Loans and Allowance for Loan Losses

The following table provides the outstanding balances of loans at December 31, 2016 and 2015.



	December 31,
(Dollars in millions)	2016			2015
Loans held for investment:
Commercial and industrial	$	25,337		$	30,214
Commercial mortgage	14,547			13,904
Construction	2,283			2,297
Lease financing	1,819			1,911
Total commercial portfolio	43,986			48,326
Residential mortgage	29,836			27,344
Home equity and other consumer loans	3,492			3,251
Total consumer portfolio	33,328			30,595
Total loans held for investment, before purchased credit-impaired loans	77,314			78,921
Purchased credit-impaired loans⁽¹⁾	237			336
Total loans held for investment⁽²⁾	77,551			79,257
Allowance for loan losses	(639		)	(723		)
Loans held for investment, net	$	76,912		$	78,534


(1)	Includes $11 million and $19 million as of December 31, 2016 and December 31, 2015, respectively, of loans for which the Company will be reimbursed a portion of any future losses under the terms of the FDIC loss share agreements.

(2)Includes $180 million and $102 million at December 31, 2016 and December 31, 2015, 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 Year Ended December 31, 2016
(Dollars in millions)	Commercial			Consumer			Purchased Credit- Impaired		Unallocated			Total
Allowance for loan losses, beginning of period	$	653		$	49		$	1	$	20		$	723
(Reversal of) provision for loan losses	132			44			2		(20		)	158
Other	2			—			—		—			2
Loans charged-off	(259		)	(12		)	—		—			(271		)
Recoveries of loans previously charged-off	24			2			1		—			27
Allowance for loan losses, end of period	$	552		$	83		$	4	$	—		$	639



	For the Year Ended December 31, 2015
(Dollars in millions)	Commercial			Consumer			Purchased Credit- Impaired			Unallocated		Total
Allowance for loan losses, beginning of period	$	468		$	49		$	3		$	20	$	540
(Reversal of) provision for loan losses	198			6			9			—		213
Other	(2		)	—			—			—		(2		)
Loans charged-off	(28		)	(8		)	(12		)	—		(48		)
Recoveries of loans previously charged-off	17			2			1			—		20
Allowance for loan losses, end of period	$	653		$	49		$	1		$	20	$	723



	For the Year Ended December 31, 2014
(Dollars in millions)	Commercial			Consumer			Purchased Credit- Impaired			Unallocated			Total
Allowance for loan losses, beginning of period	$	422		$	69		$	1		$	77		$	569
(Reversal of) provision for loan losses	54			(13		)	2			(57		)	(14		)
Other	(3		)	—			—			—			(3		)
Loans charged-off	(38		)	(11		)	(1		)	—			(50		)
Recoveries of loans previously charged-off	33			4			1			—			38
Allowance for loan losses, end of period	$	468		$	49		$	3		$	20		$	540

The following tables show the allowance for loan losses and related loan balances by portfolio segment as of December 31, 2016 and 2015.



	December 31, 2016
(Dollars in millions)	Commercial		Consumer		Purchased Credit- Impaired		Unallocated		Total
Allowance for loan losses:
Individually evaluated for impairment	$	147	$	17	$	—	$	—	$	164
Collectively evaluated for impairment	405		66		—		—		471
Purchased credit-impaired loans	—		—		4		—		4
Total allowance for loan losses	$	552	$	83	$	4	$	—	$	639
Loans held for investment:
Individually evaluated for impairment	$	516	$	269	$	1	$	—	$	786
Collectively evaluated for impairment	43,470		33,059		—		—		76,529
Purchased credit-impaired loans	—		—		236		—		236
Total loans held for investment	$	43,986	$	33,328	$	237	$	—	$	77,551



	December 31, 2015
(Dollars in millions)	Commercial		Consumer		Purchased Credit- Impaired		Unallocated		Total
Allowance for loan losses:
Individually evaluated for impairment	$	101	$	13	$	—	$	—	$	114
Collectively evaluated for impairment	552		36		—		20		608
Purchased credit-impaired loans	—		—		1		—		1
Total allowance for loan losses	$	653	$	49	$	1	$	20	$	723
Loans held for investment:
Individually evaluated for impairment	$	525	$	307	$	1	$	—	$	833
Collectively evaluated for impairment	47,801		30,288		—		—		78,089
Purchased credit-impaired loans	—		—		335		—		335
Total loans held for investment	$	48,326	$	30,595	$	336	$	—	$	79,257

Nonaccrual and Past Due Loans

The following table presents nonaccrual loans as of December 31, 2016 and 2015.



