NOTE 6 - LOANS

Composition of Loan Portfolio



(Dollars in millions)	March 31, 2017		December 31, 2016
Commercial loans:
C&I		$68,971		$69,213
CRE	5,067		4,996
Commercial construction	4,215		4,015
Total commercial loans	78,253		78,224
Residential loans:
Residential mortgages - guaranteed	549		537
Residential mortgages - nonguaranteed ¹	26,110		26,137
Residential home equity products	11,511		11,912
Residential construction	380		404
Total residential loans	38,550		38,990
Consumer loans:
Guaranteed student	6,396		6,167
Other direct	7,904		7,771
Indirect	11,067		10,736
Credit cards	1,359		1,410
Total consumer loans	26,726		26,084
LHFI		$143,529		$143,298
LHFS ²		$2,109		$4,169

¹Includes $221 million and $222 million of LHFI measured at fair value at March 31, 2017 and December 31, 2016, respectively.

²Includes $1.8 billion and $3.5 billion of LHFS measured at fair value at March 31, 2017 and December 31, 2016, respectively.

During the three months ended March 31, 2017 and 2016, the Company transferred $60 million and $55 million in LHFI to LHFS, and $7 million and $5 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 $118 million and $18 million in loans and leases during the three months ended March 31, 2017 and 2016, respectively, at a price approximating their recorded investment.

During the three months ended March 31, 2017, the Company purchased $539 million of guaranteed student loans during the normal course of business and $99 million of indirect loans. During the three months ended March 31, 2016, the Company purchased $537 million of guaranteed student loans during the normal course of business.

At March 31, 2017 and December 31, 2016, the Company had $22.8 billion and $22.6 billion, respectively, of net eligible loan collateral pledged to the Federal Reserve discount window to support $17.0 billion of available, unused borrowing capacity at the end of each period.

At March 31, 2017 and December 31, 2016, the Company had $36.2 billion and $36.9 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $30.8 billion and $31.9 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at March 31, 2017 was used to support $2.3 billion of long-term debt and $6.1 billion of letters of credit issued on the Company's behalf. At December 31, 2016, the available FHLB borrowing capacity 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.

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.

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, 2017 and December 31, 2016, 31% and 29%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At March 31, 2017 and December 31, 2016, 76% and 75%, 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)	March 31, 2017		December 31, 2016		March 31, 2017		December 31, 2016		March 31, 2017		December 31, 2016
Risk rating:
Pass		$66,776		$66,920		$4,738		$4,574		$4,070		$3,914
Criticized accruing	1,867		1,903		323		415		127		84
Criticized nonaccruing	328		390		6		7		18		17
Total		$68,971		$69,213		$5,067		$4,996		$4,215		$4,015



	Residential Loans ¹
	Residential Mortgages - Nonguaranteed				Residential Home Equity Products				Residential Construction
(Dollars in millions)	March 31, 2017		December 31, 2016		March 31, 2017		December 31, 2016		March 31, 2017		December 31, 2016
Current FICO score range:
700 and above		$22,137		$22,194		$9,506		$9,826		$322		$292
620 - 699	3,037		3,042		1,468		1,540		47		96
Below 620 ²	936		901		537		546		11		16
Total		$26,110		$26,137		$11,511		$11,912		$380		$404



	Consumer Loans ³
	Other Direct				Indirect				Credit Cards
(Dollars in millions)	March 31, 2017		December 31, 2016		March 31, 2017		December 31, 2016		March 31, 2017		December 31, 2016
Current FICO score range:
700 and above		$7,119		$7,008		$7,945		$7,642		$927		$974
620 - 699	736		703		2,368		2,381		347		351
Below 620 ²	49		60		754		713		85		85
Total		$7,904		$7,771		$11,067		$10,736		$1,359		$1,410

¹Excludes $549 million and $537 million of guaranteed residential loans at March 31, 2017 and December 31, 2016, 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 $6.4 billion and $6.2 billion of guaranteed student loans at March 31, 2017 and December 31, 2016, respectively.

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



	March 31, 2017
(Dollars in millions)	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing ²		Total
Commercial loans:
C&I		$68,601		$31		$11		$328		$68,971
CRE	5,057		2		2		6		5,067
Commercial construction	4,197		—		—		18		4,215
Total commercial loans	77,855		33		13		352		78,253
Residential loans:
Residential mortgages - guaranteed	171		55		323		—		549
Residential mortgages - nonguaranteed ¹	25,854		67		10		179		26,110
Residential home equity products	11,201		73		—		237		11,511
Residential construction	367		1		—		12		380
Total residential loans	37,593		196		333		428		38,550
Consumer loans:
Guaranteed student	4,862		667		867		—		6,396
Other direct	7,865		31		3		5		7,904
Indirect	10,972		91		—		4		11,067
Credit cards	1,338		10		11		—		1,359
Total consumer loans	25,037		799		881		9		26,726
Total LHFI		$140,485		$1,028		$1,227		$789		$143,529

¹Includes $221 million of loans measured at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $348 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, 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 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.



