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Asset Quality
 9 Months Ended
Sep. 30, 2018
Receivables [Abstract]  
Asset Quality 4. Asset Quality

We assess the credit quality of the loan portfolio by monitoring net credit losses, levels of nonperforming assets, delinquencies, and credit quality ratings as defined by management.

Credit Quality Indicators

The prevalent risk characteristic for both commercial and consumer loans is the risk of loss arising from an obligor’s inability or failure to meet contractual payment or performance terms. Evaluation of this risk is stratified and monitored by the loan risk rating grades assigned for the commercial loan portfolios and the refreshed FICO score assigned for the consumer loan portfolios.

Most extensions of credit are subject to loan grading or scoring. Loan grades are assigned at the time of origination, verified by credit risk management, and periodically re-evaluated thereafter. This risk rating methodology blends our judgment with quantitative modeling. Commercial loans generally are assigned two internal risk ratings. The first rating reflects the probability that the borrower will default on an obligation; the second rating reflects expected recovery rates on the credit facility. Default probability is determined based on, among other factors, the financial strength of the borrower, an assessment of the borrower’s management, the borrower’s competitive position within its industry sector, and our view of industry risk in the context of the general economic outlook. Types of exposure, transaction structure, and collateral, including credit risk mitigants, affect the expected recovery assessment.

Commercial Credit Exposure — Excluding PCI
Credit Risk Profile by Creditworthiness Category (a), (b) 
 
Commercial and industrial
RE — Commercial
RE — Construction
Commercial lease
Total
in millions
September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

RATING
2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

Pass
$
43,052

$
39,833

$
14,016

$
13,328

$
1,679

$
1,894

$
4,405

$
4,730

$
63,152

$
59,785

Criticized (Accruing)
1,691

1,790

398

482

79

38

55

90

2,223

2,400

Criticized (Nonaccruing)
226

153

98

30

2

2

10

6

336

191

Total
$
44,969

$
41,776

$
14,512

$
13,840

$
1,760

$
1,934

$
4,470

$
4,826

$
65,711

$
62,376

 
 
 
 
 
 
 
 
 
 
 
(a)
Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.
(b)
The term criticized refers to those loans that are internally classified by Key as special mention or worse, 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 classified as criticized.

Consumer Credit Exposure — Excluding PCI
Non-PCI Loans by Refreshed FICO Score (a) 
 
Residential — Prime
Consumer direct loans
Credit cards
Consumer indirect loans
Total
in millions
September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

FICO SCORE
2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

750 and above
$
10,040

$
10,226

$
551

$
519

$
485

$
477

$
1,620

$
1,472

$
12,696

$
12,694

660 to 749
4,850

5,181

701

690

501

508

1,315

1,184

7,367

7,563

Less than 660
1,384

1,519

211

225

112

121

514

529

2,221

2,394

No Score
220

208

341

356

—

—

106

76

667

640

Total
$
16,494

$
17,134

$
1,804

$
1,790

$
1,098

$
1,106

$
3,555

$
3,261

$
22,951

$
23,291

 
 
 
 
 
 
 
 
 
 
 
(a)
Borrower FICO scores provide information about the credit quality of our consumer loan portfolio as they provide an indication as to the likelihood that a debtor will repay its debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the above table at the dates indicated.

Commercial Credit Exposure — PCI
Credit Risk Profile by Creditworthiness Category (a), (b) 
 
Commercial and Industrial
RE — Commercial
RE — Construction
Commercial Lease
Total
in millions
September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

RATING
2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

Pass
$
23

$
41

$
134

$
153

$
3

$
26

—

—

$
160

$
220

Criticized
31

42

70

95

—

—

—

—

101

137

Total
$
54

$
83

$
204

$
248

$
3

$
26

—

—

$
261

$
357

 
 
 
 
 
 
 
 
 
 
 
(a)
Credit quality indicators are updated on an ongoing basis and reflect credit quality information as of the dates indicated.
(b)
The term “criticized” refers to those loans that are internally classified by Key as special mention or worse, 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 classified as criticized.

