Loans and Allowance for Loan Losses

The following table provides the outstanding balances of loans at June 30, 2017 and December 31, 2016:



(Dollars in millions)	June 30, 2017			December 31, 2016
Loans held for investment:
Commercial and industrial	$	24,554		$	25,379
Commercial mortgage	14,297			14,625
Construction	1,921			2,283
Lease financing	1,738			1,819
Total commercial portfolio	42,510			44,106
Residential mortgage	32,523			29,922
Home equity and other consumer loans	3,355			3,523
Total consumer portfolio	35,878			33,445
Total loans held for investment⁽¹⁾	78,388			77,551
Allowance for loan losses	(513		)	(639		)
Loans held for investment, net	$	77,875		$	76,912


(1)	Includes $232 million and $180 million at June 30, 2017 and December 31, 2016, 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, 2017
(Dollars in millions)	Commercial			Consumer			Total
Allowance for loan losses, beginning of period	$	485		$	85		$	570
(Reversal of) provision for loan losses	(24		)	4			(20		)
Other	(1		)	—			(1		)
Loans charged-off	(29		)	(11		)	(40		)
Recoveries of loans previously charged-off	4			—			4
Allowance for loan losses, end of period	$	435		$	78		$	513



	For the Three Months Ended June 30, 2016
(Dollars in millions)	Commercial			Consumer			Total
Allowance for loan losses, beginning of period	$	824		$	57		$	881
(Reversal of) provision for loan losses	(46		)	10			(36		)
Other	—			—			—
Loans charged-off	(97		)	(2		)	(99		)
Recoveries of loans previously charged-off	2			—			2
Allowance for loan losses, end of period	$	683		$	65		$	748




	For the Six Months Ended June 30, 2017
(Dollars in millions)	Commercial			Consumer			Unallocated		Total
Allowance for loan losses, beginning of period	$	556		$	83		$	—	$	639
(Reversal of) provision for loan losses	(50		)	16			—		(34		)
Other	—			—			—		—
Loans charged-off	(84		)	(22		)	—		(106		)
Recoveries of loans previously charged-off	13			1			—		14
Allowance for loan losses, end of period	$	435		$	78		$	—	$	513




	For the Six Months Ended June 30, 2016
(Dollars in millions)	Commercial			Consumer			Unallocated			Total
Allowance for loan losses, beginning of period	$	653		$	50		$	20		$	723
(Reversal of) provision for loan losses	125			17			(20		)	122
Other	4			—			—			4
Loans charged-off	(105		)	(3		)	—			(108		)
Recoveries of loans previously charged-off	6			1			—			7
Allowance for loan losses, end of period	$	683		$	65		$	—		$	748

The following tables show the allowance for loan losses and related loan balances by portfolio segment as of June 30, 2017 and December 31, 2016:



	June 30, 2017
(Dollars in millions)	Commercial		Consumer		Total
Allowance for loan losses:
Individually evaluated for impairment	$	76	$	16	$	92
Collectively evaluated for impairment	359		62		421
Total allowance for loan losses	$	435	$	78	$	513

Loans held for investment:
Individually evaluated for impairment	$	523	$	361	$	884
Collectively evaluated for impairment	41,987		35,517		77,504
Total loans held for investment	$	42,510	$	35,878	$	78,388



	December 31, 2016
(Dollars in millions)	Commercial		Consumer		Total
Allowance for loan losses:
Individually evaluated for impairment	$	151	$	17	$	168
Collectively evaluated for impairment	405		66		471
Total allowance for loan losses	$	556	$	83	$	639

Loans held for investment:
Individually evaluated for impairment	$	636	$	386	$	1,022
Collectively evaluated for impairment	43,470		33,059		76,529
Total loans held for investment	$	44,106	$	33,445	$	77,551

Nonaccrual and Past Due Loans

The following table presents nonaccrual loans as of June 30, 2017 and December 31, 2016:



(Dollars in millions)	June 30, 2017		December 31, 2016
Commercial and industrial	$	321	$	458
Commercial mortgage	24		31
Total commercial portfolio	345		489
Residential mortgage	128		171
Home equity and other consumer loans	25		29
Total consumer portfolio	153		200
Total nonaccrual loans	$	498	$	689
Troubled debt restructured loans that continue to accrue interest	$	318	$	215
Troubled debt restructured nonaccrual loans (included in total nonaccrual loans above)	$	277	$	384

The following tables show an aging of the balance of loans held for investment, by class as of June 30, 2017 and December 31, 2016:



	June 30, 2017
	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	$	26,202	$	34	$	56	$	90	$	26,292
Commercial mortgage	14,251		36		10		46		14,297
Construction	1,921		—		—		—		1,921
Total commercial portfolio	42,374		70		66		136		42,510
Residential mortgage	32,355		125		43		168		32,523
Home equity and other consumer loans	3,318		25		12		37		3,355
Total consumer portfolio	35,673		150		55		205		35,878
Total loans held for investment	$	78,047	$	220	$	121	$	341	$	78,388



	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	$	27,085	$	54	$	59	$	113	$	27,198
Commercial mortgage	14,571		37		17		54		14,625
Construction	2,283		—		—		—		2,283
Total commercial portfolio	43,939		91		76		167		44,106
Residential mortgage	29,770		110		42		152		29,922
Home equity and other consumer loans	3,479		27		17		44		3,523
Total consumer portfolio	33,249		137		59		196		33,445
Total loans held for investment	$	77,188	$	228	$	135	$	363	$	77,551

Loans 90 days or more past due and still accruing totaled $16 million at June 30, 2017 and $23 million at December 31, 2016.

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 have regulatory risk ratings of special mention, substandard or doubtful; classified credits are those that have regulatory risk ratings of 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. 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 monitored for credit quality based on regulatory risk ratings.



	June 30, 2017
			Criticized
(Dollars in millions)	Pass		Special Mention		Classified		Total
Commercial and industrial	$	24,927	$	567	$	798	$	26,292
Commercial mortgage	13,966		86		245		14,297
Construction	1,755		14		152		1,921
Total commercial portfolio	$	40,648	$	667	$	1,195	$	42,510



	December 31, 2016 ⁽¹⁾
			Criticized
(Dollars in millions)	Pass		Special Mention		Classified		Total
Commercial and industrial	$	25,028	$	860	$	1,097	$	26,985
Commercial mortgage	14,152		161		188		14,501
Construction	2,162		121		—		2,283
Total commercial portfolio	$	41,342	$	1,142	$	1,285	$	43,769


(1)	The amounts presented reflect unpaid principal balances less charge-offs.

The Company monitors the credit quality of its consumer portfolio segment based primarily on payment status. The following tables summarize the loans in the consumer portfolio segment, which exclude $9 million and $11 million of loans covered by FDIC loss share agreements, at June 30, 2017 and December 31, 2016, respectively:



	June 30, 2017
(Dollars in millions)	Accrual		Nonaccrual		Total
Residential mortgage	$	32,389	$	128	$	32,517
Home equity and other consumer loans	3,327		25		3,352
Total consumer portfolio	$	35,716	$	153	$	35,869



	December 31, 2016
(Dollars in millions)	Accrual		Nonaccrual		Total
Residential mortgage	$	29,751	$	171	$	29,922
Home equity and other consumer loans	3,494		29		3,523
Total consumer portfolio	$	33,245	$	200	$	33,445

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 based on refreshed FICO scores and refreshed LTV ratios at June 30, 2017 and December 31, 2016. These tables exclude loans covered by FDIC loss share agreements, as discussed above. The amounts presented reflect unpaid principal balances less partial charge-offs.



	June 30, 2017
	FICO scores
(Dollars in millions)	720 and above			Below 720			No FICO Available⁽¹⁾			Total
Residential mortgage	$	25,954		$	5,764		$	488		$	32,206
Home equity and other consumer loans	2,249			901			144			3,294
Total consumer portfolio	$	28,203		$	6,665		$	632		$	35,500
Percentage of total	79		%	19		%	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
	FICO scores
(Dollars in millions)	720 and above			Below 720			No FICO Available⁽¹⁾			Total
Residential mortgage	$	23,598		$	5,597		$	444		$	29,639
Home equity and other consumer loans	2,372			977			111			3,460
Total consumer portfolio	$	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).



	June 30, 2017
	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	$	31,586		$	577		$	8		$	35		$	32,206
Home equity loans	2,109			226			32			35			2,402
Total consumer portfolio	$	33,695		$	803		$	40		$	70		$	34,608
Percentage of total	98		%	2		%	—		%	—		%	100		%


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



	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	$	28,547		$	1,030		$	16		$	46		$	29,639
Home equity loans	2,160			206			41			43			2,450
Total consumer portfolio	$	30,707		$	1,236		$	57		$	89		$	32,089
Percentage of total	96		%	4		%	—		%	—		%	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 June 30, 2017 and December 31, 2016. The summary includes those TDRs that are on nonaccrual status and those that continue to accrue interest. The Company had $33 million and $59 million in commitments to lend additional funds to borrowers with loan modifications classified as TDRs as of June 30, 2017 and December 31, 2016, respectively.



