SECURITIES

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



	March 31, 2016									December 31, 2015
(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		$16		$—		$—			$16
State and political subdivisions	9		—		—			9		9		—		—			9
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	17,147		300		(13		)	17,434		17,234		153		(67		)	17,320
Other/non-agency	526		2		(40		)	488		555		4		(37		)	522
Total mortgage-backed securities	17,673		302		(53		)	17,922		17,789		157		(104		)	17,842
Total debt securities available for sale	17,698		302		(53		)	17,947		17,814		157		(104		)	17,867
Marketable equity securities	5		—		—			5		5		—		—			5
Other equity securities	12		—		—			12		12		—		—			12
Total equity securities available for sale	17		—		—			17		17		—		—			17
Total securities available for sale		$17,715		$302		($53	)		$17,964		$17,831		$157		($104	)		$17,884
Securities Held to Maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities		$4,010		$93		$—			$4,103		$4,105		$27		($11	)		$4,121
Other/non-agency	1,119		39		—			1,158		1,153		23		—			1,176
Total securities held to maturity		$5,129		$132		$—			$5,261		$5,258		$50		($11	)		$5,297
Other Investment Securities, at Fair Value
Money market mutual fund		$63		$—		$—			$63		$65		$—		$—			$65
Other investments	5		—		—			5		5		—		—			5
Total other investment securities, at fair value		$68		$—		$—			$68		$70		$—		$—			$70
Other Investment Securities, at Cost
Federal Reserve Bank stock		$468		$—		$—			$468		$468		$—		$—			$468
Federal Home Loan Bank stock	428		—		—			428		395		—		—			395
Total other investment securities, at cost		$896		$—		$—			$896		$863		$—		$—			$863

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



	Three Months Ended March 31
(in millions)	2016			2015
Other-than-temporary impairment:
Total other-than-temporary impairment losses		($41	)		($31	)
Portions of loss recognized in other comprehensive income (before taxes)	40			30
Net securities impairment losses recognized in earnings		($1	)		($1	)

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:



	March 31, 2016
	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
U.S. Treasury and other	1		$9		$—		—		$—		$—		1		$9		$—
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	15	614		(1		)	33	727		(12		)	48	1,341		(13		)
Other/non-agency	6	19		—			20	344		(40		)	26	363		(40		)
Total mortgage-backed securities	21	633		(1		)	53	1,071		(52		)	74	1,704		(53		)
Total	22		$642		($1	)	53		$1,071		($52	)	75		$1,713		($53	)



	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		$—
U.S. 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	)

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 March 31,
(in millions)	2016			2015
Cumulative balance at beginning of period		$66			$62
Credit impairments recognized in earnings on securities that have been previously impaired	1			1
Reductions due to increases in cash flow expectations on impaired securities	(1		)	(1		)
Cumulative balance at end of period		$66			$62

Cumulative credit losses recognized in earnings for impaired AFS debt securities held as of March 31, 2016 and 2015 were $66 million and $62 million, respectively. There were no credit losses recognized in earnings for the Company’s HTM portfolio as of March 31, 2016 and 2015. For the three months ended March 31, 2016 and 2015, the Company recognized credit related other-than-temporary impairment losses in earnings of $1 million related to non-agency MBS in the AFS portfolio. There were no credit impaired debt securities sold during the three months ended March 31, 2016 and 2015. Reductions in credit losses due to increases in cash flow expectations were $1 million for the three months ended March 31, 2016 and 2015, 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 March 31, 2016 and 2015, $40 million and $30 million respectively, of pre-tax non-credit related losses were deferred in OCI.

The amortized cost and fair value of debt securities at March 31, 2016 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	15		37		1,790		15,305		17,147
Other/non-agency	—		57		3		466		526
Total debt securities available for sale	30		94		1,794		15,780		17,698
Debt securities held to maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		—		—		4,010		4,010
Other/non-agency	—		—		—		1,119		1,119
Total debt securities held to maturity	—		—		—		5,129		5,129
Total amortized cost of debt securities		$30		$94		$1,794		$20,909		$22,827

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	15		39		1,823		15,557		17,434
Other/non-agency	—		57		3		428		488
Total debt securities available for sale	30		96		1,827		15,994		17,947
Debt securities held to maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		—		—		4,103		4,103
Other/non-agency	—		—		—		1,158		1,158
Total debt securities held to maturity	—		—		—		5,261		5,261
Total fair value of debt securities		$30		$96		$1,827		$21,255		$23,208

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



	Three Months Ended March 31,
(in millions)	2016		2015
Taxable		$145		$159
Non-taxable	—		—
Total interest income from investment securities and interest-bearing deposits in banks		$145		$159

Realized gains and losses on securities are shown below:



	Three Months Ended March 31,
(in millions)	2016		2015
Gains on sale of debt securities		$9		$12
Losses on sale of debt securities	—		(4		)
Debt securities gains, net		$9		$8
Equity securities gains		$—		$2

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



	March 31, 2016				December 31, 2015
(in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Pledged against repurchase agreements		$682		$695		$805		$808
Pledged against FHLB borrowed funds	1,129		1,168		1,163		1,186
Pledged against derivatives, to qualify for fiduciary powers, and to secure public and other deposits as required by law	3,336		3,406		3,579		3,610

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:



	March 31, 2016						December 31, 2015
(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			—

Note: The Company also offsets certain derivative assets and derivative liabilities on the Consolidated Balance Sheets. For further information see Note 11 “Derivatives.”

There were no securitizations of mortgage loans retained in the investment portfolio for the three months ended March 31, 2016 and there were $18 million of securitizations of mortgage loans for the three months ended March 31, 2015. These securitizations included a substantive guarantee by a third party. In 2015, the guarantor was 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.