modifications for borrowers working with third-party renegotiation

agencies that provide solutions to customers’ entire unsecured debt structures (external programs). The Corporation classifies other secured consumer loans that have been discharged in Chapter 7 bankruptcy as TDRs, which are written down to collateral value and placed on nonaccrual status no later than the time of discharge.

The table below provides information on the Corporation’s Credit Card and Other Consumer TDR portfolio including the March 31, 2022 and 2021 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during the three months ended March 31, 2022 and 2021.



Credit Card and Other Consumer – TDRs Entered into During the Three Months Ended March 31, 2022 and 2021

		Unpaid Principal Balance		Carrying Value (1)		Pre-Modification Interest Rate		Post-Modification Interest Rate

(Dollars in millions)	March 31, 2022
Credit card		$	69	$	73	18.67	%	3.69	%

Direct/Indirect consumer		4		3		5.75		5.75

Total		$	73	$	76	18.03		3.77

	March 31, 2021
Credit card		$	82	$	90	18.55	%	4.97	%

Direct/Indirect consumer		8		5		5.64		5.64

Total		$	90	$	95	17.85		5.01

(1)Includes accrued interest and fees.

The table below presents the March 31, 2022 and 2021 carrying value for Credit Card and Other Consumer loans that were modified in a TDR during the three months ended March 31, 2022 and 2021 by program type.



Credit Card and Other Consumer – TDRs by Program Type (1)




	TDRs Entered into During the Three Months Ended March 31
(Dollars in millions)		2022		2021
Internal programs		$	63	$	74
External programs		10		17
Other		3		4
Total		$	76	$	95

(1) Includes accrued interest and fees.

Credit card and other consumer loans are deemed to be in payment default during the quarter in which a borrower misses the second of two consecutive payments. Payment defaults are one of the factors considered when projecting future cash flows in the calculation of the allowance for loan and lease losses for credit card and other consumer. Based on historical experience, the Corporation estimates that 10 percent of new credit card TDRs and 17 percent of new direct/indirect consumer TDRs may be in payment default within 12 months after modification.

Commercial Loans

Modifications of loans to commercial borrowers that are experiencing financial difficulty are designed to reduce the Corporation’s loss exposure while providing the borrower with an opportunity to work through financial difficulties, often to avoid foreclosure or bankruptcy. Each modification is unique and reflects the individual circumstances of the borrower. Modifications that result in a TDR may include extensions of maturity at a concessionary (below market) rate of interest,

payment forbearances or other actions designed to benefit the borrower while mitigating the Corporation’s risk exposure. Reductions in interest rates are rare. Instead, the interest rates are typically increased, although the increased rate may not represent a market rate of interest. Infrequently, concessions may also include principal forgiveness in connection with foreclosure, short sale or other settlement agreements leading to termination or sale of the loan.

At the time of restructuring, the loans are remeasured to reflect the impact, if any, on projected cash flows resulting from the modified terms. If a portion of the loan is deemed to be uncollectible, a charge-off may be recorded at the time of restructuring. Alternatively, a charge-off may have already been recorded in a previous period such that no charge-off is required at the time of modification.

During the three months ended March 31, 2022 and 2021, the carrying value of the Corporation’s commercial loans that were modified as TDRs was $848 million and $680 million. At March 31, 2022 and December 31, 2021, the Corporation had commitments to lend $386 million and $283 million to commercial borrowers whose loans were classified as TDRs. The balance of commercial TDRs in payment default was $258 million and $262 million at March 31, 2022 and December 31, 2021.

Loans Held-for-sale

The Corporation had LHFS of $10.3 billion and $15.6 billion at March 31, 2022 and December 31, 2021. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $13.3 billion and $9.9 billion for the three months ended March 31, 2022 and 2021. Cash used for originations and purchases of LHFS totaled $6.8 billion and $8.3 billion for the three months ended March 31, 2022 and 2021. Also included were non-cash net transfers into LHFS of $1.5 billion for the three months ended March 31, 2022, primarily driven by the transfer of a $1.6 billion affinity card loan portfolio to held for sale in anticipation of its sale later in 2022, and $481 million for the three months ended March 31, 2021.

Accrued Interest Receivable

Accrued interest receivable for loans and leases and loans held-for-sale at March 31, 2022 and December 31, 2021 was $2.3 billion and $2.2 billion and is reported in customer and other receivables on the Consolidated Balance Sheet.

Outstanding credit card loan balances include unpaid principal, interest and fees. Credit card loans are not classified as nonperforming but are charged off no later than the end of the month in which the account becomes 180 days past due, within 60 days after receipt of notification of death or bankruptcy, or upon confirmation of fraud. During the three months ended March 31, 2022 and 2021, the Corporation reversed $131 million and $158 million of interest and fee income against the income statement line item in which it was originally recorded upon charge-off of the principal balance of the loan.

