ALLOWANCE FOR CREDIT LOSSES, NONPERFORMING ASSETS, AND CONCENTRATIONS OF CREDIT RISK

Allowance for Credit Losses

Management’s estimate of probable losses in the Company’s loan and lease portfolios is recorded in the ALLL and the reserve for unfunded lending commitments. On a quarterly basis, the Company evaluates the adequacy of the ALLL by performing reviews of certain individual loans and leases, analyzing changes in the composition, size and delinquency of the portfolio, reviewing previous loss experience and considering current and anticipated economic factors. The ALLL is established in accordance with the Company’s credit reserve policies, as approved by the Audit Committee of the Board of Directors. The Chief Financial Officer and Chief Risk Officer review the adequacy of the ALLL each quarter, together with risk management. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Company’s allowance for credit losses. The ALLL is maintained at a level that management considers reflective of probable losses, and is established through charges to earnings in the form of a provision for credit losses. The ALLL may be adjusted to reflect the Company’s current assessment of various qualitative risks, factors and events that may not be measured in the statistical analysis. Such factors include trends in economic conditions, loan growth, back testing results, credit underwriting policy exceptions, regulatory and audit findings, and peer comparisons. Amounts determined to be uncollectible are deducted from the ALLL and subsequent recoveries, if any, are added to the ALLL. While management uses available information to estimate loan and lease losses, future additions to the ALLL may be necessary based on changes in economic conditions.

The evaluation of the adequacy of the commercial, commercial real estate, and lease ALLL and reserve for unfunded lending commitments is primarily based on risk rating models that assess probability of default, loss given default and exposure at default on an individual loan basis. The models are primarily driven by individual customer financial characteristics and are validated against historical experience. Additionally, qualitative factors may be included in the risk rating models. After the aggregation of individual borrower incurred loss, additional overlays can be made based on back-testing against historical losses.

For non-impaired retail loans, the ALLL is based upon an incurred loss model utilizing the probability of default, loss given default and exposure at default on an individual loan basis. When developing these factors, the Company may consider the loan product and collateral type, delinquency status, LTV ratio, lien position, borrower’s credit, age of the loan, geographic location and incurred loss period. Certain retail portfolios, including SBO home equity loans and commercial credit card receivables utilize roll rate models to estimate the ALLL. For the portfolios measured using the incurred loss model, roll rate models are also run as challenger models and can be used to support management overlays if deemed necessary.

For nonaccruing commercial and commercial real estate loans with an outstanding balance of $3 million or greater and for all commercial and commercial real estate TDRs (regardless of size), the Company conducts further analysis to determine the probable amount of loss and establishes a specific allowance for the loan, if appropriate. The Company estimates the impairment amount by comparing the loan’s carrying amount to the estimated present value of its future cash flows, the fair value of its underlying collateral, or the loan’s observable market price. For collateral-dependent impaired commercial and commercial real estate loans, the excess of the Company’s recorded investment in the loan over the fair value of the collateral, less cost to sell, is charged off to the ALLL.

For retail TDRs that are not collateral-dependent, allowances are developed using the present value of expected future cash flows compared to the recorded investment in the loans. Expected re-default factors are considered in this analysis. Retail TDRs that are deemed collateral-dependent are written down to fair market value less cost to sell. The fair value of collateral is periodically monitored subsequent to the modification.

In addition to the ALLL, the Company also estimates probable credit losses associated with off balance sheet financial instruments such as standby letters of credit, financial guarantees and binding unfunded loan commitments. Off balance sheet financial instruments are subject to individual reviews and are analyzed and segregated by risk according to the Company’s internal risk rating scale. These risk classifications, in conjunction with historical loss experience, economic conditions and performance trends within specific portfolio segments, result in the estimate of the reserve for unfunded lending commitments.

The ALLL and the reserve for unfunded lending commitments are reported on the Consolidated Balance Sheets in the allowance for loan and lease losses and in other liabilities, respectively. Provision for credit losses related to the loans and leases portfolio and the unfunded lending commitments are reported in the Consolidated Statements of Operations as provision for credit losses.

As of December 31, 2017, the Company enhanced the method for assessing various qualitative risks, factors and events that may not be measured in the modeled results. The new methodology includes a statistical analysis of prior charge-off rates on a historical basis combined with a qualitative assessment based on quantitative measures affecting the determination of incurred losses in the loan and lease portfolio, and provides better alignment of the qualitative ALLL to the commercial and retail loan portfolios. The impact of the change is an increase of approximately $50 million to the commercial ALLL with a corresponding decrease to the retail ALLL; there was not a significant impact on the total qualitative ALLL as of December 31, 2017. There were no other material changes in assumptions or estimation techniques compared with prior years that impacted the determination of the current year’s ALLL and the reserve for unfunded lending commitments.

