Commitments, Contingencies and Guarantees

Commitments to Extend Credit & Standby and Commercial Letters of Credit

The following represents the Company’s commitments to extend credit, standby letters of credit and commercial letters of credit:



	March 31, 2018		December 31, 2017
	(In Thousands)
Commitments to extend credit	$	27,755,976	$	27,743,387
Standby and commercial letters of credit	1,429,550		1,446,903

Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby and commercial letters of credit are commitments issued by the Company to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions, and expire in decreasing amounts with terms ranging from one to four years.

The credit risk involved in issuing letters of credit and commitments is essentially the same as that involved in extending loan facilities to customers. The fair value of the letters of credit and commitments typically approximates the fee received from the customer for issuing such commitments. These fees are deferred and are recognized over the commitment period. At March 31, 2018 and December 31, 2017, the recorded amount of these deferred fees was $8 million and $9 million, respectively. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary. At March 31, 2018, the maximum potential amount of future undiscounted payments the Company could be required to make under outstanding standby letters of credit was $1.4 billion. At March 31, 2018 and December 31, 2017, the Company had reserves related to letters of credit and unfunded commitments recorded in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheet of $80 million and $83 million, respectively.

Loan Sale Recourse

The Company has potential recourse related to specific FNMA securitizations. At both March 31, 2018 and December 31, 2017, the amount of potential recourse was $19 million of which the Company had reserved $793 thousand which is recorded in accrued expenses and other liabilities on the Company's Unaudited Condensed Consolidated Balance Sheets for the respective periods.

The Company also issues standard representations and warranties related to mortgage loan sales to government-sponsored agencies. Although these agreements often do not specify limitations, the Company does not believe that any payments related to these representations and warranties would materially change the financial condition or results of operations of the Company. At March 31, 2018 and December 31, 2017, the Company had $1.5 million and $1.3 million, respectively, of reserves in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets related to potential losses from loans sold.

Legal and Regulatory Proceedings

In the ordinary course of business, the Company is subject to legal proceedings, including claims, litigation, investigations and administrative proceedings, all of which are considered incidental to the normal conduct of business. The Company believes it has substantial defenses to the claims asserted against it in its currently outstanding legal proceedings and, with respect to such legal proceedings, intends to defend itself vigorously. Set forth below are descriptions of certain of the Company’s legal proceedings.

