SECURITIES

The following table provides the major components of securities at amortized cost and fair value:



	June 30, 2015									December 31, 2014
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Securities Available for Sale
U.S. Treasury		$30		$—		$—			$30		$15		$—		$—			$15
State and political subdivisions	9		—		—			9		10		—		—			10
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	17,830		227		(56		)	18,001		17,683		301		(50		)	17,934
Other/non-agency	631		4		(30		)	605		703		4		(35		)	672
Total mortgage-backed securities	18,461		231		(86		)	18,606		18,386		305		(85		)	18,606
Total debt securities available for sale	18,500		231		(86		)	18,645		18,411		305		(85		)	18,631
Marketable equity securities	5		—		—			5		10		3		—			13
Other equity securities	12		—		—			12		12		—		—			12
Total equity securities available for sale	17		—		—			17		22		3		—			25
Total securities available for sale		$18,517		$231		($86	)		$18,662		$18,433		$308		($85	)		$18,656
Securities Held to Maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities		$4,253		$28		($12	)		$4,269		$3,728		$22		($31	)		$3,719
Other/non-agency	1,314		28		—			1,342		1,420		54		—			1,474
Total securities held to maturity		$5,567		$56		($12	)		$5,611		$5,148		$76		($31	)		$5,193
Other Investment Securities
Federal Reserve Bank stock		$468		$—		$—			$468		$477		$—		$—			$477
Federal Home Loan Bank stock	393		—		—			393		390		—		—			390
Venture capital and other investments	5		—		—			5		5		—		—			5
Total other investment securities		$866		$—		$—			$866		$872		$—		$—			$872

The Company has reviewed its securities portfolio for other-than-temporary impairments. The following table presents the net impairment losses (gains) recognized in earnings:



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Other-than-temporary impairment:
Total other-than-temporary impairment losses		($1	)		($5	)		($32	)		($39	)
Portions of loss (gains) recognized in other comprehensive income (before taxes)	(1		)	3			29			33
Net impairment losses recognized in earnings		($2	)		($2	)		($3	)		($6	)

The following tables summarize those securities whose fair values are below carrying values, segregated by those that have been in a continuous unrealized loss position for less than twelve months and those that have been in a continuous unrealized loss position for twelve months or longer:



	June 30, 2015
	Less than 12 Months						12 Months or Longer						Total
(dollars in millions)	Number of Issues	Fair Value		Gross Unrealized Losses			Number of Issues	Fair Value		Gross Unrealized Losses			Number of Issues	Fair Value		Gross Unrealized Losses
State and political subdivisions	1		$9		$—		—		$—		$—		1		$9		$—
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	109	5,222		(40		)	37	970		(28		)	146	6,192		(68		)
Other/non-agency	3	37		(1		)	19	398		(29		)	22	435		(30		)
Total mortgage-backed securities	112	5,259		(41		)	56	1,368		(57		)	168	6,627		(98		)
Total	113		$5,268		($41	)	56		$1,368		($57	)	169		$6,636		($98	)



	December 31, 2014
	Less than 12 Months						12 Months or Longer						Total
(dollars in millions)	Number of Issues	Fair Value		Gross Unrealized Losses			Number of Issues	Fair Value		Gross Unrealized Losses			Number of Issues	Fair Value		Gross Unrealized Losses
State and political subdivisions	—		$—		$—		1		$10		$—		1		$10		$—
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	75	3,282		(24		)	52	1,766		(57		)	127	5,048		(81		)
Other/non-agency	6	80		(2		)	17	397		(33		)	23	477		(35		)
Total mortgage-backed securities	81	3,362		(26		)	69	2,163		(90		)	150	5,525		(116		)
Total	81		$3,362		($26	)	70		$2,173		($90	)	151		$5,535		($116	)

For each debt security identified with an unrealized loss, the Company reviews the expected cash flows to determine if the impairment in value is temporary or other-than-temporary. If the Company has determined that the present value of the debt security’s expected cash flows is less than its amortized cost basis, an other-than-temporary impairment is deemed to have occurred. The amount of impairment loss that is recognized in current period earnings is dependent on the Company’s intent to sell (or not sell) the debt security.

