SECURITIES

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



	December 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		$30		$—		$—			$30		$16		$—		$—			$16
State and political subdivisions	8		—		—			8		9		—		—			9
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	19,231		78		(264		)	19,045		17,234		153		(67		)	17,320
Other/non-agency	427		2		(28		)	401		555		4		(37		)	522
Total mortgage-backed securities	19,658		80		(292		)	19,446		17,789		157		(104		)	17,842
Total debt securities available for sale	19,696		80		(292		)	19,484		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		$19,713		$80		($292	)		$19,501		$17,831		$157		($104	)		$17,884
Securities Held to Maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities		$4,126		$12		($44	)		$4,094		$4,105		$27		($11	)		$4,121
Other/non-agency	945		19		—			964		1,153		23		—			1,176
Total securities held to maturity		$5,071		$31		($44	)		$5,058		$5,258		$50		($11	)		$5,297
Other Investment Securities, at Fair Value
Money market mutual fund		$91		$—		$—			$91		$65		$—		$—			$65
Other investments	5		—		—			5		5		—		—			5
Total other investment securities, at fair value		$96		$—		$—			$96		$70		$—		$—			$70
Other Investment Securities, at Cost
Federal Reserve Bank stock		$463		$—		$—			$463		$468		$—		$—			$468
Federal Home Loan Bank stock	479		—		—			479		395		—		—			395
Total other investment securities, at cost		$942		$—		$—			$942		$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:



	Year Ended December 31,
(in millions)	2016			2015			2014
Other-than-temporary impairment:
Total other-than-temporary impairment losses		($39	)		($43	)		($45	)
Portions of loss recognized in other comprehensive income (before taxes)	27			36			35
Net securities impairment losses recognized in earnings		($12	)		($7	)		($10	)

The following tables present 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, 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
State and political subdivisions	1		$8		$—		—		$—		$—		1		$8		$—
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	323	15,387		(292		)	25	461		(16		)	348	15,848		(308		)
Other/non-agency	4	8		—			20	302		(28		)	24	310		(28		)
Total mortgage-backed securities	327	15,395		(292		)	45	763		(44		)	372	16,158		(336		)
Total	328		$15,403		($292	)	45		$763		($44	)	373		$16,166		($336	)



	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	)

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, or if it is more likely than not it will be required to sell the security before recovery, the impairment loss recognized in current period earnings equals the difference between the amortized cost basis and the fair value of the security. If the Company does not intend to sell the impaired debt security, and it is not more likely than not that the Company will be required to sell the impaired security, the other-than-temporary impairment write-down is separated into an amount representing the credit loss, which is recognized in current period earnings and the amount related to all other factors, which is recognized in OCI.

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 collateral loss model and integrated cash flow engine. The model calculates prepayment, default and loss severity assumptions using collateral performance data. These assumptions are used to produce cash flows that generate loss projections. These loss projections are reviewed on a quarterly basis by a cross-functional governance committee to determine whether security impairments are other-than-temporary.

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)	2016			2015			2014
Cumulative balance at beginning of period		$66			$62			$56
Credit impairments recognized in earnings on securities that have been previously impaired	12			7			10
Reductions due to increases in cash flow expectations on impaired securities ⁽¹⁾	(3		)	(3		)	(4		)
Cumulative balance at end of period		$75			$66			$62

⁽¹⁾Reported in interest income from investment securities on the Consolidated Statements of Operations.

Cumulative credit losses recognized in earnings for impaired AFS debt securities held as of December 31, 2016, 2015 and 2014 were $75 million, $66 million and $62 million, respectively. There were no credit losses recognized in earnings for the Company’s HTM portfolio as of December 31, 2016, 2015 and 2014.

For the years ended December 31, 2016, 2015 and 2014, the Company incurred non-agency MBS credit related other-than-temporary impairment losses in earnings of $12 million, $7 million and $10 million, respectively. Other-than-temporary impairment losses for the year ended December 31, 2016 reflect a $5 million increase from the year ended December 31, 2015 related to a one-time adjustment tied to the June 2016 migration from a proprietary internal process to a vendor-based model to estimate other-than-temporary impairment. There were no credit impaired debt securities sold during the years ended December 31, 2016, 2015 and 2014, respectively. The Company does not currently have the intent to sell these debt securities, and it is not more likely than not 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 non- credit-related factors such as changing interest rates and market liquidity. 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 more likely than not 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, 2016, 2015 and 2014, $27 million, $36 million and $35 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, 2016 by contractual maturity are presented 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		$30		$—		$—		$—		$30
State and political subdivisions	—		—		—		8		8
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	1		27		1,177		18,026		19,231
Other/non-agency	—		36		3		388		427
Total debt securities available for sale	31		63		1,180		18,422		19,696
Debt securities held to maturity:
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		—		—		4,126		4,126
Other/non-agency	—		—		—		945		945
Total debt securities held to maturity	—		—		—		5,071		5,071
Total amortized cost of debt securities		$31		$63		$1,180		$23,493		$24,767

Fair Value:
Debt securities available for sale
U.S. Treasury and other		$30		$—		$—		$—		$30
State and political subdivisions	—		—		—		8		8
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	1		28		1,194		17,822		19,045
Other/non-agency	—		36		3		362		401
Total debt securities available for sale	31		64		1,197		18,192		19,484
Debt securities held to maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		—		—		4,094		4,094
Other/non-agency	—		—		—		964		964
Total debt securities held to maturity	—		—		—		5,058		5,058
Total fair value of debt securities		$31		$64		$1,197		$23,250		$24,542

Taxable interest income from investment securities as presented on the Consolidated Statements of Operations was $584 million, $621 million and $619 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Realized gains and losses on securities are presented below:



	Year Ended December 31,
(in millions)	2016			2015			2014
Gains on sale of debt securities		$18			$41			$33
Losses on sale of debt securities	(2		)	(12		)	(5		)
Debt securities gains, net		$16			$29			$28
Equity securities gains		$3			$3			$—

In advance of the July 2017 Volcker Rule’s effective date, during the year ended December 31, 2015, the Company sold a $73 million mortgage-backed security that was classified as HTM, which would have been prohibited under the Volcker Rule, and recognized a $2 million gain.

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



	December 31, 2016				December 31, 2015
(in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Pledged against repurchase agreements		$631		$620		$805		$808
Pledged against FHLB borrowed funds	953		972		1,163		1,186
Pledged against derivatives, to qualify for fiduciary powers, and to secure public and other deposits as required by law	3,575		3,563		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 Consolidated Balance Sheets. When permitted by GAAP, the Company offsets short-term receivables associated with its reverse repurchase agreements against short-term payables associated with its repurchase agreements. The impact of this offsetting on the Consolidated Balance Sheets is presented in the following table:



	December 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 16 “Derivatives.”

Securitizations of mortgage loans retained in the investment portfolio for the years ended December 31, 2016, 2015 and 2014, were $68 million, $3 million and $18 million, respectively. These securitizations included a substantive guarantee by a third party. In 2016, the guarantors were Fannie Mae and Ginnie Mae. In 2015, the guarantor was Freddie Mac. In 2014, 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.