Loan Charge-Offs

Commercial loans are charged off when it is highly certain that a loss has been realized, including situations where a loan is determined to be both impaired and collateral-dependent. The determination of whether to recognize a charge-off involves many factors, including the prioritization of the Company’s claim in bankruptcy, expectations of the workout/restructuring of the loan and valuation of the borrower’s equity or the loan collateral.

Retail loans are generally fully charged-off or written down to the net realizable value of the underlying collateral, with an offset to the ALLL, upon reaching specified stages of delinquency in accordance with standards established by the FFIEC. Residential real estate loans, credit card loans and unsecured open end loans are generally charged off in the month in which the account becomes 180 days past due. Auto loans, education loans and unsecured closed end loans are generally charged off in the month in which the account becomes 120 days past due. Certain retail loans will be charged off earlier than the FFIEC standards in the following circumstances:


•	A charge-off is recognized when a loan is modified in a TDR if the loan is determined to be collateral-dependent. A loan is considered to be collateral-dependent when repayment of the loan is expected to be provided solely by the underlying collateral, rather than by cash flows from the borrower’s operations, income or other resources.

•

Loans to borrowers who have experienced an event (e.g. bankruptcy) that suggests a loss is either known or highly certain are subject to accelerated charge-off standards. Residential real estate and auto loans are charged down to the net realizable value when the loan becomes 60 days past due, or sooner if the loan is determined to be collateral-dependent. Credit card loans are fully charged off within 60 days of receiving notification of the bankruptcy filing or other event. Education loans are generally charged off when the loan becomes 60 days past due after receiving notification of a bankruptcy.


•	Auto loans are written down to net realizable value upon repossession of the collateral.

A summary of changes in the allowance for credit losses is presented below:



	Year Ended December 31, 2017
(in millions)	Commercial			Retail			Total
Allowance for loan and lease losses, beginning of period		$663			$573			$1,236
Charge-offs	(75		)	(437		)	(512		)
Recoveries	40			167			207
Net charge-offs	(35		)	(270		)	(305		)
Provision charged to income⁽¹⁾	57			248			305
Allowance for loan and lease losses, end of period	685			551			1,236
Reserve for unfunded lending commitments, beginning of period	72			—			72
Provision for unfunded lending commitments	16			—			16
Reserve for unfunded lending commitments, end of period	88			—			88
Total allowance for credit losses, end of period		$773			$551			$1,324

⁽¹⁾ Includes an increase of approximately $50 million to commercial and corresponding decrease to retail for the impact of the enhancement to the assessment of qualitative risks, factors and events that may not be measured in the modeled results.



	Year Ended December 31, 2016
(in millions)	Commercial			Retail			Total
Allowance for loan and lease losses, beginning of period		$596			$620			$1,216
Charge-offs	(79		)	(457		)	(536		)
Recoveries	33			168			201
Net charge-offs	(46		)	(289		)	(335		)
Provision charged to income	113			242			355
Allowance for loan and lease losses, end of period	663			573			1,236
Reserve for unfunded lending commitments, beginning of period	58			—			58
Provision for unfunded lending commitments	14			—			14
Reserve for unfunded lending commitments, end of period	72			—			72
Total allowance for credit losses, end of period		$735			$573			$1,308



	Year Ended December 31, 2015
(in millions)	Commercial			Retail			Total
Allowance for loan and lease losses, beginning of period		$544			$651			$1,195
Charge-offs	(36		)	(444		)	(480		)
Recoveries	49			147			196
Net recoveries (charge-offs)	13			(297		)	(284		)
Provision charged to income	39			266			305
Allowance for loan and lease losses, end of period	596			620			1,216
Reserve for unfunded lending commitments, beginning of period	61			—			61
Provision (credit) for unfunded lending commitments	(3		)	—			(3		)
Reserve for unfunded lending commitments as of period end	58			—			58
Total allowance for credit losses as of period end		$654			$620			$1,274

The recorded investment in loans and leases based on the Company’s evaluation methodology is presented below:



	December 31, 2017						December 31, 2016
(in millions)	Commercial		Retail		Total		Commercial		Retail		Total
Individually evaluated		$370		$761		$1,131		$424		$799		$1,223
Formula-based evaluation	51,661		57,825		109,486		51,227		55,219		106,446
Total		$52,031		$58,586		$110,617		$51,651		$56,018		$107,669

