NOTE 5 - LOANS

Composition of Loan Portfolio



(Dollars in millions)	September 30, 2015		December 31, 2014
Commercial loans:
C&I		$65,371		$65,440
CRE	6,168		6,741
Commercial construction	1,763		1,211
Total commercial loans	73,302		73,392
Residential loans:
Residential mortgages - guaranteed	627		632
Residential mortgages - nonguaranteed ¹	24,351		23,443
Home equity products	13,416		14,264
Residential construction	394		436
Total residential loans	38,788		38,775
Consumer loans:
Guaranteed student	4,588		4,827
Other direct	5,771		4,573
Indirect	10,119		10,644
Credit cards	992		901
Total consumer loans	21,470		20,945
LHFI		$133,560		$133,112
LHFS ²		$2,032		$3,232

¹Includes $262 million and $272 million of LHFI measured at fair value at September 30, 2015 and December 31, 2014, respectively.

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

During the three months ended September 30, 2015 and 2014, the Company transferred $38 million and $362 million in LHFI to LHFS, and $75 million and $19 million in LHFS to LHFI, respectively. Additionally, during the three months ended September 30, 2015 and 2014, the Company sold $178 million and $2.3 billion in loans and leases for gains of $9 million and $40 million, respectively.

During the nine months ended September 30, 2015 and 2014, the Company transferred $1.7 billion and $3.2 billion in LHFI to LHFS, and $726 million and $39 million in LHFS to LHFI, respectively. Additionally, during the nine months ended September 30, 2015 and 2014, the Company sold $2.0 billion and $3.0 billion in loans and leases for gains of $22 million and $71 million, respectively.

At September 30, 2015 and December 31, 2014, the Company had $23.3 billion and $26.5 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $17.0 billion and $18.4 billion of available, unused borrowing capacity, respectively.

At September 30, 2015 and December 31, 2014, the Company had $32.0 billion and $31.2 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $26.2 billion and $24.3 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at September 30, 2015 was used to support $408 million of long-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. The increase in criticized accruing C&I loans at September 30, 2015 compared to December 31, 2014, as presented in the following risk rating table, was due to loans primarily in the energy industry vertical that were downgraded to substandard during the first nine months of 2015.

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 September 30, 2015 and December 31, 2014, 32% and 28%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At September 30, 2015 and December 31, 2014, 81% and 79%, respectively, of the guaranteed student loan portfolio was current with respect to payments. The Company's loss exposure on guaranteed residential and student 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)	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
Risk rating:
Pass		$63,826		$64,228		$6,033		$6,586		$1,739		$1,196
Criticized accruing	1,423		1,061		120		134		23		14
Criticized nonaccruing	122		151		15		21		1		1
Total		$65,371		$65,440		$6,168		$6,741		$1,763		$1,211



	Residential Loans ¹
	Residential Mortgages - Nonguaranteed				Home Equity Products				Residential Construction
(Dollars in millions)	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
Current FICO score range:
700 and above		$19,936		$18,780		$10,897		$11,475		$321		$347
620 - 699	3,330		3,369		1,827		1,991		59		70
Below 620 ²	1,085		1,294		692		798		14		19
Total		$24,351		$23,443		$13,416		$14,264		$394		$436



	Consumer Loans ³
	Other Direct				Indirect				Credit Cards
(Dollars in millions)	September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014		September 30, 2015		December 31, 2014
Current FICO score range:
700 and above		$5,180		$4,023		$7,053		$7,661		$690		$639
620 - 699	536		476		2,426		2,335		245		212
Below 620 ²	55		74		640		648		57		50
Total		$5,771		$4,573		$10,119		$10,644		$992		$901

¹Excludes $627 million and $632 million of guaranteed residential loans at September 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 $4.6 billion and $4.8 billion of guaranteed student loans at September 30, 2015 and December 31, 2014, respectively.

