SUNTRUST BANKS INC, 10-Q filed on 11/3/2017
Quarterly Report
Document and Entity Information (USD $)
9 Months Ended
Sep. 30, 2017
Oct. 31, 2017
Dec. 31, 2016
Entity Registrant Name
SUNTRUST BANKS INC 
 
 
Entity Central Index Key
0000750556 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Document Type
10-Q 
 
 
Document Period End Date
Sep. 30, 2017 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
Q3 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
476,033,241 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Common Stock, Par or Stated Value Per Share
$ 1.00 
 
$ 1.00 
Consolidated Statements of Income (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Interest Income
 
 
 
 
Interest and fees on loans
$ 1,382 
$ 1,245 
$ 4,009 
$ 3,670 
Interest and fees on loans held for sale
24 
25 
70 
62 
Interest and Dividend Income, Securities, Available-for-sale
195 
159 
573 
483 
Trading account interest and other
34 
22 
95 
70 
Total interest income
1,635 
1,451 
4,747 
4,285 
Interest Expense
 
 
 
 
Interest on deposits
111 
67 
286 
188 
Interest Expense, Long-term Debt
76 
68 
216 
191 
Interest on other borrowings
18 
46 
29 
Total interest expense
205 
143 
548 
408 
Net, interest income
1,430 
1,308 1
4,199 
3,877 2
Provision for Loan, Lease, and Other Losses
120 3
97 1 4
330 4
343 2 4
Interest Income (Expense), after Provision for Loan Loss
1,310 
1,211 
3,869 
3,534 
Noninterest Income
 
 
 
 
Service charges on deposit accounts
154 
162 
453 
477 
Fees and Commissions, Other
92 
93 
291 
290 
Fees and Commissions, Credit and Debit Cards
86 
83 
255 
243 
Investment Banking Revenue
166 
147 
480 
372 
Trading Gain (Loss)
51 
65 
148 
154 
Fees and Commissions, Fiduciary and Trust Activities
79 
80 
229 
230 
Investment Advisory, Management and Administrative Fees
69 
71 
208 
212 
Fees and Commissions, Mortgage Banking
61 
118 
170 
288 
Servicing Fees, Net
(46)
(49)
(148)
(164)
commercial real estate related income
17 5
5
61 5
36 5
Gain (Loss) on Sale of Securities, Net
Noninterest Income, Other Operating Income
25 5
13 5
76 5
99 5
Total noninterest income
846 
889 1
2,520 
2,569 2
Noninterest Expense
 
 
 
 
Employee compensation
725 
687 
2,152 
1,994 
Other Labor-related Expenses
81 
86 
302 
315 
Outside processing and software
203 
225 
612 
626 
Net occupancy expense
94 
93 
280 
256 
Federal Deposit Insurance Corporation Premium Expense
47 
47 
143 
127 
Marketing and Advertising Expense
45 
38 
129 
120 
Equipment Expense
40 
44 
123 
126 
Operating losses
(34)
35 
17 
85 
Amortization
22 
14 
49 
35 
Other Noninterest Expense
168 
140 
436 
388 
Noninterest Expense
1,391 
1,409 1
4,243 
4,072 2
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest
765 
691 
2,146 
2,031 
Income Tax Expense (Benefit)
225 
215 
606 
611 
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest
540 
476 1
1,540 
1,420 2
Net Income (Loss) Attributable to Noncontrolling Interest
1
2
Net Income (Loss) Attributable to Parent
538 
474 1
1,533 
1,413 2
Net Income (Loss) Available to Common Stockholders, Basic
$ 512 
$ 457 
$ 1,468 
$ 1,363 
Earnings Per Share, Diluted
$ 1.06 
$ 0.91 
$ 3.00 
$ 2.70 
Earnings Per Share, Basic
$ 1.07 
$ 0.92 
$ 3.04 
$ 2.72 
Common Stock, Dividends, Per Share, Declared
$ 0.40 
$ 0.26 
$ 0.92 
$ 0.74 
Weighted Average Number of Shares Outstanding, Diluted
483,640 
500,885 
489,176 
505,619 
Weighted Average Number of Shares Outstanding, Basic
478,258 
496,304 
483,711 
501,036 
Consolidated Statements of Comprehensive Income Consolidated Statement of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net Income (Loss) Attributable to Parent
$ 538 
$ 474 1
$ 1,533 
$ 1,413 2
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax
40 
(32)
97 
383 
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax
(2)
(86)
(13)
137 
Other Comprehensive Income (Loss), Brokered Time Deposits, Net of Tax
Other Comprehensive Income (Loss), Long Term Debt, Adjustment, Net of Tax
3
(3)3
3
(5)3
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax
65 
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent
42 
(118)
86 
580 
Comprehensive Income (Loss), Net of Tax, Attributable to Parent
$ 580 
$ 356 
$ 1,619 
$ 1,993 
Consolidated Statements of Comprehensive Income Consolidated Statement of Comprehensive Income (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
 
 
 
 
Other Comprehensive Income (Loss), Available-for-sale Securities, Tax
$ 24 
$ (19)
$ 57 
$ 228 
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Tax
(1)
(51)
(7)
81 
Other Comprehensive Income (Loss), Long Term Debt, Adjustment, Tax
(2)
(3)
Other Comprehensive Income (Loss), Defined Benefit Plan, Gain (Loss) Arising During Period, Tax
$ 2 
$ 2 
$ 3 
$ 39 
Consolidated Balance Sheets (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Assets
 
 
Cash and Due from Banks
$ 7,071 
$ 5,091 
Federal Funds Sold and Securities Purchased under Agreements to Resell
1,182 
1,307 
Interest-bearing Deposits in Banks and Other Financial Institutions
25 
25 
Cash and cash equivalents
8,278 
6,423 
Trading assets
6,318 1
6,067 1
Available-for-sale Securities
31,444 2
30,672 2
Loans Held for Sale
2,835 3
4,169 3
Loans held for investment
144,264 4
143,298 4
Loans and Leases Receivable, Allowance
(1,772)
(1,709)
Net loans
142,492 
141,589 
Property, Plant and Equipment, Net
1,616 
1,556 
Goodwill
6,338 
6,337 
Intangible Assets, Net (Excluding Goodwill)
1,706 
1,657 
Other Assets
7,225 
6,405 
Total assets
208,252 
204,875 
Liabilities and Shareholders' Equity
 
