Asset Quality

6 Months Ended

Jun. 30, 2019

ASSET QUALITY

We closely monitor economic conditions and loan performance trends to manage and evaluate our exposure to credit risk. Trends in delinquency rates may be a key indicator, among other considerations, of credit risk within the loan portfolios. The measurement of delinquency status is based on the contractual terms of each loan. Loans that are 30 days or more past due in terms of payment are considered delinquent.

Nonperforming assets include nonperforming loans and leases, OREO and foreclosed assets. Nonperforming loans are those loans accounted for at amortized cost whose credit quality has deteriorated to the extent that full collection of contractual principal and interest is not probable. Interest income is not recognized on these loans. Loans accounted for under the fair value option are reported as performing loans as these loans are accounted for at fair value. However, when nonaccrual criteria is met, interest income is not recognized on these loans. Additionally, certain government insured or guaranteed loans for which we expect to collect substantially all principal and interest are not reported as nonperforming loans and continue to accrue interest. Purchased impaired loans are excluded from nonperforming loans as we are currently accreting interest income over the expected life of the loans.

See Note 1 Accounting Policies in our 2018 Form 10-K for additional information on our loan related policies.

The following tables present the delinquency status of our loans and our nonperforming assets at June 30, 2019 and December 31, 2018, respectively.

Table 36: Analysis of Loan Portfolio (a)



	Accruing
Dollars in millions	Current or Less Than 30 Days Past Due			30-59 Days Past Due			60-89 Days Past Due			90 Days Or More Past Due			Total Past Due (b)				Nonperforming Loans			Fair Value Option Nonaccrual Loans (c)			Purchased Impaired Loans			Total Loans (d)
June 30, 2019
Commercial Lending
Commercial	$	124,986		$	105		$	33		$	59		$	197			$	441								$	125,624
Commercial real estate	28,467			9			1						10				93									28,570
Equipment lease financing	7,393			7			3						10				6									7,409
Total commercial lending	160,846			121			37			59			217				540									161,603
Consumer Lending
Home equity	23,730			56			20						76				712						$	614		25,132
Residential real estate	17,808			134			75			306			515			(b)	339			$	173		1,257			20,092
Automobile	15,338			119			29			8			156				118									15,612
Credit card	6,379			47			29			48			124				8									6,511
Education	3,364			60			36			95			191			(b)										3,555
Other consumer	4,673			13			9			8			30				7									4,710
Total consumer lending	71,292			429			198			465			1,092				1,184			173			1,871			75,612
Total	$	232,138		$	550		$	235		$	524		$	1,309			$	1,724		$	173		$	1,871		$	237,215
Percentage of total loans	97.86		%	.23		%	.10		%	.22		%	.55		%		.73		%	.07		%	.79		%	100.00		%
December 31, 2018
Commercial Lending
Commercial	$	116,300		$	82		$	54		$	52		$	188			$	346								$	116,834
Commercial real estate	28,056			6			3						9				75									28,140
Equipment lease financing	7,229			56			12						68				11									7,308
Total commercial lending	151,585			144			69			52			265				432									152,282
Consumer Lending
Home equity	24,556			66			25						91				797						$	679		26,123
Residential real estate	16,216			135			73			363			571			(b)	350			$	182		1,338			18,657
Automobile	14,165			113			29			12			154				100									14,419
Credit card	6,222			46			29			53			128				7									6,357
Education	3,571			69			41			141			251			(b)										3,822
Other consumer	4,552			12			5			8			25				8									4,585
Total consumer lending	69,282			441			202			577			1,220				1,262			182			2,017			73,963
Total	$	220,867		$	585		$	271		$	629		$	1,485			$	1,694		$	182		$	2,017		$	226,245
Percentage of total loans	97.62		%	.26		%	.12		%	.28		%	.66		%		.75		%	.08		%	.89		%	100.00		%


(a)	Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment does not include any associated valuation allowance.