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



	September 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		$65,148		$89		$12		$122		$65,371
CRE	6,150		2		1		15		6,168
Commercial construction	1,762		—		—		1		1,763
Total commercial loans	73,060		91		13		138		73,302
Residential loans:
Residential mortgages - guaranteed	200		51		376		—		627
Residential mortgages - nonguaranteed ¹	24,081		105		9		156		24,351
Home equity products	13,189		81		—		146		13,416
Residential construction	375		3		—		16		394
Total residential loans	37,845		240		385		318		38,788
Consumer loans:
Guaranteed student	3,724		367		497		—		4,588
Other direct	5,742		22		3		4		5,771
Indirect	10,032		83		1		3		10,119
Credit cards	978		8		6		—		992
Total consumer loans	20,476		480		507		7		21,470
Total LHFI		$131,381		$811		$905		$463		$133,560

¹Includes $262 million of loans measured at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $278 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 measured 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.



	September 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		$59		$49		$—		$70		$51		$—
CRE	11		9		—		12		11		—
Total commercial loans	70		58		—		82		62		—
Residential loans:
Residential mortgages - nonguaranteed	431		326		—		592		425		—
Residential construction	24		9		—		31		9		—
Total residential loans	455		335		—		623		434		—
Impaired loans with an allowance recorded:
Commercial loans:
C&I	14		12		7		27		26		7
CRE	—		—		—		4		4		4
Total commercial loans	14		12		7		31		30		11
Residential loans:
Residential mortgages - nonguaranteed	1,451		1,395		181		1,381		1,354		215
Home equity products	709		637		60		703		630		66
Residential construction	128		124		14		145		145		19
Total residential loans	2,288		2,156		255		2,229		2,129		300
Consumer loans:
Other direct	11		11		1		13		13		1
Indirect	113		112		5		105		105		5
Credit cards	24		6		1		25		8		2
Total consumer loans	148		129		7		143		126		8
Total impaired loans		$2,975		$2,690		$269		$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 September 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 September 30								Nine Months Ended September 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		$51		$—		$65		$—		$53		$1		$68		$1
CRE	9		—		15		—		10		—		16		—
Total commercial loans	60		—		80		—		63		1		84		1
Residential loans:
Residential mortgages - nonguaranteed	330		4		454		5		335		11		467		14
Residential construction	9		—		14		—		11		—		15		—
Total residential loans	339		4		468		5		346		11		482		14
Impaired loans with an allowance recorded:
Commercial loans:
C&I	20		—		45		—		23		1		46		1
CRE	—		—		10		—		—		—		9		—
Total commercial loans	20		—		55		—		23		1		55		1
Residential loans:
Residential mortgages - nonguaranteed	1,393		17		1,467		18		1,396		52		1,443		59
Home equity products	640		7		668		7		646		21		662		20
Residential construction	124		2		164		2		125		6		162		6
Total residential loans	2,157		26		2,299		27		2,167		79		2,267		85
Consumer loans:
Other direct	12		—		14		—		12		—		14		—
Indirect	114		1		116		1		119		4		110		4
Credit cards	6		—		10		—		7		—		11		1
Total consumer loans	132		1		140		1		138		4		135		5
Total impaired loans		$2,708		$31		$3,042		$33		$2,737		$96		$3,023		$106

¹Of the interest income recognized during the three and nine months ended September 30, 2015, cash basis interest income was $1 million and $3 million, respectively.

Of the interest income recognized during the three and nine months ended September 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)	September 30, 2015		December 31, 2014
Nonaccrual/NPLs:
Commercial loans:
C&I		$122		$151
CRE	15		21
Commercial construction	1		1
Residential loans:
Residential mortgages - nonguaranteed	156		254
Home equity products	146		174
Residential construction	16		27
Consumer loans:
Other direct	4		6
Indirect	3		—
Total nonaccrual/NPLs ¹	463		634
OREO ²	62		99
Other repossessed assets	7		9
Nonperforming LHFS	—		38
Total NPAs		$532		$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 $50 million and $57 million at September 30, 2015 and December 31, 2014, respectively.

The Company's recorded investment of nonaccruing loans secured by residential real estate properties for which formal foreclosure proceedings are in process at September 30, 2015 and December 31, 2014 was $99 million and $152 million, respectively, included in NPLs in the table above. The Company's recorded investment of accruing loans secured by residential real estate properties for which formal foreclosure proceedings are in process at September 30, 2015 and December 31, 2014 was $169 million and $194 million, of which $158 million and $179 million were insured by the FHA or the VA, respectively.