(Dollars in millions)	June 30, 2017		December 31, 2016
Commercial and industrial	$	267	$	321
Commercial mortgage	7		9
Construction	61		—
Total commercial portfolio	335		330
Residential mortgage	231		239
Home equity and other consumer loans	29		30
Total consumer portfolio	260		269
Total restructured loans	$	595	$	599

For the second quarter of 2017, 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 for the six months ended June 30, 2017 and June 30, 2016 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 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, 2017 and 2016:



	For the Three Months Ended June 30, 2017				For the Six Months Ended June 30, 2017
(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	$	18	$	18	$	96	$	96
Commercial mortgage	1		1		1		1
Construction	—		—		61		61
Total commercial portfolio	19		19		158		158
Residential mortgage	4		4		8		8
Home equity and other consumer loans	2		2		2		2
Total consumer portfolio	6		6		10		10
Total	$	25	$	25	$	168	$	168


(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.




	For the Three Months Ended June 30, 2016				For the Six Months Ended June 30, 2016
(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	$	126	$	125	$	176	$	175
Commercial mortgage	3		3		8		8
Total commercial portfolio	129		128		184		183
Residential mortgage	2		2		6		6
Home equity and other consumer loans	2		2		3		3
Total consumer portfolio	4		4		9		9
Total	$	133	$	132	$	193	$	192


(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 tables provide the recorded investment amounts of TDRs at the date of default, for which there was a payment default during the three and six months ended June 30, 2017 and 2016, 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.



(Dollars in millions)	For the Three Months Ended June 30, 2017		For the Six Months Ended June 30, 2017
Commercial and industrial	$	17	$	19
Commercial mortgage	—		1
Total commercial portfolio	17		20
Residential mortgage	—		1
Total consumer portfolio	—		1
Total	$	17	$	21




(Dollars in millions)	For the Three Months Ended June 30, 2016		For the Six Months Ended June 30, 2016
Commercial and industrial	$	10	$	11
Total commercial portfolio	10		11
Residential mortgage	1		3
Home equity and other consumer loans	1		1
Total consumer portfolio	2		4
Total	$	12	$	15

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 June 30, 2017 and December 31, 2016:



	June 30, 2017
	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	$	303	$	113	$	416	$	75	$	365	$	128
Commercial mortgage	43		3		46		1		44		3
Construction	—		61		61		—		—		61
Total commercial portfolio	346		177		523		76		409		192
Residential mortgage	239		67		306		15		256		78
Home equity and other consumer loans	37		18		55		1		37		28
Total consumer portfolio	276		85		361		16		293		106
Total	$	622	$	262	$	884	$	92	$	702	$	298



	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	$	505	$	36	$	541	$	150	$	672	$	54
Commercial mortgage	86		9		95		1		8		9
Total commercial portfolio	591		45		636		151		680		63
Residential mortgage	250		75		325		17		295		89
Home equity and other consumer loans	41		20		61		—		11		30
Total consumer portfolio	291		95		386		17		306		119
Total	$	882	$	140	$	1,022	$	168	$	986	$	182

The following table presents 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, 2017 and 2016 for the commercial and consumer loans portfolio segments.



	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2017				2016				2017				2016
(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	$	419	$	—	$	139	$	—	$	447	$	4	$	74	$	2
Commercial mortgage	61		1		15		—		40		1		14		—
Construction	11		—		—		—		14		—		—		—
Total commercial portfolio	491		1		154		—		501		5		88		2
Residential mortgage	233		2		263		2		235		4		267		4
Home equity and other consumer loans	28		1		31		—		29		1		31		1
Total consumer portfolio	261		3		294		2		264		5		298		5
Total	$	752	$	4	$	448	$	2	$	765	$	10	$	386	$	7

The following table presents loan transfers from held to investment to held for sale and proceeds from

sales of loans during the three and six months ended June 30, 2017 and 2016 for the commercial and consumer loans portfolio segments.



	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2017				2016				2017					2016
(Dollars in millions)	Transfers of loans from held for investment to held for sale, net		Proceeds from sale		Transfers of loans from held for investment to held for sale, net		Proceeds from sale		Transfers of loans from held for investment to held for sale, net			Proceeds from sale		Transfers of loans from held for investment to held for sale, net		Proceeds from sale
Commercial portfolio	$	126	$	299	$	260	$	115	$	360		$	646	$	179	$	164
Consumer portfolio	—		—		—		—		(4		)	—		—		—
Total	$	126	$	299	$	260	$	115	$	356		$	646	$	179	$	164