SUNTRUST BANKS INC, 10-Q filed on 5/7/2014
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2014
Apr. 30, 2014
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
Mar. 31, 2014 
 
Document Fiscal Year Focus
2014 
 
Document Fiscal Period Focus
Q1 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
532,843,111 
Entity Well-known Seasoned Issuer
Yes 
 
Entity Voluntary Filers
No 
 
Entity Current Reporting Status
Yes 
 
Consolidated Statements of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Interest Income
 
 
Interest and fees on loans
$ 1,151 
$ 1,169 
Interest and fees on loans held for sale
15 
31 
Interest and Dividend Income, Securities, Available-for-sale
153 
143 
Trading account interest and other
17 
16 
Total interest income
1,336 
1,359 
Interest Expense
 
 
Interest on deposits
65 
79 
Interest Expense, Long-term Debt
58 
51 
Interest on other borrowings
Total interest expense
132 
138 
Net, interest income
1,204 
1,221 
Provision for Loan, Lease, and Other Losses
102 
212 
Interest Income (Expense), after Provision for Loan Loss
1,102 
1,009 
Noninterest Income
 
 
Service charges on deposit accounts
155 
160 
Fees and Commissions, Other
88 
89 
Fees and Commissions, Credit and Debit Cards
76 
76 
Fees and Commissions, Fiduciary and Trust Activities
130 
124 
Investment Advisory, Management and Administrative Fees
71 
61 
Investment Banking Revenue
88 
68 
Trading Gain (Loss)
49 
42 
Servicing Fees, Net
54 
38 
Fees and Commissions, Mortgage Banking
43 
159 
Gain (Loss) on Sale of Securities, Net
(1)1
1
Noninterest Income, Other Operating Income
38 
44 
Total noninterest income
791 
863 
Noninterest Expense
 
 
Employee compensation
659 
611 
Other Labor-related Expenses
141 
148 
Outside processing and software
170 
178 
Net occupancy expense
86 
89 
Equipment Expense
44 
45 
Federal Deposit Insurance Corporation Premium Expense
40 
54 
Marketing and Advertising Expense
25 
30 
Credit and collection services
22 
33 
Operating losses
21 
39 
Professional Fees
15 
Amortization of Intangible Assets and Impairment of Goodwill
Other Noninterest Expense
(137)2
(105)2
Noninterest Expense
1,357 
1,353 
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Extraordinary Items, Noncontrolling Interest
536 
519 
Income Tax Expense (Benefit)
125 2
161 2
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest
411 
358 
Net Income (Loss) Attributable to Noncontrolling Interest
Net Income (Loss) Attributable to Parent
405 
352 
Net Income (Loss) Available to Common Stockholders, Basic
$ 393 
$ 340 
Earnings Per Share, Diluted
$ 0.73 
$ 0.63 
Earnings Per Share, Basic
$ 0.74 
$ 0.64 
Common Stock, Dividends, Per Share, Declared
$ 0.10 
$ 0.05 
Weighted Average Number of Shares Outstanding, Diluted
537 
540 
Weighted Average Number of Shares Outstanding, Basic
531 
536 
Consolidated Statements of Income (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Available-for-sale Securities
$ 0 
$ 1 
Mortgage-backed Securities, Issued by Private Enterprises [Member]
 
 
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Available-for-sale Securities
1
1
Other than Temporary Impairment Losses, Investments, Portion in Other Comprehensive Loss, before Tax, Including Portion Attributable to Noncontrolling Interest, Available-for-sale Securities
$ 0 
$ 1 2
Consolidated Statements of Comprehensive Income Consolidated Statement of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Net Income (Loss) Attributable to Parent
$ 405 
$ 352 
Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax
108 
(73)
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Net of Tax
(50)
(71)
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Adjustment, Net of Tax
31 
20 
Other Comprehensive Income (Loss), Net of Tax, Portion Attributable to Parent
89 
(124)
Comprehensive Income (Loss), Net of Tax, Attributable to Parent
$ 494 
$ 228 
Consolidated Statements of Comprehensive Income Consolidated Statement of Comprehensive Income (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Other Comprehensive Income (Loss), Available-for-sale Securities, Tax
$ 63 
$ (42)
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Tax
(29)
(42)
Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Net Unamortized Gain (Loss) Arising During Period, Tax
$ 18 
$ 12 
Consolidated Balance Sheets (USD $)
In Millions, except Share data in Thousands, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Assets
 
 
Cash and Due from Banks
$ 6,978 
$ 4,258 
Federal Funds Sold and Securities Purchased under Agreements to Resell
907 
983 
Interest-bearing Deposits in Banks and Other Financial Institutions
22 
22 
Cash and cash equivalents
7,907 
5,263 
Trading assets
4,848 
5,040 
Available-for-sale Securities
23,302 
22,542 
Loans Held for Sale
1,488 1
1,699 1
Loans held for investment
129,196 2
127,877 2
Loans and Leases Receivable, Allowance
(2,040)
(2,044)
Net loans
127,156 
125,833 
Premises and equipment
1,550 
1,565 
Goodwill
6,377 
6,369 
Intangible Assets, Net (Excluding Goodwill)
1,282 
1,334 
Other real estate owned
151 
170 
Other Assets
5,481 
5,520 
Total assets
179,542 
175,335 
Liabilities and Shareholders' Equity
 