	December 31,
(Dollars in millions)	2016		2015
Commercial and industrial	$	457	$	284
Commercial mortgage	31		37
Total commercial portfolio	488		321
Residential mortgage	171		190
Home equity and other consumer loans	26		35
Total consumer portfolio	197		225
Total nonaccrual loans, before purchased credit-impaired loans	685		546
Purchased credit-impaired loans	4		6
Total nonaccrual loans	$	689	$	552
Troubled debt restructured loans that continue to accrue interest	$	215	$	413
Troubled debt restructured nonaccrual loans (included in total nonaccrual loans above)	$	384	$	409

The following tables show an aging of the balance of loans held for investment, excluding PCI loans, by class as of December 31, 2016 and 2015.



	December 31, 2016
	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	$	27,049	$	53	$	54	$	107	$	27,156
Commercial mortgage	14,503		33		11		44		14,547
Construction	2,283		—		—		—		2,283
Total commercial portfolio	43,835		86		65		151		43,986
Residential mortgage	29,691		104		41		145		29,836
Home equity and other consumer loans	3,450		26		16		42		3,492
Total consumer portfolio	33,141		130		57		187		33,328
Total loans held for investment, excluding purchased credit-impaired loans	$	76,976	$	216	$	122	$	338	$	77,314



	December 31, 2015
	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	$	32,104	$	15	$	6	$	21	$	32,125
Commercial mortgage	13,880		17		7		24		13,904
Construction	2,292		5		—		5		2,297
Total commercial portfolio	48,276		37		13		50		48,326
Residential mortgage	27,206		92		46		138		27,344
Home equity and other consumer loans	3,225		14		12		26		3,251
Total consumer portfolio	30,431		106		58		164		30,595
Total loans held for investment, excluding purchased credit-impaired loans	$	78,707	$	143	$	71	$	214	$	78,921

Loans 90 days or more past due and still accruing totaled $10 million and $2 million at December 31, 2016 and 2015, respectively. PCI loans that were 90 days or more past due and still accruing totaled $13 million and $16 million at December 31, 2016 and 2015.

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. Loans within the commercial portfolio segment are classified as either pass or criticized. Criticized credits are those that are internally risk rated as special mention, substandard or doubtful. Special mention credits are potentially weak, as the borrower has begun to exhibit deteriorating trends, which, if not corrected, may jeopardize repayment of the loan and result in further downgrade. Adversely classified credits are those that are internally risk rated as substandard or doubtful. Substandard credits have well-defined weaknesses, which, if not corrected, could jeopardize the full satisfaction of the debt. A credit classified as doubtful has critical weaknesses that make full collection improbable on the basis of currently existing facts and conditions.

The following tables summarize the loans in the commercial portfolio segment and commercial loans outstanding within the PCI loans segment monitored for credit quality based on internal ratings. The amounts presented reflect unpaid principal balances less charge-offs.



	December 31, 2016
			Criticized
(Dollars in millions)	Pass		Special Mention		Classified		Total
Commercial and industrial	$	25,028	$	860	$	1,087	$	26,975
Commercial mortgage	14,121		157		160		14,438
Construction	2,162		121		—		2,283
Total commercial portfolio	41,311		1,138		1,247		43,696
Purchased credit-impaired loans	31		4		38		73
Total	$	41,342	$	1,142	$	1,285	$	43,769



	December 31, 2015
			Criticized
(Dollars in millions)	Pass		Special Mention		Classified		Total
Commercial and industrial	$	29,836	$	844	$	1,283	$	31,963
Commercial mortgage	13,470		139		149		13,758
Construction	2,240		57		—		2,297
Total commercial portfolio	45,546		1,040		1,432		48,018
Purchased credit-impaired loans	40		12		61		113
Total	$	45,586	$	1,052	$	1,493	$	48,131

At December 31, 2016 and December 31, 2015, the commercial portfolio included $1.1 billion and $1.2 billion, respectively, in criticized loans within the oil and gas industry sector of the portfolio. Criticized loans include both special mention and classified loans.

The Company monitors the credit quality of its consumer portfolio segment and consumer loans within the PCI loans segment based primarily on payment status. The following tables summarize the loans in the consumer portfolio segment and PCI loans segment, which excludes $11 million and $19 million of loans covered by FDIC loss share agreements, at December 31, 2016 and 2015, respectively.



	December 31, 2016
(Dollars in millions)	Accrual		Nonaccrual		Total
Residential mortgage	$	29,665	$	171	$	29,836
Home equity and other consumer loans	3,466		26		3,492
Total consumer portfolio	33,131		197		33,328
Purchased credit-impaired loans	105		—		105
Total	$	33,236	$	197	$	33,433



	December 31, 2015
(Dollars in millions)	Accrual		Nonaccrual		Total
Residential mortgage	$	27,154	$	190	$	27,344
Home equity and other consumer loans	3,216		35		3,251
Total consumer portfolio	30,370		225		30,595
Purchased credit-impaired loans	148		—		148
Total	$	30,518	$	225	$	30,743

The Company also monitors the credit quality for substantially all of its consumer portfolio segment using credit scores provided by FICO and refreshed 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 credit lines for home equity 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 data available for the property location.

