| LOANS, LEASES, AND ALLOWANCE FOR CREDIT LOSSES | LOANS, LEASES, AND ALLOWANCE FOR CREDIT LOSSES Loans, Leases, and Loans Held for Sale Loans and leases are summarized as follows according to major portfolio segment and specific loan class: (In millions) September 30, December 31, Loans held for sale $ 97 $ 53 Commercial: Commercial and industrial $ 16,757 $ 16,684 Leasing 377 383 Owner-occupied 9,381 9,219 Municipal 4,270 4,302 Total commercial 30,785 30,588 Commercial real estate: Construction and land development 2,833 2,669 Term 10,650 10,702 Total commercial real estate 13,483 13,371 Consumer: Home equity credit line 3,543 3,356 1-4 family residential 9,489 8,415 Construction and other consumer real estate 997 1,442 Bankcard and other revolving plans 461 474 Other 126 133 Total consumer 14,616 13,820 Total loans and leases $ 58,884 $ 57,779 Loans and leases are measured and presented at their amortized cost basis, which includes net unamortized purchase premiums, discounts, and deferred loan fees and costs totaling $35 million and $37 million at September 30, 2024 and December 31, 2023, respectively. Amortized cost basis does not include accrued interest receivables of $289 million and $299 million at September 30, 2024 and December 31, 2023, respectively. These receivables are included in “ Other assets Municipal loans generally include loans to state and local governments (“municipalities”) with the debt service being repaid from general funds or pledged revenues of the municipal entity, or to private commercial entities or 501(c)(3) not-for-profit entities utilizing a pass-through municipal entity to achieve favorable tax treatment. Land acquisition and development loans included in the construction and land development loan portfolio were $233 million at September 30, 2024 and $219 million at December 31, 2023. Loans with a carrying value of $40.6 billion at September 30, 2024 and $36.3 billion at December 31, 2023 have been pledged at the Federal Reserve (“FRB”) and the Federal Home Loan Bank (“FHLB”) of Des Moines as collateral for current and potential borrowings. At the time of origination, we determine the classification of loans as either held for investment or held for sale. Loans held for sale are measured at fair value or the lower of cost or fair value and primarily consist of (1) commercial real estate loans that are sold into securitization entities, and (2) conforming residential mortgages that are generally sold to U.S. government agencies. The following schedule presents loans added to, or sold from, the held for sale category during the periods presented: Three Months Ended Nine Months Ended (In millions) 2024 2023 2024 2023 Loans added to held for sale $ 289 $ 183 $ 688 $ 489 Loans sold from held for sale 304 204 644 480 Occasionally, we have continuing involvement in the sold loans in the form of servicing rights or guarantees. The principal balance of sold loans for which we retain servicing was $582 million and $431 million at September 30, 2024 and December 31, 2023, respectively. Income from sold loans, excluding servicing, was $2 million and $5 million for the three and nine months ended September 30, 2024, and $8 million and $15 million for the three and nine months ended September 30, 2023, respectively. Other income from loans sold includes fair value adjustments on loans that are included in “Capital markets fees” on the consolidated statement of income. Allowance for Credit Losses The allowance for credit losses (“ACL”), which consists of the allowance for loan and lease losses (“ALLL”) and the reserve for unfunded lending commitments (“RULC”), represents our estimate of current expected credit losses related to the loan and lease portfolio and unfunded lending commitments as of the balance sheet date. For additional information regarding our policies and methodologies used to estimate the ACL, see Note 6 of our 2023 Form 10-K. The ACL for AFS and HTM debt securities is estimated separately from loans. For HTM securities, the ACL is estimated consistent