A summary of the allowance for credit losses by evaluation method is presented below:



	December 31, 2017						December 31, 2016
(in millions)	Commercial		Retail		Total		Commercial		Retail		Total
Individually evaluated		$47		$34		$81		$63		$43		$106
Formula-based evaluation	726		517		1,243		672		530		1,202
Allowance for credit losses		$773		$551		$1,324		$735		$573		$1,308

For commercial loans and leases, the Company utilizes regulatory classification ratings to monitor credit quality. Loans with a “pass” rating are those that the Company believes will be fully repaid in accordance with the contractual loan terms. Commercial loans and leases that are “criticized” are those that have some weakness or potential weakness that indicate an increased probability of future loss. “Criticized” loans are grouped into three categories, “special mention,” “substandard” and “doubtful.” Special mention loans have potential weaknesses that, if left uncorrected, may result in deterioration of the Company’s credit position at some future date. Substandard loans are inadequately protected loans; these loans have well-defined weaknesses that could hinder normal repayment or collection of the debt. Doubtful loans have the same weaknesses as substandard, with the added characteristics that the possibility of loss is high and collection of the full amount of the loan is improbable. For retail loans, the Company primarily uses the loan’s payment and delinquency status to monitor credit quality. The further a loan is past due, the greater the likelihood of future credit loss. These credit quality indicators for both commercial and retail loans are continually updated and monitored.

The recorded investment in commercial loans and leases based on regulatory classification ratings is presented below:



	December 31, 2017
			Criticized
(in millions)	Pass		Special Mention		Substandard		Doubtful		Total
Commercial		$35,430		$1,143		$785		$204		$37,562
Commercial real estate	10,706		500		74		28		11,308
Leases	3,069		73		19		—		3,161
Total commercial loans and leases		$49,205		$1,716		$878		$232		$52,031



	December 31, 2016
			Criticized
(in millions)	Pass		Special Mention		Substandard		Doubtful		Total
Commercial		$35,010		$1,015		$1,027		$222		$37,274
Commercial real estate	10,146		370		58		50		10,624
Leases	3,583		52		103		15		3,753
Total commercial loans and leases		$48,739		$1,437		$1,188		$287		$51,651

The recorded investment in classes of retail loans, categorized by delinquency status is presented below:



	December 31, 2017
			Days Past Due
(in millions)	Current		1-29		30-59		60-89		90 or More		Total
Residential mortgages		$16,714		$147		$46		$18		$120		$17,045
Home equity loans	1,212		102		20		4		54		1,392
Home equity lines of credit	12,756		438		78		23		188		13,483
Home equity loans serviced by others	477		29		10		4		22		542
Home equity lines of credit serviced by others	116		21		4		1		7		149
Automobile	11,596		1,273		220		55		60		13,204
Education	7,898		160		23		12		41		8,134
Credit cards	1,747		63		12		9		17		1,848
Other retail	2,679		68		20		12		10		2,789
Total retail loans		$55,195		$2,301		$433		$138		$519		$58,586



	December 31, 2016
			Days Past Due
(in millions)	Current		1-29		30-59		60-89		90 or More		Total
Residential mortgages		$14,807		$108		$53		$12		$135		$15,115
Home equity loans	1,628		127		23		7		73		1,858
Home equity lines of credit	13,432		396		57		20		195		14,100
Home equity loans serviced by others	673		41		14		5		17		750
Home equity lines of credit serviced by others	158		25		3		2		31		219
Automobile	12,509		1,177		172		38		42		13,938
Education	6,379		151		24		13		43		6,610
Credit cards	1,611		43		12		9		16		1,691
Other retail	1,676		45		8		4		4		1,737
Total retail loans		$52,873		$2,113		$366		$110		$556		$56,018

Nonperforming Assets

Nonperforming loans and leases are those on which accrual of interest has been suspended. Loans (other than certain retail loans insured by U.S. government agencies) are placed on nonaccrual status and considered nonperforming when full payment of principal and interest is in doubt, unless the loan is both well secured and in the process of collection.

When the Company places a loan on nonaccrual status, the accrued unpaid interest receivable is reversed against interest income and amortization of any net deferred fees is suspended. Interest collections on nonaccruing loans and leases for which the ultimate collectability of principal is uncertain are generally applied to first reduce the carrying value of the loan. Otherwise, interest income may be recognized to the extent of the cash received. A loan may be returned to accrual status if (i) principal and interest payments have been brought current, and the Company expects repayment of the remaining contractual principal and interest, (ii) the loan or lease has otherwise become well-secured and in the process of collection, or (iii) the borrower has been making regularly scheduled payments in full for the prior six months and the Company is reasonably assured that the loan or lease will be brought fully current within a reasonable period.