(b)

Past due loan amounts exclude purchased impaired loans, even if contractually past due (or if we do not expect to receive payment in full based on the original contractual terms), as we are currently accreting interest income over the expected life of the loans. Past due loan amounts include government insured or guaranteed Residential real estate mortgages totaling $.4 billion and $.5 billion at June 30, 2019 and December 31, 2018, respectively, and Education loans totaling $.2 billion at both June 30, 2019 and December 31, 2018.


(c)	Consumer loans accounted for under the fair value option for which we do not expect to collect substantially all principal and interest are subject to nonaccrual accounting and classification upon meeting any of our nonaccrual policies. Given that these loans are not accounted for at amortized cost, these loans have been excluded from the nonperforming loan population.


(d)	Net of unearned income, net deferred loan fees, unamortized discounts and premiums, and purchase discounts and premiums totaling $1.2 billion at both June 30, 2019 December 31, 2018.

At June 30, 2019, we pledged $15.6 billion of commercial loans to the Federal Reserve Bank and $65.0 billion of residential real estate and other loans to the Federal Home Loan Bank as collateral for the ability to borrow, if necessary. The comparable amounts at December 31, 2018 were $17.3 billion and $63.2 billion, respectively. Amounts pledged reflect the unpaid principal balances.

Table 37: Nonperforming Assets



Dollars in millions	June 30 2019			December 31 2018
Nonperforming loans
Total commercial lending	$	540		$	432
Total consumer lending (a)	1,184			1,262
Total nonperforming loans	1,724			1,694
OREO and foreclosed assets	126			114
Total nonperforming assets	$	1,850		$	1,808
Nonperforming loans to total loans	.73		%	.75		%
Nonperforming assets to total loans, OREO and foreclosed assets	.78		%	.80		%
Nonperforming assets to total assets	.46		%	.47		%


(a)	Excludes most consumer loans and lines of credit not secured by residential real estate, which are charged off after 120 to 180 days past due and are not placed on nonperforming status.

Nonperforming loans also include certain loans whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulties. In accordance with applicable accounting guidance, these loans are considered troubled debt restructurings (TDRs). See Note 1 Accounting Policies in our 2018 Form 10-K and the TDR section of this Note 3 for additional information on TDRs.

Total nonperforming loans in Table 37 include TDRs of $.9 billion at both June 30, 2019 and December 31, 2018. TDRs that are performing, including consumer credit card TDR loans, totaled $.9 billion and $1.0 billion at June 30, 2019 and December 31, 2018, respectively, and are excluded from nonperforming loans.

Additional Asset Quality Indicators

We have two portfolio segments – Commercial Lending and Consumer Lending. Each of these segments comprises multiple loan classes. Classes are characterized by similarities in initial measurement, risk attributes and the manner in which we monitor and assess credit risk. The Commercial Lending segment is composed of the commercial, commercial real estate and equipment lease financing loan classes. The Consumer Lending segment is composed of the home equity, residential real estate, automobile, credit card, education and other consumer loan classes.

Commercial Lending Loan Classes

The following table presents asset quality indicators for the Commercial Lending loan classes. See Note 3 Asset Quality in our 2018 Form 10-K for additional information related to our Commercial Lending loan classes, including discussion around the asset quality indicators that we use to monitor and manage the credit risk associated with each loan class.

Table 38: Commercial Lending Asset Quality Indicators (a)



In millions	Pass Rated		Criticized		Total Loans
June 30, 2019
Commercial	$	120,157	$	5,467	$	125,624
Commercial real estate	27,699		871		28,570
Equipment lease financing	7,251		158		7,409
Total commercial lending	$	155,107	$	6,496	$	161,603
December 31, 2018
Commercial	$	111,276	$	5,558	$	116,834
Commercial real estate	27,682		458		28,140
Equipment lease financing	7,180		128		7,308
Total commercial lending	$	146,138	$	6,144	$	152,282


(a)	Loans are classified as Pass and Criticized based on the Regulatory Classification definitions. The Criticized classification includes loans that were rated Special Mention, Substandard or Doubtful as of June 30, 2019 and December 31, 2018. We use probability of default and loss given default to rate loans in the commercial lending portfolio.

