NOTE 6 - LOANS

Composition of Loan Portfolio



(Dollars in millions)	December 31, 2016		December 31, 2015
Commercial loans:
C&I		$69,213		$67,062
CRE	4,996		6,236
Commercial construction	4,015		1,954
Total commercial loans	78,224		75,252
Residential loans:
Residential mortgages - guaranteed	537		629
Residential mortgages - nonguaranteed ¹	26,137		24,744
Residential home equity products	11,912		13,171
Residential construction	404		384
Total residential loans	38,990		38,928
Consumer loans:
Guaranteed student	6,167		4,922
Other direct	7,771		6,127
Indirect	10,736		10,127
Credit cards	1,410		1,086
Total consumer loans	26,084		22,262
LHFI		$143,298		$136,442
LHFS ²		$4,169		$1,838

¹Includes $222 million and $257 million of LHFI measured at fair value at December 31, 2016 and 2015, respectively.

²Includes $3.5 billion and $1.5 billion of LHFS measured at fair value at December 31, 2016 and 2015, respectively.

During the years ended December 31, 2016 and 2015, the Company transferred $360 million and $1.8 billion in LHFI to LHFS, and $30 million and $741 million in LHFS to LHFI, respectively. In addition to sales of residential and commercial mortgage LHFS in the normal course of business, the Company sold $1.6 billion and $2.1 billion in loans and leases for net gains of $6 million and $22 million during the years ended December 31, 2016 and 2015, respectively.

During the years ended December 31, 2016 and 2015, the Company's significant loan purchases included $2.2 billion and $1.2 billion of guaranteed student loans, respectively.

At December 31, 2016 and 2015, the Company had $22.6 billion and $23.6 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $17.0 billion and $17.2 billion of available, unused borrowing capacity, respectively.

At December 31, 2016 and 2015, the Company had $36.9 billion and $33.7 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $31.9 billion and $28.5 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at December 31, 2016 was used to support $2.8 billion of long-term debt and $7.3 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 these 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 Criticized accruing (which includes Special Mention and a portion of Adversely Classified) and Criticized nonaccruing (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 establishing 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, 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 December 31, 2016 and 2015, 29% and 31%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At December 31, 2016 and 2015, 75% 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 presented in the following tables:



	Commercial Loans
	C&I				CRE				Commercial Construction
(Dollars in millions)	December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015
Risk rating:
Pass		$66,920		$65,379		$4,574		$6,067		$3,914		$1,931
Criticized accruing	1,903		1,375		415		158		84		23
Criticized nonaccruing	390		308		7		11		17		—
Total		$69,213		$67,062		$4,996		$6,236		$4,015		$1,954



	Residential Loans ¹
	Residential Mortgages - Nonguaranteed				Residential Home Equity Products				Residential Construction
(Dollars in millions)	December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015
Current FICO score range:
700 and above		$22,194		$20,422		$9,826		$10,772		$292		$313
620 - 699	3,042		3,262		1,540		1,741		96		58
Below 620 ²	901		1,060		546		658		16		13
Total		$26,137		$24,744		$11,912		$13,171		$404		$384



	Consumer Loans ³
	Other Direct				Indirect				Credit Cards
(Dollars in millions)	December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015		December 31, 2016		December 31, 2015
Current FICO score range:
700 and above		$7,008		$5,501		$7,642		$7,015		$974		$759
620 - 699	703		576		2,381		2,481		351		265
Below 620 ²	60		50		713		631		85		62
Total		$7,771		$6,127		$10,736		$10,127		$1,410		$1,086

¹Excludes $537 million and $629 million of guaranteed residential loans at December 31, 2016 and 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 $6.2 billion and $4.9 billion of guaranteed student loans at December 31, 2016 and 2015, respectively.

The payment status for the LHFI portfolio is presented in the following tables:



	December 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		$68,776		$35		$12		$390		$69,213
CRE	4,988		1		—		7		4,996
Commercial construction	3,998		—		—		17		4,015
Total commercial loans	77,762		36		12		414		78,224
Residential loans:
Residential mortgages - guaranteed	155		55		327		—		537
Residential mortgages - nonguaranteed ¹	25,869		84		7		177		26,137
Residential home equity products	11,596		81		—		235		11,912
Residential construction	389		3		—		12		404
Total residential loans	38,009		223		334		424		38,990
Consumer loans:
Guaranteed student	4,637		603		927		—		6,167
Other direct	7,726		35		4		6		7,771
Indirect	10,608		126		1		1		10,736
Credit cards	1,388		12		10		—		1,410
Total consumer loans	24,359		776		942		7		26,084
Total LHFI		$140,130		$1,035		$1,288		$845		$143,298

¹Includes $222 million of loans measured at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $360 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 and loans measured at fair value are not included in the following tables. Additionally, the following tables exclude guaranteed consumer student loans and guaranteed residential mortgages for which there was nominal risk of principal loss.



	December 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		$266			$214			$—		$55		$42		$—
CRE	—			—			—		11		9		—
Total commercial loans	266			214			—		66		51		—
Residential loans:
Residential mortgages - nonguaranteed	466			360			—		500		380		—
Residential construction	16			8			—		29		8		—
Total residential loans	482			368			—		529		388		—

Impaired loans with an allowance recorded:
Commercial loans:
C&I	225			151			31		173		167		28
CRE	26			17			2		—		—		—
Total commercial loans	251			168			33		173		167		28
Residential loans:
Residential mortgages - nonguaranteed	1,277			1,248			150		1,381		1,344		178
Residential home equity products	863			795			54		740		670		60
Residential construction	109			107			11		127		125		14
Total residential loans	2,249			2,150			215		2,248		2,139		252
Consumer loans:
Other direct	59		²	59		²	1		11		11		1
Indirect	103			103			5		114		114		5
Credit cards	24			6			1		24		6		1
Total consumer loans	186			168			7		149		131		7
Total impaired loans		$3,434			$3,068			$255		$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.

