NOTE 6 - LOANS

Composition of Loan Portfolio



(Dollars in millions)	September 30, 2018		December 31, 2017
Commercial loans:
C&I ¹		$68,203		$66,356
CRE	6,618		5,317
Commercial construction	3,137		3,804
Total commercial LHFI	77,958		75,477
Consumer loans:
Residential mortgages - guaranteed	452		560
Residential mortgages - nonguaranteed ²	28,187		27,136
Residential home equity products	9,669		10,626
Residential construction	197		298
Guaranteed student	7,039		6,633
Other direct	10,100		8,729
Indirect	12,010		12,140
Credit cards	1,603		1,582
Total consumer LHFI	69,257		67,704
LHFI		$147,215		$143,181
LHFS ³		$1,961		$2,290

¹Includes $3.8 billion and $3.7 billion of lease financing, and $838 million and $778 million of installment loans at September 30, 2018 and December 31, 2017, respectively.

²Includes $168 million and $196 million of LHFI measured at fair value at September 30, 2018 and December 31, 2017, respectively.

³Includes $1.8 billion and $1.6 billion of LHFS measured at fair value at September 30, 2018 and December 31, 2017, respectively.

During the three months ended September 30, 2018 and 2017, the Company transferred $122 million and $91 million of LHFI to LHFS, and $5 million and $6 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 $14 million and $285 million of loans and leases during the three months ended September 30, 2018 and 2017, respectively, at a price approximating their recorded investment.

During the nine months ended September 30, 2018 and 2017, the Company transferred $449 million and $218 million of LHFI to LHFS, and transferred $23 million and $16 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 $187 million and $513 million of loans and leases during the nine months ended September 30, 2018 and 2017, respectively, at a price approximating their recorded investment.

During the three months ended September 30, 2018 and 2017, the Company purchased $433 million and $333 million, respectively, of guaranteed student loans. During the three months ended September 30, 2018, the Company purchased $213 million of consumer indirect loans. No consumer indirect loans were purchased during the three months ended September 30, 2017. During each of the nine months ended September 30, 2018 and 2017, the Company purchased $1.4 billion of guaranteed student loans, and purchased $229 million and $99 million, respectively, of consumer indirect loans.

At September 30, 2018 and December 31, 2017, the Company had $26.1 billion and $24.3 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $19.8 billion and $18.2 billion of available, unused borrowing capacity, respectively.

At September 30, 2018 and December 31, 2017, the Company had $39.4 billion and $38.0 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $31.5 billion and $30.5 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at September 30, 2018 was used to support $3.0 billion of long-term debt and $4.3 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), Substandard, 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 Substandard) and Criticized nonaccruing (which includes a portion of Substandard as well as 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 both September 30, 2018 and December 31, 2017, 28% of guaranteed residential mortgages were current with respect to payments. At September 30, 2018 and December 31, 2017, 74% 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)	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Risk rating:
Pass		$66,224		$64,546		$6,418		$5,126		$3,038		$3,770
Criticized accruing	1,723		1,595		157		167		99		33
Criticized nonaccruing	256		215		43		24		—		1
Total		$68,203		$66,356		$6,618		$5,317		$3,137		$3,804



	Consumer Loans ¹
	Residential Mortgages - Nonguaranteed				Residential Home Equity Products				Residential Construction
(Dollars in millions)	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Current FICO score range:
700 and above		$24,968		$23,602		$8,208		$8,946		$163		$240
620 - 699	2,499		2,721		1,046		1,242		27		50
Below 620 ²	720		813		415		438		7		8
Total		$28,187		$27,136		$9,669		$10,626		$197		$298



	Other Direct				Indirect				Credit Cards
(Dollars in millions)	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Current FICO score range:
700 and above		$9,197		$7,929		$8,967		$9,094		$1,084		$1,088
620 - 699	866		757		2,321		2,344		401		395
Below 620 ²	37		43		722		702		118		99
Total		$10,100		$8,729		$12,010		$12,140		$1,603		$1,582

¹Excludes $7.0 billion and $6.6 billion of guaranteed student loans and $452 million and $560 million of guaranteed residential mortgages at September 30, 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:



	September 30, 2018
	Accruing
(Dollars in millions)	Current		30-89 Days Past Due		90+ Days Past Due		Nonaccruing ¹			Total
Commercial loans:
C&I		$67,897		$40		$10		$256			$68,203
CRE	6,572		2		1		43			6,618
Commercial construction	3,137		—		—		—			3,137
Total commercial LHFI	77,606		42		11		299			77,958
Consumer loans:
Residential mortgages - guaranteed	127		38		287		—		³	452
Residential mortgages - nonguaranteed ²	27,880		73		9		225			28,187
Residential home equity products	9,449		70		1		149			9,669
Residential construction	185		1		2		9			197
Guaranteed student	5,175		711		1,153		—		³	7,039
Other direct	10,050		39		4		7			10,100
Indirect	11,905		99		—		6			12,010
Credit cards	1,573		15		15		—			1,603
Total consumer LHFI	66,344		1,046		1,471		396			69,257
Total LHFI		$143,950		$1,088		$1,482		$695			$147,215

¹Includes nonaccruing LHFI past due 90 days or more of $348 million. Nonaccruing LHFI 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.

²Includes $168 million of loans measured at fair value, the majority of which were accruing current.

³Guaranteed loans are not placed on nonaccruing regardless of delinquency status because collection of principal and interest is reasonably assured by the government.



	December 31, 2017
	Accruing
(Dollars in millions)	Current		30-89 Days Past Due		90+ Days Past Due		Nonaccruing ¹			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 LHFI	75,188		42		7		240			75,477
Consumer loans:
Residential mortgages - guaranteed	159		55		346		—		³	560
Residential mortgages - nonguaranteed ²	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		—		³	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 LHFI	64,768		1,104		1,398		434			67,704
Total LHFI		$139,956		$1,146		$1,405		$674			$143,181

¹Includes nonaccruing LHFI past due 90 days or more of $357 million. Nonaccruing LHFI 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.

²Includes $196 million of loans measured at fair value, the majority of which were accruing current.

³Guaranteed loans are not placed on nonaccruing regardless of delinquency status because collection of principal and interest is reasonably assured by the government.

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.



	September 30, 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		$51		$32		$—		$38		$35		$—
CRE	21		20		—		—		—		—
Total commercial LHFI with no ALLL recorded	72		52		—		38		35		—
Consumer loans:
Residential mortgages - nonguaranteed	483		378		—		458		363		—
Residential construction	12		6		—		15		9		—
Total consumer LHFI with no ALLL recorded	495		384		—		473		372		—

Impaired LHFI with an ALLL recorded:
Commercial loans:
C&I	189		165		26		127		117		19
CRE	25		21		2		21		21		2
Total commercial LHFI with an ALLL recorded	214		186		28		148		138		21
Consumer loans:
Residential mortgages - nonguaranteed	1,049		1,027		101		1,133		1,103		113
Residential home equity products	873		821		49		953		895		54
Residential construction	83		81		6		93		90		7
Other direct	57		57		1		59		59		1
Indirect	131		131		6		123		122		7
Credit cards	29		8		1		26		7		1
Total consumer LHFI with an ALLL recorded	2,222		2,125		164		2,387		2,276		183
Total impaired LHFI		$3,003		$2,747		$192		$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 September 30, 2018 and December 31, 2017 were $2.3 billion and $2.4 billion of accruing TDRs, of which 97% 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 September 30								Nine Months Ended September 30
	2018				2017				2018				2017
(Dollars in millions)	Average Carrying Value		Interest ¹ Income Recognized		Average Carrying Value		Interest ¹ Income Recognized		Average Carrying Value		Interest¹ Income Recognized		Average Carrying Value		Interest¹ Income Recognized
Impaired LHFI with no ALLL recorded:
Commercial loans:
C&I		$44		$—		$70		$—		$45		$1		$81		$—
CRE	20		—		—		—		20		—		—		—
Total commercial LHFI with no ALLL recorded	64		—		70		—		65		1		81		—
Consumer loans:
Residential mortgages - nonguaranteed	381		4		364		4		386		11		361		11
Residential construction	7		—		9		—		7		—		9		—
Total consumer LHFI with no ALLL recorded	388		4		373		4		393		11		370		11

