Outstanding Loans and Leases and Allowance for Credit Losses

v3.20.4

Outstanding Loans and Leases and Allowance for Credit Losses	12 Months Ended
	Dec. 31, 2020
Receivables [Abstract]
Outstanding Loans and Leases and Allowance for Credit Losses	Outstanding Loans and Leases and Allowance for Credit Losses The following tables present total outstanding loans and leases and an aging analysis for the Consumer Real Estate, Credit Card and Other Consumer, and Commercial portfolio segments, by class of financing receivables, at December 31, 2020 and 2019. 30-59 Days Past Due (1) 60-89 Days Past Due (1) 90 Days or More Past Due (1) Total Past Due 30 Days or More Total Current or Less Than 30 Days Past Due (1) Loans Accounted for Under the Fair Value Option Total Outstandings (Dollars in millions) December 31, 2020 Consumer real estate             Core portfolio Residential mortgage $ 1,157  $ 175  $ 786  $ 2,118  $ 213,155  $ 215,273  Home equity 126  61  269  456  29,872  30,328  Non-core portfolio Residential mortgage 273  122  913  1,308  6,974  8,282  Home equity 28  17  76  121  3,862  3,983  Credit card and other consumer Credit card 445  341  903  1,689  77,019  78,708  Direct/Indirect consumer (2) 209  67  37  313  91,050  91,363  Other consumer —  —  —  —  124  124  Total consumer 2,238  783  2,984  6,005  422,056  428,061  Consumer loans accounted for under the fair value option (3)           $ 735  735  Total consumer loans and leases 2,238  783  2,984  6,005  422,056  735  428,796  Commercial U.S. commercial 561  214  512  1,287  287,441  288,728  Non-U.S. commercial 61  44  11  116  90,344  90,460  Commercial real estate (4) 128  113  226  467  59,897  60,364  Commercial lease financing 86  20  57  163  16,935  17,098  U.S. small business commercial (5) 84  56  123  263  36,206  36,469  Total commercial 920  447  929  2,296  490,823  493,119  Commercial loans accounted for under the fair value option (3)           5,946  5,946  Total commercial loans and leases 920  447  929  2,296  490,823  5,946  499,065  Total loans and leases (6) $ 3,158  $ 1,230  $ 3,913  $ 8,301  $ 912,879  $ 6,681  $ 927,861  Percentage of outstandings 0.34  % 0.13  % 0.42  % 0.89  % 98.39  % 0.72  % 100.00  % (1)Consumer real estate loans 30-59 days past due includes fully-insured loans of $225 million and nonperforming loans of $126 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $103 million and nonperforming loans of $95 million. Consumer real estate loans 90 days or more past due includes fully-insured loans of $762 million. Consumer real estate loans current or less than 30 days past due includes $1.2 billion and direct/indirect consumer includes $66 million of nonperforming loans. For information on the Corporation's interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles. (2)Total outstandings primarily includes auto and specialty lending loans and leases of $46.4 billion, U.S. securities-based lending loans of $41.1 billion and non-U.S. consumer loans of $3.0 billion. (3)Consumer loans accounted for under the fair value option includes residential mortgage loans of $298 million and home equity loans of $437 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $2.9 billion and non-U.S. commercial loans of $3.0 billion. For more information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option. (4)Total outstandings includes U.S. commercial real estate loans of $57.2 billion and non-U.S. commercial real estate loans of $3.2 billion. (5)Includes PPP loans. (6)Total outstandings includes loans and leases pledged as collateral of $15.5 billion. The Corporation also pledged $153.1 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank. 30-59 Days Past Due (1) 60-89 Days Past Due (1) 90 Days or More Past Due (1) Total Past Due 30 Days or More Total Current or Less Than 30 Days Past Due (1) Loans Accounted for Under the Fair Value Option Total Outstandings (Dollars in millions) December 31, 2019 Consumer real estate             Core portfolio Residential mortgage $ 1,378  $ 261  $ 565  $ 2,204  $ 223,566    $ 225,770  Home equity 135  70  198  403  34,823    35,226  Non-core portfolio               Residential mortgage 458  209  1,263  1,930  8,469    10,399  Home equity 34  16  72  122  4,860    4,982  Credit card and other consumer               Credit card 564  429  1,042  2,035  95,573    97,608  Direct/Indirect