Commercial loans, commercial real estate loans, and leases are generally placed on nonaccrual status when contractually past due 90 days or more, or earlier if management believes that the probability of collection is insufficient to warrant further accrual. Some of these loans and leases may remain on accrual status when contractually past due 90 days or more if management considers the loan collectible.

Residential mortgages are generally placed on nonaccrual status when past due 120 days, or sooner if determined to be collateral-dependent, unless repayment of the loan is insured by the Federal Housing Administration. Credit card balances are placed on nonaccrual status when past due 90 days or more and are restored to accruing status if they subsequently become less than 90 days past due. All other retail loans are generally placed on nonaccrual status when past due 90 days or more, or earlier if management believes that the probability of collection is insufficient to warrant further accrual. Loans less than 90 days past due may be placed on nonaccrual status upon the death of the borrower, fraud or bankruptcy.

The following table presents nonperforming loans and leases and loans accruing and 90 days or more past due:



	Nonperforming ⁽¹⁾				Accruing and 90 days or more past due
(in millions)	December 31, 2017		December 31, 2016		December 31, 2017		December 31, 2016
Commercial		$238		$322		$5		$2
Commercial real estate	27		50		3		—
Leases	—		15		—		—
Total commercial loans and leases	265		387		8		2
Residential mortgages⁽¹⁾	128		144		16		18
Home equity loans	72		98		—		—
Home equity lines of credit	233		243		—		—
Home equity loans serviced by others	25		32		—		—
Home equity lines of credit serviced by others	18		33		—		—
Automobile	70		50		—		—
Education	38		38		3		5
Credit card	17		16		—		—
Other retail	5		4		5		1
Total retail loans	606		658		24		24
Total		$871		$1,045		$32		$26

⁽¹⁾ Nonperforming balances exclude first lien residential mortgage loans that are 100% guaranteed by the Federal Housing Administration. These loans, which are accruing and 90 days or more past due, totaled $15 million and $18 million as of December 31, 2017 and 2016, respectively. Nonperforming balances also exclude guaranteed residential mortgage loans sold to GNMA for which the Company has the right, but not the obligation, to repurchase. These loans totaled $30 million and $32 million as of December 31, 2017 and 2016, respectively. These loans are included in the Company’s Consolidated Balance Sheets.

Other nonperforming assets consisted primarily of other real estate owned and was presented in other assets on the Consolidated Balance Sheets. Other real estate owned, net of valuation allowance, was $36 million and $49 million as of December 31, 2017 and 2016, respectively.

A summary of key performance indicators is presented below:



	December 31,
	2017		2016
Nonperforming commercial loans and leases as a percentage of total loans and leases	0.24	%	0.36	%
Nonperforming retail loans as a percentage of total loans and leases	0.55		0.61
Total nonperforming loans and leases as a percentage of total loans and leases	0.79	%	0.97	%

Nonperforming commercial assets as a percentage of total assets	0.17	%	0.26	%
Nonperforming retail assets as a percentage of total assets	0.43		0.47
Total nonperforming assets as a percentage of total assets	0.60	%	0.73	%

The recorded investment in mortgage loans collateralized by residential real estate property for which formal foreclosure proceedings are in-process was $181 million and $177 million as of December 31, 2017 and 2016, respectively.

An analysis of the age of both accruing and nonaccruing loan and lease past due amounts is presented below:



	December 31, 2017								December 31, 2016
	Days Past Due								Days Past Due
(in millions)	30-59		60-89		90 or More		Total		30-59		60-89		90 or More		Total
Commercial		$26		$4		$243		$273		$36		$4		$324		$364
Commercial real estate	38		20		30		88		1		2		50		53
Leases	4		1		—		5		1		—		15		16
Total commercial loans and leases	68		25		273		366		38		6		389		433
Residential mortgages	46		18		120		184		53		12		135		200
Home equity loans	20		4		54		78		23		7		73		103
Home equity lines of credit	78		23		188		289		57		20		195		272
Home equity loans serviced by others	10		4		22		36		14		5		17		36
Home equity lines of credit serviced by others	4		1		7		12		3		2		31		36
Automobile	220		55		60		335		172		38		42		252
Education	23		12		41		76		24		13		43		80
Credit cards	12		9		17		38		12		9		16		37
Other retail	20		12		10		42		8		4		4		16
Total retail loans	433		138		519		1,090		366		110		556		1,032
Total		$501		$163		$792		$1,456		$404		$116		$945		$1,465

Impaired Loans

A loan is considered to be impaired when, based on current information and events, it is probable that the Company will be unable to collect all of the contractual interest and principal payments as scheduled in the loan agreement. This evaluation is generally based on delinquency information, an assessment of the borrower’s financial condition and the adequacy of collateral, if any. Impaired loans include nonaccruing larger balance (greater than $3 million carrying value), non-homogeneous commercial and commercial real estate loans, and restructured loans that are deemed TDRs.

