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Loans and Allowance for Credit Losses (Tables)

9 Months Ended

Sep. 30, 2018

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


	September 30, 2018					December 31, 2017
(Dollars in Millions)	Amount		Percent of Total			Amount		Percent of Total
Commercial
Commercial	$	93,692		33.3	%	$	91,958		32.8	%
Lease financing		5,581		2.0			5,603		2.0
Total commercial		99,273		35.3			97,561		34.8
Commercial Real Estate
Commercial mortgages		28,633		10.2			29,367		10.5
Construction and development		11,333		4.0			11,096		4.0
Total commercial real estate		39,966		14.2			40,463		14.5
Residential Mortgages
Residential mortgages		50,614		18.0			46,685		16.6
Home equity loans, first liens		12,290		4.3			13,098		4.7
Total residential mortgages		62,904		22.3			59,783		21.3
Credit Card		21,869		7.8			22,180		7.9
Other Retail
Retail leasing		8,447		3.0			7,988		2.8
Home equity and second mortgages		15,966		5.7			16,327		5.8
Revolving credit		3,129		1.1			3,183		1.1
Installment		9,666		3.4			8,989		3.2
Automobile		18,547		6.6			18,934		6.8
Student (a)		294		.1			1,903		.7
Total other retail		56,049		19.9			57,324		20.4
Total loans, excluding covered loans		280,061		99.5			277,311		98.9
Covered Loans (b)		1,400		.5			3,121		1.1
Total loans	$	281,461		100.0	%	$	280,432		100.0	%

(a)

During the first nine months of 2018, the Company sold all of its federally guaranteed student loans.

(b)

Effective September 30, 2018, the Company transferred $1.3 billion of its covered residential mortgage loans to loans held for sale.

Changes in Accretable Balance for Purchased Impaired Loans

Changes in the accretable balance for purchased impaired loans were as follows:


	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in Millions)	2018			2017			2018			2017
Balance at beginning of period	$	157		$	546		$	350		$	698
Accretion		(96	)		(107	)		(277	)		(286	)
Disposals		(9	)		(17	)		(36	)		(68	)
Reclassifications from nonaccretable difference (a)		4			47			19			130
Other		–			(3	)		–			(8	)
Balance at end of period	$	56		$	466		$	56		$	466

(a)

Primarily relates to changes in expected credit performance.

Activity in Allowance for Credit Losses by Portfolio Class

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


Three Months Ended September 30 (Dollars in Millions)	Commercial			Commercial Real Estate			Residential Mortgages			Credit Card			Other Retail			Total Loans, Excluding Covered Loans			Covered Loans			Total Loans
2018
Balance at beginning of period	$	1,391		$	812		$	436		$	1,082		$	667		$	4,388		$	23		$	4,411
Add
Provision for credit losses		88			(12	)		8			221			41			346			(3	)		343
Deduct
Loans charged-off		88			1			12			231			96			428			–			428
Less recoveries of loans charged-off		(22	)		(10	)		(8	)		(25	)		(35	)		(100	)		–			(100	)
Net loans charged-off		66			(9	)		4			206			61			328			–			328
Balance at end of period	$	1,413		$	809		$	440		$	1,097		$	647		$	4,406		$	20		$	4,426

2017
Balance at beginning of period	$	1,395		$	856		$	455		$	990		$	648		$	4,344		$	33		$	4,377
Add
Provision for credit losses		71			(12	)		2			216			84			361			(1	)		360
Deduct
Loans charged-off		115			2			16			214			86			433			–			433
Less recoveries of loans charged-off		(32	)		(9	)		(9	)		(27	)		(26	)		(103	)		–			(103	)
Net loans charged-off		83			(7	)		7			187			60			330			–			330
Balance at end of period	$	1,383		$	851		$	450		$	1,019		$	672		$	4,375		$	32		$	4,407


Nine Months Ended September 30 (Dollars in Millions)	Commercial			Commercial Real Estate			Residential Mortgages			Credit Card			Other Retail			Total Loans, Excluding Covered Loans			Covered Loans			Total Loans
2018
Balance at beginning of period	$	1,372		$	831		$	449		$	1,056		$	678		$	4,386		$	31		$	4,417
Add
Provision for credit losses		225			(34	)		6			668			156			1,021			(10	)		1,011
Deduct
Loans charged-off		265			6			37			727			283			1,318			–			1,318
Less recoveries of loans charged-off		(81	)		(18	)		(22	)		(100	)		(96	)		(317	)		–			(317	)
Net loans charged-off		184			(12	)		15			627			187			1,001			–			1,001
Other changes (a)		–			–			–			–			–			–			(1	)		(1	)
Balance at end of period	$	1,413		$	809		$	440		$	1,097		$	647		$	4,406		$	20		$	4,426

