2017 Tax Act — Tax Cuts and Jobs Act of 2017.

ABS — Asset-backed securities.

ACH — Automated clearing house.

AFS — Available for sale.

AIP — Annual Incentive Plan.

~~ALCO~~ ~~— Asset/Liability Committee.~~

ALM — Asset/Liability ~~Management.~~management.

ALLL — Allowance for loan and lease losses.

AOCI — Accumulated other comprehensive income.

~~APIC~~ ~~— Additional paid-in capital.~~

ASC — Accounting Standards Codification.

ASU — Accounting Standards Update.

ATE — Additional termination event.

ATM — Automated teller machine.

Bank — SunTrust Bank.

Basel III — the Third Basel Accord, a comprehensive set of reform measures developed by the BCBS.

BCBS — Basel Committee on Banking Supervision.

BHC — Bank holding company.

Board — ~~The~~the Company’s Board of Directors.

bps — Basis points.

~~BRC~~ ~~— Board Risk Committee.~~

CCAR — Comprehensive Capital Analysis and Review.

CCB — Capital conservation buffer.

CD — Certificate of ~~deposit.~~deposit (time deposit).

CDR — Conditional default rate.

CDS — Credit default swaps.

~~CECL~~ ~~— Current expected credit loss.~~

CEO — Chief Executive Officer.

CET1 — Common Equity Tier 1 Capital.

CFO — Chief Financial Officer.

CIB — Corporate and investment banking.

C&I — Commercial and industrial.

Class A shares — Visa Inc. Class A common stock.

Class B shares — Visa Inc. Class B common stock.

~~CLO~~ ~~— Collateralized loan obligation.~~

CME — Chicago Mercantile Exchange.

Company — SunTrust Banks, Inc.

CP — Commercial paper.

CPR — Conditional prepayment rate.

CRE — Commercial real estate.

CSA — Credit support annex.

DDA — Demand deposit account.

Dodd-Frank Act — Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

DOJ — Department of Justice.

DTA — Deferred tax asset.

DTL — Deferred tax liability.

DVA — Debit valuation adjustment.

~~EBPC~~ ~~— Enterprise Business Practices Committee.~~

EPS — Earnings per share.

ER — Enterprise Risk.

ERISA — Employee Retirement Income Security Act of 1974.

Exchange Act — Securities Exchange Act of 1934.

Fannie Mae — Federal National Mortgage Association.

FASB — Financial Accounting Standards Board.

Freddie Mac — Federal Home Loan Mortgage Corporation.

FDIC — Federal Deposit Insurance Corporation.

Federal Reserve — Federal Reserve System.

Fed ~~funds~~Funds — Federal funds.

FHA — Federal Housing Administration.

FHLB — Federal Home Loan Bank.

FICO — Fair Isaac Corporation.

Fitch — Fitch Ratings Ltd.

FRB — Board of Governors of the Federal Reserve ~~Board.~~System.

FTE — Fully taxable-equivalent.

FVO — Fair value option.

~~GenSpring~~ ~~— GenSpring Family Offices, LLC.~~

Ginnie Mae — Government National Mortgage Association.

GSE — Government-sponsored enterprise.

HAMP — Home Affordable Modification Program.

HUD — U.S. Department of Housing and Urban Development.

IPO — Initial public offering.

IRLC — Interest rate lock commitment.

ISDA — International Swaps and Derivatives Association.

LCH — LCH.Clearnet Limited.

LCR — Liquidity coverage ratio.

LGD — Loss given default.

LHFI — Loans held for investment.

LHFS — Loans held for sale.

LIBOR — London InterBank Offered Rate.

LOCOM — Lower of cost or market.

LTI — Long-term incentive.

LTV— Loan to value.

~~MasterCard~~Mastercard — ~~MasterCard~~Mastercard International.

MBS — Mortgage-backed securities.

MD&A — Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Moody’s — Moody’s Investors Service.

MRA — Master Repurchase Agreement.

MRM — Market Risk Management.

~~MRMG~~ ~~— Model Risk Management Group.~~

MSR — Mortgage servicing right.

MVE — Market value of equity.

NCF — National Commerce Financial Corporation.

NOL — Net operating loss.

NOW — Negotiable order of withdrawal account.

NPA — Nonperforming asset.

NPL — Nonperforming loan.

NPR — Notice of proposed rulemaking.

NSFR — Net stable funding ratio.

NYSE — New York Stock Exchange.

OCC — Office of the Comptroller of the Currency.

OCI — Other comprehensive income.

OREO — Other real estate owned.

OTC — Over-the-counter.

OTTI — Other-than-temporary impairment.

PAC — Premium Assignment Corporation.

Parent Company — SunTrust Banks, Inc. (the parent Company of SunTrust Bank and other subsidiaries).

PD — Probability of default.

Pillar — substantially all of the assets of the operating subsidiaries of Pillar Financial, LLC.

PPNR— Pre-provision net revenue.

PWM — Private Wealth Management.

REIT — Real estate investment trust.

ROA — Return on average total assets.

ROE — Return on average common shareholders’ equity.

ROTCE — Return on average tangible common shareholders' equity.

RSU — Restricted stock unit.

RWA — Risk-weighted assets.

S&P — Standard and Poor’s.

SBA — Small Business Administration.

SEC — U.S. Securities and Exchange Commission.

STAS — SunTrust Advisory Services, Inc.

STCC — SunTrust Community Capital, LLC.

STIS — SunTrust Investment Services, Inc.

STM — SunTrust Mortgage, Inc.

STRH — SunTrust Robinson Humphrey, Inc.

SunTrust — SunTrust Banks, Inc.

TDR — Troubled debt restructuring.

TRS — Total return swaps.

U.S. — United States.

U.S. GAAP — Generally Accepted Accounting Principles in the ~~United States.~~U.S.

U.S. Treasury — ~~The United States~~the U.S. Department of the Treasury.

UPB — Unpaid principal balance.

UTB — Unrecognized tax benefit.

VA ~~—Veterans Administration.~~— U.S. Department of Veterans Affairs.

VAR ~~—Value~~— Value at risk.

VI — Variable interest.

VIE — Variable interest entity.

Visa — ~~The~~the Visa, U.S.A. Inc. card association or its affiliates, collectively.

Visa Counterparty — Aa financial institution that purchased the Company's Visa Class B shares.

Principles of Consolidation and Basis of Presentation

The unaudited Consolidated Financial Statements included within this report 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. InHowever, 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~~ Interim Consolidated Financial Statements should be read in conjunction with the Company’s ~~2016~~2017 Annual Report on Form 10-K. ~~Other than~~

Changes in Significant Accounting Policies

Pursuant to the ~~recently issued~~Company's adoption of certain ASUs as of January 1, 2018, the following significant accounting ~~pronouncements discussed in this section, there~~policies have been ~~no significant changes~~added to ~~the Company’s accounting policies, as~~or updated from those disclosed in the ~~2016~~Company's 2017 Annual Report on Form ~~10-K,~~10-K:

Revenue Recognition

In the ordinary course of business, the Company recognizes revenue as services are rendered, or as transactions occur, and as collectability is reasonably assured. For the Company's revenue recognition accounting policies, see Note 2, “Revenue Recognition.”

Trading Activities and Securities AFS

Trading assets and liabilities are measured at fair value with changes in fair value recognized within Noninterest income in the Company's Consolidated Statements of Income.

Securities AFS are used primarily as a store of liquidity and as part of the overall ALM process to optimize income and market performance over an entire interest rate cycle. Interest income on securities AFS is recognized on an accrual basis in Interest income in the Company's Consolidated Statements of Income. Premiums and discounts on securities AFS are amortized or accreted as an adjustment to yield over the life of the security. The Company estimates principal prepayments on securities AFS for which prepayments are probable and the timing and amount of prepayments can be reasonably estimated. The estimates are informed by analyses of both historical prepayments and anticipated macroeconomic conditions, such as spot interest rates compared to implied forward interest rates. The estimate of prepayments for these securities impacts their lives and thereby the amortization or accretion of associated premiums and discounts. Securities AFS are measured at fair value with unrealized gains and losses, net of any tax effect, included in AOCI as a component of shareholders’ equity. Realized gains and losses, including OTTI, are determined using the specific identification method and are recognized as a

component of Noninterest income in the Consolidated Statements of Income.

Securities AFS are reviewed for OTTI on a quarterly basis. In determining whether OTTI exists for securities AFS in an unrealized loss position, the Company assesses whether it has the intent to sell the security or assesses the likelihood of selling the security prior to the recovery of its amortized cost basis. If the Company intends to sell the security or it is more-likely-than-not that ~~could~~the Company will be required to sell the security prior to the recovery of its amortized cost basis, the security is written down to fair value, and the full amount of any impairment charge is recognized as a component of Noninterest income in the Consolidated Statements of Income. If the Company does not intend to sell the security and it is more-likely-than-not that the Company will not be required to sell the security prior to recovery of its amortized cost basis, only the credit component of any impairment of a security is recognized as a component of Noninterest income in the Consolidated Statements of Income, with the amount of any remaining unrealized losses recorded in OCI.

For additional information on the Company’s trading and securities AFS activities, see Note 4, “Trading Assets and Liabilities and Derivatives,” and Note 5, “Securities Available for Sale.”

Equity Securities

The Company records equity securities that are not classified as trading assets or liabilities within Other assets in its Consolidated Balance Sheets.

Investments in equity securities with readily determinable fair values (marketable) are measured at fair value, with changes in the fair value recognized as a component of Noninterest income in the Company's Consolidated Statements of Income.

Investments in equity investments that do not have ~~a material effect~~readily determinable fair values (nonmarketable) are accounted for at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer, also referred to as the measurement alternative. Any adjustments to the carrying value of these investments are recorded in Noninterest income in the Company's Consolidated Statements of Income.

For additional information on the Company's ~~financial statements.~~equity securities, see Note 9, “Other Assets,” and Note 16, “Fair Value Election and Measurement.”

Derivative Instruments and Hedging Activities

The Company records derivative contracts at fair value in the Consolidated Balance Sheets. Accounting for changes in the fair value of a derivative depends upon whether or not it has been designated in a formal, qualifying hedging relationship.

Changes in the fair value of derivatives not designated in a hedging relationship are recorded in noninterest income. This includes derivatives that the Company enters into in a dealer capacity to facilitate client transactions and as a risk management tool to economically hedge certain identified risks, along with certain IRLCs on residential mortgage and commercial loans that are a normal part of the Company’s operations. The Company

Notes to Consolidated Financial Statements (Unaudited), continued

also evaluates contracts, such as brokered deposits and debt, to determine whether any embedded derivatives are required to be bifurcated and separately accounted for as freestanding derivatives.

Certain derivatives used as risk management tools are designated as accounting hedges of the Company’s exposure to changes in interest rates or other identified market risks. The Company prepares written hedge documentation for all derivatives which are designated as hedges of (i) changes in the fair value of a recognized asset or liability (fair value hedge) attributable to a specified risk or (ii) a forecasted transaction, such as the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). The written hedge documentation includes identification of, among other items, the risk management objective, hedging instrument, hedged item and methodologies for assessing and measuring hedge effectiveness, along with support for management’s assertion that the hedge will be highly effective. Methodologies related to hedge effectiveness include (i) statistical regression analysis of changes in the cash flows of the actual derivative and hypothetical derivatives, or (ii) statistical regression analysis of changes in the fair values of the actual derivative and the hedged item.

For designated hedging relationships, subsequent to the initial assessment of hedge effectiveness, the Company generally performs retrospective and prospective effectiveness testing using a qualitative approach. Assessments of hedge effectiveness are performed at least quarterly. Changes in the fair value of a derivative that is highly effective and that has been designated and qualifies as a fair value hedge are recorded in current period earnings, in the same line item with the changes in the fair value of the hedged item that are attributable to the hedged risk. The changes in the fair value of a derivative that is highly effective and that has been designated and qualifies as a cash flow hedge is initially recorded in AOCI and reclassified to earnings in the

same period that the hedged item impacts earnings. The amount reclassified to earnings is recorded in the same line item as the earnings effect of the hedged item.

Hedge accounting ceases for hedging relationships that are no longer deemed effective, or for which the derivative has been terminated or de-designated. For discontinued fair value hedges where the hedged item remains outstanding, the hedged item would cease to be remeasured at fair value attributable to changes in the hedged risk and any existing basis adjustment would be recognized as an adjustment to net interest income over the remaining life of the hedged item. For discontinued cash flow hedges, the unrealized gains and losses recorded in AOCI would be reclassified to earnings in the period when the previously designated hedged cash flows occur unless it was determined that transaction was probable to not occur, in which case any unrealized gains and losses in AOCI would be immediately reclassified to earnings.

It is the Company's policy to offset derivative transactions with a single counterparty as well as any cash collateral paid to and received from that counterparty for derivative contracts that are subject to ISDA or other legally enforceable netting arrangements and meet accounting guidance for offsetting treatment. For additional information on the Company’s derivative activities, see Note 15, “Derivative Financial Instruments,” and Note 16, “Fair Value Election and Measurement.”

Subsequent Events

The Company evaluated events that occurred between September 30, ~~2017~~2018 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 were adopted during the current year or not yet adopted as of September 30, 2018, 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)~~Standards Adopted in ~~2017 (or partially adopted previously)~~2018
ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606) and subsequent related ASUs	These ASUs comprise ASC Topic 606, Revenue from Contracts with Customers, which supersede 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.	January 1, 2018	The Company adopted these ASUs on a modified retrospective basis beginning January 1, 2018. Upon adoption, the Company recognized an immaterial cumulative effect adjustment that resulted in a decrease to the beginning balance of retained earnings as of January 1, 2018. Furthermore, the Company prospectively changed the presentation of certain types of revenue and expenses, such as underwriting revenue within investment banking income which is shown on a gross basis, and certain cash promotions and card network expenses, which were reclassified from noninterest expense to service charges on deposit accounts, card fees, and other charges and fees. The net quantitative impact of these presentation changes decreased both revenue and expenses by $9 million and $16 million for the three and nine months ended September 30, 2018, respectively; however, these presentation changes did not have an impact on net income. Prior period balances have not been restated to reflect these presentation changes. See Note 2, “Revenue Recognition,” for disclosures relating to ASC Topic 606.

Notes to Consolidated Financial Statements (Unaudited), continued



Standard	Description	Required Date of Adoption	Effect on the Financial Statements or Other Significant Matters
Standards Adopted in 2018 (continued)
ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities; and ASU 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities	~~The ASU amends~~These ASUs amend ASC Topic 825, Financial Instruments-Overall, and ~~addresses~~address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provisions require most investments in equity securities to be measured at fair value through net income, unless they qualify for a ~~practicability exception,~~measurement alternative, 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 and the application of the measurement alternative for certain equity investments that ~~will be~~was adopted prospectively, ~~the ASU~~these ASUs must be adopted on a modified retrospective basis.	January 1, 2018 Early adoption iswas 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~~information regarding the early adoption of this provision. Additionally, the Company ~~does not expect~~adopted the remaining provisions of ~~this ASU~~these ASUs beginning January 1, 2018, which resulted in an immaterial cumulative effect adjustment to the beginning balance of retained earnings. In connection with the adoption of these ASUs, an immaterial amount of equity securities previously classified as securities AFS were reclassified to other assets, as the AFS classification is no longer permitted for equity securities under these ASUs. Subsequent to adoption of these ASUs, the Company recognized net gains on certain of its equity investments during the three and nine months ended September 30, 2018. For additional information relating to these net gains, see Note 9, “Other Assets,” and Note 16, “Fair Value Election and Measurement.” The remaining provisions and disclosure requirements of these ASUs did not have a material impact on ~~its~~the Company's Consolidated Financial Statements ~~and~~or related ~~disclosures.~~disclosures upon adoption.
~~Standard(s)~~ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments	This 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 Flows. 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 and 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, 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	The Company adopted this ASU on a retrospective basis effective January 1, 2018 and changed the presentation of certain cash payments and receipts within its Consolidated Statements of Cash Flows. Specifically, the Company changed the presentation of proceeds from the settlement of bank-owned life insurance policies from operating activities to investing activities. The Company also changed the presentation of cash payments for bank-owned life insurance policy premiums from operating activities to investing activities. Lastly, for contingent consideration payments made more than three months after a business combination, the Company changed the presentation for the portion of the cash payment up to the acquisition date fair value of the contingent consideration as a financing activity and any amount paid in excess of the acquisition date fair value as an operating activity. For the nine months ended September 30, 2018 and 2017, the Company reclassified $201 million and $127 million, respectively, of cash payments for bank-owned life insurance policy premiums and an immaterial amount of proceeds from the settlement of bank-owned life insurance policies from operating activities to investing activities on the Company’s Consolidated Statements of Cash Flows. The remaining presentation change described above was immaterial for both the nine months ended September 30, 2018 and 2017.
ASU 2017-09, Stock Compensation (Topic 718): Scope of Modification Accounting	This ASU amends ASC Topic 718, Stock Compensation, to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting per ASC Topic 718, Stock Compensation. The amendments clarify that modification accounting only applies to an entity if the fair value, vesting conditions, or classification of the award changes as a result of changes in the terms or conditions of a share-based payment award. The ASU should be applied prospectively to awards modified on or after the adoption date.	January 1, 2018	The Company adopted this ASU on January 1, 2018 and upon adoption, the ASU did not have a material impact on the Company's Consolidated Financial Statements or related disclosures.

Notes to Consolidated Financial Statements (Unaudited), continued



Standard	Description	Required Date of Adoption	Effect on the Financial Statements or Other Significant Matters
Standards Adopted in 2018 (continued)
ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities	This 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. These changes expand the types of risk management strategies eligible for hedge accounting. The ASU also permits entities to qualitatively assert that a hedging relationship was and continues to be highly effective. New incremental disclosures are 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 early adopted this ASU beginning January 1, 2018 and modified its measurement methodology for certain hedged items designated under fair value hedge relationships. The Company elected to perform its subsequent assessments of hedge effectiveness using a qualitative, rather than a quantitative, approach. The adoption resulted in an immaterial cumulative effect adjustment to the opening balance of retained earnings and a basis adjustment to the related hedged items arising from measuring the hedged items based on the benchmark interest rate component of the total contractual coupon of the fair value hedges. For additional information on the Company’s derivative and hedging activities, see Note 15, “Derivative Financial Instruments.”
ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from AOCI	This ASU amends ASC Topic 220, Income Statement - Reporting Comprehensive Income, to allow for a reclassification from AOCI to Retained earnings for the tax effects stranded in AOCI as a result of the remeasurement of DTAs and DTLs for the change in the federal corporate tax rate pursuant to the 2017 Tax Act, which was recognized through the income tax provision in 2017. The Company may apply this ASU at the beginning of the period of adoption or retrospectively to all periods in which the 2017 Tax Act is enacted.	January 1, 2019 Early adoption is permitted.	The Company early adopted this ASU beginning January 1, 2018. Upon adoption of this ASU, the Company elected to reclassify $182 million of stranded tax effects relating to securities AFS, derivative instruments, credit risk on long-term debt, and employee benefit plans from AOCI to retained earnings. This amount was offset by $28 million of stranded tax effects relating to equity securities previously classified as securities AFS, resulting in a net $154 million increase to retained earnings.
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement	This ASU amends ASC Topic 820, Fair Value Measurement, to add new disclosure requirements, as well as to modify and remove certain disclosure requirements to improve the effectiveness of disclosures in the notes to financial statements. In the initial period of adoption, the Company will be required to disclose the average of significant unobservable inputs used to develop level 3 fair value measurements and to disclose information about the measurement uncertainty around these measurements on a prospective basis. All other amendments of this ASU must be applied retrospectively to all periods presented upon adoption.	January 1, 2020 Early adoption is permitted.	The Company early adopted this ASU beginning September 30, 2018 and modified its fair value disclosures accordingly. The adoption of this ASU did not have an impact on the Company's Consolidated Financial Statements. See Note 16, “Fair Value Election and Measurement,” for the Company's fair value disclosures.

Notes to Consolidated Financial Statements (Unaudited), continued



Standard	Description	Required Date of Adoption	Effect on the Financial Statements or Other Significant Matters
Standards Not Yet Adopted
ASU 2016-02, Leases (ASC Topic 842) and subsequent related ASUs	~~The~~This 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~~have the option to: - Recognize and measure leases at the beginning of the earliest period presented using a modified retrospective ~~approach.~~transition approach, or - Apply a modified retrospective transition approach as of the date of adoption.	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. Additionally, in conjunction with this implementation, the Company is reviewing business processes and evaluating potential changes to its control environment. The ~~Company's adoption of~~Company will adopt this ASU on January 1, 2019, which 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,~~2018, 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~~was between $1.0 billion and $1.5 billion. The Company expects to recognize a cumulative effect adjustment upon adoption to increase the beginning balance of ~~$1 billion.~~retained earnings as of January 1, 2019 for remaining deferred gains on sale-leaseback transactions which occurred prior to the date of adoption. The Company had approximately $44 million of deferred gains on sale-leaseback transactions as of September 30, 2018. The Company does not expect this ASU to have a material impact on the timing of expense recognition in its Consolidated Statements of Income.

~~Notes to Consolidated Financial Statements (Unaudited), continued~~



~~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~~This ASU ~~amends~~adds ASC Topic 326, Financial ~~Instruments-Credit~~Instruments - Credit Losses, to replace the incurred loss impairment methodology with a ~~CECL~~current expected credit loss 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~~is deducted from the amortized cost basis ~~that~~of the ~~entity does not expect~~financial assets to ~~collect.~~reflect the net amount expected to be collected on the financial assets. Additional quantitative and qualitative disclosures are required upon adoption. The change to the allowance for credit losses at the time of the adoption will be made with a cumulative effect adjustment to Retained earnings. The ~~CECL~~current expected credit loss 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~~ASU. A detailed implementation plan has been developed and substantial progress has been made on the identification and staging of data, development and validation of models, refinement of economic forecasting processes, and documentation of accounting policy decisions. Additionally, a new credit loss platform is ~~assessing~~being implemented to host data and run models in a controlled, automated environment. In conjunction with this implementation, the ~~required~~Company is reviewing business processes and evaluating potential changes to ~~its credit loss estimation methodologies.~~ the control environment. The Company plans to adopt this ASU on January 1, 2020, and it is evaluating the impact that this ASU will have on its Consolidated Financial Statements and related ~~disclosures, and the~~disclosures. 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~~The magnitude of the ~~anticipated~~ increase ~~in the allowance for credit losses~~ will ~~be impacted by~~depend on economic conditions and trends in the Company’s portfolio at the time of ~~adoption, the quantitative impact cannot yet be reasonably estimated.~~adoption.
~~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.

~~Notes to Consolidated Financial Statements (Unaudited), continued~~



~~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~~This 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~~This ASU requires an entity to recognize an impairment charge for the amount by which a reporting unit's carrying amount exceeds its fair value, ~~but~~with the loss ~~recognized should not exceed~~limited to 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,~~2017, 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~~or related disclosures. However, if upon the adoption date, which is expected to occur on January 1, 2020, the carrying amount of a reporting unit exceeds its fair value, the Company would be ~~impacted by~~required to recognize an impairment charge for the amount ~~of impairment recognized.~~that the carrying value exceeds the fair value.

Notes to Consolidated Financial Statements (Unaudited), continued



Standard	Description	Required Date of Adoption	Effect on the Financial Statements or Other Significant Matters
Standards Not Yet Adopted (continued)
ASU ~~2017-12, Derivatives and Hedging (Topic 815)~~2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): ~~Targeted Improvements~~Disclosure Framework - Changes to ~~Accounting~~the Disclosure Requirements for ~~Hedging Activities~~Defined Benefit Plans	~~The~~This ASU amends ASC ~~Topic 815,~~Subtopic 715-20, ~~Derivatives and Hedging,~~ Compensation - Retirement Benefits - Defined Benefit Plans - General, to ~~simplify~~add new disclosure requirements, as well as to remove certain disclosure requirements to improve the ~~requirements for hedge accounting. Key amendments include: eliminating the requirement to separately measure and report hedge ineffectiveness, requiring changes~~effectiveness of disclosures in the ~~value of the hedging instrument~~notes to financial statements. The ASU must 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~~adopted 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.~~basis.	~~January 1, 2019~~December 31, 2020 Early adoption is permitted.	The Company is ~~evaluating~~in the ~~significance and other effects that~~process of evaluating this ASU ~~will~~and does not expect this ASU to have a material impact on its Consolidated Financial Statements or related disclosures.
ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract	This ASU amends ASC Subtopic 350-40, Intangibles - Goodwill and Other - Internal-Use Software, to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company may apply this ASU either retrospectively, or prospectively to all implementation costs incurred after the date of adoption.	January 1, 2020 Early adoption is permitted.	The Company is in the process of evaluating this ASU. The Company’s current accounting policy for capitalizing implementation costs incurred in a hosting arrangement generally aligns with the requirements of this ASU. Therefore, the Company's adoption of this ASU is not expected to have a material impact on the Company’s Consolidated Financial Statements or related ~~disclosures; however, the quantitative impact has not yet been determined.~~disclosures.

NOTE 2 – REVENUE RECOGNITION

Pursuant to the Company's adoption of ASC Topic 606, Revenue from Contracts with Customers, the following disclosures discuss the Company's revenue recognition accounting policies. The Company recognizes two primary types of revenue: Interest income and noninterest income.

Interest Income

The Company’s principal source of revenue is interest income from loans and securities, which is recognized on an accrual basis using the effective interest method. For additional information on the Company’s policies for recognizing interest income on loans and securities, see Note 1, “Significant Accounting Policies,” in the Company’s 2017 Annual Report on Form 10-K. Interest income is not within the scope of ASC Topic 606.

Noninterest Income

Noninterest income includes revenue from various types of transactions and services provided to clients. The following table reflects the Company’s noninterest income disaggregated by the amount of revenue that is in scope and out of scope of ASC Topic 606.



(Dollars in millions)	Three Months Ended September 30				Nine Months Ended September 30
Noninterest income	2018		2017		2018		2017
Revenue in scope of ASC Topic 606		$508		$530		$1,514		$1,571
Revenue out of scope of ASC Topic 606	274		316		894		949
Total noninterest income		$782		$846		$2,408		$2,520

Notes to Consolidated Financial Statements (Unaudited), continued

The following tables further disaggregate the Company’s noninterest income by financial statement line item, business segment, and by the amount of each revenue stream that is in scope or out of scope of ASC Topic 606. The commentary following these tables describes the nature, amount, and timing of the related revenue streams.



	Three Months Ended September 30, 2018 ¹
(Dollars in millions)	Consumer ²		Wholesale ²		Out of Scope ^{2, 3}		Total
Noninterest income
Service charges on deposit accounts		$111		$33		$—		$144
Other charges and fees ⁴	28		3		58		89
Card fees	49		26		—		75
Investment banking income ⁴	—		101		49		150
Trading income	—		—		42		42
Trust and investment management income	79		—		1		80
Retail investment services	73		—		1		74
Mortgage servicing related income	—		—		43		43
Mortgage production related income	—		—		40		40
Commercial real estate related income	—		—		24		24
Net securities gains	—		—		—		—
Other noninterest income	5		—		16		21
Total noninterest income		$345		$163		$274		$782

¹ Amounts are presented in accordance with ASC Topic 606, Revenue from Contracts with Customers, except for out of scope amounts.

²Consumer total noninterest income and Wholesale total noninterest income exclude $100 million and $210 million of out of scope noninterest income, respectively, which are included in the business segment results presented on a management accounting basis in Note 18, "Business Segment Reporting."Out of scope total noninterest income includes these amounts and also includes ($36) million of Corporate Other noninterest income that is not subject to ASC Topic 606.

³ The Company presents out of scope noninterest income for the purpose of reconciling noninterest income amounts within the scope of ASC Topic 606 to noninterest income amounts presented on the Company's Consolidated Statements of Income.

⁴ Beginning July 1, 2018, the Company began presenting bridge commitment fee income related to capital market transactions in Investment banking income on the Consolidated Statements of Income. For periods prior to July 1, 2018, this income was previously presented in Other charges and fees and has been reclassified to Investment banking income for comparability.



	Three Months Ended September 30, 2017 ¹
(Dollars in millions)	Consumer ²		Wholesale ²		Out of Scope ^{2, 3}		Total
Noninterest income
Service charges on deposit accounts		$119		$35		$—		$154
Other charges and fees ⁴	29		3		57		89
Card fees	58		27		1		86
Investment banking income ⁴	—		106		63		169
Trading income	—		—		51		51
Trust and investment management income	78		—		1		79
Retail investment services	69		—		—		69
Mortgage servicing related income	—		—		46		46
Mortgage production related income	—		—		61		61
Commercial real estate related income	—		—		17		17
Net securities gains	—		—		—		—
Other noninterest income	6		—		19		25
Total noninterest income		$359		$171		$316		$846

¹Amounts for periods prior to January 1, 2018 are presented in accordance with ASC Topic 605, Revenue Recognition, and have not been restated to conform with ASC Topic 606, Revenue from Contracts with Customers.

²Consumer total noninterest income and Wholesale total noninterest income exclude $123 million and $226 million of out of scope noninterest income, respectively, which are included in the business segment results presented on a management accounting basis in Note 18, "Business Segment Reporting." Out of scope total noninterest income includes these amounts and also includes ($33) million of Corporate Other noninterest income that is not subject to ASC Topic 606.

³ The Company presents out of scope noninterest income for the purpose of reconciling noninterest income amounts within the scope of ASC Topic 606 to noninterest income amounts presented on the Company's Consolidated Statements of Income.

⁴ Beginning July 1, 2018, the Company began presenting bridge commitment fee income related to capital market transactions in Investment banking income on the Consolidated Statements of Income. For periods prior to July 1, 2018, this income was previously presented in Other charges and fees and has been reclassified to Investment banking income for comparability.

Notes to Consolidated Financial Statements (Unaudited), continued



	Nine Months Ended September 30, 2018 ¹
(Dollars in millions)	Consumer ²		Wholesale ²		Out of Scope ^{2, 3}		Total
Noninterest income
Service charges on deposit accounts		$330		$103		$—		$433
Other charges and fees ⁴	85		8		171		264
Card fees	160		78		3		241
Investment banking income ⁴	—		287		166		453
Trading income	—		—		137		137
Trust and investment management income	228		—		2		230
Retail investment services	216		2		1		219
Mortgage servicing related income	—		—		138		138
Mortgage production related income	—		—		118		118
Commercial real estate related income	—		—		66		66
Net securities gains	—		—		1		1
Other noninterest income	17		—		91		108
Total noninterest income		$1,036		$478		$894		$2,408

¹ Amounts are presented in accordance with ASC Topic 606, Revenue from Contracts with Customers, except for out of scope amounts.

²Consumer total noninterest income and Wholesale total noninterest income exclude $313 million and $646 million of out of scope noninterest income, respectively, which are included in the business segment results presented on a management accounting basis in Note 18, "Business Segment Reporting." Out of scope total noninterest income includes these amounts and also includes ($65) million of Corporate Other noninterest income that is not subject to ASC Topic 606.

³ The Company presents out of scope noninterest income for the purpose of reconciling noninterest income amounts within the scope of ASC Topic 606 to noninterest income amounts presented on the Company's Consolidated Statements of Income.

⁴ Beginning July 1, 2018, the Company began presenting bridge commitment fee income related to capital market transactions in Investment banking income on the Consolidated Statements of Income. For periods prior to July 1, 2018, this income was previously presented in Other charges and fees and has been reclassified to Investment banking income for comparability.



	Nine Months Ended September 30, 2017 ¹
(Dollars in millions)	Consumer ²		Wholesale ²		Out of Scope ^{2, 3}		Total
Noninterest income
Service charges on deposit accounts		$344		$109		$—		$453
Other charges and fees ⁴	93		9		168		270
Card fees	172		81		2		255
Investment banking income ⁴	—		309		192		501
Trading income	—		—		148		148
Trust and investment management income	227		—		2		229
Retail investment services	206		1		1		208
Mortgage servicing related income	—		—		148		148
Mortgage production related income	—		—		170		170
Commercial real estate related income	—		—		61		61
Net securities gains	—		—		1		1
Other noninterest income	20		—		56		76
Total noninterest income		$1,062		$509		$949		$2,520

¹Amounts for periods prior to January 1, 2018 are presented in accordance with ASC Topic 605, Revenue Recognition, and have not been restated to conform with ASC Topic 606, Revenue from Contracts with Customers.

²Consumer total noninterest income and Wholesale total noninterest income exclude $365 million and $660 million of out of scope noninterest income, respectively, which are included in the business segment results presented on a management accounting basis in Note 18, "Business Segment Reporting." Out of scope total noninterest income includes these amounts and also includes ($76) million of Corporate Other noninterest income that is not subject to ASC Topic 606.

³ The Company presents out of scope noninterest income for the purpose of reconciling noninterest income amounts within the scope of ASC Topic 606 to noninterest income amounts presented on the Company's Consolidated Statements of Income.

⁴ Beginning July 1, 2018, the Company began presenting bridge commitment fee income related to capital market transactions in Investment banking income on the Consolidated Statements of Income. For periods prior to July 1, 2018, this income was previously presented in Other charges and fees and has been reclassified to Investment banking income for comparability.

Service Charges on Deposit Accounts

Service charges on deposit accounts represent fees relating to the Company’s various deposit products. These fees include account maintenance, cash management, treasury management, wire transfers, overdraft and other deposit-related fees. The Company’s execution of the services related to these fees represents its related performance obligations. Each of these

performance obligations are either satisfied over time or at a point in time as the services are provided to the customer. The Company is the principal when rendering these services. Payments for services provided are either withdrawn from the customer’s account as services are rendered or in the billing period following the completion of the service. The transaction

Notes to Consolidated Financial Statements (Unaudited), continued

price for each of these fees is based on the Company’s predetermined fee schedule.

Other Charges and Fees

Other charges and fees consist primarily of loan commitment and letter of credit fees, operating lease revenue, ATM fees, insurance revenue, and miscellaneous service charges including wire fees and check cashing fees. Loan commitment and letter of credit fees and operating lease revenue are out of scope of ASC Topic 606.

The Company’s execution of the services related to the fees within the scope of ASC Topic 606 represents its related performance obligations, which are either satisfied at a point in time or over time as services are rendered. ATM fees and miscellaneous service charges are recognized at a point in time as the services are provided.

Insurance commission revenue is earned through the sale of insurance products. The commissions are recognized as revenue when the customer executes an insurance policy with the insurance carrier. In some cases, the Company receives payment of trailing commissions each year when the customer pays its annual premium. For both the three and nine months ended September 30, 2018, the Company recognized an immaterial amount of insurance trailing commissions related to performance obligations satisfied in prior periods.

