Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Loans and Allowance for Loan Losses

Note 4—Loans and Allowance for Loan Losses

        The following table provides the outstanding balances of loans at June 30, 2013 and December 31, 2012:

(Dollars in millions)	June 30, 2013			December 31, 2012
Loans held for investment:
Commercial and industrial	$	22,266		$	20,827
Commercial mortgage		13,008			9,939
Construction		808			627
Lease financing		984			1,104
Total commercial portfolio		37,066			32,497
Residential mortgage		23,835			22,705
Home equity and other consumer loans		3,456			3,647
Total consumer portfolio		27,291			26,352
Total loans held for investment, before purchased credit-impaired loans		64,357			58,849
Purchased credit-impaired loans(1)		1,486			1,185
Total loans held for investment(2)		65,843			60,034
Allowance for loan losses		(625	)		(653	)
Loans held for investment, net	$	65,218		$	59,381

(1)

Includes $348 million and $421 million as of June 30, 2013 and December 31, 2012, respectively, of loans for which the Company will be reimbursed a substantial portion of any future losses under the terms of the FDIC loss share agreements. Of these FDIC covered loans, $21 million and $24 million as of June 30, 2013 and December 31, 2012, respectively, were not accounted for under accounting guidance for loans acquired with deteriorated credit quality.

(2)

Includes $54 million and $5 million at June 30, 2013 and December 31, 2012, respectively, for net unamortized discounts and premiums and deferred fees and costs.

• Allowance for Loan Losses

        The following tables provide a reconciliation of changes in the allowance for loan losses by portfolio segment:

	For the Three Months Ended June 30, 2013
(Dollars in millions)	Commercial			Consumer			Purchased Credit- Impaired			Unallocated		Total
Allowance for loan losses, beginning of period	$	486		$	113		$	1		$	38	$	638
(Reversal of) provision for loan losses		(3	)		—			—			—		(3	)
Decrease in allowance covered by FDIC indemnification		—			—			(2	)		—		(2	)
Loans charged off		(12	)		(8	)		—			—		(20	)
Recoveries of loans previously charged off		9			1			2			—		12
Allowance for loan losses, end of period	$	480		$	106		$	1		$	38	$	625

	For the Three Months Ended June 30, 2012
(Dollars in millions)	Commercial			Consumer			Purchased Credit- Impaired			Unallocated		Total
Allowance for loan losses, beginning of period	$	439		$	128		$	10		$	127	$	704
(Reversal of) provision for loan losses		(38	)		14			—			11		(13	)
(Reversal of) provision for FDIC covered loan losses not subject to FDIC indemnification		—			—			(1	)		—		(1	)
Decrease in allowance covered by FDIC indemnification		—			—			(3	)		—		(3	)
Loans charged off		(26	)		(16	)		(2	)		—		(44	)
Recoveries of loans previously charged off		13			—			—			—		13
Allowance for loan losses, end of period	$	388		$	126		$	4		$	138	$	656

	For the Six Months Ended June 30, 2013
(Dollars in millions)	Commercial			Consumer			Purchased Credit- Impaired			Unallocated			Total
Allowance for loan losses, beginning of period	$	418		$	124		$	1		$	110		$	653
(Reversal of) provision for loan losses		65			1			—			(72	)		(6	)
Loans charged off		(15	)		(21	)		(3	)		—			(39	)
Recoveries of loans previously charged off		12			2			3			—			17
Allowance for loan losses, end of period	$	480		$	106		$	1		$	38		$	625

	For the Six Months Ended June 30, 2012
(Dollars in millions)	Commercial			Consumer			Purchased Credit- Impaired			Unallocated		Total
Allowance for loan losses, beginning of period	$	474		$	138		$	17		$	135	$	764
(Reversal of) provision for loan losses		(41	)		26			—			3		(12	)
(Reversal of) provision for FDIC covered loan losses not subject to FDIC indemnification		—			—			(3	)		—		(3	)
Decrease in allowance covered by FDIC indemnification		—			—			(9	)		—		(9	)
Loans charged off		(66	)		(39	)		(2	)		—		(107	)
Recoveries of loans previously charged off		21			1			1			—		23
Allowance for loan losses, end of period	$	388		$	126		$	4		$	138	$	656

        The following tables show the allowance for loan losses and related loan balances by portfolio segment as of June 30, 2013 and December 31, 2012:

