NOTE 5 - LOANS

Composition of Loan Portfolio



(Dollars in millions)	March 31, 2016		December 31, 2015
Commercial loans:
C&I		$68,963		$67,062
CRE	6,034		6,236
Commercial construction	2,498		1,954
Total commercial loans	77,495		75,252
Residential loans:
Residential mortgages - guaranteed	623		629
Residential mortgages - nonguaranteed ¹	25,148		24,744
Residential home equity products	12,845		13,171
Residential construction	383		384
Total residential loans	38,999		38,928
Consumer loans:
Guaranteed student	5,265		4,922
Other direct	6,372		6,127
Indirect	10,522		10,127
Credit cards	1,093		1,086
Total consumer loans	23,252		22,262
LHFI		$139,746		$136,442
LHFS ²		$1,911		$1,838

¹Includes $255 million and $257 million of LHFI measured at fair value at March 31, 2016 and December 31, 2015, respectively.

²Includes $1.6 billion and $1.5 billion of LHFS measured at fair value at March 31, 2016 and December 31, 2015, respectively.

During the three months ended March 31, 2016 and 2015, the Company transferred $55 million and $512 million in LHFI to LHFS, and $5 million and $11 million in LHFS to LHFI, respectively. In addition to sales of mortgage LHFS in the normal course of business, the Company sold $18 million in loans and leases at a price approximating their recorded investment during the three months ended March 31, 2016. During the three months ended March 31, 2015, the Company sold $405 million in loans and leases for a gain of $6 million.

At March 31, 2016 and December 31, 2015, the Company had $23.9 billion and $23.6 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $16.8 billion and $17.2 billion of available, unused borrowing capacity, respectively.

At March 31, 2016 and December 31, 2015, the Company had $34.2 billion and $33.7 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $28.9 billion and $28.5 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at March 31, 2016 was used to support $408 million of long-term debt, $750 million of short-term debt, and $7.2 billion of letters of credit issued on the Company's behalf. At December 31, 2015, the available FHLB borrowing capacity was used to support $408 million of long-term debt and $6.7 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 March 31, 2016 compared to December 31, 2015, 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 March 31, 2016 and December 31, 2015, 32% and 31%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At March 31, 2016 and December 31, 2015, 79% and 78%, 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)	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Risk rating:
Pass		$66,633		$65,379		$5,744		$6,067		$2,459		$1,931
Criticized accruing	1,765		1,375		280		158		37		23
Criticized nonaccruing	565		308		10		11		2		—
Total		$68,963		$67,062		$6,034		$6,236		$2,498		$1,954



	Residential Loans ¹
	Residential Mortgages - Nonguaranteed				Residential Home Equity Products				Residential Construction
(Dollars in millions)	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Current FICO score range:
700 and above		$20,846		$20,422		$10,476		$10,772		$322		$313
620 - 699	3,249		3,262		1,717		1,741		49		58
Below 620 ²	1,053		1,060		652		658		12		13
Total		$25,148		$24,744		$12,845		$13,171		$383		$384



	Consumer Loans ³
	Other Direct				Indirect				Credit Cards
(Dollars in millions)	March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015		March 31, 2016		December 31, 2015
Current FICO score range:
700 and above		$5,731		$5,501		$7,267		$7,015		$761		$759
620 - 699	591		576		2,565		2,481		268		265
Below 620 ²	50		50		690		631		64		62
Total		$6,372		$6,127		$10,522		$10,127		$1,093		$1,086

¹Excludes $623 million and $629 million of guaranteed residential loans at March 31, 2016 and December 31, 2015, 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 $5.3 billion and $4.9 billion of guaranteed student loans at March 31, 2016 and December 31, 2015, respectively.

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



	March 31, 2016
(Dollars in millions)	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing ²		Total
Commercial loans:
C&I		$68,274		$110		$14		$565		$68,963
CRE	6,020		4		—		10		6,034
Commercial construction	2,496		—		—		2		2,498
Total commercial loans	76,790		114		14		577		77,495
Residential loans:
Residential mortgages - guaranteed	200		51		372		—		623
Residential mortgages - nonguaranteed ¹	24,852		89		9		198		25,148
Residential home equity products	12,589		76		—		180		12,845
Residential construction	369		2		—		12		383
Total residential loans	38,010		218		381		390		38,999
Consumer loans:
Guaranteed student	4,182		493		590		—		5,265
Other direct	6,338		26		3		5		6,372
Indirect	10,442		77		—		3		10,522
Credit cards	1,077		8		8		—		1,093
Total consumer loans	22,039		604		601		8		23,252
Total LHFI		$136,839		$936		$996		$975		$139,746

¹Includes $255 million of loans measured at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $332 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, 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 and performing second lien loans where the first lien loan is nonperforming, and certain energy-related commercial loans.

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.