 
Noninterest-bearing consumer and commercial deposits
39,792 
38,800 
Interest-bearing Deposit Liabilities
93,164 
90,959 
Total deposits
132,956 
129,759 
Funds purchased
1,269 
1,192 
Securities Sold under Agreements to Repurchase
2,133 3
1,759 3
Other Short-term Borrowings
5,277 
5,788 
Long-term Debt
11,565 4
10,700 4
Trading liabilities
1,041 
1,181 
Other Liabilities
3,484 
3,534 
Total liabilities
157,725 
153,913 
Preferred Stock, Value, Outstanding
725 
725 
Common Stock, Value, Outstanding
550 
550 
Additional paid in capital
9,107 
9,115 
Retained earnings
12,278 
11,936 
Treasury stock, at cost, and other
(643)5
(615)5
Accumulated Other Comprehensive Income (Loss), Net of Tax
(200)
(289)
Total shareholders' equity
21,817 
21,422 
Total liabilities and shareholders' equity
179,542 
175,335 
Common Stock, Shares, Outstanding
534,780 
536,097 
Common shares authorized
750,000 
750,000 
Preferred Stock, Shares Outstanding
Preferred Stock, Shares Authorized
50,000 
50,000 
Treasury shares of common stock
15,141 
13,824 
Treasury Stock and Other
 
 
Liabilities and Shareholders' Equity
 
 
Treasury stock, at cost, and other
(727)
 
Total shareholders' equity
(643)
(615)
Variable Interest Entity, Primary Beneficiary [Member]
 
 
Assets
 
 
Loans held for investment
318 
327 
Liabilities and Shareholders' Equity
 
 
Long-term Debt
570 
597 
Portion at Fair Value Measurement [Member] |
Variable Interest Entity, Primary Beneficiary [Member]
 
 
Assets
 
 
Loans Held for Sale
$ 224 
$ 261 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified
Mar. 31, 2014
Dec. 31, 2013
Loans Held-for-sale, Fair Value Disclosure
$ 1,233 
$ 1,378 
Loans Receivable, Fair Value Disclosure
299 
302 
Servicing Asset at Fair Value, Amount
1,251 
1,300 
Deposits, Fair Value Disclosure
759 
764 
Long-term Debt, Fair Value
1,545 
1,556 
Common stock, par value
$ 1.00 
$ 1.00 
Loans Receivable Held-for-sale, Net
1,488 1
1,699 1
Loans held for investment
129,196 2
127,877 2
Long-term Debt
11,565 3
10,700 3
Repurchase Agreements [Member]
 
 
Trading Securities Pledged as Collateral
585 
731 
Variable Interest Entity, Primary Beneficiary [Member]
 
 
Long-term Debt, Fair Value
238 
256 
Loans held for investment
318 
327 
Long-term Debt
570 
597 
Variable Interest Entity, Primary Beneficiary [Member] |
Portion at Fair Value Measurement [Member]
 
 
Loans Receivable Held-for-sale, Net
224 
261 
Treasury Stock and Other
 
 
Stockholders' Equity Attributable to Noncontrolling Interest
$ 126 
$ 119 
Consolidated Statements of Shareholders' Equity (USD $)
In Millions, except Share data, unless otherwise specified
Total
USD ($)
Preferred Stock [Member]
USD ($)
Common Stock [Member]
USD ($)
Additional Paid-in Capital [Member]
USD ($)
Retained Earnings [Member]
USD ($)
Treasury Stock and Other
USD ($)
Accumulated Other Comprehensive Income (Loss) [Member]
USD ($)
Common Stock [Member]
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, beginning of period at Dec. 31, 2012
$ 20,985 
$ 725 
$ 550 
$ 9,174 
$ 10,817 
$ (590)1
$ 309 2
 
Common Stock, Shares, Outstanding, beginning of period at Dec. 31, 2012
 
 
539,000,000 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Net Income (Loss) Attributable to Parent
352 
 
 
 
352 
 
 
 
Other Comprehensive Income (Loss), Net of Tax
(124)
 
 
 
 
 
(124)2
 
Dividends, Common Stock, Cash
(27)
 
 
 
(27)
 
 
 
Dividends, Preferred Stock, Cash3
(9)
 
 
 
(9)
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period
 
 
 
 
 
 
 
Stock Issued During Period, Value, Stock Options Exercised
 
 
(8)
 
13 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
 
 
(33)
 
36 1
 
 
Adjustments to Additional Paid in Capital, Share-based Compensation, Restricted Stock Unit or Restricted Stock Award, Requisite Service Period Recognition
 
 
 
 
1
 
 
Stock Issued During Period, Value, Employee Benefit Plan
 
 
(1)
 
1
 
 
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, end of period at Mar. 31, 2013
21,194 
725 
550 
9,132 
11,133 
(531)1
185 2
 