with the approach for loans measured at amortized cost. See Note 5 of our 2023 Form 10-K for further discussion of our methodology used to estimate the ACL on AFS and HTM debt securities. Changes in the ACL are summarized as follows: Three Months Ended September 30, 2024 (In millions) Commercial Commercial Consumer Total Allowance for loan losses Balance at beginning of period $ 302 $ 300 $ 94 $ 696 Provision for loan losses 7 (13) 7 1 Gross loan and lease charge-offs 12 — 3 15 Recoveries 9 2 1 12 Net loan and lease charge-offs (recoveries) 3 (2) 2 3 Balance at end of period $ 306 $ 289 $ 99 $ 694 Reserve for unfunded lending commitments Balance at beginning of period $ 16 $ 7 $ 7 $ 30 Provision for unfunded lending commitments 4 5 3 12 Balance at end of period $ 20 $ 12 $ 10 $ 42 Total allowance for credit losses at end of period Allowance for loan losses $ 306 $ 289 $ 99 $ 694 Reserve for unfunded lending commitments 20 12 10 42 Total allowance for credit losses $ 326 $ 301 $ 109 $ 736 Nine Months Ended September 30, 2024 (In millions) Commercial Commercial Consumer Total Allowance for loan losses Balance at beginning of period $ 302 $ 241 $ 141 $ 684 Provision for loan losses 15 56 (37) 34 Gross loan and lease charge-offs 30 11 9 50 Recoveries 19 3 4 26 Net loan and lease charge-offs (recoveries) 11 8 5 24 Balance at end of period $ 306 $ 289 $ 99 $ 694 Reserve for unfunded lending commitments Balance at beginning of period $ 19 $ 17 $ 9 $ 45 Provision for unfunded lending commitments 1 (5) 1 (3) Balance at end of period $ 20 $ 12 $ 10 $ 42 Total allowance for credit losses at end of period Allowance for loan losses $ 306 $ 289 $ 99 $ 694 Reserve for unfunded lending commitments 20 12 10 42 Total allowance for credit losses $ 326 $ 301 $ 109 $ 736 Three Months Ended September 30, 2023 (In millions) Commercial Commercial real estate Consumer Total Allowance for loan losses Balance at beginning of period $ 323 $ 181 $ 147 $ 651 Provision for loan losses 3 44 (3) 44 Gross loan and lease charge-offs 12 3 5 20 Recoveries 5 — 1 6 Net loan and lease charge-offs (recoveries) 7 3 4 14 Balance at end of period $ 319 $ 222 $ 140 $ 681 Reserve for unfunded lending commitments Balance at beginning of period $ 20 $ 29 $ 11 $ 60 Provision for unfunded lending commitments 1 (1) (3) (3) Balance at end of period $ 21 $ 28 $ 8 $ 57 Total allowance for credit losses at end of period Allowance for loan losses $ 319 $ 222 $ 140 $ 681 Reserve for unfunded lending commitments 21 28 8 57 Total allowance for credit losses $ 340 $ 250 $ 148 $ 738 Nine Months Ended September 30, 2023 (In millions) Commercial Commercial Consumer Total Allowance for loan losses Balance at December 31, 2022 $ 300 $ 156 $ 119 $ 575 Adjustment for change in accounting standard — (4) 1 (3) Balance at beginning of period 300 152 120 572 Provision for loan losses 37 73 26 136 Gross loan and lease charge-offs 35 3 11 49 Recoveries 17 — 5 22 Net loan and lease charge-offs (recoveries) 18 3 6 27 Balance at end of period $ 319 $ 222 $ 140 $ 681 Reserve for unfunded lending commitments Balance at beginning of period $ 16 $ 33 $ 12 $ 61 Provision for unfunded lending commitments 5 (5) (4) (4) Balance at end of period $ 21 $ 28 $ 8 $ 57 Total allowance for credit losses at end of period Allowance for loan losses $ 319 $ 222 $ 140 $ 681 Reserve for unfunded lending commitments 21 28 8 57 Total allowance for credit losses $ 340 $ 250 $ 148 $ 738 Nonaccrual Loans Loans are generally placed on nonaccrual status when payment in full of principal and interest is not expected, or the loan is 90 days or more past due as to principal or interest, unless the loan is both well-secured and in the process of collection. Factors we consider in determining whether a loan is placed on nonaccrual include delinquency status, collateral value, borrower or guarantor financial statement information, bankruptcy status, and other information which would indicate that the full and timely collection of interest and principal is uncertain. A nonaccrual loan may be returned to