2017
Balance at beginning of period	$	1,450		$	812		$	510		$	934		$	617		$	4,323		$	34		$	4,357
Add
Provision for credit losses		169			21			(33	)		666			234			1,057			(2	)		1,055
Deduct
Loans charged-off		315			7			49			653			263			1,287			–			1,287
Less recoveries of loans charged-off		(79	)		(25	)		(22	)		(72	)		(84	)		(282	)		–			(282	)
Net loans charged-off		236			(18	)		27			581			179			1,005			–			1,005
Balance at end of period	$	1,383		$	851		$	450		$	1,019		$	672		$	4,375		$	32		$	4,407

(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 Allowance for Credit Losses and Related Loan Balances by Portfolio Class

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 September 30, 2018 Related to
Loans individually evaluated for impairment (a)	$	30	$	8	$	–	$	–	$	–	$	38	$	–	$	38
TDRs collectively evaluated for impairment		13		4		124		64		15		220		1		221
Other loans collectively evaluated for impairment		1,370		795		316		1,033		632		4,146		–		4,146
Loans acquired with deteriorated credit quality		–		2		–		–		–		2		19		21
Total allowance for credit losses	$	1,413	$	809	$	440	$	1,097	$	647	$	4,406	$	20	$	4,426
Allowance Balance at December 31, 2017 Related to
Loans individually evaluated for impairment (a)	$	23	$	4	$	–	$	–	$	–	$	27	$	–	$	27
TDRs collectively evaluated for impairment		14		4		139		60		19		236		1		237
Other loans collectively evaluated for impairment		1,335		818		310		996		659		4,118		–		4,118
Loans acquired with deteriorated credit quality		–		5		–		–		–		5		30		35
Total allowance for credit losses	$	1,372	$	831	$	449	$	1,056	$	678	$	4,386	$	31	$	4,417

(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
September 30, 2018
Loans individually evaluated for impairment (a)	$	242	$	144	$	–	$	–	$	–	$	386	$	–	$	386
TDRs collectively evaluated for impairment		157		149		3,322		239		183		4,050		10		4,060
Other loans collectively evaluated for impairment		98,874		39,633		59,581		21,630		55,866		275,584		721		276,305
Loans acquired with deteriorated credit quality		–		40		1		–		–		41		669		710
Total loans	$	99,273	$	39,966	$	62,904	$	21,869	$	56,049	$	280,061	$	1,400	$	281,461
December 31, 2017
Loans individually evaluated for impairment (a)	$	337	$	71	$	–	$	–	$	–	$	408	$	–	$	408
TDRs collectively evaluated for impairment		148		145		3,524		230		186		4,233		36		4,269
Other loans collectively evaluated for impairment		97,076		40,174		56,258		21,950		57,138		272,596		1,073		273,669
Loans acquired with deteriorated credit quality		–		73		1		–		–		74		2,012		2,086
Total loans	$	97,561	$	40,463	$	59,783	$	22,180	$	57,324	$	277,311	$	3,121	$	280,432

(a)

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

(b)

Includes expected reimbursements from the FDIC under loss sharing agreements

Summary of Loans by Portfolio Class, Including Delinquency Status of those that Continue to Accrue Interest and are Nonperforming

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
September 30, 2018
Commercial	$	98,765	$	230	$	62	$	216	$	99,273
Commercial real estate		39,828		30		3		105		39,966
Residential mortgages (a)		62,302		167		118		317		62,904
Credit card		21,301		309		259		–		21,869
Other retail		55,412		365		97		175		56,049
Total loans, excluding covered loans		277,608		1,101		539		813		280,061
Covered loans (b)		1,382		6		12		–		1,400
Total loans	$	278,990	$	1,107	$	551	$	813	$	281,461
December 31, 2017
Commercial	$	97,005	$	250	$	57	$	249	$	97,561
Commercial real estate		40,279		36		6		142		40,463
Residential mortgages (a)		59,013		198		130		442		59,783
Credit card		21,593		302		284		1		22,180
Other retail		56,685		376		95		168		57,324
Total loans, excluding covered loans		274,575		1,162		572		1,002		277,311
Covered loans		2,917		50		148		6		3,121
Total loans	$	277,492	$	1,212	$	720	$	1,008	$	280,432

(a)

At September 30, 2018, $414 million of loans 30–89 days past due and $1.7 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 $385 million and $1.9 billion at December 31, 2017, respectively.