In June 2013, Compass Bank (“BBVA Compass”) was named as a defendant in a lawsuit filed in the United States District Court for the Northern District of Alabama, Intellectual Ventures II, LLC v. BBVA Compass Bancshares, Inc. and BBVA Compass, wherein the plaintiff alleges that BBVA Compass is infringing five patents owned by the plaintiff and related to the security infrastructure for BBVA Compass’ online banking services. The plaintiff seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In January 2014, BBVA Compass was named as a defendant in a lawsuit filed in the District Court of Dallas County, Texas, David Bagwell, individually and as Trustee of the David S. Bagwell Trust, et al. v. BBVA Compass, et al., wherein the plaintiffs (who are the borrowers and guarantors of the underlying loans) allege that BBVA Compass wrongfully sold their loans to a third party after representing that it would not do so. The plaintiffs seek unspecified monetary relief. The estimated exposure in this lawsuit was upgraded in July 2017 after the Company received the plaintiff’s revised damages allegations. Following trial in December 2017, the jury rendered a verdict in favor of the plaintiffs totaling $98 million. Plaintiffs have requested a judgment in the amount of $79 million plus interest, but the court has not yet entered a judgment. BBVA Compass will vigorously contest the verdict and judgment in post-trial motions and on appeal. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In January 2016, BSI was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Southern District of Texas, In re Plains All American Pipeline, L.P. Securities Litigation, wherein the plaintiffs challenge statements made in registration materials and prospectuses filed with the Securities and Exchange Commission in connection with eight securities offerings of stock and notes issued by Plains GP Holdings and Plains All American Pipeline and underwritten by BSI, among others. The plaintiffs seek unspecified monetary relief. On April 2, 2018, the court granted the defendants' motion to dismiss with prejudice. The plaintiffs have appealed. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In March 2016, BBVA Compass was named as a defendant in a lawsuit filed in the United States District Court for the Southern District of Texas, Lomix Limited Partnership, et al. v. BBVA Compass, wherein the plaintiffs (who are the borrower and guarantors of the underlying loan) allege that BBVA Compass wrongfully sold their loan to a third party, and wrongfully disclosed the guarantors’ personal financial information in connection with the sale of the loan. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In October 2016, BSI was named as a defendant in a putative class action lawsuit filed in the District Court of Harris County, Texas, and subsequently removed to the United States District Court for the Southern District of Texas, St. Lucie County Fire District Firefighters' Pension Trust, individually and on behalf of all others similarly situated v. Southwestern Energy Company, et al., wherein the plaintiffs allege that Southwestern Energy Company, its officers and directors, and the underwriting defendants (including BSI) made inaccurate and misleading statements in the registration statement and prospectus related to a securities offering. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In December 2016, BBVA Compass was named as a defendant in an adversary proceeding filed in the United States Bankruptcy Court for the Southern District of New York, In re: SunEdison, Inc., et al. // Official Committee of Unsecured Creditors v. BBVA Compass, et al., wherein the plaintiffs allege that the first-lien lenders (including BBVA Compass) exercised undue influence and control over SunEdison’s bankruptcy, that SunEdison improperly incurred secured debt through second-lien secured notes to the detriment of SunEdison’s unsecured creditors shortly before SunEdison filed its bankruptcy petition, and that the second-lien notes constitute avoidable fraudulent transfers under the Bankruptcy Code. The plaintiffs seek unspecified monetary relief. The parties reached a settlement that was approved by the Bankruptcy Court as part of an overall plan that was implemented in December 2017. Under the terms of that settlement, there is not a material adverse impact to the Company. This matter is now concluded.

In December 2016, BBVA Compass was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Alabama, Robert Hossfeld, individually and on behalf of all others similarly situated v. BBVA Compass and MSR Group, LLC, alleging violations of the Telephone Consumer Protection Act in the context of customer satisfaction survey calls to the cell phones of individuals who have not given, or who have withdrawn, consent to receive calls on their cell phones. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In August 2017, BSI was named as a defendant in a putative class action lawsuit filed in the United States District Court for the District of Connecticut, Ontario Teachers’ Pension Plan Board, individually and on behalf of all others similarly situated v. Teva Pharmaceutical Industries Ltd., et al., wherein the plaintiffs allege that Teva Pharmaceutical Industries Ltd. (“Teva”), its officers and directors, and the underwriting defendants (including BSI) made inaccurate and misleading statements in the offering materials related to Teva’s role in an alleged conspiracy to inflate the market prices of certain generic drug products. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In August 2017, BBVA Compass was named as a defendant in a lawsuit filed in the United States District Court for the Northern District of Texas, United States of America ex rel. Edward Hendrickson v. BBVA Compass, et al., alleging that the defendant banks, including BBVA Compass, violated the federal False Claims Act by accepting federal agency benefit payments into the accounts of deceased customers. Hendrickson seeks unspecified monetary relief on behalf of the United States government. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In September 2017, BBVA Compass was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Illinois, Lara Bellissimo, individually and on behalf of similarly situated individuals v. BBVA Compass, alleging violations of the Telephone Consumer Protection Act in the context of collections calls to the cell phones of individuals who were not the individuals that provided the phone numbers to BBVA Compass. The plaintiffs seek unspecified monetary relief. The suit was refiled in the Circuit Court of Cook County, Illinois. The parties reached a settlement in principle on February 13, 2018 and are in the process of seeking court approval.