When a loan is identified as impaired, the impairment is measured on an individual loan level as the difference between the recorded investment in the loan (net of previous charge-offs, deferred loan fees or costs and unamortized premium or discount) and the present value of expected future cash flows, discounted at the loan’s effective interest rate. When collateral is the sole source of repayment for the impaired loan, rather than the borrower’s income or other sources of repayment, the Company charges down the loan to its net realizable value.

A summary of impaired loans by class is presented below:



	December 31, 2017
(in millions)	Impaired Loans With a Related Allowance		Allowance on Impaired Loans		Impaired Loans Without a Related Allowance		Unpaid Contractual Balance		Total Recorded Investment in Impaired Loans
Commercial		$183		$42		$159		$403		$342
Commercial real estate	25		5		3		40		28
Leases	—		—		—		—		—
Total commercial loans and leases	208		47		162		443		370
Residential mortgages	25		2		126		197		151
Home equity loans	41		4		80		162		121
Home equity lines of credit	16		1		181		241		197
Home equity loans serviced by others	29		2		22		67		51
Home equity lines of credit serviced by others	2		—		7		14		9
Automobile	2		—		21		30		23
Education	154		17		21		175		175
Credit cards	24		7		1		25		25
Other retail	5		1		4		10		9
Total retail loans	298		34		463		921		761
Total		$506		$81		$625		$1,364		$1,131



	December 31, 2016
(in millions)	Impaired Loans With a Related Allowance		Allowance on Impaired Loans		Impaired Loans Without a Related Allowance		Unpaid Contractual Balance		Total Recorded Investment in Impaired Loans
Commercial		$247		$55		$134		$431		$381
Commercial real estate	39		8		4		44		43
Leases	—		—		—		—		—
Total commercial loans and leases	286		63		138		475		424
Residential mortgages	37		2		141		235		178
Home equity loans	51		3		94		191		145
Home equity lines of credit	23		1		173		240		196
Home equity loans serviced by others	41		4		19		70		60
Home equity lines of credit serviced by others	2		—		7		13		9
Automobile	4		—		15		25		19
Education	154		25		1		155		155
Credit cards	26		6		—		26		26
Other retail	10		2		1		13		11
Total retail loans	348		43		451		968		799
Total		$634		$106		$589		$1,443		$1,223

Additional information on impaired loans is presented below:



	Year Ended December 31,
	2017				2016				2015
(in millions)	Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment
Commercial		$4		$380		$5		$295		$4		$135
Commercial real estate	—		37		—		53		1		44
Leases	—		—		—		3		—		—
Total commercial loans and leases	4		417		5		351		5		179
Residential mortgages	4		136		4		161		15		415
Home equity loans	6		121		7		144		9		222
Home equity lines of credit	6		176		6		178		4		173
Home equity loans serviced by others	3		49		3		60		4		75
Home equity lines of credit serviced by others	—		9		—		9		—		9
Automobile	1		18		—		14		—		11
Education	9		173		7		150		7		157
Credit cards	2		22		2		23		2		26
Other retail	—		9		1		12		1		16
Total retail loans	31		713		30		751		42		1,104
Total		$35		$1,130		$35		$1,102		$47		$1,283

Troubled Debt Restructurings

In situations where, for economic or legal reasons related to the borrower’s financial difficulties, the Company grants a concession to the borrower that it would not otherwise consider, the related loan is classified as a TDR. TDRs typically result from the Company’s loss mitigation efforts and are undertaken in order to improve the likelihood of recovery and continuity of the relationship. The Company’s loan modifications are handled on a case-by-case basis and are negotiated to achieve mutually agreeable terms that maximize loan collectability and meet the borrower’s financial needs. Concessions granted in TDRs for all classes of loans may include lowering the interest rate, forgiving a portion of principal, extending the loan term, lowering scheduled payments for a specified period of time, waiving or delaying a scheduled payment of principal or interest for other than an insignificant time period, or capitalizing past due amounts. A rate increase can be a concession if the increased rate is lower than a market rate for debt with risk similar to that of the restructured loan. TDRs for commercial loans and leases may also involve creating a multiple note structure, accepting non-cash assets, accepting an equity interest, or receiving a performance-based fee. In some cases, a TDR may involve multiple concessions. The financial effects of TDRs for all loan classes may include lower income (either due to a lower interest rate or a delay in the timing of cash flows), larger loan loss provisions, and accelerated charge-offs if the modification renders the loan collateral-dependent. In some cases, interest income throughout the term of the loan may increase if, for example, the loan is extended or the interest rate is increased as a result of the restructuring.