²Includes $41 million of TDRs that were modified prior to 2016 and reclassified as TDRs in the fourth quarter of 2016.

Included in the impaired loan balances above at December 31, 2016 and 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,” for further information regarding the Company’s loan impairment policy.



	Year Ended December 31
	2016				2015				2014
(Dollars in millions)	Average Amortized Cost		Interest Income Recognized¹		Average Amortized Cost		Interest Income Recognized¹		Average Amortized Cost		Interest Income Recognized ¹
Impaired loans with no related allowance recorded:
Commercial loans:
C&I		$169		$3		$58		$2		$84		$1
CRE	—		—		10		—		11		1
Total commercial loans	169		3		68		2		95		2
Residential loans:
Residential mortgages - nonguaranteed	370		16		390		17		437		17
Residential construction	8		—		11		—		12		—
Total residential loans	378		16		401		17		449		17

Impaired loans with an allowance recorded:
Commercial loans:
C&I	170		1		147		5		16		1
CRE	25		1		—		—		5		—
Total commercial loans	195		2		147		5		21		1
Residential loans:
Residential mortgages - nonguaranteed	1,251		64		1,349		65		1,357		78
Residential home equity products	812		29		682		28		644		27
Residential construction	110		6		125		8		144		8
Total residential loans	2,173		99		2,156		101		2,145		113
Consumer loans:
Other direct	10		1		12		—		14		—
Indirect	114		6		125		6		113		5
Credit cards	6		1		7		1		10		1
Total consumer loans	130		8		144		7		137		6
Total impaired loans		$3,045		$128		$2,916		$132		$2,847		$139

¹Of the interest income recognized during the years ended December 31, 2016, 2015, and 2014, cash basis interest income was $4 million, $7 million, and $4 million respectively.

NPAs are presented in the following table:



(Dollars in millions)	December 31, 2016		December 31, 2015
Nonaccrual/NPLs:
Commercial loans:
C&I		$390		$308
CRE	7		11
Commercial construction	17		—
Residential loans:
Residential mortgages - nonguaranteed	177		183
Residential home equity products	235		145
Residential construction	12		16
Consumer loans:
Other direct	6		6
Indirect	1		3
Total nonaccrual/NPLs ¹	845		672
OREO ²	60		56
Other repossessed assets	14		7
Total NPAs		$919		$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 $50 million and $52 million at December 31, 2016 and 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 December 31, 2016 and 2015 was $85 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 December 31, 2016 and 2015 was $122 million and $152 million, of which $114 million and $141 million were insured by the FHA or the VA, respectively.

At December 31, 2016, OREO included $50 million of foreclosed residential real estate properties and $7 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 considered otherwise. 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, 2016 and 2015, the Company had $29 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 presented in the following tables:



	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	144		$—		$2		$134		$136
CRE	4	—		—		—		—
Commercial construction	1	—		—		—		—
Residential loans:
Residential mortgages - nonguaranteed	931	3		82		10		95
Residential home equity products	3,448	—		10		243		253
Residential construction	63	—		—		—		—
Consumer loans:
Other direct ³	4,021	—		—		50		50
Indirect	3,141	—		—		37		37
Credit cards	719	—		3		—		3
Total TDRs	12,472		$3		$97		$474		$574

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, 2016 was immaterial.

³Includes 3,321 loans with an amortized cost of $41 million that were modified prior to 2016 and reclassified as TDRs in the fourth quarter of 2016.



	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.



	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
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.

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 the year ended December 31, 2014 was $14 million.

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



	Year Ended December 31, 2016
(Dollars in millions)	Number of Loans	Amortized Cost
Commercial loans:
C&I	22		$15
Residential loans:
Residential mortgages	55	11
Residential home equity products	137	10
Consumer loans:
Other direct	20	—
Indirect	117	1
Credit cards	97	—
Total TDRs	448		$37

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



	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

The following table presents TDRs that have defaulted during the year ended December 31, 2014 that were first modified within the previous 12 months.



	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
Home equity products	101	5
Residential construction	6	—
Consumer loans:
Other direct	9	—
Indirect	181	1
Credit cards	145	1
Total TDRs	678		$36

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 $2.2 billion and $1.6 billion at December 31, 2016 and 2015, respectively.

With respect to collateral concentration, at December 31, 2016, the Company owned $39.0 billion in loans secured by residential real estate, representing 27% of total LHFI. Additionally, the Company had $10.3 billion in commitments to extend credit on home equity lines and $4.2 billion in residential mortgage loan commitments outstanding at December 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 residential mortgage loan commitments outstanding. At December 31, 2016 and December 31, 2015, 1% and 2% of residential loans owned were guaranteed by a federal agency or a GSE, respectively.

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, 2016 and December 31, 2015, the current weighted average FICO score for the borrowers of these loans was 751 and 745, respectively.



(Dollars in millions)	December 31, 2016		December 31, 2015
Interest only mortgages with MI or with combined original LTV ≤ 80%¹		$845		$1,563
Interest only mortgages with no MI and with combined original LTV > 80%¹	279		547
Total interest only mortgages ¹	1,124		2,110
Amortizing mortgages with combined original LTV > 80% and/or second liens ²	9,198		8,366
Total mortgages with potential concentration of credit risk		$10,322		$10,476

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

²Comprised of loans with no MI.