	March 31, 2017						December 31, 2016
(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		$255		$187		$—		$266			$214			$—
Total commercial loans	255		187		—		266			214			—
Residential loans:
Residential mortgages - nonguaranteed	468		362		—		466			360			—
Residential construction	16		8		—		16			8			—
Total residential loans	484		370		—		482			368			—

Impaired loans with an allowance recorded:
Commercial loans:
C&I	203		148		25		225			151			31
CRE	26		17		5		26			17			2
Total commercial loans	229		165		30		251			168			33
Residential loans:
Residential mortgages - nonguaranteed	1,239		1,211		141		1,277			1,248			150
Residential home equity products	894		829		57		863			795			54
Residential construction	105		105		10		109			107			11
Total residential loans	2,238		2,145		208		2,249			2,150			215
Consumer loans:
Other direct	59		59		1		59		²	59		²	1
Indirect	106		105		6		103			103			5
Credit cards	24		6		1		24			6			1
Total consumer loans	189		170		8		186			168			7
Total impaired loans		$3,395		$3,037		$246		$3,434			$3,068			$255

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 both March 31, 2017 and December 31, 2016 were $2.5 billion of accruing TDRs at amortized cost, of which 98% and 97% were current, respectively. See Note 1, “Significant Accounting Policies,” to the Company's 2016 Annual Report on Form 10-K for further information regarding the Company’s loan impairment policy.



	Three Months Ended March 31
	2017				2016
(Dollars in millions)	Average Amortized Cost		Interest Income Recognized¹		Average Amortized Cost		Interest Income Recognized¹
Impaired loans with no related allowance recorded:
Commercial loans:
C&I		$240		$1		$364		$2
CRE	—		—		3		—
Total commercial loans	240		1		367		2
Residential loans:
Residential mortgages - nonguaranteed	360		4		387		4
Residential construction	8		—		8		—
Total residential loans	368		4		395		4

Impaired loans with an allowance recorded:
Commercial loans:
C&I	165		1		161		—
CRE	17		—		—		—
Total commercial loans	182		1		161		—
Residential loans:
Residential mortgages - nonguaranteed	1,216		15		1,339		16
Residential home equity products	833		8		705		7
Residential construction	105		1		120		2
Total residential loans	2,154		24		2,164		25
Consumer loans:
Other direct	58		1		12		—
Indirect	108		1		115		1
Credit cards	6		—		6		—
Total consumer loans	172		2		133		1
Total impaired loans		$3,116		$32		$3,220		$32

¹Of the interest income recognized during the three months ended March 31, 2017 and 2016, cash basis interest income was less than $1 million and $2 million, respectively.

NPAs are presented in the following table:



(Dollars in millions)	March 31, 2017		December 31, 2016
Nonaccrual/NPLs:
Commercial loans:
C&I		$328		$390
CRE	6		7
Commercial construction	18		17
Residential loans:
Residential mortgages - nonguaranteed	179		177
Residential home equity products	237		235
Residential construction	12		12
Consumer loans:
Other direct	5		6
Indirect	4		1
Total nonaccrual/NPLs ¹	789		845
OREO ²	62		60
Other repossessed assets	7		14
Total NPAs		$858		$919

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 guaranteed by 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 at both March 31, 2017 and December 31, 2016.

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, 2017 and December 31, 2016 was $94 million and $85 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, 2017 and December 31, 2016 was $127 million and $122 million, of which $119 million and $114 million were insured by the FHA or guaranteed by the VA, respectively.

At March 31, 2017, OREO included $52 million of foreclosed residential real estate properties and $8 million of foreclosed commercial real estate properties, with the remainder related to land.

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.

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 March 31, 2017 and December 31, 2016, the Company had $17 million and $29 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:



	Three Months Ended March 31, 2017 ¹
(Dollars in millions)	Number of Loans Modified	Principal Forgiveness ²		Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	24		$—		$—		$41		$41
Residential loans:
Residential mortgages - nonguaranteed	34	1		4		1		6
Residential home equity products	695	—		—		67		67
Consumer loans:
Other direct	110	—		—		1		1
Indirect	581	—		—		14		14
Credit cards	189	—		1		—		1
Total TDRs	1,633		$1		$5		$124		$130

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, 2017 was immaterial.



	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.

TDRs that have defaulted during the three months ended March 31, 2017 and 2016 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 $2.0 billion and $2.2 billion at March 31, 2017 and December 31, 2016, respectively.

With respect to collateral concentration, at March 31, 2017, the Company owned $38.6 billion in loans secured by residential real estate, representing 27% of total LHFI. Additionally, the Company had $10.4 billion in commitments to extend credit on home equity lines and $4.6 billion in residential mortgage loan commitments outstanding at March 31, 2017. At December 31, 2016, the Company owned $39.0 billion in loans secured by residential real estate, representing 27% of total LHFI, and had $10.3 billion in commitments to extend credit on home equity lines and $4.2 billion in residential mortgage loan commitments outstanding. At both March 31, 2017 and December 31, 2016, 1% of residential loans owned were guaranteed by a federal agency or a GSE, respectively.