NOTE 6 - LOANS

Composition of Loan Portfolio

The composition of the Company's loan portfolio is shown in the following table:



(Dollars in millions)	December 31, 2014		December 31, 2013
Commercial loans:
C&I		$65,440		$57,974
CRE	6,741		5,481
Commercial construction	1,211		855
Total commercial loans	73,392		64,310
Residential loans:
Residential mortgages - guaranteed	632		3,416
Residential mortgages - nonguaranteed ¹	23,443		24,412
Home equity products	14,264		14,809
Residential construction	436		553
Total residential loans	38,775		43,190
Consumer loans:
Guaranteed student loans	4,827		5,545
Other direct	4,573		2,829
Indirect	10,644		11,272
Credit cards	901		731
Total consumer loans	20,945		20,377
LHFI		$133,112		$127,877
LHFS ²		$3,232		$1,699

¹Includes $272 million and $302 million of LHFI carried at fair value at December 31, 2014 and 2013, respectively.

²Includes $1.9 billion and $1.4 billion of LHFS carried at fair value at December 31, 2014 and 2013, respectively.

During the years ended December 31, 2014 and 2013, the Company transferred $3.3 billion and $280 million in LHFI to LHFS, and $44 million and $43 million in LHFS to LHFI, respectively. Additionally, during the years ended December 31, 2014 and 2013, the Company sold $4.0 billion and $807 million in loans and leases for gains of $83 million and $1 million, respectively.

At December 31, 2014 and 2013, the Company had $26.5 billion and $27.1 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $18.4 billion and $20.8 billion of available, unused borrowing capacity, respectively.

At both December 31, 2014 and 2013, the Company had $31.2 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $24.3 billion and $20.1 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at December 31, 2014 was used to support $4.0 billion of long-term debt, $4.0 billion of short-term debt, and $7.9 billion of letters of credit issued on the Company's behalf. At December 31, 2013, the available FHLB borrowing capacity was used to support $3.0 billion of long-term debt, $4.0 billion of short-term debt, and $853 million of letters of credit issued on the Company's behalf.

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/analyses, and/or 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 higher PDs. 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. Commercial risk ratings are refreshed at least annually, or more frequently as appropriate, based upon considerations such as market conditions, borrower 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 December 31, 2014 and 2013, 28% and 82%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. The decline in the percentage of current loans in LHFI is solely due to the sale of approximately $2.0 billion in accruing current guaranteed residential loans in the third quarter of 2014. At December 31, 2014 and 2013, 79% 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)	December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
Risk rating:
Pass		$64,228		$56,443		$6,586		$5,245		$1,196		$798
Criticized accruing	1,061		1,335		134		197		14		45
Criticized nonaccruing	151		196		21		39		1		12
Total		$65,440		$57,974		$6,741		$5,481		$1,211		$855



	Residential Loans ¹
	Residential mortgages - nonguaranteed				Home equity products				Residential construction
(Dollars in millions)	December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
Current FICO score range:
700 and above		$18,780		$19,100		$11,475		$11,661		$347		$423
620 - 699	3,369		3,652		1,991		2,186		70		90
Below 620 ²	1,294		1,660		798		962		19		40
Total		$23,443		$24,412		$14,264		$14,809		$436		$553



	Consumer Loans ³
	Other direct				Indirect				Credit cards
(Dollars in millions)	December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
Current FICO score range:
700 and above		$4,023		$2,370		$7,661		$8,420		$639		$512
620 - 699	476		397		2,335		2,228		212		176
Below 620 ²	74		62		648		624		50		43
Total		$4,573		$2,829		$10,644		$11,272		$901		$731

¹Excludes $632 million and $3.4 billion of guaranteed residential loans at December 31, 2014 and 2013, respectively.

²For 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.

³Excludes $4.8 billion and $5.5 billion of guaranteed student loans at December 31, 2014 and 2013, respectively.

The payment status for the LHFI portfolio is shown in the tables below:



	December 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		$65,246		$36		$7		$151		$65,440
CRE	6,716		3		1		21		6,741
Commercial construction	1,209		1		—		1		1,211
Total commercial loans	73,171		40		8		173		73,392
Residential loans:
Residential mortgages - guaranteed	176		34		422		—		632
Residential mortgages - nonguaranteed¹	23,067		108		14		254		23,443
Home equity products	13,989		101		—		174		14,264
Residential construction	402		7		—		27		436
Total residential loans	37,634		250		436		455		38,775
Consumer loans:
Guaranteed student loans	3,801		425		601		—		4,827
Other direct	4,545		19		3		6		4,573
Indirect	10,537		104		3		—		10,644
Credit cards	887		8		6		—		901
Total consumer loans	19,770		556		613		6		20,945
Total LHFI		$130,575		$846		$1,057		$634		$133,112

¹Includes $272 million of loans carried at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $388 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

¹Includes $302 million of loans carried at fair value, the majority of which were accruing current.