Card Fees

Card fees consist of interchange fees from credit and debit cards, merchant acquirer revenue, and other card related services. Interchange fees are earned by the Company each time a request for payment is initiated by a customer at a merchant for which the Company transfers the funds on behalf of the customer. Interchange rates are set by the payment network and are based on purchase volumes and other factors. Interchange fees are received daily and recognized at a point in time when the card transaction is processed. The Company is considered an agent of the customer and incurs costs with the payment network to facilitate the interchange with the merchant; therefore, the related payment network expense is recognized as a reduction of card fees. Prior to the adoption of ASC Topic 606, these expenses were recognized in Outside processing and software in the Company's Consolidated Statements of Income. The Company offers rewards and/or rebates to its customers based on card usage. The costs associated with these programs are recognized as a reduction of card fees.

The Company also has a revenue sharing agreement with a merchant acquirer. The Company’s referral of a merchant to the merchant acquirer represents its related performance obligation, which is satisfied at a point in time when the referral is made. Monthly revenue is estimated based on the expected amount of transactions processed. Payments are generally made by the merchant acquirer quarterly in the month following the quarter in which the services are rendered.

Investment Banking Income

Investment banking income is comprised primarily of securities underwriting fees, advisory fees, and loan syndication fees. The Company assists corporate clients in raising capital by offering equity or debt securities to potential investors. The underwriting fees are earned on the trade date when the Company, as a member

of an underwriting syndicate, purchases the securities from the issuer and sells the securities to third party investors. Each member of the syndicate is responsible for selling its portion of the underwriting and is liable for the proportionate costs of the underwriting; therefore, the Company’s portion of underwriting revenue and expense is presented gross within noninterest income and noninterest expense. Prior to the adoption of ASC Topic 606, underwriting expense was recorded as a reduction of investment banking income. The transaction price is based on a percentage of the total transaction amount and payments are settled shortly after the trade date.

Loan syndication fees are typically recognized at the closing of a loan syndication transaction. These fees are out of the scope of ASC Topic 606.

The Company also provides merger and acquisition advisory services, including various activities such as business valuation, identification of potential targets or acquirers, and the issuance of fairness opinions. The Company’s execution of these advisory services represents its related performance obligations. The performance obligations relating to advisory services are fulfilled at a point in time upon completion of the contractually specified merger or acquisition. The transaction price is based on contractually specified terms agreed upon with the client for each advisory service. Additionally, payments for advisory services consist of upfront retainer fees and success fees at the date the related merger or acquisition is closed. The retainer fees are typically paid upfront, which creates a contract liability. At September 30, 2018, the contract liability relating to these retainer fees was immaterial.

Revenue related to trade execution services is earned on the trade date and recognized at a point in time. The fees related to trade execution services are due on the settlement date.

Trading Income

The Company recognizes trading income as a result of gains and losses from the sales of trading account assets and liabilities. The Company also recognizes trading income as a result of changes in the fair value of trading account assets and liabilities that it holds. The Company’s trading accounts include various types of debt and equity securities, trading loans, and derivative instruments. For additional information relating to trading income, see Note 15, “Derivative Financial Instruments,” and Note 16, “Fair Value Election and Measurement.”

Trust and Investment Management Income

Trust and investment management income includes revenue from custodial services, trust administration, financial advisory services, employee benefit solutions, and other services provided to customers within the Consumer business segment.

The Company generally recognizes trust and investment management revenue over time as services are rendered. Revenue is based on either a percentage of the market value of the assets under management, or advisement, or fixed based on the services provided to the customer. Fees are generally swept from the customer’s account one billing period in arrears based on the prior period’s assets under management or advisement.

Retail Investment Services

Retail investment services consists primarily of investment management, selling and distribution services, and trade

Notes to Consolidated Financial Statements (Unaudited), continued

execution services. The Company’s execution of these services represents its related performance obligations.

Investment management fees are generally recognized over time as services are rendered and are based on either a percentage of the market value of the assets under management, or advisement, or fixed based on the services provided to the customer. The fees are calculated quarterly and are usually collected at the beginning of the period from the customer’s account and recognized ratably over the related billing period.

The Company also offers selling and distribution services and earns commissions through the sale of annuity and mutual fund products. The Company acts as an agent in these transactions and recognizes revenue at a point in time when the customer enters into an agreement with the product carrier. The Company may also receive trailing commissions and 12b-1 fees related to mutual fund and annuity products, and recognizes this revenue in the period that they are realized since the revenue cannot be accurately predicted at the time the policy becomes effective. The Company recognized revenue of $12 million and $38 million for the three and nine months ended September 30, 2018, respectively, which relates to mutual fund 12b-1 fees and annuity trailing commissions from performance obligations satisfied in periods prior to September 30, 2018.

Trade execution commissions are earned and recognized on the trade date, when the Company executes a trade for a customer. Payment for the trade execution is due on the settlement date.

Mortgage Servicing Related Income

The Company recognizes as assets the rights to service mortgage loans, either when the loans are sold and the associated servicing rights are retained or when servicing rights are purchased from a third party. Mortgage servicing related income includes servicing fees, modification fees, fees for ancillary services, other fees customarily associated with servicing arrangements, gains or losses from hedging, and changes in the fair value of residential MSRs inclusive of decay resulting from the realization of monthly net servicing cash flows. For additional information relating to mortgage servicing related income, see Note 1, “Significant Accounting Policies,” in the Company’s 2017 Annual Report on Form 10-K, and Note 8, “Goodwill and Other Intangible Assets,” Note 15, “Derivative Financial Instruments,” and Note 16, “Fair Value Election and Measurement,” in this Form 10-Q.

Mortgage Production Related Income

Mortgage production related income is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees. For additional information relating to mortgage production related income, see Note 1, “Significant Accounting Policies,” in the Company’s 2017 Annual Report on Form 10-K, and Note 15, “Derivative Financial Instruments,” and Note 16, “Fair Value Election and Measurement,” in this Form 10-Q.

Commercial Real Estate Related Income

Commercial real estate related income consists primarily of origination fees, such as loan placement and broker fees, gains and losses on the sale of commercial loans, commercial mortgage

loan servicing fees, income from community development investments, gains and losses from the sale of structured real estate, and other fee income, such as asset advisory fees. For additional information relating to commercial real estate related income, see Note 1, “Significant Accounting Policies,” in the Company’s 2017 Annual Report on Form 10-K, and Note 8, “Goodwill and Other Intangible Assets,” Note 15, “Derivative Financial Instruments,” and Note 16, “Fair Value Election and Measurement,” in this Form 10-Q.

Net Securities Gains or Losses

The Company recognizes net securities gains or losses primarily as a result of the sale of securities AFS and the recognition of any OTTI on securities AFS. For additional information relating to net securities gains or losses, see Note 5, “Investment Securities.”

Other Noninterest Income

Other noninterest income within the scope of ASC Topic 606 consists primarily of fees from the sale of customized personal checks. The Company serves as an agent for customers by connecting them with a third party check provider. Revenue from such sales are earned in the form of commissions from the third party check provider and is recognized at a point in time on the date the customer places an order. Commissions for personal check orders are credited to revenue on an ongoing basis, and commissions for commercial check orders are received quarterly in arrears.

Other noninterest income also includes income from bank-owned life insurance policies that is not within the scope of ASC Topic 606. Income from bank-owned life insurance primarily represents changes in the cash surrender value of such life insurance policies held on certain key employees, for which the Company is the owner and beneficiary. Revenue is recognized in each period based on the change in the cash surrender value during the period.

Practical Expedients and Other

The Company has elected the practical expedient to exclude disclosure of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed.

The Company pays sales commissions as a cost to obtain certain contracts within the scope of ASC Topic 606; however, sales commissions relating to these contracts are generally expensed when incurred because the amortization period would be one year or less. Sales commissions are recognized as employee compensation within Noninterest expense on the Company’s Consolidated Statements of Income.

At September 30, 2018, the Company does not have any material contract assets, liabilities, or other receivables recorded on its Consolidated Balance Sheets, relating to its revenue streams within the scope of ASC Topic 606. Additionally, the Company's contracts generally do not contain terms that require significant judgment to determine the amount of revenue to recognize.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 23 - FEDERAL FUNDS SOLD AND SECURITIES FINANCING ACTIVITIES

Federal Funds Sold and Securities Borrowed or Purchased Under Agreements to Resell

Fed ~~funds~~Funds sold and securities borrowed or purchased under agreements to resell were as follows:


(Dollars in millions)	September 30, 2017		December 31, 2016		September 30, 2018		December 31, 2017
Fed funds sold		$—		$58		$46		$65
Securities borrowed	371		270		429		298
Securities purchased under agreements to resell	811		979		899		1,175
Total Fed funds sold and securities borrowed or purchased under agreements to resell		$1,182		$1,307		$1,374		$1,538

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~~2018 and December 31, ~~2016,~~2017, the total market value of collateral held was ~~$1.2~~$1.3 billion and ~~$1.3~~$1.5 billion, of which ~~$194~~$112 million and ~~$246~~$177 million was repledged, respectively.

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

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								September 30, 2018								December 31, 2017
(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		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		$119		$23		$—		$142		$95		$—		$—		$95
Federal agency securities	58		25		—		83		288		24		—		312		64		43		—		107		101		15		—		116
MBS - agency	738		94		—		832		793		51		—		844		772		148		—		920		694		135		—		829
CP	68		—		—		68		49		—		—		49		19		—		—		19		19		—		—		19
Corporate and other debt securities	292		75		40		407		311		50		40		401		356		146		40		542		316		88		40		444
Total securities sold under agreements to repurchase		$1,188		$194		$40		$1,422		$1,468		$125		$40		$1,633		$1,330		$360		$40		$1,730		$1,225		$238		$40		$1,503

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,~~15, "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~~2018 and December 31, ~~2016,~~2017, 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.

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,~~15, “Derivative Financial Instruments,” and the “Trading Assets and Derivative Instruments and Investment Securities ~~Available for Sale~~” section of Note ~~14,~~16, “Fair Value Election and Measurement.”

Investment securities pledged to secure public deposits, repurchase agreements, trusts, certain derivative agreements, and other funds had a fair value of ~~$3.3~~$3.4 billion and ~~$2.0~~$4.3 billion at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

The following table presents the amortized cost, fair value, and weighted average yield of ~~investments in debt~~ the Company's investment

securities ~~AFS~~ at September 30, ~~2017,~~2018, 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.

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,~~2018, 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~~2017 Annual Report on Form 10-K.

~~At September 30, 2017,~~The Company does not consider the unrealized losses on temporarily impaired securities AFS ~~that have been in an~~to be credit-related. These unrealized ~~loss position for twelve months or longer included agency MBS, U.S. Treasury securities, municipal securities, non-agency commercial MBS, federal~~losses were due primarily to market interest rates

~~agency securities, one ABS collateralized by 2004 vintage home equity loans,~~being higher than the securities' stated coupon rates, and ~~one equity security. The Company continues to receive contractual distributions on the temporarily impaired ABS and dividends on the equity security. Both~~therefore, are recorded in AOCI, net of ~~these~~tax.

A loan is considered impaired when it is probable that the Company will be unable to collect all amounts due, including principal and interest, according to the contractual terms of the agreement. Commercial nonaccrual loans greater than $3 million and certain commercial ~~residential,~~ and consumer loans whose terms have been modified in a TDR are individually evaluated for

~~for~~ impairment. Smaller-balance homogeneous loans that are collectively evaluated for impairment and loans measured at fair value are not included in the following tables. Additionally, the following tables exclude guaranteed student loans and guaranteed residential mortgages for which there was nominal risk of principal ~~loss.~~loss due to the government guarantee.

The Company's recorded investment of nonaccruing loans secured by residential real estate properties for which formal foreclosure proceedings ~~are~~were in process at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 was ~~$72~~$89 million and ~~$85~~$73 million, respectively. The Company's recorded investment of accruing loans secured by residential real estate properties for which formal foreclosure proceedings ~~are~~were in process at September 30, ~~2017~~2018 and December 31, ~~2016~~2017 was ~~$94~~$108 million and ~~$122~~$101 million, of which ~~$90~~$100 million and ~~$114~~$97 million were insured by the FHA or guaranteed by the VA, respectively.

At September 30, 2018, OREO included $49 million of foreclosed residential real estate properties and $2 million of foreclosed commercial real estate properties, with the remaining $1 million related to land.

At December 31, 2017, OREO included ~~$50~~$51 million of foreclosed residential real estate properties and $4 million of foreclosed commercial real estate properties, with the remaining ~~$3 million related to land.~~

~~At December 31, 2016, OREO included $50 million of foreclosed residential real estate properties and $7 million of foreclosed commercial real estate properties, with the remaining $3~~$2 million related to land.

A TDR is a loan for which the Company has granted an economic concession to a borrower in response to ~~certain instances of~~ financial difficulty experienced by the borrower, which the Company would not have considered otherwise. When a loan is modified under the terms of a TDR, the Company typically offers the borrower an extension of the loan maturity date and/or a reduction in the original contractual interest rate. In ~~certain~~limited situations, the Company may offer to restructure a loan in a manner that

~~manner that~~ ultimately results in the forgiveness of a contractually specified principal balance.

At both September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company had ~~$1 million and $29 million, respectively,~~an immaterial amount of commitments to lend additional funds to debtors whose terms have been modified in a TDR. The number and ~~amortized cost~~carrying value of loans modified under the terms of a TDR, by type of modification, are presented in the following tables:

As discussed in Note 1, “Significant Accounting Policies,” to the Company's ~~2016~~2017 Annual Report on Form 10-K, the ALLL is composed of both specific allowances for certain nonaccrual loans and TDRs, and general allowances for groups of loans with

similar risk characteristics. No allowance is required for loans

measured at fair value. Additionally, the Company records an immaterial allowance for loan products that are insured by federal agencies or guaranteed by ~~government agencies,~~GSEs, as there is nominal risk of principal loss.

As discussed in Note 16, "Business Segment Reporting," the Company realigned its business segment structure from three segments to two segments in the second quarter of 2017. As a result, the Company reassessed the composition of its goodwill reporting units and combined the Consumer Banking and Private Wealth Management reporting unit and Mortgage Banking reporting unit into a single Consumer goodwill reporting unit. The Mortgage Banking reporting unit did not have any associated goodwill prior to this change. The composition of the Wholesale Banking reporting unit was not impacted by the business segment structure realignment.

The Company conducts a goodwill impairment test at the reporting unit level at least annually, or more frequently as events occur or circumstances change that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount. See Note 1, "Significant Accounting Policies," to the Company's ~~2016~~2017 Annual Report on Form 10-K for additional

information regarding the Company's goodwill accounting policy.

~~The Company performed qualitative goodwill assessments in~~In the first, second, and third quarters of ~~2017,~~2018, the Company performed qualitative goodwill assessments on its Consumer and Wholesale reporting units, considering changes in key assumptions as well as other events and circumstances occurring since the most recent annual goodwill impairment test performed as of October 1, ~~2016.~~2017. The Company concluded, based on the totality of factors observed, that it is not more-likely-than-not

that the fair values of its reportable segments are less than their respective carrying values. Accordingly, goodwill was not required to be quantitatively tested for impairment during the nine months ended September 30, ~~2017.~~2018.

~~Changes~~In the second quarter of 2018, certain business banking clients were transferred from the Wholesale segment to the Consumer segment, resulting in the reallocation of $128 million in goodwill. See Note 18, "Business Segment Reporting," for additional information. The changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, ~~2017~~2018 are presented in the following table. There were no material changes in the carrying amount of goodwill by reportable segment for the nine months ended September 30, ~~2016.~~2017.

Servicing Rights

The Company acquires servicing rights and retains servicing rights for certain of its sales or securitizations of residential ~~mortgage, consumer indirect,~~mortgages and commercial loans. ~~MSRs~~Servicing rights on residential ~~mortgage loans~~ and ~~servicing rights on~~ commercial ~~and consumer indirect loans~~mortgages are the only material servicing assets capitalized by the Company and are classified ~~within other~~as Other intangible assets on the Company's Consolidated Balance Sheets.

Residential Mortgage Servicing Rights

Income earned by the Company on its residential MSRs is derived primarily from contractually specified mortgage servicing fees and late fees, net of curtailment ~~costs. Such income earned for~~costs, and is presented in the three and nine months ended September 30, 2017 was $100 million and $301 million, respectively, and $94 million and $272 million for the three and nine months ended September 30, 2016, respectively. These amounts are reportedfollowing table.



	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2018		2017		2018		2017
Income from residential MSRs ¹		$108		$100		$322		$301

¹Recognized in ~~mortgage~~Mortgage servicing related income in the Consolidated Statements of Income.

~~At September 30, 2017 and December 31, 2016, the total~~

The UPB of residential mortgage loans serviced ~~was $165.3 billion~~

~~and $160.2 billion, respectively. Included in these amounts at September 30, 2017 and December 31, 2016 were $135.4 billion and $129.6 billion, respectively, of loans serviced~~ for third ~~parties.~~ parties is presented in the following table:



(Dollars in millions)	September 30, 2018		December 31, 2017
UPB of loans underlying residential MSRs		$139,955		$136,071

Notes to Consolidated Financial Statements (Unaudited), continued

The Company purchased MSRs on residential loans with a UPB of ~~$10.9~~$7.0 billion during the nine months ended September 30, ~~2016.~~2018; $5.9 billion of which are reflected in the UPB amounts above and the transfer of servicing for the remainder is scheduled for the fourth quarter of 2018. No MSRs on residential loans were purchased during the nine months ended September 30, 2017. During the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, the Company sold MSRs on residential loans, at a price approximating their fair value, with a UPB of ~~$350~~$781 million and ~~$464~~$350 million, respectively.

The Company measures the fair value of its residential MSRs using a valuation model that calculates the present value of estimated future net servicing income using prepayment projections, spreads, and other assumptions. The Consumer Valuation Committee reviews and approves all significant assumption changes at least ~~quarterly, evaluating these inputs compared to~~annually, drawing upon various market and empirical data sources. Changes to valuation model inputs are reflected in the periods' results. See Note ~~14,~~16, “Fair Value Election and Measurement,” for further information regarding the Company's residential MSR valuation methodology.

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

A summary of the ~~key~~significant unobservable inputs used to estimate the fair value of the Company’s residential MSRs ~~at September 30, 2017 and December 31, 2016,~~ and the ~~sensitivity~~uncertainty of the fair values in response to ~~immediate~~ 10% and 20% adverse changes in those inputs at the reporting date, are presented in the following table.


(Dollars in millions)	September 30, 2017			December 31, 2016			September 30, 2018			December 31, 2017
Fair value of residential MSRs		$1,628			$1,572			$2,062			$1,710
Prepayment rate assumption (annual)	13		%	9		%	12		%	13		%
Decline in fair value from 10% adverse change		$91			$50			$91			$85
Decline in fair value from 20% adverse change	167			97			173			160
Option adjusted spread (annual)	4		%	8		%	3		%	4		%
Decline in fair value from 10% adverse change		$41			$63			$52			$47
Decline in fair value from 20% adverse change	80			122			100			90
Weighted-average life (in years)	5.2			7.0			5.8			5.4
Weighted-average coupon	4.0		%	4.0		%	4.0		%	3.9		%

~~These residential~~Residential MSR ~~sensitivities~~uncertainties are hypothetical and should be used with caution. Changes in fair value based on variations in assumptions generally cannot be extrapolated because (i) the relationship of the change in an assumption to the change in fair value may not be linear and (ii) changes in one assumption may result in changes in another, which might magnify or counteract the ~~sensitivities.~~uncertainties. The ~~sensitivities~~uncertainties do not reflect the effect of hedging activity undertaken by the Company to offset changes in the fair value of MSRs. See Note ~~13,~~15, “Derivative Financial Instruments,” for further information regarding these hedging activities.

~~Consumer Loan Servicing Rights~~

In June 2015, the Company completed the securitization of $1.0 billion of indirect auto loans, with servicing rights retained, and recognized a $13 million servicing asset at the time of sale. See Note 8, “Certain Transfers of Financial Assets and Variable Interest Entities,” for additional information on the Company's securitization transactions.

Income earned by the Company on its consumer loan servicing rights is derived primarily from contractually specified servicing fees and other ancillary fees. Such income earned was immaterial for both the three and nine months ended September 30, 2017, and was $2 million and $5 million for the three and nine months ended September 30, 2016, respectively, reported in other noninterest income in the Consolidated Statements of Income.

At September 30, 2017 and December 31, 2016, the total UPB of consumer indirect loans serviced for third parties was $337 million and $512 million, respectively. No consumer loan servicing rights were purchased or sold during the nine months ended September 30, 2017 and 2016.

Consumer loan servicing rights are accounted for at amortized cost and are monitored for impairment on an ongoing basis. The Company calculates the fair value of consumer servicing rights using a discounted cash flow model. At September 30, 2017 and December 31, 2016, the amortized cost of the Company's consumer loan servicing rights was $2 million and $4 million, respectively.

Commercial Mortgage Servicing Rights

~~In December 2016, the Company completed the acquisition of substantially all of the assets of the operating subsidiaries of~~ ~~Pillar, and as a result, the Company recognized a $62 million servicing asset. See Note 2, "Acquisitions/Dispositions," to the Company's 2016 Annual Report on Form 10-K for additional information on the~~ ~~Pillar~~ ~~acquisition.~~

Income earned by the Company on its commercial mortgage servicing rights is derived primarily from contractually specified servicing fees and other ancillary fees. Such income earned for the three and nine months ended September 30, 2017 was $6 million and $17 million, respectively, and is reported in commercial real estate related income in the Consolidated Statements of Income. There was no income earned on commercial mortgage servicing rights for the three and nine months ended September 30, 2016.

The Company also earns income from subservicing certain third party commercial mortgages for which the Company does not record servicing

rights. ~~Such~~The following table presents the Company's income earned ~~for the three and nine months ended September 30, 2017 was $3 million and $11 million, respectively, and is reported~~from servicing commercial mortgages.



	Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2018		2017		2018		2017
Income from commercial mortgage servicing rights ¹		$5		$6		$20		$17
Income from subservicing third party commercial mortgages¹	3		3		9		11

¹Recognized in ~~commercial~~Commercial real estate related income in the Consolidated Statements of Income. ~~There was no income earned from such subservicing arrangements for the three and nine months ended September 30, 2016.~~

~~At September 30, 2017 and December 31, 2016, the total~~

The UPB of commercial mortgage loans serviced for third parties ~~was $30.2 billion and $27.7 billion, respectively. Included~~is presented in ~~these amounts at September 30, 2017 and December 31, 2016 were $5.3 billion and $4.8 billion, respectively, of loans serviced for third parties for which~~ the ~~Company records servicing rights, and $24.9 billion and $22.9 billion, respectively, of loans subserviced for third parties for which the Company does not record servicing rights.~~ following table:



(Dollars in millions)	September 30, 2018		December 31, 2017
UPB of commercial mortgages subserviced for third parties		$26,206		$24,294
UPB of loans underlying commercial mortgage servicing rights	6,039		5,760
Total UPB of commercial mortgages serviced for third parties		$32,245		$30,054

No commercial mortgage servicing rights were purchased or sold during the nine months ended September 30, ~~2017~~2018 and ~~2016.~~2017.

Commercial mortgage servicing rights are accounted for at amortized cost and are monitored for impairment on an ongoing basis. The Company calculates the fair value of commercial servicing rights based on the present value of estimated future net servicing income, considering prepayment projections and other assumptions. Impairment, if any, is recognized when the carrying value of the servicing asset exceeds the fair value at the measurement date. The amortized cost of the Company's commercial mortgage servicing rights ~~were $61~~was $64 million and ~~$62~~$65 million at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

A summary of the ~~key~~significant unobservable inputs used to estimate the fair value of the Company’s commercial mortgage servicing rights and the uncertainty of the fair values in response to 10% and 20% adverse changes in those inputs at ~~September 30, 2017 and December 31, 2016,~~the reporting date, are presented in the following table.

(Dollars in millions) September 30, 2017 December 31, 2016
Fair value of commercial mortgage servicing rights
$69

$62
Discount rate (annual) 12 % 12 %
Prepayment rate assumption (annual) 7
6
Float earnings rate (annual) 1.0
0.5
Weighted-average life (in years) 7.1
7.0



(Dollars in millions)	September 30, 2018			December 31, 2017
Fair value of commercial mortgage servicing rights		$77			$75
Discount rate (annual)	12		%	12		%
Decline in fair value from 10% adverse change		$3			$3
Decline in fair value from 20% adverse change	6			6
Prepayment rate assumption (annual)	6		%	7		%
Decline in fair value from 10% adverse change		$1			$1
Decline in fair value from 20% adverse change	2			2
Weighted-average life (in years)	7.8			7.0
Float earnings rate (annual)	1.1		%	1.1		%

Commercial mortgage servicing right uncertainties are hypothetical and should be used with caution.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 9 - OTHER ASSETS

The components of other assets are presented in the following table:



(Dollars in millions)	September 30, 2018		December 31, 2017
Equity securities ¹:
Marketable equity securities ²:
Mutual fund investments		$65		$49
Other equity ³	27		7
Nonmarketable equity securities:
Federal Reserve Bank stock²	403		403
FHLB stock ²	142		15
Other equity ³	50		26
Lease assets	2,110		1,528
Tax credit investments ⁴	1,583		1,272
Bank-owned life insurance	1,619		1,411
Accrued income	1,059		880
Accounts receivable	669		2,201
Pension assets, net	518		464
Prepaid expenses	248		319
OREO	52		57
Other	887		786
Total other assets		$9,432		$9,418

¹Equity securities held for trading purposes are classified in Trading assets and derivative instruments or Trading liabilities and derivative instruments on the Company's Consolidated Balance Sheets.

²Beginning January 1, 2018, the Company reclassified equity securities previously presented in Securities available for sale to Other assets on the Consolidated Balance Sheets. Reclassifications have been made to previously reported amounts for comparability.

³ During the second quarter of 2018, the Company reclassified $22 million of equity securities from nonmarketable to marketable equity securities due to readily determinable fair value information observed in active markets.

⁴ See Note 10, "Certain Transfers of Financial Assets and Variable Interest Entities," for additional information.

Equity Securities Not Classified as Trading Assets or Liabilities

Equity securities with readily determinable fair values (marketable) that are not held for trading purposes are recorded at fair value and include mutual fund investments and other publicly traded equity securities.

Equity securities without readily determinable fair values (nonmarketable) that are not held for trading purposes include Federal Reserve Bank of Atlanta and FHLB of Atlanta capital stock, both held at cost, as well as other equity securities that the Company elected to account for under the measurement alternative, pursuant to its adoption of ASU 2016-01 on January 1, 2018. See the “Equity Securities” and “Accounting Pronouncements” sections of Note 1, “Significant Accounting Policies,” for additional information on the Company's adoption of ASU 2016-01 and for policy updates related to equity securities.

The following table summarizes net gains/(losses) for equity securities not classified as trading assets:



(Dollars in millions)	Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Net (losses)/gains from marketable equity securities ¹		($4	)		$10
Net gains/(losses) from nonmarketable equity securities:
Remeasurement losses and impairment	—			—
Remeasurement gains ¹	7			30
Less: Net realized gains from sale	—			—
Total net unrealized gains from non-trading equity securities		$3			$40

¹Recognized in Other noninterest income in the Company's Consolidated Statements of Income.

Lease Assets

Lease assets consist primarily of operating leases in which the Company is the lessor. In these scenarios, the Company leases assets and receives periodic rental payments. Depreciation on the leased asset is recognized over the term of the operating lease. Any impairment on the leased asset is recognized to the extent that the carrying value of the asset is not recoverable and is greater than its fair value.

Bank-Owned Life Insurance

Bank-owned life insurance consists of life insurance policies held on certain employees for which the Company is the beneficiary. These policies provide the Company an efficient form of funding for retirement and other employee benefits costs.

Accrued Income

Accrued income consists primarily of interest and other income accrued on the Company's LHFI. Interest income on loans, except those classified as nonaccrual, is accrued based upon the outstanding principal amounts using the effective yield method. See Note 1, “Significant Accounting Policies,” to the Company's 2017 Annual Report on Form 10-K for information regarding the Company's accounting policy for loans.

Accounts Receivable

Accounts receivable consists primarily of receivables from brokers, dealers, and customers related to pending loan trades, unsettled trades of securities, loan-related advances, and investment securities income due but not received. Additionally, includes proceeds due from the FHA and the VA on foreclosed real estate related to loans insured by the FHA or guaranteed by the VA.

Pension Assets

Pension assets (net) represent the funded status of the Company's overfunded pension and other postretirement benefits plans, measured as the difference between the fair value of plan assets and the benefit obligation at period end.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 810 - CERTAIN TRANSFERS OF FINANCIAL ASSETS AND VARIABLE INTEREST ENTITIES

The Company has transferred loans and securities in sale or securitization transactions for which the Company retains certain beneficial interests, servicing rights, and/or recourse. These transfers of financial assets include certain residential mortgage loans, ~~commercial and corporate~~guaranteed student loans, and ~~consumer~~commercial loans, as discussed in the following section, "Transfers of Financial Assets." Cash receipts on beneficial interests held related to these transfers were ~~$4 million and $9 million~~immaterial for each of the three and nine months ended September 30, ~~2017,~~2018 and $4 million and $10 million for the three and nine months ended September 30, 2016, respectively. The servicing fees related to these asset transfers (excluding servicing fees for residential and commercial mortgage loan transfers to GSEs, which are discussed in Note 7~~, “Goodwill and Other Intangible Assets”) were immaterial for the three and nine months ended September 30, 2017 and 2016.~~2017.

When a transfer or other transaction occurs with a VIE, the Company first determines whether it has a VI in the VIE. A VI is typically in the form of securities representing retained interests in transferred assets and, at times, servicing rights, and for commercial mortgage loans sold to Fannie Mae, the loss share guarantee. See Note 14, “Guarantees,” for further discussion of the Company's loss share guarantee. When determining whether to consolidate the VIE, the Company evaluates whether it is a primary beneficiary which has both (i) the power to direct the activities that most significantly impact the economic performance of the VIE, and (ii) the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE.

To determine whether a transfer should be accounted for as a sale or a secured borrowing, the Company evaluates whether: (i) the transferred assets are legally isolated, (ii) the transferee has the right to pledge or exchange the transferred assets, and (iii) the Company has relinquished effective control of the transferred assets. If all three conditions are met, then the transfer is accounted for as a sale.

Except as specifically noted herein, the Company is not required to provide additional financial support to any of the entities to which the Company has transferred financial assets, nor has the Company provided any support it was not otherwise obligated to provide. No events occurred during the nine months ended September 30, ~~2017~~2018 that changed the Company’s previous conclusions regarding whether it is the primary beneficiary of the VIEs described herein. Furthermore, no events occurred during the nine months ended September 30, ~~2017~~2018 that changed the Company’s sale conclusion with regards to previously transferred residential mortgage loans, ~~indirect auto loans,~~guaranteed student loans, or commercial ~~and corporate~~ loans.

Transfers of Financial Assets

The following discussion summarizes transfers of financial assets to entities for which the Company has retained some level of continuing involvement.

Consumer Loans

Residential Mortgage Loans

The Company typically transfers first lien residential mortgage loans in conjunction with Ginnie Mae, Fannie Mae, and Freddie Mac securitization transactions, whereby the loans are exchanged for cash or securities that are readily redeemable for cash, and servicing rights are retained.

The Company sold residential mortgage loans to Ginnie Mae, Fannie Mae, and Freddie Mac, ~~(collectively, "the Agencies"),~~ which resulted in pre-tax net gains of $46 million and $53 million for the three and nine

months ended September 30, 2018, and pre-tax net gains of $73 million and $152 million for the three and nine months ended September 30, 2017, ~~and pre-tax net gains of $131 million and $288 million for the three and nine months ended September 30, 2016,~~ respectively. Net gains/losses on the sale of residential mortgage LHFS are recorded at inception of the associated IRLCs and reflect the change in value of the loans resulting from changes in interest rates from the time the Company enters into the related IRLCs with borrowers until the loans are sold, but do not include the results of hedging activities initiated by the Company to mitigate this market risk. See Note ~~13,~~15, "Derivative Financial Instruments," for further discussion of the Company's hedging activities. The Company has made certain representations and warranties with respect to the transfer of these loans. See Note ~~12,~~14, “Guarantees,” for additional information regarding representations and warranties.

In a limited number of securitizations, the Company has received securities in addition to cash in exchange for the transferred loans, while also retaining servicing rights. The securities received are measured at fair value and classified as securities AFS. AtDuring the second quarter of 2018, the Company sold the majority of these securities for a net gain of $6 million, recognized in Net securities gains on the Consolidated Statements of Income for the nine months ended September 30, ~~2017 and December 31, 2016, the~~2018. The fair value of retained securities ~~received~~was immaterial at September 30, 2018 and totaled ~~$24~~$22 million ~~and $30 million, respectively.~~at December 31, 2017.

The Company evaluates securitization entities in which it has a VI for potential consolidation under the VIE consolidation model. Notwithstanding the Company's role as servicer, the Company typically does not have power over the securitization entities as a result of rights held by the master servicer. In certain transactions, the Company does have power as the servicer, but does not have an obligation to absorb losses, or the right to receive benefits, that could potentially be significant. In all such cases, the Company does not consolidate the securitization entity. ~~Total assets~~Due to the aforementioned sale of securities AFS in the second quarter of 2018, the Company’s remaining VI in the securitization entity was immaterial at September 30, 2018. Assets of the unconsolidated entities in which the Company has a VI ~~were $161 million and $203~~totaled $147 million at ~~September 30, 2017 and~~ December 31, ~~2016, respectively.~~2017.

The Company’s maximum exposure to loss related to these unconsolidated residential mortgage loan securitizations is comprised of the loss of value of any interests it retains, which was ~~$24 million and $30 million~~immaterial at September 30, ~~2017~~2018 and totaled $22 million at December 31, ~~2016, respectively, and~~2017, as well as any repurchase obligations or other losses it incurs as a result of any guarantees related to these securitizations, which is discussed further in Note ~~12,~~14, “Guarantees.”

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

~~Commercial and Corporate Loans~~

~~In connection with the~~ ~~Pillar~~ acquisition completed in December 2016, the Company acquired licenses and approvals to originate and sell certain commercial mortgage loans to Fannie Mae and Freddie Mac, to originate FHA insured loans, and to issue and sell Ginnie Mae commercial MBS secured by FHA insured loans. The Company transferred commercial loans to these Agencies, which resulted in pre-tax net gains of $9 million and $33 million for the three and nine months ended September 30, 2017. The loans are exchanged for cash or securities that are readily redeemable for cash, with servicing rights retained. The Company has made certain representations and warranties with respect to the transfer of these loans and has entered into a loss share guarantee related to certain loans transferred to Fannie Mae. See Note 12, “Guarantees,” for additional information regarding the commercial mortgage loan loss share guarantee.