consumer (2) 297  85  35  417  90,581    90,998  Other consumer  —  —  —  —  192    192  Total consumer 2,866  1,070  3,175  7,111  458,064  465,175  Consumer loans accounted for under the fair value option (3) $ 594  594  Total consumer loans and leases 2,866  1,070  3,175  7,111  458,064  594  465,769  Commercial               U.S. commercial 788  279  371  1,438  305,610    307,048  Non-U.S. commercial 35  23  8  66  104,900    104,966  Commercial real estate (4) 144  19  119  282  62,407    62,689  Commercial lease financing 100  56  39  195  19,685    19,880  U.S. small business commercial 119  56  107  282  15,051    15,333  Total commercial 1,186  433  644  2,263  507,653    509,916  Commercial loans accounted for under the fair value option (3) 7,741  7,741  Total commercial loans and leases 1,186  433  644  2,263  507,653  7,741  517,657  Total loans and leases (5) $ 4,052  $ 1,503  $ 3,819  $ 9,374  $ 965,717  $ 8,335  $ 983,426  Percentage of outstandings 0.41  % 0.15  % 0.39  % 0.95  % 98.20  % 0.85  % 100.00  % (1)Consumer real estate loans 30-59 days past due includes fully-insured loans of $517 million and nonperforming loans of $139 million. Consumer real estate loans 60-89 days past due includes fully-insured loans of $206 million and nonperforming loans of $114 million. Consumer real estate loans 90 days or more past due includes fully-insured loans of $1.1 billion. Consumer real estate loans current or less than 30 days past due includes $856 million and direct/indirect consumer includes $45 million of nonperforming loans. (2)Total outstandings primarily includes auto and specialty lending loans and leases of $50.4 billion, U.S. securities-based lending loans of $36.7 billion and non-U.S. consumer loans of $2.8 billion. (3)Consumer loans accounted for under the fair value option includes residential mortgage loans of $257 million and home equity loans of $337 million. Commercial loans accounted for under the fair value option includes U.S. commercial loans of $4.7 billion and non-U.S. commercial loans of $3.1 billion. For more information, see Note 20 – Fair Value Measurements and Note 21 – Fair Value Option. (4)Total outstandings includes U.S. commercial real estate loans of $59.0 billion and non-U.S. commercial real estate loans of $3.7 billion. (5)Total outstandings includes loans and leases pledged as collateral of $25.9 billion. The Corporation also pledged $168.2 billion of loans with no related outstanding borrowings to secure potential borrowing capacity with the Federal Reserve Bank and Federal Home Loan Bank. The Corporation categorizes consumer real estate loans as core and non-core based on loan and customer characteristics such as origination date, product type, LTV, Fair Isaac Corporation (FICO) score and delinquency status consistent with its current consumer and mortgage servicing strategy. Generally, loans that were originated after January 1, 2010, qualified under government-sponsored enterprise (GSE) underwriting guidelines, or otherwise met the Corporation’s underwriting guidelines in place in 2015 are characterized as core loans. All other loans are generally characterized as non-core loans and represent runoff portfolios. The Corporation has entered into long-term credit protection agreements with FNMA and FHLMC on loans totaling $9.0 billion and $7.5 billion at December 31, 2020 and 2019, 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 increased to $2.2 billion at December 31, 2020 from $1.5 billion at December 31, 2019 with broad-based increases across multiple industries. Consumer nonperforming loans increased to $2.7 billion at December 31, 2020 from $2.1 billion at December 31, 2019 driven by deferral activity, as well as the inclusion of $144 million of certain loans that were previously classified as purchased credit-impaired loans and accounted for under a pool basis. The table below presents the Corporation’s nonperforming loans and leases including nonperforming TDRs, and loans accruing past due 90 days or more at December 31, 2020 and 2019. Nonperforming 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 information on the Corporation's interest accrual policies, delinquency status for loan modifications related to the pandemic and the criteria for classification as nonperforming, see Note 1 – Summary of Significant Accounting Principles. Credit Quality