Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2015

Receivables [Abstract]

Loans and Allowance for Credit Losses

  NOTE 6   LOANS AND ALLOWANCE FOR CREDIT LOSSES

The composition of the loan portfolio at December 31, disaggregated by class and underlying specific portfolio type, was as follows:

(Dollars in Millions)	2015		2014
Commercial
Commercial	$	83,116	$	74,996
Lease financing		5,286		5,381
Total commercial		88,402		80,377
Commercial Real Estate
Commercial mortgages		31,773		33,360
Construction and development		10,364		9,435
Total commercial real estate		42,137		42,795
Residential Mortgages
Residential mortgages		40,425		38,598
Home equity loans, first liens		13,071		13,021
Total residential mortgages		53,496		51,619
Credit Card		21,012		18,515
Other Retail
Retail leasing		5,232		5,871
Home equity and second mortgages		16,384		15,916
Revolving credit		3,354		3,309
Installment		7,030		6,242
Automobile		16,587		14,822
Student		2,619		3,104
Total other retail		51,206		49,264
Total loans, excluding covered loans		256,253		242,570
Covered Loans		4,596		5,281
Total loans	$	260,849	$	247,851

The Company had loans of $78.1 billion at December 31, 2015, and $79.8 billion at December 31, 2014, pledged at the Federal Home Loan Bank, and loans of $63.4 billion at December 31, 2015, and $61.8 billion at December 31, 2014, pledged at the Federal Reserve Bank.

The majority of the Company’s loans are to borrowers in the states in which it has Consumer and Small Business Banking offices. Collateral for commercial loans may include marketable securities, accounts receivable, inventory and equipment. For details of the Company’s commercial portfolio by industry group and geography as of December 31, 2015 and 2014, see Table 7 included in Management’s Discussion and Analysis which is incorporated by reference into these Notes to Consolidated Financial Statements.

For detail of the Company’s commercial real estate portfolio by property type and geography as of December 31, 2015 and 2014, see Table 8 included in Management’s Discussion and Analysis which is incorporated by reference into these Notes to Consolidated Financial Statements. Such loans are collateralized by the related property.

Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and costs. Net unearned interest and deferred fees and costs amounted to $550 million at December 31, 2015, and $574 million at December 31, 2014. All purchased loans and related indemnification assets are recorded at fair value at the date of purchase. The Company evaluates purchased loans for impairment at the date of purchase in accordance with applicable authoritative accounting guidance. Purchased loans with evidence of credit deterioration since origination for which it is probable that all contractually required payments will not be collected are considered “purchased impaired loans.” All other purchased loans are considered “purchased nonimpaired loans.”

Changes in the accretable balance for purchased impaired loans for the years ended December 31, were as follows:

(Dollars in Millions)	2015			2014			2013
Balance at beginning of period	$	1,309		$	1,655		$	1,709
Accretion		(382	)		(441	)		(499	)
Disposals		(132	)		(131	)		(172	)
Reclassifications from nonaccretable difference(a)		163			229			258
Other(b)		(1	)		(3	)		359
Balance at end of period	$	957		$	1,309		$	1,655

(a) Primarily relates to changes in expected credit performance.

(b) The amount for the year ended December 31, 2013, primarily represents the reclassification of unamortized decreases in the FDIC asset, partially offset by the impact of changes in expectations about retaining covered single-family loans beyond the term of the indemnification agreements.

Allowance for Credit Losses The allowance for credit losses reserves for probable and estimable losses incurred in the Company’s loan and lease portfolio, including unfunded credit commitments, and includes certain amounts that do not represent loss exposure to the Company because those losses are recoverable under loss sharing agreements with the FDIC.

Activity in the allowance for credit losses by portfolio class was as follows:

(Dollars in Millions)	Commercial			Commercial Real Estate			Residential Mortgages			Credit Card			Other Retail			Total Loans, Excluding Covered Loans			Covered Loans			Total Loans
Balance at December 31, 2014	$	1,146		$	726		$	787		$	880		$	771		$	4,310		$	65		$	4,375
Add
Provision for credit losses		361			(30	)		(47	)		654			193			1,131			1			1,132
Deduct
Loans charged off		314			22			135			726			319			1,516			–			1,516
Less recoveries of loans charged off		(95	)		(50	)		(26	)		(75	)		(98	)		(344	)		–			(344	)
Net loans charged off		219			(28	)		109			651			221			1,172			–			1,172
Other changes(a)		(1	)		–			–			–			–			(1	)		(28	)		(29	)
Balance at December 31, 2015	$	1,287		$	724		$	631		$	883		$	743		$	4,268		$	38		$	4,306
Balance at December 31, 2013	$	1,075		$	776		$	875		$	884		$	781		$	4,391		$	146		$	4,537
Add
Provision for credit losses		266			(63	)		107			657			278			1,245			(16	)		1,229
Deduct
Loans charged off		305			36			216			725			384			1,666			13			1,679
Less recoveries of loans charged off		(110	)		(49	)		(21	)		(67	)		(96	)		(343	)		(2	)		(345	)
Net loans charged off		195			(13	)		195			658			288			1,323			11			1,334
Other changes(a)		–			–			–			(3	)		–			(3	)		(54	)		(57	)
Balance at December 31, 2014	$	1,146		$	726		$	787		$	880		$	771		$	4,310		$	65		$	4,375
Balance at December 31, 2012	$	1,051		$	857		$	935		$	863		$	848		$	4,554		$	179		$	4,733
Add
Provision for credit losses		144			(114	)		212			677			351			1,270			70			1,340
Deduct
Loans charged off		246			92			297			739			523			1,897			37			1,934
Less recoveries of loans charged off		(126	)		(125	)		(25	)		(83	)		(105	)		(464	)		(5	)		(469	)
Net loans charged off		120			(33	)		272			656			418			1,433			32			1,465
Other changes(a)		–			–			–			–			–			–			(71	)		(71	)
Balance at December 31, 2013	$	1,075		$	776		$	875		$	884		$	781		$	4,391		$	146		$	4,537

(a) Includes net changes in credit losses to be reimbursed by the FDIC and reductions in the allowance for covered loans where the reversal of a previously recorded allowance was offset by an associated decrease in the indemnification asset, and the impact of any loan sales.

Additional detail of the allowance for credit losses by portfolio class was as follows:

(Dollars in Millions)	Commercial		Commercial Real Estate		Residential Mortgages		Credit Card		Other Retail		Total Loans, Excluding Covered Loans		Covered Loans		Total Loans
Allowance Balance at December 31, 2015 Related to
Loans individually evaluated for impairment(a)	$	11	$	2	$	–	$	–	$	–	$	13	$	–	$	13
TDRs collectively evaluated for impairment		10		7		236		57		33		343		2		345
Other loans collectively evaluated for impairment		1,266		703		395		826		710		3,900		–		3,900
Loans acquired with deteriorated credit quality		–		12		–		–		–		12		36		48
Total allowance for credit losses	$	1,287	$	724	$	631	$	883	$	743	$	4,268	$	38	$	4,306
Allowance Balance at December 31, 2014 Related to
Loans individually evaluated for impairment(a)	$	5	$	4	$	–	$	–	$	–	$	9	$	–	$	9
TDRs collectively evaluated for impairment		12		12		319		61		41		445		4		449
Other loans collectively evaluated for impairment		1,129		678		468		819		730		3,824		1		3,825
Loans acquired with deteriorated credit quality		–		32		–		–		–		32		60		92
Total allowance for credit losses	$	1,146	$	726	$	787	$	880	$	771	$	4,310	$	65	$	4,375

(a) Represents the allowance for credit losses related to loans greater than $5 million classified as nonperforming or TDRs.

Additional detail of loan balances by portfolio class was as follows:

(Dollars in Millions)	Commercial		Commercial Real Estate		Residential Mortgages		Credit Card		Other Retail		Total Loans, Excluding Covered Loans		Covered Loans(b)		Total Loans
December 31, 2015
Loans individually evaluated for impairment(a)	$	336	$	41	$	13	$	–	$	–	$	390	$	–	$	390
TDRs collectively evaluated for impairment		138		235		4,241		210		211		5,035		35		5,070
Other loans collectively evaluated for impairment		87,927		41,566		49,241		20,802		50,995		250,531		2,059		252,590
Loans acquired with deteriorated credit quality		1		295		1		–		–		297		2,502		2,799
Total loans	$	88,402	$	42,137	$	53,496	$	21,012	$	51,206	$	256,253	$	4,596	$	260,849
December 31, 2014
Loans individually evaluated for impairment(a)	$	159	$	128	$	12	$	–	$	–	$	299	$	–	$	299
TDRs collectively evaluated for impairment		124		393		4,653		240		237		5,647		34		5,681
Other loans collectively evaluated for impairment		80,093		41,744		46,953		18,275		49,027		236,092		2,463		238,555
Loans acquired with deteriorated credit quality		1		530		1		–		–		532		2,784		3,316
Total loans	$	80,377	$	42,795	$	51,619	$	18,515	$	49,264	$	242,570	$	5,281	$	247,851

(a) Represents loans greater than $5 million classified as nonperforming or TDRs.