~~Consumer Loans~~

Guaranteed Student Loans

The Company has securitized government-guaranteed student loans through a transfer of loans to a securitization entity and retained the residual interest in the entity. The Company concluded that this entity should be consolidated because the Company has (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses, and the right to receive benefits, that could potentially be significant. At September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company’s Consolidated

Notes to Consolidated Financial Statements (Unaudited), continued

Balance Sheets reflected ~~$198~~$171 million and ~~$225~~$192 million of assets held by the securitization entity and ~~$195~~$168 million and ~~$222~~$189 million of debt issued by the entity, respectively, inclusive of related accrued interest.

To the extent that the securitization entity incurs losses on its assets, the securitization entity has recourse to the guarantor of the underlying loan, which is backed by the Department of Education up to a maximum guarantee of 98%, or in the event of death, disability, or bankruptcy, 100%. When not fully guaranteed, losses reduce the amount of available cash payable

to the Company as the owner of the residual interest. To the extent that losses result from a breach of servicing responsibilities, the Company, which functions as the master servicer, may be required to repurchase the defaulted loan(s) at par value. If the breach was caused by the subservicer, the Company would seek reimbursement from the subservicer up to the guaranteed amount. The Company’s maximum exposure to loss related to the securitization entity would arise from a breach of its servicing responsibilities. To date, loss claims filed with the guarantor that have been denied due to servicing errors have either been, or are in the process of being cured, or reimbursement has been

provided to the Company by the subservicer, or in limited cases, absorbed by the Company.

~~Indirect Auto~~Commercial Loans

~~In June 2015, the~~The Company originates and sells certain commercial mortgage loans to Fannie Mae and Freddie Mac, originates FHA insured loans, and issues and sells Ginnie Mae commercial MBS secured by FHA insured loans. The Company transferred ~~indirect auto~~commercial loans to ~~a securitization entity,~~these Agencies and GSEs, which ~~was determined to be a VIE,~~resulted in pre-tax net gains of $8 million and ~~accounted~~$22 million for the ~~transfer as a sale.~~three and nine months ended September 30, 2018, and pre-tax net gains of $9 million and $33 million for the three and nine months ended September 30, 2017, respectively. The loans are exchanged for cash or securities that are readily redeemable for cash, with servicing rights retained. The Company ~~retained servicing rights for~~has made certain representations and warranties with respect to the transfer of these loans and has entered into a loss share guarantee related to certain loans transferred loans, but did not retain any debt or equity interest in the securitization entity. The fees received for servicing do not represent a VI and, therefore, the Company does not consolidate the securitization entity.to Fannie Mae. See Note ~~7, "Goodwill and Other Intangible Assets,"~~14, “Guarantees,” for additional information regarding the ~~servicing asset recognized in this transaction.~~

To the extent that losses on the transferred loans are the result of a breach of representations and warranties related to either the initial transfer or the Company's ongoing servicing responsibilities, the Company may be obligated to either cure the breach or repurchase the affected loans. The Company’s maximum exposure tocommercial mortgage loan loss related to the loans transferred to the securitization entity would arise from a breach of representations and warranties and/or a breach of the Company's servicing obligations. Potential losses suffered by the securitization entity that the Company may be liable for are limited to approximately $338 million, which reflects the total remaining UPB of transferred loans and the carrying value of the servicing asset.share guarantee.

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

The Company's total managed loans, including the LHFI portfolio and other transferred loans (securitized and unsecuritized), are presented in the following table by portfolio balance and delinquency status (accruing loans 90 days or more past due and all nonaccrual loans) at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, as well as the related net charge-offs for the three and nine months ended September 30, ~~2017~~2018 and ~~2016.~~2017.


	Portfolio Balance				Past Due and Nonaccrual				Net Charge-offs												Portfolio Balance				Past Due and Nonaccrual				Net Charge-offs
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		Three Months Ended September 30						Nine Months Ended September 30						September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)									2017			2016			2017			2016											2018			2017			2018			2017
LHFI portfolio:
Commercial		$76,960		$78,224		$314		$426		$22			$71			$90			$183			$77,958		$75,477		$310		$247		$42			$22			$76			$90
Residential	38,730		38,990		677		758		15			21			51			80
Consumer	28,574		26,084		1,049		949		41			34			120			84			69,257		67,704		1,867		1,832		46			56			164			171
Total LHFI portfolio	144,264		143,298		2,040		2,133		78			126			261			347			147,215		143,181		2,177		2,079		88			78			240			261
Managed securitized loans ¹:
Commercial ²	5,385		4,761		—		—		—			—			—			—
Residential	133,052		126,641		96		114		2		³	2		³	5		³	6		³
Managed securitized loans:
Commercial ¹																					6,039		5,760		—		—		—			—			—			—
Consumer	337		512		—		1		1			1			2			2			138,747		134,160		226		171		1		²	3		²	5		²	7		²
Total managed securitized loans	138,774		131,914		96		115		3			3			7			8			144,786		139,920		226		171		1			3			5			7
Managed unsecuritized loans ⁴	2,359		2,985		351		438		—			—			—			—
Managed unsecuritized loans ³																					1,380		2,200		190		340		—			—			—			—
Total managed loans		$285,397		$278,197		$2,487		$2,686		$81			$129			$268			$355			$293,381		$285,301		$2,593		$2,590		$89			$81			$245			$268

¹ ~~Excludes loans that have completed the foreclosure or short sale process (i.e., involuntary prepayments).~~

² Comprised of commercial mortgages sold through Fannie Mae, Freddie Mac, and Ginnie Mae securitizations, whereby servicing has been retained by the Company.

³² ~~Net charge-offs are~~Amounts associated with ~~$336~~$429 million and ~~$410~~$602 million of managed securitized ~~residential~~ loans at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. Net charge-off data is not reported to the Company for the remaining balance of ~~$132.7~~$138.3 billion and ~~$126.2~~$133.6 billion of managed securitized ~~residential~~ loans at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

⁴³ Comprised of unsecuritized ~~residential~~ loans the Company originated and sold to private investors with servicing rights retained. Net charge-offs on these loans are not presented in the table as the data is not reported to the Company by the private investors that own these related loans.

Notes to Consolidated Financial Statements (Unaudited), continued

Other Variable Interest Entities

In addition to exposure to VIEs arising from transfers of financial assets, the Company also has involvement with VIEs from other business activities.

Tax Credit Investments

The following table provides information related to the Company's investments in tax credit VIEs that it does not consolidate:



	Community Development Investments				Renewable Energy Partnerships
(Dollars in millions)	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Carrying value of investments ¹		$1,515		$1,272		$68		$—
Maximum exposure to loss related to investments ²	2,173		1,905		165		—


¹	At September 30, 2018 and December 31, 2017, the carrying value of community development investments excludes $67 million and $59 million of investments in funds that do not qualify for tax credits, respectively.

²

At September 30, 2018 and December 31, 2017, the Company's maximum exposure to loss related to community development investments includes $484 million and $354 million of loans and $648 million and $627 million of unfunded equity commitments, respectively. At September 30, 2018 and December 31, 2017, the Company's maximum exposure to loss related to renewable energy partnerships includes $97 million and $0 of unfunded equity commitments, respectively.

Community Development Investments

The Company invests in multi-family affordable housing partnership developments and other community development entities as a limited partner and/or a lender. The carrying value of these investments is recorded in Other assets on the Company’s Consolidated Balance Sheets. The Company receives tax credits for its limited partner investments, which are recorded in Provision for income taxes in the Company's Consolidated Statements of Income. Amortization recognized on qualified affordable housing partnerships is recorded in the Provision for income taxes, net of the related tax benefits, in the Company's Consolidated Statements of Income. Amortization recognized on other community development investments is recorded in Amortization in the Company's Consolidated Statements of Income. The Company has determined that the majority of the related partnerships are VIEs.

The Company has concluded that it is not the primary beneficiary of these investments when it invests as a limited partner and there is a third party general partner. The general partner, or an affiliate of the general partner, often provides guarantees to the limited partner, which protects the Company from construction and operating losses and tax credit allocation deficits. The Company’s maximum exposure to loss would result from the loss of its limited partner investments, net of liabilities, along with loans or interest rate swap exposures related to these investments as well as unfunded equity commitments that the Company is required to fund if certain conditions are met.

The following table presents tax credits and amortization associated with the Company’s investments in community development investments.



	Tax Credits								Amortization
	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2018		2017		2018		2017		2018		2017		2018		2017
Qualified affordable housing partnerships		$28		$27		$87		$77		$29		$27		$92		$76
Other community development investments	23		25		62		60		19		19		49		45

Renewable Energy Partnerships

In the second quarter of 2018, the Company began investing in entities that promote renewable energy sources as a limited partner. The carrying value of these renewable energy partnership investments is recorded in Other assets on the Company’s Consolidated Balance Sheets, and the associated tax credits received for these investments are recorded as a reduction to the carrying value of these investments. The Company has determined that these renewable energy tax credit partnerships are VIEs.

The Company has concluded that it is not the primary beneficiary of these VIEs because it does not have the power to direct the activities that most significantly impact the VIEs' financial performance and therefore, it is not required to consolidate these VIEs. The Company’s maximum exposure to loss related to these investments is comprised of its equity investments in these partnerships and any additional unfunded equity commitments.

Total Return Swaps

At September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the outstanding notional ~~amounts~~amount of the Company's VIE-facing TRS contracts ~~were $2.5~~totaled $1.9 billion and ~~$2.1~~$1.7 billion, and related ~~senior financing~~loans outstanding to VIEs ~~were $2.5~~totaled $1.9 billion and ~~$2.1~~$1.7 billion, respectively. These financings were measured at fair value and classified within ~~trading~~Trading assets and derivative instruments on the Consolidated Balance Sheets. The Company entered into client-facing TRS contracts of the same outstanding notional amounts. The notional amounts of the TRS contracts with VIEs represent the Company’s maximum exposure to loss, although this exposure has been mitigated via the TRS contracts with ~~third party~~ clients. For additional information on the Company’s TRS contracts and its involvement with these VIEs, see Note 1315, “Derivative Financial Instruments,” ~~in this Form 10-Q,~~ as well as Note 10, "Certain Transfers of Financial Assets and Variable Interest Entities," to the Company's ~~2016~~2017 Annual Report on Form 10-K.

~~Community Development Investments~~

As part of its community reinvestment initiatives, the Company invests in multi-family affordable housing developments and other community development entities as a limited partner and/or a debt provider. The Company receives tax credits for its limited partner investments. The Company has determined that the majority of the related partnerships are VIEs.

The Company has concluded that it is not the primary beneficiary of affordable housing partnerships when it invests as a limited partner and there is a third party general partner. The investments are accounted for in accordance with the accounting guidance for investments in affordable housing projects. The general partner, or an affiliate of the general partner, often provides guarantees to the limited partner, which protects the Company from construction and operating losses and tax credit allocation deficits. Assets of $2.3 billion and $1.7 billion in these and other community development partnerships were not included in the Consolidated Balance Sheets at September 30, 2017 and December 31, 2016, respectively. The Company's limited partner interests had carrying values of $1.0 billion and $780 million at September 30, 2017 and December 31, 2016, respectively, and are recorded in other assets on the Company’s Consolidated Balance Sheets. The Company’s maximum exposure to loss for these investments totaled $1.3 billion and $1.1 billion at September 30, 2017 and December 31, 2016, respectively. The Company’s maximum exposure to loss would result from the loss of its limited partner investments, net of liabilities, along with $338 million and $306 million of loans, interest-rate swap fair value exposures, or letters of credit issued by the Company to the entities at September 30, 2017 and December 31, 2016, respectively. The remaining exposure to loss is primarily attributable to unfunded equity commitments that the Company is required to fund if certain conditions are met.

Notes to Consolidated Financial Statements (Unaudited), continued

The Company also owns noncontrolling interests in funds whose purpose is to invest in community developments. At September 30, 2017 and December 31, 2016, the Company's investment in these funds totaled $244 million and $200 million, respectively. The Company's maximum exposure to loss on its investment in these funds is comprised of its equity investments in the funds, loans issued, and any additional unfunded equity commitments, which totaled $604 million and $562 million at September 30, 2017 and December 31, 2016, respectively.

During the three and nine months ended September 30, 2017, the Company recognized $27 million and $77 million of tax credits for qualified affordable housing projects, and $27 million and $76 million of amortization on these qualified affordable housing projects, respectively. During the three and nine months ended September 30, 2016, the Company recognized $27 million and $65 million of tax credits for qualified affordable housing projects, and $23 million and $62

million of amortization on these qualified affordable housing projects, respectively. These tax credits and amortization, net of the related tax benefits, are recorded in the provision for income taxes.

Certain of the Company's community development investments do not qualify as affordable housing projects for accounting purposes. The Company recognized tax credits for these investments of $25 million and $60 million during the three and nine months ended September 30, 2017, and $18 million and $46 million during the three and nine months ended September 30, 2016, respectively, in the provision for income taxes. Amortization recognized on these investments totaled $19 million and $45 million during the three and nine months ended September 30, 2017, and $13 million and $33 million during the three and nine months ended September 30, 2016, respectively, recorded in amortization in the Company's Consolidated Statements of Income.

NOTE 911 – NET INCOME PER COMMON SHARE

Reconciliations of net income to net income available to common shareholders and average basic common shares outstanding to average diluted common shares outstanding are presented in the following table.

Equivalent shares of less than 1 million ~~and 8 million~~ related to common stock options and ~~common stock~~ warrants outstanding at September 30, 2017 ~~and 2016, respectively,~~ were excluded from the computations of diluted net income per average common share because they would have been anti-dilutive.

Reconciliations of net income to net income available to common shareholders and the difference between average basic common shares outstanding and average diluted common shares outstanding are presented in the following table.

Three Months Ended September 30 Nine Months Ended September 30
(Dollars and shares in millions, except per share data) 2017 2016 2017 2016
Net income
$538

$474

$1,533

$1,413
Less:
Preferred stock dividends (26 ) (17 ) (65 ) (49 )
Dividends and undistributed earnings allocated to unvested common share awards —
—
—
(1 )
Net income available to common shareholders
$512

$457

$1,468

$1,363

Average basic common shares outstanding 478
496
484
501
Add dilutive securities:
Stock options 1
2
1
2
RSUs, warrants, and restricted stock 5
3
4
3
Average diluted common shares outstanding 484
501
489
506

Net income per average common share - diluted
$1.06

$0.91

$3.00

$2.70
Net income per average common share - basic 1.07
0.92
3.04
2.72

~~Notes to Consolidated Financial Statements (Unaudited), continued~~



	Three Months Ended September 30						Nine Months Ended September 30
(Dollars and shares in millions, except per share data)	2018			2017			2018			2017
Net income		$752			$538			$2,117			$1,533
Less:
Preferred stock dividends	(26		)	(26		)	(81		)	(65		)
Net income available to common shareholders		$726			$512			$2,036			$1,468

Average common shares outstanding - basic	460.3			478.3			464.8			483.7
Add dilutive securities:
RSUs	3.0			2.9			2.8			2.9
Common stock warrants, options, and restricted stock	0.9			2.4			1.4			2.6
Average common shares outstanding - diluted	464.2			483.6			469.0			489.2

Net income per average common share - diluted		$1.56			$1.06			$4.34			$3.00
Net income per average common share - basic	1.58			1.07			4.38			3.04

NOTE 1012 - INCOME TAXES

For the three months ended September 30, ~~2017~~2018 and ~~2016,~~2017, the provision for income taxes was ~~$225~~$95 million and ~~$215~~$225 million, representing effective tax rates of ~~29%~~11% and ~~31%~~29%, respectively. For the nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, the provision for income taxes was ~~$606~~$412 million and ~~$611~~$606 million, representing effective tax rates of ~~28%~~16% and ~~30%~~28%, respectively. The effective tax ~~rates~~rate for the nine months ended September 30, 2018 was favorably impacted by a net $71 million discrete income tax benefit, while the effective tax rate for the nine months ended September 30, 2017 ~~and 2016 were~~was favorably impacted by a net $26 million discrete income tax benefit related primarily to share-based compensation.

The $71 million net discrete income tax ~~benefits related primarily to~~benefit for the nine months ended September 30, 2018 was driven by a $55 million tax benefit for the income tax effects of the 2017 Tax Act, a $22 million tax benefit for share-based compensation, and an $8 million tax benefit related to the release of ~~$26~~certain UTBs due to the expiration of the applicable statute of limitation. These income tax benefits were offset partially by a $14 million discrete tax expense resulting from the merger of the Company's STM and ~~$13~~Bank legal entities, which includes the $35 million ~~respectively.~~discrete tax expense in the first quarter of 2018 related to the increase in the valuation allowance recorded for STM's state carryforwards and a $21 million discrete tax benefit in the third quarter of 2018 related to the net adjustment of STM’s state DTAs and DTLs upon completion of the merger. The $55 million adjustment for

the income tax effects of the 2017 Tax Act reflects the final adjustment to the Company's December 31, 2017 DTAs and DTLs at the reduced federal corporate income tax rate of 21%. This adjustment completed the Company's accounting for the income tax effects of the 2017 Tax Act.

At September 30, 2018 and December 31, 2017, the Company had a valuation allowance against its state carryforwards and certain state DTAs of $89 million and $143 million, respectively. This decrease in the valuation allowance was due primarily to the reversal of the valuation allowance that was recorded against certain of STM's pre-merger state NOL carryforwards that could not be carried forward by the Bank after the merger. The reversal of the valuation allowance was offset by the write-off of the related state NOL carryforwards. See Note 18, “Business Segment Reporting,” for additional information regarding the merger of STM and the Bank.

The provision for income taxes includes both federal and state income taxes and differs from the provision using statutory rates due primarily to favorable permanent tax items such as interest income from lending to tax-exempt entities, tax credits, ~~from community reinvestment activities,~~ and amortization expense related to qualified affordable housing investment costs. The Company calculated the provision for income taxes ~~for the three and nine months ended September 30, 2017 and 2016~~ by applying the estimated annual effective tax rate to year-to-date pre-tax income and adjusting for discrete items that occurred during the period.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 1113 - EMPLOYEE BENEFIT PLANS

The Company sponsors various compensation and benefit programs to attract and retain talent. Aligned with a pay for performance culture, the Company's plans and programs include short-term incentives, AIP, and various LTI plans. See Note 15,

“"Employee Benefit Plans,”" to the Company's ~~2016~~2017 Annual Report on Form 10-K for additional information regarding the Company's employee benefit plans.

Stock-based compensation expense recognized in ~~employee~~Employee compensation in the Consolidated Statements of Income consisted of the following:


	Three Months Ended September 30				Nine Months Ended September 30				Three Months Ended September 30				Nine Months Ended September 30
(Dollars in millions)	2017		2016		2017		2016		2018		2017		2018		2017
RSUs		$14		$13		$64		$44		$21		$14		$82		$64
Phantom stock units ¹	17		16		57		39		10		17		36		57
Restricted stock	—		—		—		2
Total stock-based compensation expense		$31		$29		$121		$85		$31		$31		$118		$121

Stock-based compensation tax benefit ²		$12		$11		$46		$32		$8		$12		$28		$46

¹Phantom stock units are settled in cash. During the three and nine months ended September 30, 2018, the Company paid $1 million and $76 million, respectively, related to these share-based liabilities. During the three and nine months ended September 30, 2017, the Company paid $2 million and $79 million, respectively, related to these share-based liabilities.

²Does not include excess tax benefits or deficiencies recognized in the Provision for income taxes in the Consolidated Statements of Income.

Components of net periodic benefit related to the Company's pension and other postretirement benefits plans are presented in the following table and are recognized in ~~employee~~Employee benefits in the Consolidated Statements of Income:


	Pension Benefits ¹												Other Postretirement Benefits												Pension Benefits ¹												Other Postretirement Benefits
	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2017			2016			2017			2016			2017			2016			2017			2016			2018			2017			2018			2017			2018			2017			2018			2017
Service cost		$1			$1			$4			$4			$—			$—			$—			$—			$1			$1			$4			$4			$—			$—			$—			$—
Interest cost	24			24			71			73			—			—			1			1			23			24			68			71			—			—			1			1
Expected return on plan assets	(49		)	(46		)	(146		)	(140		)	(1		)	(1		)	(4		)	(3		)	(47		)	(49		)	(140		)	(146		)	(1		)	(1		)	(4		)	(4		)
Amortization of prior service credit	—			—			—			—			(1		)	(1		)	(4		)	(4		)	—			—			—			—			(2		)	(1		)	(5		)	(4		)
Amortization of actuarial loss	6			6			18			19			—			—			—			—			6			6			17			18			—			—			—			—
Net periodic benefit		($18	)		($15	)		($53	)		($44	)		($2	)		($2	)		($7	)		($6	)		($17	)		($18	)		($51	)		($53	)		($3	)		($2	)		($8	)		($7	)

¹Administrative fees are recognized in service cost for each of the periods presented.

In the second quarter of 2017, the Company amended its NCF Retirement Plan in accordance with its decision to terminate the pension plan effective as of July 31, 2017. The Company expects

to reclassify approximately $61 million of pre-tax deferred losses from AOCI into net income upon settlement of the NCF pension plan, ~~termination~~which is ~~expected~~on schedule to be completed by the end of ~~2018 and~~2018.

~~the Company is in process of evaluating the impact of the termination and expected future settlement accounting on its Consolidated Financial Statements and related disclosures.~~

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 1214 – GUARANTEES

The Company has undertaken certain guarantee obligations in the ordinary course of business. The issuance of a guarantee imposes an obligation for the Company to stand ready to perform and make future payments should certain triggering events occur. Payments may be in the form of cash, financial instruments, other assets, shares of stock, or through provision of the Company’s services. The following is a discussion of the guarantees that the Company has issued at September 30, ~~2017.~~2018. The Company has also entered into certain contracts that are similar to guarantees, but that are accounted for as derivative instruments as discussed in Note ~~13,~~15, “Derivative Financial Instruments.”

Letters of Credit

Letters of credit are conditional commitments issued by the Company, generally to guarantee the performance of a client to a third party in borrowing arrangements, such as CP, bond financing, or similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to clients but may be reduced by selling participations to third parties. The Company issues letters of credit that are classified as financial standby, performance standby, or commercial letters of credit; however, commercial letters of credit are considered guarantees of funding and are not subject to the disclosure requirements of guarantee obligations.

At ~~both~~ September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the maximum potential exposure to loss related to the Company's issued letters of credit was ~~$2.9 billion.~~$3.1 billion and $2.6 billion, respectively. The Company’s outstanding letters of credit generally have a term of more than one year. Some standby letters of credit are designed to be drawn upon in the normal course of business and others are drawn upon only in circumstances of dispute or default in the underlying transaction to which the Company is not a party. In all cases, the Company is entitled to reimbursement from the client. If a letter of credit is drawn upon and reimbursement is not provided by the client, the Company may take possession of the collateral securing the letter of credit, where applicable.

The Company monitors its credit exposure under standby letters of credit in the same manner as it monitors other extensions of credit in accordance with its credit policies. Consistent with the methodologies used for all commercial borrowers, an internal assessment of the PD and loss severity in the event of default is performed. The ~~management of~~Company's credit risk management for letters of credit leverages the risk rating process to focus greater visibility on higher risk and higher dollar letters of credit. The allowance associated with letters of credit is a component of the unfunded commitments reserve recorded in ~~other~~Other liabilities on the Consolidated Balance Sheets and is included in the allowance for credit losses as disclosed in Note 6,7, “Allowance for Credit Losses.” Additionally, unearned fees relating to letters of credit are recorded in ~~other~~Other liabilities on the Consolidated Balance Sheets. The net carrying amount of unearned fees was immaterial at both September 30, ~~2017~~2018 and December 31, ~~2016.~~2017.

Loan Sales and Servicing

~~STM, a consolidated subsidiary of the~~The Company originates and purchases residential mortgage loans, a portion of which are sold to outside investors in the normal course of business through a combination of whole loan sales to GSEs, Ginnie Mae, and ~~non-~~

~~agency~~non-agency investors. ~~In connection with the December 2016 acquisition of~~ ~~Pillar, the~~The Company also originates and sells certain commercial mortgage loans to Fannie Mae and Freddie Mac, originates FHA insured loans, and issues and sells Ginnie Mae commercial MBS secured by FHA insured loans.

When loans are sold, representations and warranties regarding certain attributes of the loans are made to third party purchasers. Subsequent to the sale, if a material underwriting deficiency or documentation defect is discovered, the Company may be obligated to repurchase the loan or to reimburse an investor for losses incurred (make whole requests), if such deficiency or defect cannot be cured by the Company within the specified period following discovery. Additionally, servicing representations and warranties can result in loan repurchases, as well as adversely affect the valuation of servicing rights, servicing advances, or other loan-related exposures. These representations and warranties may extend through the life of the loan. The Company’s risk of loss under its representations and warranties is partially driven by borrower payment performance since investors will perform extensive reviews of delinquent loans as a means of mitigating losses.

Residential loans sold to Ginnie Mae are insured by the FHA or are guaranteed by the VA. As servicer, the Company may elect to repurchase delinquent loans in accordance with Ginnie Mae guidelines; however, the loans continue to be insured. The Company may also indemnify the FHA and VA for losses related to loans not originated in accordance with their guidelines.

The Company previously reached agreements with Freddie Mac and Fannie Mae that relieve the Company of certain existing and future repurchase obligations related to residential loans sold from 2000-2008 to Freddie Mac and residential loans sold from 2000-2012 to Fannie Mae. The Company experienced significantly fewer repurchase claims and losses related to loans sold since 2009, relative to pre-2009 vintages, as a result of stronger credit performance, more stringent credit guidelines, and underwriting process improvements.

~~Residential repurchase requests from GSEs, Ginnie Mae, and non-agency investors, for all vintages, are presented in the following table that summarizes demand activity.~~

Nine Months Ended September 30
(Dollars in millions) 2017 2016
Pending repurchase requests, beginning of period
$14

$17
Repurchase requests received 29
30
Repurchase requests resolved:
Repurchased (11 ) (15 )
Cured (23 ) (23 )
Total resolved (34 ) (38 )
Pending repurchase requests, end of period ¹

$9

$9

Percent from non-agency investors:
Pending repurchase requests, end of period 1.5 % 49.9 %
Repurchase requests received 3.3
—

¹~~Comprised of $9 million and $4 million from the GSEs, and less than $1 million and $4 million from non-agency investors at September 30, 2017 and 2016, respectively.~~

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

The repurchase and make whole requests received have been due primarily to alleged material breaches of representations related to compliance with the applicable underwriting standards, including borrower misrepresentation and appraisal issues. The Company performs a loan-by-loan review of all requests and contests demands to the extent they are not considered valid.

~~The following table summarizes the changes in the Company’s reserve for residential mortgage loan repurchases:~~

Three Months Ended September 30 Nine Months Ended September 30
(Dollars in millions) 2017 2016 2017 2016
Balance, beginning of period
$40

$51

$40

$57
Repurchase provision/(benefit) —
(3 ) —
(9 )
Charge-offs, net of recoveries (1 ) —
(1 ) —
Balance, end of period
$39

$48

$39

$48

A significant degree of judgment is used to estimate the mortgage repurchase liability as the estimation process is inherently uncertain and subject to imprecision. The Company believes that its reserve appropriately estimates incurred losses based on its current analysis and assumptions, inclusive of the Freddie Mac and Fannie Mae settlement agreements, GSE owned loans serviced by third party servicers, loans sold to private investors, and other indemnifications.

Notwithstanding the aforementioned agreements with Freddie Mac and Fannie Mae settling certain aspects of the Company's repurchase obligations, those institutions preserve their right to require repurchases arising from certain types of events, and that preservation of rights can impact future losses of the Company. While the mortgage repurchase reserve includes the estimated cost of settling claims related to required repurchases, the Company's estimate of losses depends on its assumptions regarding GSE and other counterparty behavior, loan performance, home prices, and other factors. The liability is recorded in other liabilities on the Consolidated Balance Sheets, and the related repurchase provision/(benefit) is recognized in mortgage production related income in the Consolidated Statements of Income. See Note 15, "Contingencies," for additional information on current legal matters related to loan sales.

~~The following table summarizes the carrying value of the Company's outstanding repurchased residential mortgage loans:~~

(Dollars in millions) September 30, 2017 December 31, 2016
Outstanding repurchased residential mortgage loans:
Performing LHFI
$209

$230
Nonperforming LHFI 13
12
Total carrying value of outstanding repurchased residential mortgages
$222

$242

In addition to representations and warranties related to loan sales, the Company makes representations and warranties that it will service the loans in accordance with investor servicing guidelines and standards, which may include (i) collection and remittance of principal and interest, (ii) administration of escrow for taxes and insurance, (iii) advancing principal, interest, taxes, insurance, and collection expenses on delinquent accounts, and

(iv) loss mitigation strategies, including loan modifications and foreclosures.

The following table summarizes the changes in the Company’s reserve for residential mortgage loan repurchases:



	Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2018			2017			2018			2017
Balance, beginning of period		$36			$40			$39			$40
Repurchase provision/(benefit)	1			—			(2		)	—
Charge-offs, net of recoveries	(1		)	(1		)	(1		)	(1		)
Balance, end of period		$36			$39			$36			$39

A significant degree of judgment is used to estimate the mortgage repurchase liability as the estimation process is inherently uncertain and subject to imprecision. The Company ~~normally retains servicing rights when loans are transferred; however, servicing rights are occasionally sold to third parties. When servicing rights are sold,~~believes that its reserve appropriately estimates incurred losses based on its current analysis and assumptions. While the ~~Company makes representations and warranties~~mortgage repurchase reserve includes the estimated cost of settling claims related to ~~servicing standards~~required repurchases, the Company's estimate of losses depends on its assumptions regarding GSE and ~~obligations,~~other counterparty behavior, loan performance, home prices, and ~~records a~~other factors. The liability ~~for contingent losses~~is recorded in ~~other~~Other liabilities on the Consolidated Balance ~~Sheets. This liability, which~~Sheets, and the related repurchase provision/(benefit) is ~~separate from~~recognized in Mortgage production related income in the ~~mortgage repurchase reserve and separate from the commercial mortgage~~Consolidated Statements of Income. See Note 17, "Contingencies," for additional information on current legal matters related to loan ~~loss share guarantee described below, totaled $3 million and $7 million at September 30, 2017 and December 31, 2016, respectively.~~sales.

Notes to Consolidated Financial Statements (Unaudited), continued

The following table summarizes the carrying value of the Company's outstanding repurchased residential mortgage loans:



(Dollars in millions)	September 30, 2018		December 31, 2017
Outstanding repurchased residential mortgage loans:
Performing LHFI		$189		$203
Nonperforming LHFI	17		16
Total carrying value of outstanding repurchased residential mortgages		$206		$219

Residential mortgage loans sold to Ginnie Mae are insured by the FHA or are guaranteed by the VA. As servicer, the Company may elect to repurchase delinquent loans in accordance with Ginnie Mae guidelines; however, the loans continue to be insured. The Company may also indemnify the FHA and VA for losses related to loans not originated in accordance with their guidelines.

Commercial Mortgage Loan Loss Share Guarantee

In connection with the ~~December 2016~~ acquisition of Pillar, the Company assumed a loss share obligation associated with the terms of a master loss sharing agreement with Fannie Mae for multi-family commercial mortgage loans that were sold by Pillar to Fannie Mae under Fannie Mae’s delegated underwriting and servicing program. Upon the acquisition of Pillar, the Company entered into a lender contract amendment with Fannie Mae for multi-family commercial mortgage loans that Pillar sold to Fannie Mae prior to acquisition and that the Company sold to Fannie Mae subsequent to acquisition, whereby the Company bears a risk of loss of up to one-third of the incurred losses resulting from borrower defaults. The breach of any representation or warranty related to a loan sold to Fannie Mae could increase the Company's level of risk-sharing associated with the loan. The outstanding UPB of loans sold subject to the loss share guarantee was ~~$3.3 billion and $2.9~~$3.4 billion at both September 30, ~~2017~~2018 and December 31, ~~2016, respectively.~~2017. The maximum potential exposure to loss was ~~$924~~$978 million and ~~$787~~$962 million at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. Using probability of default and severity of loss estimates, the Company's loss share liability was $7$12 million and $6$11 million at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, and is recorded in ~~other~~Other liabilities on the Consolidated Balance Sheets.

Visa

The Company executes credit and debit transactions through Visa and ~~MasterCard.~~Mastercard. The Company is a defendant, along with Visa and ~~MasterCard~~Mastercard (the “Card Associations”), as well as ~~several~~ other banks, in one of several antitrust lawsuits challenging the practices of the Card Associations (the “Litigation”). The Company entered into judgment and loss sharing agreements with Visa and certain other banks in order to apportion financial responsibilities arising from any potential adverse judgment or negotiated settlements related to the Litigation. Additionally, in connection with Visa's restructuring in 2007, shares of Visa common stock were issued to its financial institution members and the Company received its proportionate number of shares of Visa Inc. common stock, which were subsequently converted to Class B shares of Visa Inc. upon completion of Visa’s IPO in 2008. A provision of the original Visa By-Laws, which was

restated in Visa's certificate of incorporation, contains a general indemnification provision between a Visa member and Visa that explicitly provides that each member's indemnification obligation is limited to losses

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

arising from its own conduct and the specifically defined Litigation. While the district court approved a class action settlement of the Litigation in 2012 that settled the claims of both a damages class and an injunctive relief class, the U.S. Court of Appeals for the Second Circuit reversed the district court's approval of the settlement on June 30, 2016. The U.S. Supreme Court denied plaintiffs' petition for certiorari on March 27, 2017, and the case returned to the district court for further action. Since being remanded to the district court, plaintiffs have pursued two separate class actions—one class action seeking damages that names, among others, the Company as a defendant, and one class action seeking injunctive relief that does not name the Company as a defendant, but for which the Company could bear some responsibility under the judgment and loss sharing agreement described above. An agreement to resolve the claims of the damages class has been filed with the district court and is awaiting court approval.

Agreements associated with Visa's IPO have provisions that Visa will fund a litigation escrow account, established for the purpose of funding judgments in, or settlements of, the Litigation. If the escrow account is insufficient to cover the Litigation losses, then Visa will issue additional Class A shares (“loss shares”). The proceeds from the sale of the loss shares would then be deposited in the escrow account. The issuance of the loss shares will cause a dilution of Visa's Class B shares as a result of an adjustment to lower the conversion factor of the Class B shares to Class A shares. Visa U.S.A.'s members are responsible for any portion of the settlement or loss on the Litigation after the escrow account is depleted and the value of the Class B shares is fully diluted.