The following tables summarize the loans in the consumer portfolio segment and consumer loans within the PCI loans segment monitored for credit quality based on refreshed FICO scores and refreshed LTV ratios at December 31, 2016 and 2015. These tables exclude loans covered by FDIC loss share agreements, as discussed above. The amounts presented reflect unpaid principal balances less partial charge-offs.



	December 31, 2016
	FICO scores
(Dollars in millions)	720 and Above			Below 720			No FICO Available⁽¹⁾			Total
Residential mortgage	$	23,564		$	5,559		$	436		$	29,559
Home equity and other consumer loans	2,363			962			110			3,435
Total consumer portfolio	25,927			6,521			546			32,994
Purchased credit-impaired loans	43			53			9			105
Total	$	25,970		$	6,574		$	555		$	33,099
Percentage of total	78		%	20		%	2		%	100		%


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



	December 31, 2015
	FICO scores
(Dollars in millions)	720 and Above			Below 720			No FICO Available⁽¹⁾			Total
Residential mortgage	$	21,209		$	5,412		$	488		$	27,109
Home equity and other consumer loans	2,276			818			85			3,179
Total consumer portfolio	23,485			6,230			573			30,288
Purchased credit-impaired loans	60			76			12			148
Total	$	23,545		$	6,306		$	585		$	30,436
Percentage of total	77		%	21		%	2		%	100		%


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



	December 31, 2016
	LTV ratios
(Dollars in millions)	Less than or Equal to 80 Percent			Greater than 80 and Less than 100 Percent			Greater than or Equal to 100 Percent			No LTV Available⁽¹⁾			Total
Residential mortgage	$	28,479		$	1,023		$	13		$	44		$	29,559
Home equity loans	2,136			205			41			43			2,425
Total consumer portfolio	30,615			1,228			54			87			31,984
Purchased credit-impaired loans	92			8			3			1			104
Total	$	30,707		$	1,236		$	57		$	88		$	32,088
Percentage of total	96		%	4		%	—		%	—		%	100		%


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



	December 31, 2015
	LTV ratios
(Dollars in millions)	Less than or Equal to 80 Percent			Greater than 80 and Less than 100 Percent			Greater than or Equal to 100 Percent			No LTV Available⁽¹⁾			Total
Residential mortgage	$	26,143		$	804		$	52		$	110		$	27,109
Home equity loans	2,190			217			83			55			2,545
Total consumer portfolio	28,333			1,021			135			165			29,654
Purchased credit-impaired loans	106			32			9			—			147
Total	$	28,439		$	1,053		$	144		$	165		$	29,801
Percentage of total	95		%	4		%	—		%	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 TDRs as of December 31, 2016 and 2015. The summary includes those TDRs that are on nonaccrual status and those that continue to accrue interest. The Company had $59 million and $98 million in commitments to lend additional funds to borrowers with loan modifications classified as TDRs as of December 31, 2016 and 2015, respectively.



	December 31,
(Dollars in millions)	2016		2015
Commercial and industrial	$	321	$	499
Commercial mortgage	9		16
Total commercial portfolio	330		515
Residential mortgage	239		276
Home equity and other consumer loans	30		31
Total consumer portfolio	269		307
Total restructured loans, excluding purchased credit-impaired loans	$	599	$	822

In 2016, TDR modifications in the commercial portfolio segment were primarily composed of interest rate changes, maturity extensions, covenant waivers, conversions from revolving lines of credit to term loans, or some combination thereof. In the consumer portfolio segment, primarily all of the modifications were composed of interest rate reductions and maturity extensions. Charge-offs related to TDR modifications in the year ended December 31, 2016 and December 31, 2015 were de minimis. 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 table provides the pre- and post-modification outstanding recorded investment amounts of TDRs as of the date of the restructuring that occurred during the years ended December 31, 2016 and 2015.



	For the Year Ended December 31, 2016				For the Year Ended December 31, 2015
(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	$	327	$	326	$	495	$	495
Commercial mortgage	10		10		9		9
Total commercial portfolio	337		336		504		504
Residential mortgage	11		11		18		18
Home equity and other consumer loans	5		5		7		7
Total consumer portfolio	16		16		25		25
Total	$	353	$	352	$	529	$	529


(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 years ended December 31, 2016 and 2015, and where the default occurred within the first twelve months after modification into a TDR. A payment default is defined as the loan being 60 days or more past due.



