Investment Securities

6 Months Ended

Jun. 30, 2015

Investment Securities Disclosure [Abstract]

NOTE 6 INVESTMENT SECURITIES

Table 69: Investment Securities Summary

			Amortized		Unrealized						Fair
In millions			Cost		Gains			Losses			Value
June 30, 2015

Securities Available for Sale
Debt securities
	U.S. Treasury and government agencies		$	5,931		$	166	$	(2)	$	6,095
	Residential mortgage-backed
		Agency		20,629			331		(118)		20,842
		Non-agency		4,357			284		(89)		4,552
	Commercial mortgage-backed
		Agency		1,980			21		(7)		1,994
		Non-agency		4,368			62		(8)		4,422
	Asset-backed			5,377			82		(24)		5,435
	State and municipal			2,010			59		(11)		2,058
	Other debt			1,822			39		(7)		1,854
		Total debt securities		46,474			1,044		(266)		47,252
Corporate stocks and other				428					(1)		427
	Total securities available for sale		$	46,902		$	1,044	$	(267)	$	47,679
Securities Held to Maturity (a)
Debt securities
	U.S. Treasury and government agencies		$	253		$	37			$	290
	Residential mortgage-backed
		Agency		8,199			117	$	(58)		8,258
		Non-agency		252			7				259
	Commercial mortgage-backed
		Agency		1,142			48				1,190
		Non-agency		812			13				825
	Asset-backed			736			3		(6)		733
	State and municipal			1,982			78				2,060
	Other debt			307			6				313
	Total securities held to maturity		$	13,683		$	309	$	(64)	$	13,928

December 31, 2014

Securities Available for Sale
Debt securities
	U.S. Treasury and government agencies		$	5,237		$	186	$	(1)	$	5,422
	Residential mortgage-backed
		Agency		17,646			438		(41)		18,043
		Non-agency		4,723			318		(99)		4,942
	Commercial mortgage-backed
		Agency		2,178			23		(14)		2,187
		Non-agency		4,085			88		(11)		4,162
	Asset-backed			5,141			78		(32)		5,187
	State and municipal			1,953			88		(3)		2,038
	Other debt			1,776			43		(6)		1,813
		Total debt securities		42,739			1,262		(207)		43,794
Corporate stocks and other				442					(1)		441
	Total securities available for sale		$	43,181		$	1,262	$	(208)	$	44,235
Securities Held to Maturity (a)
Debt securities
	U.S. Treasury and government agencies		$	248		$	44			$	292
	Residential mortgage-backed
		Agency		5,736			166	$	(10)		5,892
		Non-agency		270			13				283
	Commercial mortgage-backed
		Agency		1,200			53				1,253
		Non-agency		1,010			19				1,029
	Asset-backed			759			2		(8)		753
	State and municipal			2,042			111				2,153
	Other debt			323			6				329
	Total securities held to maturity		$	11,588		$	414	$	(18)	$	11,984
(a)	Held to maturity securities transferred from available for sale are included in held to maturity at fair value at the time of transfer. The amortized cost of held to maturity securities included net unrealized gains of $110 million and $125 million at June 30, 2015 and December 31, 2014, respectively, related to securities transferred, which are offset in Accumulated Other Comprehensive Income, net of tax.

The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. Net unrealized gains and losses in the securities available for sale portfolio are included in Shareholders’ equity as Accumulated other comprehensive income or loss, net of tax, unless credit-related. Securities held to maturity are carried at amortized cost. At June 30, 2015, Accumulated other comprehensive income included pretax gains of $93 million from derivatives that hedged the purchase of investment securities classified as held to maturity. The gains will be accreted into interest income as an adjustment of yield on the securities.

Table 70 presents gross unrealized losses on securities available for sale at June 30, 2015 and December 31, 2014. The securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and twelve months or more based on the point in time that the fair value declined below the amortized cost basis. The table includes debt securities where a portion of other-than-temporary impairment (OTTI) has been recognized in Accumulated other comprehensive income (loss).

Table 70: Gross Unrealized Loss and Fair Value of Securities Available for Sale

				Unrealized loss position less						Unrealized loss position 12
In millions				than 12 months						months or more				Total
				Unrealized				Fair		Unrealized		Fair		Unrealized		Fair
				Loss				Value		Loss		Value		Loss		Value
June 30, 2015
Debt securities
	U.S. Treasury and government agencies				$	(2)		$	1,167					$	(2)	$	1,167
	Residential mortgage-backed
		Agency				(94)			7,736	$	(24)	$	1,259		(118)		8,995
		Non-agency				(5)			443		(84)		1,395		(89)		1,838
	Commercial mortgage-backed
		Agency				(2)			429		(5)		150		(7)		579
		Non-agency				(5)			1,504		(3)		339		(8)		1,843
	Asset-backed					(5)			946		(19)		605		(24)		1,551
	State and municipal					(8)			503		(3)		49		(11)		552
	Other debt					(4)			332		(3)		139		(7)		471
			Total debt securities			(125)			13,060		(141)		3,936		(266)		16,996
	Corporate stocks and other										(1)		61		(1)		61
			Total		$	(125)		$	13,060	$	(142)	$	3,997	$	(267)	$	17,057

December 31, 2014
Debt securities
	U.S. Treasury and government agencies				$	(1)		$	1,426					$	(1)	$	1,426
	Residential mortgage-backed
		Agency				(4)			644	$	(37)	$	1,963		(41)		2,607
		Non-agency				(5)			276		(94)		1,487		(99)		1,763
	Commercial mortgage-backed
		Agency				(2)			681		(12)		322		(14)		1,003
		Non-agency				(4)			928		(7)		335		(11)		1,263
	Asset-backed					(4)			913		(28)		1,133		(32)		2,046
	State and municipal						(a)		41		(3)		77		(3)		118
	Other debt					(2)			314		(4)		186		(6)		500
			Total debt securities			(22)			5,223		(185)		5,503		(207)		10,726
	Corporate stocks and other										(1)		15		(1)		15
			Total		$	(22)		$	5,223	$	(186)	$	5,518	$	(208)	$	10,741
(a)	The unrealized loss on these securities was less than $.5 million.

The gross unrealized loss on debt securities held to maturity was $74 million at June 30, 2015, with $51 million of the loss related to securities with a fair value of $4.0 billion that had been in a continuous loss position less than 12 months and $23 million of the loss related to securities with a fair value of $1.0 billion that had been in a continuous loss position for more than 12 months. The gross unrealized loss on debt securities held to maturity was $22 million at December 31, 2014, with $1 million of the loss related to securities with a fair value of $134 million that had been in a continuous loss position less than 12 months and $21 million of the loss related to securities with a fair value of $1.6 billion that had been in a continuous loss position for more than 12 months. For securities transferred to held to maturity from available for sale, the unrealized loss for purposes of this analysis is determined by comparing the security’s original amortized cost to its current estimated fair value.

Evaluating Investment Securities for Other-than-Temporary Impairments

For the securities in the preceding Table 70, as of June 30, 2015 we do not intend to sell and believe we will not be required to sell the securities prior to recovery of the amortized cost basis.

At least quarterly, we conduct a comprehensive security-level assessment on all securities. For those securities in an unrealized loss position we determine if OTTI exists. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. An OTTI loss must be recognized for a debt security in an unrealized loss position if we intend to sell the security or it is more likely than not we will be required to sell the security prior to recovery of its amortized cost basis. In this situation, the amount of loss recognized in income is equal to the difference between the fair value and the amortized cost basis of the security. Even if we do not expect to sell the security, we must evaluate the expected cash flows to be received to determine if we believe a credit loss has occurred. In the event of a credit loss, only the amount of impairment associated with the credit loss is recognized in income. The portion of the unrealized loss relating to other factors, such as liquidity conditions in the market or changes in market interest rates, is recorded in accumulated other comprehensive income (loss).

The security-level assessment is performed on each investment security. Our assessment considers the security structure, recent security collateral performance metrics if applicable, external credit ratings, failure of the issuer to make scheduled interest or principal payments, our judgment and expectations of future performance, and relevant independent industry research, analysis and forecasts. Results of the periodic assessment are reviewed by a cross-functional senior management team representing Asset & Liability Management, Finance, and Market Risk Management. The senior management team considers the results of the assessments, as well as other factors, in determining whether the impairment is other-than-temporary.