 
Noninterest-bearing consumer and commercial deposits
43,984 
43,431 
Interest-bearing Deposit Liabilities
118,753 
116,967 
Total deposits
162,737 
160,398 
Funds purchased
3,118 
2,116 
Securities Sold under Agreements to Repurchase
1,422 
1,633 
Other Short-term Borrowings
909 
1,015 
Long-term Debt
11,280 5
11,748 5
Trading liabilities
1,284 
1,351 
Other Liabilities
2,980 
2,996 
Total liabilities
183,730 
181,257 
Preferred Stock, Value, Outstanding
1,975 
1,225 
Common Stock, Value, Outstanding
550 
550 
Additional Paid in Capital
8,985 
9,010 
Retained earnings
17,021 
16,000 
Treasury stock, at cost, and other
(3,274)6
(2,346)6
Accumulated Other Comprehensive Income (Loss), Net of Tax
(735)
(821)
Total shareholders' equity
24,522 
23,618 
Liabilities and Equity
208,252 
204,875 
Common Stock, Shares, Outstanding
476,001 7
491,188 7
Common shares authorized
750,000 
750,000 
Preferred Stock, Shares Outstanding
20 
12 
Preferred Stock, Shares Authorized
50,000 
50,000 
Treasury shares of common stock
74,053 
58,738 
Treasury Stock and Other
 
 
Liabilities and Shareholders' Equity
 
 
Treasury stock, at cost, and other
(3,374)
 
Total shareholders' equity
(3,274)8
(2,346)8
Variable Interest Entity, Primary Beneficiary [Member]
 
 
Assets
 
 
Loans held for investment
186 
211 
Liabilities and Shareholders' Equity
 
 
Long-term Debt
$ 195 
$ 222 
Restricted Stock [Member]
 
 
Liabilities and Shareholders' Equity
 
 
Common Stock, Shares, Outstanding
11 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Loans Held-for-sale, Fair Value Disclosure
$ 2,252 
$ 3,540 
Loans Receivable, Fair Value Disclosure
206 
222 
Common stock, par value
$ 1.00 
$ 1.00 
Loans and Leases Receivable, Gross
144,264 1
143,298 1
Long-term Debt
11,280 2
11,748 2
Common Stock, Shares, Outstanding
476,001 3
491,188 3
Variable Interest Entity, Primary Beneficiary [Member]
 
 
Loans and Leases Receivable, Gross
186 
211 
Long-term Debt
195 
222 
Treasury Stock and Other
 
 
Stockholders' Equity Attributable to Noncontrolling Interest
101 
103 
Residential Portfolio Segment [Member]
 
 
Loans Receivable, Fair Value Disclosure
206 
222 
Loans and Leases Receivable, Gross
38,730 
38,990 
Restricted Stock [Member]
 
 
Common Stock, Shares, Outstanding
11 
Trading Securities [Member]
 
 
Pledged Assets Separately Reported, Securities Pledged as Collateral, at Fair Value
1,043 
1,437 
Available-for-sale Securities [Member]
 
 
Pledged Assets Separately Reported, Securities Pledged as Collateral, at Fair Value
280 
Fair Value, Measurements, Recurring [Member]
 
 
Loans Held-for-sale, Fair Value Disclosure
2,252 
3,540 
Loans Receivable, Fair Value Disclosure
206 
222 
Servicing Asset at Fair Value, Amount
1,628 
1,572 
Long-term Debt, Fair Value
758 
963 
Brokered Time Deposits [Member] |
Fair Value, Measurements, Recurring [Member]
 
 
Deposits, Fair Value Disclosure
$ 207 
$ 78 
Consolidated Statements of Shareholders' Equity (USD $)
In Millions, except Share data, unless otherwise specified
Total
Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Stock and Other
AOCI Attributable to Parent [Member]
Total shareholders' equity at Dec. 31, 2015
$ 23,437 
$ 1,225 
$ 550 
$ 9,094 
$ 14,686 
$ (1,658)1
$ (460)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Common Stock, Shares, Outstanding
 
 
496,000,000 
 
 
 
 
Cumulative effect of credit risk adjustment3
 
 
 
 
(5)2
Net Income (Loss) Attributable to Parent
1,413 4
 
 
 
1,413 
 
 
Other Comprehensive Income (Loss), Net of Tax
580 
 
 
 
 
 
580 
Noncontrolling Interest, Period Increase (Decrease)
(7)
 
 
 
 
(7)1
 
Dividends, Common Stock, Cash
(370)
 
 
 
(370)
 
 
Dividends, Preferred Stock, Cash5
(49)
 
 
 
(49)
 
 
Treasury Stock, Shares, Acquired
 
 
(15,000,000)
 
 
 
 
Treasury Stock, Value, Acquired, Cost Method
(566)
 
 
 
 
(566)1
 
Payments for Repurchase of Warrants
(24)
 
 
(24)
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period
 
 
1,000,000 
 
 
 
 
Stock Issued During Period, Value, Stock Options Exercised
15 6
 
 
28 6
 
43 1
 
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures
 
 
1,000,000 
 
 
 
 
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures
18 6
 
 
(33)6
(4)
55 1
 
Adjustments to Additional Paid in Capital, Share-based Compensation, Restricted Stock Unit or Restricted Stock Award, Requisite Service Period Recognition
 
 
 
 
1
 
Total shareholders' equity at Sep. 30, 2016
24,449 
1,225 
550 
9,009 
15,681 
(2,131)1
115 
Total shareholders' equity at Dec. 31, 2016
23,618 
1,225 
550 
9,010 
16,000 
(2,346)1
(821)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Common Stock, Shares, Outstanding
476,001,000 7
 
476,000,000 
 
 
 
 
Net Income (Loss) Attributable to Parent
1,533 
 
 
 
1,533 
 
 
Other Comprehensive Income (Loss), Net of Tax
86 
 
 
 
 
 
86 
Noncontrolling Interest, Period Increase (Decrease)
(2)
 
 
 
 
(2)1
 
Dividends, Common Stock, Cash
(443)
 
 
 
(443)
 
 
Dividends, Preferred Stock, Cash5
(65)
 
 
 
(65)
 
 
Stock Issued During Period, Value, New Issues
743 
750 
 
(7)
 
 
 
Treasury Stock, Shares, Acquired
 
 
(17,000,000)
 
 
 
 
Treasury Stock, Value, Acquired, Cost Method
(984)
 
 
 
 
(984)1
 
Payments for Repurchase of Warrants
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period
 
 
1,000,000 
 
 
 
 
Stock Issued During Period, Value, Stock Options Exercised
13 
 
 
(14)
 