	June 30, 2013
(Dollars in millions)	Commercial		Consumer		Purchased Credit- Impaired		Unallocated		Total
Allowance for loan losses:
Individually evaluated for impairment	$	33	$	14	$	—	$	—	$	47
Collectively evaluated for impairment		447		92		—		38		577
Purchased credit-impaired loans		—		—		1		—		1
Total allowance for loan losses	$	480	$	106	$	1	$	38	$	625
Loans held for investment:
Individually evaluated for impairment	$	325	$	319	$	4	$	—	$	648
Collectively evaluated for impairment		36,741		26,972		—		—		63,713
Purchased credit-impaired loans		—		—		1,482		—		1,482
Total loans held for investment	$	37,066	$	27,291	$	1,486	$	—	$	65,843

	December 31, 2012
(Dollars in millions)	Commercial		Consumer		Purchased Credit- Impaired		Unallocated		Total
Allowance for loan losses:
Individually evaluated for impairment	$	24	$	18	$	—	$	—	$	42
Collectively evaluated for impairment		394		106		—		110		610
Purchased credit-impaired loans		—		—		1		—		1
Total allowance for loan losses	$	418	$	124	$	1	$	110	$	653
Loans held for investment:
Individually evaluated for impairment	$	330	$	292	$	5	$	—	$	627
Collectively evaluated for impairment		32,167		26,060		—		—		58,227
Purchased credit-impaired loans		—		—		1,180		—		1,180
Total loans held for investment	$	32,497	$	26,352	$	1,185	$	—	$	60,034

• Nonaccrual and Past Due Loans

        The following table presents nonaccrual loans as of June 30, 2013 and December 31, 2012:

(Dollars in millions)	June 30, 2013		December 31, 2012
Commercial and industrial	$	69	$	48
Commercial mortgage		62		65
Total commercial portfolio		131		113
Residential mortgage		315		306
Home equity and other consumer loans		50		56
Total consumer portfolio		365		362
Total nonaccrual loans, before purchased credit-impaired loans		496		475
Purchased credit-impaired loans		24		30
Total nonaccrual loans	$	520	$	505
Troubled debt restructured loans that continue to accrue interest	$	366	$	401
Troubled debt restructured nonaccrual loans (included in the total nonaccrual loans above)	$	245	$	209

        The following table shows an aging of the balance of loans held for investment, excluding purchased credit-impaired loans, by class as of June 30, 2013 and December 31, 2012:

	June 30, 2013
	Aging Analysis of Loans
(Dollars in millions)	Current		30 to 89 Days Past Due		90 Days or More Past Due		Total Past Due		Total
Commercial and industrial	$	23,169	$	66	$	15	$	81	$	23,250
Commercial mortgage		12,851		136		21		157		13,008
Construction		808		—		—		—		808
Total commercial portfolio		36,828		202		36		238		37,066
Residential mortgage		23,548		152		135		287		23,835
Home equity and other consumer loans		3,416		24		16		40		3,456
Total consumer portfolio		26,964		176		151		327		27,291
Total loans held for investment, excluding purchased credit-impaired loans	$	63,792	$	378	$	187	$	565	$	64,357

	December 31, 2012
	Aging Analysis of Loans
(Dollars in millions)	Current		30 to 89 Days Past Due		90 Days or More Past Due		Total Past Due		Total
Commercial and industrial	$	21,861	$	68	$	2	$	70	$	21,931
Commercial mortgage		9,869		57		13		70		9,939
Construction		622		5		—		5		627
Total commercial portfolio		32,352		130		15		145		32,497
Residential mortgage		22,351		181		173		354		22,705
Home equity and other consumer loans		3,584		44		19		63		3,647
Total consumer portfolio		25,935		225		192		417		26,352
Total loans held for investment, excluding purchased credit-impaired loans	$	58,287	$	355	$	207	$	562	$	58,849

        Loans 90 days or more past due and still accruing totaled $7 million and $1 million at June 30, 2013 and December 31, 2012, respectively. Purchased credit-impaired loans that were 90 days or more past due and still accruing totaled $210 million and $124 million at June 30, 2013 and December 31, 2012, respectively.

• Credit Quality Indicators

        Management analyzes the Company's loan portfolios by applying specific monitoring policies and procedures that vary according to the relative risk profile and other characteristics within the various loan portfolios. For further information related to the credit quality indicators the Company uses to monitor the portfolio, see Note 4 to the consolidated financial statements in the Company's 2012 Form 10-K.