(b)

Effective September 30, 2018, the Company transferred $1.3 billion of covered loans to loans held for sale. Included in the amount transferred were $42 million of loans 30-89 days past due, $108 million of loans 90 days or more past due and $6 million of loans that were nonperforming.

Summary of Loans by Portfolio Class and Company's Internal Credit Quality Rating

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
September 30, 2018
Commercial	$	96,739	$	1,382	$	1,152	$	2,534	$	99,273
Commercial real estate		38,820		542		604		1,146		39,966
Residential mortgages (b)		62,401		14		489		503		62,904
Credit card		21,610		–		259		259		21,869
Other retail		55,732		8		309		317		56,049
Total loans, excluding covered loans		275,302		1,946		2,813		4,759		280,061
Covered loans		1,358		–		42		42		1,400
Total loans	$	276,660	$	1,946	$	2,855	$	4,801	$	281,461
Total outstanding commitments	$	595,205	$	2,810	$	3,517	$	6,327	$	601,532
December 31, 2017
Commercial	$	95,297	$	1,130	$	1,134	$	2,264	$	97,561
Commercial real estate		39,162		648		653		1,301		40,463
Residential mortgages (b)		59,141		16		626		642		59,783
Credit card		21,895		–		285		285		22,180
Other retail		57,009		6		309		315		57,324
Total loans, excluding covered loans		272,504		1,800		3,007		4,807		277,311
Covered loans		3,072		–		49		49		3,121
Total loans	$	275,576	$	1,800	$	3,056	$	4,856	$	280,432
Total outstanding commitments	$	584,072	$	3,142	$	3,987	$	7,129	$	591,201

(a)

Classified rating on consumer loans primarily based on delinquency status.

(b)

At September 30, 2018, $1.7 billion of GNMA loans 90 days or more past due and $1.7 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 $1.9 billion and $1.7 billion at December 31, 2017, respectively.

Summary of Impaired Loans, which Include Nonaccrual and TDR Loans, by Portfolio Class

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
September 30, 2018
Commercial	$	453	$	812	$	44	$	141
Commercial real estate		327		538		13		17
Residential mortgages		1,747		1,875		95		–
Credit card		239		239		64		–
Other retail		309		391		19		5
Total loans, excluding GNMA and covered loans		3,075		3,855		235		163
Loans purchased from GNMA mortgage pools		1,668		1,668		30		–
Covered loans		10		31		1		–
Total	$	4,753	$	5,554	$	266	$	163
December 31, 2017
Commercial	$	550	$	915	$	44	$	199
Commercial real estate		280		596		11		–
Residential mortgages		1,946		2,339		116		1
Credit card		230		230		60		–
Other retail		302		400		22		4
Total loans, excluding GNMA and covered loans		3,308		4,480		253		204
Loans purchased from GNMA mortgage pools		1,681		1,681		25		–
Covered loans		38		44		1		–
Total	$	5,027	$	6,205	$	279	$	204

(a)

Substantially all loans classified as impaired at September 30, 2018 and December 31, 2017, had an associated allowance for credit losses.

Impaired Loans Average Recorded Investment and Interest Income Recognized

Additional information on impaired loans follows:


	2018				2017
(Dollars in Millions)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Three Months Ended September 30
Commercial	$	470	$	3	$	624	$	3
Commercial real estate		279		4		272		2
Residential mortgages		1,779		18		2,111		25
Credit card		236		1		231		1
Other retail		309		4		288		4
Total loans, excluding GNMA and covered loans		3,073		30		3,526		35
Loans purchased from GNMA mortgage pools		1,666		12		1,672		17
Covered loans		23		–		38		–
Total	$	4,762	$	42	$	5,236	$	52
Nine Months Ended September 30
Commercial	$	510	$	5	$	720	$	5
Commercial real estate		263		8		274		7
Residential mortgages		1,846		57		2,178		82
Credit card		234		3		229		3
Other retail		304		12		282		11
Total loans, excluding GNMA and covered loans		3,157		85		3,683		108
Loans purchased from GNMA mortgage pools		1,635		36		1,688		54
Covered loans		33		1		37		–
Total	$	4,825	$	122	$	5,408	$	162