27 1
 
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures
 
 
1,000,000 
 
 
 
 
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures
23 
 
 
(4)
(4)
31 1
 
Total shareholders' equity at Sep. 30, 2017
$ 24,522 
$ 1,975 
$ 550 
$ 8,985 
$ 17,021 
$ (3,274)1
$ (735)
Consolidated Statements of Shareholders' Equity (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Treasury Stock, Value
$ (3,274)1
 
Common stock dividends, per share
$ 0.92 
$ 0.74 
Adjustment to Additional Paid in Capital, Income Tax Effect from Share-based Compensation, Net
 
(4)
Treasury Stock and Other
 
 
Treasury Stock, Value
(3,374)
(2,232)
Deferred Compensation Equity
Stockholders' Equity Attributable to Noncontrolling Interest
$ 101 
$ 101 
Series A Preferred Stock [Member]
 
 
Preferred Stock, Dividends, Per Share, Cash Paid
$ 3,044 
$ 3,056 
Series B Preferred Stock [Member]
 
 
Preferred Stock, Dividends, Per Share, Cash Paid
$ 3,044 
$ 3,056 
Series E Preferred Stock [Member]
 
 
Preferred Stock, Dividends, Per Share, Cash Paid
$ 4,406 
$ 4,406 
Series F Preferred Stock [Member]
 
 
Preferred Stock, Dividends, Per Share, Cash Paid
$ 4,219 
$ 4,219 
Series G Preferred Stock [Member]
 
 
Preferred Stock, Dividends, Per Share, Cash Paid
$ 2,090 
 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Cash Flows from Operating Activities:
 
 
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest
$ 1,540 
$ 1,420 1
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
 
 
Depreciation, Amortization and Accretion, Net
540 
533 
Payments to Acquire Mortgage Servicing Rights (MSR)
262 
198 
Provisions For Credit Losses And Foreclosed Properties
336 
347 
Stock Option Compensation And Amortization Of Restricted Stock Compensation
121 
85 
Gain (Loss) on Sale of Securities, Net
Gain (Loss) on Sale of Loans and Leases
183 
376 
Net decrease/(increase) in loans held for sale
(1,488)
1,647 
Increase (Decrease) in Trading Securities
272 
704 
Net (increase)/decrease in other assets
950 
193 
Increase (Decrease) in Other Operating Liabilities
(267)
155 
Net Cash Provided by (Used in) Operating Activities, Continuing Operations
(2,090)
582 
Cash Flows from Investing Activities:
 
 
Proceeds from Maturities, Prepayments and Calls of Available-for-sale Securities
3,169 
3,763 
Proceeds from Sale of Available-for-sale Securities
1,486 
197 
Payments to Acquire Available-for-sale Securities
5,344 
5,297 
Proceeds from (payments for) Originations and Purchases of Loans Held-for-investment
(1,839)
(7,007)
Proceeds from sales of loans
520 
1,482 
Payments for (Proceeds from) Mortgage Servicing Rights
(101)
Capital expenditures
(233)
(188)
Payments related to acquisitions, including contingent consideration
(23)
Proceeds from Sale of Other Real Estate
183 
171 
Net Cash Provided by (Used in) Investing Activities, Continuing Operations
(2,058)
(7,003)
Cash Flows from Financing Activities:
 
 
Net (decrease)/increase in total deposits
2,339 
9,012 
Net increase/(decrease) in funds purchased, securities sold under agreements to repurchase, and other short-term borrowings
685 
272 
Proceeds from Issuance of Long-term Debt
2,623 
4,924 
Repayment of long-term debt
(3,073)
(1,448)
Proceeds from Issuance of Preferred Stock and Preference Stock
743 
Payments for Repurchase of Common Stock
(984)
(566)
Payments for Repurchase of Warrants
(24)
Common and preferred dividends paid
(485)
(412)
Payments Related to Tax Withholding for Share-based Compensation
(38)
(47)
Proceeds from the exercise of stock options
13 
15 
Net Cash Provided by (Used in) Financing Activities, Continuing Operations
1,823 
11,726 
Cash and Cash Equivalents, Period Increase (Decrease)
1,855 
4,141 
Cash and cash equivalents
6,423 
5,599 
Cash and cash equivalents
8,278 
9,740 
Supplemental Disclosures:
 
 
Transfer of Loans Held-for-sale to Portfolio Loans
16 
23 
Transfer of Portfolio Loans and Leases to Held-for-sale
218 
315 
Transfer to Other Real Estate
43 
46 
Non-cash impact of debt acquired by purchaser in leverage lease sale
$ 9 
$ 74 
Significant Accounting Policies
Significant Accounting Policies [Text Block]
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The unaudited Consolidated Financial Statements have been prepared in accordance with U.S. GAAP to present interim financial statement information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete, consolidated financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments that are necessary for a fair presentation of the results of operations in these financial statements, have been made.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes; actual results could vary from these estimates. Certain reclassifications have been made to prior period amounts to conform to the current period presentation.
These interim Consolidated Financial Statements should be read in conjunction with the Company’s 2016 Annual Report on Form 10-K. Other than the recently issued accounting pronouncements discussed in this section, there have been no significant changes to the Company’s accounting policies, as disclosed in the 2016 Annual Report on Form 10-K, that could have a material effect on the Company's financial statements.
The Company evaluated events that occurred between September 30, 2017 and the date the accompanying financial statements were issued, and there were no material events, other than those already discussed in this Form 10-Q, that would require recognition in the Company's Consolidated Financial Statements or disclosure in the accompanying Notes.

Recently Issued Accounting Pronouncements
The following table summarizes ASUs recently issued by the FASB that could have a material effect on the Company's financial statements:
Standard
Description
Required Date of Adoption
Effect on the Financial Statements or Other Significant Matters
Standard(s) Adopted in 2017 (or partially adopted previously)
ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities
The ASU amends ASC Topic 825, Financial Instruments-Overall, and addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provisions require investments in equity securities to be measured at fair value through net income, unless they qualify for a practicability exception, and require fair value changes arising from changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option to be recognized in other comprehensive income. With the exception of disclosure requirements that will be adopted prospectively, the ASU must be adopted on a modified retrospective basis.
January 1, 2018

Early adoption is permitted beginning January 1, 2016 or 2017 for the provision related to changes in instrument-specific credit risk for financial liabilities under the FVO.

