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Loans
3 Months Ended
Mar. 31, 2014
Receivables [Abstract]  
Loans
NOTE 4 - LOANS
Composition of Loan Portfolio
The composition of the Company's loan portfolio is shown in the following table:
(Dollars in millions)
March 31,
2014
 
December 31, 2013
Commercial loans:
 
 
 
C&I

$58,828

 

$57,974

CRE
5,961

 
5,481

Commercial construction
920

 
855

Total commercial loans
65,709

 
64,310

Residential loans:
 
 
 
Residential mortgages - guaranteed
3,295

 
3,416

Residential mortgages - nonguaranteed 1
24,331

 
24,412

Home equity products
14,637

 
14,809

Residential construction
532

 
553

Total residential loans
42,795

 
43,190

Consumer loans:
 
 
 
Guaranteed student loans
5,533

 
5,545

Other direct
3,109

 
2,829

Indirect
11,339

 
11,272

Credit cards
711

 
731

Total consumer loans
20,692

 
20,377

LHFI

$129,196

 

$127,877

LHFS

$1,488

 

$1,699

1 Includes $299 million and $302 million of loans carried at fair value at March 31, 2014 and December 31, 2013, respectively.


At March 31, 2014 and December 31, 2013, the Company had $57.1 billion and $56.4 billion, respectively, of net eligible loan collateral pledged to the Federal Reserve Discount Window or the FHLB of Atlanta to support available borrowing capacity.

During the three months ended March 31, 2014 and 2013, the Company transferred $115 million and $57 million in LHFI to LHFS, and $17 million and $12 million in LHFS to LHFI, respectively. Additionally, during the three months ended March 31, 2014 and 2013, the Company sold $85 million and $503 million in loans and leases for a gain of $9 million and a gain of $4 million, respectively.

Credit Quality Evaluation
The Company evaluates the credit quality of its loan portfolio by employing a dual internal risk rating system, which assigns both PD and LGD ratings to derive expected losses. Assignment of PD and LGD ratings are predicated upon numerous factors, including consumer credit risk scores, rating agency information, borrower/guarantor financial capacity, LTV ratios, collateral type, debt service coverage ratios, collection experience, other internal metrics/analysis, and qualitative assessments.
For the commercial portfolio, the Company believes that the most appropriate credit quality indicator is an individual loan’s risk assessment expressed according to the broad regulatory agency classifications of Pass or Criticized. The Company's risk rating system is granular, with multiple risk ratings in both the Pass and Criticized categories. Pass ratings reflect relatively low PDs; whereas, Criticized assets have a higher PD. The granularity in Pass ratings assists in the establishment of pricing, loan structures, approval requirements, reserves, and ongoing credit management requirements. The Company conforms to the following regulatory classifications for Criticized assets: Other Assets Especially Mentioned (or Special Mention), Adversely Classified, Doubtful, and Loss. However, for the purposes of disclosure, management believes the most meaningful distinction within the Criticized categories is between Accruing Criticized (which includes Special Mention and a portion of Adversely Classified) and Nonaccruing Criticized (which includes a portion of Adversely Classified and Doubtful and Loss). This distinction identifies those relatively higher risk loans for which there is a basis to believe that the Company will collect all amounts due from those where full collection is less certain.
Risk ratings are refreshed at least annually, or more frequently as appropriate, based upon considerations such as market conditions, loan characteristics, and portfolio trends. Additionally, management routinely reviews portfolio risk ratings, trends, and concentrations to support risk identification and mitigation activities.
For consumer and residential loans, the Company monitors credit risk based on indicators such as delinquencies and FICO scores. The Company believes that consumer credit risk, as assessed by the industry-wide FICO scoring method, is a relevant credit quality indicator. Borrower-specific FICO scores are obtained at origination as part of the Company’s formal underwriting process, and refreshed FICO scores are obtained by the Company at least quarterly.
For government-guaranteed loans, the Company monitors the credit quality based primarily on delinquency status, as it is a more relevant indicator of credit quality due to the government guarantee. At March 31, 2014 and December 31, 2013, 83% and 82%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At March 31, 2014 and December 31, 2013, 82% and 81%, respectively, of the guaranteed student loan portfolio was current with respect to payments. Loss exposure to the Company on these loans is mitigated by the government guarantee.
LHFI by credit quality indicator are shown in the tables below:
 
Commercial Loans
 
C&I
 
CRE
 
Commercial construction
(Dollars in millions)
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
Credit rating:
 