accrual status when (1) all delinquent interest and principal become current in accordance with the terms of the loan agreement, (2) the loan, if secured, is well-secured, (3) the borrower has paid according to the contractual terms for a minimum of six months, and (4) an analysis of the borrower indicates a reasonable assurance of the borrower's ability and willingness to maintain payments. The amortized cost basis of nonaccrual loans is summarized as follows: September 30, 2024 Amortized cost basis Total amortized cost basis (In millions) with no allowance with allowance Related allowance Commercial: Commercial and industrial $ 27 $ 146 $ 173 $ 25 Leasing — 2 2 — Owner-occupied 13 16 29 1 Municipal 5 6 11 2 Total commercial 45 170 215 28 Commercial real estate: Construction and land development — 2 2 — Term 38 29 67 2 Total commercial real estate 38 31 69 2 Consumer: Home equity credit line 4 26 30 6 1-4 family residential 12 35 47 4 Bankcard and other revolving plans — 1 1 1 Other — 1 1 — Total consumer 16 63 79 11 Total $ 99 $ 264 $ 363 $ 41 December 31, 2023 Amortized cost basis Total amortized cost basis (In millions) with no allowance with allowance Related allowance Commercial: Commercial and industrial $ 11 $ 71 $ 82 $ 30 Leasing — 2 2 1 Owner-occupied 12 8 20 1 Total commercial 23 81 104 32 Commercial real estate: Construction and land development 22 — 22 — Term 37 2 39 1 Total commercial real estate 59 2 61 1 Consumer: Home equity credit line 1 16 17 5 1-4 family residential 8 32 40 5 Total consumer 9 48 57 10 Total $ 91 $ 131 $ 222 $ 43 For accruing loans, interest is accrued and interest payments are recognized into interest income according to the contractual loan agreement. For nonaccruing loans, the accrual of interest is discontinued, any uncollected or accrued interest is reversed from interest income in a timely manner (generally within one month), and any payments received on these loans are not recognized into interest income, but are applied as a reduction to the principal outstanding. When the collectability of the amortized cost basis for a nonaccrual loan is no longer in doubt, then interest payments may be recognized in interest income on a cash basis. For the three and nine months ended September 30, 2024 and 2023, there was no interest income recognized on a cash basis during the period the loans were on nonaccrual. The amount of accrued interest receivables reversed from interest income during the periods presented is summarized by loan portfolio segment as follows: Three Months Ended Nine Months Ended (In millions) 2024 2023 2024 2023 Commercial $ 5 $ 2 $ 10 $ 7 Commercial real estate 1 2 4 2 Consumer 1 — 3 1 Total $ 7 $ 4 $ 17 $ 10 Past Due Loans Closed-end loans with payments scheduled monthly are reported as past due when the borrower is in arrears for two or more monthly payments. Similarly, open-end credits, such as bankcard and other revolving credit plans, are reported as past due when the minimum payment has not been made for two or more billing cycles. Other multi-payment obligations (i.e., quarterly, semi-annual, etc.), single payment, and demand notes, are reported as past due when either principal or interest is due and unpaid for a period of 30 days or more. Past due loans (accruing and nonaccruing) are summarized as follows: September 30, 2024 (In millions) Current 30-89 days 90+ days Total Total Accruing Nonaccrual loans that are current 1 Commercial: Commercial and industrial $ 16,691 $ 35 $ 31 $ 66 $ 16,757 $ 6 $ 140 Leasing 376 1 — 1 377 — 1 Owner-occupied 9,359 15 7 22 9,381 — 17 Municipal 4,243 27 — 27 4,270 — 11 Total commercial 30,669 78 38 116 30,785 6 169 Commercial real estate: Construction and land development 2,828 3 2 5 2,833 — — Term 10,616 3 31 34 10,650 — 37 Total commercial real estate 13,444 6 33 39 13,483 — 37 Consumer: Home equity credit line 3,521 12 10 22 3,543 — 15 1-4 family residential 9,450 10 29 39 9,489 — 15 Construction and other consumer real estate 996 1 — 1 997 — — Bankcard and other revolving plans 457 3 1 4 461 1 — Other 125 1 — 1 126 — 1 Total consumer 14,549 27 40 67 14,616 1 31 Total $ 58,662 $ 111 $ 111 $ 222 $ 58,884 $ 7 $ 237 December 31, 2023 (In millions) Current 30-89 days 90+ days Total Total Accruing Nonaccrual loans that are current 1 Commercial: Commercial and industrial $ 16,631 $ 38 $ 15 $ 53 $ 16,684 $ 1 $ 65 Leasing 381 2 — 2 383 — — Owner-occupied 9,206 11 2 13 9,219 1 18 Municipal 4,301 1 — 1 4,302 — — Total commercial 30,519 52 17 69 30,588 2 83 Commercial real estate: Construction and land development 2,645 2 22 24 2,669 — — Term 10,661 14 27 41 10,702 — 3 Total commercial real estate 13,306 16 49 65 13,371 — 3 Consumer: Home equity credit line 3,334 17 5 22 3,356 — 9 1-4 family residential 8,375 17 23 40 8,415 — 13 Construction and other consumer real estate 1,442 — — — 1,442 — — Bankcard and other revolving plans 468 5 1 6 474 1 — Other 132 1 — 1 133 — — Total consumer 13,751 40 29 69 13,820 1 22 Total $ 57,576 $ 108 $ 95 $ 203 $ 57,779 $ 3 $ 108 1 Represents nonaccrual loans that are not past due more than 30 days; however, full payment of principal and interest is not expected. Credit Quality Indicators In addition to the nonaccrual and past due criteria, we also analyze loans using loan risk-grading systems, which vary based on the size and type of credit risk exposure. The internal risk grades assigned to loans follow our definition of Pass, Special Mention, Substandard, and Doubtful, which are consistent with published definitions of regulatory risk classifications. • Pass — A Pass asset is higher-quality and does not fit any of the other categories described below. The likelihood of loss is considered low. • Special Mention — A Special Mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in our credit position at some future date. • Substandard — A Substandard asset is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified have well-defined weaknesses and are characterized by the distinct possibility that we may sustain some loss if deficiencies are not corrected. • Doubtful — A Doubtful asset has all the weaknesses inherent in a Substandard asset with the added characteristics that the weaknesses make collection or liquidation in full highly questionable and improbable. The amount of loans classified as Doubtful totaled $20 million at September 30, 2024; we had no loans classified as Doubtful at December 31, 2023. For consumer loans and for CRE loans with commitments greater than $1 million, we generally assign internal risk grades similar to those described previously based on automated rules that depend on refreshed credit scores, payment performance, and other risk indicators. These are generally assigned either a Pass, Special Mention, or Substandard grade, and are reviewed as we identify information that might warrant a grade change. The following schedule presents the amortized cost basis of loans and leases categorized by year of origination and by credit quality classification as monitored by management. September 30, 2024 Term loans Revolving loans amortized cost basis Revolving loans converted to term loans amortized cost basis Amortized cost basis by year of origination (In millions) 2024 2023 2022 2021 2020 Prior Total Commercial: Commercial and industrial Pass $ 1,707 $ 2,281 $ 1,741 $ 918 $ 473 $ 752 $ 8,000 $ 135 $ 16,007 Special Mention 16 12 38 18 3 16 72 3 178 Accruing Substandard 29 58 138 20 2 22 127 3 399 Nonaccrual 5 13 47 18 1 8 77 4 173 Total commercial and industrial 1,757 2,364 1,964 974 479 798 8,276 145 16,757 Leasing Pass 73 85 104 33 18 47 — — 360 Special Mention — — — — — — — — — Accruing Substandard 1 3 8 2 1 — — — 15 Nonaccrual — — 2 — — — — — 2 Total leasing 74 88 114 35 19 47 — — 377 Owner-occupied Pass 934 1,080 1,715 1,789 923 2,220 253 51 8,965 Special Mention — 1 17 8 1 11 17 — 55 Accruing Substandard 5 26 73 50 28 142 3 5 332 Nonaccrual 5 1 1 1 — 15 6 — 29 Total owner-occupied 944 1,108 1,806 1,848 952 2,388 279 56 9,381 Municipal Pass 443 486 949 979 578 789 4 18 4,246 Special Mention — — — — — — — — — Accruing Substandard — 13 — — — — — — 13 Nonaccrual 3 — — 5 — 3 — — 11 Total municipal 446 499 949 984 578 792 4 18 4,270 Total commercial 3,221 4,059 4,833 3,841 2,028 4,025 8,559 219 30,785 Commercial real estate: Construction and land development Pass 289 732 729 52 1 10 660 67 2,540 Special Mention 13 — 9 37 — — — — 59 Accruing Substandard 11 19 102 100 — — — — 232 Nonaccrual — — — — — — 2 — 2 Total construction and land development 313 751 840 189 1 10 662 67 2,833 Term Pass 1,108 1,360 2,271 1,460 1,113 1,843 274 163 9,592 Special Mention 72 14 64 30 46 24 — — 250 Accruing Substandard 189 66 274 153 13 35 1 10 741 Nonaccrual — — 22 — — 11 — 34 67 Total term 1,369 1,440 2,631 1,643 1,172 1,913 275 207 10,650 Total commercial real estate 1,682 2,191 3,471 1,832 1,173 1,923 937 274 13,483 September 30, 2024 Term loans Revolving loans amortized cost basis Revolving loans converted to term loans amortized cost basis Amortized cost basis by year of origination (In millions) 2024 2023 2022 2021 2020 Prior Total Consumer: Home equity credit line Pass — — — — — — 3,412 96 3,508 Special Mention — — — — — — — — — Accruing Substandard — — — — — — 5 — 5 Nonaccrual — — — — — — 23 7 30 Total home equity credit line — — — — — — 3,440 103 3,543 1-4 family residential Pass 697 842 2,810 1,884 944 2,264 — — 9,441 Special Mention — — — — — — — — — Accruing Substandard — — — — — 1 — — 1 Nonaccrual — 3 8 7 2 27 — — 47 Total 1-4 family residential 697 845 2,818 1,891 946 2,292 — — 9,489 Construction and other consumer real estate Pass 95 251 583 57 8 3 — — 997 Special Mention — — — — — — — — — Accruing Substandard — — — — — — — — — Nonaccrual — — — — — — — — — Total construction and other consumer real estate 95 251 583 57 8 3 — — 997 Bankcard and other revolving plans Pass — — — — — — 457 1 458 Special Mention — — — — — — — — — Accruing Substandard — — — — — — 2 — 2 Nonaccrual — — — — — — 1 — 1 Total bankcard and other revolving plans — — — — — — 460 1 461 Other consumer Pass 46 39 25 10 3 2 — — 125 Special Mention — — — — — — — — — Accruing Substandard — — — — — — — — — Nonaccrual — 1 — — — — — — 1 Total other consumer 46 40 25 10 3 2 — — 126 Total consumer 838 1,136 3,426 1,958 957 2,297 3,900 104 14,616 Total loans $ 5,741 $ 7,386 $ 11,730 $ 7,631 $ 4,158 $ 8,245 $ 13,396 $ 597 $ 58,884 December 31, 2023 Term loans Revolving loans amortized cost basis Revolving loans converted to term loans amortized cost basis Amortized cost basis by year of origination (In millions) 2023 2022 2021 2020 2019 Prior Total Commercial: Commercial and industrial Pass $ 2,654 $ 2,420 $ 1,204 $ 639 $ 494 $ 598 $ 7,973 $ 151 $ 16,133 Special Mention 8 98 34 2 20 37 103 — 302 Accruing Substandard 11 18 7 2 19 8 99 3 167 Nonaccrual 5 36 1 2 11 1 21 5 82 Total commercial and industrial 2,678 2,572 1,246 645 544 644 8,196 159 16,684 Leasing Pass 104 125 47 29 45 18 — — 368 Special Mention 2 9 1 1 — — — — 13 Accruing Substandard — — — — — — — — — Nonaccrual — 2 — — — — — — 2 Total leasing 106 136 48 30 45 18 — — 383 Owner-occupied Pass 1,080 1,945 2,020 1,002 721 1,907 212 52 8,939 Special Mention 2 5 17 5 17 15 — — 61 Accruing Substandard 10 31 29 21 16 90 2 — 199 Nonaccrual — 1 1 7 3 8 — — 20 Total owner-occupied 1,092 1,982 2,067 1,035 757 2,020 214 52 9,219 Municipal Pass 601 1,080 1,069 623 382 512 — 3 4,270 Special Mention 7 — — — — 6 — — 13 Accruing Substandard 8 — 6 3 1 1 — — 19 Nonaccrual — — — — — — — — — Total municipal 616 1,080 1,075 626 383 519 — 3 4,302 Total commercial 4,492 5,770 4,436 2,336 1,729 3,201 8,410 214 30,588 Commercial real estate: Construction and land development Pass 553 938 355 56 7 4 518 127 2,558 Special Mention — — 29 30 — — — — 59 Accruing Substandard 23 2 — 5 — — — — 30 Nonaccrual — — — — 21 — 1 — 22 Total construction and land development 576 940 384 91 28 4 519 127 2,669 Term Pass 1,861 2,385 1,833 1,449 804 1,438 238 110 10,118 Special Mention 55 108 65 78 44 6 — — 356 Accruing Substandard 79 18 12 16 5 24 — 35 189 Nonaccrual — 26 — — 3 10 — — 39 Total term 1,995 2,537 1,910 1,543 856 1,478 238 145 10,702 Total commercial real estate 2,571 3,477 2,294 1,634 884 1,482 757 272 13,371 December 31, 2023 Term loans Revolving loans amortized cost basis Revolving loans converted to term loans amortized cost basis Amortized cost basis by year of origination (In millions) 2023 2022 2021 2020 2019 Prior Total Consumer: Home equity credit line Pass — — — — — — 3,237 97 3,334 Special Mention — — — — — — — — — Accruing Substandard — — — — — — 4 1 5 Nonaccrual — — — — — — 15 2 17 Total home equity credit line — — — — — — 3,256 100 3,356 1-4 family residential Pass 814 2,264 1,823 988 594 1,891 — — 8,374 Special Mention — — — — — — — — — Accruing Substandard — — — — — 1 — — 1 Nonaccrual — 3 3 3 4 27 — — 40 Total 1-4 family residential 814 2,267 1,826 991 598 1,919 — — 8,415 Construction and other consumer real estate Pass 212 1,002 200 15 7 6 — — 1,442 Special Mention — — — — — — — — — Accruing Substandard — — — — — — — — — Nonaccrual — — — — — — — — — Total construction and other consumer real estate 212 1,002 200 15 7 6 — — 1,442 Bankcard and other revolving plans Pass — — — — — — 471 1 472 Special Mention — — — — — — — — — Accruing Substandard — — — — — — 2 — 2 Nonaccrual — — — — — — — — — Total bankcard and other revolving plans — — — — — — 473 1 474 Other consumer Pass 66 37 18 6 4 2 — — 133 Special Mention — — — — — — — — — Accruing Substandard — — — — — — — — — Nonaccrual — — — — — — — — — Total other consumer 66 37 18 6 4 2 — — 133 Total consumer 1,092 3,306 2,044 1,012 609 1,927 3,729 101 13,820 Total loans $ 8,155 $ 12,553 $ 8,774 $ 4,982 $ 3,222 $ 6,610 $ 12,896 $ 587 $ 57,779 The following schedules present gross charge-offs by year of loan origination for the periods presented. Three Months Ended September 30, 2024 Term loans Revolving loans Revolving loans converted to term loans gross charge-offs Gross charge-offs by year of loan origination (In millions) 2024 2023 2022 2021 2020 Prior Total Commercial: Commercial and industrial $ — $ 1 $ 4 $ — $ — $ 1 $ 4 $ 1 $ 11 Owner-occupied — — 1 — — — — — 1 Total commercial — 1 5 — — 1 4 1 12 Consumer: Home equity credit line — — — — — — 1 — 1 Bankcard and other revolving plans — — — — — — 2 — 2 Total consumer — — — — — — 3 — 3 Total gross charge-offs $ — $ 1 $ 5 $ — $ — $ 1 $ 7 $ 1 $ 15 Nine Months Ended September 30, 2024 Term loans Revolving loans Revolving loans converted to term loans gross charge-offs Gross charge-offs by year of loan origination (In millions) 2024 2023 2022 2021 2020 Prior Total Commercial: Commercial and industrial $ — $ 3 $ 8 $ 2 $ — $ 4 $ 10 $ 2 $ 29 Owner-occupied — — 1 — — — — — 1 Total commercial — 3 9 2 — 4 10 2 30 Commercial real estate: Term — 7 4 — — — — — 11 Consumer: Home equity credit line — — — — — — 1 — 1 1-4 family residential — — — — — 1 — — 1 Bankcard and other revolving plans — — — — — — 6 — 6 Other — — — — — 1 — — 1 Total consumer — — — — — 2 7 — 9 Total gross charge-offs $ — $ 10 $ 13 $ 2 $ — $ 6 $ 17 $ 2 $ 50 Three Months Ended September 30, 2023 Term loans Revolving loans Revolving loans converted to term loans gross charge-offs Gross charge-offs by year of loan origination (In millions) 2023 2022 2021 2020 2019 Prior Total Commercial: Commercial and industrial $ 1 $ 4 $ — $ — $ — $ — $ 7 $ — $ 12 Commercial real estate: Construction and land development — — — — 1 — — — 1 Term — 2 — — — — — — 2 Total commercial real estate — 2 — — 1 — — — 3 Consumer: Home equity credit line — — — — — — 3 — 3 Bankcard and other revolving plans — — — — — — 2 — 2 Total consumer — — — — — — 5 — 5 Total gross charge-offs $ 1 $ 6 $ — $ — $ 1 $ — $ 12 $ — $ 20 Nine Months Ended September 30, 2023 Term loans Revolving loans Revolving loans converted to term loans gross charge-offs Gross charge-offs by year of loan origination (In millions) 2023 2022 2021 2020 2019 Prior Total Commercial: Commercial and industrial $ 1 $ 10 $ 5 $ — $ — $ 1 $ 16 $ 2 $ 35 Commercial real estate: Construction and land development — — — — 1 — — — 1 Term — 2 — — — — — — 2 Total commercial real estate — 2 — — 1 — — — 3 Consumer: Home equity credit line — — — — — — 3 — 3 