The Company early adopted the provision related to changes in instrument-specific credit risk beginning January 1, 2016, which resulted in an immaterial, cumulative effect adjustment from retained earnings to AOCI. See Note 1, “Significant Accounting Policies,” to the Company's 2016 Annual Report on Form 10-K for additional information. The Company does not expect the remaining provisions of this ASU to have a material impact on its Consolidated Financial Statements and related disclosures.

Standard(s) Not Yet Adopted
ASU 2016-02, Leases
The ASU creates ASC Topic 842, Leases, which supersedes ASC Topic 840, Leases. ASC Topic 842 requires lessees to recognize right-of-use assets and associated liabilities that arise from leases, with the exception of short-term leases. The ASU does not make significant changes to lessor accounting; however, there were certain improvements made to align lessor accounting with the lessee accounting model and ASC Topic 606, Revenue from Contracts with Customers. There are several new qualitative and quantitative disclosures required. Upon transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.

January 1, 2019

Early adoption is permitted.
The Company has formed a cross-functional team to oversee the implementation of this ASU. The Company's implementation efforts are ongoing, including the review of its lease portfolios and related lease accounting policies, the review of its service contracts for embedded leases, and the deployment of a new lease software solution. The Company's adoption of this ASU will result in an increase in right-of-use assets and associated lease liabilities, arising from operating leases in which the Company is the lessee, on its Consolidated Balance Sheets.

The amount of the right-of-use assets and associated lease liabilities recorded upon adoption will be based primarily on the present value of unpaid future minimum lease payments, the amount of which will depend on the population of leases in effect at the date of adoption. At September 30, 2017, the Company’s estimate of right-of-use assets and lease liabilities that would be recorded on its Consolidated Balance Sheets upon adoption is in excess of $1 billion. The Company does not expect this ASU to have a material impact on its Consolidated Statements of Income.

Standard
Description
Required Date of Adoption
Effect on the Financial Statements or Other Significant Matters
Standard(s) Not Yet Adopted (continued)
ASU 2016-13, Measurement of Credit Losses on Financial Instruments
The ASU amends ASC Topic 326, Financial Instruments-Credit Losses, to replace the incurred loss impairment methodology with a CECL methodology for financial instruments measured at amortized cost and other commitments to extend credit. For this purpose, expected credit losses reflect losses over the remaining contractual life of an asset, considering the effect of voluntary prepayments and considering available information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The resulting allowance for credit losses reflects the portion of the amortized cost basis that the entity does not expect to collect. Additional quantitative and qualitative disclosures are required upon adoption.

The CECL model does not apply to AFS debt securities; however, the ASU requires entities to record an allowance when recognizing credit losses for AFS securities, rather than recording a direct write-down of the carrying amount.

January 1, 2020

Early adoption is permitted beginning January 1, 2019.
The Company has formed a cross-functional team to oversee the implementation of this ASU and is assessing the required changes to its credit loss estimation methodologies. The Company is evaluating the impact that this ASU will have on its Consolidated Financial Statements and related disclosures, and the Company currently anticipates that an increase to the allowance for credit losses will be recognized upon adoption to provide for the expected credit losses over the estimated life of the financial assets. However, since the magnitude of the anticipated increase in the allowance for credit losses will be impacted by economic conditions and trends in the Company’s portfolio at the time of adoption, the quantitative impact cannot yet be reasonably estimated.

ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments
The ASU amends ASC Topic 230, Statement of Cash Flows, to clarify the classification of certain cash receipts and payments within the Company's Consolidated Statements of Cash Flow. These items include: cash payments for debt prepayment or debt extinguishment costs; cash outflows for the settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; and beneficial interests acquired in securitization transactions. The ASU also clarifies that when no specific U.S. GAAP guidance exists and the source of the cash flows are not separately identifiable, then the predominant source of cash flow should be used to determine the classification for the item. The ASU must be adopted on a retrospective basis.

January 1, 2018

Early adoption is permitted.
The Company is evaluating the impact that this ASU will have on its Consolidated Statements of Cash Flows. Changes in the Company's presentation of certain cash payments and receipts between the operating, financing, and investing sections of its Consolidated Statements of Cash Flows are expected; however, the quantitative impact has not yet been determined.
ASU 2014-09, Revenue from Contracts with Customers

ASU 2015-14, Deferral of the Effective Date

ASU 2016-08, Principal versus Agent Considerations

ASU 2016-10, Identifying Performance Obligations and Licensing

ASU 2016-12, Narrow-Scope Improvements and Practical Expedients

ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers

These ASUs comprise ASC Topic 606, Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of these ASUs is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. These ASUs may be adopted either retrospectively or on a modified retrospective basis to new contracts and existing contracts, with remaining performance obligations as of the effective date.
January 1, 2018

Early adoption is permitted beginning January 1, 2017.
The Company is completing its evaluation of the anticipated effects that these ASUs will have on its Consolidated Financial Statements and related disclosures. The Company conducted a comprehensive scoping exercise to determine the revenue streams that are in the scope of these updates. Results indicate that certain noninterest income financial statement line items, including service charges on deposit accounts, card fees, other charges and fees, investment banking income, trust and investment management income, retail investment services, commercial real estate related income, and other noninterest income, contain revenue streams that are within the scope of these updates. Additionally, the Company's analyses indicate that there will be changes to the presentation of certain types of revenue and expenses within investment banking income, such as underwriting revenue and expenses, which will be shown gross pursuant to the new requirements.

The Company is in the process of developing additional quantitative and qualitative disclosures that will be required upon adoption of these ASUs. The Company plans to adopt these standards beginning January 1, 2018 and expects to use the modified retrospective method of adoption. The Company does not expect these ASUs to have a material impact on its Consolidated Financial Statements and related disclosures.

Standard
Description
Required Date of Adoption
Effect on the Financial Statements or Other Significant Matters
Standard(s) Not Yet Adopted (continued)
ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
The ASU amends ASC Topic 350, Intangibles - Goodwill and Other, to simplify the subsequent measurement of goodwill, by eliminating Step 2 from the goodwill impairment test. The amendments require an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Entities should recognize an impairment charge for the amount by which a reporting unit's carrying amount exceeds its fair value, but the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU must be applied on a prospective basis.