(b) Includes expected reimbursements from the FDIC under loss sharing agreements.

Credit Quality The quality of the Company’s loan portfolios is assessed as a function of net credit losses, levels of nonperforming assets and delinquencies, and credit quality ratings as defined by the Company. These credit quality ratings are an important part of the Company’s overall credit risk management and evaluation of its allowance for credit losses.

The following table provides a summary of loans by portfolio class, including the delinquency status of those that continue to accrue interest, and those that are nonperforming:

	Accruing
(Dollars in Millions)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonperforming		Total
December 31, 2015
Commercial	$	87,863	$	317	$	48	$	174	$	88,402
Commercial real estate		41,907		89		14		127		42,137
Residential mortgages(a)		52,438		170		176		712		53,496
Credit card		20,532		243		228		9		21,012
Other retail		50,745		224		75		162		51,206
Total loans, excluding covered loans		253,485		1,043		541		1,184		256,253
Covered loans		4,236		62		290		8		4,596
Total loans	$	257,721	$	1,105	$	831	$	1,192	$	260,849
December 31, 2014
Commercial	$	79,977	$	247	$	41	$	112	$	80,377
Commercial real estate		42,406		110		20		259		42,795
Residential mortgages(a)		50,330		221		204		864		51,619
Credit card		18,046		229		210		30		18,515
Other retail		48,764		238		75		187		49,264
Total loans, excluding covered loans		239,523		1,045		550		1,452		242,570
Covered loans		4,804		68		395		14		5,281
Total loans	$	244,327	$	1,113	$	945	$	1,466	$	247,851

(a) At December 31, 2015, $320 million of loans 30–89 days past due and $2.9 billion of loans 90 days or more past due purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs, were classified as current, compared with $431 million and $3.1 billion at December 31, 2014, respectively.

Total nonperforming assets include nonaccrual loans, restructured loans not performing in accordance with modified terms, other real estate and other nonperforming assets owned by the Company. For details of the Company’s nonperforming assets as of December 31, 2015 and 2014, see Table 16 included in Management’s Discussion and Analysis which is incorporated by reference into these Notes to Consolidated Financial Statements.

At December 31, 2015, the amount of foreclosed residential real estate held by the Company, and included in OREO, was $282 million ($250 million excluding covered assets), compared with $270 million ($233 million excluding covered assets) at December 31, 2014. This excludes $535 million and $641 million at December 31, 2015 and 2014, respectively, of foreclosed residential real estate related to mortgage loans whose payments are primarily insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs. In addition, the amount of residential mortgage loans secured by residential real estate in the process of foreclosure at December 31, 2015 and 2014, was $2.6 billion and $2.9 billion, respectively, of which $1.9 billion and $2.1 billion, respectively, related to loans purchased from Government National Mortgage Association (“GNMA”) mortgage pools whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs.

The following table provides a summary of loans by portfolio class and the Company’s internal credit quality rating:

			Criticized
(Dollars in Millions)	Pass		Special Mention		Classified(a)			Total Criticized		Total
December 31, 2015
Commercial(b)	$	85,206	$	1,629	$	1,567		$	3,196	$	88,402
Commercial real estate		41,079		365		693			1,058		42,137
Residential mortgages(c)		52,548		2		946			948		53,496
Credit card		20,775		–		237			237		21,012
Other retail		50,899		6		301			307		51,206
Total loans, excluding covered loans		250,507		2,002		3,744			5,746		256,253
Covered loans		4,507		–		89			89		4,596
Total loans	$	255,014	$	2,002	$	3,833		$	5,835	$	260,849
Total outstanding commitments	$	539,614	$	3,945	$	4,84	5	$	8,790	$	548,404
December 31, 2014
Commercial(b)	$	78,409	$	1,204	$	764		$	1,968	$	80,377
Commercial real estate		41,322		451		1,022			1,473		42,795
Residential mortgages(c)		50,479		5		1,135			1,140		51,619
Credit card		18,275		–		240			240		18,515
Other retail		48,932		20		312			332		49,264
Total loans, excluding covered loans		237,417		1,680		3,473			5,153		242,570
Covered loans		5,164		–		117			117		5,281
Total loans	$	242,581	$	1,680	$	3,590		$	5,270	$	247,851
Total outstanding commitments	$	501,535	$	2,964	$	4,179		$	7,143	$	508,678

(a) Classified rating on consumer loans primarily based on delinquency status.