	March 31, 2016						December 31, 2015
(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		$389		$369		$—		$55		$42		$—
CRE	—		—		—		11		9		—
Total commercial loans	389		369		—		66		51		—
Residential loans:
Residential mortgages - nonguaranteed	505		386		—		500		380		—
Residential construction	19		8		—		29		8		—
Total residential loans	524		394		—		529		388		—

Impaired loans with an allowance recorded:
Commercial loans:
C&I	163		152		34		173		167		28
Total commercial loans	163		152		34		173		167		28
Residential loans:
Residential mortgages - nonguaranteed	1,371		1,338		176		1,381		1,344		178
Residential home equity products	775		703		54		740		670		60
Residential construction	120		120		12		127		125		14
Total residential loans	2,266		2,161		242		2,248		2,139		252
Consumer loans:
Other direct	12		12		1		11		11		1
Indirect	113		113		5		114		114		5
Credit cards	6		6		1		24		6		1
Total consumer loans	131		131		7		149		131		7
Total impaired loans		$3,473		$3,207		$283		$3,165		$2,876		$287

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 March 31, 2016 and December 31, 2015 were $2.5 billion and $2.6 billion, respectively, of accruing TDRs at amortized cost, of which 97% were current. See Note 1, “Significant Accounting Policies,” to the Company's 2015 Annual Report on Form 10-K for further information regarding the Company’s loan impairment policy.



	Three Months Ended March 31
	2016				2015
(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		$364		$2		$41		$—
CRE	3		—		10		—
Total commercial loans	367		2		51		—
Residential loans:
Residential mortgages - nonguaranteed	387		4		413		4
Residential construction	8		—		9		—
Total residential loans	395		4		422		4

Impaired loans with an allowance recorded:
Commercial loans:
C&I	161		—		38		1
CRE	—		—		3		—
Total commercial loans	161		—		41		1
Residential loans:
Residential mortgages - nonguaranteed	1,339		16		1,374		17
Residential home equity products	705		7		636		7
Residential construction	120		2		137		2
Total residential loans	2,164		25		2,147		26
Consumer loans:
Other direct	12		—		13		—
Indirect	115		1		108		1
Credit cards	6		—		8		—
Total consumer loans	133		1		129		1
Total impaired loans		$3,220		$32		$2,790		$32

¹Of the interest income recognized during the three months ended March 31, 2016 and 2015, cash basis interest income was $2 million and $1 million, respectively.

NPAs are shown in the following table:



(Dollars in millions)	March 31, 2016		December 31, 2015
Nonaccrual/NPLs:
Commercial loans:
C&I		$565		$308
CRE	10		11
Commercial construction	2		—
Residential loans:
Residential mortgages - nonguaranteed	198		183
Residential home equity products	180		145
Residential construction	12		16
Consumer loans:
Other direct	5		6
Indirect	3		3
Total nonaccrual/NPLs ¹	975		672
OREO ²	52		56
Other repossessed assets	8		7
Total NPAs		$1,035		$735

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 $48 million and $52 million at March 31, 2016 and December 31, 2015, respectively.

The Company's recorded investment of nonaccruing loans secured by residential real estate properties for which formal foreclosure proceedings are in process at March 31, 2016 and December 31, 2015 was $123 million and $112 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 March 31, 2016 and December 31, 2015 was $155 million and $152 million, of which $144 million and $141 million were insured by the FHA or the VA, respectively.

At March 31, 2016, OREO included $39 million of foreclosed residential real estate properties and $9 million of foreclosed commercial real estate properties, with the remainder related to land.

At December 31, 2015, OREO included $39 million of foreclosed residential real estate properties and $11 million of foreclosed commercial real estate properties, with the remainder related to land.

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 March 31, 2016 and December 31, 2015, the Company had $1 million and $4 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.



	Three months ended March 31, 2016 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	12		$—		$2		$2
Commercial construction	1	—		—		—
Residential loans:
Residential mortgages - nonguaranteed	120	31		3		34
Residential home equity products	732	7		52		59
Consumer loans:
Other direct	23	—		1		1
Indirect	486	—		11		11
Credit cards	169	1		—		1
Total TDRs	1,543		$39		$69		$108

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



	Three months ended March 31, 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	22		$—		$—		$5		$5
Residential loans:
Residential mortgages - nonguaranteed	216	4		30		7		41
Residential 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 may have had other 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.

The following table presents TDRs that have defaulted during the three months ended March 31, 2016 that were first modified within the previous 12 months.



	Three Months Ended March 31, 2016
(Dollars in millions)	Number of Loans	Amortized Cost
Commercial loans:
C&I	5		$1
Residential loans:
Residential mortgages	19	5
Residential home equity products	38	1
Consumer loans:
Indirect	29	—
Credit cards	22	—
Total TDRs	113		$7

The following table presents TDRs that have defaulted during the three months ended March 31, 2015 that were first modified within the previous 12 months.



	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
Residential home equity products	30	1
Consumer loans:
Other direct	1	—
Indirect	39	—
Credit cards	19	—
Total TDRs	129		$8

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 $2.0 billion and $1.6 billion at March 31, 2016 and December 31, 2015, respectively.

With respect to collateral concentration, at March 31, 2016, the Company owned $39.0 billion in loans secured by residential real estate, representing 28% of total LHFI. Additionally, the Company had $10.6 billion in commitments to extend credit on home equity lines and $3.6 billion in mortgage loan commitments outstanding at March 31, 2016. At December 31, 2015, the Company owned $38.9 billion in loans secured by residential real estate, representing 29% of total LHFI, and had $10.5 billion in commitments to extend credit on home equity lines and $3.2 billion in mortgage loan commitments outstanding. At both March 31, 2016 and December 31, 2015, 2% of residential loans owned were guaranteed by a federal agency or a GSE.