If the Company intends to sell the impaired debt security, the impairment loss recognized in current period earnings equals the difference between the debt security’s fair value and its amortized cost. If the Company does not intend to sell the impaired debt security, and it is not likely that the Company will be required to sell the impaired security, the credit-related impairment loss is recognized in current period earnings and equals the difference between the amortized cost of the debt security and the present value of the expected cash flows that have currently been projected.

In addition to these cash flow projections, several other characteristics of each debt security are reviewed when determining whether a credit loss exists and the period over which the debt security is expected to recover. These characteristics include: (1) the type of investment, (2) various market factors affecting the fair value of the security (e.g., interest rates, spread levels, liquidity in the sector, etc.), (3) the length and severity of impairment, and (4) the public credit rating of the instrument.

The Company estimates the portion of loss attributable to credit using a cash flow model. The inputs to this model include prepayment, default and loss severity assumptions that are based on industry research and observed data. The loss projections generated by the model are reviewed on a quarterly basis by a cross-functional governance committee. This governance committee determines whether security impairments are other-than-temporary based on this review.

The following table presents the cumulative credit related losses recognized in earnings on debt securities held by the Company:



	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2015			2014			2015			2014
Cumulative balance at beginning of period		$62			$59			$62			$56
Credit impairments recognized in earnings on securities that have been previously impaired	2			2			3			6
Reductions due to increases in cash flow expectations on impaired securities	(2		)	(1		)	(3		)	(2		)
Cumulative balance at end of period		$62			$60			$62			$60

Cumulative credit losses recognized in earnings for impaired AFS debt securities held as of June 30, 2015 and 2014 were $62 million and $60 million, respectively. There were no credit losses recognized in earnings for the Company’s HTM portfolio as of June 30, 2015 and 2014. For the three months ended June 30, 2015 and 2014, the Company recognized credit related other-than-temporary impairment losses in earnings of $2 million related to non-agency MBS in the AFS portfolio. For the six months ended June 30, 2015 and 2014, the Company recognized credit related other-than-temporary impairment losses in earnings of $3 million and $6 million, respectively. There were no credit impaired debt securities sold during the three or six months ended June 30, 2015 and 2014, respectively. Reductions in credit losses due to increases in cash flow expectations were $2 million and $1 million for the three months ended June 30, 2015 and 2014, respectively, and $3 million and $2 million for the six months ended June 30, 2015 and 2014, respectively, and were presented in interest income from investment securities on the Consolidated Statements of Operations. The Company does not currently have the intent to sell these debt securities, and it is not likely that the Company will be required to sell these debt securities prior to the recovery of their amortized cost bases.

The Company has determined that credit losses are not expected to be incurred on the remaining agency and non-agency MBS identified with unrealized losses as of the current reporting date. The unrealized losses on these debt securities reflect the reduced liquidity in the MBS market and the increased risk spreads due to the uncertainty of the U.S. macroeconomic environment. Therefore, the Company has determined that these debt securities are not other-than-temporarily impaired because the Company does not currently have the intent to sell these debt securities, and it is not likely that the Company will be required to sell these debt securities prior to the recovery of their amortized cost bases. Any subsequent increases in the valuation of impaired debt securities do not impact their recorded cost bases. As of June 30, 2015 and 2014, $29 million and $33 million, respectively, of pre-tax non-credit related losses were deferred in OCI.

The amortized cost and fair value of debt securities at June 30, 2015 by contractual maturity are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without incurring penalties.



