NOTE 5 - LOANS

Composition of Loan Portfolio



(Dollars in millions)	September 30, 2017		December 31, 2016
Commercial loans:
C&I ¹		$67,758		$69,213
CRE	5,238		4,996
Commercial construction	3,964		4,015
Total commercial loans	76,960		78,224
Residential loans:
Residential mortgages - guaranteed	497		537
Residential mortgages - nonguaranteed ²	27,041		26,137
Residential home equity products	10,865		11,912
Residential construction	327		404
Total residential loans	38,730		38,990
Consumer loans:
Guaranteed student	6,559		6,167
Other direct	8,597		7,771
Indirect	11,952		10,736
Credit cards	1,466		1,410
Total consumer loans	28,574		26,084
LHFI		$144,264		$143,298
LHFS ³		$2,835		$4,169

¹Includes $3.5 billion and $3.7 billion of lease financing and $764 million and $729 million of installment loans at September 30, 2017 and December 31, 2016, respectively.

² Includes $206 million and $222 million of LHFI measured at fair value at September 30, 2017 and December 31, 2016, respectively.

³Includes $2.3 billion and $3.5 billion of LHFS measured at fair value at September 30, 2017 and December 31, 2016, respectively.

During the three months ended September 30, 2017 and 2016, the Company transferred $91 million and $153 million of LHFI to LHFS, and $6 million and $13 million of LHFS to LHFI, respectively. In addition to sales of residential and commercial mortgage LHFS in the normal course of business, the Company sold $285 million and $1.2 billion of loans and leases for a net loss of $1 million and a net gain of $8 million during the three months ended September 30, 2017 and 2016, respectively.

During the nine months ended September 30, 2017 and 2016, the Company transferred $218 million and $315 million of LHFI to LHFS, and transferred $16 million and $23 million of LHFS to LHFI, respectively. In addition to sales of residential and commercial mortgage LHFS in the normal course of business, the Company sold $513 million and $1.5 billion of loans and leases for an immaterial net gain and a net gain of $6 million during the nine months ended September 30, 2017 and 2016, respectively.

During the three months ended September 30, 2017 and 2016, the Company purchased $333 million and $506 million, respectively, of guaranteed student loans in the normal course of business. During the nine months ended September 30, 2017, the Company purchased $1.4 billion of guaranteed student loans and $99 million of consumer indirect loans, and during the nine months ended September 30, 2016, the Company purchased $1.6 billion of guaranteed student loans.

At September 30, 2017 and December 31, 2016, the Company had $23.9 billion and $22.6 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $17.8 billion and $17.0 billion of available, unused borrowing capacity, respectively.

At September 30, 2017 and December 31, 2016, the Company had $38.2 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 September 30, 2017 was used to support $1.3 billion of long-term debt and $5.0 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 September 30, 2017 and December 31, 2016, 32% and 29%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At September 30, 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)	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Risk rating:
Pass		$65,768		$66,961		$4,933		$4,574		$3,882		$3,914
Criticized accruing	1,698		1,862		300		415		81		84
Criticized nonaccruing	292		390		5		7		1		17
Total		$67,758		$69,213		$5,238		$4,996		$3,964		$4,015



	Residential Loans ¹
	Residential Mortgages - Nonguaranteed				Residential Home Equity Products				Residential Construction
(Dollars in millions)	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Current FICO score range:
700 and above		$23,444		$22,194		$9,067		$9,826		$274		$292
620 - 699	2,769		3,042		1,334		1,540		43		96
Below 620 ²	828		901		464		546		10		16
Total		$27,041		$26,137		$10,865		$11,912		$327		$404



	Consumer Loans ³
	Other Direct				Indirect				Credit Cards
(Dollars in millions)	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Current FICO score range:
700 and above		$7,778		$7,008		$8,907		$7,642		$1,000		$974
620 - 699	783		703		2,339		2,381		370		351
Below 620 ²	36		60		706		713		96		85
Total		$8,597		$7,771		$11,952		$10,736		$1,466		$1,410

¹Excludes $497 million and $537 million of guaranteed residential loans at September 30, 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 $6.6 billion and $6.2 billion of guaranteed student loans at September 30, 2017 and December 31, 2016, respectively.

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



	September 30, 2017
(Dollars in millions)	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing ²		Total
Commercial loans:
C&I		$67,396		$55		$15		$292		$67,758
CRE	5,231		1		1		5		5,238
Commercial construction	3,963		—		—		1		3,964
Total commercial loans	76,590		56		16		298		76,960
Residential loans:
Residential mortgages - guaranteed	161		50		286		—		497
Residential mortgages - nonguaranteed ¹	26,802		73		5		161		27,041
Residential home equity products	10,559		92		—		214		10,865
Residential construction	315		1		—		11		327
Total residential loans	37,837		216		291		386		38,730
Consumer loans:
Guaranteed student	4,974		567		1,018		—		6,559
Other direct	8,547		38		6		6		8,597
Indirect	11,815		130		—		7		11,952
Credit cards	1,441		13		12		—		1,466
Total consumer loans	26,777		748		1,036		13		28,574
Total LHFI		$141,204		$1,020		$1,343		$697		$144,264

¹Includes $206 million of loans measured at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $333 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, 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 student loans and guaranteed residential mortgages for which there was nominal risk of principal loss.



	September 30, 2017						December 31, 2016
(Dollars in millions)	Unpaid Principal Balance		Amortized Cost ¹		Related ALLL		Unpaid Principal Balance		Amortized Cost ¹		Related ALLL
Impaired LHFI with no ALLL recorded:
Commercial loans:
C&I		$79		$72		$—		$266		$214		$—
Total commercial loans	79		72		—		266		214		—
Residential loans:
Residential mortgages - nonguaranteed	461		365		—		466		360		—
Residential construction	16		9		—		16		8		—
Total residential loans	477		374		—		482		368		—

Impaired LHFI with an ALLL recorded:
Commercial loans:
C&I	171		153		30		225		151		31
CRE	—		—		—		26		17		2
Total commercial loans	171		153		30		251		168		33
Residential loans:
Residential mortgages - nonguaranteed	1,161		1,132		124		1,277		1,248		150
Residential home equity products	945		885		55		863		795		54
Residential construction	97		96		8		109		107		11
Total residential loans	2,203		2,113		187		2,249		2,150		215
Consumer loans:
Other direct	59		59		1		59		59		1
Indirect	118		117		7		103		103		5
Credit cards	25		6		1		24		6		1
Total consumer loans	202		182		9		186		168		7
Total impaired LHFI		$3,132		$2,894		$226		$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.

Included in the impaired LHFI balances above at both September 30, 2017 and December 31, 2016 were $2.5 billion of accruing TDRs at amortized cost, of which 97% were current for each period. 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 September 30								Nine Months Ended September 30
	2017				2016				2017				2016
(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 LHFI with no ALLL recorded:
Commercial loans:
C&I		$70		$—		$268		$1		$81		$—		$200		$1
Total commercial loans	70		—		268		1		81		—		200		1
Residential loans:
Residential mortgages - nonguaranteed	364		4		364		4		361		11		368		12
Residential construction	9		—		8		—		9		—		8		—
Total residential loans	373		4		372		4		370		11		376		12

Impaired LHFI with an ALLL recorded:
Commercial loans:
C&I	150		—		188		—		145		2		185		1
Total commercial loans	150		—		188		—		145		2		185		1
Residential loans:
Residential mortgages - nonguaranteed	1,135		14		1,288		15		1,146		45		1,292		48
Residential home equity products	890		8		771		7		901		24		780		22
Residential construction	96		2		112		1		98		4		114		4
Total residential loans	2,121		24		2,171		23		2,145		73		2,186		74
Consumer loans:
Other direct	58		1		10		—		59		3		11		—
Indirect	120		2		109		1		128		4		115		4
Credit cards	6		—		6		—		6		1		6		—
Total consumer loans	184		3		125		1		193		8		132		4
Total impaired LHFI		$2,898		$31		$3,124		$29		$2,934		$94		$3,079		$92

¹Of the interest income recognized during the three and nine months ended September 30, 2017, cash basis interest income was less than $1 million and $3 million, respectively.

