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Loans and Related Allowance for Credit Losses

9 Months Ended

Sep. 30, 2020

Loan Portfolio

Our loan portfolio consists of two portfolio segments – Commercial and Consumer. Each of these segments comprises multiple loan classes. Classes are characterized by similarities in risk attributes and the manner in which we monitor and assess credit risk.



Commercial		Consumer
Commercial		Consumer
• Commercial and industrial		• Home equity
• Commercial real estate		• Residential real estate
• Equipment lease financing		• Automobile
		• Credit card
		• Education
		• Other consumer

See Note 1 Accounting Policies for additional information on our loan related policies.

Credit Quality

We closely monitor economic conditions and loan performance trends to manage and evaluate our exposure to credit risk within the loan portfolio based on our defined loan classes. In doing so, we use several credit quality indicators, including trends in delinquency rates, nonperforming status, analysis of PD and LGD ratings, updated credit scores, and originated and updated LTV ratios.

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. With the adoption of the CECL standard, accruing loans past due as of September 30, 2020 include PCD loans, while amounts as of December 31, 2019 excluded purchased impaired loans. See Note 1 Accounting Policies for additional information related to the adoption of this standard, including the discontinuation of purchased impaired loan accounting.

The following table presents the composition and delinquency status of our loan portfolio at September 30, 2020 and December 31, 2019. Pursuant to the interagency guidance issued in April 2020 and in connection with the credit reporting rules from the CARES Act, the September 30, 2020 delinquency status of loans modified due to COVID-19 related hardships aligns with the rules set forth for banks to report delinquency status to the credit agencies. These rules require that COVID-19 related loan modifications be reported as follows:


•	if current at the time of modification, the loan remains current throughout the modification period,


•	if delinquent at the time of modification and the borrower was not made current as part of the modification, the loan maintains its reported delinquent status during the modification period, or


•	if delinquent at the time of modification and the borrower was made current as part of the modification or became current during the modification period, the loan is reported as current.

As a result, certain loans modified due to COVID-19 related hardships are not being reported as past due as of September 30, 2020 based on the contractual terms of the loan, even where borrowers may not be making payments on their loans during the modification period. Loan modifications due to COVID-19 related hardships that permanently reduce either the contractual interest rate or the principal balance of a loan do not qualify for TDR relief under the CARES Act or the interagency guidance.

Table 44: Analysis of Loan Portfolio



	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 (c)				Nonperforming Loans			Fair Value Option Nonaccrual Loans (d)			Total Loans (e)(f)
September 30, 2020 (a) (b)
Commercial
Commercial and industrial	$	136,381		$	56		$	37		$	36		$	129			$	677					$	137,187
Commercial real estate	28,799			6			6						12				217						29,028
Equipment lease financing	6,447			7			4						11				21						6,479
Total commercial	171,627			69			47			36			152				915						172,694
Consumer
Home equity	23,774			48			22						70				639			$	56		24,539
Residential real estate	21,503			188			80			269			537			(c)	339			507			22,886
Automobile	14,646			116			32			12			160				171						14,977
Credit card	6,153			44			33			60			137				13						6,303
Education	2,905			57			26			63			146			(c)							3,051
Other consumer	4,785			17			11			8			36				8						4,829
Total consumer	73,766			470			204			412			1,086				1,170			563			76,585
Total	$	245,393		$	539		$	251		$	448		$	1,238			$	2,085		$	563		$	249,279
Percentage of total loans	98.43		%	.22		%	.10		%	.18		%	.50		%		.84		%	.23		%	100.00		%


(a)	Amounts in table represent loans held for investment and do not include any associated valuation allowance.


(b)	The accrued interest associated with our loan portfolio at September 30, 2020 totaled $.7 billion and is included in Other assets on the Consolidated Balance Sheet.


(c)	Past due loan amounts include government insured or guaranteed Residential real estate loans and Education loans totaling $.4 billion and $.1 billion, respectively, at September 30, 2020.


(d)	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.


