NOTE 5 - LOANS

Composition of Loan Portfolio

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



(Dollars in millions)	June 30, 2015		December 31, 2014
Commercial loans:
C&I		$65,713		$65,440
CRE	6,058		6,741
Commercial construction	1,530		1,211
Total commercial loans	73,301		73,392
Residential loans:
Residential mortgages - guaranteed	625		632
Residential mortgages - nonguaranteed ¹	24,038		23,443
Home equity products	13,672		14,264
Residential construction	401		436
Total residential loans	38,736		38,775
Consumer loans:
Guaranteed student	4,401		4,827
Other direct	5,329		4,573
Indirect	9,834		10,644
Credit cards	937		901
Total consumer loans	20,501		20,945
LHFI		$132,538		$133,112
LHFS ²		$2,457		$3,232

¹Includes $263 million and $272 million of LHFI carried at fair value at June 30, 2015 and December 31, 2014, respectively.

²Includes $1.9 billion of LHFS carried at fair value at both June 30, 2015 and December 31, 2014.

During the three months ended June 30, 2015 and 2014, the Company transferred $1.2 billion and $2.7 billion in LHFI to LHFS, and $640 million and $3 million in LHFS to LHFI, respectively. Additionally, during the three months ended June 30, 2015 and 2014, the Company sold $1.4 billion and $534 million in loans and leases for gains of $7 million and $22 million, respectively.

During the six months ended June 30, 2015 and 2014, the Company transferred $1.7 billion and $2.8 billion in LHFI to LHFS, and $651 million and $20 million in LHFS to LHFI, respectively. Additionally, during the six months ended June 30, 2015 and 2014, the Company sold $1.8 billion and $619 million in loans and leases for gains of $13 million and $31 million, respectively.

At June 30, 2015 and December 31, 2014, the Company had $24.3 billion and $26.5 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $17.2 billion and $18.4 billion of available, unused borrowing capacity, respectively.

At both June 30, 2015 and December 31, 2014, the Company had $31.2 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $25.1 billion and $24.3 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at June 30, 2015 was used to support $1.5 billion of long-term debt, $2.3 billion of short-term debt, and $6.2 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 June 30, 2015 and December 31, 2014, 30% and 28%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At June 30, 2015 and December 31, 2014, 82% 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)	June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014
Risk rating:
Pass		$64,190		$64,228		$5,934		$6,586		$1,515		$1,196
Criticized accruing	1,383		1,061		107		134		14		14
Criticized nonaccruing	140		151		17		21		1		1
Total		$65,713		$65,440		$6,058		$6,741		$1,530		$1,211



	Residential Loans ¹
	Residential Mortgages - Nonguaranteed				Home Equity Products				Residential Construction
(Dollars in millions)	June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014
Current FICO score range:
700 and above		$19,582		$18,780		$11,076		$11,475		$324		$347
620 - 699	3,298		3,369		1,878		1,991		62		70
Below 620 ²	1,158		1,294		718		798		15		19
Total		$24,038		$23,443		$13,672		$14,264		$401		$436



	Consumer Loans ³
	Other Direct				Indirect				Credit Cards
(Dollars in millions)	June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014		June 30, 2015		December 31, 2014
Current FICO score range:
700 and above		$4,754		$4,023		$7,066		$7,661		$661		$639
620 - 699	520		476		2,181		2,335		226		212
Below 620 ²	55		74		587		648		50		50
Total		$5,329		$4,573		$9,834		$10,644		$937		$901

¹Excludes $625 million and $632 million of guaranteed residential loans at June 30, 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 $4.4 billion and $4.8 billion of guaranteed student loans at June 30, 2015 and December 31, 2014, respectively.

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



	June 30, 2015
(Dollars in millions)	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing ²		Total
Commercial loans:
C&I		$65,518		$36		$19		$140		$65,713
CRE	6,038		2		1		17		6,058
Commercial construction	1,529		—		—		1		1,530
Total commercial loans	73,085		38		20		158		73,301
Residential loans:
Residential mortgages - guaranteed	190		35		400		—		625
Residential mortgages - nonguaranteed ¹	23,789		92		10		147		24,038
Home equity products	13,443		76		—		153		13,672
Residential construction	378		5		—		18		401
Total residential loans	37,800		208		410		318		38,736
Consumer loans:
Guaranteed student	3,617		312		472		—		4,401
Other direct	5,301		21		3		4		5,329
Indirect	9,755		78		—		1		9,834
Credit cards	926		6		5		—		937
Total consumer loans	19,599		417		480		5		20,501
Total LHFI		$130,484		$663		$910		$481		$132,538

¹Includes $263 million of loans carried at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $273 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	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.