Substantially all of the credit impairment we have recognized relates to non-agency residential mortgage-backed securities and asset-backed securities collateralized by first-lien and second-lien non-agency residential mortgage loans. Potential credit losses on these securities are evaluated on a security-by-security basis. Collateral performance assumptions are developed for each security after reviewing collateral composition and collateral performance statistics. This includes analyzing recent delinquency roll rates, loss severities, voluntary prepayments and various other collateral and performance metrics. This information is then combined with general expectations on the housing market, employment and other macroeconomic factors to develop estimates of future performance.

Security level assumptions for prepayments, loan defaults and loss given default are applied to each non-agency residential mortgage-backed security and asset-backed security collateralized by first-lien and second-lien non-agency residential mortgage loans using a third-party cash flow model. The third-party cash flow model then generates projected cash flows according to the structure of each security. Based on the results of the cash flow analysis, we determine whether we expect that we will recover the amortized cost basis of our security.

For those securities on our balance sheet where we determined losses represented OTTI, we have recorded cumulative credit losses of $1.2 billion at June 30, 2015. During the first six months and second quarters of 2015 and 2014, the OTTI credit losses recognized in noninterest income and the OTTI noncredit losses recognized in accumulated other comprehensive income (loss), net of tax, on securities were not significant.

Information relating to gross realized securities gains and losses from the sales of securities is set forth in the following table.

Table 71: Gains (Losses) on Sales of Securities Available for Sale

			Gross		Gross		Net		Tax
In millions	Proceeds		Gains		Losses		Gains		Expense
Six months ended June 30
2015	$	2,441	$	51	$	(1)	$	50	$	17
2014	$	3,401	$	29	$	(25)	$	4	$	1

The following table presents, by remaining contractual maturity, the amortized cost, fair value and weighted-average yield of debt securities at June 30, 2015.

Table 72: Contractual Maturity of Debt Securities

June 30, 2015					After 1 Year			After 5 Years			After 10
Dollars in millions		1 Year or Less			through 5 Years			through 10 Years			Years			Total
Securities Available for Sale
U.S. Treasury and government agencies		$	513		$	804		$	3,976		$	638		$	5,931
Residential mortgage-backed
	Agency					123			760			19,746			20,629
	Non-agency					5			1			4,351			4,357
Commercial mortgage-backed
	Agency		83			136			48			1,713			1,980
	Non-agency					85						4,283			4,368
Asset-backed			5			1,150			2,104			2,118			5,377
State and municipal			9			129			316			1,556			2,010
Other debt			140			1,174			327			181			1,822
Total debt securities available for sale		$	750		$	3,606		$	7,532		$	34,586		$	46,474
Fair value		$	757		$	3,682		$	7,628		$	35,185		$	47,252
Weighted-average yield, GAAP basis			2.96	%		2.46	%		2.33	%		2.98	%		2.83	%
Securities Held to Maturity
U.S. Treasury and government agencies											$	253		$	253
Residential mortgage-backed
	Agency							$	215			7,984			8,199
	Non-agency											252			252
Commercial mortgage-backed
	Agency				$	940			144			58			1,142
	Non-agency					6						806			812
Asset-backed						9			592			135			736
State and municipal						56			825			1,101			1,982
Other debt									307						307
Total debt securities held to maturity					$	1,011		$	2,083		$	10,589		$	13,683
Fair value					$	1,050		$	2,134		$	10,744		$	13,928
Weighted-average yield, GAAP basis						3.49	%		3.04	%		3.56	%		3.48	%

Weighted-average yields are based on historical cost with effective yields weighted for the contractual maturity of each security. At June 30, 2015, there were no securities of a single issuer, other than FNMA, that exceeded 10% of Total shareholders’ equity.

The following table presents the fair value of securities that have been either pledged to or accepted from others to collateralize outstanding borrowings.

Table 73: Fair Value of Securities Pledged and Accepted as Collateral

		June 30			December 31
In millions		2015			2014
Pledged to others			$	10,051		$	10,874
Accepted from others:
	Permitted by contract or custom to sell or repledge			1,569			1,658
	Permitted amount repledged to others			1,399			1,488

The securities pledged to others include positions held in our portfolio of investment securities, trading securities, and securities accepted as collateral from others that we are permitted by contract or custom to sell or repledge, and were used to secure public and trust deposits, repurchase agreements, and for other purposes.