Retail and commercial loans whose contractual terms have been modified in a TDR and are current at the time of restructuring may remain on accrual status if there is demonstrated performance prior to the restructuring and payment in full under the restructured terms is expected. Retail loans that were discharged in bankruptcy and not reaffirmed by the borrower are deemed to be collateral-dependent TDRs and are generally charged off to the fair value of the collateral, less cost to sell, and less amounts recoverable under a government guarantee (if any). Cash receipts on nonaccruing impaired loans, including nonaccruing loans involved in TDRs, are generally applied to reduce the unpaid principal balance. Certain TDRs that are current in payment status are classified as nonaccrual in accordance with regulatory guidance. Income on these loans is generally recognized on a cash basis if management believes that the remaining book value of the loan is realizable. Nonaccruing TDRs that meet the guidelines above for accrual status can be returned to accruing if supported by a well-documented evaluation of the borrowers’ financial condition, and if they have been current for at least six months.

Because TDRs are impaired loans, the Company measures impairment by comparing the present value of expected future cash flows, or when appropriate, the fair value of collateral less costs to sell, to the loan’s recorded investment. Any excess of recorded investment over the present value of expected future cash flows or collateral value is included in the ALLL. Any portion of the loan’s recorded investment the Company does not expect to collect as a result of the modification is charged off at the time of modification. For Retail TDR accounts where the expected value of cash flows is utilized, any recorded investment in excess of the present value of expected cash flows is recognized by creating or increasing the ALLL. For Retail TDR accounts assessed based on the fair value of collateral, any portion of the loan’s recorded investment in excess of the collateral value less costs to sell is charged off at the time of modification or at the time of subsequent and regularly recurring valuations.

The table below summarizes TDRs by class and total unfunded commitments:



	December 31,
(in millions)	2017		2016
Commercial		$129		$120
Retail	761		799
Unfunded commitments tied to TDRs	39		42

The table below summarizes how loans were modified during the year ended December 31, 2017, the charge-offs related to the modifications, and the impact on the ALLL. The reported balances can include loans that became TDRs during 2017 and were paid off in full, charged off, or sold prior to December 31, 2017.



	Primary Modification Types
	Interest Rate Reduction ⁽¹⁾					Maturity Extension ⁽²⁾
(dollars in millions)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	7		$1		$1	45		$22		$22
Commercial real estate	—	—		—		1	—		—
Leases	—	—		—		—	—		—
Total commercial loans and leases	7	1		1		46	22		22
Residential mortgages	71	9		10		73	12		13
Home equity loans	82	5		6		1	—		—
Home equity lines of credit	50	3		3		235	30		30
Home equity loans serviced by others	15	1		1		—	—		—
Home equity lines of credit serviced by others	5	—		—		2	—		—
Automobile	130	2		2		29	1		1
Education	—	—		—		—	—		—
Credit cards	2,363	13		13		—	—		—
Other retail	1	—		—		—	—		—
Total retail loans	2,717	33		35		340	43		44
Total	2,724		$34		$36	386		$65		$66



	Primary Modification Types
	Other ⁽³⁾
(dollars in millions)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Net Change to ALLL Resulting from Modification			Charge-offs Resulting from Modification
Commercial	15		$70		$71		($1	)		$—
Commercial real estate	1	—		—		—			—
Leases	—	—		—		—			—
Total commercial loans and leases	16	70		71		(1		)	—
Residential mortgages	171	19		19		(1		)	—
Home equity loans	232	13		13		—			—
Home equity lines of credit	395	27		27		—			1
Home equity loans serviced by others	52	2		2		—			—
Home equity lines of credit serviced by others	26	2		2		—			—
Automobile	1,336	24		20		—			4
Education	329	7		7		2			—
Credit cards	—	—		—		3			—
Other retail	5	—		—		(2		)	—
Total retail loans	2,546	94		90		2			5
Total	2,562		$164		$161		$1			$5

⁽¹⁾ Includes modifications that consist of multiple concessions, one of which is an interest rate reduction.