(e)	Net of unearned income, unamortized deferred fees and costs on originated loans, and premiums or discounts on purchased loans totaling $1.4 billion at September 30, 2020.


(f)	Collateral dependent loans totaled $1.2 billion at September 30, 2020. The majority of these loans are within the Home equity and Residential real estate loan classes and are secured by consumer real estate.



	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 (h)				Nonperforming Loans			Fair Value Option Nonaccrual Loans (i)			Purchased Impaired Loans			Total Loans (j)
December 31, 2019 (g)
Commercial
Commercial and industrial	$	124,695		$	102		$	30		$	85		$	217			$	425								$	125,337
Commercial real estate	28,061			4			1						5				44									28,110
Equipment lease financing	7,069			49			5						54				32									7,155
Total commercial	159,825			155			36			85			276				501									160,602
Consumer
Home equity	23,791			58			24						82				669						$	543		25,085
Residential real estate	19,640			140			69			315			524			(h)	315			$	166		1,176			21,821
Automobile	16,376			178			47			18			243				135									16,754
Credit card	7,133			60			37			67			164				11									7,308
Education	3,156			55			34			91			180			(h)										3,336
Other consumer	4,898			15			11			9			35				4									4,937
Total consumer	74,994			506			222			500			1,228				1,134			166			1,719			79,241
Total	$	234,819		$	661		$	258		$	585		$	1,504			$	1,635		$	166		$	1,719		$	239,843
Percentage of total loans	97.90		%	.28		%	.11		%	.24		%	.63		%		.68		%	.07		%	.72		%	100.00		%


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

(h)

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 accreted interest income over the expected life of the loans. Past due loan amounts include government insured or guaranteed Residential real estate loans totaling $.4 billion and Education loans totaling $.2 billion at December 31, 2019.


(i)	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.


(j)	Net of unearned income, unamortized deferred fees and costs on originated loans, and premiums or discounts on purchased loans totaling $1.1 billion at December 31, 2019.

At September 30, 2020, we pledged $30.5 billion of commercial loans to the Federal Reserve Bank and $68.9 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, 2019 were $16.9 billion and $68.0 billion, respectively. Amounts pledged reflect the unpaid principal balances.

Nonperforming Assets

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, 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.

With the adoption of the CECL standard, nonperforming loans as of September 30, 2020 include PCD loans. Amounts as of December 31, 2019 excluded purchased impaired loans as we were accreting interest income over the expected life of the loans. See Note 1 Accounting Policies for additional information related to the adoption of this standard and our nonperforming loan and lease policies.

The following table presents our nonperforming assets as of September 30, 2020 and December 31, 2019, respectively.

Table 45: Nonperforming Assets



Dollars in millions	September 30 2020			December 31 2019
Nonperforming loans
Commercial	$	915		$	501
Consumer (a)	1,170			1,134
Total nonperforming loans (b)	2,085			1,635
OREO and foreclosed assets	67			117
Total nonperforming assets	$	2,152		$	1,752
Nonperforming loans to total loans	.84		%	.68		%
Nonperforming assets to total loans, OREO and foreclosed assets	.86		%	.73		%
Nonperforming assets to total assets	.47		%	.43		%


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


(b)	Nonperforming loans for which there is no related ALLL totaled $.6 billion at September 30, 2020, and is primarily comprised of loans with a valuation that exceeds the amortized cost basis.

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 TDRs. See Note 1 Accounting Policies and the TDR section of this Note 4 for additional information on TDRs.

Total nonperforming loans in Table 45 include TDRs of $.8 billion and $.9 billion at September 30, 2020 and December 31, 2019, respectively. TDRs that are performing, including consumer credit card TDR loans, totaled $.8 billion at both September 30, 2020 and December 31, 2019 and are excluded from nonperforming loans.

Additional Credit Quality Indicators by Loan Class

Commercial and Industrial

For commercial and industrial loans, we monitor the performance of the borrower in a disciplined and regular manner based upon the level of credit risk inherent in the loan. To evaluate the level of credit risk, we assign an internal risk rating reflecting the borrower’s PD and LGD. This two-dimensional credit risk rating methodology provides granularity in the risk monitoring process. These ratings are reviewed and updated, generally at least once per year. For small balance homogeneous pools of commercial and industrial loans and leases, we apply scoring techniques to assist in determining the PD. The combination of the PD and LGD ratings assigned to commercial and industrial loans, capturing both the combination of expectations of default and loss severity in the event of default, reflects credit quality characteristics as of the reporting date and are used as inputs into our loss forecasting process.

Based upon the amount of the lending arrangement and our risk rating assessment, we follow a formal schedule of written periodic reviews. Quarterly, we conduct formal reviews of a market’s or business unit’s loan portfolio, focusing on those loans which we perceive to be of higher risk, based upon PDs and LGDs, or loans for which credit quality is weakening. If circumstances warrant, it is our practice to review any customer obligation and its level of credit risk more frequently. We attempt to proactively manage our loans by using various procedures that are customized to the risk of a given loan, including ongoing outreach, contact, and assessment of obligor financial conditions, collateral inspection and appraisal.

Commercial Real Estate

We manage credit risk associated with our commercial real estate projects and commercial mortgages similar to commercial and industrial loans by evaluating PD and LGD. Risks associated with commercial real estate projects and commercial mortgage activities tend to be correlated to the loan structure and collateral location, project progress and business environment. As a result, these attributes are also monitored and utilized in assessing credit risk.

As with the commercial and industrial loan class, a formal schedule of periodic reviews is also performed to assess market/geographic risk and business unit/industry risk. Often as a result of these overviews, more in-depth reviews and increased scrutiny are placed on areas of higher risk, such as adverse changes in risk ratings, deteriorating operating trends, and/or areas that concern management. These reviews are designed to assess risk and facilitate actions to mitigate such risks.

Equipment Lease Financing

We manage credit risk associated with our equipment lease financing loan class similar to commercial and industrial loans by analyzing PD and LGD.

Based upon the dollar amount of the lease and the level of credit risk, we follow a formal schedule of periodic reviews. Generally, this occurs quarterly, although we have established practices to review such credit risk more frequently if circumstances warrant. Our review process entails analysis of the following factors: equipment value/residual value, exposure levels, jurisdiction risk, industry risk, guarantor requirements, and regulatory compliance as applicable.

Table 46: Commercial Credit Quality Indicators (a)



	Term Loans by Origination Year
September 30, 2020 - In millions	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Commercial and industrial
Pass Rated	$	30,385	$	14,778	$	9,241	$	6,474	$	4,531	$	7,916	$	56,000	$	55	$	129,380
Criticized	331		721		725		382		217		531		4,881		19		7,807
Total commercial and industrial	30,716		15,499		9,966		6,856		4,748		8,447		60,881		74		137,187
Commercial real estate
Pass Rated	3,226		6,552		3,625		3,384		2,622		7,574		164				27,147
Criticized	194		139		53		305		340		753		97				1,881
Total commercial real estate	3,420		6,691		3,678		3,689		2,962		8,327		261				29,028
Equipment lease financing
Pass Rated	1,048		1,258		1,043		826		494		1,454						6,123
Criticized	61		95		95		46		26		33						356
Total equipment lease financing	1,109		1,353		1,138		872		520		1,487						6,479
Total commercial	$	35,245	$	23,543	$	14,782	$	11,417	$	8,230	$	18,261	$	61,142	$	74	$	172,694



December 31, 2019 - In millions	Pass Rated		Criticized		Total Loans
Commercial and industrial	$	119,761	$	5,576	$	125,337
Commercial real estate	27,424		686		28,110
Equipment lease financing	6,891		264		7,155
Total commercial	$	154,076	$	6,526	$	160,602


(a)	Loans in our commercial portfolio are classified as Pass Rated or Criticized based on the regulatory definitions, which are driven by the PD and LGD ratings that we assign. The Criticized classification includes loans that were rated special mention, substandard or doubtful as of September 30, 2020 and December 31, 2019.

Home Equity and Residential Real Estate

We use several credit quality indicators, including delinquency information, nonperforming loan information, updated credit scores, originated and updated LTV ratios, to monitor and manage credit risk within the home equity and residential real estate loan classes. A summary of credit quality indicators follows:

Delinquency/Delinquency Rates: We monitor trending of delinquency/delinquency rates for home equity and residential real estate loans. See Table 44 for additional information.

Nonperforming Loans: We monitor trending of nonperforming loans for home equity and residential real estate loans. See Table 44 for additional information.

Credit Scores: We use a national third-party provider to update FICO credit scores for home equity and residential real estate loans at least quarterly. The updated scores are incorporated into a series of credit management reports, which are utilized to monitor the risk in the loan classes.

LTV (inclusive of combined loan-to-value (CLTV) for first and subordinate lien positions): At least annually, we update the property values of real estate collateral and calculate an updated LTV ratio. For open-end credit lines secured by real estate in regions experiencing significant declines in property values, more frequent valuations may occur. We examine LTV migration and stratify LTV into categories to monitor the risk in the loan classes.

We use a combination of original LTV and updated LTV for internal risk management and reporting purposes (e.g., line management, loss mitigation strategies). In addition to the fact that estimated property values by their nature are estimates, given certain data limitations, it is important to note that updated LTVs may be based upon management’s assumptions (i.e., if an updated LTV is not provided by the third-party service provider, HPI changes will be incorporated in arriving at management’s estimate of updated LTV).

Updated LTV is estimated using modeled property values. The related estimates and inputs are based upon an approach that uses a combination of third-party automated valuation models, broker price opinions, HPI indices, property location, internal and external balance information, origination data and management assumptions. We generally utilize origination lien balances provided by a third-party, where applicable, which do not include an amortization assumption when calculating updated LTV. Accordingly, the results of the calculations do not represent actual appraised loan level collateral or updated LTV based upon lien balances held by others, and as such, are necessarily imprecise and subject to change as we refine our methodology.

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

Table 47: Home Equity and Residential Real Estate Credit Quality Indicators



	Term Loans by Origination Year
September 30, 2020 - In millions	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Home equity
Current estimated LTV ratios																	.
Greater than or equal to 100%	$	5	$	41	$	18	$	17	$	10	$	100	$	605	$	309	$	1,105
Greater than or equal to 90% to less than 100%	29		95		21		15		8		69		687		226		1,150
Less than 90%	2,609		2,121		621		889		750		4,225		7,941		3,128		22,284
Total home equity	$	2,643	$	2,257	$	660	$	921	$	768	$	4,394	$	9,233	$	3,663	$	24,539
Updated FICO scores
Greater than 660	$	2,580	$	2,156	$	605	$	867	$	725	$	3,955	$	8,818	$	2,846	$	22,552
Less than or equal to 660	62		101		54		53		42		429		402		732		1,875
No FICO score available	1				1		1		1		10		13		85		112
Total home equity	$	2,643	$	2,257	$	660	$	921	$	768	$	4,394	$	9,233	$	3,663	$	24,539
Residential real estate
Current estimated LTV ratios
Greater than or equal to 100%			$	34	$	33	$	49	$	49	$	189					$	354
Greater than or equal to 90% to less than 100%	$	15	69		32		54		37		114						321
Less than 90%	6,174		4,757		1,329		2,153		2,254		4,693						21,360
Government insured or guaranteed loans	5		23		23		34		49		717						851
Total residential real estate	$	6,194	$	4,883	$	1,417	$	2,290	$	2,389	$	5,713					$	22,886
Updated FICO scores
Greater than 660	$	6,151	$	4,813	$	1,362	$	2,215	$	2,272	$	4,295					$	21,108
Less than or equal to 660	36		45		30		37		62		567						777
No FICO score available	2		2		2		4		6		134						150
Government insured or guaranteed loans	5		23		23		34		49		717						851
Total residential real estate	$	6,194	$	4,883	$	1,417	$	2,290	$	2,389	$	5,713					$	22,886