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

NPAs are presented in the following table:



(Dollars in millions)	September 30, 2017		December 31, 2016
Nonaccrual/NPLs:
Commercial loans:
C&I		$292		$390
CRE	5		7
Commercial construction	1		17
Residential loans:
Residential mortgages - nonguaranteed	161		177
Residential home equity products	214		235
Residential construction	11		12
Consumer loans:
Other direct	6		6
Indirect	7		1
Total nonaccrual/NPLs ¹	697		845
OREO ²	57		60
Other repossessed assets	7		14
Nonperforming LHFS	31		—
Total NPAs		$792		$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 September 30, 2017 and December 31, 2016, respectively.

The Company's recorded investment of nonaccruing loans secured by residential real estate properties for which formal foreclosure proceedings are in process at September 30, 2017 and December 31, 2016 was $72 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 September 30, 2017 and December 31, 2016 was $94 million and $122 million, of which $90 million and $114 million were insured by the FHA or guaranteed by the VA, respectively.

At September 30, 2017, OREO included $50 million of foreclosed residential real estate properties and $4 million of foreclosed commercial real estate properties, with the remaining $3 million 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 remaining $3 million related to land.

Restructured Loans

A TDR is a loan for which the Company has granted an economic concession to a borrower in response to certain instances of financial difficulty experienced by the borrower, which 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 September 30, 2017 and December 31, 2016, the Company had $1 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 September 30, 2017 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	76		$2		$7		$9
Residential loans:
Residential mortgages - nonguaranteed	41	6		4		10
Residential home equity products	696	18		45		63
Consumer loans:
Other direct	135	—		2		2
Indirect	738	—		17		17
Credit cards	182	1		—		1
Total TDR additions	1,868		$27		$75		$102

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



	Nine Months Ended September 30, 2017 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	136		$2		$86		$88
Residential loans:
Residential mortgages - nonguaranteed	119	17		8		25
Residential home equity products	1,971	18		172		190
Consumer loans:
Other direct	425	—		6		6
Indirect	2,034	—		50		50
Credit cards	615	3		—		3
Total TDR additions	5,300		$40		$322		$362

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



	Three Months Ended September 30, 2016 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	19		$—		$49		$49
Residential loans:
Residential mortgages - nonguaranteed	102	22		3		25
Residential home equity products	569	—		55		55
Consumer loans:
Other direct	2	—		—		—
Indirect	351	—		9		9
Credit cards	149	1		—		1
Total TDR additions	1,192		$23		$116		$139

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



	Nine Months Ended September 30, 2016 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	48		$—		$95		$95
Commercial construction	1	—		—		—
Residential loans:
Residential mortgages - nonguaranteed	339	80		11		91
Residential home equity products	2,030	9		182		191
Consumer loans:
Other direct	34	—		1		1
Indirect	1,217	—		30		30
Credit cards	501	2		—		2
Total TDR additions	4,170		$91		$319		$410

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

TDRs that defaulted during the three and nine months ended September 30, 2017 and 2016, which were first modified within the previous 12 months, were immaterial. The majority of loans that were modified under the terms of a TDR 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, Virginia, Maryland, and North Carolina. The Company engages in limited international banking activities. The Company’s total cross-border outstanding loans were $1.5 billion and $2.2 billion at September 30, 2017 and December 31, 2016, respectively.

With respect to collateral concentration, at September 30, 2017, the Company owned $38.7 billion in loans secured by residential real estate, representing 27% of total LHFI. Additionally, the Company had $10.1 billion in commitments to extend credit on home equity lines and $4.1 billion in residential mortgage loan commitments outstanding at September 30, 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 September 30, 2017 and December 31, 2016, 1% of residential loans owned were guaranteed by a federal agency or a GSE, respectively.