January 1, 2020

Early adoption is permitted.
Based on the Company's most recent annual goodwill impairment test performed as of October 1, 2016, there were no reporting units for which the carrying amount of the reporting unit exceeded its fair value; therefore, this ASU would not currently have an impact on the Company's Consolidated Financial Statements and related disclosures. However, if upon adoption the carrying amount of a reporting unit exceeds its fair value, the Company would be impacted by the amount of impairment recognized.
ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
The ASU amends ASC Topic 815, Derivatives and Hedging, to simplify the requirements for hedge accounting. Key amendments include: eliminating the requirement to separately measure and report hedge ineffectiveness, requiring changes in the value of the hedging instrument to be presented in the same income statement line as the earnings effect of the hedged item, and the ability to measure the hedged item based on the benchmark interest rate component of the total contractual coupon for fair value hedges. New incremental disclosures are also required for reporting periods subsequent to the date of adoption. All transition requirements and elections should be applied to hedging relationships existing on the date of adoption using a modified retrospective approach.

January 1, 2019

Early adoption is permitted.
The Company is evaluating the significance and other effects that this ASU will have on its Consolidated Financial Statements and related disclosures; however, the quantitative impact has not yet been determined.
Federal Funds Sold and Securities Borrowed or Purchased Under Agreements to Resell
Repurchase Agreements, Resale Agreements, Securities Borrowed, and Securities Loaned Disclosure [Text Block]
NOTE 2 - FEDERAL FUNDS SOLD AND SECURITIES FINANCING ACTIVITIES
Federal Funds Sold and Securities Borrowed or Purchased Under Agreements to Resell
Fed funds sold and securities borrowed or purchased under agreements to resell were as follows:
(Dollars in millions)
September 30, 2017
 
December 31, 2016
Fed funds sold

$—

 

$58

Securities borrowed
371

 
270

Securities purchased under agreements to resell
811

 
979

Total Fed funds sold and securities borrowed or purchased under agreements to resell

$1,182

 

$1,307


Securities purchased under agreements to resell are primarily collateralized by U.S. government or agency securities and are carried at the amounts at which the securities will be subsequently resold, plus accrued interest. Securities borrowed are primarily collateralized by corporate securities. The Company borrows securities and purchases securities under agreements to resell as part of its securities financing activities. On the acquisition date of these securities, the Company and the related counterparty agree on the amount of collateral required to secure the principal amount loaned under these arrangements. The Company monitors collateral values daily and calls for additional collateral to be provided as warranted under the respective agreements. At September 30, 2017 and December 31, 2016, the total market value of collateral held was $1.2 billion and $1.3 billion, of which $194 million and $246 million was repledged, respectively.

Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase are accounted for as secured borrowings. The following table presents the Company’s related activity, by collateral type and remaining contractual maturity:
 
September 30, 2017
 
December 31, 2016
(Dollars in millions)
Overnight and Continuous
 
Up to 30 days
 
30-90 days
 
Total
 
Overnight and Continuous
 
Up to 30 days
 
30-90 days
 
Total
U.S. Treasury securities

$32

 

$—

 

$—

 

$32

 

$27

 

$—

 

$—

 

$27

Federal agency securities
58

 
25

 

 
83

 
288

 
24

 

 
312

MBS - agency
738

 
94

 

 
832

 
793

 
51

 

 
844

CP
68

 

 

 
68

 
49

 

 

 
49

Corporate and other debt securities
292

 
75

 
40

 
407

 
311

 
50

 
40

 
401

Total securities sold under agreements to repurchase

$1,188

 

$194

 

$40

 

$1,422

 

$1,468

 

$125

 

$40

 

$1,633



For these securities sold under agreements to repurchase, the Company would be obligated to provide additional collateral in the event of a significant decline in fair value of the collateral pledged. This risk is managed by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions.

Netting of Securities - Repurchase and Resell Agreements
The Company has various financial assets and financial liabilities that are subject to enforceable master netting agreements or similar agreements. The Company's derivatives that are subject to enforceable master netting agreements or similar agreements are discussed in Note 13, "Derivative Financial Instruments." The following table presents the Company's securities borrowed or purchased under agreements to resell and securities sold under agreements to repurchase that are subject to MRAs. Generally, MRAs require collateral to exceed the asset or liability recognized on the balance sheet. Transactions subject to these agreements are treated as collateralized financings, and those with a single counterparty are permitted to be presented net on the Company's Consolidated Balance Sheets, provided certain criteria are met that permit balance sheet netting. At September 30, 2017 and December 31, 2016, there were no such transactions subject to legally enforceable MRAs that were eligible for balance sheet netting.
The following table includes the amount of collateral pledged or received related to exposures subject to enforceable MRAs. While these agreements are typically over-collateralized, the amount of collateral presented in this table is limited to the amount of the related recognized asset or liability for each counterparty.
(Dollars in millions)
Gross
Amount
 
Amount
Offset
 
Net Amount
Presented in
Consolidated
Balance Sheets
 
Held/Pledged Financial
Instruments
 
Net
Amount
September 30, 2017
 
 
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
 
Securities borrowed or purchased under agreements to resell

$1,182

 

$—

 

$1,182

1 

$1,165

 

$17

Financial liabilities:
 
 
 
 
 
 
 
 
 
Securities sold under agreements to repurchase
1,422

 

 
1,422

 
1,422

 

 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
 
Securities borrowed or purchased under agreements to resell

$1,249

 

$—

 

$1,249

1 

$1,241

 

$8

Financial liabilities:
 
 
 
 
 
 
 
 
 
Securities sold under agreements to repurchase
1,633

 

 
1,633

 
1,633

 


1 Excludes $0 and $58 million of Fed funds sold, which are not subject to a master netting agreement at September 30, 2017 and December 31, 2016, respectively.

Trading Assets and Liabilities and Derivatives Trading Assets and Liabilities and Derivatives
Trading Assets and Liabilities and Derivatives [Text Block]
NOTE 3 - TRADING ASSETS AND LIABILITIES AND DERIVATIVE INSTRUMENTS

The fair values of the components of trading assets and liabilities and derivative instruments are presented in the following table:
(Dollars in millions)
September 30, 2017
 
December 31, 2016
Trading Assets and Derivative Instruments:
 
 
 
U.S. Treasury securities

$366

 

$539

Federal agency securities
303

 
480

U.S. states and political subdivisions
53

 
134

MBS - agency
666

 
567

CLO securities

 
1

Corporate and other debt securities
665

 
656

CP
383

 
140

Equity securities
30

 
49

Derivative instruments 1
898

 
984

Trading loans 2
2,954

 
2,517

Total trading assets and derivative instruments

$6,318

 

$6,067

 
 
 
 
Trading Liabilities and Derivative Instruments:
 
 
 
U.S. Treasury securities

$555

 

$697

MBS - agency

 
1

Corporate and other debt securities
347

 
255

Equity securities
5

 

Derivative instruments 1
377

 
398

Total trading liabilities and derivative instruments

$1,284

 

$1,351

1 Amounts include the impact of offsetting cash collateral received from and paid to the same derivative counterparties, and the impact of netting derivative assets and derivative liabilities when a legally enforceable master netting agreement or similar agreement exists.
2 Includes loans related to TRS.

