SECURITIES

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



	December 31, 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 and other		$16		$—		$—			$16		$15		$—		$—			$15
State and political subdivisions	9		—		—			9		10		—		—			10
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	17,234		153		(67		)	17,320		17,683		301		(50		)	17,934
Other/non-agency	555		4		(37		)	522		703		4		(35		)	672
Total mortgage-backed securities	17,789		157		(104		)	17,842		18,386		305		(85		)	18,606
Total debt securities available for sale	17,814		157		(104		)	17,867		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		$17,831		$157		($104	)		$17,884		$18,433		$308		($85	)		$18,656
Securities Held to Maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities		$4,105		$27		($11	)		$4,121		$3,728		$22		($31	)		$3,719
Other/non-agency	1,153		23		—			1,176		1,420		54		—			1,474
Total securities held to maturity		$5,258		$50		($11	)		$5,297		$5,148		$76		($31	)		$5,193
Other Investment Securities, at Fair Value
Money market mutual fund		$65		$—		$—			$65		$28		$—		$—			$28
Other investments	5		—		—			5		5		—		—			5
Total other investment securities, at fair value		$70		$—		$—			$70		$33		$—		$—			$33
Other Investment Securities, at Cost
Federal Reserve Bank stock		$468		$—		$—			$468		$477		$—		$—			$477
Federal Home Loan Bank stock	395		—		—			395		390		—		—			390
Total other investment securities, at cost		$863		$—		$—			$863		$867		$—		$—			$867

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



	Year Ended December 31,
(in millions)	2015			2014			2013
Other-than-temporary impairment:
Total other-than-temporary impairment losses		($43	)		($45	)		($49	)
Portions of loss recognized in other comprehensive income (before taxes)	36			35			41
Net securities impairment losses recognized in earnings		($7	)		($10	)		($8	)

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:



	December 31, 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		$—
US Treasury and other	1	15		—			—	—		—			1	15			$—
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	162	7,423		(51		)	36	819		(27		)	198	8,242		(78		)
Other/non-agency	2	9		—			20	361		(37		)	22	370		(37		)
Total mortgage-backed securities	164	7,432		(51		)	56	1,180		(64		)	220	8,612		(115		)
Total	166		$7,456		($51	)	56		$1,180		($64	)	222		$8,636		($115	)



	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:



	Year Ended December 31,
(in millions)	2015			2014			2013
Cumulative balance at beginning of period		$62			$56			$55
Credit impairments recognized in earnings on securities that have been previously impaired	7			10			8
Reductions due to increases in cash flow expectations on impaired securities	(3		)	(4		)	(7		)
Cumulative balance at end of period		$66			$62			$56

Cumulative credit losses recognized in earnings for impaired AFS debt securities held as of December 31, 2015, 2014 and 2013 were $66 million, $62 million and $56 million, respectively. There were no credit losses recognized in earnings for the Company’s HTM portfolio as of December 31, 2015, 2014 and 2013. For the years ended December 31, 2015, 2014 and 2013, the Company recognized credit related other-than-temporary impairment losses in earnings of $7 million, $10 million and $8 million, respectively, related to non-agency MBS in the AFS portfolio. There were no credit impaired debt securities sold during the years ended December 31, 2015, 2014 and 2013, respectively. Reductions in credit losses due to increases in cash flow expectations were $3 million, $4 million and $7 million for the years ended December 31, 2015, 2014 and 2013, 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. Additionally, as of December 31, 2015, 2014 and 2013, $36 million, $35 million and $41 million respectively, of pre-tax non-credit related losses were deferred in OCI.

The amortized cost and fair value of debt securities at December 31, 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 and other		$15		$—		$1		$—		$16
State and political subdivisions	—		—		—		9		9
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	4		52		1,833		15,345		17,234
Other/non-agency	—		68		3		484		555
Total debt securities available for sale	19		120		1,837		15,838		17,814
Debt securities held to maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		—		—		4,105		4,105
Other/non-agency	—		—		—		1,153		1,153
Total debt securities held to maturity	—		—		—		5,258		5,258
Total amortized cost of debt securities		$19		$120		$1,837		$21,096		$23,072

Fair Value:
Debt securities available for sale
U.S. Treasury and other		$15		$—		$1		$—		$16
State and political subdivisions	—		—		—		9		9
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	4		54		1,845		15,417		17,320
Other/non-agency	—		70		3		449		522
Total debt securities available for sale	19		124		1,849		15,875		17,867
Debt securities held to maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		—		—		4,121		4,121
Other/non-agency	—		—		—		1,176		1,176
Total debt securities held to maturity	—		—		—		5,297		5,297
Total fair value of debt securities		$19		$124		$1,849		$21,172		$23,164

The following table reports the amounts recognized in interest income from investment securities and interest-bearing deposits in banks on the Consolidated Statements of Operations:



	Year Ended December 31,
(in millions)	2015		2014		2013
Taxable		$621		$619		$477
Non-taxable	—		—		—
Interest-bearing cash and due from banks and deposits in banks		$5		$5		$11
Total interest income from investment securities and interest-bearing deposits in banks		$626		$624		$488

Realized gains and losses on securities are shown below:



	Year Ended December 31,
(in millions)	2015			2014			2013
Gains on sale of debt securities		$41			$33			$144
Losses on sale of debt securities	(12		)	(5		)	—
Debt securities gains, net		$29			$28			$144
Equity securities gains		$3			$—			$—

Included in the table above is a $2 million gain recognized on the sale of a $73 million mortgage-backed security that was classified as HTM. The HTM security was sold because the holding would have been prohibited under the Volcker Rule beginning in July 2017.

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



	December 31, 2015				December 31, 2014
(in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Pledged against repurchase agreements		$805		$808		$3,650		$3,701
Pledged against FHLB borrowed funds	1,163		1,186		1,355		1,407
Pledged against derivatives, to qualify for fiduciary powers, and to secure public and other deposits as required by law	3,579		3,610		3,453		3,520

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:



	December 31, 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 purchased under agreements to resell		$500			($500	)		$—		$—			$—		$—
Securities sold under agreements to repurchase	(500		)	500			—		(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 16 “Derivatives.”

Securitizations of mortgage loans retained in the investment portfolio for the years ended December 31, 2015, 2014 and 2013, were $3 million, $18 million and $106 million, respectively. These securitizations included a substantive guarantee by a third party. In 2015, the guarantor was Freddie Mac. In 2014 and 2013, the guarantors were Fannie Mae, Ginnie Mae, and Freddie Mac. These securitizations were accounted for as a sale of the transferred loans and as a purchase of securities. The securities received from the guarantors are classified as AFS.

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 December 31, 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 purchased under agreements to resell
Mortgage-backed securities - Agency		$—		$500			$—		$—		$500
Total securities purchased under agreements to resell		$—		$500			$—		$—		$500
Securities sold under agreements to repurchase
Mortgage-backed securities - Agency		$—		($500	)		$—		$—		($500	)
Total securities sold under agreement to repurchase		$—		($500	)		$—		$—		($500	)

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.