        The following tables summarize the loans in the commercial portfolio segment and commercial loans within the purchased credit-impaired loans segment monitored for credit quality based on internal ratings, excluding $302 million and $365 million covered by Federal Deposit Insurance Corporation (FDIC) loss share agreements, at June 30, 2013 and December 31, 2012, respectively. The amounts presented reflect unpaid principal balances less charge-offs. The amounts presented for purchased credit-impaired loans also reflect purchase price adjustments as of the acquisition date.

	June 30, 2013
(Dollars in millions)	Pass		Special Mention		Classified		Total
Commercial and industrial	$	22,248	$	535	$	356	$	23,139
Construction		792		16		—		808
Commercial mortgage		12,366		243		212		12,821
Total commercial portfolio		35,406		794		568		36,768
Purchased credit-impaired loans		74		351		442		867
Total	$	35,480	$	1,145	$	1,010	$	37,635

	December 31, 2012
(Dollars in millions)	Pass		Special Mention		Classified		Total
Commercial and industrial	$	20,961	$	438	$	380	$	21,779
Construction		610		17		—		627
Commercial mortgage		9,298		194		248		9,740
Total commercial portfolio		30,869		649		628		32,146
Purchased credit-impaired loans		21		153		301		475
Total	$	30,890	$	802	$	929	$	32,621

        The Company monitors the credit quality of its consumer portfolio segment and consumer loans within the purchased credit-impaired loans segment based primarily on payment status. The following tables summarize the loans in the consumer portfolio segment and purchased credit-impaired loans segment, which excludes $46 million and $57 million of loans covered by FDIC loss share agreements, at June 30, 2013 and December 31, 2012, respectively:

	June 30, 2013
(Dollars in millions)	Accrual		Nonaccrual		Total
Residential mortgage	$	23,520	$	315	$	23,835
Home equity and other consumer loans		3,406		50		3,456
Total consumer portfolio		26,926		365		27,291
Purchased credit-impaired loans		270		1		271
Total	$	27,196	$	366	$	27,562

	December 31, 2012
(Dollars in millions)	Accrual		Nonaccrual		Total
Residential mortgage	$	22,399	$	306	$	22,705
Home equity and other consumer loans		3,591		56		3,647
Total consumer portfolio		25,990		362		26,352
Purchased credit-impaired loans		288		—		288
Total	$	26,278	$	362	$	26,640

        The Company also monitors the credit quality for substantially all of its consumer portfolio segment using credit scores provided by Fair Isaac Corporation (FICO) and refreshed weighted average loan-to-value (LTV) ratios. FICO credit scores are refreshed at least quarterly to monitor the quality of the portfolio. Refreshed LTV measures the principal balance of the loan as a percentage of the estimated current value of the property securing the loan. Home equity loans are evaluated using combined LTV, which measures the principal balance of the combined loans that have liens against the property (including unused amounts for home equity line products) as a percentage of the estimated current value of the property securing the loans. The LTV ratios are refreshed on a quarterly basis, using the most recent home pricing index (HPI) data available for the property location.

        The following tables summarize the loans in the consumer portfolio segment and consumer loans within the purchased credit-impaired loans segment monitored for credit quality based on refreshed FICO scores and refreshed LTV ratios at June 30, 2013 and December 31, 2012. These tables exclude loans serviced by third-parties and loans covered by FDIC loss share agreements, as discussed above. The amounts presented reflect unpaid principal balances less partial charge-offs.

	June 30, 2013
	FICO scores
(Dollars in millions)	720 and above			Below 720			No FICO available(1)			Total
Residential mortgage	$	17,824		$	4,909		$	208		$	22,941
Home equity and other consumer loans		2,405			921			54			3,380
Total consumer portfolio		20,229			5,830			262			26,321
Purchased credit-impaired loans		95			164			12			271
Total	$	20,324		$	5,994		$	274		$	26,592
Percentage of total		76	%		23	%		1	%		100	%

	December 31, 2012
	FICO scores
(Dollars in millions)	720 and above			Below 720			No FICO available(1)			Total
Residential mortgage	$	17,103		$	4,666		$	395		$	22,164
Home equity and other consumer loans		2,464			986			122			3,572
Total consumer portfolio		19,567			5,652			517			25,736
Purchased credit-impaired loans		106			172			10			288
Total	$	19,673		$	5,824		$	527		$	26,024
Percentage of total		76	%		22	%		2	%		100	%

(1)

Represents loans for which management was not able to obtain an updated FICO score (e.g., due to recent profile changes).