In May 2009, the Company sold its 3.2 million Class B shares to the Visa Counterparty and entered into a derivative with the Visa Counterparty. Under the derivative, the Visa

Counterparty is compensated by the Company for any decline in the conversion factor as a result of the outcome of the Litigation. Conversely, the Company is compensated by the Visa Counterparty for any increase in the conversion factor. The amount of payments made or received under the derivative is a function of the 3.2 million shares sold to the Visa Counterparty, the change in conversion rate, and Visa’s share price. The Visa Counterparty, as a result of its ownership of the Class B shares, is impacted by dilutive adjustments to the conversion factor of the Class B shares caused by the Litigation losses. Additionally, the Company will make periodic payments based on the notional of the derivative and a fixed rate until the date on which the Litigation is settled. The fair value of the derivative is estimated based on unobservable inputs consisting of management's estimate of the probability of certain litigation scenarios and the timing of the resolution of the Litigation due in large part to the aforementioned decision by the U.S. Court of Appeals for the Second Circuit. The fair value of the derivative liability was $7 million and $15 million at ~~both~~ September 30, ~~2017~~2018 and December 31, ~~2016.~~2017, respectively. The fair value of the derivative is estimated based on the Company's expectations regarding the resolution of the Litigation. The ultimate impact to the Company could be significantly different based on the Litigation outcome.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 1315 - DERIVATIVE FINANCIAL INSTRUMENTS

The Company enters into various derivative financial instruments, both in a dealer capacity to facilitate client transactions and as an end user as a risk management tool. The Company generally manages the risk associated with these derivatives within the established MRM and credit risk management frameworks. Derivatives may be used by the Company to hedge various economic or client-related exposures. In such instances, derivative positions are typically monitored using a VAR methodology, with exposures reviewed daily. Derivatives are also used as a risk management tool to hedge the Company’s balance sheet exposure to changes in identified cash flow and fair value risks, either economically or in accordance with hedge accounting provisions. The Company’s Corporate Treasury function is responsible for employing the various hedge strategies to manage these objectives. The Company enters into IRLCs on residential and commercial mortgage loans that are accounted for as freestanding derivatives. Additionally, certain contracts containing embedded derivatives are measured, in their entirety, at fair value. All derivatives, including both freestanding as well as any embedded derivatives that the Company bifurcates from the host contracts, are measured at fair value in the Consolidated Balance Sheets in ~~trading~~Trading assets and derivative instruments and ~~trading~~Trading liabilities and derivative instruments. The associated gains and losses are either recognized in AOCI, net of tax, or within the Consolidated Statements of Income, depending upon the use and designation of the derivatives.

Credit and Market Risk Associated with Derivative Instruments

Derivatives expose the Company to risk that the counterparty to the derivative contract does not perform as expected. The

Company manages its exposure to counterparty credit risk associated with derivatives by entering into transactions with counterparties with defined exposure limits based on their credit quality and in accordance with established policies and procedures. All counterparties are reviewed regularly as part of the Company’s credit risk management practices and appropriate action is taken to adjust the exposure limits to certain counterparties as necessary. The Company’s derivative transactions are generally governed by ISDA agreements or other legally enforceable industry standard master netting agreements. In certain cases and depending on the nature of the underlying derivative transactions, bilateral collateral agreements are also utilized. Furthermore, the Company and its subsidiaries are subject to OTC derivative clearing requirements, which require certain derivatives to be cleared through central clearing houses, such as ~~LCH.Clearnet Limited ("LCH")~~LCH and the CME. These clearing houses require the Company to post initial and variation margin to mitigate the risk of non-payment, the latter of which is received or paid daily based on the net asset or liability position of the contracts. Effective January 3, 2017, the CME amended its rulebook to legally characterize variation margin cash payments for cleared OTC derivatives as settlement rather than as collateral. Consistent with the CME's amended requirements, LCH amended its rulebook effective January 16, 2018, to legally characterize variation margin cash payments for cleared OTC derivatives as settlement rather than as collateral. As a result, in the first quarter of ~~2017,~~2018, the Company began reducing the corresponding derivative asset and liability balances for ~~CME~~LCH~~-cleared~~-

cleared OTC derivatives to reflect the settlement of those positions via the exchange of variation margin. ~~Variation margin payments for LCH-cleared OTC derivatives continue to be subject to collateral accounting and characterized by the Company as collateral.~~

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

When the Company has more than one outstanding derivative transaction with a single counterparty, and there exists a legal right of offset with that counterparty, the Company considers its exposure to the counterparty to be the net fair value of its derivative positions with that counterparty. If the net fair value is positive, then the corresponding asset value also reflects cash collateral held. At September 30, ~~2017,~~2018, the economic exposure of these net derivative asset positions was ~~$636~~$404 million, reflecting ~~$974~~$889 million of net derivative gains, adjusted for cash and other collateral of ~~$338~~$485 million that the Company held in relation to these positions. At December 31, ~~2016,~~2017, the economic exposure of net derivative asset positions was ~~$774~~$541 million, reflecting ~~$1.1 billion~~$940 million of net derivative gains, adjusted for cash and other collateral held of ~~$339~~$399 million.

Derivatives also expose the Company to market risk arising from the adverse effects that changes in market factors, such as interest rates, currency rates, equity prices, commodity prices, or implied volatility, may have on the value of ~~a derivative.~~the Company's derivatives. The Company manages this risk by establishing and monitoring limits on the types and degree of risk that may be undertaken. The Company measures its market risk exposure using a VAR methodology for derivatives designated as trading instruments. Other tools and risk measures are also used to actively manage risk associated with derivatives including scenario analysis and stress testing.

Derivative instruments are priced using observable market inputs at a mid-market valuation point and take into consideration appropriate valuation adjustments for collateral, market liquidity, and counterparty credit risk. For purposes of determining fair value adjustments to its OTC derivative positions, the Company takes into consideration the credit profile and likelihood of default by counterparties and itself, as well as its net exposure, which considers legally enforceable master netting agreements and collateral along with remaining maturities. The expected loss of each counterparty is estimated using market-based views of counterparty default probabilities observed in the single-name CDS market, when available and of sufficient liquidity. When single-name CDS market data is not available or not of sufficient liquidity, the probability of default is estimated using a combination of the Company's internal risk rating system and sector/rating based CDS data.

For purposes of estimating the Company’s own credit risk on derivative liability positions, the DVA, the Company uses probabilities of default from observable, sector/rating based CDS data. The ~~Company adjusted the~~ net fair value of ~~its~~the Company's derivative contracts were adjusted by an immaterial amount for estimates of counterparty credit risk ~~by approximately $6 million~~and its own credit risk at both September 30, ~~2017~~2018 and December 31, ~~2016.~~2017. For additional information on the Company's fair value measurements, see Note ~~14,~~16, "Fair Value Election and Measurement."

Currently, the industry standard master netting agreements governing the majority of the ~~Company’s derivatives~~Company's derivative transactions with counterparties contain ~~contingencies that relate~~bilateral events of default and acceleration provisions related to the creditworthiness of the ~~Bank. These contingencies, which are contained in industry standard master netting agreements, may be considered events of default.~~Bank and the counterparty. Should the Bank be in default under any of these

provisions, the Bank’s counterparties would be

Notes to Consolidated Financial Statements (Unaudited), continued

permitted to close out transactions with the Bank on a net basis, at amounts that would approximate the fair values of the derivatives, resulting in a single sum due by one party to the other. The counterparties would have the right to apply any collateral posted by the Bank against any net amount owed by the Bank. Additionally, certain of the Company’s derivative liability positions, totaling ~~$1.3~~$1.0 billion and $1.1 billion in fair value at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, contain provisions conditioned on downgrades of the Bank’s credit rating. These provisions, if triggered, would either give rise to an ATE that permits the counterparties to close-out net and apply collateral or, where a CSA is present, require the Bank to post additional collateral.

At September 30, ~~2017,~~2018, the Bank held senior long-term debt credit ratings of Baal/A-/A- from Moody’s, S&P, and Fitch, respectively. At September 30, ~~2017,~~2018, ATEs have been triggered for less than $1 million in fair value liabilities. The maximum additional liability that could be triggered from ATEs was approximately ~~$16~~$18 million at September 30, ~~2017.~~2018. At September 30, ~~2017, $1.3~~2018, $1.0 billion in fair value of derivative liabilities were subject to CSAs, against which the Bank has posted ~~$1.2 billion~~$918 million in collateral, primarily in the form of cash. ~~If requested by the counterparty pursuant~~

Pursuant to the terms of the CSA, the Bank would be required to post additional collateral of approximately $2 million against these contracts if the Bank were downgraded to ~~Baa3/BBB-.~~Baa2/BBB+. Further downgrades to Baa3/BBB and Ba1/BBB- would require the Bank to post an additional $3 million and $2 million of collateral, respectively. Any downgrades below Ba2/BB+ ~~or below~~ do not contain predetermined collateral posting levels.

Notional and Fair Value of Derivative Positions

The following ~~tables present~~table presents the Company’s derivative positions at September 30, ~~2017~~2018 and December 31, ~~2016.~~2017. The notional amounts in the ~~tables~~table are presented on a gross basis ~~and have been classified within derivative assets or derivative liabilities based on the estimated fair value of the individual contract~~ at September 30, ~~2017~~2018 and December 31, ~~2016.~~2017. Gross positive and gross negative fair value amounts associated with respective notional amounts are presented without consideration of any netting agreements, including collateral arrangements. Net fair value derivative amounts are adjusted on an aggregate basis, where applicable, to take into consideration the effects of legally enforceable master netting agreements, including any cash collateral received or paid, and are recognized in ~~trading~~Trading assets and derivative instruments or ~~trading~~Trading liabilities and derivative instruments on the Consolidated Balance Sheets. For contracts constituting a combination of options that contain a written option and a purchased option (such as a collar), the notional amount of each option is presented separately, with the purchased notional amount generally being presented as a derivative asset and the written notional amount being presented as a derivative liability. For contracts that contain a combination of options, the fair value is generally presented as a single value with the purchased notional amount if the combined fair value is positive, and with the written notional amount if the combined fair value is negative.Sheets.

Notes to Consolidated Financial Statements (Unaudited), continued


	September 30, 2017										September 30, 2018								December 31, 2017
	Asset Derivatives					Liability Derivatives							Fair Value								Fair Value
(Dollars in millions)	Notional Amounts		Fair Value			Notional Amounts		Fair Value			Notional Amounts		Asset Derivatives			Liability Derivatives			Notional Amounts		Asset Derivatives			Liability Derivatives
Derivative instruments designated in cash flow hedging relationships ¹
Derivative instruments designated in hedging relationships											Derivative instruments designated in hedging relationships
Cash flow hedges: ¹
Interest rate contracts hedging floating rate LHFI		$3,150		$3			$10,550		$187			$12,900		$2			$1			$14,200		$2			$252

Derivative instruments designated in fair value hedging relationships ²
Subtotal											12,900		2			1			14,200		2			252
Fair value hedges: ²
Interest rate contracts hedging fixed rate debt	500		—			5,420		36			7,705		2			—			5,920		1			58
Interest rate contracts hedging brokered CDs	30		—			30		—
Total	530		—			5,450		36
Interest rate contracts hedging brokered time deposits											60		—			—			60		—			—
Subtotal											7,765		2			—			5,980		1			58

Derivative instruments not designated as hedging instruments ³											Derivative instruments not designated as hedging instruments ³
Interest rate contracts hedging:
Residential MSRs ⁴	23,954		145			15,062		128			25,690		18			20			42,021		119			119
LHFS, IRLCs ⁵	5,628		13			4,218		13			5,485		15			4			7,590		9			6
LHFI	90		2			85		2			183		—			—			175		2			2
Trading activity ⁶	73,673		1,126			57,454		1,014			127,059		595			894			126,366		1,066			946
Foreign exchange rate contracts hedging trading activity	3,668		126			3,468		112
Foreign exchange rate contracts hedging loans and trading activity											7,418		106			91			7,058		110			102
Credit contracts hedging:
LHFI	—		—			620		8			825		—			23			515		—			11
Trading activity ⁷	2,517		17			2,534		13			3,869		25			23			3,454		15			12
Equity contracts hedging trading activity ⁶	16,512		2,315			28,295		2,836			37,362		2,384			2,648			38,907		2,499			2,857
Other contracts:
IRLCs and other ⁸	1,786		26			820		22			1,886		13			9			2,017		18			16
Commodity derivatives	756		39			744		37			1,678		118			116			1,422		63			61
Total	128,584		3,809			113,300		4,185
Subtotal											211,455		3,274			3,828			229,525		3,901			4,132

Total derivative instruments		$132,264		$3,812			$129,300		$4,408			$232,120		$3,278			$3,829			$249,705		$3,904			$4,442

Total gross derivative instruments, before netting				$3,812					$4,408
Total gross derivative instruments (before netting)														$3,278			$3,829					$3,904			$4,442
Less: Legally enforceable master netting agreements			(2,611		)			(2,611		)			(2,185		)	(2,185		)			(2,731		)	(2,731		)
Less: Cash collateral received/paid			(303		)			(1,420		)			(471		)	(946		)			(371		)	(1,303		)
Total derivative instruments, after netting				$898					$377
Total derivative instruments (after netting)														$622			$698					$802			$408

¹~~See “Cash Flow Hedges” in this Note for further discussion.~~

² ~~See “Fair Value Hedges” in this Note for further discussion.~~

³ ~~See “Economic Hedging and Trading Activities” in this Note for further discussion.~~

⁴ Amount includes $13.3 billion of notional amounts related to interest rate futures. These futures contracts settle in cash daily, one day in arrears. The derivative asset or liability associated with the one day lag is included in the fair value column of this table.

⁵ Amount includes $497 million of notional amounts related to interest rate futures. These futures contracts settle in cash daily, one day in arrears. The derivative asset or liability associated with the one day lag is included in the fair value column of this table.

⁶ Amounts include $10.1 billion of notional amounts related to interest rate futures and $180 million of notional amounts related to equity futures. These futures contracts settle in cash daily, one day in arrears. The derivative asset or liability associated with the one day lag is included in the fair value column of this table. Amounts also include notional amounts related to interest rate swaps hedging fixed rate debt.

⁷ Asset and liability amounts include $5 million and $11 million, respectively, of notional amounts from purchased and written credit risk participation agreements, whose notional is calculated as the notional of the derivative participated adjusted by the relevant RWA conversion factor.

⁸ Includes $49 million notional amount that is based on the 3.2 million of Visa Class B shares, the conversion ratio from Class B shares to Class A shares, and the Class A share price at the derivative inception date of May 28, 2009. This derivative was established upon the sale of Class B shares in the second quarter of 2009. See Note 12, “Guarantees” for additional information.


¹	See “Cash Flow Hedging” in this Note for further discussion.


²	See “Fair Value Hedging” in this Note for further discussion.


³	See “Economic Hedging Instruments and Trading Activities” in this Note for further discussion.


⁴	Notional amounts include $5.6 billion and $16.6 billion related to interest rate futures at September 30, 2018 and December 31, 2017, respectively. These futures contracts settle in cash daily, one day in arrears. The derivative asset or liability associated with the one day lag is included in the fair value column of this table.


⁵	Notional amounts include $302 million and $190 million related to interest rate futures at September 30, 2018 and December 31, 2017, respectively. These futures contracts settle in cash daily, one day in arrears. The derivative asset or liability associated with the one day lag is included in the fair value column of this table.

⁶

Notional amounts include $4.9 billion and $9.8 billion related to interest rate futures at September 30, 2018 and December 31, 2017, and $274 million and $1.2 billion related to equity futures at September 30, 2018 and December 31, 2017, respectively. These futures contracts settle in cash daily, one day in arrears. The derivative asset or liability associated with the one day lag is included in the fair value column of this table. Notional amounts also include amounts related to interest rate swaps hedging fixed rate debt.

⁷

Notional amounts include $7 million and $4 million from purchased credit risk participation agreements at September 30, 2018 and December 31, 2017, and $33 million and $11 million from written credit risk participation agreements at September 30, 2018 and December 31, 2017, respectively. These notional amounts are calculated as the notional of the derivative participated adjusted by the relevant RWA conversion factor.


⁸	Notional amounts include $41 million and $49 million related to the Visa derivative liability at September 30, 2018 and December 31, 2017, respectively. See Note 14, "Guarantees" for additional information.

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

December 31, 2016
Asset Derivatives Liability Derivatives
(Dollars in millions)
Notional
Amounts

Fair
Value

Notional
Amounts

Fair
Value
Derivative instruments designated in cash flow hedging relationships ¹

Interest rate contracts hedging floating rate LHFI
$6,400

$34

$11,050

$265

Derivative instruments designated in fair value hedging relationships ²

Interest rate contracts hedging fixed rate debt 600
2
4,510
81
Interest rate contracts hedging brokered CDs 60
—
30
—
Total 660
2
4,540
81

Derivative instruments not designated as hedging instruments³

Interest rate contracts hedging:
Residential MSRs ⁴
12,165
413
18,774
335
LHFS, IRLCs ⁵
11,774
134
8,306
58
LHFI 100
2
36
1
Trading activity ⁶
70,599
1,536
67,477
1,401
Foreign exchange rate contracts hedging trading activity 3,231
161
3,360
148
Credit contracts hedging:
LHFI 15
—
620
8
Trading activity ⁷
2,128
34
2,271
33
Equity contracts hedging trading activity ⁶
17,225
2,095
28,658
2,477
Other contracts:
IRLCs and other ⁸
2,412
28
668
22
Commodity derivatives 747
75
746
73
Total 120,396
4,478
130,916
4,556
Total derivative instruments
$127,456

$4,514

$146,506

$4,902

Total gross derivative instruments, before netting
$4,514

$4,902
Less: Legally enforceable master netting agreements (3,239 ) (3,239 )
Less: Cash collateral received/paid (291 ) (1,265 )
Total derivative instruments, after netting
$984

$398

¹~~See “Cash Flow Hedges” in this Note for further discussion.~~

² ~~See “Fair Value Hedges” in this Note for further discussion.~~

³~~See “Economic Hedging and Trading Activities” in this Note for further discussion.~~

⁴ Amount includes $6.7 billion of notional amounts related to interest rate futures. These futures contracts settle in cash daily, one day in arrears. The derivative asset or liability associated with the one day lag is included in the fair value column of this table.

⁵ Amount includes $720 million of notional amounts related to interest rate futures. These futures contracts settle in cash daily, one day in arrears. The derivative asset or liability associated with the one day lag is included in the fair value column of this table.

⁶ Amounts include $12.3 billion of notional amounts related to interest rate futures and $629 million of notional amounts related to equity futures. These futures contracts settle in cash daily, one day in arrears. The derivative asset or liability associated with the one day lag is included in the fair value column of this table. Amounts also include notional amounts related to interest rate swaps hedging fixed rate debt.

⁷ Asset and liability amounts include $5 million and $13 million, respectively, of notional amounts from purchased and written credit risk participation agreements, whose notional is calculated as the notional of the derivative participated adjusted by the relevant RWA conversion factor.

⁸ Includes $49 million notional amount that is based on the 3.2 million of Visa Class B shares, the conversion ratio from Class B shares to Class A shares, and the Class A share price at the derivative inception date of May 28, 2009. This derivative was established upon the sale of Class B shares in the second quarter of 2009. See Note 12, “Guarantees” for additional information.

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

~~Impact of Derivative Instruments on the Consolidated Statements of Income and Shareholders’ Equity~~

The impacts of derivative instruments on the Consolidated Statements of Income and the Consolidated Statements of Shareholders’ Equity for the three and nine months ended September 30, 2017 and 2016 are presented in the following tables. The impacts are segregated between derivatives that are designated in hedge accounting relationships and those that are

used for economic hedging or trading purposes, with further identification of the underlying risks in the derivatives and the hedged items, where appropriate. The tables do not disclose the financial impact of the activities that these derivative instruments are intended to hedge.

Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017 Classification of Pre-tax Gain Reclassified from AOCI into Income (Effective Portion)
(Dollars in millions)
Amount of
Pre-tax Gain
Recognized
in OCI on Derivatives (Effective Portion)

Amount of
Pre-tax Gain Reclassified from
AOCI into Income
(Effective Portion)

Amount of
Pre-tax Gain
Recognized
in OCI on Derivatives (Effective Portion)

Amount of
Pre-tax Gain Reclassified from
AOCI into Income
(Effective Portion)

Derivative instruments in cash flow hedging relationships:
Interest rate contracts hedging floating rate LHFI ¹

$10

$3

$61

$37
Interest and fees on loans

¹During the three and nine months ended September 30, 2017, the Company also reclassified $10 million and $44 million of pre-tax gains from AOCI into net interest income, respectively. These gains related to hedging relationships that have been terminated and are reclassified into earnings consistent with the pattern of net cash flows expected to be recognized.

Three Months Ended September 30, 2017 Nine Months Ended September 30, 2017
(Dollars in millions)
Amount of Loss on Derivatives
Recognized
in Income

Amount of Gain
on Related Hedged Items
Recognized
in Income

Amount of Gain/(Loss)
Recognized
in Income
on Hedges
(Ineffective Portion)

Amount of Gain on Derivatives
Recognized
in Income

Amount of Loss
on Related Hedged Items
Recognized
in Income

Amount of Gain
Recognized
in Income
on Hedges
(Ineffective Portion)
Derivative instruments in fair value hedging relationships:
Interest rate contracts hedging fixed rate debt ¹

($3 )
$3

$—

$5

($4 )
$1
Interest rate contracts hedging brokered CDs ¹
—
—
—
—
—
—
Total
($3 )
$3

$—

$5

($4 )
$1

¹~~Amounts are recognized in trading income in the Consolidated Statements of Income.~~

(Dollars in millions)
Classification of Gain/(Loss)
Recognized in Income on Derivatives

Amount of Gain/(Loss)
Recognized in Income
on Derivatives During
the Three Months Ended
September 30, 2017

Amount of Gain/(Loss)
Recognized in Income
on Derivatives During
the Nine Months Ended
September 30, 2017
Derivative instruments not designated as hedging instruments:
Interest rate contracts hedging:
Residential MSRs Mortgage servicing related income
$14

$34
LHFS, IRLCs Mortgage production related income (20 ) (57 )
LHFI Other noninterest income —
(1 )
Trading activity Trading income 11
33
Foreign exchange rate contracts hedging trading activity Trading income (10 ) (43 )
Credit contracts hedging:
LHFI Other noninterest income (1 ) (3 )
Trading activity Trading income 8
19
Equity contracts hedging trading activity Trading income (1 ) (1 )
Other contracts:
IRLCs and other
Mortgage production related income,
Commercial real estate related income
49
154
Commodity derivatives Trading income —
1
Total
$50

$136

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016 Classification of Pre-tax Gain Reclassified from AOCI into Income (Effective Portion)
(Dollars in millions) Amount of
Pre-tax Loss
Recognized
in OCI on Derivatives (Effective Portion) Amount of
Pre-tax Gain
Reclassified from
AOCI into Income
(Effective Portion) Amount of
Pre-tax Gain
Recognized
in OCI on Derivatives (Effective Portion) Amount of
Pre-tax Gain
Reclassified from
AOCI into Income
(Effective Portion)
Derivative instruments in cash flow hedging relationships:

Interest rate contracts hedging floating rate LHFI ¹

($78 )
$36

$408

$113
Interest and fees on loans

¹During the three and nine months ended September 30, 2016, the Company also reclassified $23 million and $77 million of pre-tax gains from AOCI into net interest income, respectively. These gains related to hedging relationships that have been terminated and are reclassified into earnings consistent with the pattern of net cash flows expected to be recognized.

Three Months Ended September 30, 2016 Nine Months Ended September 30, 2016
(Dollars in millions) Amount of Loss on Derivatives
Recognized
in Income Amount of Gain on Related Hedged Items
Recognized
in Income Amount of Gain
Recognized
in Income
on Hedges
(Ineffective Portion) Amount of Gain on Derivatives
Recognized
in Income Amount of Loss on Related Hedged Items
Recognized
in Income Amount of Gain
Recognized
in Income
on Hedges
(Ineffective Portion)
Derivative instruments in fair value hedging relationships:
Interest rate contracts hedging fixed rate debt ¹

($10 )
$11

$1

$20

($19 )
$1
Interest rate contracts hedging brokered CDs ¹
—
—
—
—
—
—
Total
($10 )
$11

$1

$20

($19 )
$1

¹~~Amounts are recognized in trading income in the Consolidated Statements of Income.~~

(Dollars in millions)
Classification of Gain/(Loss)
Recognized in Income on Derivatives

Amount of Gain/(Loss)
Recognized in Income
on Derivatives During
the Three Months Ended
September 30, 2016

Amount of Gain/(Loss)
Recognized in Income
on Derivatives During
the Nine Months Ended
September 30, 2016
Derivative instruments not designated as hedging instruments:
Interest rate contracts hedging:
Residential MSRs Mortgage servicing related income
$15

$306
LHFS, IRLCs Mortgage production related income (35 ) (162 )
LHFI Other noninterest income —
(3 )
Trading activity Trading income 11
24
Foreign exchange rate contracts hedging trading activity Trading income 36
52
Credit contracts hedging:
LHFI Other noninterest income (1 ) (3 )
Trading activity Trading income 5
14
Equity contracts hedging trading activity Trading income 1
5
Other contracts:

IRLCs Mortgage production related income 122
291
Commodity derivatives Trading income 1
2
Total
$155

$526

Notes to Consolidated Financial Statements (Unaudited), continued

Netting of Derivative Instruments

The Company has various financial assets and financial liabilities that are subject to enforceable master netting agreements or similar agreements. The Company's securities borrowed or purchased under agreements to resell, and securities sold under agreements to repurchase, that are subject to enforceable master netting agreements or similar agreements, are discussed in Note 2,3, "Federal Funds Sold and Securities Financing Activities." The Company enters into ISDA or other legally enforceable industry standard master netting agreements with derivative counterparties. Under the terms of the master netting agreements, 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.~~

The following tables present total gross derivative instrument assets and liabilities at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, which are adjusted to reflect the effects of legally enforceable master netting agreements and cash collateral received or paid when calculating the net amount reported in the Consolidated Balance Sheets. Also included in the tables are financial instrument collateral related to legally enforceable master netting agreements that represents securities collateral received or pledged and customer cash collateral held at third party custodians. These amounts are not offset on the Consolidated Balance Sheets but are shown as a reduction to total derivative instrument assets and liabilities to derive net derivative assets and liabilities. These amounts are limited to the derivative asset/liability balance, and accordingly, do not include excess collateral received/pledged.


(Dollars in millions)	Gross Amount		Amount Offset		Net Amount Presented in Consolidated Balance Sheets			Held/Pledged Financial Instruments		Net Amount		Gross Amount		Amount Offset		Net Amount Presented in Consolidated Balance Sheets			Held/Pledged Financial Instruments		Net Amount
September 30, 2017
September 30, 2018
Derivative instrument assets:
Derivatives subject to master netting arrangement or similar arrangement		$3,436		$2,768		$668			$35		$633		$2,940		$2,525		$415			$14		$401
Derivatives not subject to master netting arrangement or similar arrangement	26		—		26			—		26		14		—		14			—		14
Exchange traded derivatives	350		146		204			—		204		324		131		193			—		193
Total derivative instrument assets		$3,812		$2,914		$898	¹		$35		$863		$3,278		$2,656		$622	¹		$14		$608

Derivative instrument liabilities:
Derivatives subject to master netting arrangement or similar arrangement		$4,146		$3,885		$261			$54		$207		$3,587		$3,000		$587			$58		$529
Derivatives not subject to master netting arrangement or similar arrangement	115		—		115			—		115		111		—		111			—		111
Exchange traded derivatives	147		146		1			—		1		131		131		—			—		—
Total derivative instrument liabilities		$4,408		$4,031		$377	²		$54		$323		$3,829		$3,131		$698	²		$58		$640

December 31, 2016
December 31, 2017
Derivative instrument assets:
Derivatives subject to master netting arrangement or similar arrangement		$4,193		$3,384		$809			$48		$761		$3,491		$2,923		$568			$28		$540
Derivatives not subject to master netting arrangement or similar arrangement	27		—		27			—		27		18		—		18			—		18
Exchange traded derivatives	294		146		148			—		148		395		179		216			—		216
Total derivative instrument assets		$4,514		$3,530		$984	¹		$48		$936		$3,904		$3,102		$802	¹		$28		$774

Derivative instrument liabilities:
Derivatives subject to master netting arrangement or similar arrangement		$4,649		$4,358		$291			$33		$258		$4,128		$3,855		$273			$27		$246
Derivatives not subject to master netting arrangement or similar arrangement	105		—		105			—		105		130		—		130			—		130
Exchange traded derivatives	148		146		2			—		2		184		179		5			—		5
Total derivative instrument liabilities		$4,902		$4,504		$398	²		$33		$365		$4,442		$4,034		$408	²		$27		$381

¹ At September 30, ~~2017, $898~~2018, $622 million, net of ~~$303~~$471 million offsetting cash collateral, is recognized in ~~trading~~Trading assets and derivative instruments within the Company's Consolidated Balance Sheets. At December 31, ~~2016, $984~~2017, $802 million, net of ~~$291~~$371 million offsetting cash collateral, is recognized in ~~trading~~Trading assets and derivative instruments within the Company's Consolidated Balance Sheets.

² At September 30, ~~2017, $377~~2018, $698 million, net of ~~$1.4 billion~~$946 million offsetting cash collateral, is recognized in ~~trading~~Trading liabilities and derivative instruments within the Company's Consolidated Balance Sheets. At December 31, ~~2016, $398~~2017, $408 million, net of $1.3 billion offsetting cash collateral, is recognized in ~~trading~~Trading liabilities and derivative instruments within the Company's Consolidated Balance Sheets.

Notes to Consolidated Financial Statements (Unaudited), continued

Fair Value and Cash Flow Hedging Instruments

Fair Value Hedging

The Company enters into interest rate swap agreements as part of its risk management objectives for hedging exposure to changes in fair value due to changes in interest rates. These hedging arrangements convert certain fixed rate long-term debt and CDs to floating rates. Subsequent to the adoption of ASU 2017-12, changes in the fair value of the hedging instrument attributable to the hedged risk are recognized in the same income statement line as the earnings impact from the hedged item. There were no components of derivative gains or losses excluded in the Company’s assessment of hedge effectiveness related to the fair value hedges. For additional information on the Company's adoption of ASU 2017-12 and related policy updates, see Note 1, “Significant Accounting Policies.”

Cash Flow Hedging

The Company utilizes a comprehensive risk management strategy to monitor sensitivity of earnings to movements in interest rates. Specific types of funding and principal amounts hedged are determined based on prevailing market conditions and the shape of the yield curve. In conjunction with this strategy, the Company may employ various interest rate derivatives as risk management tools to hedge interest rate risk from recognized assets and liabilities or from forecasted transactions. The terms and notional amounts of derivatives are determined based on management’s assessment of future interest rates, as well as other factors.

The Company enters into interest rate swaps designated as cash flow hedging instruments to hedge its exposure to benchmark interest rate risk associated with floating rate loans. For the three and nine months ended September 30, 2018, the amount of pre-tax loss recognized in OCI on derivative instruments was $48 million and $274 million, respectively. For the three and nine months ended September 30, 2017, the amount of pre-tax gain recognized in OCI on derivative instruments was $10 million and $61 million, respectively. At September 30, 2018, the maturities for hedges of floating rate loans ranged from less than one year to seven years, with the weighted average being 3.1 years. At December 31, 2017, the maturities for hedges of floating rate loans ranged from less than one year to five years, with the weighted average being 3.6 years. These hedges have been highly effective in offsetting the designated risks. At September 30, 2018, $135 million of deferred net pre-tax losses on derivative instruments designated as cash flow hedges on floating rate loans recognized in AOCI are expected to be reclassified into net interest income during the next twelve months. The amount to be reclassified into income incorporates the impact from both active and terminated cash flow hedges, including the net interest income earned on the active hedges, assuming no changes in LIBOR. The Company may choose to terminate or de-designate a hedging relationship due to a change in the risk management objective for that specific hedge item, which may arise in conjunction with an overall balance sheet management strategy.

Notes to Consolidated Financial Statements (Unaudited), continued

Pursuant to the adoption of ASU 2017-12, the following table presents gains and losses on derivatives in fair value and cash flow hedging relationships by contract type and by income statement line item for the three and nine months ended September 30, 2018. For the three and nine months ended September 30, 2017 the amounts presented below were not conformed to the new hedge accounting guidance. The table does not disclose the financial impact of the activities that these derivative instruments are intended to hedge.



	Net Interest Income											Noninterest Income
(Dollars in millions)	Interest and fees on LHFI				Interest on Long-term Debt				Interest on Deposits			Trading Income			Total
Three Months Ended September 30, 2018
Interest income/(expense), including the effects of fair value and cash flow hedges		$1,549				($95	)			($193	)		$42			$1,303

(Loss)/gain on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives		$—				($2	)			$—			$—			($2	)
Recognized on derivatives	—				(33		)		—			—			(33		)
Recognized on hedged items	—				31			¹	—			—			31
Net expense recognized on fair value hedges		$—				($4	)			$—			$—			($4	)

Loss on cash flow hedging relationships:
Interest rate contracts:
Amount of pre-tax loss reclassified from AOCI into income		($22	)	²		$—				$—			$—			($22	)
Net expense recognized on cash flow hedges		($22	)			$—				$—			$—			($22	)

Nine Months Ended September 30, 2018
Interest income/(expense), including the effects of fair value and cash flow hedges		$4,424				($252	)			($484	)		$137			$3,825

(Loss)/gain on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives		$—				($1	)			$—			$—			($1	)
Recognized on derivatives	—				(130		)		—			—			(130		)
Recognized on hedged items	—				124			¹	—			—			124
Net expense recognized on fair value hedges		$—				($7	)			$—			$—			($7	)

Loss on cash flow hedging relationships:
Interest rate contracts:
Amount of pre-tax loss reclassified from AOCI into income		($39	)	²		$—				$—			$—			($39	)
Net expense recognized on cash flow hedges		($39	)			$—				$—			$—			($39	)

Three Months Ended September 30, 2017
Interest income/(expense), including the effects of fair value and cash flow hedges		$1,382				($76	)			($111	)		$51			$1,246

Gain/(loss) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives		$—				$3				$—			$—			$3
Recognized on derivatives	—				—				—			(3		)	(3		)
Recognized on hedged items	—				—				—			3			3
Net income recognized on fair value hedges		$—				$3				$—			$—			$3

Gain on cash flow hedging relationships:
Interest rate contracts:
Amount of pre-tax gain reclassified from AOCI into income		$13		²		$—				$—			$—			$13
Net income recognized on cash flow hedges		$13				$—				$—			$—			$13

Nine Months Ended September 30, 2017
Interest income/(expense), including the effects of fair value and cash flow hedges		$4,009				($216	)			($286	)		$148			$3,655

Gain/(loss) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements on derivatives		$—				$12				$—			$—			$12
Recognized on derivatives	—				—				—			5			5
Recognized on hedged items	—				—				—			(4		)	(4		)
Net income recognized on fair value hedges		$—				$12				$—			$1			$13

Gain on cash flow hedging relationships:
Interest rate contracts:
Amount of pre-tax gain reclassified from AOCI into income		$81		²		$—				$—			$—			$81
Net income recognized on cash flow hedges		$81				$—				$—			$—			$81

¹ Includes amortization from de-designated fair value hedging relationships.

