Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2016

Receivables [Abstract]

Loans and Allowance for Credit Losses

  NOTE 5   _{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)	2016		2015
Commercial
Commercial	$	87,928	$	83,116
Lease financing		5,458		5,286
Total commercial		93,386		88,402
Commercial Real Estate
Commercial mortgages		31,592		31,773
Construction and development		11,506		10,364
Total commercial real estate		43,098		42,137
Residential Mortgages
Residential mortgages		43,632		40,425
Home equity loans, first liens		13,642		13,071
Total residential mortgages		57,274		53,496
Credit Card		21,749		21,012
Other Retail
Retail leasing		6,316		5,232
Home equity and second mortgages		16,369		16,384
Revolving credit		3,282		3,354
Installment		8,087		7,030
Automobile		17,571		16,587
Student		2,239		2,619
Total other retail		53,864		51,206
Total loans, excluding covered loans		269,371		256,253
Covered Loans		3,836		4,596
Total loans	$	273,207	$	260,849

The Company had loans of $84.5 billion at December 31, 2016, and $78.1 billion at December 31, 2015, pledged at the Federal Home Loan Bank, and loans of $66.5 billion at December 31, 2016, and $63.4 billion at December 31, 2015, 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, equipment and real estate. For details of the Company’s commercial portfolio by industry group and geography as of December 31, 2016 and 2015, 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, 2016 and 2015, see Table 8 included in Management’s Discussion and Analysis which is incorporated by reference into these Notes to Consolidated Financial Statements. Collateral for such loans may include the related property, marketable securities, accounts receivable, inventory and equipment.

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 $672 million at December 31, 2016, and $550 million at December 31, 2015. 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)	2016			2015			2014
Balance at beginning of period	$	957		$	1,309		$	1,655
Accretion		(392	)		(382	)		(441	)
Disposals		(110	)		(132	)		(131	)
Reclassifications from nonaccretable difference (a)		244			163			229
Other		(1	)		(1	)		(3	)
Balance at end of period	$	698		$	957		$	1,309

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

Allowance for Credit Losses The allowance for credit losses is established 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, 2015	$	1,287		$	724		$	631		$	883		$	743		$	4,268		$	38		$	4,306
Add
Provision for credit losses		488			75			(61	)		728			95			1,325			(1	)		1,324
Deduct
Loans charged off		417			22			85			759			332			1,615			–			1,615
Less recoveries of loans charged off		(92	)		(35	)		(25	)		(83	)		(111	)		(346	)		–			(346	)
Net loans charged off		325			(13	)		60			676			221			1,269			–			1,269
Other changes(a)		–			–			–			(1	)		–			(1	)		(3	)		(4	)
Balance at December 31, 2016	$	1,450		$	812		$	510		$	934		$	617		$	4,323		$	34		$	4,357
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

(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, 2016 Related to
Loans individually evaluated for impairment(a)	$	50	$	4	$	–	$	–	$	–	$	54	$	–	$	54
TDRs collectively evaluated for impairment		12		4		180		65		20		281		1		282
Other loans collectively evaluated for impairment		1,388		798		330		869		597		3,982		–		3,982
Loans acquired with deteriorated credit quality		–		6		–		–		–		6		33		39
Total allowance for credit losses	$	1,450	$	812	$	510	$	934	$	617	$	4,323	$	34	$	4,357
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

(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, 2016
Loans individually evaluated for impairment(a)	$	623	$	70	$	–	$	–	$	–	$	693	$	–	$	693
TDRs collectively evaluated for impairment		145		146		3,678		222		173		4,364		35		4,399
Other loans collectively evaluated for impairment		92,611		42,751		53,595		21,527		53,691		264,175		1,553		265,728
Loans acquired with deteriorated credit quality		7		131		1		–		–		139		2,248		2,387
Total loans	$	93,386	$	43,098	$	57,274	$	21,749	$	53,864	$	269,371	$	3,836	$	273,207
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

(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 credit 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, 2016
Commercial	$	92,588	$	263	$	52	$	483	$	93,386
Commercial real estate		42,922		44		8		124		43,098
Residential mortgages(a)		56,372		151		156		595		57,274
Credit card		21,209		284		253		3		21,749
Other retail		53,340		284		83		157		53,864
Total loans, excluding covered loans		266,431		1,026		552		1,362		269,371
Covered loans		3,563		55		212		6		3,836
Total loans	$	269,994	$	1,081	$	764	$	1,368	$	273,207
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