 
 
 
 
 
 
 
 
 
 
Pass

$57,182

 

$56,443

 

$5,742

 

$5,245

 

$879

 

$798

Criticized accruing
1,469

 
1,335

 
178

 
197

 
30

 
45

Criticized nonaccruing
177

 
196

 
41

 
39

 
11

 
12

Total

$58,828

 

$57,974

 

$5,961

 

$5,481

 

$920

 

$855

 
Residential Loans 1
 
Residential mortgages -
nonguaranteed
 
Home equity products
 
Residential construction
(Dollars in millions)
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
Current FICO score range:
 
 
 
 
 
 
 
 
 
 
 
700 and above

$18,983

 

$19,100

 

$11,537

 

$11,661

 

$413

 

$423

620 - 699
3,740

 
3,652

 
2,159

 
2,186

 
82

 
90

Below 620 2
1,608

 
1,660

 
941

 
962

 
37

 
40

Total

$24,331

 

$24,412

 

$14,637

 

$14,809

 

$532

 

$553

 
Consumer Loans 3
 
Other direct
 
Indirect
 
Credit cards
(Dollars in millions)
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
Current FICO score range:
 
 
 
 
 
 
 
 
 
 
 
700 and above

$2,648

 

$2,370

 

$8,390

 

$8,420

 

$489

 

$512

620 - 699
401

 
397

 
2,286

 
2,228

 
178

 
176

Below 620 2
60

 
62

 
663

 
624

 
44

 
43

Total

$3,109

 

$2,829

 

$11,339

 

$11,272

 

$711

 

$731


1 Excludes $3.3 billion and $3.4 billion at March 31, 2014 and December 31, 2013, respectively, of guaranteed residential loans. At March 31, 2014 and December 31, 2013, the majority of these loans had FICO scores of 700 and above.
2 For substantially all loans with refreshed FICO scores below 620, the borrower’s FICO score at the time of origination exceeded 620 but has since deteriorated as the loan has seasoned.
3 Excludes $5.5 billion of guaranteed student loans at March 31, 2014 and December 31, 2013.

The payment status for the LHFI portfolio is shown in the tables below:
 
March 31, 2014
(Dollars in millions)
Accruing
Current
 
Accruing
30-89 Days
Past Due
 
Accruing
90+ Days
Past Due
 
 Nonaccruing 2
 
Total
Commercial loans:
 
 
 
 
 
 
 
 
 
C&I

$58,576

 

$56

 

$19

 

$177

 

$58,828

CRE
5,914

 
6

 

 
41

 
5,961

Commercial construction
907

 
2

 

 
11

 
920

Total commercial loans
65,397

 
64

 
19

 
229

 
65,709

Residential loans:
 
 
 
 
 
 
 
 
 
Residential mortgages - guaranteed
2,731

 
38

 
526

 

 
3,295

Residential mortgages - nonguaranteed1
23,770

 
121

 
14

 
426

 
24,331

Home equity products
14,323

 
107

 

 
207

 
14,637

Residential construction
472

 
9

 

 
51

 
532

Total residential loans
41,296

 
275

 
540

 
684

 
42,795

Consumer loans:
 
 
 
 
 
 
 
 
 
Guaranteed student loans
4,520

 
444

 
569

 

 
5,533

Other direct
3,086

 
15

 
2

 
6

 
3,109

Indirect
11,268

 
64

 
1

 
6

 
11,339

Credit cards
699

 
6

 
6

 

 
711

Total consumer loans
19,573

 
529

 
578

 
12

 
20,692

Total LHFI

$126,266

 

$868

 

$1,137

 

$925

 

$129,196

1 Includes $299 million of loans carried at fair value, the majority of which were accruing current.
2 Nonaccruing loans past due 90 days or more totaled $635 million. Nonaccruing loans past due fewer than 90 days include modified nonaccrual loans reported as TDRs and performing second lien loans which are classified as nonaccrual when the first lien loan is nonperforming. 