(b) At December 31, 2015, $1.1 billion of loans to customers in energy-related businesses had a special mention or classified rating, compared with $122 million at December 31, 2014.

(c) At December 31, 2015, $2.9 billion of GNMA loans 90 days or more past due and $1.9 billion of restructured GNMA loans whose repayments are insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs were classified with a pass rating, compared with $3.1 billion and $2.2 billion at December 31, 2014, respectively.

For all loan classes, a loan is considered to be impaired when, based on current events or information, it is probable the Company will be unable to collect all amounts due per the contractual terms of the loan agreement. A summary of impaired loans, which include all nonaccrual and TDR loans, by portfolio class was as follows:

(Dollars in Millions)	Period-end Recorded Investment(a)		Unpaid Principal Balance		Valuation Allowance		Commitments to Lend Additional Funds
December 31, 2015
Commercial	$	520	$	1,110	$	25	$	154
Commercial real estate		336		847		11		1
Residential mortgages		2,575		3,248		199		–
Credit card		210		210		57		–
Other retail		309		503		35		4
Total loans, excluding GNMA and covered loans		3,950		5,918		327		159
Loans purchased from GNMA mortgage pools		1,913		1,913		40		–
Covered loans		39		48		2		1
Total	$	5,902	$	7,879	$	369	$	160
December 31, 2014
Commercial	$	329	$	769	$	21	$	51
Commercial real estate		624		1,250		23		18
Residential mortgages		2,730		3,495		273		–
Credit card		240		240		61		–
Other retail		361		570		44		4
Total loans, excluding GNMA and covered loans		4,284		6,324		422		73
Loans purchased from GNMA mortgage pools		2,244		2,244		50		–
Covered loans		43		55		4		1
Total	$	6,571	$	8,623	$	476	$	74

(a) Substantially all loans classified as impaired at December 31, 2015 and 2014, had an associated allowance for credit losses. The total amount of interest income recognized during 2015 on loans classified as impaired at December 31, 2015, excluding those acquired with deteriorated credit quality, was $274 million, compared to what would have been recognized at the original contractual terms of the loans of $370 million.

Additional information on impaired loans for the years ended December 31 follows:

(Dollars in Millions)	Average Recorded Investment		Interest Income Recognized
2015
Commercial	$	383	$	13
Commercial real estate		433		16
Residential mortgages		2,666		131
Credit card		221		4
Other retail		336		14
Total loans, excluding GNMA and covered loans		4,039		178
Loans purchased from GNMA mortgage pools		2,079		95
Covered loans		42		1
Total	$	6,160	$	274
2014
Commercial	$	414	$	9
Commercial real estate		592		26
Residential mortgages		2,742		140
Credit card		273		9
Other retail		377		17
Total loans, excluding GNMA and covered loans		4,398		201
Loans purchased from GNMA mortgage pools		2,609		124
Covered loans		334		15
Total	$	7,341	$	340
2013
Commercial	$	382	$	29
Commercial real estate		889		39
Residential mortgages		2,749		134
Credit card		366		16
Other retail		424		24
Total loans, excluding GNMA and covered loans		4,810		242
Loans purchased from GNMA mortgage pools		1,967		100
Covered loans		561		27
Total	$	7,338	$	369

Troubled Debt Restructurings In certain circumstances, the Company may modify the terms of a loan to maximize the collection of amounts due when a borrower is experiencing financial difficulties or is expected to experience difficulties in the near-term. The following table provides a summary of loans modified as TDRs for the years ended December 31, by portfolio class:

(Dollars in Millions)	Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance
2015
Commercial		1,607	$	385	$	396
Commercial real estate		108		78		76
Residential mortgages		2,080		260		258
Credit card		26,772		133		134
Other retail		2,530		54		54
Total loans, excluding GNMA and covered loans		33,097		910		918
Loans purchased from GNMA mortgage pools		8,199		864		862
Covered loans		16		5		5
Total loans		41,312	$	1,779	$	1,785
2014
Commercial		2,027	$	238	$	203
Commercial real estate		78		80		71
Residential mortgages		2,089		271		274
Credit card		26,511		144		145
Other retail		2,833		61		61
Total loans, excluding GNMA and covered loans		33,538		794		754
Loans purchased from GNMA mortgage pools		8,961		1,000		1,013
Covered loans		43		15		14
Total loans		42,542	$	1,809	$	1,781
2013
Commercial		2,429	$	166	$	155
Commercial real estate		165		205		198
Residential mortgages		2,179		309		304
Credit card		26,669		160		161
Other retail		4,290		103		102
Total loans, excluding GNMA and covered loans		35,732		943		920
Loans purchased from GNMA mortgage pools		8,878		1,121		1,066
Covered loans		123		94		72
Total loans		44,733	$	2,158	$	2,058