Impaired LHFI with an ALLL recorded:
Commercial loans:
C&I	177		—		150		—		176		3		145		2
CRE	21		—		—		—		22		—		—		—
Total commercial LHFI with an ALLL recorded	198		—		150		—		198		3		145		2
Consumer loans:
Residential mortgages - nonguaranteed	1,027		13		1,135		14		1,031		39		1,146		45
Residential home equity products	824		9		890		8		833		27		901		24
Residential construction	80		1		96		2		82		4		98		4
Other direct	57		1		58		1		58		3		59		3
Indirect	134		2		120		2		141		5		128		4
Credit cards	8		—		6		—		8		1		6		1
Total consumer LHFI with an ALLL recorded	2,130		26		2,305		27		2,153		79		2,338		81
Total impaired LHFI		$2,780		$30		$2,898		$31		$2,809		$94		$2,934		$94

¹Of the interest income recognized during each of the three and nine months ended September 30, 2018 and 2017, cash basis interest income was immaterial.

NPAs are presented in the following table:



(Dollars in millions)	September 30, 2018		December 31, 2017
NPAs:
Commercial NPLs:
C&I		$256		$215
CRE	43		24
Commercial construction	—		1
Consumer NPLs:
Residential mortgages - nonguaranteed	225		206
Residential home equity products	149		203
Residential construction	9		11
Other direct	7		7
Indirect	6		7
Total nonaccrual loans/NPLs ¹	695		674
OREO ²	52		57
Other repossessed assets	7		10
Total NPAs		$754		$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 $49 million and $45 million at September 30, 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 September 30, 2018 and December 31, 2017 was $89 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 September 30, 2018 and December 31, 2017 was $108 million and $101 million, of which $100 million and $97 million were insured by the FHA or guaranteed by the VA, respectively.

At September 30, 2018, OREO included $49 million of foreclosed residential real estate properties and $2 million of foreclosed commercial real estate properties, with the remaining $1 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 September 30, 2018 and December 31, 2017, the Company had an immaterial amount 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 September 30, 2018 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	47		$—		$16		$16
Consumer loans:
Residential mortgages - nonguaranteed	48	3		7		10
Residential home equity products	130	1		11		12
Other direct	141	—		2		2
Indirect	559	—		14		14
Credit cards	345	1		—		1
Total TDR additions	1,270		$5		$50		$55

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



	Nine Months Ended September 30, 2018 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	122		$—		$75		$75
Consumer loans:
Residential mortgages - nonguaranteed	267	18		46		64
Residential home equity products	410	1		34		35
Residential construction	4	—		—		—
Other direct	469	—		6		6
Indirect	1,954	—		46		46
Credit cards	1,079	4		—		4
Total TDR additions	4,305		$23		$207		$230

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



	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
Consumer loans:
Residential mortgages - nonguaranteed	41	6		4		10
Residential home equity products	696	18		45		63
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
Consumer loans:
Residential mortgages - nonguaranteed	119	17		8		25
Residential home equity products	1,971	18		172		190
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.

TDRs that defaulted during the three and nine months ended September 30, 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 majority of the Company's LHFI portfolio represents borrowers that reside in Florida, Georgia, Virginia, Maryland, and North Carolina. The Company’s cross-border outstanding loans totaled $1.4 billion at both September 30, 2018 and December 31, 2017.

With respect to collateral concentration, the Company's recorded investment in residential real estate secured LHFI totaled $38.5 billion at September 30, 2018 and represented 26% 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 September 30, 2018 and December 31, 2017, the Company had commitments to extend credit on home equity lines of $10.2 billion and $10.1 billion, and had residential mortgage commitments outstanding of $3.8 billion and $3.0 billion, respectively. At both September 30, 2018 and December 31, 2017, 1% of the Company's LHFI secured by residential real estate was insured by the FHA or guaranteed by the VA.