NOTE 5 - LOANS

Composition of Loan Portfolio

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



(Dollars in millions)	March 31, 2015		December 31, 2014
Commercial loans:
C&I		$65,574		$65,440
CRE	6,389		6,741
Commercial construction	1,484		1,211
Total commercial loans	73,447		73,392
Residential loans:
Residential mortgages - guaranteed	655		632
Residential mortgages - nonguaranteed ¹	23,419		23,443
Home equity products	13,954		14,264
Residential construction	417		436
Total residential loans	38,445		38,775
Consumer loans:
Guaranteed student loans	4,337		4,827
Other direct	4,937		4,573
Indirect	10,336		10,644
Credit cards	878		901
Total consumer loans	20,488		20,945
LHFI		$132,380		$133,112
LHFS ²		$3,404		$3,232

¹Includes $268 million and $272 million of LHFI carried at fair value at March 31, 2015 and December 31, 2014, respectively.

²Includes $2.1 billion and $1.9 billion of LHFS carried at fair value at March 31, 2015 and December 31, 2014, respectively.

During the three months ended March 31, 2015 and 2014, the Company transferred $512 million and $115 million in LHFI to LHFS, and $11 million and $17 million in LHFS to LHFI, respectively. Additionally, during the three months ended March 31, 2015 and 2014, the Company sold $405 million and $85 million in loans and leases for gains of $6 million and $9 million, respectively.

At March 31, 2015 and December 31, 2014, the Company had $25.2 billion and $26.5 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $17.5 billion and $18.4 billion of available, unused borrowing capacity, respectively.

At March 31, 2015 and December 31, 2014, the Company had $31.0 billion and $31.2 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $24.5 billion and $24.3 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at March 31, 2015 was used to support $4.0 billion of long-term debt, $500 million of short-term debt, and $6.4 billion of letters of credit issued on the Company's behalf. At December 31, 2014, the available FHLB borrowing capacity 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.

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 March 31, 2015 and December 31, 2014, 30% and 28%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At March 31, 2015 and December 31, 2014, 80% and 79%, 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, 2015		December 31, 2014		March 31, 2015		December 31, 2014		March 31, 2015		December 31, 2014
Risk rating:
Pass		$64,295		$64,228		$6,265		$6,586		$1,468		$1,196
Criticized accruing	1,139		1,061		100		134		15		14
Criticized nonaccruing	140		151		24		21		1		1
Total		$65,574		$65,440		$6,389		$6,741		$1,484		$1,211



	Residential Loans ¹
	Residential mortgages - nonguaranteed				Home equity products				Residential construction
(Dollars in millions)	March 31, 2015		December 31, 2014		March 31, 2015		December 31, 2014		March 31, 2015		December 31, 2014
Current FICO score range:
700 and above		$18,752		$18,780		$11,245		$11,475		$327		$347
620 - 699	3,411		3,369		1,932		1,991		71		70
Below 620 ²	1,256		1,294		777		798		19		19
Total		$23,419		$23,443		$13,954		$14,264		$417		$436



	Consumer Loans ³
	Other direct				Indirect				Credit cards
(Dollars in millions)	March 31, 2015		December 31, 2014		March 31, 2015		December 31, 2014		March 31, 2015		December 31, 2014
Current FICO score range:
700 and above		$4,345		$4,023		$7,324		$7,661		$613		$639
620 - 699	530		476		2,361		2,335		219		212
Below 620 ²	62		74		651		648		46		50
Total		$4,937		$4,573		$10,336		$10,644		$878		$901

¹Excludes $655 million and $632 million of guaranteed residential loans at March 31, 2015 and December 31, 2014, 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 $4.3 billion and $4.8 billion of guaranteed student loans at March 31, 2015 and December 31, 2014, respectively.

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



	March 31, 2015
(Dollars in millions)	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing ²		Total
Commercial loans:
C&I		$65,369		$44		$21		$140		$65,574
CRE	6,362		3		—		24		6,389
Commercial construction	1,483		—		—		1		1,484
Total commercial loans	73,214		47		21		165		73,447
Residential loans:
Residential mortgages - guaranteed	195		34		426		—		655
Residential mortgages - nonguaranteed ¹	23,058		95		12		254		23,419
Home equity products	13,705		84		—		165		13,954
Residential construction	388		6		—		23		417
Total residential loans	37,346		219		438		442		38,445
Consumer loans:
Guaranteed student loans	3,454		372		511		—		4,337
Other direct	4,912		18		3		4		4,937
Indirect	10,260		74		1		1		10,336
Credit cards	866		6		6		—		878
Total consumer loans	19,492		470		521		5		20,488
Total LHFI		$130,052		$736		$980		$612		$132,380

¹Includes $268 million of loans carried at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $379 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, 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 - nonguaranteed ¹	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.

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.



	March 31, 2015						December 31, 2014
(Dollars in millions)	Unpaid Principal Balance		Amortized Cost ¹		Related Allowance		Unpaid Principal Balance		Amortized Cost ¹		Related Allowance
Impaired loans with no related allowance recorded:
Commercial loans:
C&I		$54		$39		$—		$70		$51		$—
CRE	11		10		—		12		11		—
Total commercial loans	65		49		—		82		62		—
Residential loans:
Residential mortgages - nonguaranteed	557		410		—		592		425		—
Residential construction	30		8		—		31		9		—
Total residential loans	587		418		—		623		434		—
Impaired loans with an allowance recorded:
Commercial loans:
C&I	34		28		5		27		26		7
CRE	3		3		1		4		4		4
Total commercial loans	37		31		6		31		30		11
Residential loans:
Residential mortgages - nonguaranteed	1,413		1,373		196		1,381		1,354		215
Home equity products	708		633		73		703		630		66
Residential construction	137		137		16		145		145		19
Total residential loans	2,258		2,143		285		2,229		2,129		300
Consumer loans:
Other direct	12		12		—		13		13		1
Indirect	107		106		5		105		105		5
Credit cards	8		8		2		8		8		2
Total consumer loans	127		126		7		126		126		8
Total impaired loans		$3,074		$2,767		$298		$3,091		$2,781		$319

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 at March 31, 2015 and December 31, 2014 were $2.6 billion and $2.5 billion of accruing TDRs at amortized cost, of which 97% and 96% were current, respectively. See Note 1, “Significant Accounting Policies,” to the Company's 2014 Annual Report on Form 10-K for further information regarding the Company’s loan impairment policy.