²Nonaccruing 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 commercial, residential, and consumer 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.



	December 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		$70		$51		$—		$81		$56		$—
CRE	12		11		—		61		60		—
Total commercial loans	82		62		—		142		116		—
Residential loans:
Residential mortgages - nonguaranteed	592		425		—		672		425		—
Residential construction	31		9		—		68		17		—
Total residential loans	623		434		—		740		442		—
Impaired loans with an allowance recorded:
Commercial loans:
C&I	27		26		7		51		49		10
CRE	4		4		4		8		3		—
Commercial construction	—		—		—		6		3		—
Total commercial loans	31		30		11		65		55		10
Residential loans:
Residential mortgages - nonguaranteed	1,381		1,354		215		1,685		1,626		226
Home equity products	703		630		66		710		638		96
Residential construction	145		145		19		173		172		23
Total residential loans	2,229		2,129		300		2,568		2,436		345
Consumer loans:
Other direct	13		13		1		14		14		—
Indirect	105		105		5		83		83		5
Credit cards	8		8		2		13		13		3
Total consumer loans	126		126		8		110		110		8
Total impaired loans		$3,091		$2,781		$319		$3,625		$3,159		$363

¹Amortized 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 $2.5 billion and $2.7 billion of accruing TDRs at amortized cost, at December 31, 2014 and 2013, respectively, of which 96% were current at both year ends. See Note 1, “Significant Accounting Policies,” for further information regarding the Company’s loan impairment policy.



	Year Ended December 31
	2014				2013				2012
(Dollars in millions)	Average Amortized Cost		Interest Income Recognized¹		Average Amortized Cost		Interest Income Recognized¹		Average Amortized Cost		Interest Income Recognized¹
Impaired loans with no related allowance recorded:
Commercial loans:
C&I		$84		$1		$75		$1		$48		$1
CRE	11		1		60		2		9		—
Commercial construction	—		—		—		—		45		1
Total commercial loans	95		2		135		3		102		2
Residential loans:
Residential mortgages - nonguaranteed	437		17		449		18		512		15
Residential construction	12		—		21		1		53		1
Total residential loans	449		17		470		19		565		16
Impaired loans with an allowance recorded:
Commercial loans:
C&I	16		1		45		1		51		1
CRE	5		—		3		—		9		—
Commercial construction	—		—		5		—		4		—
Total commercial loans	21		1		53		1		64		1
Residential loans:
Residential mortgages - nonguaranteed	1,357		78		1,576		76		1,551		68
Home equity products	644		27		649		23		627		26
Residential construction	144		8		172		10		156		9
Total residential loans	2,145		113		2,397		109		2,334		103
Consumer loans:
Other direct	14		—		15		1		15		1
Indirect	113		5		89		4		50		2
Credit cards	10		1		16		1		24		2
Total consumer loans	137		6		120		6		89		5
Total impaired loans		$2,847		$139		$3,175		$138		$3,154		$127

¹Of the interest income recognized during the year ended December 31, 2014, 2013, and 2012, cash basis interest income was $4 million, $10 million, and $18 million, respectively.

NPAs are shown in the following table:



(Dollars in millions)	December 31, 2014		December 31, 2013
Nonaccrual/NPLs:
Commercial loans:
C&I		$151		$196
CRE	21		39
Commercial construction	1		12
Residential loans:
Residential mortgages - nonguaranteed	254		441
Home equity products	174		210
Residential construction	27		61
Consumer loans:
Other direct	6		5
Indirect	—		7
Total nonaccrual/NPLs ¹	634		971
OREO ²	99		170
Other repossessed assets	9		7
Nonperforming LHFS	38		17
Total NPAs		$780		$1,165

¹ Nonaccruing restructured loans are included in total nonaccrual/NPLs.

²Does 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 $57 million and $88 million at December 31, 2014 and 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 December 31, 2014 and 2013, the Company had $1 million and $8 million, respectively, 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:



	2014 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification ^2,3		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	78		$—		$1		$37		$38
CRE	6	4		—		3		7
Residential loans:
Residential mortgages - nonguaranteed	1,135	10		127		44		181
Home equity products	1,977	—		7		86		93
Residential construction	11	—		1		—		1
Consumer loans:
Other direct	71	—		—		1		1
Indirect	2,928	—		—		57		57
Credit cards	450	—		2		—		2
Total TDRs	6,656		$14		$138		$228		$380

¹Includes loans modified under the terms of a TDR that were charged-off during the period.