	Home equity		Residential real estate
December 31, 2019 - In millions	Home equity		Residential real estate
Current estimated LTV ratios
Greater than or equal to 100%	$	1,243	$	333
Greater than or equal to 90% to less than 100%	1,047		340
Less than 90%	22,068		19,305
No LTV ratio available	184		83
Government insured or guaranteed loans			584
Purchased impaired loans	543		1,176
Total loans	$	25,085	$	21,821
Updated FICO Scores
Greater than 660	$	22,245	$	19,341
Less than or equal to 660	2,019		569
No FICO score available	278		151
Government insured or guaranteed loans			584
Purchased impaired loans	543		1,176
Total loans	$	25,085	$	21,821

Automobile, Credit Card, Education and Other Consumer

We monitor a variety of credit quality information in the management of these consumer loan classes. For all loan types, we generally use a combination of internal loan parameters as well as an updated FICO score. We use FICO scores as a primary credit quality indicator for automobile and credit card loans, as well as non-government guaranteed or non-insured education loans and other secured and unsecured lines and loans. Internal credit metrics, such as delinquency status, are heavily relied upon as credit quality indicators for government guaranteed or insured education loans and consumer loans to high net worth individuals, as internal credit metrics are more relevant than FICO scores for these types of loans.

Along with the monitoring of delinquency trends and losses for each class, FICO credit score updates are obtained at least quarterly along with a variety of credit bureau attributes. Loans with high FICO scores tend to have a lower likelihood of loss. Conversely, loans with low FICO scores tend to have a higher likelihood of loss.

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

Table 48: Credit Quality Indicators for Automobile, Credit Card, Education and Other Consumer Loan Classes



	Term Loans by Origination Year
September 30, 2020 - In millions	2020		2019		2018		2017		2016		Prior		Revolving Loans		Revolving Loans Converted to Term		Total Loans
Automobile
FICO score greater than 719	$	2,184	$	3,573	$	1,663	$	916	$	496	$	141					$	8,973
650 to 719	630		1,642		929		403		162		53						3,819
620 to 649	90		365		213		83		31		12						794
Less than 620	75		532		474		202		78		30						1,391
Total automobile	$	2,979	$	6,112	$	3,279	$	1,604	$	767	$	236					$	14,977
Credit card
FICO score greater than 719													$	3,309	$	13	$	3,322
650 to 719													2,033		31		2,064
620 to 649													348		13		361
Less than 620													419		40		459
No FICO score available or required (a)													94		3		97
Total credit card													$	6,203	$	100	$	6,303
Education
FICO score greater than 719	$	17	$	88	$	117	$	89	$	73	$	651					$	1,035
650 to 719	6		10		14		9		7		102						148
620 to 649			1		2		1		1		15						20
Less than 620					1		1		1		16						19
No FICO score available or required (a)	11		10		7		5		1		1						35
Total loans using FICO credit metric	34		109		141		105		83		785						1,257
Other internal credit metrics	30		58								1,706						1,794
Total education	$	64	$	167	$	141	$	105	$	83	$	2,491					$	3,051
Other consumer
FICO score greater than 719	$	338	$	487	$	164	$	50	$	14	$	69	$	209	$	1	$	1,332
650 to 719	129		273		112		25		6		19		138		1		703
620 to 649	12		42		18		4		1		4		22				103
Less than 620	9		38		25		7		2		7		32		1		121
Total loans using FICO credit metric	488		840		319		86		23		99		401		3		2,259
Other internal credit metrics	63		41		40		28		61		77		2,246		14		2,570
Total other consumer	$	551	$	881	$	359	$	114	$	84	$	176	$	2,647	$	17	$	4,829