	Three Months Ended March 31
	2015				2014
(Dollars in millions)	Average Amortized Cost		Interest Income Recognized ¹		Average Amortized Cost		Interest Income Recognized ¹
Impaired loans with no related allowance recorded:
Commercial loans:
C&I		$41		$—		$52		$1
CRE	10		—		11		—
Commercial construction	—		—		5		—
Total commercial loans	51		—		68		1
Residential loans:
Residential mortgages - nonguaranteed	413		4		440		4
Residential construction	9		—		18		—
Total residential loans	422		4		458		4
Impaired loans with an allowance recorded:
Commercial loans:
C&I	38		1		63		—
CRE	3		—		12		—
Commercial construction	—		—		4		—
Total commercial loans	41		1		79		—
Residential loans:
Residential mortgages - nonguaranteed	1,374		17		1,591		21
Home equity products	636		7		637		7
Residential construction	137		2		164		2
Total residential loans	2,147		26		2,392		30
Consumer loans:
Other direct	13		—		14		—
Indirect	108		1		93		1
Credit cards	8		—		12		—
Total consumer loans	129		1		119		1
Total impaired loans		$2,790		$32		$3,116		$36

¹Of the interest income recognized during both the three months ended March 31, 2015 and 2014, cash basis interest income was $1 million.

NPAs are shown in the following table:



(Dollars in millions)	March 31, 2015		December 31, 2014
Nonaccrual/NPLs:
Commercial loans:
C&I		$140		$151
CRE	24		21
Commercial construction	1		1
Residential loans:
Residential mortgages - nonguaranteed	254		254
Home equity products	165		174
Residential construction	23		27
Consumer loans:
Other direct	4		6
Indirect	1		—
Total nonaccrual/NPLs ¹	612		634
OREO ²	79		99
Other repossessed assets	5		9
Nonperforming LHFS	—		38
Total NPAs		$696		$780

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 $61 million and $57 million at March 31, 2015 and December 31, 2014, respectively.

Included in residential NPLs in the table above at March 31, 2015 and December 31, 2014 was $224 million and $251 million, respectively, of nonaccruing loans secured by residential real estate properties for which formal foreclosure proceedings are in process. The Company also had $199 million and $208 million of accruing loans secured by residential real estate properties for which formal foreclosure proceedings are in process, of which $177 million and $182 million were insured by the FHA or the VA, at March 31, 2015 and December 31, 2014, respectively.

At March 31, 2015 and December 31, 2014, OREO was comprised of $61 million and $75 million of foreclosed residential real estate properties and $13 million and $16 million of foreclosed commercial real estate properties, respectively, with the remainder related to land and other properties.

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 March 31, 2015 and December 31, 2014, the Company had $5 million and $1 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.



	Three Months Ended March 31, 2015 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	22		$—		$—		$5		$5
Residential loans:
Residential mortgages - nonguaranteed	216	4		30		7		41
Home equity products	468	—		3		24		27
Residential construction	1	—		—		—		—
Consumer loans:
Other direct	17	—		—		—		—
Indirect	569	—		—		12		12
Credit cards	236	—		1		—		1
Total TDRs	1,529		$4		$34		$48		$86

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 three months ended March 31, 2015 was immaterial.

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 three months ended March 31, 2015.



	Three Months Ended March 31, 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	16		$—		$—		$2		$2
CRE	2	—		—		3		3
Residential loans:
Residential mortgages - nonguaranteed	313	3		39		19		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		$3		$43		$58		$104

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

For the three months ended March 31, 2015, the table below represents defaults on loans that were first modified between the periods January 1, 2014 and March 31, 2015 that became 90 days or more delinquent or were charged-off during the period.



	Three Months Ended March 31, 2015
(Dollars in millions)	Number of Loans	Amortized Cost
Commercial loans:
C&I	4		$1
Residential loans:
Residential mortgages	36	6
Home equity products	30	1
Consumer loans:
Other direct	1	—
Indirect	39	—
Credit cards	19	—
Total TDRs	129		$8

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
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

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 $1.5 billion and $1.3 billion at March 31, 2015 and December 31, 2014, 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, 2015, the Company owned $38.4 billion in residential loans, representing 29% of total LHFI, and had $10.9 billion in commitments to extend credit on home equity lines and $5.2 billion in mortgage loan commitments. 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 both March 31, 2015 and December 31, 2014, 2% of residential loans owned were guaranteed by a federal agency or a GSE.

The following table presents loans in the residential mortgage portfolio that 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 March 31, 2015 and December 31, 2014, borrowers' current weighted average FICO score on these loans was 738 and 754, respectively.



(Dollars in millions)	March 31, 2015		December 31, 2014
High LTV residential mortgages:
Interest only LHFI with no MI ^{1, 2}		$817		$873
Interest only LHFI with MI ¹	2,810		3,180
Total interest only residential mortgages	3,627		4,053
Amortizing loans with no MI ²	7,423		7,368
Total high LTV residential mortgages		$11,050		$11,421

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.