² Restructured loans which had forgiveness of amounts contractually due under the terms of the loan typically have had multiple concessions including rate modifications and/or term extensions. The total amount of charge-offs associated with principal forgiveness during the year ended December 31, 2014 was $14 million.

³Restructured 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 year ended December 31, 2014.



	2013 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification ^2,3		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	152		$18		$2		$105		$125
CRE	6	—		3		1		4
Commercial construction	1	—		—		—		—
Residential loans:
Residential mortgages - nonguaranteed	1,584	1		166		94		261
Home equity products	2,630	—		71		75		146
Residential construction	259	—		24		3		27
Consumer loans:
Other direct	140	—		1		3		4
Indirect	3,409	—		—		65		65
Credit cards	593	—		3		—		3
Total TDRs	8,774		$19		$270		$346		$635

¹Includes loans modified under the terms of a TDR that were charged-off during the period.



	2012 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification ^2,3		Term Extension and/or Other Concessions ⁴		Total
Commercial loans:
C&I	358		$5		$4		$23		$32
CRE	33	20		7		6		33
Commercial construction	16	4		—		14		18
Residential loans:
Residential mortgages - nonguaranteed	2,804	—		72		125		197
Home equity products	3,790	—		110		91		201
Residential construction	564	—		1		73		74
Consumer loans:
Other direct	127	—		—		4		4
Indirect	2,803	—		—		49		49
Credit cards	1,421	—		8		—		8
Total TDRs	11,916		$29		$202		$385		$616

¹Includes loans modified under the terms of a TDR that were charged-off during the period.

⁴ 4,231 of the residential loans, with an amortized cost of $201 million at December 31, 2012, relate to loans discharged in Chapter 7 bankruptcy that were reclassified as TDRs during 2012.

For the year ended December 31, 2014, the table below represents defaults on loans that were first modified between the periods January 1, 2013 and December 31, 2014 that became 90 days or more delinquent or were charged-off during the period.



	Year Ended December 31, 2014
(Dollars in millions)	Number of Loans	Amortized Cost
Commercial loans:
C&I	78		$10
Residential loans:
Residential mortgages	158	19
Home equity products	101	5
Residential construction	6	—
Consumer loans:
Other direct	9	—
Indirect	181	1
Credit cards	145	1
Total TDRs	678		$36

For the year ended December 31, 2013, the table below represents defaults on loans that were first modified between the periods January 1, 2012 and December 31, 2013 that became 90 days or more delinquent or were charged-off during the period.



	Year Ended December 31, 2013
(Dollars in millions)	Number of Loans	Amortized Cost
Commercial loans:
C&I	55		$5
CRE	5	3
Commercial construction	1	—
Residential loans:
Residential mortgages	287	23
Home equity products	188	10
Residential construction	48	3
Consumer loans:
Other direct	15	1
Indirect	207	2
Credit cards	169	1
Total TDRs	975		$48

For the year ended December 31, 2012, the following table represents defaults on loans that were first modified between the periods January 1, 2011 and December 31, 2012 that became 90 days or more delinquent or were charged-off during the period.



	Year Ended December 31, 2012
(Dollars in millions)	Number of Loans	Amortized Cost
Commercial loans:
C&I	84		$5
CRE	9	5
Commercial construction	10	7
Residential loans:
Residential mortgages	141	20
Home equity products	164	11
Residential construction	24	3
Consumer loans:
Other direct	4	—
Indirect	43	—
Credit cards	204	1
Total TDRs	683		$52

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 $1.3 billion and $956 million at December 31, 2014 and 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 December 31, 2014, the Company owned $38.8 billion in residential loans, representing 29% of total LHFI, and had $10.9 billion in commitments to extend credit on home equity lines and $3.3 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 December 31, 2014 and December 31, 2013, 2% and 8%, respectively, were guaranteed by a federal agency or a GSE.

The following table presents loans in the residential mortgage portfolio at December 31, which included terms such as a high original LTV ratio (in excess of 80%), an interest only feature, or a second lien position that may increase the Company’s exposure to credit risk and result in a concentration of credit risk. At December 31, 2014 and 2013, borrowers' current weighted average FICO score on these loans was 754 and 732, respectively.



(Dollars in millions)	2014		2013
High LTV residential mortgages:
Interest only LHFI with no MI ^{1, 2}		$873		$1,128
Interest only LHFI with MI ¹	3,180		4,403
Total interest only residential mortgages	4,053		5,531
Amortizing loans with no MI ²	7,368		6,918
Total high LTV residential mortgages		$11,421		$12,449

¹ Primarily with an initial 10 year interest only period.

² Comprised of first liens with combined original LTV ratios in excess of 80% and/or 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.