⁽²⁾ Includes modifications that consist of multiple concessions, one of which is a maturity extension (unless one of the other concessions was an interest rate reduction).

⁽³⁾ Includes modifications other than interest rate reductions or maturity extensions, such as lowering scheduled payments for a specified period of time, principal forgiveness, and capitalizing arrearages. Also included are the following: deferrals, trial modifications, certain bankruptcies, loans in forbearance and prepayment plans. Modifications can include the deferral of accrued interest resulting in post modification balances being higher than pre-modification.

The table below summarizes how loans were modified during the year ended December 31, 2016, the charge-offs related to the modifications, and the impact on the ALLL. The reported balances can include loans that became TDRs during 2016 and were paid off in full, charged off, or sold prior to December 31, 2016.



	Primary Modification Types
	Interest Rate Reduction ⁽¹⁾					Maturity Extension ⁽²⁾
(dollars in millions)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	12		$1		$1	81		$20		$21
Commercial real estate	1	—		—		1	5		5
Leases	—	—		—		—	—		—
Total commercial loans and leases	13	1		1		82	25		26
Residential mortgages	71	10		10		60	10		10
Home equity loans	97	6		6		39	4		5
Home equity lines of credit	49	4		4		121	13		12
Home equity loans serviced by others	18	1		1		—	—		—
Home equity lines of credit serviced by others	8	—		—		5	1		1
Automobile	138	3		3		41	1		1
Education	—	—		—		—	—		—
Credit cards	2,187	12		12		—	—		—
Other retail	4	—		—		—	—		—
Total retail loans	2,572	36		36		266	29		29
Total	2,585		$37		$37	348		$54		$55



	Primary Modification Types
	Other ⁽³⁾
(dollars in millions)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Net Change to ALLL Resulting from Modification			Charge-offs Resulting from Modification
Commercial	14		$48		$48		$3			$—
Commercial real estate	—	—		—		—			—
Leases	—	—		—		—			—
Total commercial loans and leases	14	48		48		3			—
Residential mortgages	247	26		26		(1		)	—
Home equity loans	279	18		17		(1		)	—
Home equity lines of credit	304	23		22		—			1
Home equity loans serviced by others	60	2		2		—			—
Home equity lines of credit serviced by others	24	1		1		—			—
Automobile	1,081	20		18		—			3
Education	479	12		12		4			—
Credit cards	—	—		—		3			—
Other retail	13	—		—		—			—
Total retail loans	2,487	102		98		5			4
Total	2,501		$150		$146		$8			$4

⁽¹⁾ Includes modifications that consist of multiple concessions, one of which is an interest rate reduction.

⁽²⁾ Includes modifications that consist of multiple concessions, one of which is a maturity extension (unless one of the other concessions was an interest rate reduction).

The table below summarizes how loans were modified during the year ended December 31, 2015, the charge-offs related to the modifications, and the impact on the ALLL. The reported balances can include loans that became TDRs during 2015 and were paid off in full, charged off, or sold prior to December 31, 2015.



	Primary Modification Types
	Interest Rate Reduction ⁽¹⁾					Maturity Extension ⁽²⁾
(dollars in millions)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Commercial	25		$19		$19	160		$22		$22
Commercial real estate	1	—		—		1	—		—
Leases	—	—		—		—	—		—
Total commercial loans and leases	26	19		19		161	22		22
Residential mortgages	153	31		31		40	7		6
Home equity loans	96	5		5		191	35		35
Home equity lines of credit	4	1		1		23	2		2
Home equity loans serviced by others	29	2		2		—	—		—
Home equity lines of credit serviced by others	2	—		—		1	—		—
Automobile	108	2		2		5	—		—
Education	—	—		—		—	—		—
Credit cards	2,413	13		13		—	—		—
Other retail	3	—		—		—	—		—
Total retail loans	2,808	54		54		260	44		43
Total	2,834		$73		$73	421		$66		$65



	Primary Modification Types
	Other ⁽³⁾
(dollars in millions)	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Net Change to ALLL Resulting from Modification			Charge-offs Resulting from Modification
Commercial	16		$34		$34		($1	)		$1
Commercial real estate	1	4		4		—			—
Leases	—	—		—		—			—
Total commercial loans and leases	17	38		38		(1		)	1
Residential mortgages	275	33		33		(1		)	—
Home equity loans	448	28		28		—			1
Home equity lines of credit	320	21		19		—			2
Home equity loans serviced by others	124	6		5		—			1
Home equity lines of credit serviced by others	41	3		2		—			—
Automobile	812	14		12		—			2
Education	1,204	22		22		4			—
Credit cards	—	—		—		2			—
Other retail	20	—		—		—			—
Total retail loans	3,244	127		121		5			6
Total	3,261		$165		$159		$4			$7

⁽¹⁾ Includes modifications that consist of multiple concessions, one of which is an interest rate reduction.