² These amounts include pre-tax gains/(losses) related to cash flow hedging relationships that have been terminated and were reclassified into earnings consistent with the pattern of net cash flows expected to be recognized.

Notes to Consolidated Financial Statements (Unaudited), continued

The following table presents the carrying amount of hedged liabilities on the Consolidated Balance Sheets in fair value hedging relationships and the associated cumulative basis adjustment related to the application of hedge accounting:



			Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Liabilities
(Dollars in millions)	Carrying Amount of Hedged Liabilities		Hedged Items Currently Designated			Hedged Items No Longer Designated
September 30, 2018
Long-term debt		$6,495		($170	)		($73	)
Brokered time deposits	29		—			—

Economic Hedging Instruments and Trading Activities

In addition to designated hedge accounting relationships, the Company also enters into derivatives as an end user to economically hedge risks associated with certain non-derivative and derivative instruments, along with entering into derivatives in a trading capacity with its clients.

The primary risks that the Company economically hedges are interest rate risk, foreign exchange risk, and credit risk. The Company mitigates these risks by entering into offsetting derivatives either on an individual basis or collectively on a macro basis.

The Company utilizes interest rate derivatives as economic hedges related to:

Residential MSRs. The Company hedges these instruments with a combination of interest rate derivatives, including forward and option contracts, futures, and forward rate agreements.

Residential mortgage IRLCs and LHFS. The Company hedges these instruments using forward and option contracts, futures, and forward rate agreements.

The Company is exposed to volatility and changes in foreign exchange rates associated with certain commercial loans. To hedge against this foreign exchange rate risk, the Company enters into foreign exchange rate contracts that provide for the future receipt and delivery of foreign currency at previously agreed-upon terms.

The Company enters into CDS to hedge credit risk associated with certain loans held within its Wholesale segment. The Company accounts for these contracts as derivatives, and accordingly, recognizes these contracts at fair value, with changes in fair value recognized in Other noninterest income in the Consolidated Statements of Income.

Trading activity primarily includes interest rate swaps, equity derivatives, CDS, futures, options, foreign exchange rate contracts, and commodity derivatives. These derivatives are entered into in a dealer capacity to facilitate client transactions, or are utilized as a risk management tool by the Company as an end user (predominantly in certain macro-hedging strategies).

The impacts of derivative instruments used for economic hedging or trading purposes on the Consolidated Statements of Income are presented in the following table:



	Classification of (Loss)/Gain Recognized in Income on Derivatives	Amount of (Loss)/Gain Recognized in Income on Derivatives During the Three Months Ended September 30						Amount of (Loss)/Gain Recognized in Income on Derivatives During the Nine Months Ended September 30
(Dollars in millions)		2018			2017			2018			2017
Derivative instruments not designated as hedging instruments:
Interest rate contracts hedging:
Residential MSRs	Mortgage servicing related income		($54	)		$17			($210	)		$41
LHFS, IRLCs	Mortgage production related income	10			(20		)	57			(57		)
LHFI	Other noninterest income	1			—			3			(1		)
Trading activity	Trading income	18			11			48			33
Foreign exchange rate contracts hedging loans and trading activity	Trading income	9			(10		)	49			(43		)
Credit contracts hedging:
LHFI	Other noninterest income	(5		)	(1		)	(5		)	(3		)
Trading activity	Trading income	5			8			16			19
Equity contracts hedging trading activity	Trading income	6			(1		)	8			(1		)
Other contracts:
IRLCs and other	Mortgage production related income, Commercial real estate related income	19			49			39			154
Commodity derivatives	Trading income	—			—			—			1
Total			$9			$53			$5			$143

Notes to Consolidated Financial Statements (Unaudited), continued

Credit Derivative Instruments

As part of the Company's trading businesses, the Company enters into contracts that are, in form or substance, written guarantees; specifically, CDS, risk participations, and TRS. The Company accounts for these contracts as derivatives, and accordingly, records these contracts at fair value, with changes in fair value recognized in ~~trading~~Trading income in the Consolidated Statements of Income.

At September 30, ~~2017 and~~2018, there were no purchased CDS contracts designated as trading instruments. At December 31, ~~2016,~~2017, the gross notional amount of purchased CDS contracts designated as trading instruments was ~~$10 million and $135 million, respectively.~~$5 million. The fair value of purchased CDS was immaterial at ~~September 30, 2017 and $3 million at~~ December 31, ~~2016.~~2017.

The Company has also entered into TRS contracts on loans. The Company’s TRS business consists of matched trades, such that when the Company pays depreciation on one TRS, it receives the same amount on the matched TRS. To mitigate its credit risk, the Company typically receives initial cash collateral from the counterparty upon entering into the TRS and is entitled to additional collateral if the fair value of the underlying reference assets deteriorates. There were ~~$2.5~~$1.9 billion and ~~$2.1~~$1.7 billion of outstanding TRS notional balances at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. The fair values of these TRS assets and liabilities at September 30, ~~2017~~2018 were ~~$17~~$25 million and ~~$13~~$23 million, respectively, and related cash collateral held at September 30, ~~2017~~2018 was ~~$552~~$486 million. The fair values of the TRS assets and liabilities at December 31, ~~2016~~2017 were ~~$34~~$15 million and ~~$31~~$13 million, respectively, and related cash collateral held at December 31, ~~2016~~2017 was ~~$450~~$368 million. For additional information on the Company's TRS contracts, see Note 8,10, "Certain Transfers of Financial Assets and Variable Interest

Entities," as well as Note ~~14,~~16, "Fair Value Election and Measurement."

The Company writes risk participations, which are credit derivatives, whereby the Company has guaranteed payment to a dealer counterparty in the event the counterparty experiences a loss on a derivative, such as an interest rate swap, due to a failure to pay by the counterparty’s customer (the “obligor”) on that derivative. The Company manages its payment risk on its risk participations by monitoring the creditworthiness of the obligors, which are all corporations or partnerships, through the normal credit review process that the Company would have performed had it entered into a derivative directly with the obligors. To date, no material losses have been incurred related to the Company’s written risk participations. At September 30, 2018, the remaining terms on these risk participations generally ranged from less than one year to 11 years, with a weighted average term on the maximum estimated exposure of 6.4 years. At December 31, 2017, the remaining terms on these risk participations generally ranged from less than one year to nine years, with a weighted average term on the maximum estimated exposure of 5.6 years. At December 31, 2016, the remaining terms on these risk participations generally ranged from less than one year to thirty-one years, with a weighted average term on the maximum estimated exposure of 8.55.5 years. The Company’s maximum estimated exposure to written risk participations, as measured by projecting a maximum value of the guaranteed derivative instruments based on interest rate curve simulations and assuming 100% default by all obligors on the maximum values, was approximately ~~$60~~$230 million and ~~$95~~$55 million at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively. The fair values of the written risk participations were immaterial at both September 30, ~~2017~~2018 and December 31, ~~2016.~~

~~Cash Flow Hedging Instruments~~

The Company utilizes a comprehensive risk management strategy to monitor sensitivity of earnings to movements in interest rates. Specific types of funding and principal amounts hedged are determined based on prevailing market conditions and the shape of the yield curve. In conjunction with this strategy, the Company may employ various interest rate derivatives as risk management tools to hedge interest rate risk from recognized assets and liabilities or from forecasted transactions. The terms and notional amounts of derivatives are determined based on management’s assessment of future interest rates, as well as other factors.

Interest rate swaps have been designated as hedging the exposure to the benchmark interest rate risk associated with floating rate loans. At September 30, 2017, the maturities for hedges of floating rate loans ranged from less than one year to five years, with the weighted average being 3.8 years. At December 31, 2016, the maturities for hedges of floating rate loans ranged from less than one year to six years, with the weighted average being 4.1 years. These hedges have been highly effective in offsetting the designated risks, yielding an immaterial amount of ineffectiveness for the three and nine months ended September 30, 2017 and 2016. At September 30, 2017, $28 million of deferred net pre-tax gains on derivative instruments designated as cash flow hedges on floating rate loans recognized in AOCI are expected to be reclassified into net interest income during the next twelve months. The amount to be reclassified into income incorporates the impact from both active and terminated cash flow hedges, including the net interest income earned on the active hedges, assuming no changes in LIBOR. The Company may choose to terminate or de-designate a hedging relationship due to a change in the risk management objective for that specific hedge item, which may arise in conjunction with an overall balance sheet management strategy.

~~Fair Value Hedging Instruments~~

The Company enters into interest rate swap agreements as part of the Company’s risk management objectives for hedging its exposure to changes in fair value due to changes in interest rates. These hedging arrangements convert certain fixed rate long-term debt and CDs to floating rates. Consistent with this objective, the Company reflects the accrued contractual interest on the hedged item and the related swaps as part of current period interest expense. There were no components of derivative gains or losses excluded in the Company’s assessment of hedge effectiveness related to the fair value hedges.

~~Economic Hedging Instruments and Trading Activities~~

In addition to designated hedge accounting relationships, the Company also enters into derivatives as an end user to economically hedge risks associated with certain non-derivative and derivative instruments, along with entering into derivatives in a trading capacity with its clients.

The primary risks that the Company economically hedges are interest rate risk, foreign exchange risk, and credit risk. The Company mitigates these risks by entering into offsetting derivatives either on an individual basis or collectively on a macro basis.

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

~~The Company utilizes interest rate derivatives as economic hedges related to:~~

~~Residential MSRs. The Company hedges these instruments with a combination of interest rate derivatives, including forward and option contracts, futures, and forward rate agreements.~~

~~Residential mortgage IRLCs and LHFS. The Company hedges these instruments using forward and option contracts, futures, and forward rate agreements.~~

The Company is exposed to volatility and changes in foreign exchange rates associated with certain commercial loans. To hedge against this foreign exchange rate risk, the Company enters into foreign exchange rate contracts that provide for the future

~~receipt and delivery of foreign currency at previously agreed-upon terms.~~

The Company enters into CDS to hedge credit risk associated with certain loans held within its Wholesale segment. The Company accounts for these contracts as derivatives, and accordingly, recognizes these contracts at fair value, with changes in fair value recognized in other noninterest income in the Consolidated Statements of Income.

Trading activity primarily includes interest rate swaps, equity derivatives, CDS, futures, options, foreign exchange rate contracts, and commodity derivatives. These derivatives are entered into in a dealer capacity to facilitate client transactions, or are utilized as a risk management tool by the Company as an end user (predominantly in certain macro-hedging strategies).2017.

Notes to Consolidated Financial Statements (Unaudited), continued

NOTE 1416 - FAIR VALUE ELECTION AND MEASUREMENT

The Company measures certain assets and liabilities at fair value, which are classified as level 1, 2, or 3 within the fair value hierarchy, as shown below, on the basis of whether the measurement employs observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s own assumptions, taking into account information about market participant assumptions that is readily available.

Level 1: Quoted prices for identical instruments in active markets

Level 2: Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets

Level 3: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable

Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The Company’s recurring fair value measurements are based on either a requirement to measure such assets and liabilities at fair value or on the Company’s election to measure certain financial assets and liabilities at fair value. Assets and liabilities that are required to be measured at fair value on a recurring basis include trading securities, securities AFS, and derivative financial instruments. Assets and liabilities that the Company has elected to measure at fair value on a recurring basis include its residential MSRs, trading loans, and certain LHFS, LHFI, brokered time deposits, and ~~fixed rate~~long-term debt issuances.

The Company elects to measure certain assets and liabilities at fair value to better align its financial performance with the economic value of actively traded or hedged assets or liabilities. The use of fair value also enables the Company to mitigate non-economic earnings volatility caused from financial assets and liabilities being measured using different bases of accounting, as well as to more accurately portray the active and dynamic management of the Company’s balance sheet.

The Company uses various valuation techniques and assumptions in estimating fair value. The assumptions used to estimate the value of an instrument have varying degrees of

impact to the overall fair value of an asset or liability. This process involves gathering multiple sources of information, including broker quotes, values provided by pricing services, trading activity in other identical or similar securities, market indices, and pricing matrices. When observable market prices for the asset or liability are not available, the Company employs various

modeling techniques, such as discounted cash flow analyses, to estimate fair value. Models used to produce material financial reporting information are validated prior to use and following any material change in methodology. Their performance is monitored at least quarterly, and any material deterioration in model performance is escalated. ~~This review is performed by different internal groups depending on the type of fair value asset or liability.~~

The Company has formal processes and controls in place to support the appropriateness of its fair value estimates. For fair values obtained from a third party, or those that include certain trader estimates of fair value, there is an independent price validation function that provides oversight for these estimates. For level 2 instruments and certain level 3 instruments, the validation generally involves evaluating pricing received from two or more third party pricing sources that are widely used by market participants. The Company evaluates this pricing information from both a qualitative and quantitative perspective and determines whether any pricing differences exceed acceptable thresholds. If thresholds are exceeded, the Company assesses differences in valuation approaches used, which may include contacting a pricing service to gain further insight into the valuation of a particular security or class of securities to resolve the pricing variance, which could include an adjustment to the price used for financial reporting purposes.

The Company classifies instruments within level 2 in the fair value hierarchy when it determines that external pricing sources estimated fair value using prices for similar instruments trading in active markets. A wide range of quoted values from pricing sources may imply a reduced level of market activity and indicate that significant adjustments to price indications have been made. In such cases, the Company evaluates whether the asset or liability should be classified as level 3.

Determining whether to classify an instrument as level 3 involves judgment and is based on a variety of subjective factors, including whether a market is inactive. A market is considered inactive if significant decreases in the volume and level of activity for the asset or liability have been observed. In making this determination the Company evaluates the number of recent transactions in either the primary or secondary market, whether or not price quotations are current, the nature of market participants, the variability of price quotations, the breadth of bid/ask spreads, declines in, or the absence of, new issuances, and the availability of public information. When a market is determined to be inactive, significant adjustments may be made to price indications when estimating fair value. In making these adjustments the Company seeks to employ assumptions a market participant would use to value the asset or liability, including consideration of illiquidity in the referenced market.

Notes to Consolidated Financial Statements (Unaudited), continued

Recurring Fair Value Measurements

The following tables present certain information regarding assets and liabilities measured at fair value on a recurring basis and the changes in fair value for those specific financial instruments for which fair value has been elected.


	September 30, 2017											September 30, 2018
	Fair Value Measurements											Fair Value Measurements
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments ¹			Assets/Liabilities at Fair Value		Level 1		Level 2		Level 3		Netting Adjustments ¹			Assets/Liabilities at Fair Value
Assets
Trading assets and derivative instruments:
U.S. Treasury securities		$366		$—		$—		$—			$366		$247		$—		$—		$—			$247
Federal agency securities	—		303		—		—			303		—		507		—		—			507
U.S. states and political subdivisions	—		53		—		—			53		—		91		—		—			91
MBS - agency	—		666		—		—			666		—		743		—		—			743
Corporate and other debt securities	—		665		—		—			665		—		820		—		—			820
CP	—		383		—		—			383		—		408		—		—			408
Equity securities	30		—		—		—			30		67		—		—		—			67
Derivative instruments	350		3,439		23		(2,914		)	898		324		2,942		12		(2,656		)	622
Trading loans	—		2,954		—		—			2,954		—		2,171		—		—			2,171
Total trading assets and derivative instruments	746		8,463		23		(2,914		)	6,318		638		7,682		12		(2,656		)	5,676

Securities AFS:
U.S. Treasury securities	4,261		—		—		—			4,261		4,133		—		—		—			4,133
Federal agency securities	—		270		—		—			270		—		223		—		—			223
U.S. states and political subdivisions	—		563		—		—			563		—		602		—		—			602
MBS - agency	—		24,980		—		—			24,980
MBS - non-agency residential	—		—		62		—			62
MBS - agency residential												—		22,505		—		—			22,505
MBS - agency commercial												—		2,602		—		—			2,602
MBS - non-agency commercial	—		750		—		—			750		—		905		—		—			905
ABS	—		—		8		—			8
Corporate and other debt securities	—		28		5		—			33		—		14		—		—			14
Other equity securities ²	44		—		473		—			517
Total securities AFS	4,305		26,591		548		—			31,444
Total securities AFS ²												4,133		26,851		—		—			30,984

LHFS	—		2,251		1		—			2,252		—		1,822		—		—			1,822
LHFI	—		—		206		—			206		—		—		168		—			168
Residential MSRs	—		—		1,628		—			1,628		—		—		2,062		—			2,062
Other assets ²												92		—		—		—			92

Liabilities
Trading liabilities and derivative instruments:
U.S. Treasury securities	555		—		—		—			555		742		—		—		—			742
Corporate and other debt securities	—		347		—		—			347		—		411		—		—			411
Equity securities	5		—		—		—			5		12		—		—		—			12
Derivative instruments	147		4,244		17		(4,031		)	377		132		3,688		9		(3,131		)	698
Total trading liabilities and derivative instruments	707		4,591		17		(4,031		)	1,284		886		4,099		9		(3,131		)	1,863

Brokered time deposits	—		207		—		—			207		—		384		—		—			384
Long-term debt	—		758		—		—			758		—		235		—		—			235

¹Amounts represent 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. See Note ~~13,~~15, "Derivative Financial Instruments," for additional information.

² ~~Includes $41 million of mutual fund investments, $68 million of FHLB of Atlanta stock, $403 million of Federal Reserve Bank of Atlanta stock, and $5 million of other.~~Beginning January 1, 2018, the Company reclassified equity securities previously presented in Securities available for sale to Other assets on the Consolidated Balance Sheets. Reclassifications have been made to previously reported amounts for comparability. See Note 9, "Other Assets," for additional information.

Notes to Consolidated Financial Statements (Unaudited), continued


	December 31, 2016											December 31, 2017
	Fair Value Measurements											Fair Value Measurements
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments ¹			Assets/Liabilities at Fair Value		Level 1		Level 2		Level 3		Netting Adjustments ¹			Assets/Liabilities at Fair Value
Assets
Trading assets and derivative instruments:
U.S. Treasury securities		$539		$—		$—		$—			$539		$157		$—		$—		$—			$157
Federal agency securities	—		480		—		—			480		—		395		—		—			395
U.S. states and political subdivisions	—		134		—		—			134		—		61		—		—			61
MBS - agency	—		567		—		—			567		—		700		—		—			700
CLO securities	—		1		—		—			1
Corporate and other debt securities	—		656		—		—			656		—		655		—		—			655
CP	—		140		—		—			140		—		118		—		—			118
Equity securities	49		—		—		—			49		56		—		—		—			56
Derivative instruments	293		4,193		28		(3,530		)	984		395		3,493		16		(3,102		)	802
Trading loans	—		2,517		—		—			2,517		—		2,149		—		—			2,149
Total trading assets and derivative instruments	881		8,688		28		(3,530		)	6,067		608		7,571		16		(3,102		)	5,093

Securities AFS:
U.S. Treasury securities	5,405		—		—		—			5,405		4,331		—		—		—			4,331
Federal agency securities	—		313		—		—			313		—		259		—		—			259
U.S. states and political subdivisions	—		275		4		—			279		—		617		—		—			617
MBS - agency	—		23,662		—		—			23,662
MBS - agency residential												—		22,704		—		—			22,704
MBS - agency commercial												—		2,086		—		—			2,086
MBS - non-agency residential	—		—		74		—			74		—		—		59		—			59
MBS - non-agency commercial	—		252		—		—			252		—		866		—		—			866
ABS	—		—		10		—			10		—		—		8		—			8
Corporate and other debt securities	—		30		5		—			35		—		12		5		—			17
Other equity securities ²	102		—		540		—			642
Total securities AFS	5,507		24,532		633		—			30,672
Total securities AFS ²												4,331		26,544		72		—			30,947

LHFS	—		3,528		12		—			3,540		—		1,577		—		—			1,577
LHFI	—		—		222		—			222		—		—		196		—			196
Residential MSRs	—		—		1,572		—			1,572		—		—		1,710		—			1,710
Other assets ²												56		—		—		—			56

Liabilities
Trading liabilities and derivative instruments:
U.S. Treasury securities	697		—		—		—			697		577		—		—		—			577
MBS - agency	—		1		—		—			1
Corporate and other debt securities	—		255		—		—			255		—		289		—		—			289
Equity securities												9		—		—		—			9
Derivative instruments	149		4,731		22		(4,504		)	398		183		4,243		16		(4,034		)	408
Total trading liabilities and derivative instruments	846		4,987		22		(4,504		)	1,351		769		4,532		16		(4,034		)	1,283

Brokered time deposits	—		78		—		—			78		—		236		—		—			236
Long-term debt	—		963		—		—			963		—		530		—		—			530

¹ Amounts represent 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. See Note ~~13,~~15, "Derivative Financial Instruments," for additional information.

² ~~Includes $102 million of mutual fund investments, $132 million of FHLB of Atlanta stock, $402 million of Federal Reserve Bank of Atlanta stock, and $6 million of other.~~Beginning January 1, 2018, the Company reclassified equity securities previously presented in Securities available for sale to Other assets on the Consolidated Balance Sheets. Reclassifications have been made to previously reported amounts for comparability. See Note 9, "Other Assets," for additional information.

Notes to Consolidated Financial Statements (Unaudited), continued

The following tables present the difference between fair value and the aggregate UPB for which the FVO has been elected for certain trading loans, LHFS, LHFI, brokered time deposits, and long-term debt instruments.


(Dollars in millions)	Fair Value at September 30, 2017		Aggregate UPB at September 30, 2017		Fair Value Over/(Under) Unpaid Principal			Fair Value at September 30, 2018		Aggregate UPB at September 30, 2018		Fair Value Over/(Under) Unpaid Principal
Assets:
Trading loans		$2,954		$2,917		$37			$2,171		$2,160		$11
LHFS:
Accruing	2,252		2,180		72			1,822		1,775		47
LHFI:
Accruing	203		208		(5		)	162		171		(9		)
Nonaccrual	3		4		(1		)	6		8		(2		)
Liabilities:
Brokered time deposits	207		208		(1		)	384		379		5
Long-term debt	758		736		22			235		230		5

(Dollars in millions)	Fair Value at December 31, 2016		Aggregate UPB at December 31, 2016		Fair Value Over/(Under) Unpaid Principal			Fair Value at December 31, 2017		Aggregate UPB at December 31, 2017		Fair Value Over/(Under) Unpaid Principal
Assets:
Trading loans		$2,517		$2,488		$29			$2,149		$2,111		$38
LHFS:
Accruing	3,540		3,516		24			1,576		1,533		43
Past due 90 days or more								1		1		—
LHFI:
Accruing	219		225		(6		)	192		198		(6		)
Nonaccrual	3		4		(1		)	4		6		(2		)
Liabilities:
Brokered time deposits	78		80		(2		)	236		233		3
Long-term debt	963		924		39			530		517		13

The following tables present the ~~change~~changes in fair value ~~during the three and nine months ended September 30, 2017 and 2016~~ of financial instruments for which the FVO has been ~~elected, as well as for residential MSRs.~~elected. The tables do not reflect the change in fair value attributable to related economic hedges that the Company uses to mitigate market-related risks associated with the financial instruments. Generally, changes in the fair value of

economic hedges are recognized in ~~trading~~Trading income, ~~mortgage~~Mortgage production related income, ~~mortgage~~ Mortgage

servicing related income, ~~commercial~~Commercial real estate related income, or ~~other~~Other noninterest income as appropriate, and are designed to partially offset the change in fair value of the financial instruments referenced in the tables below. The Company’s economic hedging activities are deployed at both the instrument and portfolio level.

Trading Assets and Derivative Instruments and Investment Securities ~~Available for Sale~~

Unless otherwise indicated, trading assets are priced by the trading desk and investment securities ~~AFS~~ are valued by an independent third party pricing service. The third party pricing service gathers relevant market data and observable inputs, such as new issue data, benchmark curves, reported trades, credit spreads, and dealer bids and offers, and integrates relevant credit information, market movements, and sector news into its matrix pricing and other market-based modeling techniques.

U.S. Treasury Securities

The Company estimates the fair value of its U.S. Treasury securities based on quoted prices observed in active markets; as such, these investments are classified as level 1.

Federal Agency Securities

The Company includes in this classification securities issued by federal agencies and GSEs. Agency securities consist of debt obligations issued by HUD, FHLB, and other agencies, oras well as securities collateralized by loans that are guaranteed by the SBA, and thus, are ~~therefore,~~ backed by the full faith and credit of the U.S. government. For SBA instruments, the Company estimates fair value based on pricing from observable trading activity for similar securities or from a third party pricing service. Accordingly, ~~the Company classified~~ these instruments are classified as level 2.

U.S. States and Political Subdivisions

The Company’s investments in U.S. states and political subdivisions (collectively “municipals”) include obligations of county and municipal authorities and agency bonds, which are general obligations of the municipality or are supported by a specified revenue source. Holdings are geographically dispersed, with no significant concentrations in any one state or municipality. Additionally, all AFS municipal obligations classified as level 2 are highly rated or are otherwise collateralized by securities backed by the full faith and credit of the federal government.

At December 31, 2016, level 3 AFS municipal securities included an immaterial amount of bonds redeemable with the issuer at par and cannot be traded in the market. As such, no significant observable market data for these instruments was available; therefore, these securities were priced at par. These level 3 AFS municipal securities matured during the second quarter of 2017.

MBS – Agency

Agency MBS includes pass-through securities and collateralized mortgage obligations issued by GSEs and U.S. government agencies, such as Fannie Mae, Freddie Mac, and Ginnie Mae. Each security contains a guarantee by the issuing GSE or agency. For agency MBS, the Company estimates fair value based on pricing from observable trading activity for similar securities or from a third party pricing service; accordingly, the Company ~~has~~ classified these instruments as level 2.

MBS – ~~Non-agency~~Non-Agency

Non-agency residential MBS includes purchased interests in third party securitizations, as well as retained interests in

Company-sponsored securitizations of 2006 and 2007 vintage residential mortgages (including both prime jumbo fixed rate collateral and floating rate collateral). At the time of purchase or origination, these securities had high investment grade ratings; however, ~~through the credit crisis,~~ they have experienced deterioration in credit quality leading to downgrades to non-investment grade levels. The

Company obtains pricing for these securities from an independent pricing service. The Company evaluates third party pricing to determine the reasonableness of the information relative to changes in market data, such as any recent trades, information received from market participants and analysts, and/or changes in the underlying collateral performance. ~~The~~At December 31, 2017, the Company ~~continued to classify~~classified non-agency residential MBS as level 3, as the Company believes that available third party pricing relies on significant unobservable assumptions, as evidenced by a persistently wide bid-ask price range and variability in pricing from the pricing services, particularly for the vintage and exposures held by the Company.3.

Non-agency commercial MBS ~~at September 30, 2017 and December 31, 2016~~ consists of purchased interests in third party securitizations. These interests have high investment grade ratings, and the Company obtains pricing for these securities from an independent pricing service. The Company has classified these non-agency commercial MBS as level 2, as the ~~Company believes that the independent~~third party pricing service relies on observable data for similar securities in active markets.

~~CLO Securities~~

~~CLO preference share exposure is estimated at fair value based on pricing from observable trading activity for similar securities. Accordingly, the Company has classified these instruments as level 2.~~

Asset-Backed Securities

ABS classified as securities AFS includes purchased interests in third party securitizations collateralized by home equity ~~loans and are valued based on third party pricing with significant unobservable assumptions; as such, they are~~loans. At December 31, 2017, the Company classified ABS as level 3.

Corporate and Other Debt Securities

Corporate debt securities are comprised predominantly of senior and subordinate debt obligations of domestic corporations and are classified as level 2. Other debt securities classified as AFS ~~in level 3 at September 30, 2017 and December 31, 2016~~ include bonds that are redeemable with the issuer at ~~par~~par. At September 30, 2018 and ~~cannot be traded in~~December 31, 2017, the ~~market. As such, observable market data for these instruments is not available.~~Company classified other debt securities AFS as level 2 and level 3, respectively.

Commercial Paper

The Company acquires CP that is generally short-term in nature (maturity of less than 30 days) and highly rated. The Company estimates the fair value of this CP based on observable pricing from executed trades of similar instruments; as such, CP is classified as level 2.

The Company's derivative instruments classified as level 2 are primarily transacted in the institutional dealer market and priced with observable market assumptions at a mid-market valuation point, with appropriate valuation adjustments for liquidity and credit risk. ~~To this end, the Company has evaluated liquidity premiums required by market participants, as well as the credit risk of its counterparties and its own credit.~~ See Note ~~13,~~15, “Derivative Financial Instruments,” for additional information on the Company's derivative instruments.

The Company's derivative instruments classified as level 3 include IRLCs that satisfy the criteria to be treated as derivative financial instruments. The fair value of IRLCs on ~~residential and commercial~~ LHFS, while based on interest rates observable in the market, is highly dependent on the ultimate closing of the loans. These “pull-through” rates are based on the Company’s historical data and reflect the Company’s best estimate of the likelihood that a commitment will result in a closed loan. As pull-through rates increase, the fair value of IRLCs also increases. Servicing value is included in the fair value of IRLCs, and the fair value of servicing is determined by projecting cash flows, which are then discounted to estimate an expected fair value. The fair value of servicing is impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually specified servicing fees, servicing costs, and underlying portfolio characteristics. Because these inputs are not transparent in market trades, IRLCs are considered to be level 3

assets. During the three and nine months ended September 30, 2018, the Company transferred $26 million and $43 million, respectively, of net IRLC assets out of level 3 as the associated loans were closed. During the three and nine months ended September 30, 2017, the Company transferred $51 million and $157 million, respectively, of net ~~IRLCs out of level 3 as the associated loans were closed. During the three and nine months ended September 30, 2016, the Company transferred $116 million and $232 million, respectively, of net IRLCs~~IRLC assets out of level 3, as the associated loans were closed.

Trading Loans

The Company engages in certain businesses whereby electing to measure loans at fair value for financial reporting aligns with the underlying business purpose. Specifically, loans included within this classification include trading loans that ~~are:~~are (i) made or acquired in connection with the Company’s TRS business, (ii) part of the loan sales and trading business within the Company’s Wholesale segment, or (iii) backed by the SBA. See Note 8,10, "Certain Transfers of Financial Assets and Variable Interest Entities," and Note ~~13,~~15, “Derivative Financial Instruments,” for further discussion of this business. All of these loans are classified as level 2 due to the nature of market data that the Company uses to estimate fair value.

The loans made in connection with the Company’s TRS business are short-term, senior demand loans supported by a pledge agreement granting first priority security interest to the Bank in all the assets held by the borrower, a VIE with assets comprised primarily of corporate loans. While these TRS-related loans do not trade in the market, the Company believes that the par amount of the loans approximates fair value and no unobservable assumptions are used by the Company to value these loans. At September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company had ~~$2.5~~$1.9 billion and ~~$2.1~~$1.7 billion, respectively, of these short-term loans outstanding, measured at fair ~~value, respectively.~~value.

The loans from the Company’s sales and trading business are commercial and corporate leveraged loans that are either traded in the market or for which similar loans trade. The Company elected to measure these loans at fair value since they

are actively traded. For ~~both~~each of the three and nine months ended September 30, ~~2017~~2018 and ~~2016,~~2017, the Company recognized an immaterial amount of gains/(losses) in the Consolidated Statements of Income due to changes in fair value attributable to instrument-specific credit risk. The Company is able to obtain fair value estimates for substantially all of these loans through a third party valuation service that is broadly used by market participants. While most of the loans are traded in the market, the Company does not believe that trading activity qualifies the loans as level 1 instruments, as the volume and level of trading activity is subject to variability and the loans are not exchange-traded. At September 30, ~~2017~~2018 and December 31, ~~2016, $422~~2017, $65 million and ~~$356~~$48 million, respectively, of loans related to the Company’s trading business were held in inventory.

SBA loans are similar to SBA securities discussed herein under “Federal agency securities,” except for their legal form. In both cases, the Company trades instruments that are fully guaranteed by the U.S. government as to contractual principal and interest and there is sufficient observable trading activity upon which to base the estimate of fair value. As these SBA loans are fully guaranteed, the changes in fair value are attributable to factors other than instrument-specific credit risk. At September 30, 2018 and December 31, 2017, the Company held $182 million and $368 million of SBA loans in inventory, respectively.

Commercial Mortgage LHFS

The Company values certain commercial mortgage LHFS at fair value based upon observable current market prices for similar loans. These loans are generally transferred to agencies within 90 days of origination. The Company had commitments from agencies to purchase these loans at September 30, ~~2017~~2018 and December 31, ~~2016;~~2017; therefore, they are classified as level 2. Origination fees are recognized within ~~commercial~~Commercial real estate related income in the Consolidated Statements of Income when earned at the time of closing. To mitigate the effect of interest rate risk inherent in entering into IRLCs with borrowers, the Company enters into forward contracts with investors at the same time that it enters into IRLCs with borrowers. The mark-to-market adjustments related to commercial mortgage LHFS, IRLCs, and forward contracts are recognized in ~~commercial~~Commercial real estate related income. For commercial ~~loans~~mortgages that the Company has elected to measure at fair value, the Company recognized no gains/(losses) in the Consolidated Statements of Income due to changes in fair value attributable to borrower-specific credit risk for ~~both~~each of the three and nine months ended September 30, ~~2017~~2018 and ~~2016.~~2017.

LHFI

LHFI classified as level 3 includes predominantly mortgage loans that are not marketable, largely due to the identification of loan defects. The Company chooses to measure these mortgage LHFI at fair value to better align reported results with the underlying economic changes in value of the loans and any related hedging instruments. The Company values these loans using a discounted cash flow approach based on assumptions that are generally not observable in current markets, such as prepayment speeds, default rates, loss severity rates, and discount rates. Level 3 LHFI also includes mortgage loans that are valued using collateral based pricing. Changes in the applicable housing price index since the time of the loan origination are considered and applied to the loan's collateral value. An additional discount representing the return that a buyer would require is also considered in the overall fair value.

Residential Mortgage Servicing Rights

The Company records residential MSR assets at fair value using a discounted cash flow approach. The fair values of residential MSRs are impacted by a variety of factors, including prepayment assumptions, discount rates, delinquency rates, contractually specified servicing fees, servicing costs, and underlying portfolio characteristics. The underlying assumptions and estimated values are corroborated by values received from independent third parties based on their review of the servicing portfolio, and comparisons to market transactions. Because these inputs are not transparent in market trades, residential MSRs are classified as level 3 assets. For additional information see Note 7,8, "Goodwill and Other Intangible Assets."