Various trading and derivative instruments are used as part of the Company’s overall balance sheet management strategies and to support client requirements executed through the Bank and/or STRH, a broker/dealer subsidiary of the Company. The Company manages the potential market volatility associated with trading instruments by using appropriate risk management strategies. The size, volume, and nature of the trading products and derivative instruments can vary based on economic conditions as well as client-specific and Company-specific asset or liability positions.
Product offerings to clients include debt securities, loans traded in the secondary market, equity securities, derivative contracts, and other similar financial instruments. Other trading-related activities include acting as a market maker for certain debt and equity security transactions, derivative instrument transactions, and foreign exchange transactions. The Company also uses derivatives to manage its interest rate and market risk from non-trading activities. The Company has policies and procedures to manage market risk associated with client trading and non-trading activities, and assumes a limited degree of market risk by managing the size and nature of its exposure. For valuation assumptions and additional information related to the Company's trading products and derivative instruments, see Note 13, “Derivative Financial Instruments,” and the “Trading Assets and Derivative Instruments and Securities Available for Sale” section of Note 14, “Fair Value Election and Measurement.”
Pledged trading assets are presented in the following table:
(Dollars in millions)
September 30, 2017
 
December 31, 2016
Pledged trading assets to secure repurchase agreements 1

$756

 

$968

Pledged trading assets to secure certain derivative agreements
291

 
471

Pledged trading assets to secure other arrangements
51

 
40

1 Repurchase agreements secured by collateral totaled $721 million and $928 million at September 30, 2017 and December 31, 2016, respectively.
Securities Available for Sale
Securities Available for Sale
NOTE 4SECURITIES AVAILABLE FOR SALE
Securities Portfolio Composition
 
September 30, 2017
(Dollars in millions)
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
U.S. Treasury securities

$4,300

 

$9

 

$48

 

$4,261

Federal agency securities
266

 
5

 
1

 
270

U.S. states and political subdivisions
558

 
9

 
4

 
563

MBS - agency
24,860

 
287

 
167

 
24,980

MBS - non-agency residential
59

 
4

 
1

 
62

MBS - non-agency commercial
747

 
6

 
3

 
750

ABS
6

 
2

 

 
8

Corporate and other debt securities
33

 

 

 
33

Other equity securities 1
518

 
1

 
2

 
517

Total securities AFS

$31,347

 

$323

 

$226

 

$31,444

 
 
 
 
 
 
 
 
 
December 31, 2016
(Dollars in millions)
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
U.S. Treasury securities

$5,486

 

$5

 

$86

 

$5,405

Federal agency securities
310

 
5

 
2

 
313

U.S. states and political subdivisions
279

 
5

 
5

 
279

MBS - agency
23,642

 
313

 
293

 
23,662

MBS - non-agency residential
71

 
3

 

 
74

MBS - non-agency commercial
257

 

 
5

 
252

ABS
8

 
2

 

 
10

Corporate and other debt securities
34

 
1

 

 
35

Other equity securities 1
642

 
1

 
1

 
642

Total securities AFS

$30,729

 

$335

 

$392

 

$30,672

1 At September 30, 2017, the fair value of other equity securities was comprised of the following: $68 million of FHLB of Atlanta stock, $403 million of Federal Reserve Bank of Atlanta stock, $41 million of mutual fund investments, and $5 million of other.
At December 31, 2016, the fair value of other equity securities was comprised of the following: $132 million of FHLB of Atlanta stock, $402 million of Federal Reserve Bank of Atlanta stock, $102 million of mutual fund investments, and $6 million of other.

The following table presents interest and dividends on securities AFS:
 
Three Months Ended September 30
 
Nine Months Ended September 30
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Taxable interest

$187

 

$154

 

$551

 

$470

Tax-exempt interest
4

 
2

 
9

 
4

Dividends
4

 
3

 
13

 
9

Total interest and dividends on securities AFS

$195

 

$159

 

$573

 

$483



Securities AFS pledged to secure public deposits, repurchase agreements, trusts, certain derivative agreements, and other funds had a fair value of $3.3 billion and $2.0 billion at September 30, 2017 and December 31, 2016, respectively.

The following table presents the amortized cost, fair value, and weighted average yield of investments in debt securities AFS at September 30, 2017, by remaining contractual maturity, with the exception of MBS and ABS, which are based on estimated average life. Receipt of cash flows may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
 
Distribution of Remaining Maturities
(Dollars in millions)
Due in 1 Year or Less
 
Due After 1 Year through 5 Years
 
Due After 5 Years through 10 Years
 
Due After 10 Years
 
Total
Amortized Cost:
 
 
 
 
 
 
 
 
 
U.S. Treasury securities

$—

 

$2,002

 

$2,298

 

$—

 

$4,300

Federal agency securities
126

 
46

 
4

 
90

 
266

U.S. states and political subdivisions
6

 
46

 
179

 
327

 
558

MBS - agency
1,475

 
9,092

 
13,785

 
508

 
24,860

MBS - non-agency residential

 
59

 

 

 
59

MBS - non-agency commercial
5

 
12

 
730

 

 
747

ABS

 
6

 

 

 
6

Corporate and other debt securities
23

 
10

 

 

 
33

Total debt securities AFS

$1,635

 

$11,273

 

$16,996

 

$925

 

$30,829

Fair Value:
 
 
 
 
 
 
 
 
 
U.S. Treasury securities

$—

 

$1,996

 

$2,265

 

$—

 

$4,261

Federal agency securities
129

 
47

 
4

 
90

 
270

U.S. states and political subdivisions
6

 
48

 
185

 
324

 
563

MBS - agency
1,544

 
9,199

 
13,730

 
507

 
24,980

MBS - non-agency residential

 
62

 

 

 
62

MBS - non-agency commercial
5

 
12

 
733

 

 
750

ABS

 
8

 

 

 
8

Corporate and other debt securities
23

 
10

 

 

 
33

Total debt securities AFS

$1,707

 

$11,382

 

$16,917

 

$921

 

$30,927

 Weighted average yield 1
3.51
%
 
2.35
%
 
2.67
%
 
3.15
%
 
2.62
%
1 Weighted average yields are based on amortized cost.

