NOTE 5 - LOANS

Composition of Loan Portfolio



(Dollars in millions)	June 30, 2016		December 31, 2015
Commercial loans:
C&I		$68,603		$67,062
CRE	6,228		6,236
Commercial construction	2,617		1,954
Total commercial loans	77,448		75,252
Residential loans:
Residential mortgages - guaranteed	534		629
Residential mortgages - nonguaranteed ¹	26,037		24,744
Residential home equity products	12,481		13,171
Residential construction	397		384
Total residential loans	39,449		38,928
Consumer loans:
Guaranteed student	5,562		4,922
Other direct	6,825		6,127
Indirect	11,195		10,127
Credit cards	1,177		1,086
Total consumer loans	24,759		22,262
LHFI		$141,656		$136,442
LHFS ²		$2,468		$1,838

¹Includes $246 million and $257 million of LHFI measured at fair value at June 30, 2016 and December 31, 2015, respectively.

²Includes $2.2 billion and $1.5 billion of LHFS measured at fair value at June 30, 2016 and December 31, 2015, respectively.

During the three months ended June 30, 2016 and 2015, the Company transferred $107 million and $1.2 billion in LHFI to LHFS, and $5 million and $640 million in LHFS to LHFI, respectively. In addition to sales of mortgage LHFS in the normal course of business, the Company sold $260 million and $1.4 billion in loans and leases for a loss of $2 million and a gain of $7 million during the three months ended June 30, 2016 and 2015, respectively.

During the six months ended June 30, 2016 and 2015, the Company transferred $162 million and $1.7 billion in LHFI to LHFS, and $10 million and $651 million in LHFS to LHFI, respectively. In addition to sales of mortgage LHFS in the normal course of business, the Company sold $278 million and $1.8 billion in loans and leases for a loss of $2 million and a gain of $13 million during the six months ended June 30, 2016 and 2015, respectively.

At June 30, 2016 and December 31, 2015, the Company had $24.5 billion and $23.6 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $17.6 billion and $17.2 billion of available, unused borrowing capacity, respectively.

At June 30, 2016 and December 31, 2015, the Company had $35.0 billion and $33.7 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $29.9 billion and $28.5 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at June 30, 2016 was used to support $3.4 billion of long-term debt, $1.0 billion of short-term debt, and $3.2 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 more 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 June 30, 2016 compared to December 31, 2015, as presented in the following risk rating table, was driven primarily 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 June 30, 2016 and December 31, 2015, 29% and 31%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At June 30, 2016 and December 31, 2015, 80% 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)	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Risk rating:
Pass		$66,234		$65,379		$5,933		$6,067		$2,536		$1,931
Criticized accruing	1,878		1,375		285		158		79		23
Criticized nonaccruing	491		308		10		11		2		—
Total		$68,603		$67,062		$6,228		$6,236		$2,617		$1,954



	Residential Loans ¹
	Residential Mortgages - Nonguaranteed				Residential Home Equity Products				Residential Construction
(Dollars in millions)	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Current FICO score range:
700 and above		$21,882		$20,422		$10,094		$10,772		$333		$313
620 - 699	3,174		3,262		1,640		1,741		53		58
Below 620 ²	981		1,060		747		658		11		13
Total		$26,037		$24,744		$12,481		$13,171		$397		$384



	Consumer Loans ³
	Other Direct				Indirect				Credit Cards
(Dollars in millions)	June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015		June 30, 2016		December 31, 2015
Current FICO score range:
700 and above		$6,154		$5,501		$7,834		$7,015		$827		$759
620 - 699	625		576		2,749		2,481		285		265
Below 620 ²	46		50		612		631		65		62
Total		$6,825		$6,127		$11,195		$10,127		$1,177		$1,086

¹Excludes $534 million and $629 million of guaranteed residential loans at June 30, 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 $5.6 billion and $4.9 billion of guaranteed student loans at June 30, 2016 and December 31, 2015, respectively.

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



	June 30, 2016
(Dollars in millions)	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing ²		Total
Commercial loans:
C&I		$68,059		$32		$21		$491		$68,603
CRE	6,216		2		—		10		6,228
Commercial construction	2,615		—		—		2		2,617
Total commercial loans	76,890		34		21		503		77,448
Residential loans:
Residential mortgages - guaranteed	156		53		325		—		534
Residential mortgages - nonguaranteed ¹	25,753		80		10		194		26,037
Residential home equity products	12,175		80		—		226		12,481
Residential construction	384		—		—		13		397
Total residential loans	38,468		213		335		433		39,449
Consumer loans:
Guaranteed student	4,427		462		673		—		5,562
Other direct	6,794		22		4		5		6,825
Indirect	11,102		89		1		3		11,195
Credit cards	1,162		8		7		—		1,177
Total consumer loans	23,485		581		685		8		24,759
Total LHFI		$138,843		$828		$1,041		$944		$141,656

¹Includes $246 million of loans measured at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $305 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.