	June 30, 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		$47		$39		$—		$70		$51		$—
CRE	11		9		—		12		11		—
Total commercial loans	58		48		—		82		62		—
Residential loans:
Residential mortgages - nonguaranteed	486		359		—		592		425		—
Residential construction	24		7		—		31		9		—
Total residential loans	510		366		—		623		434		—
Impaired loans with an allowance recorded:
Commercial loans:
C&I	31		16		5		27		26		7
CRE	—		—		—		4		4		4
Total commercial loans	31		16		5		31		30		11
Residential loans:
Residential mortgages - nonguaranteed	1,410		1,370		189		1,381		1,354		215
Home equity products	706		634		69		703		630		66
Residential construction	129		129		15		145		145		19
Total residential loans	2,245		2,133		273		2,229		2,129		300
Consumer loans:
Other direct	12		12		1		13		13		1
Indirect	110		109		5		105		105		5
Credit cards	24		7		1		25		8		2
Total consumer loans	146		128		7		143		126		8
Total impaired loans		$2,990		$2,691		$285		$3,108		$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 both June 30, 2015 and December 31, 2014 were $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 June 30								Six Months Ended June 30
	2015				2014				2015				2014
(Dollars in millions)	Average Amortized Cost		Interest Income Recognized¹		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		$44		$1		$72		$—		$46		$1		$76		$1
CRE	10		—		15		—		10		—		15		—
Total commercial loans	54		1		87		—		56		1		91		1
Residential loans:
Residential mortgages - nonguaranteed	365		4		448		5		368		7		454		9
Residential construction	8		—		15		—		10		—		16		—
Total residential loans	373		4		463		5		378		7		470		9
Impaired loans with an allowance recorded:
Commercial loans:
C&I	19		—		52		—		25		—		54		—
CRE	—		—		11		—		—		—		11		—
Commercial construction	—		—		3		—		—		—		3		—
Total commercial loans	19		—		66		—		25		—		68		—
Residential loans:
Residential mortgages - nonguaranteed	1,366		17		1,471		20		1,367		34		1,460		41
Home equity products	637		7		651		7		640		14		648		13
Residential construction	129		2		164		2		128		4		162		4
Total residential loans	2,132		26		2,286		29		2,135		52		2,270		58
Consumer loans:
Other direct	12		—		14		—		12		—		14		—
Indirect	111		1		105		1		114		3		103		3
Credit cards	7		—		11		—		7		—		11		—
Total consumer loans	130		1		130		1		133		3		128		3
Total impaired loans		$2,708		$32		$3,032		$35		$2,727		$63		$3,027		$71

¹Of the interest income recognized during both the three and six months ended June 30, 2015, cash basis interest income was $1 million.

Of the interest income recognized during the three and six months ended June 30, 2014, cash basis interest income was less than $1 million and $2 million, respectively.

NPAs are shown in the following table:



(Dollars in millions)	June 30, 2015		December 31, 2014
Nonaccrual/NPLs:
Commercial loans:
C&I		$140		$151
CRE	17		21
Commercial construction	1		1
Residential loans:
Residential mortgages - nonguaranteed	147		254
Home equity products	153		174
Residential construction	18		27
Consumer loans:
Other direct	4		6
Indirect	1		—
Total nonaccrual/NPLs ¹	481		634
OREO ²	72		99
Other repossessed assets	6		9
Nonperforming LHFS	98		38
Total NPAs		$657		$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 $55 million and $57 million at June 30, 2015 and December 31, 2014, respectively.

Included in NPLs in the table above at June 30, 2015 and December 31, 2014 were $228 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 $187 million and $208 million of accruing loans secured by residential real estate properties for which formal foreclosure proceedings are in process, of which $167 million and $182 million were insured by the FHA or the VA, at June 30, 2015 and December 31, 2014, respectively.

At June 30, 2015 and December 31, 2014, OREO was comprised of $56 million and $75 million of foreclosed residential real estate properties and $10 million and $16 million of foreclosed commercial real estate properties, respectively, with the remainder related to land and other properties.

Restructured Loans

A TDR is a loan for which the Company has granted an economic concession to the borrower, in response to certain instances of financial difficulty experienced by the borrower, that the Company would not have otherwise considered. When a loan is 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 a contractually specified principal balance.