Summary of Loans Modified as TDRs

The following table provides a summary of loans modified as TDRs during the periods presented by portfolio class:


	2018						2017
(Dollars in Millions)	Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance		Number of Loans		Pre-Modification Outstanding Loan Balance		Post-Modification Outstanding Loan Balance
Three Months Ended September 30
Commercial		700	$	42	$	33		616	$	40	$	27
Commercial real estate		38		123		125		29		18		16
Residential mortgages		144		19		17		141		15		16
Credit card		8,450		42		43		8,106		38		38
Other retail		763		17		16		1,949		39		32
Total loans, excluding GNMA and covered loans		10,095		243		234		10,841		150		129
Loans purchased from GNMA mortgage pools		1,649		216		211		1,340		169		171
Covered loans		3		1		1		3		–		–
Total loans		11,747	$	460	$	446		12,184	$	319	$	300
Nine Months Ended September 30
Commercial		2,047	$	255	$	234		2,117	$	239	$	195
Commercial real estate		97		154		155		93		56		55
Residential mortgages		397		56		53		641		72		73
Credit card		24,457		122		124		25,657		123		124
Other retail		1,857		45		43		3,210		65		55
Total loans, excluding GNMA and covered loans		28,855		632		609		31,718		555		502
Loans purchased from GNMA mortgage pools		4,785		631		619		5,312		697		686
Covered loans		3		1		1		10		2		2
Total loans		33,643	$	1,264	$	1,229		37,040	$	1,254	$	1,190

Summary of Loans Modified as TDRs in the Past Twelve Months that have Subsequently Defaulted

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


	2018				2017
(Dollars in Millions)	Number of Loans		Amount Defaulted		Number of Loans		Amount Defaulted
Three Months Ended September 30
Commercial		207	$	51		200	$	25
Commercial real estate		10		2		10		3
Residential mortgages		34		4		84		7
Credit card		1,924		9		2,076		9
Other retail		93		1		89		1
Total loans, excluding GNMA and covered loans		2,268		67		2,459		45
Loans purchased from GNMA mortgage pools		380		50		354		46
Covered loans		–		–		1		–
Total loans		2,648	$	117		2,814	$	91
Nine Months Ended September 30
Commercial		623	$	63		555	$	49
Commercial real estate		26		8		28		6
Residential mortgages		148		15		251		26
Credit card		5,893		26		6,107		26
Other retail		240		3		320		4
Total loans, excluding GNMA and covered loans		6,930		115		7,261		111
Loans purchased from GNMA mortgage pools		1,129		148		711		95
Covered loans		1		–		2		–
Total loans		8,060	$	263		7,974	$	206

Carrying Amount of Covered Assets

The carrying amount of the covered assets consisted of purchased impaired loans, purchased nonimpaired loans and other assets as shown in the following table:


	September 30, 2018								December 31, 2017
(Dollars in Millions)	Purchased Impaired Loans		Purchased Nonimpaired Loans		Other		Total		Purchased Impaired Loans		Purchased Nonimpaired Loans		Other		Total
Residential mortgage loans (a)	$	669	$	245	$	–	$	914	$	2,012	$	400	$	–	$	2,412
Other retail loans		–		99		–		99		–		151		–		151
Losses reimbursable by the FDIC (b)		–		–		329		329		–		–		320		320
Unamortized changes in FDIC asset (c)		–		–		58		58		–		–		238		238
Covered loans		669		344		387		1,400		2,012		551		558		3,121
Covered loans held for sale (a)		–		–		1,296		1,296		–		–		–		–
Foreclosed real estate		–		–		19		19		–		–		21		21
Total covered assets	$	669	$	344	$	1,702	$	2,715	$	2,012	$	551	$	579	$	3,142

(a)

Effective September 30, 2018, the Company transferred $1.3 billion of covered residential mortgage loans to loans held for sale.

(b)

Relates to loss sharing agreements with remaining terms up through the fourth quarter of 2019.

(c)

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.