	December 31,
(Dollars in millions)	2016		2015
Commercial and industrial	$	57	$	25
Commercial mortgage	—		3
Total commercial portfolio	57		28
Residential mortgage	4		4
Home equity and other consumer loans	2		—
Total consumer portfolio	6		4
Total	$	63	$	32

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

Loan Impairment

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

The following tables show information about impaired loans by class as of December 31, 2016 and 2015.



	December 31, 2016
	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	$	463	$	36	$	499	$	146	$	552	$	54
Commercial mortgage	8		9		17		1		8		9
Total commercial portfolio	471		45		516		147		560		63
Residential mortgage	164		75		239		17		178		89
Home equity and other consumer loans	10		20		30		—		11		30
Total consumer portfolio	174		95		269		17		189		119
Total, excluding purchased credit-impaired loans	645		140		785		164		749		182
Purchased credit-impaired loans	1		—		1		—		1		—
Total	$	646	$	140	$	786	$	164	$	750	$	182



	December 31, 2015
	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	$	363	$	142	$	505	$	100	$	377	$	144
Commercial mortgage	14		6		20		1		15		9
Total commercial portfolio	377		148		525		101		392		153
Residential mortgage	183		93		276		13		199		109
Home equity and other consumer loans	9		22		31		—		10		35
Total consumer portfolio	192		115		307		13		209		144
Total, excluding purchased credit-impaired loans	569		263		832		114		601		297
Purchased credit-impaired loans	1		—		1		—		1		—
Total	$	570	$	263	$	833	$	114	$	602	$	297

The following table presents the average recorded investment in impaired loans and the amount of interest income recognized for impaired loans during 2016, 2015 and 2014 for the commercial, consumer and PCI loans portfolio segments.



	Years Ended December 31,
	2016				2015				2014
(Dollars in millions)	Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income		Average Recorded Investment		Recognized Interest Income
Commercial and industrial	$	530	$	4	$	241	$	6	$	188	$	5
Commercial mortgage	17		1		28		1		36		2
Construction	—		—		—		—		—		—
Total commercial portfolio	547		5		269		7		224		7
Residential mortgage	258		8		294		9		310		10
Home equity and other consumer loans	31		2		30		2		27		2
Total consumer portfolio	289		10		324		11		337		12
Total, excluding purchased credit-impaired loans	836		15		593		18		561		19
Purchased credit-impaired loans	1		—		2		—		2		—
Total	$	837	$	15	$	595	$	18	$	563	$	19

The following table presents loan transfers from held to investment to held for sale and proceeds from sales of loans during 2016, 2015 and 2014 for the commercial and consumer loans portfolio segments.



	Years Ended December 31,
	2016				2015				2014
(Dollars in millions)	Transfer of loans from held for investment to held for sale, net		Proceeds from sale		Transfer of loans from held for investment to held for sale, net		Proceeds from sale		Transfer of loans from held for investment to held for sale, net		Proceeds from sale
Commercial portfolio	$	1,632	$	1,182	$	397	$	511	$	203	$	292
Consumer portfolio	344		344		810		827		—		—
Total	$	1,976	$	1,526	$	1,207	$	1,338	$	203	$	292

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 (PCI loans). The following table presents the outstanding balances and carrying amounts of the Company's PCI loans at December 31, 2016 and 2015.



(Dollars in millions)	December 31, 2016		December 31, 2015
Total outstanding balance	$	393	$	567
Carrying amount	233		330

The accretable yield for PCI loans for the years ended December 31, 2016, 2015, and 2014 was as follows:



	For the Year Ended December 31,
(Dollars in millions)	2016			2015			2014
Accretable yield, beginning of period	$	195		$	288		$	378
Additions	—			—			—
Accretion	(96		)	(151		)	(268		)
Reclassifications from nonaccretable difference during the period	55			58			178
Accretable yield, end of period	$	154		$	195		$	288

Loan Concentrations

The Company's most significant concentrations of credit risk within its loan portfolio include residential mortgage loans, commercial real estate loans, and commercial and industrial loans made to the financial and insurance industry, power and utilities industry, oil and gas industry, and manufacturing industry. At December 31, 2016, the Company had $29.8 billion in residential mortgage loans, primarily in California. The Company had $16.4 billion in loans made to the commercial real estate industry and an additional $5.1 billion in unfunded commitments. At December 31, 2016, the Company had $4.8 billion in loans made to the financial and insurance industry and an additional $5.2 billion in unfunded commitments. At December 31, 2016, the Company had $4.1 billion in loans made to the power and utilities industry and an additional $6.1 billion in unfunded commitments. At December 31, 2016, the Company had $2.0 billion in loans made to the oil and gas industry and an additional $2.3 billion in unfunded commitments. At December 31, 2016, the Company had $4.0 billion in loans made to the manufacturing industry and an additional $3.2 billion in unfunded commitments.