	June 30, 2013
	LTV ratios
(Dollars in millions)	Less than 80 percent			80 - 100 percent			Greater than 100 percent			No LTV available(1)			Total
Residential mortgage	$	20,609		$	1,906		$	422		$	4		$	22,941
Home equity loans		2,470			446			298			58			3,272
Total consumer portfolio		23,079			2,352			720			62			26,213
Purchased credit-impaired loans		158			50			57			—			265
Total	$	23,237		$	2,402		$	777		$	62		$	26,478
Percentage of total		88	%		9	%		3	%		—	%		100	%

	December 31, 2012
	LTV ratios
(Dollars in millions)	Less than 80 percent			80 - 100 percent			Greater than 100 percent			No LTV available(1)			Total
Residential mortgage	$	17,771		$	3,031		$	1,232		$	130		$	22,164
Home equity loans		2,216			618			540			113			3,487
Total consumer portfolio		19,987			3,649			1,772			243			25,651
Purchased credit-impaired loans		72			50			153			13			288
Total	$	20,059		$	3,699		$	1,925		$	256		$	25,939
Percentage of total		77	%		14	%		8	%		1	%		100	%

(1)

Represents loans for which management was not able to obtain refreshed property values.

• Troubled Debt Restructurings

        The following table provides a summary of the Company's recorded investment in troubled debt restructurings (TDRs) as of June 30, 2013 and December 31, 2012. The summary includes those TDRs that are on nonaccrual status and those that continue to accrue interest. The Company had $42 million in commitments to lend additional funds to borrowers with loan modifications classified as TDRs as of June 30, 2013.

(Dollars in millions)	June 30, 2013		December 31, 2012
Commercial and industrial	$	246	$	215
Commercial mortgage		41		64
Construction		2		35
Total commercial portfolio		289		314
Residential mortgage		297		271
Home equity and other consumer loans		22		21
Total consumer portfolio		319		292
Total restructured loans, excluding purchased credit-impaired loans(1)	$	608	$	606

(1)

Amounts exclude $3 million and $4 million of TDRs covered by FDIC loss share agreements at June 30, 2013 and December 31, 2012, respectively.

        For the second quarter of 2013, TDR modifications in the commercial portfolio segment were primarily composed of interest rate changes, maturity extensions, principal paydowns, covenant waivers and payment deferrals, or some combination thereof. In the consumer portfolio segment, primarily all of the modifications were composed of interest rate reductions and maturity extensions. There were no charge-offs related to TDR modifications in the second quarter of 2013. For the commercial and consumer portfolio segments, the allowance for loan losses for TDRs is measured on an individual loan basis or in pools with similar risk characteristics.

        The following tables provide the pre- and post-modification outstanding recorded investment amounts of TDRs as of the date of the restructuring that occurred during the three and six months ended June 30, 2013:

	For the Three Months Ended June 30, 2013				For the Six Months Ended June 30, 2013
(Dollars in millions)	Pre-Modification Outstanding Recorded Investment(1)		Post-Modification Outstanding Recorded Investment(2)		Pre-Modification Outstanding Recorded Investment(1)		Post-Modification Outstanding Recorded Investment(2)
Commercial and industrial	$	49	$	47	$	125	$	121
Commercial mortgage		4		4		15		15
Construction		—		—		—		—
Total commercial portfolio		53		51		140		136
Residential mortgage		30		30		55		54
Home equity and other consumer loans		3		2		4		3
Total consumer portfolio		33		32		59		57
Total	$	86	$	83	$	199	$	193

(1)

Represents the recorded investment in the loan immediately prior to the restructuring event.

(2)

Represents the recorded investment in the loan immediately following the restructuring event. It includes the effect of paydowns that were required as part of the restructuring terms.

        The following table provides the recorded investment amounts of TDRs at the date of default, for which there was a payment default during the second quarter of 2013, and where the default occurred within the twelve months after modification into a TDR. A payment default is defined as the loan being 60 days or more past due.