	Distribution of Maturities
(in millions)	1 Year or Less		1-5 Years		5-10 Years		After 10 Years		Total
Amortized Cost:
Debt securities available for sale
U.S. Treasury		$30		$—		$—		$—		$30
State and political subdivisions	—		—		—		9		9
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		52		2,002		15,776		17,830
Other/non-agency	—		75		13		543		631
Total debt securities available for sale	30		127		2,015		16,328		18,500
Debt securities held to maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		—		—		4,253		4,253
Other/non-agency	—		—		—		1,314		1,314
Total debt securities held to maturity	—		—		—		5,567		5,567
Total amortized cost of debt securities		$30		$127		$2,015		$21,895		$24,067

Fair Value:
Debt securities available for sale
U.S. Treasury		$30		$—		$—		$—		$30
State and political subdivisions	—		—		—		9		9
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		55		2,014		15,932		18,001
Other/non-agency	—		76		13		516		605
Total debt securities available for sale	30		131		2,027		16,457		18,645
Debt securities held to maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		—		—		4,269		4,269
Other/non-agency	—		—		—		1,342		1,342
Total debt securities held to maturity	—		—		—		5,611		5,611
Total fair value of debt securities		$30		$131		$2,027		$22,068		$24,256

The following table reports the amounts recognized in interest income from investment securities on the Consolidated Statements of Operations:



	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2015		2014		2015		2014
Taxable		$155		$154		$314		$303
Non-taxable	—		—		—		—
Total interest income from investment securities		$155		$154		$314		$303

Realized gains and losses on AFS securities are shown below:



	Three Months Ended June 30,					Six Months Ended June 30,
(in millions)	2015			2014		2015			2014
Gains on sale of debt securities		$10			$—		$22			$25
Losses on sale of debt securities	(1		)	—		(5		)	—
Debt securities gains, net		$9			$—		$17			$25
Equity securities gains		$1			$—		$3			$—

The amortized cost and fair value of securities pledged are shown below:



	June 30, 2015				December 31, 2014
(in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Pledged against repurchase agreements		$3,749		$3,785		$3,650		$3,701
Pledged against FHLB borrowed funds	1,254		1,280		1,355		1,407
Pledged against derivatives, to qualify for fiduciary powers, and to secure public and other deposits as required by law	3,955		4,013		3,453		3,520

There were no loan securitizations for the three or six months ended June 30, 2015 and 2014.

The Company regularly enters into security repurchase agreements with unrelated counterparties. Repurchase agreements are financial transactions that involve the transfer of a security from one party to another and a subsequent transfer of the same (or “substantially the same”) security back to the original party. The Company’s repurchase agreements are typically short-term transactions, but they may be extended to longer terms to maturity. Such transactions are accounted for as secured borrowed funds on the Company’s financial statements. When permitted by GAAP, the Company offsets the short-term receivables associated with its reverse repurchase agreements with the short-term payables associated with its repurchase agreements.

The effects of this offsetting on the Consolidated Balance Sheets are presented in the following table:



	June 30, 2015								December 31, 2014
(in millions)	Gross Assets (Liabilities)			Gross Assets (Liabilities) Offset		Net Amounts of Assets (Liabilities)			Gross Assets (Liabilities)			Gross Assets (Liabilities) Offset		Net Amounts of Assets (Liabilities)
Securities sold under agreements to repurchase		($3,050	)		$—		($3,050	)		($2,600	)		$—		($2,600	)

Note: The Company also offsets certain derivative assets and derivative liabilities on the Consolidated Balance Sheets. For further information see Note 12 “Derivatives.”

Securities under the agreements to repurchase or resell are accounted for as secured borrowings. The following table presents the Company's related activity, by collateral type and remaining contractual maturity, at June 30, 2015:

Remaining Contractual Maturity of the Agreements

(in millions)

Overnight and Continuous

Up to 30 Days

30-90 Days

Greater Than 90 Days

Total

Securities sold under agreements to repurchase

Mortgage-backed securities - Agency

$—

$250

$1,000

$1,800

$3,050

For these securities sold under the 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. The Company manages the risk by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions.