NOTE 6 - LOANS

Composition of Loan Portfolio



(Dollars in millions)	March 31, 2018		December 31, 2017
Commercial loans:
C&I ¹		$66,321		$66,356
CRE	5,352		5,317
Commercial construction	3,651		3,804
Total commercial loans	75,324		75,477
Consumer loans:
Residential mortgages - guaranteed	611		560
Residential mortgages - nonguaranteed ²	27,165		27,136
Residential home equity products	10,241		10,626
Residential construction	256		298
Guaranteed student	6,693		6,633
Other direct	8,941		8,729
Indirect	11,869		12,140
Credit cards	1,518		1,582
Total consumer loans	67,294		67,704
LHFI		$142,618		$143,181
LHFS ³		$2,377		$2,290

¹Includes $3.6 billion and $3.7 billion of lease financing, and $788 million and $778 million of installment loans at March 31, 2018 and December 31, 2017, respectively.

² Includes $188 million and $196 million of LHFI measured at fair value at March 31, 2018 and December 31, 2017, respectively.

³Includes $1.4 billion and $1.6 billion of LHFS measured at fair value at March 31, 2018 and December 31, 2017, respectively.

During the three months ended March 31, 2018 and 2017, the Company transferred $204 million and $60 million of LHFI to LHFS, and transferred $6 million and $7 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 $36 million and $118 million of loans and leases during the three months ended March 31, 2018 and 2017, respectively, at a price approximating their recorded investment.

During the three months ended March 31, 2018, the Company purchased $475 million of guaranteed student loans. During the three months ended March 31, 2017, the Company purchased $539 million of guaranteed student loans and $99 million of consumer indirect loans.

At March 31, 2018 and December 31, 2017, the Company had $23.5 billion and $24.3 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $17.6 billion and $18.2 billion of available, unused borrowing capacity, respectively.

At March 31, 2018 and December 31, 2017, the Company had $38.2 billion and $38.0 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $30.3 billion and $30.5 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at March 31, 2018 was used to support $4 million of long-term debt and $4.8 billion of letters of credit issued on the Company's behalf. At December 31, 2017, the available FHLB borrowing capacity was used to support $4 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.

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 March 31, 2018 and December 31, 2017, 29% and 28%, respectively, of guaranteed residential mortgages were current with respect to payments. At March 31, 2018 and December 31, 2017, 77% and 75%, respectively, 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)	March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017
Risk rating:
Pass		$64,453		$64,546		$5,152		$5,126		$3,597		$3,770
Criticized accruing	1,652		1,595		154		167		54		33
Criticized nonaccruing	216		215		46		24		—		1
Total		$66,321		$66,356		$5,352		$5,317		$3,651		$3,804



	Consumer Loans ¹
	Residential Mortgages - Nonguaranteed				Residential Home Equity Products				Residential Construction
(Dollars in millions)	March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017
Current FICO score range:
700 and above		$23,732		$23,602		$8,621		$8,946		$204		$240
620 - 699	2,655		2,721		1,174		1,242		45		50
Below 620 ²	778		813		446		438		7		8
Total		$27,165		$27,136		$10,241		$10,626		$256		$298



	Other Direct				Indirect				Credit Cards
(Dollars in millions)	March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017
Current FICO score range:
700 and above		$8,145		$7,929		$8,867		$9,094		$1,034		$1,088
620 - 699	755		757		2,270		2,344		385		395
Below 620 ²	41		43		732		702		99		99
Total		$8,941		$8,729		$11,869		$12,140		$1,518		$1,582

¹Excludes $6.7 billion and $6.6 billion of guaranteed student loans and $611 million and $560 million of guaranteed residential mortgages at March 31, 2018 and December 31, 2017, 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:



	March 31, 2018
(Dollars in millions)	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing ²		Total
Commercial loans:
C&I		$66,064		$32		$9		$216		$66,321
CRE	5,304		2		—		46		5,352
Commercial construction	3,651		—		—		—		3,651
Total commercial loans	75,019		34		9		262		75,324
Consumer loans:
Residential mortgages - guaranteed	179		53		379		—		611
Residential mortgages - nonguaranteed ¹	26,838		66		8		253		27,165
Residential home equity products	10,006		66		—		169		10,241
Residential construction	240		—		—		16		256
Guaranteed student	5,148		612		933		—		6,693
Other direct	8,893		35		5		8		8,941
Indirect	11,780		84		1		4		11,869
Credit cards	1,491		14		13		—		1,518
Total consumer loans	64,575		930		1,339		450		67,294
Total LHFI		$139,594		$964		$1,348		$712		$142,618

¹Includes $188 million of loans measured at fair value, the majority of which were accruing current.

²Nonaccruing loans past due 90 days or more totaled $417 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, 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.

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.



	March 31, 2018						December 31, 2017
(Dollars in millions)	Unpaid Principal Balance		Carrying¹ Value		Related ALLL		Unpaid Principal Balance		Carrying¹ Value		Related ALLL
Impaired LHFI with no ALLL recorded:
Commercial loans:
C&I		$28		$20		$—		$38		$35		$—
CRE	21		21		—		—		—		—
Total commercial loans with no ALLL recorded	49		41		—		38		35		—
Consumer loans:
Residential mortgages - nonguaranteed	453		355		—		458		363		—
Residential construction	12		6		—		15		9		—
Total consumer loans with no ALLL recorded	465		361		—		473		372		—

Impaired LHFI with an ALLL recorded:
Commercial loans:
C&I	157		149		22		127		117		19
CRE	25		21		—		21		21		2
Total commercial loans with an ALLL recorded	182		170		22		148		138		21
Consumer loans:
Residential mortgages - nonguaranteed	1,112		1,087		107		1,133		1,103		113
Residential home equity products	927		871		52		953		895		54
Residential construction	91		89		7		93		90		7
Other direct	57		58		1		59		59		1
Indirect	129		128		6		123		122		7
Credit cards	27		7		1		26		7		1
Total consumer loans with an ALLL recorded	2,343		2,240		174		2,387		2,276		183
Total impaired LHFI		$3,039		$2,812		$196		$3,046		$2,821		$204

¹Carrying value 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 carrying values above at both March 31, 2018 and December 31, 2017 were $2.4 billion of accruing TDRs, of which 98% and 96% were current, respectively. See Note 1, “Significant Accounting Policies,” to the Company's 2017 Annual Report on Form 10-K for further information regarding the Company’s loan impairment policy.



	Three Months Ended March 31
	2018				2017
(Dollars in millions)	Average Carrying Value		Interest¹ Income Recognized		Average Carrying Value		Interest¹ Income Recognized
Impaired LHFI with no ALLL recorded:
Commercial loans:
C&I		$20		$—		$240		$1
CRE	21		—		—		—
Total commercial loans with no ALLL recorded	41		—		240		1
Consumer loans:
Residential mortgages - nonguaranteed	353		4		360		4
Residential construction	6		—		8		—
Total consumer loans with no ALLL recorded	359		4		368		4

Impaired LHFI with an ALLL recorded:
Commercial loans:
C&I	149		1		165		1
CRE	25		—		17		—
Total commercial loans with an ALLL recorded	174		1		182		1
Consumer loans:
Residential mortgages - nonguaranteed	1,093		12		1,216		15
Residential home equity products	873		9		833		8
Residential construction	90		1		105		1
Other direct	57		1		58		1
Indirect	131		2		108		1
Credit cards	7		—		6		—
Total consumer loans with an ALLL recorded	2,251		25		2,326		26
Total impaired LHFI		$2,825		$30		$3,116		$32

¹Of the interest income recognized during each of the three months ended March 31, 2018 and 2017, cash basis interest income was less than $1 million.

NPAs are presented in the following table:



(Dollars in millions)	March 31, 2018		December 31, 2017
Nonaccrual loans/NPLs:
Commercial loans:
C&I		$216		$215
CRE	46		24
Commercial construction	—		1
Consumer loans:
Residential mortgages - nonguaranteed	253		206
Residential home equity products	169		203
Residential construction	16		11
Other direct	8		7
Indirect	4		7
Total nonaccrual loans/NPLs ¹	712		674
OREO ²	59		57
Other repossessed assets	7		10
Total NPAs		$778		$741

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 $43 million and $45 million at March 31, 2018 and December 31, 2017, respectively.

The Company's recorded investment of nonaccruing loans secured by residential real estate properties for which formal foreclosure proceedings were in process at March 31, 2018 and December 31, 2017 was $81 million and $73 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 March 31, 2018 and December 31, 2017 was $106 million and $101 million, of which $99 million and $97 million were insured by the FHA or guaranteed by the VA, respectively.

At March 31, 2018, OREO included $54 million of foreclosed residential real estate properties and $3 million of foreclosed commercial real estate properties, with the remaining $2 million related to land.

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.

Restructured Loans

A TDR is a loan for which the Company has granted an economic concession to a borrower in response to 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 both March 31, 2018 and December 31, 2017, the Company had $2 million 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:



	Three Months Ended March 31, 2018 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	46		$—		$56		$56
Consumer loans:
Residential mortgages - nonguaranteed	61	9		8		17
Residential home equity products	136	—		13		13
Other direct	114	—		1		1
Indirect	778	—		20		20
Credit cards	308	1		1		2
Total TDR additions	1,443		$10		$99		$109

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



	Three Months Ended March 31, 2017 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	30		$—		$41		$41
Consumer loans:
Residential mortgages - nonguaranteed	34	4		2		6
Residential home equity products	655	1		66		67
Other direct	110	—		1		1
Indirect	547	—		14		14
Credit cards	235	1		—		1
Total TDR additions	1,611		$6		$124		$130

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

TDRs that defaulted during the three months ended March 31, 2018 and 2017, 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’s total cross-border outstanding loans were $1.4 billion at both March 31, 2018 and December 31, 2017.

With respect to collateral concentration, the Company's recorded investment in residential real estate secured LHFI totaled $38.3 billion at March 31, 2018 and represented 27% of total LHFI. At December 31, 2017, the Company's recorded investment in residential real estate secured LHFI totaled $38.6 billion and represented 27% of total LHFI. Additionally, at March 31, 2018 and December 31, 2017, the Company had $10.2 billion and $10.1 billion in commitments to extend credit on home equity lines and $3.4 billion and $3.0 billion in residential mortgage commitments outstanding, respectively. At March 31, 2018 and December 31, 2017, 2% and 1%, respectively, of the Company's residential real estate secured LHFI were insured by the FHA or guaranteed by the VA.