Other Assets

The Company estimates the fair value of its mutual fund investments and other equity securities with readily determinable fair values based on quoted prices observed in active markets; therefore, these investments are classified as level 1. During the second quarter of 2018, the Company reclassified $22 million of nonmarketable equity securities to

marketable equity securities due to newly available, readily determinable fair value information observed in active markets.

Liabilities

Trading Liabilities and Derivative Instruments

Trading liabilities are comprised primarily of derivative contracts, including IRLCs that satisfy the criteria to be treated as derivative financial instruments, as well as various contracts (primarily U.S. Treasury securities, corporate and other debt securities) that the Company uses in certain of its trading businesses. The Company's valuation methodologies for these derivative contracts and securities are consistent with those discussed within the corresponding sections herein under “Trading Assets and Derivative Instruments and Investment Securities ~~Available for Sale~~.”

During the second quarter of 2009, in connection with its sale of Visa Class B shares, the Company entered into a derivative contract whereby the ultimate cash payments received or paid, if any, under the contract are based on the ultimate resolution of the Litigation involving Visa. The fair value of the derivative is estimated based on the Company’s expectations regarding the ultimate resolution of that Litigation. The significant unobservable inputs used in the fair value measurement of the derivative involve a high degree of judgment and subjectivity; accordingly, the derivative liability is classified as level 3. See Note ~~12,~~14, "Guarantees," for a discussion of the valuation assumptions.

Brokered Time Deposits

The Company has elected to measure certain CDs that contain embedded derivatives at fair value. This fair value election better aligns the economics of the CDs with the Company’s risk

debt with the accounting for offsetting derivative positions, without having to apply complex hedge accounting.

~~On January 1, 2016,~~The Company has elected to measure certain debt issuances that contain embedded derivatives at fair value. This fair value election better aligns the economics of the debt with the Company’s risk management strategies. The Company ~~partially adopted~~ ~~ASU~~ ~~2016-01, which requires changes in credit spreads for certain financial instruments elected to~~evaluated, on an instrument by instrument basis, whether a new issuance would be measured at fair ~~value to be recognized in OCI.~~value. The ~~impact to OCI for public debt~~Company has classified these instruments measured at fair value ~~is determined~~as level 2

instruments due to the Company's ability to reasonably measure all significant inputs based on observable market variables. The Company employs a discounted cash flow approach based on observable market interest rates for the ~~change~~term of the debt and an estimate of the Parent Company's credit risk. For any embedded derivative features, the Company uses the same valuation methodologies that would be used if the derivative were a standalone derivative, as discussed in ~~credit spreads above LIBOR swap spreads. For both~~ the three and nine months ended September 30, 2017, the impact on AOCI from changes in credit spreads resulted in an immaterial gain, net of tax. For the three and nine months ended September 30, 2016, the impact on AOCI from changes in credit spreads resulted in losses of $3 million and $5 million, respectively, net of tax. For additional information on the Company's partial adoption of ~~ASU~~ ~~2016-01, see Note 1, "Significant Accounting Policies."~~"Derivative Instruments" section above.

The following tables present a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (other than servicing rights which are disclosed in Note 7,8, “Goodwill and Other Intangible Assets”). Transfers into and out

of the fair value hierarchy levels are assumed to occur at the end

of the period in which the transfer occurred. None of the transfers into or out of level 3 have been the result of using alternative valuation approaches to estimate fair values. ~~There were no transfers between level 1 and 2 during the three and nine months ended September 30, 2017 and 2016.~~

The following tables present gains and losses recognized on assets still held at period end, and measured at fair value on a non-recurring basis, for the three and nine months ended September 30, ~~2017~~2018 and the year ended December 31, ~~2016.~~2017. Adjustments to fair value generally result from the application ~~of LOCOM or through~~

of LOCOM, or the measurement alternative, or through write-downs of individual assets. The tables do not reflect changes in fair value attributable to economic hedges the Company may have used to mitigate interest rate risk associated with LHFS.

Loans Held for Sale

At September 30, 2018 and December 31, 2017, LHFS classified as level 2 consisted of commercial loans that were valued using market prices and measured at LOCOM. During the three and nine months ended September 30, 2017, the Company transferred $31 million of C&I NPLs to LHFS as the Company elected to actively market these loans for sale. As a result of transferring the C&I NPLs to LHFS, the Company recognized a $5 million charge-off to reflect the loans' estimated market value. There were no gains/(losses) recognized in earnings during the three and nine months ended September 30, 2018 or during the year ended December 31, 2017 as the charge-offs related to these loans are a component of the ALLL.

Loans Held for Investment

At September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, LHFI classified as level 3 consisted primarily of consumer ~~and residential real estate~~ loans discharged in Chapter 7 bankruptcy that had not been reaffirmed by the borrower, as well as nonperforming CRE loans for which specific reserves had been recognized. Cash proceeds from the sale of the underlying collateral is the expected source of repayment for a majority of these loans. Accordingly, the fair value of these loans is derived from the estimated fair value of the underlying collateral, incorporating market data if available. There were no gains/(losses) recognized during the three and nine months ended September 30, 2017 or during the year ended December 31, 2016, as the charge-offs related to these loans are a component of the ALLL. Due to the lack of market data for similar assets, all of these loans are classified as level 3. There were no gains/(losses) recognized during the three and nine months ended September 30, 2018 or during the year ended December 31, 2017, as the charge-offs related to these loans are a component of the ALLL.

OREO

OREO is measured at the lower of cost or fair value less costs to sell. Level 2 OREO ~~classified as level~~consists primarily of residential homes, commercial properties, and vacant lots and land for which binding purchase agreements exist. Level 3 OREO consists primarily of residential homes, commercial properties, and vacant lots and land for which initial valuations are based on property-specific appraisals, broker pricing opinions, or other ~~limited, highly~~

limited, highly subjective market information. Updated value estimates are received regularly for level 3 OREO.

Other Assets

Other assets ~~consists~~consist of ~~cost and~~ equity ~~method~~ investments, other repossessed assets, assets under operating leases where the Company is the lessor, branch properties, land held for sale, and software.

~~Investments~~Pursuant to the adoption of ASU 2016-01 on January 1, 2018, the Company elected the measurement alternative for measuring certain equity securities without readily determinable fair values, which are adjusted based on any observable price changes in ~~cost~~orderly transactions. These equity securities are classified as level 2 based on the valuation methodology and associated inputs. During the three and nine months ended September 30, 2018, the Company recognized remeasurement gains of $7 million and $30 million on these equity ~~method~~securities, respectively.

Prior to the adoption of ASU 2016-01, equity investments ~~are~~were evaluated for potential impairment based on the expected remaining cash flows to be received from these assets discounted at a market rate that is commensurate with the expected risk, considering relevant ~~Company-specific~~company-specific valuation multiples, where applicable. Based on the valuation methodology and associated unobservable inputs, these investments are classified as level 3. ~~The Company recognized $1 million of impairment charges on equity investments during both the three and nine months ended September 30, 2017.~~ During the year ended December 31, ~~2016,~~2017, the Company recognized an immaterial amount of impairment charges ~~of $8 million~~ on its equity investments.

Other repossessed assets ~~comprises~~include repossessed personal property that is measured at fair value less cost to sell. These assets are classified as level 3 as their fair value is determined based on a variety of subjective, unobservable factors. There were no losses recognized in earnings by the Company on other repossessed assets during the three and nine months ended September 30, ~~2017~~2018 or during the year ended December 31, ~~2016,~~ 2017,

as the impairment charges on repossessed personal property were a component of the ALLL.

The Company monitors the fair value of assets under operating leases where the Company is the lessor and recognizes impairment on the leased asset to the extent the carrying value is not recoverable and is greater than its fair value. Fair value is determined using collateral specific pricing digests, external appraisals, broker opinions, recent sales data from industry

~~Notes to Consolidated Financial Statements (Unaudited), continued~~

This ~~report~~Quarterly Report contains forward-looking statements. Statements regarding: (i) 2018 on track to be the seventh consecutive year of growth in EPS, improved efficiency, and higher capital returns; (ii) future levels of net interest margin, ~~deposit costs, premium amortization, expenses,~~noninterest income, the tangible efficiency ~~delinquencies, charge-offs, hurricane related losses,~~ratio, share repurchases, the net ~~charge-off~~charge-offs to total average LHFI ratio, the ALLL to period-end LHFI ratio, the NPLs to period-end LHFI ratio, and the provision for loan ~~losses,~~losses; (iii) the pace of expansion in our net ~~charge-offs,~~interest margin; (iv) the timing of our ~~capital ratios, and share repurchases; (ii)~~ tangible efficiency ratio goals; ~~(iii)~~(v) continued migration towards higher cost deposit products; (vi) future trends or increases in deposit costs; (vii) our access to alternative funding sources; (viii) potential acceleration of share repurchases; (ix) the possible purchase of additional, or termination of existing, interest rate swaps; (x) the amount and timing of ~~closing~~pre-tax deferred losses that will be reclassified from AOCI into net income related to the termination and settlement of the NCF pension plan; (xi) growth opportunities in our ~~sale of~~ ~~PAC; (iv) the asset sensitivity of our balance sheet and our exposure to interest rate risk in future periods; (v)~~Wholesale segment; (xii) future changes in the size and composition of the securities AFS portfolio; ~~(vi) future issuances~~(xiii) our flexibility to use our securities AFS portfolio to manage our interest rate risk profile; (xiv) the estimated impact of ~~preferred stock; (vii) future impacts~~proposed regulatory capital rules and changes in banking laws, rules, and regulations; (xv) the impact of ~~ASUs not yet adopted; (viii) the provision for income taxes; (ix) future optimization of~~a gradual shift in interest rates on our ~~capital structure~~MVE; and ~~balance sheet; and (x)~~(xvi) future credit ratings and outlook, are forward-looking statements. Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “target,” “forecast,” “future,” “strategy,” “goal,” “initiative,” “plan,” “opportunity,” “potentially,” “probably,” “project,” “outlook,” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Such statements are based upon the current beliefs and expectations of management and on information currently available to management. They speak as of the date hereof, and we do not assume any obligation to update the statements made herein or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward-looking statements. Factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, Item 1A., ~~"Risk Factors"~~“Risk Factors,” in our ~~2016~~2017 Annual Report on Form 10-K and in Part II, Item 1A., “Risk Factors,” in our Quarterly Report on Form 10-Q for the period ended March 31, 2018, and also include risks discussed in this ~~report~~Quarterly Report and in other periodic 2018 reports that we ~~file~~filed with the SEC. ~~Additional~~Such factors include: current and future legislation and regulation could require us to change our business practices, reduce revenue, impose additional costs, or otherwise adversely affect business operations or competitiveness; we are subject to stringent capital adequacy and liquidity requirements and our failure to meet these would adversely affect our financial condition; the monetary and

fiscal policies of the federal government and its agencies could have a material adverse effect on our earnings; our financial results have been, and may continue to be, materially affected by general economic conditions, and a deterioration of economic conditions or of the financial markets may materially adversely affect our lending and other businesses and our financial results and condition; changes in market interest rates or capital markets could adversely affect our revenue and expenses, the value of assets and obligations, and the availability and cost of capital and liquidity; i~~nterest~~interest rates on our outstanding financial instruments might be subject to change based on regulatory developments, which could adversely affect our revenue, expenses, and the value of those financial ~~instruments~~;instruments; our

earnings may be affected by volatility in mortgage production and servicing revenues, and by changes in carrying values of our servicing assets and mortgages held for sale due to changes in interest rates; disruptions in our ability to access global capital markets may adversely affect our capital resources and liquidity; we are subject to credit risk; we may have more credit risk and higher credit losses to the extent that our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral; we rely on the mortgage secondary market and GSEs for some of our liquidity; loss of customer deposits could increase our funding costs; any reduction in our credit rating could increase the cost of our funding from the capital markets; we are subject to litigation, and our expenses related to this litigation may adversely affect our results; we may incur fines, penalties and other negative consequences from regulatory violations, possibly even inadvertent or unintentional violations; we are subject to certain risks related to originating and selling mortgages, and may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of breaches of representations and warranties, or borrower fraud, and this could harm our liquidity, results of operations, and financial condition; we face risks as a servicer of loans; ~~we are subject to risks related to delays in the foreclosure process;~~ consumers and small businesses may decide not to use banks to complete their financial transactions, which could affect net income; we have businesses other than banking which subject us to a variety of risks; negative public opinion could damage our reputation and adversely impact business and revenues; we may face more intense scrutiny of our sales, training, and incentive compensation practices; we rely on other companies to provide key components of our business infrastructure; competition in the financial services industry is intense and we could lose business or suffer margin declines as a result; we continually encounter technological change and must effectively develop and implement new technology; maintaining or increasing market share depends on market acceptance and regulatory approval of new products and services; we have in the past and may in the future pursue acquisitions, which could affect costs and from which we may not be able to realize anticipated benefits; we depend on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements, operations may suffer; we may not be able to hire or retain additional qualified personnel and recruiting and

compensation costs may increase as a result of turnover, both of which may increase costs and reduce profitability and may adversely impact our ability to implement our business strategies; our framework for managing risks may not be effective in mitigating risk and loss to us; our controls and procedures may not prevent or detect all errors or acts of fraud; we are at risk of increased losses from fraud; our operational and communications systems and infrastructure may fail or may be the subject of a breach or cyber-attack that, if successful, could adversely affect our business; and disrupt business continuity; a disruption, breach, or failure in the operational systems and infrastructure of our third party vendors and other service providers, including as a result of cyber-attacks, could adversely

We are a leading provider of financial services, with our headquarters located in Atlanta, Georgia. We are an organization driven by our Company purpose of Lighting the Way to Financial Well-Being — helping instill a sense of confidence in the financial circumstances of clients, communities, teammates, and shareholders is at the center of everything we do. Our principal ~~banking~~ subsidiary, SunTrust Bank, offers a full line of financial services for consumers, businesses, corporations, institutions, and ~~institutions,~~not-for-profit entities, both through its branches (located primarily in Florida, Georgia, Virginia, North Carolina, Tennessee, Maryland, South Carolina, and the District of Columbia) and through other digital and national delivery channels. In addition to deposit, credit, mortgage banking, and trust and investment services offered by the Bank, our other subsidiaries provide capital markets, ~~mortgage banking,~~ securities brokerage, ~~online consumer lending, and asset~~investment banking, and wealth management services. We operate two business segments: Consumer and Wholesale, with ~~our~~ functional activities included in Corporate Other. See Note ~~16,~~18, "Business Segment Reporting," to the Consolidated Financial Statements in this Form 10-Q for a description of our business ~~segments and related business segment structure realignment from three segments to two segments in the second quarter of 2017.~~segments.

This MD&A is intended to assist readers in their analysis of the accompanying Consolidated Financial Statements and supplemental financial information. It should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements in Part I, Item 1

of this Form 10-Q, as well as other information contained in this document and in our ~~2016~~2017 Annual Report on Form 10-K. When we refer to “SunTrust,” “the Company,” “we,” “our,” and “us” in this ~~narrative,~~report, we mean SunTrust Banks, Inc. and its consolidated subsidiaries.

In ~~the~~this MD&A, consistent with SEC guidance in Industry Guide 3 that contemplates the calculation of tax exempt income on a tax equivalent basis, we present net interest income, net interest margin, total revenue, and efficiency ratios on an FTE basis. The FTE basis adjusts for the tax-favored status of net interest income from certain loans and investments using a federal tax rate of 21% for all periods beginning on or after January 1, 2018 and 35% ~~and~~for all periods prior to January 1, 2018, as well as state income taxes, where applicable, to increase tax-exempt interest income to a taxable-equivalent basis. We believe ~~this measure to be~~the FTE basis is the preferred industry measurement ofbasis for net interest income, net interest margin, total revenue, and efficiency ratios, and that it enhances comparability of net interest income and total revenue arising from taxable and tax-exempt sources. Additionally, we present other non-U.S. GAAP metrics to assist investors in understanding

management’s view of particular financial measures, as well as to align presentation of these financial measures with peers in the industry who may also provide a similar presentation. Reconcilements for all non-U.S. GAAP measures are provided in Table 20.

We

Aided by a favorable operating environment, we delivered 47% year-over-year diluted EPS growth, reflecting ongoing efficiency improvements, solid ~~revenue~~loan growth, higher capital return, and continued strong credit quality. Our sustained performance in these areas and our momentum going into the fourth quarter indicate that we are on track to realize our seventh consecutive year of growth in EPS, improved efficiency, and higher capital returns in the third quarter of 2017, resulting in strong EPS growth. Our performance was driven by consistent execution against our core strategies and provides further evidence that our differentiated value proposition continues to resonate with clients. returns.

Total revenue for the third quarter of ~~2017 increased 2%~~2018 was down 1% sequentially and ~~4% compared to the third quarter of 2016, driven~~stable year-over-year, as lower noninterest income was largely offset by higher net interest ~~income and strong investment banking performance.~~income.

Net interest income was $1.5 billion for the third quarter of ~~2017,~~2018, an increase of 2% sequentially and ~~9% compared~~5% relative to the third quarter of ~~2016, due~~2017, driven by growth in average earning assets relative to both comparative periods and net interest margin expansion and growth in average earning assets. Noninterest income increased 2% sequentially and decreased 5% compared to the third quarter of 2016. The sequential increase was due primarily to our continued success in meeting more of our clients' capital markets needs across the entire Wholesale segment, evidenced by the $24 million increase in capital markets-related income as mergers and acquisitions advisory and equity offerings both had strong quarters. The year-over-year decrease in noninterest income was driven by lower mortgage-related income, offset partially by higher investment banking and commercial real estate related income.

year-over-year. Our net interest margin ~~increased~~decreased one basis point sequentially and 19increased 12 basis points compared to the third quarter of ~~2016,~~2017. The year-over-year increase was driven primarily by higher earning asset yields arising from higher benchmark interest rates, ~~continued~~ favorable mix shift in the LHFI ~~portfolio,~~and securities AFS portfolios, and lower ~~MBS~~ premium amortization expense, offset partially by ~~funding costs.~~higher rates paid on average interest-bearing liabilities. Looking ~~forward~~ to the fourth quarter of ~~2017,~~2018, we expect net interest margin to ~~decline by one~~increase between zero and two basis points compared to ~~three basis points. Beyond that, we anticipate future net interest margin expansion if~~ the ~~short end~~third quarter of 2018, largely as a result of the ~~yield curve continues to rise.~~September 2018 Fed Funds rate increase. See additional discussion related to revenue, noninterest income, and net interest income and margin in the "Noninterest Income" and "Net Interest Income/Margin" sections of this MD&A. Also in this MD&A, see Table 12, "Net Interest Income Asset Sensitivity," for an analysis of potential changes in net interest income due to instantaneous moves in benchmark interest rates.

Noninterest income decreased 6% sequentially and 8% compared to the third quarter of 2017. The sequential decrease was due primarily to lower capital markets-related income, other noninterest income, and client transaction-related fees, which was offset partially by higher commercial real estate related income and wealth management-related income. Year-over-year, the decrease in noninterest income was driven by lower mortgage and capital markets-related income as well as lower client transaction-related fees. We expect noninterest income in the fourth quarter of 2018 to increase relative to the third quarter of 2018, given our solid capital markets pipelines and seasonally higher fee income in certain categories, including mortgage servicing and commercial real estate related income.

Noninterest expense ~~remained stable~~decreased $6 million compared to the prior quarter and ~~declined $18~~$7 million, or 1%, compared to the third quarter of ~~2016. Sequentially,~~2017. The sequential decrease was driven largely by lower employee compensation and benefits, other noninterest expense, net occupancy expense, and equipment expense, offset partially by higher ~~severance~~outside processing and software costs and marketing and customer development costs. The decrease compared to the third quarter of 2017 was due to reductions in most expense categories, offset largely by higher outside processing and software ~~writedowns, and higher personnel costs were offset by~~expense in the current quarter as well as the favorable resolution of several legal matters ~~during~~in the ~~current quarter. The decrease compared~~third quarter of 2017.

Separately, in accordance with our previously announced decision to terminate a pension plan that we acquired as part of the ~~prior year~~NCF acquisition in 2004, we expect to reclassify approximately $61 million of pre-tax deferred losses from AOCI into net income upon settlement of the pension plan in the fourth quarter was driven by the aforementioned legal accrual reversals and reduced outside processing and software expenses during the current quarter. Though our expense base has and will vary from quarter to quarter, we remain focused on reducing less productive expenses to provide funding for investments in talent, technology, and improved product offerings.of 2018. See additional

lending activity. We expect deposit ~~growth we have produced over~~costs to continue to trend upwards, with the ~~past several years, in addition to our access to low-cost funding, enables us to prudently manage~~

~~our funding base~~trajectory influenced by the absolute level of interest rates, the pace of interest rate increases, and ~~more effectively manage our deposit costs.~~loan growth. We remain focused on maximizing the value proposition of deposits for our clients, outside of ~~rates paid, by meeting more of our clients' needs through strategic investments in talent and technology.~~rate paid. Our access to alternative funding is strong should deposit growth prove to be slower than expected. See additional discussion regarding average deposits in the "Net Interest Income/Margin" section of this MD&A.

Capital and Liquidity

Our ~~regulatory~~ capital ratios ~~increased~~continue to be well above regulatory requirements. The CET1 ratio decreased slightly to 9.60% at September 30, 2018, a 14 basis point decline compared to December 31, ~~2016, with a CET1 ratio of 9.62% at September 30,~~ 2017, driven primarily by growth in risk weighted assets, offset partially by an increase in retained earnings. ~~Additionally,~~Our Tier 1 capital and Total capital ratios declined compared to December 31, 2017, due to the impact of our ~~CET1 ratio, on a fully phased-in basis, was estimated to be 9.48% at September 30, 2017, which is well above~~redemption of all outstanding shares of Series E Preferred Stock in the ~~current regulatory requirement.~~first quarter of 2018. Our book value and tangible book value per common share both ~~increased~~remained relatively stable compared to December 31, ~~2016, due primarily to earnings growth.~~2017, as higher accumulated other comprehensive loss was offset largely by growth in retained earnings. See additional details related to our capital in the “Capital Resources” section of this MD&A and in Note 13, "Capital," to the Consolidated Financial Statements in our ~~2016~~2017 Annual Report on Form 10-K. Also see Table 20, "Selected Financial Data and Reconcilement of Non-U.S. GAAP Measures," in this MD&A for additional information regarding, and ~~reconciliations~~a reconciliation of, tangible book value per common ~~share and our fully phased-in CET1 ratio.~~share.

In June ~~2017,~~2018, we announced capital plans in response to the Federal Reserve's review of and non-objection to our ~~2017~~2018 capital plan submitted in conjunction with the ~~2017~~2018 CCAR. Accordingly, during the third quarter of ~~2017,~~2018, we increased our quarterly common stock dividend by ~~54%~~25% to ~~$0.40~~$0.50 per common share. We also repurchased ~~$330~~$500 million of our outstanding common stock during the third quarter of ~~2017~~2018 in conjunction with the ~~2017~~2018 capital plan. At September 30, ~~2017,~~2018, we had ~~$990 million~~$1.5 billion of remaining common stock repurchase capacity available under this ~~plan, which we expect to conduct~~plan. We will repurchase a minimum of $500 million of our outstanding common stock in ~~relatively even quarterly increments through~~ the ~~end of the second~~fourth quarter of 2018. See additional details related to our capital actions and share repurchases in the “Capital Resources” section of this MD&A and in Part II, Item 2 of this Form 10-Q.

Business Segments Highlights

Consumer

Our investments across Consumer ~~net~~Lending, together with our strategic partnerships, have collectively improved our growth, returns, and diversity. Enhanced analytics, new product offerings, and increased referrals have been key contributors to our growth in LightStream and direct consumer lending. This growth has been offset partially by declines in home equity loan balances and certain lower return portfolios such as indirect auto.

Net interest income increased ~~$14~~$21 million sequentially and ~~decreased $17~~$80 million compared to the third quarter of ~~2016. The sequential increase was driven by revenue~~2017, resulting from continued balance sheet growth and ~~the favorable resolution~~increased deposit spreads. The average balance of ~~legal matters during the current quarter, offset by an increase in provision for credit losses due to anticipated losses incurred from recent hurricanes. The year-over-year decrease~~our LHFI portfolio was ~~driven primarily by lower mortgage production related income. Net interest income increased 3%~~ stable

sequentially and increased 1% compared to the third quarter of 2017. Noninterest income decreased 2% sequentially and decreased 8% compared to the third quarter of ~~2016, resulting from strong loan and deposit growth and continued balance sheet optimization. The average balance of our LHFI portfolio~~2017, due primarily to lower mortgage-related income.

We continue to demonstrate positive underlying trends within PWM, as assets under management increased 2%3% sequentially and 4%7% compared to the third quarter of ~~2016. Deposit growth continues to be a key contributor to our net interest income momentum, with average balances up 3% year-over-year. Noninterest~~2017 and wealth management-related noninterest income increased ~~2% sequentially~~4% year-over-year. Our value proposition for our targeted client segments is resonating in the marketplace, continuing to drive growth in new clients and ~~decreased 15%~~in deepening relationships with existing clients.

Our efficiency ratio was 65.3% for the third quarter of 2018, compared to 62.6% for the ~~same period in 2016.~~third quarter of 2017. The ~~sequential~~ increase was ~~driven by higher mortgage-related income, which has begun to stabilize. The year-over-year decrease was due primarily to lower mortgage-related income,~~

Overall, while market conditions can ~~drive~~create quarterly variability, our pipelines are strong and we continue to be optimistic about growth opportunities within Wholesale, as our differentiated business model ~~in Wholesale continues to deliver strong results~~attracts clients from new and ~~we expect to see further growth in 2018.~~existing markets.

Additional information related to our business segments can be found in Note ~~16,~~18, "Business Segment Reporting," to the Consolidated Financial Statements in this Form 10-Q, and further discussion of our business segment results for the nine months ended September 30, ~~2017~~2018 and ~~2016~~2017 can be found in the "Business Segment Results" section of this MD&A.

The following is a discussion of the more significant financial assets and financial liabilities that are measured at fair value on the Consolidated Balance Sheets at September 30, ~~2017~~2018 and December 31, ~~2016.~~2017. For a complete discussion of our financial instruments measured at fair value and the methodologies used to estimate the fair values of our financial instruments, see Note ~~14,~~16, “Fair Value Election and Measurement,” to the Consolidated Financial Statements in this Form 10-Q.

Trading Assets and Liabilities and Derivative Instruments

Trading assets and derivative instruments increased ~~$251~~$583 million, or 4%11%, compared to December 31, ~~2016.~~2017. This increase was due primarily to increases in ~~trading loans~~CP, corporate and ~~CP, offset largely by decreases in~~other debt securities, federal agency securities, U.S. Treasury securities, agency MBS, and municipal ~~securities.~~securities, offset partially by a decrease in derivative instruments. These changes were driven

by normal activity in the trading portfolio product mix as we

manage our business and continue to meet our clients' needs. Trading liabilities and derivative instruments ~~decreased $67~~increased $580 million, or 5%45%, compared to December 31, ~~2016, due primarily to decreases~~2017, driven by increases in derivative instruments, U.S. Treasury securities, and ~~net derivative instruments, offset partially by an increase in~~ corporate and other debt securities. For composition and valuation assumptions related to our trading products, as well as additional information on our derivative instruments, see Note 3,4, “Trading Assets and Liabilities and Derivative Instruments,” Note ~~13,~~15, “Derivative Financial Instruments,” and the “Trading Assets and Derivative Instruments and Investment Securities ~~Available for Sale~~” section of Note ~~14,~~16, “Fair Value Election and Measurement,” to the Consolidated Financial Statements in this Form 10-Q. Also, for a discussion of market risk associated with our trading activities, refer to the “Market Risk Management—Market Risk from Trading Activities” section of this MD&A.

As mentioned above, the Bank and Parent Company maintain programs to access the debt capital markets. The Parent Company maintains an SEC shelf registration from which it may issue senior or subordinated notes and various capital securities, such as common or preferred stock. ~~Our~~In August 2018, our Board ~~has~~approved a new SEC shelf registration, which authorized

Federal Home Loan Bank and Federal Reserve Bank Stock. We previously acquired capital stock in the FHLB of Atlanta as a precondition for becoming a member of that institution. As a member, we are able to take advantage of competitively priced advances as a wholesale funding source and to access grants and low-cost loans for affordable housing and community development projects, among other benefits. At September 30, 2018, we held $142 million of capital stock in the FHLB of Atlanta, an increase of $127 million compared to December 31, 2017 due to an increase in short-term FHLB advances over the same period. For each of the three and nine months ended September 30, 2018 and 2017, we recognized an immaterial amount of dividends related to FHLB capital stock.

Similarly, to remain a member of the Federal Reserve System, we are required to hold a certain amount of capital stock, determined as either a percentage of the Bank’s capital or as a percentage of total deposit liabilities. At both September 30, 2018 and December 31, 2017, we held $403 million of Federal Reserve Bank of Atlanta stock. For both the three months ended September 30, 2018 and 2017, we recognized an immaterial amount of dividends related to Federal Reserve Bank of Atlanta stock. For the nine months ended September 30, 2018 and 2017, we recognized dividends related to Federal Reserve Bank of Atlanta stock of $9 million and $7 million, respectively.

Parent Company Liquidity. Our primary measure of Parent Company liquidity is the length of time the Parent Company can meet its existing and forecasted obligations using its cash resources. We measure and manage this metric using forecasts from both normal and adverse conditions. Under adverse conditions, we measure how long the Parent Company can meet its capital and debt service obligations after experiencing material attrition of short-term unsecured funding and without the support of dividends from the Bank or access to the capital markets. In accordance with these risk limits established by ALCO and the Board, we manage the Parent Company’s liquidity by structuring its net maturity schedule to minimize the amount of debt maturing within a short period of time. A majority of the Parent Company’s liabilities are long-term in nature, coming from the proceeds of issuances of our capital securities and long-term senior and subordinated notes. See the "Borrowings" section of this MD&A, as well as Note 11, “Borrowings and Contractual Commitments,” to the Consolidated Financial Statements in our 2016 Annual Report on Form 10-K for further information regarding our debt.

We manage the Parent Company to maintain most of its liquid assets in cash and securities that it can quickly convert into cash. Unlike the Bank, it is not typical for the Parent Company to maintain a material investment portfolio of publicly traded securities. We manage the Parent Company cash balance to provide sufficient liquidity to fund all forecasted obligations (primarily debt and capital service) for an extended period of months in accordance with our risk limits.

The primary uses of Parent Company liquidity include debt service, dividends on capital instruments, the periodic purchase

of investment securities, loans to our subsidiaries, and common share repurchases. See further details of the authorized common share repurchases in the ~~"Capital Resources"~~“Capital Resources” section of this MD&A and in Part II, Item 2, ~~"Unregistered Sales of Equity Securities and Use of Proceeds"~~ in this Form 10-Q. We fund corporate dividends with Parent Company cash, the primary sources of which are dividends from our banking subsidiary and proceeds from the issuance of debt and

capital securities. We are subject to both state and federal banking regulations that limit our ability to pay common stock dividends in certain circumstances.

Recent Developments. In October 2018, the Bank issued $500 million of 7-year fixed rate senior notes, $600 million of 3-year fixed-to-floating rate senior notes, and $300 million of 3-year floating rate senior notes under our Global Bank Note program. Similar to our debt issuances in the first nine months of 2018, these issuances allowed us to supplement our funding sources and pay down other borrowings. See Table 10 in “Borrowings” for additional details regarding debt issuances we completed subsequent to September 30, 2018.

Other Liquidity Considerations. As presented in Table 17, we had an aggregate potential obligation of ~~$87.0~~$92.5 billion to our clients in unused lines of credit at September 30, ~~2017.~~2018. Commitments to extend credit are arrangements to lend to clients who have complied with predetermined contractual obligations. We also had ~~$2.9~~$3.2 billion in letters of credit outstanding at September 30, ~~2017,~~2018, most of which are standby letters of credit, which require that we provide funding if certain future events occur. Approximately ~~$263~~$196 million of these letters ~~supported~~were available to support variable rate demand obligations at September 30, ~~2017.~~2018. Unused commercial lines of credit ~~have decreased~~increased since December 31, ~~2016,~~2017, driven by ~~revolver utilization.~~an increase in commercial line of credit commitments during the nine months ended September 30, 2018. Residential mortgage commitments also ~~decreased~~increased since December 31, ~~2016, due primarily to~~2017, driven by the ~~decrease~~increase in IRLC volume outpacing the ~~decrease~~increase in closed loan volume during the ~~first~~ nine months ~~of 2017.~~ended September 30, 2018. Additionally, unused CRE lines of credit ~~decreased~~increased since December 31, ~~2016,~~2017, driven primarily by ~~increased utilization~~an increase in CRE line of ~~existing CRE lines of credit.~~credit commitments during the nine months ended September 30, 2018.


Unfunded Lending Commitments	Unfunded Lending Commitments						Table 17		Unfunded Lending Commitments						Table 17
	As of				Average for the Three Months Ended				As of				Average for��the Three Months Ended
(Dollars in millions)	September 30, 2017		December 31, 2016		September 30, 2017		September 30, 2016		September 30, 2018		December 31, 2017		September 30, 2018		September 30, 2017
Unused lines of credit:
Commercial		$58,616		$59,803		$57,807		$57,175		$63,400		$59,625		$62,728		$57,807
Residential mortgage commitments ¹	4,076		4,240		4,268		7,222		3,777		3,036		3,810		4,268
Home equity lines	10,116		10,336		10,159		10,420		10,200		10,086		10,165		10,159
CRE ²	3,786		4,468		3,953		4,485		4,534		4,139		4,263		3,953
Credit card	10,442		9,798		10,338		9,495		10,601		10,533		10,602		10,338
Total unused lines of credit		$87,036		$88,645		$86,525		$88,797		$92,512		$87,419		$91,568		$86,525

Letters of credit:
Financial standby		$2,813		$2,777		$2,722		$2,662		$3,041		$2,453		$2,912		$2,722
Performance standby	117		130		121		129		101		125		101		121
Commercial	17		19		14		17		37		14		34		14
Total letters of credit		$2,947		$2,926		$2,857		$2,808		$3,179		$2,592		$3,047		$2,857

¹Includes residential mortgage IRLCs with notional balances of ~~$2.3~~$1.6 billion and ~~$2.6~~$1.7 billion at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

²Includes commercial mortgage IRLCs and other commitments with notional balances of ~~$282~~$262 million and ~~$395~~$240 million at September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

Other Market Risk

Except as discussed below, there have been no other significant changes to other market risk as described in our ~~2016~~2017 Annual Report on Form 10-K.

We measure our residential MSRs at fair value on a recurring basis and hedge the risk associated with changes in fair value. Residential MSRs totaled ~~$1.6~~$2.1 billion and $1.7 billion at ~~both~~ September 30, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively, and are managed and monitored as part of a comprehensive risk governance process, which includes established risk limits.