(a) At December 31, 2016, $273 million of loans 30–89 days past due and $2.5 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 United States Department of Veterans Affairs, were classified as current, compared with $320 million and $2.9 billion at December 31, 2015, 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, 2016 and 2015, 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, 2016, the amount of foreclosed residential real estate held by the Company, and included in OREO, was $201 million ($175 million excluding covered assets), compared with $282 million ($250 million excluding covered assets) at December 31, 2015. This excludes $373 million and $535 million at December 31, 2016 and 2015, respectively, of foreclosed residential real estate related to mortgage loans whose payments are primarily insured by the Federal Housing Administration or guaranteed by the United States 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, 2016 and 2015, was $2.1 billion and $2.6 billion, respectively, of which $1.6 billion and $1.9 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 United States 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, 2016
Commercial(b)	$	89,739	$	1,721	$	1,926	$	3,647	$	93,386
Commercial real estate		41,634		663		801		1,464		43,098
Residential mortgages(c)		56,457		10		807		817		57,274
Credit card		21,493		–		256		256		21,749
Other retail		53,576		6		282		288		53,864
Total loans, excluding covered loans		262,899		2,400		4,072		6,472		269,371
Covered loans		3,766		–		70		70		3,836
Total loans	$	266,665	$	2,400	$	4,142	$	6,542	$	273,207
Total outstanding commitments	$	562,704	$	4,920	$	5,629	$	10,549	$	573,253
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	$	4,845	$	8,790	$	548,404

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

(b) At December 31, 2016, $1.2 billion of energy loans ($2.8 billion of total outstanding commitments) had a special mention or classified rating, compared with $1.1 billion of energy loans ($1.9 billion of total outstanding commitments) at December 31, 2015.

(c) At December 31, 2016, $2.5 billion of GNMA loans 90 days or more past due and $1.6 billion of restructured GNMA loans whose repayments are insured by the Federal Housing Administration or guaranteed by the United States Department of Veterans Affairs were classified with a pass rating, compared with $2.9 billion and $1.9 billion at December 31, 2015, 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, 2016
Commercial	$	849	$	1,364	$	68	$	284
Commercial real estate		293		697		10		–
Residential mortgages		2,274		2,847		153		–
Credit card		222		222		64		–
Other retail		281		456		22		4
Total loans, excluding GNMA and covered loans		3,919		5,586		317		288
Loans purchased from GNMA mortgage pools		1,574		1,574		28		–
Covered loans		36		42		1		1
Total	$	5,529	$	7,202	$	346	$	289
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

(a) Substantially all loans classified as impaired at December 31, 2016 and 2015, had an associated allowance for credit losses. The total amount of interest income recognized during 2016 on loans classified as impaired at December 31, 2016, excluding those acquired with deteriorated credit quality, was $237 million, compared to what would have been recognized at the original contractual terms of the loans of $308 million.

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

(Dollars in Millions)	Average Recorded Investment		Interest Income Recognized
2016
Commercial	$	799	$	9
Commercial real estate		324		15
Residential mortgages		2,422		124
Credit card		214		4
Other retail		293		13
Total loans, excluding GNMA and covered loans		4,052		165
Loans purchased from GNMA mortgage pools		1,620		71
Covered loans		38		1
Total	$	5,710	$	237
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

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
2016
Commercial		2,352	$	844	$	699
Commercial real estate		102		259		256
Residential mortgages		1,576		168		178
Credit card		31,394		151		153
Other retail		2,235		41		40
Total loans, excluding GNMA and covered loans		37,659		1,463		1,326
Loans purchased from GNMA mortgage pools		11,260		1,274		1,267
Covered loans		39		6		7
Total loans		48,958	$	2,743	$	2,600
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

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 2016, at December 31, 2016, 106 residential mortgages, 6 home equity and second mortgage loans and 1,366 loans purchased from GNMA mortgage pools with outstanding balances of $11 million, less than $1 million and $179 million, respectively, were in a trial period and have estimated post-modification balances of $13 million, less than $1 million and $175 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
2016
Commercial		531	$	24
Commercial real estate		27		12
Residential mortgages		132		17
Credit card		6,827		30
Other retail		434		9
Total loans, excluding GNMA and covered loans		7,951		92
Loans purchased from GNMA mortgage pools		202		25
Covered loans		4		1
Total loans		8,157	$	118
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

In addition to the defaults in the table above, the Company had a total of 1,697 residential mortgage loans, home equity and second mortgage loans and loans purchased from GNMA mortgage pools for the year ended December 31, 2016, 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. These loans had aggregate outstanding balances of $230 million for year ended December 31, 2016.

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:

	2016								2015
(Dollars in Millions)	Purchased Impaired Loans		Purchased Nonimpaired Loans		Other		Total		Purchased Impaired Loans		Purchased Nonimpaired Loans		Other		Total
Residential mortgage loans	$	2,248	$	506	$	–	$	2,754	$	2,502	$	615	$	–	$	3,117
Other retail loans		–		278		–		278		–		447		–		447
Losses reimbursable by the FDIC(a)		–		–		381		381		–		–		517		517
Unamortized changes in FDIC asset(b)		–		–		423		423		–		–		515		515
Covered loans		2,248		784		804		3,836		2,502		1,062		1,032		4,596
Foreclosed real estate		–		–		26		26		–		–		32		32
Total covered assets	$	2,248	$	784	$	830	$	3,862	$	2,502	$	1,062	$	1,064	$	4,628

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