NOTE 6 - LOANS

Composition of Loan Portfolio



(Dollars in millions)	December 31, 2015		December 31, 2014
Commercial loans:
C&I		$67,062		$65,440
CRE	6,236		6,741
Commercial construction	1,954		1,211
Total commercial loans	75,252		73,392
Residential loans:
Residential mortgages - guaranteed	629		632
Residential mortgages - nonguaranteed ¹	24,744		23,443
Residential home equity products	13,171		14,264
Residential construction	384		436
Total residential loans	38,928		38,775
Consumer loans:
Guaranteed student	4,922		4,827
Other direct	6,127		4,573
Indirect	10,127		10,644
Credit cards	1,086		901
Total consumer loans	22,262		20,945
LHFI		$136,442		$133,112
LHFS ²		$1,838		$3,232

¹Includes $257 million and $272 million of LHFI measured at fair value at December 31, 2015 and 2014, respectively.

²Includes $1.5 billion and $1.9 billion of LHFS measured at fair value at December 31, 2015 and 2014, respectively.

During the years ended December 31, 2015 and 2014, the Company transferred $1.8 billion and $3.3 billion in LHFI to LHFS, and $741 million and $44 million in LHFS to LHFI, respectively. In addition to sales of mortgage LHFS in the normal course of business, the Company sold $2.1 billion and $4.0 billion in loans and leases for gains of $22 million and $83 million, during the years ended December 31, 2015 and 2014, respectively.

At December 31, 2015 and 2014, the Company had $23.6 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 December 31, 2015 and 2014, the Company had $33.7 billion and $31.2 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $28.5 billion and $24.3 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at December 31, 2015 was used to support $408 million of long-term debt and $6.7 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 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 not collect all amounts due under those loan agreements. 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. 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 and nonaccruing C&I loans at December 31, 2015 compared to December 31, 2014, as presented in the following risk rating table, was primarily driven by downgrades of loans in the energy industry vertical.

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, 2015 and 2014, 31% and 28%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At December 31, 2015 and 2014, 78% 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)	December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014
Risk rating:
Pass		$65,379		$64,228		$6,067		$6,586		$1,931		$1,196
Criticized accruing	1,375		1,061		158		134		23		14
Criticized nonaccruing	308		151		11		21		—		1
Total		$67,062		$65,440		$6,236		$6,741		$1,954		$1,211



	Residential Loans ¹
	Residential Mortgages - Nonguaranteed				Residential Home Equity Products				Residential Construction
(Dollars in millions)	December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014
Current FICO score range:
700 and above		$20,422		$18,780		$10,772		$11,475		$313		$347
620 - 699	3,262		3,369		1,741		1,991		58		70
Below 620 ²	1,060		1,294		658		798		13		19
Total		$24,744		$23,443		$13,171		$14,264		$384		$436



	Consumer Loans ³
	Other Direct				Indirect				Credit Cards
(Dollars in millions)	December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014		December 31, 2015		December 31, 2014
Current FICO score range:
700 and above		$5,501		$4,023		$7,015		$7,661		$759		$639
620 - 699	576		476		2,481		2,335		265		212
Below 620 ²	50		74		631		648		62		50
Total		$6,127		$4,573		$10,127		$10,644		$1,086		$901

¹Excludes $629 million and $632 million of guaranteed residential loans at December 31, 2015 and 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 $4.9 billion and $4.8 billion of guaranteed student loans at December 31, 2015 and 2014, respectively.

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



	December 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		$66,670		$61		$23		$308		$67,062
CRE	6,222		3		—		11		6,236
Commercial construction	1,952		—		2		—		1,954
Total commercial loans	74,844		64		25		319		75,252
Residential loans:
Residential mortgages - guaranteed	192		59		378		—		629
Residential mortgages - nonguaranteed ¹	24,449		105		7		183		24,744
Residential home equity products	12,939		87		—		145		13,171
Residential construction	365		3		—		16		384
Total residential loans	37,945		254		385		344		38,928
Consumer loans:
Guaranteed student	3,861		500		561		—		4,922
Other direct	6,094		24		3		6		6,127
Indirect	10,022		102		—		3		10,127
Credit cards	1,070		9		7		—		1,086
Total consumer loans	21,047		635		571		9		22,262
Total LHFI		$133,836		$953		$981		$672		$136,442

¹Includes $257 million of loans measured at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $336 million. Nonaccruing loans past due fewer than 90 days include modified nonaccrual loans reported as TDRs, performing second lien loans where the first lien loan is nonperforming, and certain energy-related commercial loans.



	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
Residential 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 where 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 consumer student loans and guaranteed residential mortgages for which there was nominal risk of principal loss.



	December 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		$55		$42		$—		$70		$51		$—
CRE	11		9		—		12		11		—
Total commercial loans	66		51		—		82		62		—
Residential loans:
Residential mortgages - nonguaranteed	500		380		—		592		425		—
Residential construction	29		8		—		31		9		—
Total residential loans	529		388		—		623		434		—

Impaired loans with an allowance recorded:
Commercial loans:
C&I	173		167		28		27		26		7
CRE	—		—		—		4		4		4
Total commercial loans	173		167		28		31		30		11
Residential loans:
Residential mortgages - nonguaranteed	1,381		1,344		178		1,381		1,354		215
Residential home equity products	740		670		60		703		630		66
Residential construction	127		125		14		145		145		19
Total residential loans	2,248		2,139		252		2,229		2,129		300
Consumer loans:
Other direct	11		11		1		13		13		1
Indirect	114		114		5		105		105		5
Credit cards	24		6		1		25		8		2
Total consumer loans	149		131		7		143		126		8
Total impaired loans		$3,165		$2,876		$287		$3,108		$2,781		$319

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

Included in the impaired loan balances above at December 31, 2015 and 2014 were $2.6 billion and $2.5 billion, respectively, of accruing TDRs at amortized cost, of which 97% and 96% were current, respectively. See Note 1, “Significant Accounting Policies,” for further information regarding the Company’s loan impairment policy.