We originated residential MSRs with fair values at the time of origination of $100 million and $250 million during the three and nine months ended September 30, 2018 and $90 million and $252 million during the three and nine months ended September 30, 2017, ~~and $88 million and $198 million during the three and nine months ended September 30, 2016,~~ respectively. Additionally, we purchased residential MSRs with a fair value of approximately ~~$27~~$14 million and ~~$104~~$89 million during the three and nine months ended September 30, ~~2016.~~2018, respectively. No residential MSRs were purchased during the three and nine months ended September 30, 2017.

We recognized a mark-to-market ~~decreases~~decrease in the fair value of our residential MSRs of $10 million and an increase of $15 million during the ~~residential MSR portfolio~~three and nine months ended September 30, 2018 and decreases of $70 million and $195 million during the three and nine months ended September 30, 2017, ~~respectively. During the three and nine months ended September 30, 2016, we recognized mark-to-market decreases of $56 million and $488 million,~~ respectively. Changes in fair value include the decay resulting from the realization of monthly net servicing cash flows. We recognized net losses related to residential MSRs, inclusive of fair value changes and related hedges, of $64 million and $184 million for the three and nine months ended September 30, 2018 and $54 million and $153 million for the three and nine months ended September 30, 2017, ~~and $44 million and $107 million for the three and nine months ended September 30, 2016,~~ respectively. Compared to the prior year periods, the increase in net losses related to residential MSRs was primarily driven by higher decay combined with ~~a decrease in~~lower net hedge performance in the current periods. Higher decay was driven by an increase in residential MSR asset value as well as an increase in the size of the servicing portfolio, offset partially

by a decrease in payoff volume. All other servicing rights, which include commercial mortgage and consumer indirect loan servicing

rights, are not measured at fair value on a recurring basis, and therefore, are not subject to the same market risks associated with residential MSRs.

OFF-BALANCE SHEET ARRANGEMENTS

In the ordinary course of business we engage in certain activities that are not reflected in our Consolidated Balance Sheets, generally referred to as "off-balance sheet arrangements." These activities involve transactions with unconsolidated VIEs as well as other arrangements, such as commitments and guarantees, to meet the financing needs of our ~~customers~~clients and to support ongoing operations. Additional information regarding these types of activities is included in the "Liquidity Risk Management" section of this MD&A, Note 8,10, "Certain Transfers of Financial Assets and Variable Interest Entities," and Note ~~12,~~14, "Guarantees," to the Consolidated Financial Statements in this Form 10-Q, as well as in our ~~2016~~2017 Annual Report on Form 10-K.

Contractual Obligations

In the normal course of business, we enter into certain contractual obligations, including obligations to make future payments on our borrowings, partnership investments, and lease arrangements, as well as commitments to lend to clients and to fund capital expenditures and service contracts.

Except for changes in unfunded lending commitments (presented in Table 17 within the "Liquidity Risk Management"

section of this MD&A), borrowings (presented in the "Borrowings" section of this MD&A), and pension and other postretirement benefit plans (disclosed in Note ~~11,~~13, "Employee Benefit Plans," to the Consolidated Financial Statements in this Form 10-Q), there have been no material changes in our contractual obligations from those disclosed in our ~~2016~~2017 Annual Report on Form 10-K.

BUSINESS SEGMENTS

See Note ~~16,~~18, "Business Segment Reporting," to the Consolidated Financial Statements in this Form 10-Q for a description of our business segments, basis of presentation, internal management ~~reporting methodologies, and business segment structure~~

~~realignment from three segments to two segments in the second quarter of 2017.~~reporting methodologies, and additional information. Table 18 presents net income for our reportable business segments:


Net Income by Business Segment										Table 18												Table 18

	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended September 30						Nine Months Ended September 30
(Dollars in millions)	2017			2016			2017			2016			2018			2017 ^{1, 2}			2018			2017 ^{1, 2}
Consumer		$241			$258			$651			$762			$381			$264			$1,081			$698
Wholesale	359			252			967			684			372			341			1,120			917

Corporate Other	(22		)	26			37			133			50			(17		)	49			60
Reconciling Items ¹	(40		)	(62		)	(122		)	(166		)
Reconciling Items ³													(51		)	(50		)	(133		)	(142		)
Total Corporate Other	(62		)	(36		)	(85		)	(33		)	(1		)	(67		)	(84		)	(82		)
Consolidated Net Income		$538			$474			$1,533			$1,413			$752			$538			$2,117			$1,533


¹	During the second quarter of 2018, certain business banking clients were transferred from the Wholesale business segment to the Consumer business segment. For all periods prior to the second quarter of 2018, the corresponding financial results have been transferred to the Consumer business segment for comparability purposes.


²	During the fourth quarter of 2017, we sold PAC, the results of which were previously reported within the Wholesale business segment. For all periods prior to January 1, 2018, PAC's financial results, including the gain on sale, have been transferred to Corporate Other for enhanced comparability of the Wholesale business segment excluding PAC.


³	Reflects differences between net income reported for each business segment using management accounting practices and U.S. GAAP. Prior period information has been restated to reflect changes in internal reporting methodology. See additional information in Note 18, "Business Segment Reporting," to the Consolidated Financial Statements in this Form 10-Q.

¹ Includes differences between net income reported for each business segment using management accounting practices and U.S. GAAP. Prior period information has been restated to reflect changes in internal reporting methodology. See additional information in Note 16, "Business Segment Reporting," to the Consolidated Financial Statements in this Form 10-Q.

Table 19 presents average ~~loans~~LHFI and average deposits for our reportable business segments:


Average Loans and Deposits by Business Segment							Table 19
Average LHFI and Deposits by Business Segment									Average LHFI and Deposits by Business Segment							Table 19

	Three Months Ended September 30								Three Months Ended September 30
	Average Loans				Average Consumer and Commercial Deposits				Average LHFI				Average Consumer and Commercial Deposits
(Dollars in millions)	2017		2016		2017		2016		2018		2017 ^{1, 2}		2018			2017 ^{1, 2}
Consumer		$73,378		$70,560		$103,066		$99,730		$75,414		$74,742		$111,930			$109,774
Wholesale	71,255		71,625		56,211		55,489		70,485		68,568		47,773			49,515
Corporate Other	73		72		142		94		96		1,396		(355		)	130


	Nine Months Ended September 30								Nine Months Ended September 30
	Average Loans				Average Consumer and Commercial Deposits				Average LHFI				Average Consumer and Commercial Deposits
(Dollars in millions)	2017		2016		2017		2016		2018		2017 ^{1, 2}		2018			2017 ^{1, 2}
Consumer		$72,200		$69,075		$102,686		$98,751		$75,122		$73,613		$111,025			$109,301
Wholesale	72,005		71,489		56,326		54,099		69,155		69,303		48,259			49,724
Corporate Other	71		64		133		61		91		1,360		(125		)	120

BUSINESS SEGMENT RESULTS

Nine Months Ended September 30, ~~2017~~2018 versus Nine Months Ended September 30, ~~2016~~2017

Consumer

Consumer reported net income of ~~$651 million~~$1.1 billion for the nine months ended September 30, ~~2017, a decrease~~2018, an increase of ~~$111~~$383 million, or ~~15%~~55%, compared to the same period in ~~2016.~~2017. The ~~decrease~~increase was driven primarily by higher ~~provision~~net interest income and lower provisions for credit losses and ~~lower mortgage production related~~ income taxes, offset partially by lower noninterest income and higher ~~net interest income.~~noninterest expense.

Net interest income was ~~$2.7~~$3.1 billion, an increase of ~~$170~~$229 million, or 7%8%, compared to the same period in ~~2016,~~2017, driven by ~~growth in average loan and~~improved spreads on deposit ~~balances as well as improved deposit spreads.~~balances. Net interest income related to deposits increased ~~$138~~$235 million, or ~~10%~~14%, driven by ~~an 11~~a 25 basis point increase in deposit ~~spread~~spreads and a ~~$3.9~~$1.7 billion, or 4%2%, increase in average deposit balances. Net interest income related to LHFI increased ~~$45~~$8 million, or 4%1%, driven primarily by ~~growth~~a $1.5 billion, or 2%, increase in average LHFI balances, offset partially by a three basis point decrease in loan ~~balances.~~spreads. Consumer loan growth was driven by increases in residential mortgages, consumer direct, indirect, and guaranteed student loans, offset partially by declines in home equity products.

Provision for credit losses was ~~$299~~$101 million, ~~an increase~~a decrease of $209 million, ~~compared to the same period in 2016 as a result of higher net charge-offs and increased hurricane-related reserves during the third quarter of 2017.~~

~~Total noninterest income was $1.4 billion, a decrease of $167 million,~~ or ~~11%~~67%, compared to the same period in ~~2016.~~2017. The decrease was driven by lower net charge-offs, improved credit quality, and the release of hurricane-related ALLL reserves.

Total noninterest income was $1.3 billion, a decrease of $78 million, or 5%, compared to the same period in 2017. The decrease was driven primarily by lower ~~mortgage-related~~mortgage related income and lower client transaction-related fee income (which includes service charges on ~~deposits~~deposit accounts, other charges and fees, and card fees), offset partially by increases in retail investment services and other noninterest income. The decline in client transaction-related fee income was due primarily to the ~~enhanced posting order~~impact of our adoption of the revenue recognition accounting standard on January 1, 2018 and by a change in our process ~~instituted during~~for recognizing card rewards expenses, which resulted in four months of rewards expenses being recognized in card fee income in the ~~fourth~~third quarter of ~~2016.~~2018.

Total noninterest expense was ~~$2.8~~$3.0 billion, ~~a decrease~~an increase of $7$56 million, or 2%, compared to the same period in ~~2016.~~2017. The ~~decrease~~increase was driven primarily by higher outside processing and software costs due to ~~lower staff expense, lower outside processing costs,~~ investments in technology and ~~accrual reversals related to~~favorable developments with certain legal matters in the ~~favorable resolution~~third quarter of ~~previous legal matters,~~2017, offset partially by ~~increased expenses associated with corporate support and technology, occupancy and branch network-related activities, and marketing investments.~~revenue recognition accounting impacts in the current period.

Wholesale

Wholesale reported net income of ~~$967 million~~$1.1 billion for the nine months ended September 30, ~~2017,~~2018, an increase of ~~$283~~$203 million, or ~~41%~~22%, compared to the same period in ~~2016.~~2017. The ~~year-over-year~~ increase was ~~attributable~~due to higher net interest income ~~noninterest income,~~ and lower provision for ~~credit losses,~~income taxes, offset partially by lower noninterest income and higher noninterest ~~expense associated with revenue growth and the acquisition of~~ ~~Pillar~~.expense.

Net interest income was ~~$1.8~~$1.7 billion, an increase of ~~$184~~$73 million, or ~~12%~~5%, compared to the same period in ~~2016,~~2017, driven primarily by ~~growth in average deposit balances as well as~~ improved deposit ~~spreads.~~and equity spreads, offset partially by declines in loan and deposit volume. Net interest income related to deposits increased ~~$112~~$84 million, or ~~19%~~15%, ~~driven~~as a

result of improved spreads, offset partially by ~~a 21 basis point increase in~~decreased deposit ~~spreads.~~volumes. Average deposit balances ~~grew $2.2~~decreased $1.5 billion, or 4%3%, ~~driven primarily by an increase in interest-bearing~~

~~commercial DDA and business CD balances, offset partially by declines~~as a result of decreases in money market accounts and ~~noninterest-bearing~~non-interest-bearing commercial ~~DDAs.~~DDAs, offset partially by increases in interest-bearing commercial DDAs and business CD products. Net interest income related to LHFI ~~increased $54~~decreased $44 million, or 6%5%, as ~~average LHFI grew $516~~a result of lower tax exempt loan and lease spreads, which were specifically impacted by the 2017 Tax Act. Net interest income related to equity increased $40 million, or ~~1%. Growth in loan-related net interest income was~~32%, due to ~~improved spreads on C&I loans~~higher equity balances and ~~growth in CRE loan balances.~~spreads.

Provision for credit losses was ~~$31~~$19 million, stable compared to the same period in 2017.

Total noninterest income was $1.1 billion, a decrease of ~~$222~~$45 million, or ~~88%~~4%, compared to the same period in ~~2016.~~2017. The decrease was ~~due primarily to~~driven largely by lower ~~energy-related net charge-offs.~~investment banking income, which decreased $32 million, or 7%, as a result of lower syndication and high yield bond fees. The gross-up of tax credits decreased $21 million, or 17%, driven by the lower effective tax rate for the nine months ended September 30, 2018. Commercial credit related income was down $10 million, or 4%, as a result of lower bridge commitment fees and service charges, which were down $5 million, or 4%. These decreases were offset partially by $30 million of remeasurement gains on an equity investment following our adoption of the recognition and measurement of financial assets accounting standard on January 1, 2018 and a $4 million, or 3%, increase in trading income resulting from higher client-related derivative activity.

Total noninterest ~~income~~expense was ~~$1.2~~$1.3 billion, an increase of ~~$198~~$23 million, or ~~20%~~2%, compared to the same period in 2016. The year-over-year increase was driven primarily by higher investment banking income, which increased $108 million, or 29%, with broad-based growth across several products and services, particularly in mergers and acquisitions advisory, syndicated finance, bonds and equity origination. Additionally, ~~Pillar~~ ~~contributed $52 million of fee income on a year-over-year basis with the remainder of the increase attributable to structured lease gains and card fees.~~

~~Total noninterest expense was $1.4 billion, an increase of $156 million, or 13%, compared to the same period in 2016.~~2017. The increase was due ~~primarily~~ to ~~Pillar-related~~higher investment banking transaction expenses related to the impact of our adoption of the revenue recognition accounting standard on January 1, 2018, higher ~~compensation associated with improved business performance, ongoing investment in technology,~~functional support expense, and higher amortization expense ~~related to increased~~associated with STCC ~~community development investments.~~tax credit investments, offset partially by lower headcount and incentive related compensation.

Corporate Other

Corporate Other net income was ~~$37~~$49 million for the nine months ended September 30, ~~2017,~~2018, a decrease of ~~$96~~$11 million, or ~~72%~~18%, compared to the same period in ~~2016.~~2017. The decrease in net income was due primarily to lower net interest income.

Net interest income was a net expense of ~~$15~~$118 million, a decrease of ~~$100~~$149 million compared to the same period in ~~2016.~~2017. The decrease was driven by lower commercial ~~loan swap-related~~loan-related swap income due to higher ~~LIBOR~~benchmark interest rates. Average long-term debt remained stable and average short-term borrowings increased ~~$527~~$316 million, or 6%15%, ~~compared to the same period in 2016,~~ driven by balance sheet management activities.

Total noninterest income was ~~$59~~$50 million, a decrease of ~~$53~~$9 million, or ~~47%~~15%, compared to the same period in ~~2016.~~2017. The decrease was ~~due to~~driven primarily by a decline in capital markets related income, which decreased $15 million, or 82%, offset partially by a mark-to-market net gain of $9 million recognized on an equity investment for the ~~sale-leaseback of one of our office buildings in the second quarter of 2016.~~nine months ended September 30, 2018.

Total noninterest expense was ~~$26~~a benefit of $95 million ~~an increase of $23~~for the nine months ended September 30, 2018. The benefit increased $129 million compared to the same period in ~~2016. The increase was~~2017 due primarily to higher ~~severance costs.~~recoveries of internal expense allocations during the current period.


Selected Financial Data and Reconcilement of Non-U.S. GAAP Measures	Selected Financial Data and Reconcilement of Non-U.S. GAAP Measures									Table 20			Selected Financial Data and Reconcilement of Non-U.S. GAAP Measures									Table 20
(Dollars in millions and shares in thousands, except per share data)
	Three Months Ended September 30						Nine Months Ended September 30						Three Months Ended September 30						Nine Months Ended September 30
Selected Financial Data	2017			2016			2017			2016			2018			2017			2018			2017
Summary of Operations:
Interest income		$1,635			$1,451			$4,747			$4,285			$1,834			$1,635			$5,261			$4,747
Interest expense	205			143			548			408			322			205			821			548
Net interest income	1,430			1,308			4,199			3,877			1,512			1,430			4,440			4,199
Provision for credit losses	120			97			330			343			61			120			121			330
Net interest income after provision for credit losses	1,310			1,211			3,869			3,534			1,451			1,310			4,319			3,869
Noninterest income	846			889			2,520			2,569			782			846			2,408			2,520
Noninterest expense	1,391			1,409			4,243			4,072			1,384			1,391			4,191			4,243
Income before provision for income taxes	765			691			2,146			2,031			849			765			2,536			2,146
Provision for income taxes	225			215			606			611			95			225			412			606
Net income attributable to noncontrolling interest	2			2			7			7			2			2			7			7
Net income		$538			$474			$1,533			$1,413			$752			$538			$2,117			$1,533
Net income available to common shareholders		$512			$457			$1,468			$1,363			$726			$512			$2,036			$1,468
Net interest income-FTE ¹		$1,467			$1,342			$4,306			$3,982			$1,534			$1,467			$4,505			$4,306
Total revenue	2,276			2,197			6,719			6,446			2,294			2,276			6,848			6,719
Total revenue-FTE ¹	2,313			2,231			6,826			6,551			2,316			2,313			6,913			6,826
Net income per average common share:
Diluted		$1.06			$0.91			$3.00			$2.70			$1.56			$1.06			$4.34			$3.00
Basic	1.07			0.92			3.04			2.72			1.58			1.07			4.38			3.04
Dividends paid per average common share	0.40			0.26			0.92			0.74
Dividends declared per common share													0.50			0.40			1.30			0.92
Book value per common share							47.16			46.63									48.00			47.16
Tangible book value per common share ²							34.34			34.33									34.51			34.34
Market capitalization							28,451			21,722									30,632			28,451
Market price per common share:
Market price per common share (NYSE trading symbol “STI”):
High		$60.04			$44.61			$61.69			$44.61			$75.08			$60.04			$75.08			$61.69
Low	51.96			38.75			51.96			31.07			65.82			51.96			64.32			51.96
Close	59.77			43.80			59.77			43.80			66.79			59.77			66.79			59.77
Selected Average Balances:
Total assets		$205,738			$201,476			$204,833			$197,613			$207,395			$205,738			$205,370			$204,833
Earning assets	184,861			180,523			184,180			177,600			186,344			184,861			184,607			184,180
LHFI	144,706			142,257			144,276			140,628			145,995			144,706			144,368			144,276
Consumer and commercial deposits	159,419			155,313			159,145			152,911
Intangible assets including residential MSRs	8,009			7,415			8,019			7,509			8,396			8,009			8,332			8,019
Residential MSRs	1,589			1,065			1,599			1,157			1,987			1,589			1,922			1,599
Consumer and commercial deposits													159,348			159,419			159,159			159,145
Preferred stock	1,975			1,225			1,643			1,225			2,025			1,975			2,145			1,643
Total shareholders’ equity	24,573			24,410			24,131			24,076			24,275			24,573			24,324			24,131
Average common shares - diluted	483,640			500,885			489,176			505,619			464,164			483,640			469,006			489,176
Average common shares - basic	478,258			496,304			483,711			501,036			460,252			478,258			464,804			483,711
Financial Ratios (Annualized):
ROA	1.04		%	0.94		%	1.00		%	0.96		%	1.44		%	1.04		%	1.38		%	1.00		%
ROE	9.03			7.89			8.77			8.01			13.01			9.03			12.33			8.77
ROTCE ³	12.45			10.73			12.09			10.96			18.06			12.45			17.14			12.09
Net interest margin	3.07			2.88			3.05			2.92			3.22			3.07			3.22			3.05
Net interest margin-FTE ¹	3.15			2.96			3.13			2.99			3.27			3.15			3.26			3.13
Efficiency ratio ⁴	61.12			64.13			63.16			63.17			60.34			61.12			61.20			63.16
Efficiency ratio-FTE ^{1, 4}	60.14			63.14			62.17			62.16			59.76			60.14			60.62			62.17
Tangible efficiency ratio-FTE ^{1, 4, 5}	59.21			62.54			61.44			61.63			58.94			59.21			59.89			61.44
Total average shareholders’ equity to total average assets	11.94			12.12			11.78			12.18			11.71			11.94			11.84			11.78
Tangible common equity to tangible assets ⁶							8.10			8.57									7.72			8.10
Common dividend payout ratio							37.2			28.2									31.6			37.2


Selected Financial Data and Reconcilement of Non-U.S. GAAP Measures (continued)	Selected Financial Data and Reconcilement of Non-U.S. GAAP Measures (continued)					Selected Financial Data and Reconcilement of Non-U.S. GAAP Measures (continued)

Selected Financial Data (continued)		Nine Months Ended September 30					Nine Months Ended September 30
Capital Ratios at period end ⁷:		2017		2016			2018		2017
CET1		9.62	%	9.78	%		9.60	%	9.62	%
CET1 - fully phased-in		9.48		9.66
Tier 1 capital		10.74		10.50			10.72		10.74
Total capital		12.69		12.57			12.47		12.69
Leverage		9.50		9.28			9.66		9.50

Evaluation of Disclosure Controls and Procedures

The ~~Company~~Company's management conducted an evaluation, under the supervision and with the participation of its CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) at September 30, ~~2017.~~2018. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to the Company’s management, including its CEO and CFO, as

appropriate, to allow timely decisions regarding required disclosure. Based upon the evaluation, the CEO and CFO

concluded that the Company’s disclosure controls and procedures were effective at September 30, ~~2017.~~2018.

Changes in Internal Control over Financial Reporting

Effective January 1, 2018, the Company adopted several new accounting standards and implemented relevant changes to its control activities and processes to monitor and maintain appropriate internal controls over financial reporting. There ~~have been~~were no other changes to the Company’s internal control over financial reporting during the nine months ended September 30, ~~2017~~2018 that ~~have~~ materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. Refer to the Company's ~~2016~~2017 Annual Report on Form 10-K for additional information.

On June 28, ~~2017,~~2018, the Company announced that the Federal Reserve had no objections to the repurchase of up to ~~$1.32~~$2.0 billion of the Company's outstanding common stock to be completed between July 1, ~~2017~~2018 and June 30, ~~2018,~~2019, as part of the Company's ~~2017~~2018 capital plan submitted in connection with the ~~2017~~2018 CCAR. During the third quarter of ~~2017,~~2018, the Company repurchased ~~$330~~$500 million of its outstanding common stock at market value as part of this publicly announced ~~2017~~2018 capital plan. At September 30, ~~2017,~~2018, the Company had ~~$990 million~~$1.5 billion of remaining common stock repurchase capacity available under its ~~2017~~2018 capital plan (reflected in the table above).

At September 30, ~~2017, 7.1 million~~2018, a total of 387,950 Series A and B warrants to purchase the Company's common stock remained outstanding. The Series A and B warrants have expiration dates of December 31, 2018 and November 14, 2018, respectively.

In the first quarter of 2018, the Company redeemed all 4,500 issued and outstanding shares of its Series E Preferred Stock in accordance with the terms of the Series E Preferred Stock. The Company did not repurchase any shares of its Series A Preferred Stock, ~~Depositary Shares,~~ Series B Preferred Stock, Series ~~E Preferred Stock Depositary Shares, Series~~ F Preferred Stock, ~~Depositary Shares, or~~ Series G Preferred Stock, ~~Depositary Shares~~or Series H Preferred Stock during the ~~third quarter~~first nine months of ~~2017,~~2018, and at September 30, 2018, there was no unused Board authority to repurchase any shares of Series A Preferred Stock, ~~Depositary Shares,~~ Series B Preferred Stock, Series ~~E Preferred Stock Depositary Shares, Series~~ F Preferred Stock, ~~Depositary Shares, or the~~ Series G Preferred Stock, ~~Depositary Shares.~~or Series H Preferred Stock.

Refer to the Company's ~~2016~~2017 Annual Report on Form 10-K for additional information regarding the Company's equity securities.



Georgia		58-1575035
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)



Large accelerated filer	þ	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨
		Emerging growth company	¨



		Page
GLOSSARY OF DEFINED TERMS		i

PART I - FINANCIAL INFORMATION		1

Item 11..	Financial Statements (Unaudited)	2
	Consolidated Statements of Income	2
	Consolidated Statements of Comprehensive Income	3
	Consolidated Balance Sheets	4
	Consolidated Statements of Shareholders’ Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements (Unaudited)	7
	Note 1 - Significant Accounting Policies	7
	Note 2 - ~~Federal Funds Sold and Securities Financing Activities~~	9
	~~Note 3 - Trading Assets and Liabilities and Derivative Instruments~~	11
	~~Note 4 - Securities Available for Sale~~Revenue Recognition	12
	Note 53 - ~~Loans~~Federal Funds Sold and Securities Financing Activities	1617
	Note 4 - Trading Assets and Liabilities and Derivative Instruments	18
	Note 5 - Investment Securities	19
	Note 6 - ~~Allowance for Credit Losses~~Loans	2423
	Note 7 - ~~Goodwill and Other Intangible Assets~~Allowance for Credit Losses	2531
	Note 8 - Goodwill and Other Intangible Assets	32
	Note 9 - Other Assets	35
	Note 10 - Certain Transfers of Financial Assets and Variable Interest Entities	28
	~~Note 9 - Net Income Per Common Share~~	31
	~~Note 10 - Income Taxes~~	3236
	Note 11 - ~~Employee Benefit Plans~~Net Income Per Common Share	3239
	Note 12 - ~~Guarantees~~Income Taxes	3339
	Note 13 - ~~Derivative Financial Instruments~~Employee Benefit Plans	3540
	Note 14 - ~~Fair Value Election and Measurement~~Guarantees	4441
	Note 15 - ~~Contingencies~~Derivative Financial Instruments	5943
	Note 16 - ~~Business Segment Reporting~~Fair Value Election and Measurement	6251
	Note 17 - Contingencies	65
	Note 18 - Business Segment Reporting	67
	Note 19 - Accumulated Other Comprehensive ~~(Loss)/Income~~Loss	6671

Item 22..	Management's Discussion and Analysis of Financial Condition and Results of Operation	6873
Item 33..	Quantitative and Qualitative Disclosures About Market Risk	~~103~~105
Item 44..	Controls and Procedures	~~103~~105

PART II - OTHER INFORMATION		~~104~~105

Item 11..	Legal Proceedings	~~104~~105
Item 1A1A..	Risk Factors	~~104~~105
Item 22..	Unregistered Sales of Equity Securities and Use of Proceeds	~~106~~107
Item 33..	Defaults Upon Senior Securities	~~107~~108
Item 44..	Mine Safety Disclosures	~~107~~108
Item 55..	Other Information	~~107~~108
Item 66..	Exhibits	~~107~~108

SIGNATURE		~~108~~109


	September 30,			December 31,
(Dollars in millions and shares in thousands, except per share data)	2017			2016			September 30, 2018			December 31, 2017
Assets	(Unaudited)						(Unaudited)
Cash and due from banks		$7,071			$5,091			$6,206			$5,349
Federal funds sold and securities borrowed or purchased under agreements to resell	1,182			1,307			1,374			1,538
Interest-bearing deposits in other banks	25			25			25			25
Cash and cash equivalents	8,278			6,423			7,605			6,912
Trading assets and derivative instruments ¹	6,318			6,067			5,676			5,093
Securities available for sale ²	31,444			30,672
Loans held for sale ($2,252 and $3,540 at fair value at September 30, 2017 and December 31, 2016, respectively)	2,835			4,169
Loans ³ ($206 and $222 at fair value at September 30, 2017 and December 31, 2016, respectively)	144,264			143,298
Securities available for sale ^{2, 3}							30,984			30,947
Loans held for sale ($1,822 and $1,577 at fair value at September 30, 2018 and December 31, 2017, respectively)							1,961			2,290
Loans held for investment ⁴ ($168 and $196 at fair value at September 30, 2018 and December 31, 2017, respectively)							147,215			143,181
Allowance for loan and lease losses	(1,772		)	(1,709		)	(1,623		)	(1,735		)
Net loans	142,492			141,589
Net loans held for investment							145,592			141,446
Premises and equipment, net	1,616			1,556			1,555			1,734
Goodwill	6,338			6,337			6,331			6,331
Other intangible assets (Residential MSRs at fair value: $1,628 and $1,572 at September 30, 2017 and December 31, 2016, respectively)	1,706			1,657
Other assets	7,225			6,405
Other intangible assets (Residential MSRs at fair value: $2,062 and $1,710 at September 30, 2018 and December 31, 2017, respectively)							2,140			1,791
Other assets ³($92 and $56 at fair value at September 30, 2018 and December 31, 2017, respectively)							9,432			9,418
Total assets		$208,252			$204,875			$211,276			$205,962

Liabilities
Noninterest-bearing deposits		$43,984			$43,431			$41,870			$42,784
Interest-bearing deposits (CDs at fair value: $207 and $78 at September 30, 2017 and December 31, 2016, respectively)	118,753			116,967
Interest-bearing deposits ($384 and $236 at fair value at September 30, 2018 and December 31, 2017, respectively)							118,508			117,996
Total deposits	162,737			160,398			160,378			160,780
Funds purchased	3,118			2,116			3,354			2,561
Securities sold under agreements to repurchase	1,422			1,633			1,730			1,503
Other short-term borrowings	909			1,015			2,856			717
Long-term debt ⁴ ($758 and $963 at fair value at September 30, 2017 and December 31, 2016, respectively)	11,280			11,748
Long-term debt ⁵ ($235 and $530 at fair value at September 30, 2018 and December 31, 2017, respectively)							14,289			9,785
Trading liabilities and derivative instruments	1,284			1,351			1,863			1,283
Other liabilities	2,980			2,996			2,667			4,179
Total liabilities	183,730			181,257			187,137			180,808
Shareholders’ Equity
Preferred stock, no par value	1,975			1,225			2,025			2,475
Common stock, $1.00 par value	550			550			553			550
Additional paid-in capital	8,985			9,010			9,001			9,000
Retained earnings	17,021			16,000			19,111			17,540
Treasury stock, at cost, and other ⁵	(3,274		)	(2,346		)
Treasury stock, at cost, and other ⁶							(4,677		)	(3,591		)
Accumulated other comprehensive loss, net of tax	(735		)	(821		)	(1,874		)	(820		)
Total shareholders’ equity	24,522			23,618			24,139			25,154
Total liabilities and shareholders’ equity		$208,252			$204,875			$211,276			$205,962

Common shares outstanding ⁶	476,001			491,188
Common shares outstanding ⁷							458,626			470,931
Common shares authorized	750,000			750,000			750,000			750,000
Preferred shares outstanding	20			12			20			25
Preferred shares authorized	50,000			50,000			50,000			50,000
Treasury shares of common stock	74,053			58,738			94,038			79,133

¹ Includes trading securities pledged as collateral where counterparties have the right to sell or repledge the collateral		$1,043			$1,437			$1,362			$1,086
² Includes securities AFS pledged as collateral where counterparties have the right to sell or repledge the collateral	280			—			164			223
³ Includes loans of consolidated VIEs	186			211
⁴ Includes debt of consolidated VIEs	195			222
⁵ Includes noncontrolling interest	101			103
⁶ Includes restricted shares	9			11
³ Beginning January 1, 2018, the Company reclassified equity securities previously presented in Securities available for sale to Other assets. Reclassifications have been made to previously reported amounts for comparability.
⁴ Includes loans held for investment of consolidated VIEs							159			179
⁵ Includes debt of consolidated VIEs							168			189
⁶ Includes noncontrolling interest							101			103
⁷ Includes restricted shares							7			9

SunTrust Banks, Inc. Consolidated Statements of Cash Flows	SunTrust Banks, Inc. Consolidated Statements of Cash Flows						SunTrust Banks, Inc. Consolidated Statements of Cash Flows

	Nine Months Ended September 30						Nine Months Ended September 30
(Dollars in millions) (Unaudited)	2017			2016			2018			2017
Cash Flows from Operating Activities
Cash Flows from Operating Activities:
Net income including income attributable to noncontrolling interest		$1,540			$1,420			$2,124			$1,540
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion	540			533			535			540
Origination of servicing rights	(262		)	(198		)	(260		)	(262		)
Provisions for credit losses and foreclosed property	336			347			130			336
Stock-based compensation	121			85			118			121
Net securities gains	(1		)	(4		)	(1		)	(1		)
Net gain on sale of loans held for sale, loans, and other assets	(183		)	(376		)
Net decrease/(increase) in loans held for sale	1,488			(1,647		)
Net increase in trading assets	(272		)	(704		)
Net increase in other assets	(950		)	(193		)
Net (decrease)/increase in other liabilities	(267		)	155
Net cash provided by/(used in) operating activities	2,090			(582		)
Cash Flows from Investing Activities
Net gains on sale of loans held for sale, loans, and other assets							(83		)	(183		)
Net decrease in loans held for sale							382			1,488
Net increase in trading assets and derivative instruments							(818		)	(272		)
Net increase in other assets ¹							(1,713		)	(835		)
Net increase/(decrease) in other liabilities							478			(267		)
Net cash provided by operating activities							892			2,205
Cash Flows from Investing Activities:
Proceeds from maturities, calls, and paydowns of securities available for sale	3,169			3,763			2,840			3,169
Proceeds from sales of securities available for sale	1,486			197			2,047			1,486
Purchases of securities available for sale	(5,344		)	(5,297		)	(5,534		)	(5,344		)
Net increase in loans, including purchases of loans	(1,839		)	(7,007		)	(4,566		)	(1,839		)
Proceeds from sales of loans	520			1,482
Purchases of servicing rights	—			(101		)
Proceeds from sales of loans and leases							199			520
Net cash paid for servicing rights							(73		)	—
Payments for bank-owned life insurance policy premiums ¹							(201		)	(127		)
Proceeds from the settlement of bank-owned life insurance ¹							8			3
Capital expenditures	(233		)	(188		)	(170		)	(233		)
Payments related to acquisitions, including contingent consideration, net of cash acquired	—			(23		)
Proceeds from the sale of other real estate owned and other assets	183			171			148			183
Other investing activities ¹							1			9
Net cash used in investing activities	(2,058		)	(7,003		)	(5,301		)	(2,173		)
Cash Flows from Financing Activities
Net increase in total deposits	2,339			9,012
Cash Flows from Financing Activities:
Net (decrease)/increase in total deposits							(402		)	2,339
Net increase in funds purchased, securities sold under agreements to repurchase, and other short-term borrowings	685			272			3,159			685
Proceeds from issuance of long-term debt	2,623			4,924			5,111			2,623
Repayments of long-term debt	(3,073		)	(1,448		)	(484		)	(3,073		)
Proceeds from the issuance of preferred stock	743			—			—			743
Repurchase of preferred stock							(450		)	—
Repurchase of common stock	(984		)	(566		)	(1,160		)	(984		)
Repurchase of common stock warrants	—			(24		)
Common and preferred stock dividends paid	(485		)	(412		)	(664		)	(485		)
Taxes paid related to net share settlement of equity awards	(38		)	(47		)	(44		)	(38		)
Proceeds from exercise of stock options	13			15			36			13
Net cash provided by financing activities	1,823			11,726			5,102			1,823
Net increase in cash and cash equivalents	1,855			4,141			693			1,855
Cash and cash equivalents at beginning of period	6,423			5,599			6,912			6,423
Cash and cash equivalents at end of period		$8,278			$9,740			$7,605			$8,278

Supplemental Disclosures:
Loans transferred from loans held for sale to loans		$16			$23
Loans transferred from loans to loans held for sale	218			315
Loans transferred from loans and loans held for sale to other real estate owned	43			46
Loans transferred from loans held for sale to loans held for investment								$23			$16
Loans transferred from loans held for investment to loans held for sale							449			218
Loans transferred from loans held for investment and loans held for sale to other real estate owned							44			43
Non-cash impact of debt assumed by purchaser in lease sale	9			74			—			9


(Dollars and shares in millions, except per share data) (Unaudited)	Preferred Stock		Common Shares Outstanding		Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock and Other¹			Accumulated Other Comprehensive (Loss)/Income			Total			Preferred Stock			Common Shares Outstanding		Common Stock		Additional Paid-in Capital			Retained Earnings			Treasury Stock and Other¹			Accumulated Other Comprehensive Loss			Total
Balance, January 1, 2016		$1,225	509			$550		$9,094			$14,686			($1,658	)		($460	)		$23,437
Cumulative effect of credit risk adjustment ²	—		—		—		—			5			—			(5		)	—
Net income	—		—		—		—			1,413			—			—			1,413
Other comprehensive income	—		—		—		—			—			—			580			580
Change in noncontrolling interest	—		—		—		—			—			(7		)	—			(7		)
Common stock dividends, $0.74 per share	—		—		—		—			(370		)	—			—			(370		)
Preferred stock dividends ³	—		—		—		—			(49		)	—			—			(49		)
Repurchase of common stock	—		(15	)	—		—			—			(566		)	—			(566		)
Repurchase of common stock warrants	—		—		—		(24		)	—			—			—			(24		)
Exercise of stock options and stock compensation expense ⁴	—		1		—		(28		)	—			43			—			15
Restricted stock activity ⁴	—		1		—		(33		)	(4		)	55			—			18
Amortization of restricted stock compensation	—		—		—		—			—			2			—			2
Balance, September 30, 2016		$1,225	496			$550		$9,009			$15,681			($2,131	)		$115			$24,449

Balance, January 1, 2017		$1,225	491			$550		$9,010			$16,000			($2,346	)		($821	)		$23,618			$1,225		491			$550		$9,010			$16,000			($2,346	)		($821	)		$23,618
Net income	—		—		—		—			1,533			—			—			1,533			—			—		—		—			1,533			—			—			1,533
Other comprehensive income	—		—		—		—			—			—			86			86			—			—		—		—			—			—			86			86
Change in noncontrolling interest	—		—		—		—			—			(2		)	—			(2		)	—			—		—		—			—			(2		)	—			(2		)
Common stock dividends, $0.92 per share	—		—		—		—			(443		)	—			—			(443		)	—			—		—		—			(443		)	—			—			(443		)
Preferred stock dividends ³	—		—		—		—			(65		)	—			—			(65		)
Preferred stock dividends ²																						—			—		—		—			(65		)	—			—			(65		)
Issuance of preferred stock, Series G	750		—		—		(7		)	—			—			—			743			750			—		—		(7		)	—			—			—			743
Repurchase of common stock	—		(17	)	—		—			—			(984		)	—			(984		)	—			(17	)	—		—			—			(984		)	—			(984		)
Exercise of stock options and stock compensation expense	—		1		—		(14		)	—			27			—			13			—			1		—		(14		)	—			27			—			13
Restricted stock activity	—		1		—		(4		)	(4		)	31			—			23			—			1		—		(4		)	(4		)	31			—			23
Balance, September 30, 2017		$1,975	476			$550		$8,985			$17,021			($3,274	)		($735	)		$24,522			$1,975		476			$550		$8,985			$17,021			($3,274	)		($735	)		$24,522

Balance, January 1, 2018																							$2,475		471			$550		$9,000			$17,540			($3,591	)		($820	)		$25,154
Cumulative effect adjustment related to ASU adoptions ³																						—			—		—		—			144			—			(154		)	(10		)
Net income																						—			—		—		—			2,117			—			—			2,117
Other comprehensive loss																						—			—		—		—			—			—			(900		)	(900		)
Change in noncontrolling interest																						—			—		—		—			—			(2		)	—			(2		)
Common stock dividends, $1.30 per share																						—			—		—		—			(603		)	—			—			(603		)
Preferred stock dividends ²																						—			—		—		—			(81		)	—			—			(81		)
Redemption of preferred stock, Series E																						(450		)	—		—		—			—			—			—			(450		)
Repurchase of common stock																						—			(17	)	—		—			—			(1,160		)	—			(1,160		)
Exercise of stock options and stock compensation expense																						—			1		—		—			—			36			—			36
Exercise of stock warrants																						—			3		3		(3		)	—			—			—			—
Restricted stock activity																						—			1		—		4			(6		)	40			—			38
Balance, September 30, 2018																							$2,025		459			$553		$9,001			$19,111			($4,677	)		($1,874	)		$24,139


	Distribution of Remaining Maturities															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			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:
Securities AFS:
U.S. Treasury securities		$—			$2,002			$2,298			$—			$4,300			$15			$2,695			$1,565			$—			$4,275
Federal agency securities	126			46			4			90			266			113			28			8			75			224
U.S. states and political subdivisions	6			46			179			327			558			3			72			25			521			621
MBS - agency	1,475			9,092			13,785			508			24,860
MBS - non-agency residential	—			59			—			—			59
MBS - agency residential																1,619			6,488			14,736			269			23,112
MBS - agency commercial																1			467			1,937			308			2,713
MBS - non-agency commercial	5			12			730			—			747			—			12			931			—			943
ABS	—			6			—			—			6
Corporate and other debt securities	23			10			—			—			33			—			14			—			—			14
Total debt securities AFS		$1,635			$11,273			$16,996			$925			$30,829
Total securities AFS																	$1,751			$9,776			$19,202			$1,173			$31,902
Fair Value:
Securities AFS:
U.S. Treasury securities		$—			$1,996			$2,265			$—			$4,261			$15			$2,615			$1,503			$—			$4,133
Federal agency securities	129			47			4			90			270			114			28			8			73			223
U.S. states and political subdivisions	6			48			185			324			563			3			75			25			499			602
MBS - agency	1,544			9,199			13,730			507			24,980
MBS - non-agency residential	—			62			—			—			62
MBS - agency residential																1,674			6,341			14,230			260			22,505
MBS - agency commercial																1			448			1,859			294			2,602
MBS - non-agency commercial	5			12			733			—			750			—			12			893			—			905
ABS	—			8			—			—			8
Corporate and other debt securities	23			10			—			—			33			—			14			—			—			14
Total debt securities AFS		$1,707			$11,382			$16,917			$921			$30,927
Total securities AFS																	$1,807			$9,533			$18,518			$1,126			$30,984
Weighted average yield ¹	3.51		%	2.35		%	2.67		%	3.15		%	2.62		%	3.22		%	2.38		%	2.94		%	3.12		%	2.79		%


	September 30, 2017												September 30, 2018
	Less than twelve months				Twelve months or longer				Total				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		Fair Value		Unrealized Losses ¹		Fair Value		Unrealized Losses ¹		Fair Value		Unrealized Losses ¹
Temporarily impaired securities AFS:
U.S. Treasury securities		$1,092		$9		$1,382		$39		$2,474		$48		$2,554		$77		$1,579		$65		$4,133		$142
Federal agency securities	43		—		33		1		76		1		16		—		62		3		78		3
U.S. states and political subdivisions	178		1		119		3		297		4		210		7		280		15		490		22
MBS - agency	9,571		92		2,709		75		12,280		167
MBS - agency residential													10,347		276		8,772		442		19,119		718
MBS - agency commercial													1,029		25		1,519		87		2,548		112
MBS - non-agency commercial	207		2		47		1		254		3		781		30		124		8		905		38
ABS	—		—		5		—		5		—
Corporate and other debt securities	10		—		—		—		10		—		—		—		9		—		9		—
Other equity securities	—		—		3		2		3		2
Total temporarily impaired securities AFS	11,101		104		4,298		121		15,399		225		14,937		415		12,345		620		27,282		1,035
OTTI securities AFS ¹:
MBS - non-agency residential	14		1		—		—		14		1
ABS	—		—		1		—		1		—
OTTI securities AFS ²:
Total OTTI securities AFS	14		1		1		—		15		1		—		—		—		—		—		—
Total impaired securities AFS		$11,115		$105		$4,299		$121		$15,414		$226		$14,937		$415		$12,345		$620		$27,282		$1,035



	December 31, 2017 ¹
	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		$1,993		$12		$841		$20		$2,834		$32
Federal agency securities	23		—		60		1		83		1
U.S. states and political subdivisions	267		3		114		5		381		8
MBS - agency residential	8,095		38		4,708		96		12,803		134
MBS - agency commercial	887		9		915		29		1,802		38
MBS - non-agency commercial	134		1		93		2		227		3
ABS	—		—		4		—		4		—
Corporate and other debt securities	10		—		—		—		10		—
Total temporarily impaired securities AFS	11,409		63		6,735		153		18,144		216
OTTI securities AFS ³:
ABS	—		—		1		—		1		—
Total OTTI securities AFS	—		—		1		—		1		—
Total impaired securities AFS		$11,409		$63		$6,736		$153		$18,145		$216


	Commercial Loans												Commercial Loans
	C&I				CRE				Commercial Construction				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		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Risk rating:
Pass		$65,768		$66,961		$4,933		$4,574		$3,882		$3,914		$66,224		$64,546		$6,418		$5,126		$3,038		$3,770
Criticized accruing	1,698		1,862		300		415		81		84		1,723		1,595		157		167		99		33
Criticized nonaccruing	292		390		5		7		1		17		256		215		43		24		—		1
Total		$67,758		$69,213		$5,238		$4,996		$3,964		$4,015		$68,203		$66,356		$6,618		$5,317		$3,137		$3,804


	Residential Loans ¹												Consumer Loans ¹
	Residential Mortgages - Nonguaranteed				Residential Home Equity Products				Residential Construction				Residential Mortgages - Nonguaranteed				Residential Home Equity Products				Residential Construction
(Dollars in millions)	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Current FICO score range:
700 and above		$23,444		$22,194		$9,067		$9,826		$274		$292		$24,968		$23,602		$8,208		$8,946		$163		$240
620 - 699	2,769		3,042		1,334		1,540		43		96		2,499		2,721		1,046		1,242		27		50
Below 620 ²	828		901		464		546		10		16		720		813		415		438		7		8
Total		$27,041		$26,137		$10,865		$11,912		$327		$404		$28,187		$27,136		$9,669		$10,626		$197		$298


	Consumer Loans ³
	Other Direct				Indirect				Credit Cards				Other Direct				Indirect				Credit Cards
(Dollars in millions)	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017
Current FICO score range:
700 and above		$7,778		$7,008		$8,907		$7,642		$1,000		$974		$9,197		$7,929		$8,967		$9,094		$1,084		$1,088
620 - 699	783		703		2,339		2,381		370		351		866		757		2,321		2,344		401		395
Below 620 ²	36		60		706		713		96		85		37		43		722		702		118		99
Total		$8,597		$7,771		$11,952		$10,736		$1,466		$1,410		$10,100		$8,729		$12,010		$12,140		$1,603		$1,582



	December 31, 2016
(Dollars in millions)	Accruing Current		Accruing 30-89 Days Past Due		Accruing 90+ Days Past Due		Nonaccruing ²		Total
Commercial loans:
C&I		$68,776		$35		$12		$390		$69,213
CRE	4,988		1		—		7		4,996
Commercial construction	3,998		—		—		17		4,015
Total commercial loans	77,762		36		12		414		78,224
Residential loans:
Residential mortgages - guaranteed	155		55		327		—		537
Residential mortgages - nonguaranteed ¹	25,869		84		7		177		26,137
Residential home equity products	11,596		81		—		235		11,912
Residential construction	389		3		—		12		404
Total residential loans	38,009		223		334		424		38,990
Consumer loans:
Guaranteed student	4,637		603		927		—		6,167
Other direct	7,726		35		4		6		7,771
Indirect	10,608		126		1		1		10,736
Credit cards	1,388		12		10		—		1,410
Total consumer loans	24,359		776		942		7		26,084
Total LHFI		$140,130		$1,035		$1,288		$845		$143,298


	Three Months Ended September 30, 2016 ¹							Three Months Ended September 30, 2017 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total		Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	19		$—		$49		$49	76		$2		$7		$9
Residential loans:
Consumer loans:
Residential mortgages - nonguaranteed	102	22		3		25		41	6		4		10
Residential home equity products	569	—		55		55		696	18		45		63
Consumer loans:
Other direct	2	—		—		—		135	—		2		2
Indirect	351	—		9		9		738	—		17		17
Credit cards	149	1		—		1		182	1		—		1
Total TDR additions	1,192		$23		$116		$139	1,868		$27		$75		$102


	Nine Months Ended September 30, 2016 ¹							Nine Months Ended September 30, 2017 ¹
(Dollars in millions)	Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total		Number of Loans Modified	Rate Modification		Term Extension and/or Other Concessions		Total
Commercial loans:
C&I	48		$—		$95		$95	136		$2		$86		$88
Commercial construction	1	—		—		—
Residential loans:
Consumer loans:
Residential mortgages - nonguaranteed	339	80		11		91		119	17		8		25
Residential home equity products	2,030	9		182		191		1,971	18		172		190
Consumer loans:
Other direct	34	—		1		1		425	—		6		6
Indirect	1,217	—		30		30		2,034	—		50		50
Credit cards	501	2		—		2		615	3		—		3
Total TDR additions	4,170		$91		$319		$410	5,300		$40		$322		$362



Item 1.	FINANCIAL STATEMENTS (UNAUDITED)


(Dollars in millions)	Residential MSRs - Fair Value			Other			Total			Residential MSRs - Fair Value			Commercial Mortgage Servicing Rights and Other			Total
Balance, January 1, 2018											$1,710			$81			$1,791
Amortization ¹										—			(13		)	(13		)
Servicing rights originated										250			10			260
Servicing rights purchased										89			—			89
Changes in fair value:
Due to changes in inputs and assumptions ²										198			—			198
Other changes in fair value ³										(183		)	—			(183		)
Servicing rights sold										(2		)	—			(2		)
Balance, September 30, 2018											$2,062			$78			$2,140

Balance, January 1, 2017		$1,572			$85			$1,657			$1,572			$85			$1,657
Amortization ¹	—			(16		)	(16		)	—			(16		)	(16		)
Servicing rights originated	252			10			262			252			10			262
Changes in fair value:
Due to changes in inputs and assumptions ²	(27		)	—			(27		)	(27		)	—			(27		)
Other changes in fair value ³	(168		)	—			(168		)	(168		)	—			(168		)
Servicing rights sold	(1		)	—			(1		)	(1		)	—			(1		)
Other ⁴	—			(1		)	(1		)	—			(1		)	(1		)
Balance, September 30, 2017		$1,628			$78			$1,706			$1,628			$78			$1,706

Balance, January 1, 2016		$1,307			$18			$1,325
Amortization ¹	—			(6		)	(6		)
Servicing rights originated	198			—			198
Servicing rights purchased	104			—			104
Changes in fair value:
Due to changes in inputs and assumptions ²	(328		)	—			(328		)
Other changes in fair value ³	(160		)	—			(160		)
Servicing rights sold	(2		)	—			(2		)
Balance, September 30, 2016		$1,119			$12			$1,131



(Dollars in millions)	Classification of Gain/(Loss) Recognized in Income on Derivatives	Amount of Gain/(Loss) Recognized in Income on Derivatives During the Three Months Ended September 30, 2017			Amount of Gain/(Loss) Recognized in Income on Derivatives During the Nine Months Ended September 30, 2017
Derivative instruments not designated as hedging instruments:
Interest rate contracts hedging:
Residential MSRs	Mortgage servicing related income		$14			$34
LHFS, IRLCs	Mortgage production related income	(20		)	(57		)
LHFI	Other noninterest income	—			(1		)
Trading activity	Trading income	11			33
Foreign exchange rate contracts hedging trading activity	Trading income	(10		)	(43		)
Credit contracts hedging:
LHFI	Other noninterest income	(1		)	(3		)
Trading activity	Trading income	8			19
Equity contracts hedging trading activity	Trading income	(1		)	(1		)
Other contracts:
IRLCs and other	Mortgage production related income, Commercial real estate related income	49			154
Commodity derivatives	Trading income	—			1
Total			$50			$136



	Three Months Ended September 30, 2016							Nine Months Ended September 30, 2016
(Dollars in millions)	Amount of Loss on Derivatives Recognized in Income			Amount of Gain on Related Hedged Items Recognized in Income		Amount of Gain Recognized in Income on Hedges (Ineffective Portion)		Amount of Gain on Derivatives Recognized in Income		Amount of Loss on Related Hedged Items Recognized in Income			Amount of Gain Recognized in Income on Hedges (Ineffective Portion)
Derivative instruments in fair value hedging relationships:
Interest rate contracts hedging fixed rate debt ¹		($10	)		$11		$1		$20		($19	)		$1
Interest rate contracts hedging brokered CDs ¹	—			—		—		—		—			—
Total		($10	)		$11		$1		$20		($19	)		$1


	Fair Value Gain/(Loss) for the Three Months Ended September 30, 2017 for Items Measured at Fair Value Pursuant to Election of the FVO												Fair Value Gain/(Loss) for the Nine Months Ended September 30, 2017 for Items Measured at Fair Value Pursuant to Election of the FVO												Fair Value Gain/(Loss) for the Three Months Ended September 30, 2018 for Items Measured at Fair Value Pursuant to Election of the FVO														Fair Value Gain/(Loss) for the Nine Months Ended September 30, 2018 for Items Measured at Fair Value Pursuant to Election of the FVO
(Dollars in millions)	Trading Income		Mortgage Production Related Income ¹		Mortgage Servicing Related Income			Other Noninterest Income		Total Changes in Fair Values Included in Earnings ²			Trading Income		Mortgage Production Related Income ¹		Mortgage Servicing Related Income			Other Noninterest Income		Total Changes in Fair Values Included in Earnings ²			Trading Income			Mortgage Production Related Income ¹		Mortgage Servicing Related Income			Other Noninterest Income			Total Changes in Fair Values Included in Earnings ²			Trading Income		Mortgage Production Related Income ¹			Mortgage Servicing Related Income		Other Noninterest Income			Total Changes in Fair Values Included in Earnings ²
Assets:
Trading loans		$8		$—		$—			$—		$8			$16		$—		$—			$—		$16			$3			$—		$—			$—			$3			$10		$—			$—		$—			$10
LHFS	—		21		—			—		21			—		44		—			—		44			—			5		—			—			5			—		(3		)	—		—			(3		)
LHFI	—		—		—			—		—			—		—		—			1		1			—			—		—			(1		)	(1		)	—		—			—		(4		)	(4		)
Residential MSRs	—		1		(70		)	—		(69		)	—		3		(195		)	—		(192		)	—			3		(11		)	—			(8		)	—		7			15		—			22
Liabilities:
Brokered time deposits	—		—		—			—		—			2		—		—			—		2			(4		)	—		—			—			(4		)	6		—			—		—			6
Long-term debt	5		—		—			—		5			16		—		—			—		16			1			—		—			—			1			6		—			—		—			6



	Level 3 Significant Unobservable Input Assumptions
(Dollars in millions)	Fair value September 30, ~~2017~~2018		Valuation Technique	Unobservable Input¹	Range ~~(weighted average)~~ (Weighted Average) ¹
Assets
Trading assets and derivative instruments:
Derivative instruments, net ²		$63	Internal model	Pull through rate	~~46-100% (79%~~40-100% (82%)
Derivative instruments, net ²		$63	Internal model	MSR value	~~27-160~~28-173 bps ~~(104~~(116 bps)
~~Securities AFS:~~
~~MBS - non-agency residential~~	62		~~Third party pricing~~	~~N/A~~
~~ABS~~	8		~~Third party pricing~~	~~N/A~~
~~Corporate and other debt securities~~	5		~~Cost~~	~~N/A~~
~~Other equity securities~~	~~473~~		~~Cost~~	~~N/A~~
~~Residential LHFS~~	1		~~Monte Carlo/Discounted cash flow~~	~~Option adjusted spread~~	~~125 bps (125 bps)~~
				~~Conditional prepayment rate~~	~~5-30 CPR (14 CPR)~~
				~~Conditional default rate~~	~~0-2 CDR (0.5 CDR)~~
LHFI	~~203~~162		Monte Carlo/Discounted cash flow	Option adjusted spread	62-784 bps ~~(188~~(177 bps)
				Conditional prepayment rate	~~3-36~~4-27 CPR ~~(11~~(12 CPR)
				Conditional default rate	~~0-9~~0-2 CDR ~~(1.4~~(0.7 CDR)
	36		Collateral based pricing	Appraised value	NM ³
Residential MSRs	~~1,628~~2,062		Monte Carlo/Discounted cash flow	Conditional prepayment rate	~~7-29~~5-30 CPR (13 CPR)
Residential MSRs	~~1,628~~2,062		Monte Carlo/Discounted cash flow	Option adjusted spread	~~0-111% (4%~~0-113% (3%)



	Level 3 Significant Unobservable Input Assumptions
(Dollars in millions)	Fair value December 31, ~~2016~~2017		Valuation Technique		Unobservable Input ¹		Range (~~weighted average)~~Weighted Average) ²
Assets
Trading assets and derivative instruments:
Derivative instruments, net ²³		$6—	Internal model		Pull through rate		~~40-100%~~41-100% (81%)
Derivative instruments, net ²³		$6—	Internal model		MSR value		~~22-170~~41-190 bps ~~(106~~(113 bps)
Securities AFS:
~~U.S. states and political subdivisions~~	4		~~Cost~~		~~N/A~~
MBS - non-agency residential	7459		Third party pricing		N/A
ABS	108		Third party pricing		N/A
Corporate and other debt securities	5		Cost		N/A
~~Other equity securities~~	~~540~~		~~Cost~~		~~N/A~~
	~~Residential LHFS~~	12		~~Monte Carlo/Discounted cash flow~~		~~Option adjusted spread~~		~~104-125 bps (124 bps)~~
						~~Conditional prepayment rate~~		~~2-28 CPR (7 CPR)~~
						~~Conditional default rate~~		~~0-3 CDR (0.4 CDR)~~
LHFI	~~219~~192		Monte Carlo/Discounted cash flow		Option adjusted spread		62-784 bps ~~(184~~(215 bps)
					Conditional prepayment rate		~~3-36~~2-34 CPR ~~(13~~(11 CPR)
					Conditional default rate		0-5 CDR ~~(2.1~~(0.7 CDR)
	34		Collateral based pricing		Appraised value		NM ³⁴
Residential MSRs	~~1,572~~1,710		Monte Carlo/Discounted cash flow		Conditional prepayment rate		~~1-25~~6-30 CPR (9(13 CPR)
Residential MSRs	~~1,572~~1,710		Monte Carlo/Discounted cash flow		Option adjusted spread		~~0-122% (8%~~1-125% (4%)



	Fair Value Measurements Using Significant Unobservable Inputs
(Dollars in millions)	Beginning Balance July 1, 2017		Included in Earnings			OCI			Purchases		Sales			Settlements			Transfers to/from Other Balance Sheet Line Items			Transfers into Level 3		Transfers out of Level 3		Fair Value September 30, 2017		Included in Earnings (held at September 30, 2017 ¹)
Assets
Trading assets:
Derivative instruments, net		$4		$52	²		$—			$—		$—			$1			($51	)		$—		$—		$6		$19	²
Securities AFS:
MBS - non-agency residential	67		—			1		³	—		—			(6		)	—			—		—		62		—
ABS	9		—			—			—		—			(1		)	—			—		—		8		—
Corporate and other debt securities	5		—			—			—		—			—			—			—		—		5		—
Other equity securities	547		—			—			—		—			(74		)	—			—		—		473		—
Total securities AFS	628		—			1		³	—		—			(81		)	—			—		—		548		—

Residential LHFS	2		—			—			—		(2		)	(1		)	(1		)	3		—		1		—
LHFI	214		—			—			—		—			(9		)	1			—		—		206		—



	Fair Value Measurements Using Significant Unobservable Inputs
(Dollars in millions)	Beginning Balance January 1, 2017		Included in Earnings			OCI			Purchases		Sales			Settlements			Transfers to/from Other Balance Sheet Line Items			Transfers into Level 3		Transfers out of Level 3			Fair Value September 30, 2017		Included in Earnings (held at September 30, 2017 ¹)
Assets
Trading assets:
Derivative instruments, net		$6		$157	²		$—			$—		$—			$—			($157	)		$—		$—			$6		$17	²
Securities AFS:
U.S. states and political subdivisions	4		—			—			—		—			(4		)	—			—		—			—		—
MBS - non-agency residential	74		—			1		³	—		—			(13		)	—			—		—			62		—
ABS	10		—			—			—		—			(2		)	—			—		—			8		—
Corporate and other debt securities	5		—			—			—		—			—			—			—		—			5		—
Other equity securities	540		—			1		³	75		—			(138		)	—			—		(5		)	473		—
Total securities AFS	633		—			2		³	75		—			(157		)	—			—		(5		)	548		—

Residential LHFS	12		—			—			—		(22		)	(1		)	(3		)	17		(2		)	1		—
LHFI	222		1		⁴	—			—		—			(24		)	3			4		—			206		1		⁴



	Fair Value Measurements Using Significant Unobservable Inputs
(Dollars in millions)	Beginning Balance July 1, 2018		Included in Earnings			OCI		Purchases		Sales		Settlements			Transfers to/from Other Balance Sheet Line Items			Transfers into Level 3		Transfers out of Level 3		Fair Value September 30, 2018
Assets
Trading assets:
Derivative instruments, net		$3		$18	¹		$—		$—		$—		$8			($26	)		$—		$—		$3

LHFI	177		—		²	—		—		—		(9		)	—			—		—		168



	Fair Value Measurements Using Significant Unobservable Inputs
(Dollars in millions)	Beginning Balance January 1, 2018		Included in Earnings				OCI		Purchases		Sales		Settlements			Transfers to/from Other Balance Sheet Line Items			Transfers into Level 3		Transfers out of Level 3			Fair Value September 30, 2018
Assets
Trading assets:
Derivative instruments, net		$—		$36		¹		$—		$—		$—		$10			($43	)		$—		$—			$3
Securities AFS:
MBS - non-agency residential	59		—				—		—		—		(2		)	—			—		(57		)	—
ABS	8		—				—		—		—		(1		)	—			—		(7		)	—
Corporate and other debt securities	5		—				—		—		—		—			—			—		(5		)	—
Total securities AFS	72		—				—		—		—		(3		)	—			—		(69		)	—

LHFI	196		(3		)	²	—		—		—		(26		)	—			1		—			168



	Fair Value Measurements Using Significant Unobservable Inputs
(Dollars in millions)	Beginning Balance July 1, 2016		Included in Earnings				OCI			Purchases		Sales			Settlements			Transfers to/from Other Balance Sheet Line Items			Transfers into Level 3		Transfers out of Level 3		Fair Value September 30, 2016		Included in Earnings (held at September 30, 2016 ¹)
Assets
Trading assets:
Derivative instruments, net		$60		$118		²		$—			$—		$—			$2			($116	)		$—		$—		$64		$73		²
Securities AFS:
U.S. states and political subdivisions	4		—				—			—		—			—			—			—		—		4		—
MBS - non-agency residential	83		—				—			—		—			(7		)	—			—		—		76		—
ABS	11		—				1		³	—		—			(1		)	—			—		—		11		—
Corporate and other debt securities	5		—				—			—		—			—			—			—		—		5		—
Other equity securities	610		—				—			—		—			(59		)	—			—		—		551		—
Total securities AFS	713		—				1		³	—		—			(67		)	—			—		—		647		—

Residential LHFS	4		—				—			—		(13		)	—			(2		)	14		—		3		—
LHFI	246		(2		)	⁴	—			—		—			(10		)	(2		)	2		—		234		(2		)	⁴



	Fair Value Measurements Using Significant Unobservable Inputs
(Dollars in millions)	Beginning Balance January 1, 2016		Included in Earnings				OCI				Purchases		Sales			Settlements			Transfers to/from Other Balance Sheet Line Items			Transfers into Level 3		Transfers out of Level 3			Fair Value September 30, 2016		Included in Earnings (held at September 30, 2016 ¹)
Assets
Trading assets:
Corporate and other debt securities		$89		($1	)	⁵		$—				$—		($88	)		$—			$—			$—		$—			$—		$—
Derivative instruments, net	15		279			²	—				—		—			2			(232		)	—		—			64		68		²
Total trading assets	104		278				—				—		(88		)	2			(232		)	—		—			64		68
Securities AFS:
U.S. states and political subdivisions	5		—				—				—		—			(1		)	—			—		—			4		—
MBS - non-agency residential	94		—				(1		)	³	—		—			(17		)	—			—		—			76		—
ABS	12		—				1			³	—		—			(2		)	—			—		—			11		—
Corporate and other debt securities	5		—				—				—		—			—			—			—		—			5		—
Other equity securities	440		—				1			³	276		—			(166		)	—			—		—			551		—
Total securities AFS	556		—				1			³	276		—			(186		)	—			—		—			647		—

Residential LHFS	5		—				—				—		(27		)	—			(4		)	31		(2		)	3		—
LHFI	257		4			⁴	—				—		—			(32		)	(1		)	6		—			234		4		⁴
Liabilities
Other liabilities	23		—				—				—		—			(23		)	—			—		—			—		—


			Fair Value Measurements						Losses for the Three Months Ended September 30, 2017			Losses for the Nine Months Ended September 30, 2017					Fair Value Measurements								(Losses)/Gains for the Three Months Ended September 30, 2018			(Losses)/Gains for the Nine Months Ended September 30, 2018
(Dollars in millions)	September 30, 2017		Level 1		Level 2		Level 3				September 30, 2018				Level 1			Level 2			Level 3
LHFS		$46		$—		$46		$—		$—					$—		$12			$—			$12		$—			$—		$—
LHFI	76		—		—		76		—			—		17			—			—			17		—			—
OREO	20		—		—		20		(2	)		(4	)	22			—			1			21		(3		)	(4	)
Other assets	50		—		7		43		(21	)		(35	)	63			—			44			19		3			18

			Fair Value Measurements						Losses for the Year Ended December 31, 2016								Fair Value Measurements								Losses for the Year Ended December 31, 2017
(Dollars in millions)	December 31, 2016		Level 1		Level 2		Level 3						December 31, 2017			Level 1			Level 2			Level 3
LHFS															$13			$—			$13			$—		$—
LHFI		$75		$—		$—		$75		$—					49			—			—			49		—
OREO	17		—		—		17		(2	)				24			—			1			23		(4		)
Other assets	112		—		58		54		(36	)				53			—			4			49		(43		)


~~(a)~~	~~Cash and cash equivalents are valued at their carrying amounts, which are reasonable estimates of fair value due to the relatively short period to maturity of the instruments.~~


~~(b)~~	Trading assets and derivative instruments, securities AFS, and trading liabilities and derivative instruments that are classified as level 1 are valued based on quoted prices observed in active markets. For those instruments classified as level 2 or 3, refer to the respective valuation discussions within this footnote.


~~(e)~~	~~Deposit liabilities with no defined maturity such as DDAs, NOW/money market accounts, and savings accounts have~~


◦	~~In September 2017, the Company announced that it reached a definitive agreement to sell its~~ ~~PAC~~ ~~subsidiary.~~ ~~PAC~~ ~~had $1.3 billion in assets at September 30, 2017. The sale is expected to close in the fourth quarter of 2017, subject to various customary closing conditions.~~


	Nine Months Ended September 30, 2016 ¹											Three Months Ended September 30, 2017 ^{1, 2}
(Dollars in millions)	Consumer		Wholesale		Corporate Other		Reconciling Items			Consolidated		Consumer		Wholesale			Corporate Other			Reconciling Items			Consolidated
Balance Sheets:
Average loans		$69,075		$71,489		$66		($2	)		$140,628
Average LHFI													$74,742		$68,568			$1,399			($3	)		$144,706
Average consumer and commercial deposits	98,751		54,099		122		(61		)	152,911		109,774		49,515			189			(59		)	159,419
Average total assets	78,378		85,392		31,510		2,333			197,613		84,345		82,573			36,286			2,534			205,738
Average total liabilities	99,746		59,798		14,019		(26		)	173,537		110,713		55,054			15,406			(8		)	181,165
Average total equity	—		—		—		24,076			24,076		—		—			—			24,573			24,573
Statements of Income:
Net interest income		$2,578		$1,488		$83		($272	)		$3,877		$999		$511			($5	)		($75	)		$1,430
FTE adjustment	—		103		2		—			105		—		36			1			—			37
Net interest income-FTE ²	2,578		1,591		85		(272		)	3,982
Provision for credit losses ³	90		253		—		—			343
Net interest income after provision for credit losses-FTE	2,488		1,338		85		(272		)	3,639
Net interest income-FTE ³												999		547			(4		)	(75		)	1,467
Provision/(benefit) for credit losses ⁴												140		(19		)	—			(1		)	120
Net interest income after provision/(benefit) for credit losses-FTE												859		566			(4		)	(74		)	1,347
Total noninterest income	1,568		996		112		(107		)	2,569		482		397			19			(52		)	846
Total noninterest expense	2,839		1,243		3		(13		)	4,072		927		421			48			(5		)	1,391
Income before provision for income taxes-FTE	1,217		1,091		194		(366		)	2,136		414		542			(33		)	(121		)	802
Provision for income taxes-FTE ⁴	455		407		54		(200		)	716
Provision for income taxes-FTE ⁵												150		201			(18		)	(71		)	262
Net income including income attributable to noncontrolling interest	762		684		140		(166		)	1,420		264		341			(15		)	(50		)	540
Net income attributable to noncontrolling interest	—		—		7		—			7		—		—			2			—			2
Net income		$762		$684		$133		($166	)		$1,413		$264		$341			($17	)		($50	)		$538


²	During the fourth quarter of 2017, the Company sold PAC, the results of which were previously reported within the Wholesale business segment. For all periods prior to January 1, 2018, PAC's financial results, including the gain on sale, have been transferred to Corporate Other for enhanced comparability of the Wholesale business segment excluding PAC.


³	Presented on a matched maturity funds transfer price basis for the segments.