Nonperforming Loans and Leases Accruing Past Due 90 Days or More (1) December 31 (Dollars in millions) 2020 2019 2020 2019 Residential mortgage (2) $ 2,005  $ 1,470  $ 762  $ 1,088  With no related allowance (3) 1,378  n/a —  —  Home equity (2) 649  536  —  —  With no related allowance (3) 347  n/a —  —  Credit Card n/a n/a 903  1,042  Direct/indirect consumer 71  47  33  33  Total consumer 2,725  2,053  1,698  2,163  U.S. commercial 1,243  1,094  228  106  Non-U.S. commercial 418  43  10  8  Commercial real estate 404  280  6  19  Commercial lease financing 87  32  25  20  U.S. small business commercial 75  50  115  97  Total commercial 2,227  1,499  384  250  Total nonperforming loans $ 4,952  $ 3,552  $ 2,082  $ 2,413  Percentage of outstanding loans and leases 0.54  % 0.36  % 0.23  % 0.25  % (1)For information on the Corporation's interest accrual policies and delinquency status for loan modifications related to the pandemic, see Note 1 – Summary of Significant Accounting Principles. (2)Residential mortgage loans accruing past due 90 days or more are fully-insured loans. At December 31, 2020 and 2019 residential mortgage includes $537 million and $740 million of loans on which interest had been curtailed by the FHA, and therefore were no longer accruing interest, although principal was still insured, and $225 million and $348 million of loans on which interest was still accruing. (3)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 Included in the December 31, 2020 nonperforming loans are $127 million and $17 million of residential mortgage and home equity loans that prior to the January 1, 2020 adoption of the new credit loss standard were not included in nonperforming loans, as they were previously classified as purchased credit-impaired loans and accounted for under a pool basis. 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. Within the Consumer Real Estate portfolio segment, the primary credit quality indicators are refreshed LTV and refreshed 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 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 December 31, 2020, 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, 2020 2020 2019 2018 2017 2016 Prior Total Residential Mortgage Refreshed LTV       Less than or equal to 90 percent $ 207,389  $ 68,907  $ 43,771  $ 14,658  $ 21,589  $ 22,967  $ 35,497  Greater than 90 percent but less than or equal to 100 percent 3,138  1,970  684  128  70  96  190  Greater than 100 percent 1,210  702  174  47  39  37  211  Fully-insured loans 11,818  3,826  2,014  370  342  1,970  3,296  Total Residential Mortgage $ 223,555  $ 75,405  $ 46,643  $ 15,203  $ 22,040  $ 25,070  $ 39,194  Total Residential Mortgage Refreshed FICO score Less than 620 $ 2,717  $ 823  $ 177  $ 139  $ 170  $ 150  $ 1,258  Greater than or equal to 620 and less than 680 5,462  1,804  666  468  385  368  1,771  Greater than or equal to 680 and less than 740 25,349  8,533  4,679  1,972  2,427  2,307  5,431  Greater than or equal to 740 178,209  60,419  39,107  12,254  18,716  20,275  27,438  Fully-insured loans 11,818  3,826  2,014  370  342  1,970  3,296  Total Residential Mortgage $ 223,555  $ 75,405  $ 46,643  $ 15,203  $ 22,040  $ 25,070  $ 39,194  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, 2020 Total Home Equity Refreshed LTV       Less than or equal to 90 percent $ 33,447  $ 1,919  $ 22,639  $ 8,889  Greater than 90 percent but less than or equal to 100 percent 351  126  94  131  Greater than 100 percent 513  172  118  223  Total Home Equity $ 34,311  $ 2,217  $ 22,851  $ 9,243  Total Home Equity Refreshed FICO score Less than 620 $ 1,082  $ 250  $ 244  $ 588  Greater than or equal to 620 and less than 680 1,798  263  568  967  Greater than or equal to 680 and less than 740 5,762  556  2,905  2,301  Greater than or equal to 740 25,669  1,148  19,134  5,387  Total Home Equity $ 34,311  $ 2,217  $ 22,851  $ 9,243  (1)Includes reverse mortgages of $1.3 billion and home equity loans of $885 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, 2020 Revolving Loans 2020 2019 2018 2017 2016 Prior Total Credit Card as of December 31, 2020 Revolving Loans Revolving Loans Converted to Term Loans (3) Refreshed FICO score     Less than 620 $ 959  $ 19  $ 111  $ 200  $ 175  $ 243  $ 148  $ 63  $ 4,018  $ 3,832  $ 186  Greater than or equal to 620 and less than 680 2,143  20  653  559  