 
December 31, 2013
(Dollars in millions)
Accruing
Current
 
Accruing
30-89 Days
Past Due
 
Accruing
90+ Days
Past Due
 
 Nonaccruing 2
 
Total
Commercial loans:
 
 
 
 
 
 
 
 
 
C&I

$57,713

 

$47

 

$18

 

$196

 

$57,974

CRE
5,430

 
5

 
7

 
39

 
5,481

Commercial construction
842

 
1

 

 
12

 
855

Total commercial loans
63,985

 
53

 
25

 
247

 
64,310

Residential loans:
 
 
 
 
 
 
 
 
 
Residential mortgages - guaranteed
2,787

 
58

 
571

 

 
3,416

Residential mortgages - nonguaranteed1
23,808

 
150

 
13

 
441

 
24,412

Home equity products
14,480

 
119

 

 
210

 
14,809

Residential construction
488

 
4

 

 
61

 
553

Total residential loans
41,563

 
331

 
584

 
712

 
43,190

Consumer loans:
 
 
 
 
 
 
 
 
 
Guaranteed student loans
4,475

 
461

 
609

 

 
5,545

Other direct
2,803

 
18

 
3

 
5

 
2,829

Indirect
11,189

 
75

 
1

 
7

 
11,272

Credit cards
718

 
7

 
6

 

 
731

Total consumer loans
19,185

 
561

 
619

 
12

 
20,377

Total LHFI

$124,733

 

$945

 

$1,228

 

$971

 

$127,877

1 Includes $302 million of loans carried at fair value, the majority of which were accruing current.
2 Nonaccruing loans past due 90 days or more totaled $653 million. Nonaccruing loans past due fewer than 90 days include modified nonaccrual loans reported as TDRs and performing second lien loans which are classified as nonaccrual when the first lien loan is nonperforming.

Impaired Loans

A loan is considered impaired when it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the agreement. Commercial nonaccrual loans greater than $3 million and certain consumer, residential, and commercial loans whose terms have been modified in a TDR are individually evaluated for impairment. Smaller-balance homogeneous loans that are collectively evaluated for impairment are not included in the following tables. Additionally, the tables below exclude guaranteed student loans and guaranteed residential mortgages for which there was nominal risk of principal loss.
 
March 31, 2014
 
December 31, 2013
(Dollars in millions)
Unpaid
Principal
Balance
 
Amortized   
Cost1
 
Related
Allowance
 
Unpaid
Principal
Balance
 
Amortized   
Cost1
 
Related
Allowance
Impaired loans with no related allowance recorded:
 
 
 
 
 
 
 
 
 
 
Commercial loans:
 
 
 
 
 
 
 
 
 
 
 
C&I

$65

 

$52

 

$—

 

$81

 

$56

 

$—

CRE
12

 
11

 

 
61

 
60

 

Commercial construction
6

 
3

 

 

 

 

Total commercial loans
83

 
66

 

 
142

 
116

 

Impaired loans with an allowance recorded:
 
 
 
 
 
 
 
 
 
 
 
Commercial loans:
 
 
 
 
 
 
 
 
 
 
 
C&I
64

 
59

 
14

 
51

 
49

 
10

CRE
18

 
12

 
1

 
8

 
3

 

Commercial construction
6

 
4

 

 
6

 
3

 

Total commercial loans
88

 
75

 
15

 
65

 
55

 
10

Residential loans:
 
 
 
 
 
 
 
 
 
 
 
Residential mortgages - nonguaranteed
2,328

 
2,031

 
242

 
2,357

 
2,051

 
226

Home equity products
706

 
631

 
92

 
710

 
638

 
96

Residential construction
225

 
181

 
23

 
241

 
189

 
23

Total residential loans
3,259

 
2,843

 
357

 
3,308

 
2,878

 
345

Consumer loans:
 
 
 
 
 
 
 
 
 
 
 
Other direct
14

 
14

 
1

 
14

 
14

 

Indirect
91

 
91

 
5

 
83

 
83

 
5

Credit cards
11

 
11

 
2

 
13

 
13

 
3

Total consumer loans
116

 
116

 
8

 
110

 
110

 
8

Total impaired loans

$3,546

 

$3,100

 

$380

 

$3,625

 

$3,159

 

$363


1 Amortized cost reflects charge-offs that have been recognized plus other amounts that have been applied to reduce the net book balance.


Included in the impaired loan balances above were $2.7 billion of accruing TDRs at amortized cost, at both March 31, 2014 and December 31, 2013, of which 96% were current. See Note 1, “Significant Accounting Policies,” to the Company's 2013 Annual Report on Form 10-K for further information regarding the Company’s loan impairment policy.