Common Stock, Shares, Outstanding, end of period at Mar. 31, 2013
 
 
540,000,000 
 
 
 
 
 
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, beginning of period at Dec. 31, 2013
21,422 
725 
550 
9,115 
11,936 
(615)
(289)2
 
Common Stock, Shares, Outstanding, beginning of period at Dec. 31, 2013
536,097,000 
 
536,000,000 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Net Income (Loss) Attributable to Parent
405 
 
 
 
405 
 
 
 
Other Comprehensive Income (Loss), Net of Tax
89 
 
 
 
 
 
89 2
 
Noncontrolling Interest, Period Increase (Decrease)
 
 
 
 
1
 
 
Dividends, Common Stock, Cash
(54)
 
 
 
(54)
 
 
 
Dividends, Preferred Stock, Cash3
(9)
 
 
 
(9)
 
 
 
Treasury Stock, Shares, Acquired
 
 
 
 
 
 
 
(1,000,000)
Treasury Stock, Value, Acquired, Cost Method
(50)
 
 
 
 
(50)1
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period
 
 
 
 
 
 
 
Stock Issued During Period, Value, Stock Options Exercised
(1)
 
 
(9)
 
1
 
 
Stock Issued During Period, Shares, Restricted Stock Award, Net of Forfeitures
 
 
 
 
 
 
 
Stock Issued During Period, Value, Restricted Stock Award, Net of Forfeitures
 
 
 
(3)1
 
 
Adjustments to Additional Paid in Capital, Share-based Compensation, Restricted Stock Unit or Restricted Stock Award, Requisite Service Period Recognition
 
 
 
 
1
 
 
Stock Issued During Period, Value, Employee Benefit Plan
(4)
 
 
(6)
 
1
 
 
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest, end of period at Mar. 31, 2014
$ 21,817 
$ 725 
$ 550 
$ 9,107 
$ 12,278 
$ (643)
$ (200)2
 
Common Stock, Shares, Outstanding, end of period at Mar. 31, 2014
534,780,000 
 
535,000,000 
 
 
 
 
 
Consolidated Statements of Shareholders' Equity (Parenthetical) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Common stock dividends, per share
$ 0.10 
$ 0.05 
Treasury Stock, Value
$ (643)1
 
Accumulated Other Comprehensive Income (Loss), Available-for-sale Securities Adjustment, Net of Tax
31 
447 
Accumulated Other Comprehensive Income (Loss), Cumulative Changes in Net Gain (Loss) from Cash Flow Hedges, Effect Net of Tax
229 
461 
Accumulated Other Comprehensive Income (Loss), Pension and Other Postretirement Benefit Plans, Net of Tax
(460)
(723)
Treasury Stock and Other
 
 
Treasury Stock, Value
(727)
(569)
Deferred Compensation Equity
(42)
(76)
Stockholders' Equity Attributable to Noncontrolling Interest
$ 126 
$ 114 
Series A Preferred Stock [Member]
 
 
Preferred Stock, Dividends, Per Share, Cash Paid
$ 1,000 
$ 1,000 
Series B Preferred Stock [Member]
 
 
Preferred Stock, Dividends, Per Share, Cash Paid
$ 1,000 
$ 1,000 
Series E Preferred Stock [Member]
 
 
Preferred Stock, Dividends, Per Share, Cash Paid
$ 1,469 
$ 1,387 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2014
Mar. 31, 2013
Cash Flows from Operating Activities:
 
 
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest
$ 411 
$ 358 
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
 
 
Depreciation, Amortization and Accretion, Net
163 
184 
Origination of Mortgage Servicing Rights (MSRs)
(32)
(110)
Provisions for credit losses and foreclosed property
104 
228 
Mortgage repurchase provision
14 
Stock Option Compensation And Amortization Of Restricted Stock Compensation
Excess Tax Benefit from Share-based Compensation, Operating Activities
(3)
Gain (Loss) on Sale of Securities, Net
(1)1
1
Net gain on sale of assets
(70)
(198)
Net decrease/(increase) in loans held for sale
353 
404 
Net (increase)/decrease in other assets
117 
(437)
Increase (Decrease) in Other Operating Liabilities
(222)
172 
Net Cash Provided by (Used in) Operating Activities
830 
621 
Cash Flows from Investing Activities:
 
 
Proceeds from Maturities, Prepayments and Calls of Available-for-sale Securities
762 
1,614 
Proceeds from sales of securities available for sale
69 
33 
Purchases of securities available for sale
(1,436)
(3,678)
Proceeds from sales of trading securities
59 
Proceeds from (payments for) Originations and Purchases of Loans Held-for-investment
(1,667)
(167)
Proceeds from sales of loans
94 
494 
Capital expenditures
(34)
(28)
Payments related to acquisitions, including contingent consideration
Proceeds from Sale of Other Real Estate
96 
145 
Net cash (used in)/provided by investing activities
(2,065)
(1,587)
Cash Flows from Financing Activities:
 
 
Net (decrease)/increase in total deposits
3,197 
(2,401)
Net increase/(decrease) in funds purchased, securities sold under agreements to repurchase, and other short-term borrowings
(60)
1,134 
Proceeds from Issuance of Long-term Debt
876 
12 
Repayment of long-term debt
(28)
(44)
Payments for Repurchase of Common Stock
(50)
Common and preferred dividends paid
(63)
(36)
Stock option activity
Net cash provided by/(used in) financing activities
3,879 
(1,329)
Net (decrease)/increase in cash and cash equivalents
2,644 
(2,295)
Cash and cash equivalents at beginning of period
5,263 
8,257 
Cash and cash equivalents at end of period
7,907 
5,962 
Supplemental Disclosures:
 
 
Transfer of Loans Held-for-sale to Portfolio Loans
17 
12 
Loans transferred from loans to loans held for sale
115 
57 
Transfer to Other Real Estate
$ 42 
$ 66 
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 for interim financial 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, which 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 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.

The Company evaluated subsequent events through the date its financial statements were issued.

These financial statements should be read in conjunction with the Company’s 2013 Annual Report on Form 10-K. There have been no significant changes to the Company’s accounting policies as disclosed in the Company’s 2013 Annual Report on Form 10-K.
Accounting Policies Recently Adopted and Pending Accounting Pronouncements
In March 2013, the FASB issued ASU 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force)." The ASU requires additional disclosures about joint and several liability arrangements and requires the Company to measure obligations resulting from joint and several liability arrangements as the sum of the amount the Company agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the Company expects to pay on behalf of its co-obligors. The ASU is effective for the fiscal years and interim periods beginning after December 15, 2013. The Company adopted the ASU at January 1, 2014 and the adoption did not have an impact on the Company's financial position, results of operations, or EPS.
In June 2013, the FASB issued ASU 2013-08, "Financial Services—Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements." The ASU clarifies the characteristics of an investment company and requires an investment company to measure noncontrolling ownership interests in other investment companies at fair value rather than using the equity method of accounting. The ASU is effective for fiscal years and interim periods beginning after December 15, 2013. The Company adopted the ASU at January 1, 2014 and the adoption did not have an impact on the Company's financial position, results of operations, or EPS.

In January 2014, the FASB issued ASU 2014-01, "Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing Projects (a consensus of the FASB Emerging Issues Task Force)." The ASU allows for use of the proportional amortization method for investments in qualified affordable housing projects if certain conditions are met. Under the proportional amortization method, the initial cost of the investment is amortized in proportion to the tax credits and other tax benefits received and the net investment performance is recognized in the income statement as a component of income tax expense. The ASU provides for a practical expedient, which allows for amortization of the investment in proportion to only the tax credits if it produces a measurement that is substantially similar to the measurement that would result from using both tax credits and other tax benefits. The ASU is effective for fiscal years and interim periods beginning after December 15, 2014. As early adoption is permitted, the Company adopted this ASU effective January 1, 2014, utilizing the practical expedient method. During the three months ended March 31, 2014, $13 million of investment amortization expense has been recognized on a net basis with tax credits received as a component of income tax expense. The standard is required to be applied retrospectively; therefore prior period amounts included in noninterest expense prior to adoption have been reclassified. During the three months ended March 31, 2013, $10 million of investment amortization expense was included in other noninterest expense in the Consolidated Statements of Income which was reclassified to income tax expense upon adoption. No other impact is expected on the Company's financial position, results of operations, or EPS.

In January 2014, the FASB issued ASU 2014-04, "Receivables—Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure (a consensus of the FASB Emerging Issues Task Force)." The update clarifies that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. The ASU is effective for fiscal years and interim periods beginning after December 15, 2014. The adoption of this ASU is not expected to have a significant impact on the Company's financial position, results of operations, or EPS.

In April 2014, the FASB issued ASU 2014-08, "Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360):  Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." The update changes the requirements for reporting discontinued operations in Subtopic 205-20. The ASU is effective for fiscal years and interim periods beginning after December 15, 2014. Early adoption is permitted only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued. The Company adopted the ASU upon issuance for prospective transactions not previously reported. The adoption is not expected to have an impact on the Company's financial position, results of operations, or EPS.
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 BORROWED OR PURCHASED UNDER AGREEMENTS TO RESELL AND SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

Fed funds sold and securities borrowed or purchased under agreements to resell were as follows:
(Dollars in millions)
March 31, 2014
 
December 31, 2013
Fed funds sold

$—

 

$75

Securities borrowed
308

 
184

Resell agreements
599

 
724

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

$907

 

$983


Securities purchased under agreements to resell are primarily collateralized by U.S. government or agency securities and are carried at the amounts at which securities will be subsequently resold. Securities borrowed are primarily collateralized by corporate securities. The Company takes possession of all securities purchased under agreements to resell and securities borrowed and performs the appropriate margin evaluation on the acquisition date based on market volatility, as necessary. It is the Company's policy to obtain possession of collateral with a fair value between 95% to 110% of the principal amount loaned under resale and securities borrowing agreements. The total market value of the collateral held was $909 million and $913 million at March 31, 2014 and December 31, 2013, respectively, of which $251 million and $234 million was repledged, respectively.