329  301  176  105  9,419  9,201  218  Greater than or equal to 680 and less than 740 7,431  80  2,848  2,015  1,033  739  400  316  27,585  27,392  193  Greater than or equal to 740 36,064  120  12,540  10,588  5,869  3,495  1,781  1,671  37,686  37,642  44  Other internal credit    metrics (1, 2) 44,766  44,098  74  115  84  67  52  276  —  —  —  Total credit card and other consumer $ 91,363  $ 44,337  $ 16,226  $ 13,477  $ 7,490  $ 4,845  $ 2,557  $ 2,431  $ 78,708  $ 78,067  $ 641  (1)Other internal credit metrics may include delinquency status, geography or other factors. (2)Direct/indirect consumer includes $44.1 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 December 31, 2020. (3)Represents TDRs that were modified into term loans. Commercial – Credit Quality Indicators By Vintage (1, 2) Term Loans Amortized Cost Basis by Origination Year (Dollars in millions) Total as of December 31, 2020 2020 2019 2018 2017 2016 Prior Revolving Loans U.S. Commercial Risk ratings         Pass rated $ 268,812  $ 33,456  $ 33,305  $ 17,363  $ 14,102  $ 7,420  $ 21,784  $ 141,382  Reservable criticized 19,916  2,524  2,542  2,689  854  698  1,402  9,207  Total U.S. Commercial $ 288,728  $ 35,980  $ 35,847  $ 20,052  $ 14,956  $ 8,118  $ 23,186  $ 150,589  Non-U.S. Commercial Risk ratings Pass rated $ 85,914  $ 16,301  $ 11,396  $ 7,451  $ 5,037  $ 1,674  $ 2,194  $ 41,861  Reservable criticized 4,546  914  572  492  436  138  259  1,735  Total Non-U.S. Commercial $ 90,460  $ 17,215  $ 11,968  $ 7,943  $ 5,473  $ 1,812  $ 2,453  $ 43,596  Commercial Real Estate Risk ratings Pass rated $ 50,260  $ 8,429  $ 14,126  $ 8,228  $ 4,599  $ 3,299  $ 6,542  $ 5,037  Reservable criticized 10,104  933  2,558  2,115  1,582  606  1,436  874  Total Commercial Real Estate $ 60,364  $ 9,362  $ 16,684  $ 10,343  $ 6,181  $ 3,905  $ 7,978  $ 5,911  Commercial Lease Financing Risk ratings Pass rated $ 16,384  $ 3,083  $ 3,242  $ 2,956  $ 2,532  $ 1,703  $ 2,868  $ —  Reservable criticized 714  117  117  132  81  88  179  —  Total Commercial Lease Financing $ 17,098  $ 3,200  $ 3,359  $ 3,088  $ 2,613  $ 1,791  $ 3,047  $ —  U.S. Small Business Commercial (3) Risk ratings Pass rated $ 28,786  $ 24,539  $ 1,121  $ 837  $ 735  $ 527  $ 855  $ 172  Reservable criticized 1,148  76  239  210  175  113  322  13  Total U.S. Small Business Commercial $ 29,934  $ 24,615  $ 1,360  $ 1,047  $ 910  $ 640  $ 1,177  $ 185   Total (1, 2) $ 486,584  $ 90,372  $ 69,218  $ 42,473  $ 30,133  $ 16,266  $ 37,841  $ 200,281  (1) Excludes $5.9 billion of loans accounted for under the fair value option at December 31, 2020. (2)     Includes $58 million of loans that converted from revolving to term loans. (3)     Excludes U.S. Small Business Card loans of $6.5 billion. Refreshed FICO scores for this portfolio are $265 million for less than 620; $582 million for greater than or equal to 620 and less than 680; $1.7 billion for greater than or equal to 680 and less than 740; and $3.9 billion greater than or equal to 740. Due to the economic impact of COVID-19, commercial asset quality weakened during 2020. Commercial reservable criticized utilized exposure increased to $38.7 billion at December 31, 2020 from $11.5 billion (to 7.31 percent from 2.09 percent of total commercial reservable utilized exposure) at December 31, 2019 with increases spread across multiple industries, including travel and entertainment. Troubled Debt Restructurings The Corporation has been entering into loan modifications with borrowers in response to the pandemic, most of which are not classified as TDRs, and therefore are not included in the discussion below. For more information on the criteria for classifying loans as TDRs, see Note 1 – Summary of Significant Accounting Principles.  