1-4 family residential — — — — — 2 — — 2 Bankcard and other revolving plans — — — — — — 6 — 6 Total consumer — — — — — 2 9 — 11 Total gross charge-offs $ 1 $ 12 $ 5 $ — $ 1 $ 3 $ 25 $ 2 $ 49 Loan Modifications Loans may be modified in the normal course of business for competitive reasons or to strengthen our collateral position. Loan modifications may also occur when the borrower experiences financial difficulty and needs temporary or permanent relief from the original contractual terms of the loan. For loans that have been modified with a borrower experiencing financial difficulty, we use the same credit loss estimation methods that we use for the rest of the loan portfolio. These methods incorporate the post-modification loan terms, as well as defaults and charge-offs associated with historical modified loans. All nonaccruing loans more than $1 million are evaluated individually, regardless of modification. We consider many factors in determining whether to agree to a loan modification and we seek a solution that will both minimize potential loss to us and attempt to help the borrower. We evaluate borrowers’ current and forecasted future cash flows, their ability and willingness to make current contractual or proposed modified payments, the value of the underlying collateral (if applicable), the possibility of obtaining additional security or guarantees, and the potential costs related to a repossession or foreclosure and the subsequent sale of the collateral. A modified loan on nonaccrual will generally remain on nonaccrual until the borrower has proven the ability to perform under the modified structure for a minimum of six months, and there is evidence that such payments can and are likely to continue as agreed. Performance prior to the modification, or significant events that coincide with the modification, are included in assessing whether the borrower can meet the new terms and may result in the loan being returned to accrual at the time of modification or after a shorter performance period. If the borrower’s ability to meet the revised payment schedule is uncertain, the loan remains on nonaccrual. On an ongoing basis, we monitor the performance of all modified loans according to their modified terms. The amortized cost of modified loans that had a payment default during the three and nine months ended September 30, 2024, which were still in default at period end, and were within 12 months or less of being modified was approximately $5 million for both periods, primarily commercial real estate loans, and less than $1 million for both the three and nine months ended September 30, 2023, respectively. The amortized cost of loans to borrowers experiencing financial difficulty that were modified during the period, by loan class and modification type, is summarized in the following schedule: Three Months Ended September 30, 2024 Amortized cost associated with (Dollar amounts in millions) Interest Maturity Principal Payment Multiple modification types 1 Total 2 Percentage of total loans 3 Commercial: Commercial and industrial $ 9 $ 11 $ — $ 1 $ 13 $ 34 0.2 % Commercial real estate: Construction and land development — 5 — — — 5 0.2 Term — 33 — — 36 69 0.6 Total commercial real estate — 38 — — 36 74 0.5 Total $ 9 $ 49 $ — $ 1 $ 49 $ 108 0.2 Nine Months Ended September 30, 2024 Amortized cost associated with (Dollar amounts in millions) Interest Maturity Principal Payment Multiple modification types 1 Total 2 Percentage of total loans 3 Commercial: Commercial and industrial $ 9 $ 44 $ — $ 2 $ 22 $ 77 0.5 % Owner-occupied — 1 — — — 1 — Municipal — 3 — — — 3 0.1 Total commercial 9 48 — 2 22 81 0.3 Commercial real estate: Construction and land development — 7 — — — 7 0.2 Term — 110 — — 36 146 1.4 Total commercial real estate — 117 — — 36 153 1.1 Consumer: Home equity credit line — — — — 1 1 — 1-4 family residential — — 2 — 2 4 — Other — 1 — — — 1 0.8 Total consumer — 1 2 — 3 6 — Total $ 9 $ 166 $ 2 $ 2 $ 61 $ 240 0.4 Three Months Ended September 30, 2023 Amortized cost associated with (Dollar amounts