Consumer Credit Exposure — PCI
PCI Loans by Refreshed FICO Score (a) 
 
Residential — Prime
Consumer direct loans
Credit cards
Consumer indirect loans
Total
in millions
September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

September 30,

December 31,

FICO SCORE
2018

2017

2018

2017

2018

2017

2018

2017

2018

2017

750 and above
$
138

$
149

—

—

—

—

—

—

$
138

$
149

660 to 749
97

117

$
1

$
2

—

—

—

—

98

119

Less than 660
99

105

2

2

—

—

—

—

101

107

No Score 
8

6

—

—

—

—

—

—

8

6

Total
$
342

$
377

$
3

$
4

—

—

—

—

$
345

$
381

 
 
 
 
 
 
 
 
 
 
 
(a)
Borrower FICO scores provide information about the credit quality of our consumer loan portfolio as they provide an indication as to the likelihood that a debtor will repay its debts. The scores are obtained from a nationally recognized consumer rating agency and are presented in the above table at the dates indicated.

Nonperforming and Past Due Loans

Our policies for determining past due loans, placing loans on nonaccrual, applying payments on nonaccrual loans, and resuming accrual of interest for our commercial and consumer loan portfolios are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Nonperforming Loans” beginning on page 101 of our 2017 Form 10-K.

The following aging analysis of past due and current loans as of September 30, 2018, and December 31, 2017, provides further information regarding Key’s credit exposure.

Aging Analysis of Loan Portfolio (a) 
September 30, 2018
Current
30-59
Days Past
Due (b)
60-89
Days Past
Due (b)
90 and
Greater
Days Past
Due (b)
Non-performing
Loans
Total Past
Due and
Non-performing
Loans
Purchased
Credit
Impaired
Total
Loans (c), (d)
in millions
LOAN TYPE
 
 
 
 
 
 
 
 
Commercial and industrial
$
44,561

$
74

$
83

$
24

$
227

$
408

$
54

$
45,023

Commercial real estate:
 
 
 
 
 
 
 
 
Commercial mortgage
14,347

24

20

23

98

165

204

14,716

Construction
1,715

20

14

9

2

45

3

1,763

Total commercial real estate loans
16,062

44

34

32

100

210

207

16,479

Commercial lease financing
4,449

9

1

1

10

21

—

4,470

Total commercial loans
$
65,072

$
127

$
118

$
57

$
337

$
639

$
261

$
65,972

Real estate — residential mortgage
$
5,094

$
13

$
3

$
2

$
62

$
80

$
323

$
5,497

Home equity loans
11,044

36

11

8

221

276

19

11,339

Consumer direct loans
1,779

9

5

7

4

25

3

1,807

Credit cards
1,075

6

5

10

2

23

—

1,098

Consumer indirect loans
3,498

29

6

3

19

57

—

3,555

Total consumer loans
$
22,490

$
93

$
30

$
30

$
308

$
461

$
345

$
23,296

Total loans
$
87,562

$
220

$
148

$
87

$
645

$
1,100

$
606

$
89,268

 
 
 
 
 
 
 
 
 
(a)
Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs.
(b)
Past due loan amounts exclude PCI, even if contractually past due (or if we do not expect to collect principal or interest in full based on the original contractual terms), as we are currently accreting income over the remaining term of the loans.
(c)
Net of unearned income, net deferred loan fees and costs, and unamortized discounts and premiums.
(d)
Future accretable yield related to PCI loans is not included in the analysis of the loan portfolio.
December 31, 2017
Current
30-59
Days Past
Due (b)
60-89
Days Past
Due (b)
90 and
Greater
Days Past
Due (b)
Non-performing
Loans
Total Past
Due and
Non-performing
Loans
Purchased
Credit
Impaired
Total
Loans (c), (d)
in millions
LOAN TYPE
 
 
 
 
 
 
 
 
Commercial and industrial
$
41,444

$
111

$
34

$
34

$
153

$
332

83

$
41,859

Commercial real estate:
 
 
 
 
 
 
 
 
Commercial mortgage
13,750

26

13

21

30

90

248

14,088

Construction
1,919

4

9

—

2

15

26

1,960

Total commercial real estate loans
15,669

30

22

21

32

105

274

16,048

Commercial lease financing
4,791

23

4

2

6

35

—

4,826

Total commercial loans
$
61,904

$
164

$
60

$
57

$
191

$
472

357

$
62,733

Real estate — residential mortgage
$
5,043

$
16

$
7

$
4

$
58

$
85

$
355

$
5,483

Home equity loans
11,721

32

15

9

229

285

22

12,028

Consumer direct loans
1,768

9

4

5

4

22

4

1,794

Credit cards
1,081

7

5

11

2

25

—

1,106

Consumer indirect loans
3,199

33

7

3

19

62

—

3,261

Total consumer loans
$
22,812

$
97

$
38

$
32

$
312

$
479

$
381

$
23,672

Total loans
$
84,716

$
261

$
98

$
89

$
503

$
951

$
738

$
86,405

 
 
 
 
 
 
 
 
 
(a)
Amounts in table represent recorded investment and exclude loans held for sale. Recorded investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs.
(b)
Past due loan amounts exclude PCI, even if contractually past due (or if we do not expect to collect principal or interest in full based on the original contractual terms), as we are currently accreting income over the remaining term of the loans.
(c)
Net of unearned income, net deferred loan fees and costs, and unamortized discounts and premiums.
(d)
Future accretable yield related to purchased credit impaired loans is not included in the analysis of the loan portfolio.

At September 30, 2018, the approximate carrying amount of our commercial nonperforming loans outstanding represented 80% of their original contractual amount owed, total nonperforming loans outstanding represented 83% of their original contractual amount owed, and nonperforming assets in total were carried at 83% of their original contractual amount owed.

Nonperforming loans and loans held for sale reduced expected interest income by $8 million and $22 million for the three and nine months ended September 30, 2018, respectively, and $6 million and $18 million for the three and nine months ended September 30, 2017, respectively.

The following tables set forth a further breakdown of individually impaired loans as of September 30, 2018, and December 31, 2017: 

 
September 30, 2018
 
December 31, 2017
 
Recorded
Investment (a)
Unpaid Principal Balance (b)
Specific
Allowance
 
Recorded
Investment (a)
Unpaid Principal Balance (b)
Specific
Allowance
in millions
With no related allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
$
187

$
255

—

 
$
126

$
153

—

Commercial real estate:
 
 
 
 
 
 
 
Commercial mortgage
11

15

—

 
12

18

—

Total commercial real estate loans
11

15

—

 
12

18

—

Total commercial loans
198

270

—

 
138

171

—

Real estate — residential mortgage
15

22

—

 
17

17

—

Home equity loans
50

57

—

 
56

56

—

Consumer Direct
—

1

—

 
—

—

—

Consumer indirect loans
2

4

—

 
2

2

—

Total consumer loans
67

84

—

 
75

75

—

Total loans with no related allowance recorded
265

354

—

 
213

246

—

With an allowance recorded:
 
 
 
 
 
 
 
Commercial and industrial
45

48

$
5

 
10

28

$
6

Commercial real estate:
 
 
 
 
 
 
 
Commercial mortgage
65

66

11

 
—

—

—

Total commercial real estate loans
65

66

11

 
—

—

—

Total commercial loans
110

114

16

 
10

28

6

Real estate — residential mortgage
34

52

4

 
32

32

5

Home equity loans
77

84

7

 
61

61

9

Consumer direct loans
4

4

—

 
4

4

—

Credit cards
3

3

—

 
2

2

—

Consumer indirect loans
33

33

3

 
32

32

3

Total consumer loans
151

176

14

 
131

131

17

Total loans with an allowance recorded
261

290

30

 
141

159

23

Total
$
526

$
644

$
30

 
$
354

$
405

$
23

 
 
 
 
 
 
 
 
(a)
The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our Consolidated Balance Sheet.
(b)
The Unpaid Principal Balance represents the customer’s legal obligation to us.

The following table sets forth a further breakdown of the average individually impaired loans reported by Key:
Average Recorded Investment (a)
Three Months Ended September 30,
Nine Months Ended September 30,
in millions
2018

2017

2018

2017

Commercial and industrial
$
209

$
162

$
184

$
221

Commercial real estate:
 
 
 
 
Commercial mortgage
48

14

44

8

Total commercial real estate loans
48

14

44

8

Total commercial loans
257

176

228

229

Real estate — residential mortgage
49

49

49

50

Home equity loans
126

118

122

121

Consumer direct loans
4

4

4

3

Credit cards
3

2

3

3

Consumer indirect loans
35

33

34

32

Total consumer loans
217

206

212

209

Total
$
474

$
382

$
440

$
438

 
 
 
 
 
(a)
The Recorded Investment represents the face amount of the loan increased or decreased by applicable accrued interest, net deferred loan fees and costs, and unamortized premium or discount, and reflects direct charge-offs. This amount is a component of total loans on our Consolidated Balance Sheet.

Interest income recognized on the outstanding balances of accruing impaired loans totaled $4 million and $9 million for the three and nine months ended September 30, 2018, respectively, and $3 million and $9 million for the three and nine months ended September 30, 2017, respectively.

TDRs

We classify loan modifications as TDRs when a borrower is experiencing financial difficulties and we have granted a concession without commensurate financial, structural, or legal consideration. An acquired loan may only be classified as a TDR if a modification meeting the above TDR criteria is performed after the acquisition date. PCI loans cannot be classified as TDRs. All commercial and consumer loan TDRs, regardless of size, are individually evaluated for impairment to determine the probable loss content and are assigned a specific loan allowance. This
designation has the effect of moving the loan from the general reserve methodology (i.e., collectively evaluated) to the specific reserve methodology (i.e., individually evaluated) and may impact the ALLL through a charge-off or increased loan loss provision. These components affect the ultimate allowance level.

As TDRs are individually evaluated for impairment under the specific reserve methodology, subsequent defaults do not generally have a significant additional impact on the ALLL. Commitments outstanding to lend additional funds to borrowers whose loan terms have been modified in TDRs are $4 million and $2 million at September 30, 2018, and December 31, 2017, respectively.

Our loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. The consumer TDR other concession category primarily includes those borrowers’ debts that are discharged through bankruptcy and have not been formally re-affirmed. At September 30, 2018, and December 31, 2017, the recorded investment of consumer residential mortgage loans in the process of foreclosure was approximately $130 million and $142 million, respectively. At September 30, 2018, and December 31, 2017, we had $28 million and $31 million, respectively, of OREO which included the carrying value of foreclosed residential real estate of approximately $25 million and $26 million, respectively.

The following table shows the post-modification outstanding recorded investment by concession type for our commercial and consumer accruing and nonaccruing TDRs that occurred during the periods indicated:
 
Three Months Ended September 30,
Nine Months Ended September 30,
in millions
2018
2017
2018
2017
Commercial loans:
 
 
 
 
Extension of Maturity Date
$
20

$
7

$
20

$
24

Payment or Covenant Modification/Deferment
26

—

46

32

Bankruptcy Plan Modification
—

—

7

30

Total
$
46

$
7

$
73

$
86

Consumer loans:
 
 
 
 
Interest rate reduction
$
4

$
3

$
22

$
10

Other
10

8

29

21

Total
$
14

$
11

$
51

$
31

Total commercial and consumer TDRs
$
60

$
18

$
124

$
117



The following table summarizes the change in the post-modification outstanding recorded investment of our accruing and nonaccruing TDRs during the periods indicated:
 
Three Months Ended September 30,
Nine Months Ended September 30,
in millions
2018
2017
2018
2017
Balance at beginning of the period
$
347

$
333

$
317

$
280

Additions
58

20

133

134

Payments
(28
)
(36
)
(69
)
(83
)
Charge-offs
(11
)
(2
)
(15
)
(16
)
Balance at end of period (a)
$
366

$
315

$
366

$
315

 
 
 
 
 


A further breakdown of TDRs included in nonperforming loans by loan category for the periods indicated are as follows:
 
September 30, 2018
 
December 31, 2017
 
Number of
Loans
Pre-modification
Outstanding
Recorded
Investment
Post-modification
Outstanding
Recorded
Investment
 
Number of
Loans
Pre-modification
Outstanding
Recorded
Investment
Post-modification
Outstanding
Recorded
Investment
dollars in millions
LOAN TYPE
 
 
 
 
 
 
 
Nonperforming:
 
 
 
 
 
 
 
Commercial and industrial
30

$
120

$
101

 
20

$
109

$
86

Commercial real estate:
 
 
 
 
 
 
 
Commercial mortgage
6

14

10

 
8

16

12

Total commercial real estate loans
6

14

10

 
8

16

12

Total commercial loans
36

134

111

 
28

125

98

Real estate — residential mortgage
257

18

18

 
308

18

18

Home equity loans
1,233

72

66

 
1,025

64

57

Consumer direct loans
137

2

2

 
114

2

2

Credit cards
249

1

1

 
322

2

1

Consumer indirect loans
973

17

13

 
825

16

13

Total consumer loans
2,849

110

100

 
2,594

102

91

Total nonperforming TDRs
2,885

244

211

 
2,622

227

189

Prior-year accruing:(a)
 
 
 
 
 
 
 
Commercial and industrial
18

53

37

 
4

30

13

Total commercial loans
18

53

37

 
4

30

13

Real estate — residential mortgage
508

37

31

 
484

31

31

Home equity loans
1,305

77

61

 
1,276

75

59

Consumer direct loans
81

4

2

 
48

3

2

Credit cards
522

3

2

 
430

1

1

Consumer indirect loans
512

34

22

 
320

31

22

Total consumer loans
2,928

155

118

 
2,558

141

115

Total prior-year accruing TDRs
2,946

208

155

 
2,562

171

128

Total TDRs
5,831

$
452

$
366

 
5,184

$
398

$
317

 
 
 
 
 
 
 
 
(a)
All TDRs that were restructured prior to January 1, 2018, and January 1, 2017, and are fully accruing.

Commercial loan TDRs are considered defaulted when principal and interest payments are 90 days past due. Consumer loan TDRs are considered defaulted when principal and interest payments are more than 60 days past due. During the three months ended September 30, 2018, there were no commercial loan TDRs and 82 consumer loan TDRs with a combined recorded investment of $2 million that experienced payment defaults after modifications resulting in TDR status during 2017. During the three months ended September 30, 2017, there were no commercial loan TDRs and 45 consumer loan TDRs with a combined recorded investment of $1 million that experienced payment defaults after modifications resulting in TDR status during 2016.

During the nine months ended September 30, 2018, there were no commercial loan TDRs and 178 consumer loan TDRs with a combined recorded investment of $4 million that experienced payment defaults after modifications resulting in TDR status during 2017. During the nine months ended September 30, 2017, there were no commercial loan TDRs and 100 consumer loan TDRs with a combined recorded investment of $3 million that experienced payment defaults after modifications resulting in TDR status during 2016.

ALLL and Liability for Credit Losses on Unfunded Lending-Related Commitments

We determine the appropriate level of the ALLL on at least a quarterly basis. The methodology is described in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Allowance for Loan and Lease Losses” beginning on page 102 of our 2017 Form 10-K.

The ALLL on the acquired non-impaired loan portfolio is estimated using the same methodology as the originated portfolio, however, the estimated ALLL is compared to the remaining accretable yield to determine if an ALLL must be recorded. For PCI loans, Key estimates cash flows expected to be collected quarterly. Decreases in expected cash flows are recognized as impairment through a provision for loan and lease losses and an increase in the ALLL. There was less than $1 million of provision for loan and lease losses on PCI loans during the nine months ended September 30, 2018, and a credit of $1 million during the three months ended September 30, 2018. There was $4 million of provision for loan and lease losses on PCI loans during the nine months ended September 30, 2017, and less than $1 million of provision for loan and lease losses on PCI loans during the three months ended September 30, 2017. There was $3 million of provision for loan and lease losses on PCI loans during the twelve months ended December 31, 2017.

The ALLL at September 30, 2018, represents our best estimate of the incurred credit losses inherent in the loan portfolio at that date. The changes in the ALLL by loan category for the periods indicated are as follows:

Three months ended September 30, 2018:
in millions
June 30, 2018
Provision
 
Charge-offs
Recoveries
September 30, 2018
Commercial and Industrial
$
542

$
34

 
$
(38
)
$
5

$
543

Commercial real estate:
 
 
 
 
 
 
Real estate — commercial mortgage
139

9

 
(6
)
1

143

Real estate — construction
28

3

 
—

—

31

Total commercial real estate loans
167

12

 
(6
)
1

174

Commercial lease financing
40

(2
)
 
(4
)
3

37

Total commercial loans
749

44

 
(48
)
9

754

Real estate — residential mortgage
10

(1
)
 
(2
)
2

9

Home equity loans
37

(2
)
 
(4
)
3

34

Consumer direct loans
26

9

 
(10
)
1

26

Credit cards
46

7

 
(10
)
2

45

Consumer indirect loans
19

3

 
(7
)
4

19

Total consumer loans
138

16

 
(33
)
12

133

Total ALLL — continuing operations
887

60

(a) 
(81
)
21

887

Discontinued operations
14

3

 
(4
)
1

14

Total ALLL — including discontinued operations
$
901

$
63

 
$
(85
)
$
22

$
901

 
 
 
 
 
 
 
(a)
Excludes a provision for losses on lending-related commitments of $2 million.

Three months ended September 30, 2017:
in millions
June 30, 2017
Provision
 
Charge-offs
Recoveries
September 30, 2017
Commercial and Industrial
$
528

$
8

 
$
(29
)
$
25

$
532

Commercial real estate:
 
 
 
 
 
 
Real estate — commercial mortgage
144

(1
)
 
(6
)
1

138

Real estate — construction
28

3

 
(2
)
—

29

Total commercial real estate loans
172

2

 
(8
)
1

167

Commercial lease financing
40

1

 
(1
)
3

43

Total commercial loans
740

11

 
(38
)
29

742

Real estate — residential mortgage
9

(2
)
 
—

1

8

Home equity loans
42

(1
)
 
(6
)
4

39

Consumer direct loans
25

10

 
(8
)
1

28

Credit cards
44

10

 
(11
)
1

44

Consumer indirect loans
10

14

 
(8
)
3

19

Total consumer loans
130

31

 
(33
)
10

138

Total ALLL — continuing operations
870

42

(a) 
(71
)
39

880

Discontinued operations
21

5

 
(10
)
2

18

Total ALLL — including discontinued operations
$
891

$
47

 
$
(81
)
$
41

$
898

 
 
 
 
 
 
 

(a)
Excludes a provision for losses on lending-related commitments of $9 million.


Nine months ended September 30, 2018:
in millions
December 31, 2017
Provision
 
Charge-offs
Recoveries
September 30, 2018
Commercial and Industrial
529

$
110

 
$
(114
)
$
18

$
543

Commercial real estate:
 
 
 
 
 
 
Real estate — commercial mortgage
133

17

 
(9
)
2

143

Real estate — construction
30

—

 
—

1

31

Total commercial real estate loans
163

17

 
(9
)
3

174

Commercial lease financing
43

(1
)
 
(9
)
4

37

Total commercial loans
735

126

 
(132
)
25

754

Real estate — residential mortgage
7

3

 
(3
)
2

9

Home equity loans
43

(4
)
 
(14
)
9

34

Consumer direct loans
28

20

 
(27
)
5

26

Credit cards
44

30

 
(34
)
5

45

Consumer indirect loans
20

9

 
(22
)
12

19

Total consumer loans
142

58

 
(100
)
33

133

Total ALLL — continuing operations
877

184

(a) 
(232
)
58

887

Discontinued operations
16

5

 
(11
)
4

14

Total ALLL — including discontinued operations
$
893

$
189

 
$
(243
)
$
62

$
901

 
 
 
 
 
 
 
(a)
Excludes a provision for losses on lending-related commitments of $3 million.

Nine months ended September 30, 2017:
in millions
December 31, 2016
Provision
 
Charge-offs
Recoveries
September 30, 2017
Commercial and Industrial
$
508

$
93

 
$
(101
)
$
32

$
532

Commercial real estate:
 
 
 
 
 
 
Real estate — commercial mortgage
144

2

 
(9
)
1

138

Real estate — construction
22

8

 
(2
)
1

29

Total commercial real estate loans
166

10

 
(11
)
2

167

Commercial lease financing
42

5

 
(9
)
5

43

Total commercial loans
716

108

 
(121
)
39

742

Real estate — residential mortgage
17

(11
)
 
(2
)
4

8

Home equity loans
54

(4
)
 
(23
)
12

39

Consumer direct loans
24

26

 
(26
)
4

28

Credit cards
38

36

 
(34
)
4

44

Consumer indirect loans
9

23

 
(24
)
11

19

Total consumer loans
142

70

 
(109
)
35

138

Total ALLL — continuing operations
858

178

(a) 
(230
)
74

880

Discontinued operations
24

8

 
(20
)
6

18

Total ALLL — including discontinued operations
$
882

$
186

 
$
(250
)
$
80

$
898

 
 
 
 
 
 
 
(a)
Excludes a provision for losses on lending-related commitments of $2 million.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of September 30, 2018, follows:
 
Allowance
 
Outstanding
September 30, 2018
Individually
Evaluated  for
Impairment
Collectively
Evaluated  for
Impairment
Purchased
Credit
Impaired
 
Loans
 
Individually
Evaluated  for
Impairment
Collectively
Evaluated  for
Impairment
 
Purchased
Credit
Impaired
in millions
 
 
Commercial and industrial
$
5

$
536

$
2

 
$
45,023

  
$
232

$
44,737

  
$
54

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Commercial mortgage
11

129

3

 
14,716

  
76

14,436

  
204

Construction
—

31

—

 
1,763

  
—

1,760

  
3

Total commercial real estate loans
11

160

3

 
16,479

  
76

16,196

  
207

Commercial lease financing
—

37

—

 
4,470

  
—

4,470

  
—

Total commercial loans 
16

733

5

 
65,972

  
308

65,403

  
261

Real estate — residential mortgage
4

5

—

 
5,497

  
49

5,125

  
323

Home equity loans
7

26

1

 
11,339

  
127

11,193

  
19

Consumer direct loans
—

26

—

 
1,807

  
4

1,800

  
3

Credit cards
—

45

—

 
1,098

  
3

1,095

  
—

Consumer indirect loans
3

16

—

 
3,555

  
35

3,520

  
—

Total consumer loans
14

118

1

 
23,296

  
218

22,733

  
345

Total ALLL — continuing operations
30

851

6

 
89,268

  
526

88,136

  
606

Discontinued operations
2

12

—

 
1,130

(a)  
22

1,108

(a)  
—

Total ALLL — including discontinued operations
$
32

$
863

$
6

 
$
90,398

  
$
548

$
89,244

  
$
606

 
 
 
 
 
 
 
 
 
 
 
(a)
Amount includes $2 million of loans carried at fair value that are excluded from ALLL consideration.