December 31, 2019 - In millions	Automobile		Credit Card		Education		Other Consumer
FICO score greater than 719	$	9,232	$	3,867	$	1,139	$	1,421
650 to 719	4,577		2,326		197		843
620 to 649	1,001		419		25		132
Less than 620	1,603		544		27		143
No FICO score available or required (a)	341		152		15		27
Total loans using FICO credit metric	16,754		7,308		1,403		2,566
Consumer loans using other internal credit metrics					1,933		2,371
Total loans	$	16,754	$	7,308	$	3,336	$	4,937
Weighted-average updated FICO score (b)	726		724		773		727

(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)

A TDR is a loan whose terms have been restructured in a manner that grants a concession to a borrower experiencing financial difficulty. Loans that have been restructured for COVID-19 related hardships and meet certain criteria under the CARES Act are not categorized as TDRs. See Note 1 Accounting Policies for additional information related to TDRs.

Table 49 quantifies the number of loans that were classified as TDRs as well as the change in the loans’ balance as a result of becoming a TDR during the three and nine months ended September 30, 2020 and September 30, 2019. Additionally, the table provides information about the types of TDR concessions. See Note 3 Asset Quality in our 2019 Form 10-K for additional details on these TDR concessions.

Table 49: Financial Impact and TDRs by Concession Type



			Pre-TDR Amortized Cost Basis (b)		Post-TDR Amortized Cost Basis (c)
During the three months ended September 30, 2020 (a) Dollars in millions	Number of Loans		Pre-TDR Amortized Cost Basis (b)		Principal Forgiveness		Rate Reduction		Other		Total
Commercial		16	$	95			$	10	$	69	$	79
Consumer		2,769	46				26		14		40
Total TDRs		2,785	$	141			$	36	$	83	$	119
During the nine months ended September 30, 2020 (a) Dollars in millions
Commercial		58	$	304	$	39	$	10	$	231	$	280
Consumer		9,925	139				67		59		126
Total TDRs		9,983	$	443	$	39	$	77	$	290	$	406

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

(b) Represents the amortized cost basis of the loans as of the quarter end prior to TDR designation.



			Pre-TDR Recorded Investment (e)		Post-TDR Recorded Investment (f)
During the three months ended September 30, 2019 (d) Dollars in millions	Number of Loans		Pre-TDR Recorded Investment (e)		Principal Forgiveness	Rate Reduction		Other		Total
Commercial		21	$	97				$	72	$	72
Consumer		3,656	45			$	24	19		43
Total TDRs		3,677	$	142		$	24	$	91	$	115
During the nine months ended September 30, 2019 (d) Dollars in millions
Commercial		58	$	233		$	1	$	208	$	209
Consumer		11,009	131			72		51		123
Total TDRs		11,067	$	364		$	73	$	259	$	332

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

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

(f) 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 following table provides a summary of TDRs that subsequently defaulted during the periods presented and were classified as

TDRs during the applicable 12-month period preceding September 30, 2020 and September 30, 2019.

Table 50: Subsequently Defaulted TDRs



In millions	2020		2019
Three months ended September 30	$	26	$	42
Nine months ended September 30	$	46	$	68

Allowance for Credit Losses

We maintain the ACL related to loans at levels that we believe to be appropriate to absorb expected credit losses in the portfolios as of the balance sheet date. See Note 1 Accounting Policies for a discussion of the methodologies used to determine this allowance. A rollforward of the ACL related to loans follows.

Table 51: Rollforward of Allowance for Credit Losses (a)