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 $372 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 December 31, 2020, of which $102 million were classified as nonperforming and $68 million were loans fully insured. Consumer real estate TDRs are measured primarily based on the net present value of the estimated cash flows discounted at the loan’s original effective interest rate. If the carrying value of a TDR exceeds this amount, a specific allowance is recorded as a component of the allowance for loan and lease losses. Alternatively, consumer real estate TDRs that are considered to be dependent solely on the collateral for repayment (e.g., due to the lack of income verification) are measured based on the estimated fair value of the collateral, and a charge-off is recorded if the carrying value exceeds the fair value of the collateral. Consumer real estate loans that reach 180 days past due prior to modification are charged off to their net realizable value, less costs to sell, before they are modified as TDRs in accordance with established policy. Subsequent declines in the fair value of the collateral after a loan has reached 180 days past due are recorded as charge-offs. Fully-insured loans are protected against principal loss, and therefore, the Corporation does not record an allowance for loan and lease losses on the outstanding principal balance, even after they have been modified in a TDR. At December 31, 2020 and 2019, 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 $123 million and $229 million at December 31, 2020 and 2019. The carrying value of consumer real estate loans, including fully-insured loans, for which formal foreclosure proceedings were in process at December 31, 2020 was $1.2 billion. Although the Corporation has paused formal loan foreclosure proceedings and foreclosure sales for occupied properties, during 2020, the Corporation reclassified $182 million of consumer real estate loans completed or which were in process prior to the pause in foreclosures, 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 December 31, 2020, 2019 and 2018 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of consumer real estate loans that were modified in TDRs during 2020, 2019 and 2018. 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 2020, 2019 and 2018 (1) Unpaid Principal Balance Carrying Value Pre-Modification Interest Rate Post-Modification Interest Rate (2) (Dollars in millions) December 31, 2020 Residential mortgage $ 732  $ 646  3.66  % 3.59  % Home equity 87  69  3.67  3.61  Total $ 819  $ 715  3.66  3.59  December 31, 2019 Residential mortgage $ 464  $ 377  4.19  % 4.13  % Home equity 141  101  5.04  4.31  Total $ 605  $ 478  4.39  4.17  December 31, 2018 Residential mortgage $ 774  $ 641  4.33  % 4.21  % Home equity 489  358  4.46  3.74  Total $ 1,263  $ 999  4.38  4.03  (1)For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles. (2)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 December 31, 2020, 2019 and 2018 carrying value for consumer real estate loans that were modified in a TDR during 2020, 2019 and 2018, by type of modification. Consumer Real Estate – Modification Programs (1) TDRs Entered into During (Dollars in millions) 2020 2019 2018 Modifications under government programs $ 13  $ 35  $ 61  Modifications under proprietary programs 570  174  523  Loans discharged in Chapter 7 bankruptcy (2) 53  68  130  Trial modifications 79  201  285  Total modifications $ 715  $ 478  $ 999  (1)For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles. (2)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 2020, 2019 and 2018 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 (1) (Dollars in millions) 2020 2019 2018 Modifications under government programs $ 16  $ 26  $ 39  Modifications under proprietary programs 51  88  158  Loans discharged in Chapter 7 bankruptcy (2) 19  30  64  Trial modifications (3) 54  57  107  Total modifications $ 140  $ 201  $ 368  (1)For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles. (2)Includes loans discharged in Chapter 7 bankruptcy with no change in repayment terms that are classified as TDRs. (3)Includes trial modification offers to which the customer did not respond. Credit Card and Other Consumer The Corporation seeks to assist customers that 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 December 31, 2020, 2019 and 2018 unpaid principal balance, carrying value, and average pre- and post-modification interest rates of loans that were modified in TDRs during 2020, 2019 and 2018. Credit Card and Other Consumer – TDRs Entered into During 2020, 2019 and 2018 (1)   Unpaid Principal Balance Carrying Value (2) Pre-Modification Interest Rate Post-Modification Interest Rate (Dollars in millions) December 31, 2020 Credit card $ 269  $ 277  18.16  % 5.63  % Direct/Indirect consumer 52  37  5.83  5.83  Total $ 321  $ 314  16.70  5.65  December 31, 2019 Credit card $ 340  $ 355  19.18  % 5.35  % Direct/Indirect consumer 40  21  