⁽²⁾ Includes modifications that consist of multiple concessions, one of which is a maturity extension (unless one of the other concessions was an interest rate reduction).

⁽³⁾ Includes modifications other than interest rate reductions or maturity extensions, such as lowering scheduled payments for a specified period of time, principal forgiveness, and capitalizing arrearages. Also included are the following: deferrals, trial modifications, certain bankruptcies, loans in forbearance and prepayment plans. Modifications can include the deferral of accrued interest resulting in post-modification balances being higher than pre-modification.

The table below summarizes TDRs that defaulted within 12 months of their modification date during 2017, 2016 and 2015. For purposes of this table, a payment default refers to a loan that becomes 90 days or more past due under the modified terms. Amounts represent the loan’s recorded investment at the time of payment default. Loan data includes loans meeting the criteria that were paid off in full, charged off, or sold prior to December 31, 2017 and 2016. If a TDR of any loan type becomes 90 days past due after being modified, the loan is written down to the fair value of collateral less cost to sell. The amount written off is charged to the ALLL.



	Year Ended December 31,
	2017			2016			2015
(dollars in millions)	Number of Contracts	Balance Defaulted		Number of Contracts	Balance Defaulted		Number of Contracts	Balance Defaulted
Commercial	8		$5	22		$13	23		$2
Commercial real estate	1	4		1	—		—	—
Leases	—	—		—	—		—	—
Total commercial loans and leases	9	9		23	13		23	2
Residential mortgages	152	19		187	24		168	21
Home equity loans	43	2		50	3		184	13
Home equity lines of credit	200	14		155	13		131	7
Home equity loans serviced by others	23	—		37	1		43	1
Home equity lines of credit serviced by others	10	1		17	—		22	1
Automobile	140	1		110	2		87	1
Education	44	1		59	1		171	3
Credit cards	491	3		433	3		455	3
Other retail	4	—		3	—		4	—
Total retail loans	1,107	41		1,051	47		1,265	50
Total	1,116		$50	1,074		$60	1,288		$52

Concentrations of Credit Risk

Most of the Company’s lending activity is with customers located in the New England, Mid-Atlantic and Midwest regions. Generally, loans are collateralized by assets including real estate, inventory, accounts receivable, other personal property and investment securities. As of December 31, 2017 and 2016, the Company had a significant amount of loans collateralized by residential and commercial real estate. There were no significant concentration risks within the commercial loan or retail loan portfolios. Exposure to credit losses arising from lending transactions may fluctuate with fair values of collateral supporting loans, which may not perform according to contractual agreements. The Company’s policy is to collateralize loans to the extent necessary; however, unsecured loans are also granted on the basis of the financial strength of the applicant and the facts surrounding the transaction.

Certain loan products, including residential mortgages, home equity loans and lines of credit, and credit cards, have contractual features that may increase credit exposure to the Company in the event of an increase in interest rates or a decline in housing values. These products include loans that exceed 90% of the value of the underlying collateral (high LTV loans), interest-only and negative amortization residential mortgages, and loans with low introductory rates. Certain loans have more than one of these characteristics.

The following tables present balances of loans with these characteristics:



	December 31, 2017
(in millions)	Residential Mortgages		Home Equity Loans and Lines of Credit		Home Equity Products Serviced by Others		Credit Cards		Education		Total
High loan-to-value		$366		$166		$264		$—		$—		$796
Interest only/negative amortization	1,763		—		—		—		1		1,764
Low introductory rate	—		—		—		197		—		197
Multiple characteristics and other	1		—		—		—		—		1
Total		$2,130		$166		$264		$197		$1		$2,758



	December 31, 2016
(in millions)	Residential Mortgages		Home Equity Loans and Lines of Credit		Home Equity Products Serviced by Others		Credit Cards		Education		Total
High loan-to-value		$566		$550		$476		$—		$—		$1,592
Interest only/negative amortization	1,582		—		—		—		1		1,583
Low introductory rate	—		—		—		112		—		112
Multiple characteristics and other	3		—		—		—		—		3
Total		$2,151		$550		$476		$112		$1		$3,290