In November 2017, BBVA Compass was named as a defendant in a lawsuit filed in the United States District Court for the Southern District of New York and subsequently transferred to the United States District Court for the Northern District of Texas, Stabilis Fund II, LLC v. BBVA Compass, alleging that BBVA Compass fraudulently induced the plaintiff to purchase a loan that subsequently became the subject of litigation. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In January 2018, BBVA Compass was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Illinois, Petra Lopez and Colea Wright, on behalf of themselves and all others similarly situated v. BBVA Compass, challenging BBVA Compass’ assessment of certain overdraft fees. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In January 2018, BBVA Compass was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Western District of Texas, Daniel Andrade, Sr. and Elizabeth M. Andrade, individually and as the representative of a class of similarly situated persons v. BBVA Compass and Taherzadeh, PLLC, alleging that BBVA Compass improperly assesses default rate interest on HELOCs prior to default and without prior notice. The plaintiffs seek unspecified monetary relief. On April 20, 2018, the parties reached a settlement in principle on an individual (non-class) basis. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In March 2018, the Company and BSI were named as defendants in a putative class action lawsuit filed in the United States District Court for the Southern District of New York, Oklahoma Firefighters Pension & Retirement System, et al., on behalf of themselves and all others similarly situated v. BBVA Compass Bancshares, Inc., BSI, et al., alleging that the defendant banks and their named subsidiaries engaged in collusion with respect to the sale of Mexican Government Bonds. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In April 2018, the Company was served with a complaint that was filed with the Federal Conciliation and Arbitration Labor Board of Mexico City, Mexico, David Lannon Powell Finneran v. BBVA Compass Bancshares, Inc., BBVA Compass, et al., wherein the claimant alleges that he was subject to harassment and wrongfully terminated. The plaintiff seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

The Company is or may become involved from time to time in information-gathering requests, reviews, investigations and proceedings (both formal and informal) by various governmental regulatory agencies, law enforcement authorities and self-regulatory bodies regarding the Company’s business. Such matters may result in material adverse consequences, including without limitation adverse judgments, settlements, fines, penalties, orders, injunctions, alterations in the Company’s business practices or other actions, and could result in additional expenses and collateral costs, including reputational damage, which could have a material adverse impact on the Company’s business, consolidated financial position, results of operations or cash flows.

The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments. Where a loss is not probable or the amount of a probable loss is not reasonably estimable, the Company does not accrue legal reserves. At March 31, 2018, the Company had accrued legal reserves in the amount of $27 million. Additionally, for those matters where a loss is reasonably possible and the amount of loss is reasonably estimable, the Company estimates the amount of losses that it could incur beyond the accrued legal reserves. Under U.S. GAAP, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote" if “the chance of the future event or events occurring is slight.” For a limited number of legal matters in which the Company is involved, the Company is able to estimate a range of reasonably possible losses in excess of related reserves, if any. Management currently estimates these losses to range from $0 to approximately $76 million. This estimated range of reasonably possible losses is based on information available at March 31, 2018. The matters underlying the estimated range will change from time to time, and the actual results may vary significantly from this estimate. Those matters for which an estimate is not possible are not included within this estimated range; therefore, this estimated range does not represent the Company’s maximum loss exposure.

While the outcome of legal proceedings and the timing of the ultimate resolution are inherently difficult to predict, based on information currently available, advice of counsel and available insurance coverage, the Company believes that it has established adequate legal reserves. Further, based upon available information, the Company is of the opinion that these legal proceedings, individually or in the aggregate, will not have a material adverse effect on the Company’s financial condition or results of operations. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, may be material to the Company’s results of operations for any particular period, depending, in part, upon the size of the loss or liability imposed and the operating results for the applicable period.

Income Tax Review

The Company is subject to review and examination from various tax authorities. The Company is currently under examination by a number of states, and has received notices of proposed adjustments related to state income taxes due for prior years. Management believes that adequate provisions for income taxes have been recorded.