The Company has pledged $585 million and $731 million of trading assets to secure $605 million and $717 million of repurchase agreements at March 31, 2014 and December 31, 2013, respectively.

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 11, "Derivative Financial Instruments." Securities purchased under agreements to resell and securities sold under agreements to repurchase are governed by a MRA. Under the terms of the MRA, all transactions between the Company and the counterparty constitute a single business relationship such that in the event of default, the nondefaulting party is entitled to set off claims and apply property held by that party in respect of any transaction against obligations owed. Any payments, deliveries, or other transfers may be applied against each other and netted. These amounts are limited to the contract asset/liability balance, and accordingly, do not include excess collateral received/pledged.
The following table presents the Company's eligible securities borrowed or purchased under agreements to resell and securities sold under agreements to repurchase at March 31, 2014 and December 31, 2013:
(Dollars in millions)
Gross
Amount
 
Amount
Offset
 
Net Amount
Presented in
Consolidated
Balance Sheets
 
Held/Pledged Financial Instruments
 
Net
Amount
March 31, 2014
 
 
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
 
Securities borrowed or purchased under agreements to resell

$907

 

$—

 

$907

1 

$896

 

$11

Financial liabilities:
 
 
 
 
 
 
 
 
 
Securities sold under agreements to repurchase
2,133

 

 
2,133

1 
2,133

 

 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
 
 
 
 
 
 
 
 
Financial assets:
 
 
 
 
 
 
 
 
 
Securities borrowed or purchased under agreements to resell

$908

 

$—

 

$908

1,2 

$899

 

$9

Financial liabilities:
 
 
 
 
 
 
 
 
 
Securities sold under agreements to repurchase
1,759

 

 
1,759

1 
1,759

 


1 None of the Company's repurchase and reverse repurchase transactions met the right of setoff criteria for net balance sheet presentation at March 31, 2014 and December 31, 2013.
2 Excludes $75 million of Fed funds sold which are not subject to a master netting agreement at December 31, 2013
Securities Available for Sale
Securities Available for Sale
NOTE 3 – SECURITIES AVAILABLE FOR SALE

Securities Portfolio Composition
 
March 31, 2014
(Dollars in millions)
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
U.S. Treasury securities

$1,582

 

$7

 

$32

 

$1,557

Federal agency securities
1,015

 
15

 
43

 
987

U.S. states and political subdivisions
281

 
6

 

 
287

MBS - agency
19,317

 
447

 
317

 
19,447

MBS - private
147

 
2

 

 
149

ABS
65

 
3

 
1

 
67

Corporate and other debt securities
39

 
3

 

 
42

Other equity securities 1
765

 
1

 

 
766

Total securities AFS

$23,211

 

$484

 

$393

 

$23,302

 
 
 
 
 
 
 
 
 
December 31, 2013
(Dollars in millions)
Amortized
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
U.S. Treasury securities

$1,334

 

$6

 

$47

 

$1,293

Federal agency securities
1,028

 
13

 
57

 
984

U.S. states and political subdivisions
232

 
7

 
2

 
237

MBS - agency
18,915

 
421

 
425

 
18,911

MBS - private
155

 
1

 
2

 
154

ABS
78

 
2

 
1

 
79

Corporate and other debt securities
39

 
3

 

 
42

Other equity securities 1
841

 
1

 

 
842

Total securities AFS

$22,622

 

$454

 

$534

 

$22,542

1 At March 31, 2014, other equity securities was comprised of the following: $308 million in FHLB of Atlanta stock, $402 million in Federal Reserve Bank stock, $54 million in mutual fund investments, and $2 million of other. At December 31, 2013, other equity securities was comprised of the following: $336 million in FHLB of Atlanta stock, $402 million in Federal Reserve Bank stock, $103 million in mutual fund investments, and $1 million of other.

The following table presents interest and dividends on securities AFS:
 
Three Months Ended March 31
(Dollars in millions)
2014
 
2013
Taxable interest

$141

 

$132

Tax-exempt interest
3

 
3

Dividends
9

 
8

Total interest and dividends

$153

 

$143



Securities AFS that were pledged to secure public deposits, repurchase agreements, trusts, and other funds had a fair value of $10.8 billion and $11.0 billion at March 31, 2014 and December 31, 2013, respectively. At March 31, 2014, there was $625 million of securities AFS pledged against repurchase arrangements under which the secured party has possession of the collateral and has the right to sell or repledge that collateral. At December 31, 2013, no securities AFS were pledged under such secured borrowing arrangements.

The amortized cost and fair value of investments in debt securities at March 31, 2014, by estimated average life, are shown below. Actual cash flows may differ from estimated average lives and contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.