5.23  5.21  Total $ 380  $ 376  18.42  5.34  December 31, 2018 Credit card $ 278  $ 292  19.49  % 5.24  % Direct/Indirect consumer 42  23  5.10  4.95  Total $ 320  $ 315  18.45  5.22  (1)For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles. (2)Includes accrued interest and fees. The table below presents the December 31, 2020, 2019 and 2018 carrying value for Credit Card and Other Consumer loans that were modified in a TDR during 2020, 2019 and 2018, by program type. Credit Card and Other Consumer – TDRs by Program Type at December 31 (1) (Dollars in millions) 2020 2019 2018 Internal programs $ 225  $ 247  $ 199  External programs 73  108  93  Other 16  21  23  Total $ 314  $ 376  $ 315  (1)Includes accrued interest and fees. For more information on the Corporation's loan modification programs offered in response to the pandemic, most of which are not TDRs, see Note 1 – Summary of Significant Accounting Principles. 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 13 percent of new credit card TDRs and 19 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. For more information on modifications for the U.S. small business commercial portfolio, see Credit Card and Other Consumer in this Note. At December 31, 2020 and 2019, the Corporation had $1.7 billion and $2.2 billion of commercial TDRs with remaining commitments to lend additional funds to debtors of $402 million and $445 million. The balance of commercial TDRs in payment default was $218 million and $207 million at December 31, 2020 and 2019. Loans Held-for-sale The Corporation had LHFS of $9.2 billion at both December 31, 2020 and 2019. Cash and non-cash proceeds from sales and paydowns of loans originally classified as LHFS were $20.1 billion, $30.6 billion and $29.2 billion for 2020, 2019 and 2018, respectively. Cash used for originations and purchases of LHFS totaled approximately $19.7 billion, $28.9 billion and $28.1 billion for 2020, 2019 and 2018, respectively. Accrued Interest Receivable Accrued interest receivable for loans and leases and loans held-for-sale at December 31, 2020 and 2019 was $2.4 billion and $2.6 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 2020, the Corporation reversed $512 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 2020, the Corporation reversed $44 million of interest and fee income at the time the loans were classified as nonperforming against the income statement line item in which it was originally recorded. For more information on the Corporation's nonperforming loan policies, see Note 1 – Summary of Significant Accounting Principles. Allowance for Credit Losses On January 1, 2020, the Corporation adopted the new accounting standard that requires the measurement of the allowance for credit losses to be based on management’s best estimate of lifetime ECL inherent in the Corporation’s relevant financial assets. Upon adoption of the new accounting standard, the Corporation recorded a $3.3 billion, or 32 percent, increase in the allowance for credit losses on January 1, 2020, which was comprised of a net increase of $2.9 billion in the allowance for loan and lease losses and a $310 million increase in the reserve for unfunded lending commitments. The net increase in the allowance for loan and lease losses was primarily driven by a $3.1 billion increase in credit card as the Corporation now reserves for the life of these receivables. The increase in the reserve for unfunded lending commitments included $119 million in the consumer portfolio for the undrawn portion of HELOCs and $191 million in the commercial portfolio. 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. 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. As of January 1, 2020, to determine the allowance for credit losses, the Corporation used a series of economic outlooks that resulted in an economic outlook that was weighted towards the potential of a recession with some expectation of tail risk similar to the severely adverse scenario used in stress testing. Various economic outlooks were also used in the December 31, 2020 estimate for allowance for credit losses that included consensus estimates, multiple downside scenarios which assumed a significantly longer period until economic recovery, a tail risk scenario similar to the severely adverse scenario used in stress testing and an upside scenario to reflect the potential for