	Three months ended September 30, 2020									Nine months ended September 30, 2020
In millions	Commercial			Consumer			Total			Commercial			Consumer			Total
Allowance for loan and lease losses
Beginning balance	$	3,380		$	2,548		$	5,928		$	1,812		$	930		$	2,742
Adoption of ASU 2016-13 (b)										(304		)	767			463
Beginning balance, adjusted	3,380			2,548			5,928			1,508			1,697			3,205
Charge-offs	(64		)	(183		)	(247		)	(269		)	(596		)	(865		)
Recoveries	26			66			92			65			197			262
Net (charge-offs)	(38		)	(117		)	(155		)	(204		)	(399		)	(603		)
Provision for (recapture of) credit losses	185			(208		)	(23		)	2,224			925			3,149
Other	1						1
Ending balance	$	3,528		$	2,223		$	5,751		$	3,528		$	2,223		$	5,751
Allowance for unfunded lending related commitments (c)
Beginning balance	$	548		$	114		$	662		$	316		$	2		$	318
Adoption of ASU 2016-13 (b)										53			126			179
Beginning balance, adjusted	548			114			662			369			128			497
Provision for (recapture of) credit losses	34			(7		)	27			213			(21		)	192
Ending balance	$	582		$	107		$	689		$	582		$	107		$	689
Allowance for credit losses at September 30	$	4,110		$	2,330		$	6,440		$	4,110		$	2,330		$	6,440


(a)	Excludes allowances for investment securities and other financial assets, which together totaled $98 million at September 30, 2020.


(b)	Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2020 and our transition from an incurred loss methodology for our reserves to an expected credit loss methodology.

(c)

See Note 9 Commitments for additional information about the underlying commitments related to this allowance.

The following presents an analysis of changes impacting the ACL related to loans for the nine months ended September 30, 2020.

Table 52: Analysis of Changes in the Allowance for Credit Losses (a)

In millions

(a) Excludes allowances for investment securities and other financial assets, which together totaled $98 million at September 30, 2020.

(b) Portfolio changes primarily represents the impact of increases/decreases in loan balances, age and mix due to new originations/purchases, as well as credit quality and net charge-off activity.

(c) Economic and qualitative factors primarily represent our evaluation and determination of an economic forecast applied to our loan portfolio, as well as updates to qualitative factor adjustments.

The $2.7 billion increase in the ACL since January 1, 2020 was driven by the following factors in the commercial and consumer portfolios:


•	Commercial reserves increased $2.2 billion attributable to the significantly adverse economic impact of the pandemic and its resulting effects on credit quality and loan growth.


•	Consumer reserves increased $.5 billion primarily reflecting the significantly adverse economic impact of the pandemic.

Allowance for Loan and Lease Losses

Prior to January 1, 2020, we maintained our ALLL at levels we believed to be appropriate to absorb estimated probable credit losses incurred in the portfolios as of the balance sheet date. We used the two main portfolio segments - Commercial and Consumer, and developed and documented the ALLL under separate methodologies for each of these portfolio segments. See Note 1 Accounting Policies in our 2019 Form 10-K for a description of the accounting policies for ALLL.

A rollforward of the ALLL and associated loan data follows:

Table 53: Rollforward of Allowance for Loan and Lease Losses and Associated Loan Data



At or for the nine months ended September 30, 2019 Dollars in millions	Commercial			Consumer			Total
Allowance for loan and lease losses
January 1, 2019	$	1,663		$	966		$	2,629
Charge-offs	(138		)	(545		)	(683		)
Recoveries	59			191			250
Net (charge-offs)	(79		)	(354		)	(433		)
Provision for credit losses	247			305			552
Net decrease in allowance for unfunded loan commitments and letters of credit	(20		)	1			(19		)
Other				9			9
September 30, 2019	$	1,811		$	927		$	2,738
TDRs individually evaluated for impairment	$	34		$	95		$	129
Other loans individually evaluated for impairment	47						47
Loans collectively evaluated for impairment	1,730			554			2,284
Purchased impaired loans				278			278
September 30, 2019	$	1,811		$	927		$	2,738
Loan portfolio
TDRs individually evaluated for impairment	$	420		$	1,343		$	1,763
Other loans individually evaluated for impairment	265						265
Loans collectively evaluated for impairment	159,503			73,298			232,801
Fair value option loans (a)				754			754
Purchased impaired loans				1,794			1,794
September 30, 2019	$	160,188		$	77,189		$	237,377

(a) Loans accounted for under the fair value option were not evaluated for impairment as these loans are accounted for at fair value. Accordingly, there was no allowance recorded on those loans.