 
Distribution of Maturities
(Dollars in millions)
1 Year
or Less
 
1-5
Years
 
5-10
Years
 
After 10
Years
 
Total
Amortized Cost:
 
 
 
 
 
 
 
 
 
U.S. Treasury securities

$1

 

$893

 

$688

 

$—

 

$1,582

Federal agency securities
71

 
253

 
544

 
147

 
1,015

U.S. states and political subdivisions
97

 
57

 
94

 
33

 
281

MBS - agency
1,722

 
6,093

 
7,415

 
4,087

 
19,317

MBS - private

 
147

 

 

 
147

ABS
44

 
19

 
2

 

 
65

Corporate and other debt securities

 
22

 
17

 

 
39

Total debt securities

$1,935

 

$7,484

 

$8,760

 

$4,267

 

$22,446

Fair Value:
 
 
 
 
 
 
 
 
 
U.S. Treasury securities

$1

 

$896

 

$660

 

$—

 

$1,557

Federal agency securities
71

 
264

 
509

 
143

 
987

U.S. states and political subdivisions
98

 
60

 
95

 
34

 
287

MBS - agency
1,825

 
6,252

 
7,456

 
3,914

 
19,447

MBS - private

 
149

 

 

 
149

ABS
44

 
21

 
2

 

 
67

Corporate and other debt securities

 
25

 
17

 

 
42

Total debt securities

$2,039

 

$7,667

 

$8,739

 

$4,091

 

$22,536

 Weighted average yield 1
2.93
%
 
2.51
%
 
2.88
%
 
2.92
%
 
2.77
%
1Average yields are based on amortized cost and presented on a FTE basis.

Securities in an Unrealized Loss Position
The Company held certain investment securities where amortized cost exceeded fair market value, resulting in unrealized loss positions. Market changes in interest rates and credit spreads may result in temporary unrealized losses as the market price of securities fluctuates. At March 31, 2014, 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 has reviewed its portfolio for OTTI in accordance with the accounting policies described in the Company's 2013 Annual Report on Form 10-K.
 
March 31, 2014
 
Less than twelve months
 
Twelve months or longer
 
Total
(Dollars in millions)
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized  
Losses
Temporarily impaired securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities

$1,252

 

$32

 

$—

 

$—

 

$1,252

 

$32

Federal agency securities
352

 
21

 
269

 
22

 
621

 
43

U.S. states and political subdivisions
11

 

 

 

 
11

 

MBS - agency
8,269

 
262

 
633

 
55

 
8,902

 
317

ABS

 

 
13

 
1

 
13

 
1

Total temporarily impaired securities
9,884

 
315

 
915

 
78

 
10,799

 
393

OTTI securities 1:
 
 
 
 
 
 
 
 
 
 
 
MBS - private
51

 

 

 

 
51

 

Total OTTI securities
51

 

 

 

 
51

 

Total impaired securities

$9,935

 

$315

 

$915

 

$78

 

$10,850

 

$393


 
December 31, 2013
 
Less than twelve months
 
Twelve months or longer
 
Total
(Dollars in millions)
Fair
   Value   
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Temporarily impaired securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities

$1,036

 

$47

 

$—

 

$—

 

$1,036

 

$47

Federal agency securities
398

 
29

 
264

 
28

 
662

 
57

U.S. states and political subdivisions
12

 

 
20

 
2

 
32

 
2

MBS - agency
9,173

 
358

 
618

 
67

 
9,791

 
425

ABS

 

 
13

 
1

 
13

 
1

Total temporarily impaired securities
10,619

 
434

 
915

 
98

 
11,534

 
532

OTTI securities 1:
 
 
 
 
 
 
 
 
 
 
 
MBS - private
105

 
2

 

 

 
105

 
2

Total OTTI securities
105

 
2

 

 

 
105

 
2

Total impaired securities

$10,724

 

$436

 

$915

 

$98

 

$11,639

 

$534

1Includes OTTI securities for which credit losses have been recorded in earnings in current or prior periods.

Unrealized losses on securities that have been in a temporarily impaired position for longer than twelve months at March 31, 2014, included federal agency securities, agency MBS, and one ABS collateralized by 2004 vintage home equity loans. The fair value of federal agency and agency MBS securities has declined due to the increase in market interest rates. The ABS continues to receive timely principal and interest payments, and is evaluated quarterly for credit impairment. Cash flow analysis shows that the underlying collateral can withstand highly stressed loss assumptions without incurring a credit loss.

The portion of unrealized losses on securities that have been OTTI that relates to factors other than credit is recorded in AOCI. Losses related to credit impairment on these securities are determined through estimated cash flow analyses and have been recorded in earnings in prior periods.

Realized Gains and Losses and Other-than-Temporarily Impaired Securities
 
Three Months Ended March 31
(Dollars in millions)
2014
 
2013
Gross realized gains

$—



$3

Gross realized losses
(1
)
 

OTTI

 
(1
)
Net securities (losses)/gains

($1
)
 

$2


Credit impairment that is determined through the use of models is estimated using cash flows on security specific collateral and the transaction structure. Future expected credit losses are determined by using various assumptions, the most significant of which include default rates, prepayment rates, and loss severities. If, based on this analysis, the 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. OTTI credit losses reflect the difference between the present value of cash flows expected to be collected and the amortized cost basis of these securities. During the three months ended March 31, 2013, all OTTI recognized in earnings related to private MBS that have underlying collateral of residential mortgage loans securitized in 2007 or ABS collateralized by 2004 vintage home equity loans.

