NOTE 6 - LOANS

Composition of Loan Portfolio



(Dollars in millions)	December 31, 2017		December 31, 2016
Commercial loans:
C&I ¹		$66,356		$69,213
CRE	5,317		4,996
Commercial construction	3,804		4,015
Total commercial loans	75,477		78,224
Consumer loans:
Residential mortgages - guaranteed	560		537
Residential mortgages - nonguaranteed ²	27,136		26,137
Residential home equity products	10,626		11,912
Residential construction	298		404
Guaranteed student	6,633		6,167
Other direct	8,729		7,771
Indirect	12,140		10,736
Credit cards	1,582		1,410
Total consumer loans	67,704		65,074
LHFI		$143,181		$143,298
LHFS ³		$2,290		$4,169

¹Includes $3.7 billion of lease financing at both December 31, 2017 and 2016, and $778 million and $729 million of installment loans at December 31, 2017 and 2016, respectively.

² Includes $196 million and $222 million of LHFI measured at fair value at December 31, 2017 and 2016, respectively.

³Includes $1.6 billion and $3.5 billion of LHFS measured at fair value at December 31, 2017 and 2016, respectively.

During the years ended December 31, 2017 and 2016, the Company transferred $288 million and $360 million of LHFI to LHFS, and transferred $19 million and $30 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 $705 million and $1.6 billion of loans and leases for an immaterial net gain and a net gain of $6 million during the years ended December 31, 2017 and 2016, respectively.

During the year ended December 31, 2017, the Company purchased $1.7 billion of guaranteed student loans and $233 million of consumer indirect loans, and during the year ended December 31, 2016, the Company purchased $2.2 billion of guaranteed student loans.

At December 31, 2017 and 2016, the Company had $24.3 billion and $22.6 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $18.2 billion and $17.0 billion of available, unused borrowing capacity, respectively.

At December 31, 2017 and 2016, the Company had $38.0 billion and $36.9 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $30.5 billion and $31.9 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at December 31, 2017 was used to support $4 million of long-term debt and $6.7 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 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 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, 2017 and 2016, 28% and 29%, respectively, of guaranteed residential mortgages were current with respect to payments. At both December 31, 2017 and 2016, 75% of guaranteed student loans were current with respect to payments. The Company's loss exposure on guaranteed residential mortgages 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, 2017		December 31, 2016		December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016
Risk rating:
Pass		$64,546		$66,961		$5,126		$4,574		$3,770		$3,914
Criticized accruing	1,595		1,862		167		415		33		84
Criticized nonaccruing	215		390		24		7		1		17
Total		$66,356		$69,213		$5,317		$4,996		$3,804		$4,015



	Consumer Loans ¹
	Residential Mortgages - Nonguaranteed				Residential Home Equity Products				Residential Construction
(Dollars in millions)	December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016
Current FICO score range:
700 and above		$23,602		$22,194		$8,946		$9,826		$240		$292
620 - 699	2,721		3,042		1,242		1,540		50		96
Below 620 ²	813		901		438		546		8		16
Total		$27,136		$26,137		$10,626		$11,912		$298		$404



	Other Direct				Indirect				Credit Cards
(Dollars in millions)	December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016
Current FICO score range:
700 and above		$7,929		$7,008		$9,094		$7,642		$1,088		$974
620 - 699	757		703		2,344		2,381		395		351
Below 620 ²	43		60		702		713		99		85
Total		$8,729		$7,771		$12,140		$10,736		$1,582		$1,410

¹Excludes $6.6 billion and $6.2 billion of guaranteed student loans and $560 million and $537 million of guaranteed residential mortgages at December 31, 2017 and 2016, respectively, for which there was nominal risk of principal loss due to the government guarantee.

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.

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



	December 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		$66,092		$42		$7		$215		$66,356
CRE	5,293		—		—		24		5,317
Commercial construction	3,803		—		—		1		3,804
Total commercial loans	75,188		42		7		240		75,477
Consumer loans:
Residential mortgages - guaranteed	159		55		346		—		560
Residential mortgages - nonguaranteed ¹	26,778		148		4		206		27,136
Residential home equity products	10,348		75		—		203		10,626
Residential construction	280		7		—		11		298
Guaranteed student	4,946		659		1,028		—		6,633
Other direct	8,679		36		7		7		8,729
Indirect	12,022		111		—		7		12,140
Credit cards	1,556		13		13		—		1,582
Total consumer loans	64,768		1,104		1,398		434		67,704
Total LHFI		$139,956		$1,146		$1,405		$674		$143,181

¹Includes $196 million of loans measured at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $357 million. Nonaccruing loans past due fewer than 90 days include nonaccrual loans modified in 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
Consumer 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
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	62,368		999		1,276		431		65,074
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 nonaccrual loans modified in 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 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 due to the government guarantee.



	December 31, 2017						December 31, 2016
(Dollars in millions)	Unpaid Principal Balance		Carrying Value ¹		Related ALLL		Unpaid Principal Balance			Carrying Value ¹			Related ALLL
Impaired LHFI with no ALLL recorded:
Commercial loans:
C&I		$38		$35		$—		$266			$214			$—
Total commercial loans with no ALLL recorded	38		35		—		266			214			—
Consumer loans:
Residential mortgages - nonguaranteed	458		363		—		466			360			—
Residential construction	15		9		—		16			8			—
Total consumer loans with no ALLL recorded	473		372		—		482			368			—

Impaired LHFI with an ALLL recorded:
Commercial loans:
C&I	127		117		19		225			151			31
CRE	21		21		2		26			17			2
Total commercial loans with an ALLL recorded	148		138		21		251			168			33
Consumer loans:
Residential mortgages - nonguaranteed	1,133		1,103		113		1,277			1,248			150
Residential home equity products	953		895		54		863			795			54
Residential construction	93		90		7		109			107			11
Other direct	59		59		1		59		²	59		²	1
Indirect	123		122		7		103			103			5
Credit cards	26		7		1		24			6			1
Total consumer loans with an ALLL recorded	2,387		2,276		183		2,435			2,318			222
Total impaired LHFI		$3,046		$2,821		$204		$3,434			$3,068			$255

¹Carrying value 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 LHFI carrying values above at December 31, 2017 and 2016 were $2.4 billion and $2.5 billion of accruing TDRs, of which 96% and 97% were current, respectively. See Note 1, “Significant Accounting Policies,” for further information regarding the Company’s loan impairment policy.



	Year Ended December 31
	2017				2016				2015
(Dollars in millions)	Average Carrying Value		Interest Income Recognized¹		Average Carrying Value		Interest Income Recognized¹		Average Carrying Value		Interest Income Recognized ¹
Impaired LHFI with no ALLL recorded:
Commercial loans:
C&I		$34		$1		$169		$3		$58		$2
CRE	—		—		—		—		10		—
Total commercial loans with no ALLL recorded	34		1		169		3		68		2
Consumer loans:
Residential mortgages - nonguaranteed	357		15		370		16		390		17
Residential construction	8		—		8		—		11		—
Total consumer loans with no ALLL recorded	365		15		378		16		401		17

Impaired LHFI with an ALLL recorded:
Commercial loans:
C&I	112		2		170		1		147		5
CRE	22		1		25		1		—		—
Total commercial loans with an ALLL recorded	134		3		195		2		147		5
Consumer loans:
Residential mortgages - nonguaranteed	1,123		58		1,251		64		1,349		65
Residential home equity products	914		32		812		29		682		28
Residential construction	94		5		110		6		125		8
Other direct	60		4		10		1		12		—
Indirect	136		6		114		6		125		6
Credit cards	6		1		6		1		7		1
Total consumer loans with an ALLL recorded	2,333		106		2,303		107		2,300		108
Total impaired LHFI		$2,866		$125		$3,045		$128		$2,916		$132

¹Of the interest income recognized during the years ended December 31, 2017, 2016, and 2015, cash basis interest income was $4 million, $4 million, and $7 million, respectively.

NPAs are presented in the following table:



(Dollars in millions)	December 31, 2017		December 31, 2016
Nonaccrual loans/NPLs:
Commercial loans:
C&I		$215		$390
CRE	24		7
Commercial construction	1		17
Consumer loans:
Residential mortgages - nonguaranteed	206		177
Residential home equity products	203		235
Residential construction	11		12
Other direct	7		6
Indirect	7		1
Total nonaccrual loans/NPLs ¹	674		845
OREO ²	57		60
Other repossessed assets	10		14
Total NPAs		$741		$919

¹ Nonaccruing restructured loans are included in total nonaccrual loans/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 and the VA totaled $45 million and $50 million at December 31, 2017 and 2016, respectively.

The Company's recorded investment of nonaccruing loans secured by residential real estate properties for which formal foreclosure proceedings were in process at December 31, 2017 and 2016 was $73 million and $85 million, respectively. The Company's recorded investment of accruing loans secured by residential real estate properties for which formal foreclosure proceedings were in process at December 31, 2017 and 2016 was $101 million and $122 million, of which $97 million and $114 million were insured by the FHA or guaranteed by the VA, respectively.

At December 31, 2017, OREO included $51 million of foreclosed residential real estate properties and $4 million of foreclosed commercial real estate properties, with the remaining $2 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 limited 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, 2017 and 2016, the Company had $2 million and $29 million, respectively, of commitments to lend additional funds to debtors whose terms have been modified in a TDR. The number and carrying value of loans modified under the terms of a TDR, by type of modification, are presented in the following tables:



	Year Ended December 31, 2017 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	178		$3		$43		$46
Consumer loans:
Residential mortgages - nonguaranteed	150	22		10		32
Residential home equity products	2,488	45		176		221
Other direct	661	—		9		9
Indirect	2,740	—		61		61
Credit cards	919	4		—		4
Total TDR additions	7,136		$74		$299		$373

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



	Year Ended December 31, 2016 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	84		$2		$68		$70
Commercial construction	1	—		—		—
Consumer loans:
Residential mortgages - nonguaranteed	397	79		12		91
Residential home equity products	2,611	9		227		236
Residential construction	1	—		—		—
Other direct ²	3,925	—		50		50
Indirect	1,539	—		32		32
Credit cards	720	3		—		3
Total TDR additions	9,278		$93		$389		$482

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

² Includes 3,321 loans with a carrying value of $41 million that were modified prior to 2016 and reclassified as TDRs in the fourth quarter of 2016.



	Year Ended December 31, 2015 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	57		$1		$3		$4
CRE	2	—		—		—
Commercial construction	1	—		—		—
Consumer loans:
Residential mortgages - nonguaranteed	737	125		34		159
Residential home equity products	1,888	24		108		132
Residential construction	4	5		—		5
Other direct	54	—		1		1
Indirect	2,299	—		47		47
Credit cards	557	2		—		2
Total TDR additions	5,599		$157		$193		$350

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

TDRs that defaulted during the years ended December 31, 2017, 2016, and 2015, 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 credit 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 $1.4 billion and $2.2 billion at December 31, 2017 and 2016, respectively.

With respect to collateral concentration, the Company's recorded investment in residential real estate secured LHFI totaled $38.6 billion at December 31, 2017 and represented 27% of total LHFI. At December 31, 2016, the Company's recorded investment in residential real estate secured LHFI totaled $39.0 billion and represented 27% of total LHFI. Additionally, at December 31, 2017 and 2016, the Company had $10.1 billion and $10.3 billion in commitments to extend credit on home equity lines and $3.0 billion and $4.2 billion in residential mortgage commitments outstanding, respectively. At both December 31, 2017 and December 31, 2016, 1% of the Company's residential real estate secured LHFI were insured by the FHA or guaranteed by the VA, respectively.

The following table presents residential mortgage LHFI 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/or result in a concentration of credit risk. At December 31, 2017 and 2016, the current weighted average FICO score for the borrowers of these residential mortgage LHFI was 756 and 751, respectively.



(Dollars in millions)	December 31, 2017		December 31, 2016
Interest only mortgages with MI or with combined original LTV ≤ 80%¹		$569		$845
Interest only mortgages with no MI and with combined original LTV > 80%¹	77		279
Total interest only mortgages ¹	646		1,124
Amortizing mortgages with combined original LTV > 80% and/or second liens ²	10,197		9,198
Total mortgages with potential concentration of credit risk		$10,843		$10,322

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

²Comprised of loans with no MI.