	Year Ended December 31
	2015				2014				2013
(Dollars in millions)	Average Amortized Cost		Interest Income Recognized ¹		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		$58		$2		$84		$1		$75		$1
CRE	10		—		11		1		60		2
Total commercial loans	68		2		95		2		135		3
Residential loans:
Residential mortgages - nonguaranteed	390		17		437		17		449		18
Residential construction	11		—		12		—		21		1
Total residential loans	401		17		449		17		470		19

Impaired loans with an allowance recorded:
Commercial loans:
C&I	147		5		16		1		45		1
CRE	—		—		5		—		3		—
Commercial construction	—		—		—		—		5		—
Total commercial loans	147		5		21		1		53		1
Residential loans:
Residential mortgages - nonguaranteed	1,349		65		1,357		78		1,576		76
Residential home equity products	682		28		644		27		649		23
Residential construction	125		8		144		8		172		10
Total residential loans	2,156		101		2,145		113		2,397		109
Consumer loans:
Other direct	12		—		14		—		15		1
Indirect	125		6		113		5		89		4
Credit cards	7		1		10		1		16		1
Total consumer loans	144		7		137		6		120		6
Total impaired loans		$2,916		$132		$2,847		$139		$3,175		$138

¹Of the interest income recognized during December 31, 2015, 2014, and 2013, cash basis interest income was $7 million, $4 million, and $10 million, respectively.

NPAs are shown in the following table:



(Dollars in millions)	December 31, 2015		December 31, 2014
Nonaccrual/NPLs:
Commercial loans:
C&I		$308		$151
CRE	11		21
Commercial construction	—		1
Residential loans:
Residential mortgages - nonguaranteed	183		254
Residential home equity products	145		174
Residential construction	16		27
Consumer loans:
Other direct	6		6
Indirect	3		—
Total nonaccrual/NPLs ¹	672		634
OREO ²	56		99
Other repossessed assets	7		9
Nonperforming LHFS	—		38
Total NPAs		$735		$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 property is conveyed and the funds are received. The receivable related to proceeds due from the FHA or the VA totaled $52 million and $57 million at December 31, 2015 and 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 December 31, 2015 and 2014 was $112 million and $152 million, respectively. The Company's recorded investment of accruing loans secured by residential real estate properties for which formal foreclosure proceedings are in process at December 31, 2015 and 2014 was $152 million and $194 million, of which $141 million and $179 million were insured by the FHA or the VA, respectively.

At December 31, 2015 and 2014, OREO was comprised of $39 million and $75 million of foreclosed residential real estate properties and $11 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 December 31, 2015 and 2014, the Company had $4 million and $1 million, respectively, 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.



	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	79		$—		$1		$8		$9
CRE	1	—		—		—		—
Residential loans:
Residential mortgages - nonguaranteed	789	12		129		25		166
Residential home equity products	2,172	—		25		113		138
Residential construction	23	—		6		—		6
Consumer loans:
Other direct	66	—		—		1		1
Indirect	2,578	—		—		52		52
Credit cards	683	—		3		—		3
Total TDRs	6,391		$12		$164		$199		$375

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 may have had other concessions including rate modifications and/or term extensions. The total amount of charge-offs associated with principal forgiveness during the year ended December 31, 2015 was $2 million.



	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	78		$—		$1		$37		$38
CRE	6	4		—		3		7
Residential loans:
Residential mortgages - nonguaranteed	1,135	10		127		44		181
Residential 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.



	2013 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification		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
Residential 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.

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



	Year Ended December 31, 2015
(Dollars in millions)	Number of Loans	Amortized Cost
Commercial loans:
C&I	34		$1
Residential loans:
Residential mortgages	120	16
Residential home equity products	138	6
Consumer loans:
Other direct	5	—
Indirect	171	2
Credit cards	84	—
Total TDRs	552		$25

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
Residential 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 following table 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
Residential 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

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

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 within Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia, and the District of Columbia. The Company engages in limited international banking activities. The Company’s total cross-border outstanding loans were $1.6 billion and $1.3 billion at December 31, 2015 and 2014, respectively.

With respect to collateral concentration, at December 31, 2015, the Company owned $38.9 billion in loans secured by residential real estate, representing 29% of total LHFI. Additionally, the Company had $10.5 billion in commitments to extend credit on home equity lines and $3.2 billion in mortgage loan commitments at December 31, 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 December 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 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 December 31, 2015 and December 31, 2014, borrowers' current weighted average FICO score on these loans was 745 and 738, respectively.



(Dollars in millions)	December 31, 2015		December 31, 2014
Interest only mortgages with MI or with combined original LTV ≤ 80%¹		$1,563		$3,180
Interest only mortgages with no MI and with combined original LTV > 80%¹	547		873
Total interest only mortgages ¹	2,110		4,053
Amortizing mortgages with combined original LTV > 80% and/or second liens ²	8,366		7,368
Total mortgages with potential concentration of credit risk		$10,476		$11,421

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

²Comprised of loans with no MI.