The Company continues to reduce existing exposure primarily through paydowns. In certain instances, the amount of impairment losses recognized in earnings includes credit losses on debt securities that exceeds the total unrealized losses, and as a result, the securities may have unrealized gains in AOCI relating to factors other than credit.

The securities that gave rise to credit impairments recognized during the three months ended March 31, 2013, as shown in the table below, consisted of private MBS and ABS with a combined fair value of approximately $2 million at March 31, 2013.
(Dollars in millions)
2014
 
2013
OTTI 1

$—

 

$—

Portion of gains recognized in OCI (before taxes)

 
1

Net impairment losses recognized in earnings

$—

 

$1

1 The initial OTTI amount represents the excess of the amortized cost over the fair value of AFS debt securities. For subsequent impairments of the same security, amount includes additional declines in the fair value subsequent to the previously recorded OTTI, if applicable, until such time the security is no longer in an unrealized loss position.

The following is a rollforward of credit losses recognized in earnings for the three months ended March 31, 2014 and 2013, related to securities for which the Company does not intend to sell and it is not more-likely-than-not that the Company will be required to sell as of the end of each period presented. 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.
(Dollars in millions)
2014
 
2013
Balance, beginning of period

$25

 

$31

Additions:
 
 
 
OTTI credit losses on previously impaired securities

 
1

Balance, end of period

$25

 

$32


The following table presents a summary of the significant inputs used in determining the measurement of credit losses recognized in earnings for private MBS and ABS for the three months ended March 31:
 
  2014 1
 
2013
Default rate
N/A
 
6 - 9%
Prepayment rate
N/A
 
7 - 8%
Loss severity
N/A
 
61 - 74%

1 "N/A" - Not applicable

Assumption ranges represent the lowest and highest lifetime average estimates of each security for which credit losses were recognized in earnings. Ranges may vary from period to period as the securities for which credit losses are recognized vary. Additionally, severity may vary widely when losses are few and large.
Loans
Loans
NOTE 4 - LOANS
Composition of Loan Portfolio
The composition of the Company's loan portfolio is shown in the following table:
(Dollars in millions)
March 31,
2014
 
December 31, 2013
Commercial loans:
 
 
 
C&I

$58,828

 

$57,974

CRE
5,961

 
5,481

Commercial construction
920

 
855

Total commercial loans
65,709

 
64,310

Residential loans:
 
 
 
Residential mortgages - guaranteed
3,295

 
3,416

Residential mortgages - nonguaranteed 1
24,331

 
24,412

Home equity products
14,637

 
14,809

Residential construction
532

 
553

Total residential loans
42,795

 
43,190

Consumer loans:
 
 
 
Guaranteed student loans
5,533

 
5,545

Other direct
3,109

 
2,829

Indirect
11,339

 
11,272

Credit cards
711

 
731

Total consumer loans
20,692

 
20,377

LHFI

$129,196

 

$127,877

LHFS

$1,488

 

$1,699

1 Includes $299 million and $302 million of loans carried at fair value at March 31, 2014 and December 31, 2013, respectively.


At March 31, 2014 and December 31, 2013, the Company had $57.1 billion and $56.4 billion, respectively, of net eligible loan collateral pledged to the Federal Reserve Discount Window or the FHLB of Atlanta to support available borrowing capacity.

During the three months ended March 31, 2014 and 2013, the Company transferred $115 million and $57 million in LHFI to LHFS, and $17 million and $12 million in LHFS to LHFI, respectively. Additionally, during the three months ended March 31, 2014 and 2013, the Company sold $85 million and $503 million in loans and leases for a gain of $9 million and a gain of $4 million, respectively.

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 PD and LGD 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/analysis, and 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's risk rating system is granular, with multiple risk ratings in both the Pass and Criticized categories. Pass ratings reflect relatively low PDs; whereas, Criticized assets have a higher PD. The granularity in Pass ratings assists in the establishment of pricing, loan structures, approval requirements, reserves, and ongoing credit management requirements. 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 Accruing Criticized (which includes Special Mention and a portion of Adversely Classified) and Nonaccruing Criticized (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 collect all amounts due from those where full collection is less certain.
Risk ratings are refreshed at least annually, or more frequently as appropriate, based upon considerations such as market conditions, loan 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 March 31, 2014 and December 31, 2013, 83% and 82%, respectively, of the guaranteed residential loan portfolio was current with respect to payments. At March 31, 2014 and December 31, 2013, 82% and 81%, respectively, of the guaranteed student loan portfolio was current with respect to payments. Loss exposure to the Company on these loans is mitigated by the government guarantee.
LHFI by credit quality indicator are shown in the tables below:
 
Commercial Loans
 
C&I
 
CRE
 
Commercial construction
(Dollars in millions)
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
Credit rating:
 
 
 
 
 
 
 
 
 
 
 
Pass

$57,182

 

$56,443

 

$5,742

 

$5,245

 

$879

 

$798

Criticized accruing
1,469

 
1,335

 
178

 
197

 
30

 
45

Criticized nonaccruing
177

 
196

 
41

 
39

 
11

 
12

Total

$58,828

 

$57,974

 

$5,961

 

$5,481

 