For the outstanding residential mortgage, home equity, direct/indirect consumer and commercial loan balances classified as nonperforming during the three months ended March 31, 2022 and 2021, interest and fee income reversed at the time the loans were classified as nonperforming was not significant. For more information on the Corporation's nonperforming loan policies, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2021 Annual Report on Form 10-K

Allowance for Credit Losses

The allowance for credit losses is estimated using quantitative and qualitative methods that consider a variety of factors, such as historical loss experience, the current credit quality of the portfolio and an economic outlook over the life of the loan. Qualitative reserves cover losses that are expected but, in the Corporation's assessment, may not be adequately reflected in the quantitative methods or the economic assumptions. The Corporation incorporates forward-looking information through the use of several macroeconomic scenarios in determining the weighted economic outlook over the forecasted life of the assets. These scenarios include key macroeconomic variables such as gross domestic product, unemployment rate, real estate prices and corporate bond spreads. The scenarios that are chosen each quarter and the weighting given to each scenario depend on a variety of factors including recent economic events, leading economic indicators, internal and third-party economist views, and industry trends. For more information on the Corporation's credit loss accounting policies including the allowance for credit losses, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2021 Annual Report on Form 10-K.

The March 31, 2022 estimate for allowance for credit losses was based on various economic outlooks that included a baseline scenario, which is derived from consensus estimates, a downside scenario that assumed a significantly longer period until full economic recovery, a tail risk scenario similar to the severely adverse scenario used in stress testing, and a scenario to account for inflationary risk and higher interest rates at levels above what is already factored into the Corporation’s baseline and other downside scenarios. The Corporation’s upside scenario was removed as of March 31, 2022 given that the recent geopolitical environment may limit an upside outlook. The weighted economic outlook assumes that the U.S. average unemployment rate will be 5.0 percent by the fourth quarter of 2022 and thereafter will slowly decline to just above 4.5 percent by the fourth quarter of 2023. Additionally, in this economic outlook, U.S. gross domestic product is forecasted to grow at 1.4 percent year-over-year in the fourth quarters of 2022 and 2023. While asset quality continues to point to economic recovery and there have been signs of relief from the COVID-19 pandemic (the pandemic), uncertainty remains about the timing and strength of the economy’s recovery, which could be hampered by broader economic impacts as a result of the current geopolitical situation, supply chain disruptions and inflationary pressures, and could lead to adverse impacts to credit quality metrics in future periods. As such, the Corporation has factored the aforementioned uncertainties into its allowance for credit losses.

The allowance for credit losses at March 31, 2022 was $13.5 billion, a decrease of $360 million compared to December 31, 2021. The decrease in the allowance for credit losses was primarily driven by credit quality improvements, offset by a reserve build related to Russian exposure and loan growth. The change in the allowance for credit losses was comprised of a net decrease of $283 million in the allowance for loan and lease losses and a $77 million decrease in the reserve for unfunded lending commitments. The decrease in the allowance for credit losses was attributed to $89 million in the consumer real estate portfolio, $234 million in the credit card and other consumer portfolio, and $37 million in the commercial portfolio. The provision for credit losses was $30 million during

three months ended March 31, 2022, as asset quality improvements were offset by a reserve build related to Russian exposure and loan growth. The provision for credit losses increased $1.9 billion compared to the same period in 2021, primarily due to the impact of the improved macroeconomic outlook in the prior-year period.

Outstanding loans and leases excluding loans accounted for under the fair value option increased $14.7 billion during the

three months ended March 31, 2022 driven by commercial loans, which increased $12.7 billion excluding small business, primarily driven by Global Banking. Consumer loans increased $3.2 billion primarily driven by new originations in Residential Mortgage.

The changes in the allowance for credit losses, including net charge-offs and provision for loan and lease losses, are detailed in the table below.



	Consumer Real Estate		Credit Card and Other Consumer		Commercial		Total
(Dollars in millions)	Three Months Ended March 31, 2022
Allowance for loan and lease losses, January 1	$	557	$	6,476	$	5,354	$	12,387
Loans and leases charged off	(23)		(619)		(92)		(734)
Recoveries of loans and leases previously charged off	63		239		40		342
Net charge-offs	40		(380)		(52)		(392)

Provision for loan and lease losses	(126)		146		88		108
Other	2		—		(1)		1
Allowance for loan and lease losses, March 31	473		6,242		5,389		12,104
Reserve for unfunded lending commitments, January 1	96		—		1,360		1,456
Provision for unfunded lending commitments	(6)		—		(72)		(78)
Other	1		—		—		1
Reserve for unfunded lending commitments, March 31	91		—		1,288		1,379
Allowance for credit losses, March 31	$	564	$	6,242	$	6,677	$	13,483

	Three Months Ended March 31, 2021
Allowance for loan and lease losses, January 1	$	858	$	9,213	$	8,731	$	18,802
Loans and leases charged off	(15)		(977)		(194)		(1,186)
Recoveries of loans and leases previously charged off	54		245		64		363
Net charge-offs	39		(732)		(130)		(823)

Provision for loan and lease losses	(207)		(536)		(1,068)		(1,811)
Other	(1)		1		—		—
Allowance for loan and lease losses, March 31	689		7,946		7,533		16,168


Reserve for unfunded lending commitments, January 1	137		—		1,741		1,878
Provision for unfunded lending commitments	(13)		—		(36)		(49)

Reserve for unfunded lending commitments, March 31	124		—		1,705		1,829
Allowance for credit losses, March 31	$	813	$	7,946	$	9,238	$	17,997