Securities AFS in an Unrealized Loss Position
The Company held certain investment securities AFS where amortized cost exceeded fair value, resulting in unrealized loss positions. Market changes in interest rates and credit spreads may result in temporary unrealized losses as the market prices of securities fluctuate. At September 30, 2017, the Company did not intend to sell these securities nor was it more-likely-than-not that the Company would be required to sell these securities before their anticipated recovery or maturity. The Company reviewed its portfolio for OTTI in accordance with the accounting policies described in Note 1, "Significant Accounting Policies," to the Company's 2016 Annual Report on Form 10-K.

Securities AFS in an unrealized loss position at period end are presented in the following tables:
 
September 30, 2017
 
Less than twelve months
 
Twelve months or longer
 
Total
(Dollars in millions)
Fair
Value
 
Unrealized
Losses
2
 
Fair
Value
 
Unrealized
Losses
2
 
Fair
Value
 
Unrealized
Losses
2
Temporarily impaired securities AFS:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities

$1,092

 

$9

 

$1,382

 

$39

 

$2,474

 

$48

Federal agency securities
43

 

 
33

 
1

 
76

 
1

U.S. states and political subdivisions
178

 
1

 
119

 
3

 
297

 
4

MBS - agency
9,571

 
92

 
2,709

 
75

 
12,280

 
167

MBS - non-agency commercial
207

 
2

 
47

 
1

 
254

 
3

ABS

 

 
5

 

 
5

 

Corporate and other debt securities
10

 

 

 

 
10

 

Other equity securities

 

 
3

 
2

 
3

 
2

Total temporarily impaired securities AFS
11,101

 
104


4,298


121


15,399


225

OTTI securities AFS 1:
 
 
 
 
 
 
 
 
 
 
 
MBS - non-agency residential
14

 
1

 

 

 
14

 
1

ABS

 

 
1

 

 
1

 

Total OTTI securities AFS
14

 
1

 
1

 

 
15

 
1

Total impaired securities AFS

$11,115

 

$105

 

$4,299

 

$121

 

$15,414

 

$226

1 OTTI securities AFS are impaired securities for which OTTI credit losses have been previously recognized in earnings.
2 Unrealized losses less than $0.5 million are presented as zero within the table.

 
December 31, 2016
 
Less than twelve months
 
Twelve months or longer
 
Total
(Dollars in millions)
Fair
Value
 
Unrealized
 Losses 2
 
Fair
Value
 
Unrealized
Losses
2
 
Fair
Value
 
Unrealized
 Losses 2
Temporarily impaired securities AFS:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities

$4,380

 

$86

 

$—

 

$—

 

$4,380

 

$86

Federal agency securities
96

 
2

 
3

 

 
99

 
2

U.S. states and political subdivisions
149

 
5

 

 

 
149

 
5

MBS - agency
14,622

 
285

 
451

 
8

 
15,073

 
293

MBS - non-agency commercial
184

 
5

 

 

 
184

 
5

ABS

 

 
5

 

 
5

 

Corporate and other debt securities
12

 

 

 

 
12

 

Other equity securities

 

 
4

 
1

 
4

 
1

Total temporarily impaired securities AFS
19,443

 
383

 
463

 
9

 
19,906

 
392

OTTI securities AFS 1:
 
 
 
 
 
 
 
 
 
 
 
MBS - non-agency residential
16

 

 

 

 
16

 

ABS

 

 
1

 

 
1

 

Total OTTI securities AFS
16

 

 
1

 

 
17

 

Total impaired securities AFS

$19,459

 

$383

 

$464

 

$9

 

$19,923

 

$392

1 OTTI securities AFS are impaired securities for which OTTI credit losses have been previously recognized in earnings.
2 Unrealized losses less than $0.5 million are presented as zero within the table.

At September 30, 2017, temporarily impaired securities AFS that have been in an unrealized loss position for twelve months or longer included agency MBS, U.S. Treasury securities, municipal securities, non-agency commercial MBS, federal agency securities, one ABS collateralized by 2004 vintage home equity loans, and one equity security. The Company continues to receive contractual distributions on the temporarily impaired ABS and dividends on the equity security. Both of these securities are evaluated quarterly for OTTI. Unrealized losses on the remaining temporarily impaired securities were due to market interest rates being higher than the securities' stated coupon rates. Unrealized losses on securities AFS that relate to factors other than credit are recorded in AOCI, net of tax.
Realized Gains and Losses and Other-Than-Temporarily Impaired Securities AFS
Net securities gains/(losses) are comprised of gross realized gains, gross realized losses, and OTTI credit losses recognized in earnings. For both the three and nine months ended September 30, 2017, gross realized gains and gross realized losses were immaterial and there were no OTTI credit losses recognized in earnings. For the three months ended September 30, 2016, no gross realized gains were recognized and for the nine months ended September 30, 2016, gross realized gains were $4 million. For both the three and nine months ended September 30, 2016, gross realized losses were immaterial and there were no OTTI credit losses recognized in earnings.
Securities AFS in an unrealized loss position are evaluated quarterly for other-than-temporary credit impairment, which is determined using cash flow analyses that take into account security specific collateral and transaction structure. Future expected credit losses are determined using various assumptions, the most significant of which include default rates, prepayment rates, and loss severities. If, based on this analysis, a security is in an unrealized loss position and the Company does not expect to recover the entire amortized cost basis of the security, the expected cash flows are then discounted at the security’s initial effective interest rate to arrive at a present value amount. Credit losses on the OTTI security are recognized in earnings and reflect the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security. See Note 1, "Significant Accounting Policies," to the Company's 2016 Annual Report on Form 10-K for additional information regarding the Company's policy on securities AFS and related impairments.
The Company seeks to reduce existing exposure on OTTI securities primarily through paydowns. In certain instances, the amount of credit losses recognized in earnings on a debt security exceeds the total unrealized losses on the security, which may result in unrealized gains relating to factors other than credit recorded in AOCI, net of tax.
During the three and nine months ended September 30, 2017 and 2016, there were no credit impairment losses recognized on securities AFS held at the end of each period. The accumulated balance of OTTI credit losses recognized in earnings on securities AFS held at period end was $22 million at September 30, 2017 and $24 million at September 30, 2016. Subsequent credit losses may be recorded on securities without a corresponding further decline in fair value when there has been a decline in expected cash flows.
Loans
Loans, Notes, Trade and Other Receivables, Excluding Allowance for Credit Losses [Text Block]
NOTE 5 - LOANS
Composition of Loan Portfolio
(Dollars in millions)
September 30, 2017
 