$920

 

$855

 
Residential Loans 1
 
Residential mortgages -
nonguaranteed
 
Home equity products
 
Residential construction
(Dollars in millions)
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
Current FICO score range:
 
 
 
 
 
 
 
 
 
 
 
700 and above

$18,983

 

$19,100

 

$11,537

 

$11,661

 

$413

 

$423

620 - 699
3,740

 
3,652

 
2,159

 
2,186

 
82

 
90

Below 620 2
1,608

 
1,660

 
941

 
962

 
37

 
40

Total

$24,331

 

$24,412

 

$14,637

 

$14,809

 

$532

 

$553

 
Consumer Loans 3
 
Other direct
 
Indirect
 
Credit cards
(Dollars in millions)
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
 
March 31,
2014
 
December 31, 2013
Current FICO score range:
 
 
 
 
 
 
 
 
 
 
 
700 and above

$2,648

 

$2,370

 

$8,390

 

$8,420

 

$489

 

$512

620 - 699
401

 
397

 
2,286

 
2,228

 
178

 
176

Below 620 2
60

 
62

 
663

 
624

 
44

 
43

Total

$3,109

 

$2,829

 

$11,339

 

$11,272

 

$711

 

$731


1 Excludes $3.3 billion and $3.4 billion at March 31, 2014 and December 31, 2013, respectively, of guaranteed residential loans. At March 31, 2014 and December 31, 2013, the majority of these loans had FICO scores of 700 and above.
2 For substantially all loans with refreshed FICO scores below 620, the borrower’s FICO score at the time of origination exceeded 620 but has since deteriorated as the loan has seasoned.
3 Excludes $5.5 billion of guaranteed student loans at March 31, 2014 and December 31, 2013.

The payment status for the LHFI portfolio is shown in the tables below:
 
March 31, 2014
(Dollars in millions)
Accruing
Current
 
Accruing
30-89 Days
Past Due
 
Accruing
90+ Days
Past Due
 
 Nonaccruing 2
 
Total
Commercial loans:
 
 
 
 
 
 
 
 
 
C&I

$58,576

 

$56

 

$19

 

$177

 

$58,828

CRE
5,914

 
6

 

 
41

 
5,961

Commercial construction
907

 
2

 

 
11

 
920

Total commercial loans
65,397

 
64

 
19

 
229

 
65,709

Residential loans:
 
 
 
 
 
 
 
 
 
Residential mortgages - guaranteed
2,731

 
38

 
526

 

 
3,295

Residential mortgages - nonguaranteed1
23,770

 
121

 
14

 
426

 
24,331

Home equity products
14,323

 
107

 

 
207

 
14,637

Residential construction
472

 
9

 

 
51

 
532

Total residential loans
41,296

 
275

 
540

 
684

 
42,795

Consumer loans:
 
 
 
 
 
 
 
 
 
Guaranteed student loans
4,520

 
444

 
569

 

 
5,533

Other direct
3,086

 
15

 
2

 
6

 
3,109

Indirect
11,268

 
64

 
1

 
6

 
11,339

Credit cards
699

 
6

 
6

 

 
711

Total consumer loans
19,573

 
529

 
578

 
12

 
20,692

Total LHFI

$126,266

 

$868

 

$1,137

 

$925

 

$129,196

1 Includes $299 million of loans carried at fair value, the majority of which were accruing current.
2 Nonaccruing loans past due 90 days or more totaled $635 million. Nonaccruing loans past due fewer than 90 days include modified nonaccrual loans reported as TDRs and performing second lien loans which are classified as nonaccrual when the first lien loan is nonperforming. 

 
December 31, 2013
(Dollars in millions)
Accruing
Current
 
Accruing
30-89 Days
Past Due
 
Accruing
90+ Days
Past Due
 
 Nonaccruing 2
 
Total
Commercial loans:
 
 
 
 
 
 
 
 
 
C&I

$57,713

 

$47

 

$18

 

$196

 

$57,974

CRE
5,430

 
5

 
7

 
39

 
5,481

Commercial construction
842

 
1

 

 
12

 
855

Total commercial loans
63,985

 
53

 
25

 
247

 
64,310

Residential loans:
 
 
 
 
 
 
 
 
 
Residential mortgages - guaranteed
2,787

 
58

 
571

 

 
3,416

Residential mortgages - nonguaranteed1
23,808

 
150

 
13

 
441

 
24,412

Home equity products
14,480

 
119

 

 
210

 
14,809

Residential construction
488

 
4

 

 
61

 
553

Total residential loans
41,563

 
331

 
584

 
712

 
43,190

Consumer loans:
 
 
 
 
 
 
 
 
 
Guaranteed student loans
4,475

 
461

 
609

 

 
5,545

Other direct
2,803

 
18

 
3

 
5

 
2,829

Indirect
11,189

 
75

 
1

 
7

 
11,272

Credit cards
718

 
7

 
6

 

 
731

Total consumer loans
19,185

 
561

 
619

 
12

 
20,377

Total LHFI

$124,733

 

$945

 

$1,228

 

$971

 

$127,877

1 Includes $302 million