 
Three Months Ended March 31
 
2014
 
2013
(Dollars in millions)
Average
Amortized
Cost
 
Interest
Income
Recognized1
 
Average
Amortized
Cost
 
Interest
Income
Recognized1
Impaired loans with no related allowance recorded:
 
 
 
 
 
 
 
Commercial loans:
 
 
 
 
 
 
 
C&I

$52

 

$1

 

$49

 

$—

CRE
11

 

 
9

 

Commercial construction
5

 

 
45

 
1

Total commercial loans
68

 
1

 
103

 
1

Impaired loans with an allowance recorded:
 
 
 
 
 
 
 
Commercial loans:
 
 
 
 
 
 
 
C&I
63

 

 
29

 

CRE
12

 

 
10

 

Commercial construction
4

 

 
5

 

Total commercial loans
79

 

 
44

 

Residential loans:
 
 
 
 
 
 
 
Residential mortgages - nonguaranteed
2,031

 
25

 
2,020

 
22

Home equity products
637

 
7

 
629

 
5

Residential construction
182

 
2

 
206

 
2

Total residential loans
2,850

 
34

 
2,855

 
29

Consumer loans:
 
 
 
 
 
 
 
Other direct
14

 

 
15

 

Indirect
93

 
1

 
60

 
1

Credit cards
12

 

 
20

 

Total consumer loans
119

 
1

 
95

 
1

Total impaired loans

$3,116

 

$36

 

$3,097

 

$31

1 Of the interest income recognized during the three months ended March 31, 2014, and 2013, cash basis interest income was $1 million and $4 million, respectively.


NPAs are shown in the following table:
(Dollars in millions)
March 31, 2014
 
December 31, 2013
Nonaccrual/NPLs:
 
 
 
Commercial loans:
 
 
 
C&I

$177

 

$196

CRE
41

 
39

Commercial construction
11

 
12

Residential loans:
 
 
 
Residential mortgages - nonguaranteed
426

 
441

Home equity products
207

 
210

Residential construction
51

 
61

Consumer loans:
 
 
 
Other direct
6

 
5

Indirect
6

 
7

Total nonaccrual/NPLs1
925

 
971

OREO2
151

 
170

Other repossessed assets
7

 
7

Nonperforming LHFS
12

 
17

Total NPAs

$1,095

 

$1,165

1 Nonaccruing restructured loans are included in total nonaccrual/NPLs.
2 Does not include foreclosed real estate related to loans insured by the FHA or the VA. Proceeds due from the FHA and the VA are recorded as a receivable in other assets in the Consolidated Balance Sheets until the funds are received and the property is conveyed. The receivable amount related to proceeds due from the FHA or the VA totaled $81 million and $88 million at March 31, 2014 and December 31, 2013, respectively.


Restructured Loans
TDRs are loans in which the borrower is experiencing financial difficulty and the Company has granted an economic concession to the borrower that the Company would not otherwise consider. When loans are modified under the terms of a TDR, the Company typically offers the borrower an extension of the loan maturity date and/or a reduction in the original contractual interest rate. In certain situations, the Company may offer to restructure a loan in a manner that ultimately results in the forgiveness of contractually specified principal balances.
At both March 31, 2014 and December 31, 2013, the Company had $8 million in commitments to lend additional funds to debtors whose terms have been modified in a TDR.
The number and amortized cost of loans modified under the terms of a TDR by type of modification are shown in the following tables:
 
Three Months Ended March 31, 20141
(Dollars in millions)
Number of Loans Modified
 
Rate
 Modification 2
 
Term Extension and/or Other Concessions
 
Total
Commercial loans:
 
 
 
 
 
 
 
C&I
16
 

$—

 

$2

 

$2

CRE
2
 

 
3

 
3

Residential loans:
 
 
 
 
 
 
 
Residential mortgages - nonguaranteed
313
 
43

 
18

 
61

Home equity products
433
 
3

 
18

 
21

Residential construction
6
 

 

 

Consumer loans:
 
 
 
 
 
 
 
Other direct
17
 

 

 

Indirect
839
 

 
16

 
16

Credit cards
97
 
1

 

 
1

Total TDRs
1,723
 

$47

 

$57

 

$104

1 Includes loans modified under the terms of a TDR that were charged-off during the period.
2 Restructured loans which had a modification of the loan's contractual interest rate may also have had an extension of the loan's contractual maturity date and/or other concessions. The financial effect of modifying the interest rate on the loans modified as a TDR was immaterial to the financial statements during the three months ended March 31, 2014.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 20131
(Dollars in millions)
Number of Loans Modified
 
Rate
 Modification 2
 
Term Extension and/or Other Concessions
 
Total
Commercial loans:
 
 
 
 
 
 
 
C&I
67
 

$2

 

$35

 