Consumer Lending Loan Classes

See Note 3 Asset Quality in our 2018 Form 10-K for additional information related to our Consumer Lending loan classes, including discussion around the asset quality indicators that we use to monitor and manage the credit risk associated with each loan class.

Home Equity and Residential Real Estate Loan Classes

The following table presents asset quality indicators for the home equity and residential real estate loan classes.

Table 39: Asset Quality Indicators for Home Equity and Residential Real Estate Loans



	June 30, 2019				December 31, 2018
	Home equity		Residential real estate		Home equity		Residential real estate
In millions
Current estimated LTV ratios
Greater than or equal to 125%	$	432	$	129	$	461	$	116
Greater than or equal to 100% to less than 125%	991		248		1,020		255
Greater than or equal to 90% to less than 100%	1,200		358		1,174		335
Less than 90%	21,732		17,359		22,644		15,922
No LTV ratio available	163		148		145		6
Government insured or guaranteed loans			593				685
Purchased impaired loans	614		1,257		679		1,338
Total loans	$	25,132	$	20,092	$	26,123	$	18,657
Updated FICO Scores
Greater than 660	$	22,186	$	17,450	$	22,996	$	15,956
Less than or equal to 660	2,067		568		2,210		585
No FICO score available	265		224		238		93
Government insured or guaranteed loans			593				685
Purchased impaired loans	614		1,257		679		1,338
Total loans	$	25,132	$	20,092	$	26,123	$	18,657

Automobile, Credit Card, Education and Other Consumer Loan Classes

The following table presents asset quality indicators for the automobile, credit card, education and other consumer loan classes.

Table 40: Asset Quality Indicators for Automobile, Credit Card, Education and Other Consumer Loans




Dollars in millions	Automobile		Credit Card		Education		Other Consumer
June 30, 2019
FICO score greater than 719	$	8,358	$	3,918	$	1,223	$	1,393
650 to 719	4,679		1,846		176		705
620 to 649	1,076		297		23		111
Less than 620	1,163		332		23		102
No FICO score available or required (a)	336		118		40		27
Total loans using FICO credit metric	15,612		6,511		1,485		2,338
Consumer loans using other internal credit metrics					2,070		2,372
Total loans	$	15,612	$	6,511	$	3,555	$	4,710
Weighted-average updated FICO score (b)	726		733		777		732
December 31, 2018
FICO score greater than 719	$	7,740	$	3,809	$	1,240	$	1,280
650 to 719	4,365		1,759		194		641
620 to 649	1,007		280		26		106
Less than 620	1,027		332		24		105
No FICO score available or required (a)	280		177		57		25
Total loans using FICO credit metric	14,419		6,357		1,541		2,157
Consumer loans using other internal credit metrics					2,281		2,428
Total loans	$	14,419	$	6,357	$	3,822	$	4,585
Weighted-average updated FICO score (b)	726		733		774		732

(a)

Loans with no FICO score available or required generally refers to new accounts issued to borrowers with limited credit history, accounts for which we cannot obtain an updated FICO score (e.g., recent profile changes), cards issued with a business name and/or cards secured by collateral. Management proactively assesses the risk and size of this loan category and, when necessary, takes actions to mitigate the credit risk.


(b)	Weighted-average updated FICO score excludes accounts with no FICO score available or required.

Troubled Debt Restructurings (TDRs)

Table 41 quantifies the number of loans that were classified as TDRs, as well as the change in the loans’ recorded investment as a result of becoming a TDR during the three and six months ended June 30, 2019 and June 30, 2018. Additionally, the table provides information about the types of TDR concessions. See Note 3 Asset Quality in our 2018 Form 10-K for additional discussion of TDRs.