December 31, 2016
Commercial loans:
 
 
 
C&I 1

$67,758

 

$69,213

CRE
5,238

 
4,996

Commercial construction
3,964

 
4,015

Total commercial loans
76,960

 
78,224

Residential loans:
 
 
 
Residential mortgages - guaranteed
497

 
537

Residential mortgages - nonguaranteed 2
27,041

 
26,137

Residential home equity products
10,865

 
11,912

Residential construction
327

 
404

Total residential loans
38,730

 
38,990

Consumer loans:
 
 
 
Guaranteed student
6,559

 
6,167

Other direct
8,597

 
7,771

Indirect
11,952

 
10,736

Credit cards
1,466

 
1,410

Total consumer loans
28,574

 
26,084

LHFI

$144,264

 

$143,298

LHFS 3

$2,835

 

$4,169

1 Includes $3.5 billion and $3.7 billion of lease financing and $764 million and $729 million of installment loans at September 30, 2017 and December 31, 2016, respectively.
2 Includes $206 million and $222 million of LHFI measured at fair value at September 30, 2017 and December 31, 2016, respectively.
3 Includes $2.3 billion and $3.5 billion of LHFS measured at fair value at September 30, 2017 and December 31, 2016, respectively.
During the three months ended September 30, 2017 and 2016, the Company transferred $91 million and $153 million of LHFI to LHFS, and $6 million and $13 million of LHFS to LHFI, respectively. In addition to sales of residential and commercial mortgage LHFS in the normal course of business, the Company sold $285 million and $1.2 billion of loans and leases for a net loss of $1 million and a net gain of $8 million during the three months ended September 30, 2017 and 2016, respectively.
During the nine months ended September 30, 2017 and 2016, the Company transferred $218 million and $315 million of LHFI to LHFS, and transferred $16 million and $23 million of LHFS to LHFI, respectively. In addition to sales of residential and commercial mortgage LHFS in the normal course of business, the Company sold $513 million and $1.5 billion of loans and leases for an immaterial net gain and a net gain of $6 million during the nine months ended September 30, 2017 and 2016, respectively.
During the three months ended September 30, 2017 and 2016, the Company purchased $333 million and $506 million, respectively, of guaranteed student loans in the normal course of business. During the nine months ended September 30, 2017, the Company purchased $1.4 billion of guaranteed student loans and $99 million of consumer indirect loans, and during the nine months ended September 30, 2016, the Company purchased $1.6 billion of guaranteed student loans.
At September 30, 2017 and December 31, 2016, the Company had $23.9 billion and $22.6 billion of net eligible loan collateral pledged to the Federal Reserve discount window to support $17.8 billion and $17.0 billion of available, unused borrowing capacity, respectively.
At September 30, 2017 and December 31, 2016, the Company had $38.2 billion and $36.9 billion of net eligible loan collateral pledged to the FHLB of Atlanta to support $30.8 billion and $31.9 billion of available borrowing capacity, respectively. The available FHLB borrowing capacity at September 30, 2017 was used to support $1.3 billion of long-term debt and $5.0 billion of letters of credit issued on the Company's behalf. At December 31, 2016, the available FHLB borrowing capacity was used to support $2.8 billion of long-term debt and $7.3 billion of letters of credit issued on the Company's behalf.
Credit Quality Evaluation
The Company evaluates the credit quality of its loan portfolio by employing a dual internal risk rating system, which assigns both PD and LGD ratings to derive expected losses. Assignment of these ratings are predicated upon numerous factors, including consumer credit risk scores, rating agency information, borrower/guarantor financial capacity, LTV ratios, collateral type, debt service coverage ratios, collection experience, other internal metrics/analyses, and/or qualitative assessments.
For the commercial portfolio, the Company believes that the most appropriate credit quality indicator is an individual loan’s risk assessment expressed according to the broad regulatory agency classifications of Pass or Criticized. The Company conforms to the following regulatory classifications for Criticized assets: Other Assets Especially Mentioned (or Special Mention), Adversely Classified, Doubtful, and Loss. However, for the purposes of disclosure, management believes the most meaningful distinction within the Criticized categories is between Criticized accruing (which includes Special Mention and a portion of Adversely Classified) and Criticized nonaccruing (which includes a portion of Adversely Classified and Doubtful and Loss). This distinction identifies those relatively higher risk loans for which there is a basis to believe that the Company will not collect all amounts due under those loan agreements. The Company's risk rating system is more granular, with multiple risk ratings in both the Pass and Criticized categories. Pass ratings reflect relatively low PDs, whereas, Criticized assets have higher PDs. The granularity in Pass ratings assists in establishing pricing, loan structures, approval requirements, reserves, and ongoing credit management requirements. Commercial risk ratings are refreshed at least annually, or more frequently as appropriate, based upon considerations such as market conditions, borrower characteristics, and portfolio trends. Additionally, management routinely reviews portfolio risk ratings, trends, and concentrations to support risk identification and mitigation activities.
For consumer and residential loans, the Company monitors credit risk based on indicators such as delinquencies and FICO scores. The Company believes that consumer credit risk, as assessed by the industry-wide FICO scoring method, is a relevant credit quality indicator. Borrower-specific FICO scores are obtained at origination as part of the Company’s formal underwriting process, and refreshed FICO scores are obtained by the Company at least quarterly.
For government-guaranteed loans, the Company monitors the credit quality based primarily on delinquency status, as it is a more relevant indicator of credit quality due to the government guarantee. At September 30, 2017 and December 31, 2016, 32% and 29%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At September 30, 2017 and December 31, 2016, 76% and 75%, respectively, of the guaranteed student loan portfolio was current with respect to payments. The Company's loss exposure on guaranteed residential and student loans is mitigated by the government guarantee.
LHFI by credit quality indicator are presented in the following tables:
 
Commercial Loans
 
C&I
 
CRE
 
Commercial Construction
(Dollars in millions)
September 30, 2017
 
December 31, 2016
 
September 30, 2017
 
December 31, 2016
 
September 30, 2017
 
December 31, 2016
Risk rating:
 
 
 
 
 
 
 
 
 
 
 
Pass

$65,768

 

$66,961

 

$4,933

 

$4,574

 

$3,882

 

$3,914

Criticized accruing
1,698

 
1,862

 
300

 
415

 
81

 
84

Criticized nonaccruing
292