At both June 30, 2015 and December 31, 2014, the Company had an immaterial amount of 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 June 30, 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	23		$—		$—		$1		$1
CRE	1	—		—		—		—
Residential loans:
Residential mortgages - nonguaranteed	241	3		34		3		40
Home equity products	499	—		9		17		26
Residential construction	10	—		—		—		—
Consumer loans:
Other direct	20	—		—		—		—
Indirect	819	—		—		14		14
Credit cards	136	—		1		—		1
Total TDRs	1,749		$3		$44		$35		$82



	Six Months Ended June 30, 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	45		$—		$1		$5		$6
CRE	1	—		—		—		—
Residential loans:
Residential mortgages - nonguaranteed	457	7		63		11		81
Home equity products	967	—		13		41		54
Residential construction	11	—		—		—		—
Consumer loans:
Other direct	37	—		—		—		—
Indirect	1,388	—		—		26		26
Credit cards	372	—		1		—		1
Total TDRs	3,278		$7		$78		$83		$168

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 both the three and six months ended June 30, 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 both the three and six months ended June 30, 2015.



	Three Months Ended June 30, 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	27		$—		$—		$12		$12
CRE	2	3		—		—		3
Residential loans:
Residential mortgages - nonguaranteed	365	4		41		10		55
Home equity products	471	—		2		20		22
Residential construction	4	—		—		—		—
Consumer loans:
Other direct	21	—		—		—		—
Indirect	712	—		—		14		14
Credit cards	130	—		1		—		1
Total TDRs	1,732		$7		$44		$56		$107



	Six Months Ended June 30, 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	43		$—		$—		$14		$14
CRE	4	3		—		3		6
Residential loans:
Residential mortgages - nonguaranteed	678	7		79		29		115
Home equity products	904	—		5		38		43
Residential construction	10	—		1		—		1
Consumer loans:
Other direct	38	—		—		1		1
Indirect	1,551	—		—		30		30
Credit cards	227	—		1		—		1
Total TDRs	3,455		$10		$86		$115		$211

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

For the three and six months ended June 30, 2015, the table below represents defaults on loans that were first modified between the periods January 1, 2014 and June 30, 2015 that became 90 days or more delinquent or were charged-off during the period.



	Three Months Ended June 30, 2015			Six Months Ended June 30, 2015
(Dollars in millions)	Number of Loans	Amortized Cost		Number of Loans	Amortized Cost
Commercial loans:
C&I	8		$—	12		$1
Residential loans:
Residential mortgages	19	3		55	9
Home equity products	32	1		62	2
Consumer loans:
Other direct	—	—		1	—
Indirect	32	—		71	—
Credit cards	4	—		23	—
Total TDRs	95		$4	224		$12

For the three and six months ended June 30, 2014, the table below represents defaults on loans that were first modified between the periods January 1, 2013 and June 30, 2014 that became 90 days or more delinquent or were charged-off during the period.



	Three Months Ended June 30, 2014			Six Months Ended June 30, 2014
(Dollars in millions)	Number of Loans	Amortized Cost		Number of Loans	Amortized Cost
Commercial loans:
C&I	22		$4	47		$5
Residential loans:
Residential mortgages	40	6		89	10
Home equity products	24	2		47	3
Residential construction	2	—		6	—
Consumer loans:
Other direct	—	—		5	—
Indirect	46	—		89	1
Credit cards	63	1		83	1
Total TDRs	197		$13	366		$20

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 $1.7 billion and $1.3 billion at June 30, 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 June 30, 2015, the Company owned $38.7 billion in residential loans, representing 29% of total LHFI, and had $10.8 billion in commitments to extend credit on home equity lines, $7.5 billion in credit card commitments, and $4.9 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, $6.7 billion in credit card commitments, and $3.3 billion in mortgage loan commitments. At both June 30, 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 a high original LTV ratio (in excess of 80%), an interest only feature, and/or a second lien position that may increase the Company’s exposure to credit risk and result in a concentration of credit risk. At both June 30, 2015 and December 31, 2014, borrowers' current weighted average FICO score on these loans was 738.



(Dollars in millions)	June 30, 2015		December 31, 2014
Interest only mortgages with MI or with combined original LTV ≤ 80%¹		$2,314		$3,180
Interest only mortgages with no MI and with combined original LTV > 80%¹	714		873
Total interest only mortgages ¹	3,028		4,053
Amortizing mortgages with combined original LTV > 80% and/or second liens²	7,810		7,368
Total mortgages with potential concentration of credit risk		$10,838		$11,421

¹Comprised of first and/or second liens, primarily with an initial 10 year interest only period.

²Comprised of loans with no MI.