Table 41: Financial Impact and TDRs by Concession Type (a)



			Pre-TDR Recorded Investment (b)		Post-TDR Recorded Investment (c)
During the three months ended June 30, 2019 Dollars in millions	Number of Loans		Pre-TDR Recorded Investment (b)		Principal Forgiveness		Rate Reduction		Other		Total
Total commercial lending		15	$	31			$	1	$	27	$	28
Total consumer lending		3,539	44				24		16		40
Total TDRs		3,554	$	75			$	25	$	43	$	68
During the three months ended June 30, 2018 Dollars in millions
Total commercial lending		15	$	20			$	1	$	17	$	18
Total consumer lending		2,889	35		$	1	17		13		31
Total TDRs		2,904	$	55	$	1	$	18	$	30	$	49



			Pre-TDR Recorded Investment (b)		Post-TDR Recorded Investment (c)
During the six months ended June 30, 2019 Dollars in millions	Number of Loans		Pre-TDR Recorded Investment (b)		Principal Forgiveness		Rate Reduction		Other		Total
Total commercial lending		37	$	136			$	1	$	136	$	137
Total consumer lending		7,353	86				48		32		80
Total TDRs		7,390	$	222			$	49	$	168	$	217
During the six months ended June 30, 2018 Dollars in millions
Total commercial lending		47	$	30			$	2	$	24	$	26
Total consumer lending		5,868	84		$	1	47		29		77
Total TDRs		5,915	$	114	$	1	$	49	$	53	$	103

(a) Impact of partial charge-offs at TDR date are included in this table.

(b) Represents the recorded investment of the loans as of the quarter end prior to TDR designation, and excludes immaterial amounts of accrued interest receivable.

(c) Represents the recorded investment of the TDRs as of the end of the quarter in which the TDR occurs, and excludes immaterial amounts of accrued interest receivable.

After a loan is determined to be a TDR, we continue to track its performance under its most recent restructured terms. We consider a TDR to have subsequently defaulted when it becomes 60 days past due after the most recent date the loan was restructured. The recorded investment of loans that were both (i) classified as TDRs or were subsequently modified during each 12-month period preceding January 1, 2019 and January 1, 2018, respectively, and (ii) subsequently defaulted during three and six months ended June 30, 2019 totaled $28 million and $39 million, respectively. The comparable amounts for the three and six months ended June 30, 2018 totaled $24 million and $38 million, respectively.

Impaired Loans

Impaired loans include commercial and consumer nonperforming loans and TDRs, regardless of nonperforming status. TDRs that were previously recorded at amortized cost and are now classified and accounted for as held for sale are also included. Excluded from impaired loans are nonperforming leases, loans accounted for as held for sale other than the TDRs described in the preceding sentence, loans accounted for under the fair value option, smaller balance homogeneous type loans and purchased impaired loans. We did not recognize any interest income on impaired loans that have not returned to performing status, while they were impaired during the six months ended June 30, 2019 and June 30, 2018. Table 42 provides further detail on impaired loans individually evaluated for impairment and the associated ALLL. Certain commercial and consumer impaired loans do not have a related ALLL as the valuation of these impaired loans exceeded the recorded investment.

Table 42: Impaired Loans



In millions	Unpaid Principal Balance		Recorded Investment		Associated Allowance		Average Recorded Investment (a)
June 30, 2019
Impaired loans with an associated allowance
Total commercial lending	$	530	$	396	$	86	$	365
Total consumer lending	824		777		123		800
Total impaired loans with an associated allowance	1,354		1,173		209		1,165
Impaired loans without an associated allowance
Total commercial lending	358		287				292
Total consumer lending	1,007		604				611
Total impaired loans without an associated allowance	1,365		891				903
Total impaired loans	$	2,719	$	2,064	$	209	$	2,068
December 31, 2018
Impaired loans with an associated allowance
Total commercial lending	$	440	$	315	$	73	$	349
Total consumer lending	863		817		136		904
Total impaired loans with an associated allowance	1,303		1,132		209		1,253
Impaired loans without an associated allowance
Total commercial lending	413		326				294
Total consumer lending	1,042		625				645
Total impaired loans without an associated allowance	1,455		951				939
Total impaired loans	$	2,758	$	2,083	$	209	$	2,192

(a)

Average recorded investment is for the six months ended June 30, 2019 and the year ended December 31, 2018, respectively.