At September 30, 2015 and December 31, 2014, OREO was comprised of $50 million and $75 million of foreclosed residential real estate properties and $8 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 September 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 September 30, 2015 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	18		$—		$—		$—		$—
Residential loans:
Residential mortgages - nonguaranteed	175	3		32		10		45
Home equity products	419	—		7		21		28
Residential construction	6	—		—		—		—
Consumer loans:
Other direct	10	—		—		—		—
Indirect	611	—		—		13		13
Credit cards	157	—		1		—		1
Total TDRs	1,396		$3		$40		$44		$87



	Nine Months Ended September 30, 2015 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	63		$—		$1		$5		$6
CRE	1	—		—		—		—
Residential loans:
Residential mortgages - nonguaranteed	632	10		95		20		125
Home equity products	1,386	—		20		62		82
Residential construction	17	—		—		—		—
Consumer loans:
Other direct	47	—		—		1		1
Indirect	1,999	—		—		39		39
Credit cards	529	—		2		—		2
Total TDRs	4,674		$10		$118		$127		$255

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 nine months ended September 30, 2015 was immaterial.



	Three Months Ended September 30, 2014 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	23		$—		$—		$8		$8
Residential loans:
Residential mortgages - nonguaranteed	266	2		26		8		36
Home equity products	503	—		1		22		23
Residential construction	1	—		—		—		—
Consumer loans:
Other direct	21	—		—		—		—
Indirect	638	—		—		12		12
Credit cards	123	—		1		—		1
Total TDRs	1,575		$2		$28		$50		$80



	Nine Months Ended September 30, 2014 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	66		$—		$—		$22		$22
CRE	4	3		—		3		6
Residential loans:
Residential mortgages - nonguaranteed	944	8		105		38		151
Home equity products	1,407	—		6		59		65
Residential construction	11	—		1		—		1
Consumer loans:
Other direct	59	—		—		1		1
Indirect	2,189	—		—		43		43
Credit cards	350	—		2		—		2
Total TDRs	5,030		$11		$114		$166		$291

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

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



	Three Months Ended September 30, 2015			Nine Months Ended September 30, 2015
(Dollars in millions)	Number of Loans	Amortized Cost		Number of Loans	Amortized Cost
Commercial loans:
C&I	13		$—	25		$1
Residential loans:
Residential mortgages	25	3		80	12
Home equity products	33	2		95	4
Consumer loans:
Other direct	2	—		3	—
Indirect	47	—		118	1
Credit cards	22	—		45	—
Total TDRs	142		$5	366		$18

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



	Three Months Ended September 30, 2014			Nine Months Ended September 30, 2014
(Dollars in millions)	Number of Loans	Amortized Cost		Number of Loans	Amortized Cost
Commercial loans:
C&I	30		$3	77		$8
Residential loans:
Residential mortgages	46	6		135	16
Home equity products	28	1		75	4
Residential construction	—	—		6	—
Consumer loans:
Other direct	3	—		8	—
Indirect	45	—		134	1
Credit cards	60	—		143	1
Total TDRs	212		$10	578		$30

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 $1.4 billion and $1.3 billion at September 30, 2015 and December 31, 2014, respectively.

With respect to collateral concentration, at September 30, 2015, the Company owned $38.8 billion in loans secured by residential real estate, representing 29% of total LHFI. Additionally, the Company had $10.6 billion in commitments to extend credit on home equity lines and $4.0 billion in mortgage loan commitments at September 30, 2015. At December 31, 2014, the Company owned $38.8 billion in loans secured by residential real estate, 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 September 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 September 30, 2015 and December 31, 2014, borrowers' current weighted average FICO score on these loans was 744 and 738, respectively.



(Dollars in millions)	September 30, 2015		December 31, 2014
Interest only mortgages with MI or with combined original LTV ≤ 80%¹		$1,892		$3,180
Interest only mortgages with no MI and with combined original LTV > 80%¹	620		873
Total interest only mortgages ¹	2,512		4,053
Amortizing mortgages with combined original LTV > 80% and/or second liens²	8,154		7,368
Total mortgages with potential concentration of credit risk		$10,666		$11,421

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

²Comprised of loans with no MI.