	June 30, 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		$215		$197		$—		$55		$42		$—
CRE	—		—		—		11		9		—
Total commercial loans	215		197		—		66		51		—
Residential loans:
Residential mortgages - nonguaranteed	505		385		—		500		380		—
Residential construction	18		8		—		29		8		—
Total residential loans	523		393		—		529		388		—

Impaired loans with an allowance recorded:
Commercial loans:
C&I	213		188		43		173		167		28
Total commercial loans	213		188		43		173		167		28
Residential loans:
Residential mortgages - nonguaranteed	1,343		1,314		169		1,381		1,344		178
Residential home equity products	816		744		55		740		670		60
Residential construction	117		116		12		127		125		14
Total residential loans	2,276		2,174		236		2,248		2,139		252
Consumer loans:
Other direct	11		10		1		11		11		1
Indirect	111		111		5		114		114		5
Credit cards	23		6		1		24		6		1
Total consumer loans	145		127		7		149		131		7
Total impaired loans		$3,372		$3,079		$286		$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 June 30, 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 June 30								Six Months Ended June 30
	2016				2015				2016				2015
(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		$277		$1		$44		$1		$261		$3		$46		$1
CRE	—		—		10		—		—		—		10		—
Total commercial loans	277		1		54		1		261		3		56		1
Residential loans:
Residential mortgages - nonguaranteed	388		4		365		4		390		8		368		7
Residential construction	9		—		8		—		9		—		10		—
Total residential loans	397		4		373		4		399		8		378		7

Impaired loans with an allowance recorded:
Commercial loans:
C&I	193		—		19		—		181		—		25		—
Total commercial loans	193		—		19		—		181		—		25		—
Residential loans:
Residential mortgages - nonguaranteed	1,313		17		1,366		17		1,316		33		1,367		34
Residential home equity products	747		7		637		7		752		15		640		14
Residential construction	115		1		129		2		116		3		128		4
Total residential loans	2,175		25		2,132		26		2,184		51		2,135		52
Consumer loans:
Other direct	11		—		12		—		11		—		12		—
Indirect	113		1		111		1		116		3		114		3
Credit cards	6		—		7		—		6		—		7		—
Total consumer loans	130		1		130		1		133		3		133		3
Total impaired loans		$3,172		$31		$2,708		$32		$3,158		$65		$2,727		$63

¹Of the interest income recognized during the three and six months ended June 30, 2016, cash basis interest income was less than $1 million and $2 million, respectively.

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

NPAs are shown in the following table:



(Dollars in millions)	June 30, 2016		December 31, 2015
Nonaccrual/NPLs:
Commercial loans:
C&I		$491		$308
CRE	10		11
Commercial construction	2		—
Residential loans:
Residential mortgages - nonguaranteed	194		183
Residential home equity products	226		145
Residential construction	13		16
Consumer loans:
Other direct	5		6
Indirect	3		3
Total nonaccrual/NPLs ¹	944		672
OREO ²	49		56
Other repossessed assets	8		7
Total NPAs		$1,001		$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 $52 million at both June 30, 2016 and December 31, 2015.

The Company's recorded investment of nonaccruing loans secured by residential real estate properties for which formal foreclosure proceedings are in process at June 30, 2016 and December 31, 2015 was $127 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 June 30, 2016 and December 31, 2015 was $138 million and $152 million, of which $128 million and $141 million were insured by the FHA or the VA, respectively.

At June 30, 2016, OREO included $37 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 June 30, 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 June 30, 2016 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		$—		$—		$44		$44
Residential loans:
Residential mortgages - nonguaranteed	119	1		26		5		32
Residential home equity products	799	—		2		75		77
Consumer loans:
Other direct	9	—		—		—		—
Indirect	432	—		—		10		10
Credit cards	183	—		1		—		1
Total TDRs	1,565		$1		$29		$134		$164



	Six months ended June 30, 2016 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	35		$—		$—		$46		$46
Commercial construction	1	—		—		—		—
Residential loans:
Residential mortgages - nonguaranteed	239	1		58		7		66
Residential home equity products	1,531	—		9		127		136
Consumer loans:
Other direct	32	—		—		1		1
Indirect	918	—		—		21		21
Credit cards	352	—		1		—		1
Total TDRs	3,108		$1		$68		$202		$271

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 and six months ended June 30, 2016 was immaterial.



	Three Months Ended June 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	23		$—		$—		$1		$1
CRE	1	—		—		—		—
Residential loans:
Residential mortgages - nonguaranteed	241	3		34		3		40
Residential 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		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
Residential 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.

TDRs that have defaulted during the three and six months ended June 30, 2016 and 2015 that were first modified within the previous 12 months were immaterial. 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, and Virginia. The Company engages in limited international banking activities. The Company’s total cross-border outstanding loans were $1.7 billion and $1.6 billion at June 30, 2016 and December 31, 2015, respectively.

With respect to collateral concentration, at June 30, 2016, the Company owned $39.4 billion in loans secured by residential real estate, representing 28% of total LHFI. Additionally, the Company had $10.5 billion in commitments to extend credit on home equity lines and $7.0 billion in mortgage loan commitments outstanding at June 30, 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 June 30, 2016 and December 31, 2015, 1% and 2% of residential loans owned were guaranteed by a federal agency or a GSE, respectively.