A breakdown of the individual and collective ALLL and the corresponding loan balances as of December 31, 2017, follows:
 
Allowance
 
Outstanding
December 31, 2017
Individually
Evaluated  for
Impairment
Collectively
Evaluated  for
Impairment
Purchased
Credit
Impaired
 
Loans
 
Individually
Evaluated  for
Impairment
Collectively
Evaluated  for
Impairment
 
Purchased
Credit
Impaired
in millions
 
 
Commercial and Industrial
$
6

$
520

$
3

 
$
41,859

  
$
136

$
41,640

  
$
83

Commercial real estate:
 
 
 
 
 
 
 
 
 
 
Commercial mortgage
—

131

2

 
14,088

  
12

13,828

  
248

Construction
—

30

—

 
1,960

  
—

1,934

  
26

Total commercial real estate loans
—

161

2

 
16,048

  
12

15,762

  
274

Commercial lease financing
—

43

—

 
4,826

  
—

4,826

  
—

Total commercial loans
6

724

5

 
62,733

  
148

62,228

  
357

Real estate — residential mortgage
5

2

—

 
5,483

  
49

5,079

  
355

Home equity loans
9

33

1

 
12,028

  
117

11,889

  
22

Consumer direct loans
—

28

—

 
1,794

  
4

1,786

  
4

Credit cards
—

44

—

 
1,106

  
2

1,104

  
—

Consumer indirect loans
3

17

—

 
3,261

  
34

3,227

  
—

Total consumer loans
17

124

1

 
23,672

  
206

23,085

  
381

Total ALLL — continuing operations
23

848

6

 
86,405

  
354

85,313

  
738

Discontinued operations
3

13

—

 
1,314

(a)  
21

1,293

(a) 
—

Total ALLL — including discontinued operations
$
26

$
861

$
6

 
$
87,719

  
$
375

$
86,606

  
$
738

 
 
 
 
 
 
 
 
 
 
 
(a)
Amount includes $2 million of loans carried at fair value that are excluded from ALLL consideration.

The liability for credit losses inherent in unfunded lending-related commitments, such as letters of credit and unfunded loan commitments, is included in “accrued expense and other liabilities” on the balance sheet. We establish the amount of this reserve by considering both historical trends and current market conditions quarterly, or more often if deemed necessary.

Changes in the liability for credit losses on unfunded lending-related commitments are summarized as follows:
 
Three months ended September 30,
Nine months ended September 30,
in millions
2018
2017
2018
2017
Balance at beginning of period
$
58

$
48

$
57

$
55

Provision (credit) for losses on lending-related commitments
2

9

3

2

Balance at end of period
$
60

$
57

$
60

$
57

 
 
 
 
 


PCI Loans

Purchased loans that have evidence of deterioration in credit quality since origination and for which it is probable, at acquisition, that all contractually required payments will not be collected are deemed PCI. Our policies for determining, recording payments on, and derecognizing PCI loans are disclosed in Note 1 (“Summary of Significant Accounting Policies”) under the heading “Purchased Loans” beginning on page 107 of our 2017 Form 10-K.

We have PCI loans from two separate acquisitions, one in 2012 and one in 2016. The following tables present the roll-forward of the accretable yield and the beginning and ending outstanding unpaid principal balance and carrying amount of all PCI loans for the three and nine months ended September 30, 2018, and the twelve months ended December 31, 2017.
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2018
in millions
Accretable Yield
Carrying Amount
Outstanding Unpaid Principal Balance
 
Accretable Yield
Carrying Amount
Outstanding Unpaid Principal Balance
Balance at beginning of period
$
121

$
622

$
669

 
$
131

$
738

$
803

Accretion
(10
)
 
 
 
(33
)
 
 
Net reclassifications from nonaccretable to accretable
13

 
 
 
41

 
 
Payments received, net
(3
)
 
 
 
(18
)
 
 
Balance at end of period
$
121

$
599

$
642

 
$
121

$
599

$
642

 
 
 
 
 
 
 
 

 
 
 
Twelve Months Ended December 31,
 
 
 
2017
in millions
 
 
 
 
Accretable Yield
Carrying Amount
Outstanding Unpaid Principal Balance
Balance at beginning of period
 
 
 
 
$
197

$
865

$
1,002

Additions
 
 
 
 
(32
)
 
 
Accretion
 
 
 
 
(44
)
 
 
Net reclassifications from nonaccretable to accretable
 
 
 
 
15

 
 
Payments received, net
 
 
 
 
(4
)
 
 
Disposals
 
 
 
 
(1
)
 
 
Balance at end of period
 
 
 
 
$
131

$
738

$
803