Residential mortgages, home equity and second mortgages, and loans purchased from GNMA mortgage pools in the table above include trial period arrangements offered to customers during the periods presented. The post-modification balances for these loans reflect the current outstanding balance until a permanent modification is made. In addition, the post-modification balances typically include capitalization of unpaid accrued interest and/or fees under the various modification programs. For those loans modified as TDRs during the fourth quarter of 2015, at December 31, 2015, 151 residential mortgages, 66 home equity and second mortgage loans and 1,954 loans purchased from GNMA mortgage pools with outstanding balances of $18 million, $5 million and $257 million, respectively, were in a trial period and have estimated post-modification balances of $24 million, $5 million and $259 million, respectively, assuming permanent modification occurs at the end of the trial period.

The following table provides a summary of TDR loans that defaulted (fully or partially charged-off or became 90 days or more past due) for the years ended December 31, that were modified as TDRs within 12 months previous to default:

(Dollars in Millions)	Number of Loans		Amount Defaulted
2015
Commercial		494	$	21
Commercial real estate		18		8
Residential mortgages		273		36
Credit card		6,286		29
Other retail		636		12
Total loans, excluding GNMA and covered loans		7,707		106
Loans purchased from GNMA mortgage pools		598		75
Covered loans		5		1
Total loans		8,310	$	182
2014
Commercial		629	$	44
Commercial real estate		22		12
Residential mortgages		611		86
Credit card		6,335		33
Other retail		845		24
Total loans, excluding GNMA and covered loans		8,442		199
Loans purchased from GNMA mortgage pools		876		102
Covered loans		14		5
Total loans		9,332	$	306
2013
Commercial		642	$	46
Commercial real estate		87		102
Residential mortgages		1,099		163
Credit card		6,640		37
Other retail		1,841		80
Total loans, excluding GNMA and covered loans		10,309		428
Loans purchased from GNMA mortgage pools		4,972		640
Covered loans		63		49
Total loans		15,344	$	1,117

In addition to the defaults in the table above, for the year ended December 31, 2015, the Company had a total of 1,885 residential mortgage loans, home equity and second mortgage loans and loans purchased from GNMA mortgage pools with aggregate outstanding balances of $252 million where borrowers did not successfully complete the trial period arrangement and therefore are no longer eligible for a permanent modification under the applicable modification program.

Covered Assets Covered assets represent loans and other assets acquired from the FDIC, subject to loss sharing agreements, and include expected reimbursements from the FDIC. The carrying amount of the covered assets at December 31, consisted of purchased impaired loans, purchased nonimpaired loans and other assets as shown in the following table:

	2015								2014
(Dollars in Millions)	Purchased Impaired Loans		Purchased Nonimpaired Loans		Other		Total		Purchased Impaired Loans		Purchased Nonimpaired Loans		Other		Total
Residential mortgage loans	$	2,502	$	615	$	–	$	3,117	$	2,784	$	738	$	–	$	3,522
Other retail loans		–		447		–		447		–		584		–		584
Losses reimbursable by the FDIC(a)		–		–		517		517		–		–		717		717
Unamortized changes in FDIC asset(b)		–		–		515		515		–		–		458		458
Covered loans		2,502		1,062		1,032		4,596		2,784		1,322		1,175		5,281
Foreclosed real estate		–		–		32		32		–		–		37		37
Total covered assets	$	2,502	$	1,062	$	1,064	$	4,628	$	2,784	$	1,322	$	1,212	$	5,318

(a) Relates to loss sharing agreements with remaining terms up to four years.

(b) Represents decreases in expected reimbursements by the FDIC as a result of decreases in expected losses on the covered loans. These amounts are amortized as a reduction in interest income on covered loans over the shorter of the expected life of the respective covered loans or the remaining contractual term of the indemnification agreements.

Interest income is recognized on purchased impaired loans through accretion of the difference between the carrying amount of those loans and their expected cash flows. The initial determination of the fair value of the purchased loans includes the impact of expected credit losses and, therefore, no allowance for credit losses is recorded at the purchase date. To the extent credit deterioration occurs after the date of acquisition, the Company records an allowance for credit losses.