$37

CRE
4
 
3

 

 
3

Residential loans:
 
 
 
 
 
 
 
Residential mortgages - nonguaranteed
276
 
25

 
17

 
42

Home equity products
683
 
19

 
18

 
37

Residential construction
113
 
12

 
1

 
13

Consumer loans:
 
 
 
 
 
 
 
Other direct
48
 

 
1

 
1

Indirect
903
 

 
17

 
17

Credit cards
231
 
1

 

 
1

Total TDRs
2,325
 

$62

 

$89

 

$151

1 Includes loans modified under the terms of a TDR that were charged-off during the period.
2 Restructured loans which had a modification of the loan's contractual interest rate may also have had an extension of the loan's contractual maturity date and/or other concessions. The financial effect of modifying the interest rate on the loans modified as a TDR was immaterial to the financial statements during the three months ended March 31, 2013.

 
 
 
 
 
 
 
 
 
 
For the three months ended March 31, 2014, the table below represents defaults on loans that were first modified between the periods January 1, 2013 and March 31, 2014 that became 90 days or more delinquent or were charged-off during the period.
 
Three Months Ended March 31, 2014
(Dollars in millions)
Number of Loans
 
Amortized Cost
Commercial loans:
 
 
 
C&I
25
 

$1

CRE

 

Commercial construction

 

Residential loans:
 
 
 
Residential mortgages
49
 
4

Home equity products
23
 
1

Residential construction
4
 

Consumer loans:
 
 
 
Other direct
5
 

Indirect
43
 
1

Credit cards
20
 

Total TDRs
169
 

$7




For the three months ended March 31, 2013, the table below represents defaults on loans that were first modified between the periods January 1, 2012 and March 31, 2013 that became 90 days or more delinquent or were charged-off during the period.
 
Three Months Ended March 31, 2013
(Dollars in millions)
Number of Loans
 
Amortized Cost
Commercial loans:
 
 
 
C&I
23
 

$—

CRE
1
 
3

Commercial construction
1
 

Residential loans:
 
 
 
Residential mortgages
76
 
4

Home equity products
49
 
3

Residential construction
6
 
1

Consumer loans:
 
 
 
Other direct
7
 

Indirect
39
 
1

Credit cards
44
 
1

Total TDRs
246
 

$13


 
 
 
 


The majority of loans that were modified and subsequently became 90 days or more delinquent have remained on nonaccrual status since the time of modification.

Concentrations of Credit Risk
The Company does not have a significant concentration of risk to any individual client except for the U.S. government and its agencies. However, a geographic concentration arises because the Company operates primarily in the Southeastern and Mid-Atlantic regions of the U.S. The Company engages in limited international banking activities. The Company’s total cross-border outstanding loans were $1.1 billion and $1.0 billion at March 31, 2014 and December 31, 2013, respectively.
The major concentrations of credit risk for the Company arise by collateral type in relation to loans and credit commitments. The only significant concentration that exists is in loans secured by residential real estate. At March 31, 2014, the Company owned $42.8 billion in residential loans, representing 33% of total LHFI, and had $11.1 billion in commitments to extend credit on home equity lines and $2.8 billion in mortgage loan commitments. At December 31, 2013, the Company owned $43.2 billion in residential loans, representing 34% of total LHFI, and had $11.2 billion in commitments to extend credit on home equity lines and $2.7 billion in mortgage loan commitments. Of the residential loans owned at March 31, 2014 and December 31, 2013, 8% were guaranteed by a federal agency or a GSE.
Included in the residential mortgage portfolio were $12.2 billion and $12.4 billion of mortgage loans at March 31, 2014 and December 31, 2013, respectively, that included terms such as an interest only feature, a high original LTV ratio, or a second lien position that may increase the Company’s exposure to credit risk and result in a concentration of credit risk. Of these mortgage loans, $5.2 billion and $5.5 billion, respectively, were interest only loans, primarily with a ten year interest only period. Approximately $1.1 billion of those interest only loans at March 31, 2014 and December 31, 2013, respectively, were loans with no MI and were either first liens with combined original LTV ratios in excess of 80% or were second liens. Additionally, the Company owned approximately $7.0 billion and $6.9 billion of amortizing loans with no MI at March 31, 2014 and December 31, 2013, respectively, comprised of first liens with combined original LTV ratios in excess of 80% and second liens. Despite changes in underwriting guidelines that have curtailed the origination of high LTV loans, the balances of such loans have increased due to lending to high credit quality clients.