in millions) Interest Maturity Principal Payment Multiple modification types 1 Total 2 Percentage of total loans 3 Commercial: Commercial and industrial $ — $ 35 $ — $ 1 $ — $ 36 0.2 % Owner-occupied — 3 — — — 3 — Total commercial — 38 — 1 — 39 0.1 Commercial real estate: Construction and land development — — — — — — — Term — 83 — — — 83 0.8 Total commercial real estate — 83 — — — 83 0.6 Consumer: 1-4 family residential — — — — 1 1 — Total $ — $ 121 $ — $ 1 $ 1 $ 123 0.2 Nine Months Ended September 30, 2023 Amortized cost associated with (Dollar amounts in millions) Interest Maturity Principal Payment Multiple modification types 1 Total 2 Percentage of total loans 3 Commercial: Commercial and industrial $ — $ 63 $ — $ 1 $ — $ 64 0.4 % Owner-occupied 4 8 — — — 12 0.1 Total commercial 4 71 — 1 — 76 0.3 Commercial real estate: Construction and land development — 23 — — — 23 0.9 Term — 141 — — — 141 1.3 Total commercial real estate — 164 — — — 164 1.2 Consumer: 1-4 family residential — — 1 — 1 2 — Bankcard and other revolving plans — 1 — — — 1 0.2 Total consumer — 1 1 — 1 3 — Total $ 4 $ 236 $ 1 $ 1 $ 1 $ 243 0.4 1 Includes modifications that resulted from a combination of interest rate reduction, maturity or term extension, principal forgiveness, and payment deferral modifications. 2 Unfunded lending commitments related to loans modified to borrowers experiencing financial difficulty totaled $8 million and $10 million at September 30, 2024 and September 30, 2023, respectively. 3 Amounts less than 0.05% are rounded to zero. The financial impact of loan modifications to borrowers experiencing financial difficulty is summarized in the following schedules: Three Months Ended Nine Months Ended Weighted-average interest rate reduction (in percentage points) Weighted-average term extension Weighted-average interest rate reduction (in percentage points) Weighted-average term extension Commercial: Commercial and industrial 0.3 % 5 0.4 % 7 Owner-occupied — 0 — 3 Municipal — 0 — 61 Total commercial 0.3 5 0.4 9 Commercial real estate: Construction and land development — 8 — 1 Term 0.2 3 0.2 10 Total commercial real estate 0.2 8 0.2 10 Consumer: Home equity credit line — 0 6.8 44 1-4 family residential — 0 1.3 78 Other — 0 — 71 Total consumer — 0 8.0 67 Total weighted average financial impact 0.3 7 0.4 11 Three Months Ended Nine Months Ended Weighted-average interest rate reduction (in percentage points) Weighted-average term extension Weighted-average interest rate reduction (in percentage points) Weighted-average term extension Commercial: Commercial and industrial — % 16 — % 12 Owner-occupied — 2 4.4 13 Total commercial — 14 4.4 12 Commercial real estate: Construction and land development — 0 — 5 Term — 21 — 17 Total commercial real estate — 21 — 16 Consumer: 1 1-4 family residential — 217 — 153 Bankcard and other revolving plans — 0 — 63 Total consumer — 217 — 117 Total weighted average financial impact — 19 4.4 16 1 Primarily relates to a small number of loans within each consumer loan class. Loan modifications to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2024 and 2023 resulted in less than $1 million of principal forgiveness for each respective period. The following schedule presents the aging of loans to borrowers experiencing financial difficulty that were modified on or after October 1, 2023 through September 30, 2024, presented by portfolio segment and loan class: September 30, 2024 (In millions) Current 30-89 days 90+ days Total Total Commercial: Commercial and industrial $ 76 $ 4 $ 3 $ 7 $ 83 Owner-occupied 6 — — — 6 Municipal 3 8 — 8 11 Total commercial 85 12 3 15 100 Commercial real estate: Construction and land development 24 — 2 2 26 Term 170 — 5 5 175 Total commercial real estate 194 — 7 7 201 Consumer: Home equity credit line 1 — — — 1 1-4 family residential 4 — — — 4 Other 1 — — — 1 Total consumer 6 — — — 6 Total $ 285 $ 12 $ 10 $ 22 $ 307 The following schedule presents the aging of loans to borrowers experiencing financial difficulty that were modified on or after January |