continued improvement in the consensus outlooks. The weighted economic outlook assumes that the U.S. unemployment rate at the end of 2021 would be relatively consistent with the level as of December 2020, slightly above 6.5 percent. Additionally, in this economic outlook, U.S. gross domestic product returns to pre-pandemic levels in the early part of 2022. The allowance for credit losses considers the impact of enacted government stimulus, including the COVID-19 Emergency Relief Act of 2020, and continues to factor in the unprecedented nature of the current health crisis. The Corporation also factored into its allowance for credit losses an estimated impact from higher-risk segments that included leveraged loans and industries such as travel and entertainment, which have been adversely impacted by the effects of COVID-19, as well as the energy sector. The Corporation also holds additional reserves for borrowers who requested deferrals that take into account their credit characteristics and payment behavior subsequent to deferral. The allowance for credit losses at December 31, 2020 was $20.7 billion, an increase of $7.2 billion compared to January 1, 2020. The increase in the allowance for credit losses was driven by the deterioration in the economic outlook resulting from the impact of COVID-19. The increase in the allowance for credit losses was comprised of a net increase of $6.4 billion in the allowance for loan and lease losses and a $755 million increase in the reserve for unfunded lending commitments. The increase in the allowance for loan and lease losses was attributed to $418 million in the consumer real estate portfolio, $1.8 billion in the credit card and other consumer portfolio, and $4.2 billion in the commercial portfolio. Outstanding loans and leases excluding loans accounted for under the fair value option decreased $53.9 billion in 2020, driven by consumer loans, which decreased $37.1 billion primarily due to a decline in credit card loans from reduced retail spending and higher payments. 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) 2020 Allowance for loan and lease losses, January 1 $ 440  $ 7,430  $ 4,488  $ 12,358  Loans and leases charged off (98) (3,646) (1,675) (5,419) Recoveries of loans and leases previously charged off 201  891  206  1,298  Net charge-offs 103  (2,755) (1,469) (4,121) Provision for loan and lease losses 307  4,538  5,720  10,565  Other (1) 8  —  (8) —  Allowance for loan and lease losses, December 31 858  9,213  8,731  18,802  Reserve for unfunded lending commitments, January 1 119  —  1,004  1,123  Provision for unfunded lending commitments 18  —  737  755  Reserve for unfunded lending commitments, December 31 137  —  1,741  1,878  Allowance for credit losses, December 31 $ 995  $ 9,213  $ 10,472  $ 20,680  2019 Allowance for loan and lease losses, January 1 $ 928  $ 3,874  $ 4,799  $ 9,601  Loans and leases charged off (522) (4,302) (822) (5,646) Recoveries of loans and leases previously charged off 927  911  160  1,998  Net charge-offs 405  (3,391) (662) (3,648) Provision for loan and lease losses (680) 3,512  742  3,574  Other (1) (107) 1  (5) (111) Allowance for loan and lease losses, December 31 546  3,996  4,874  9,416  Reserve for unfunded lending commitments, January 1 —  —  797  797  Provision for unfunded lending commitments —  —  16  16  Reserve for unfunded lending commitments, December 31 —  —  813  813  Allowance for credit losses, December 31 $ 546  $ 3,996  $ 5,687  $ 10,229  2018 Allowance for loan and lease losses, January 1 $ 1,720  $ 3,663  $ 5,010  $ 10,393  Loans and leases charged off (690) (4,037) (675) (5,402) Recoveries of loans and leases previously charged off 664  823  152  1,639  Net charge-offs (26) (3,214) (523) (3,763) Provision for loan and lease losses (492) 3,441  313  3,262  Other (1) (274) (16) (1) (291) Allowance for loan and lease losses, December 31 928  3,874  4,799  9,601  Reserve for unfunded lending commitments, January 1 —  —  777  777  Provision for unfunded lending commitments —  —  20  20  Reserve for unfunded lending commitments, December 31 —  —  797  797  Allowance for credit losses, December 31 $ 928  $ 3,874  $ 5,596  $ 10,398  (1)Primarily represents write-offs of purchased credit-impaired loans in 2019, and the net impact of portfolio sales, transfers to held-for-sale and transfers to foreclosed properties.