(Dollars in millions)	For the Three Months Ended June 30, 2013		For the Six Months Ended June 30, 2013
Commercial and industrial	$	3	$	8
Residential mortgage		7		9
Home equity and other consumer loans		1		1
Total consumer portfolio		8		10
Total	$	11	$	18

        For the consumer portfolio, historical payment defaults and the propensity to redefault are some of the factors considered when determining the allowance for loan losses for situations where impairment is measured using the present value of expected future cash flows discounted at the loan's effective interest rate.

• Loan Impairment

        Loans that are individually evaluated for impairment include larger commercial and industrial, construction, commercial mortgage loans, and loans modified in a TDR. When the value of an impaired loan is less than the recorded investment in the loan, the Company records an impairment allowance.

        The following tables show information about impaired loans by class as of June 30, 2013 and December 31, 2012:

	June 30, 2013
	Recorded Investment								Unpaid Principal Balance
(Dollars in millions)	With an Allowance		Without an Allowance		Total		Allowance for Impaired Loans		With an Allowance		Without an Allowance
Commercial and industrial	$	230	$	36	$	266	$	30	$	234	$	37
Commercial mortgage		29		28		57		3		31		38
Construction		2		—		2		—		3		—
Total commercial portfolio		261		64		325		33		268		75
Residential mortgage		189		108		297		14		203		123
Home equity and other consumer loans		3		19		22		—		3		33
Total consumer portfolio		192		127		319		14		206		156
Total, excluding purchased credit-impaired loans		453		191		644		47		474		231
Purchased credit-impaired loans		1		3		4		—		1		9
Total	$	454	$	194	$	648	$	47	$	475	$	240

	December 31, 2012
	Recorded Investment								Unpaid Principal Balance
(Dollars in millions)	With an Allowance		Without an Allowance		Total		Allowance for Impaired Loans		With an Allowance		Without an Allowance
Commercial and industrial	$	156	$	64	$	220	$	24	$	167	$	64
Commercial mortgage		15		60		75		—		18		70
Construction		—		35		35		—		—		38
Total commercial portfolio		171		159		330		24		185		172
Residential mortgage		186		85		271		18		199		97
Home equity and other consumer loans		3		18		21		—		3		31
Total consumer portfolio		189		103		292		18		202		128
Total, excluding purchased credit-impaired loans		360		262		622		42		387		300
Purchased credit-impaired loans		—		4		4		—		1		14
Total	$	360	$	266	$	626	$	42	$	388	$	314

        The following tables present the average recorded investment in impaired loans and the amount of interest income recognized for impaired loans during the three and six months ended June 30, 2013 and 2012 for the commercial, consumer and purchased credit-impaired loans portfolio segments.

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2013				2012				2013				2012
(Dollars in millions)	Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income
Commercial and industrial	$	265	$	5	$	197	$	2	$	250	$	8	$	205	$	3
Commercial mortgage		53		1		117		1		60		1		121		1
Construction		2		—		52		1		13		—		57		2
Total commercial portfolio		320		6		366		4		323		9		383		6
Residential mortgage		288		2		175		4		282		5		164		5
Home equity and other consumer loans		22		1		2		—		21		1		2		—
Total consumer portfolio		310		3		177		4		303		6		166		5
Total, excluding purchased credit-impaired loans		630		9		543		8		626		15		549		11
Purchased credit-impaired loans		4		—		10		1		4		—		11		1
Total	$	634	$	9	$	553	$	9	$	630	$	15	$	560	$	12

        The Company transferred a net $215 million of loans from held for investment to held for sale and sold $199 million in loans during the second quarter of 2013.

• Loans Acquired in Business Combinations

        The Company accounts for certain loans acquired in business combinations in accordance with accounting guidance related to loans acquired with deteriorated credit quality (purchased credit-impaired loans). The following table presents the outstanding balances and carrying amounts of the Company's purchased credit-impaired loans as of June 30, 2013 and December 31, 2012.

(Dollars in millions)	June 30, 2013		December 31, 2012
Total outstanding balance	$	2,346	$	2,155
Carrying amount	$	1,465	$	1,161

        The accretable yield for purchased credit-impaired loans for the three and six months ended June 30, 2013 and 2012 was as follows:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(Dollars in millions)	2013			2012			2013			2012
Accretable yield, beginning of period	$	501		$	441		$	590		$	424
Additions		31			—			31			—
Accretion		(81	)		(72	)		(160	)		(135	)
Reclassifications from nonaccretable difference during the period		28			105			18			185
Accretable yield, end of period	$	479		$	474		$	479		$	474