SECURITIES

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



	March 31, 2017									December 31, 2016
(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		$15		$—		$—			$15		$30		$—		$—			$30
State and political subdivisions	7		—		—			7		8		—		—			8
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	19,773		71		(282		)	19,562		19,231		78		(264		)	19,045
Other/non-agency	397		2		(19		)	380		427		2		(28		)	401
Total mortgage-backed securities	20,170		73		(301		)	19,942		19,658		80		(292		)	19,446
Total debt securities available for sale	20,192		73		(301		)	19,964		19,696		80		(292		)	19,484
Marketable equity securities	—		—		—			—		5		—		—			5
Other equity securities	—		—		—			—		12		—		—			12
Total equity securities available for sale	—		—		—			—		17		—		—			17
Total securities available for sale		$20,192		$73		($301	)		$19,964		$19,713		$80		($292	)		$19,501
Securities Held to Maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities		$4,075		$15		($36	)		$4,054		$4,126		$12		($44	)		$4,094
Other/non-agency	917		24		—			941		945		19		—			964
Total securities held to maturity		$4,992		$39		($36	)		$4,995		$5,071		$31		($44	)		$5,058
Other Investment Securities, at Fair Value
Money market mutual fund		$96		$—		$—			$96		$91		$—		$—			$91
Other investments	5		—		—			5		5		—		—			5
Total other investment securities, at fair value		$101		$—		$—			$101		$96		$—		$—			$96
Other Investment Securities, at Cost
Federal Reserve Bank stock		$463		$—		$—			$463		$463		$—		$—			$463
Federal Home Loan Bank stock	458		—		—			458		479		—		—			479
Other equity securities	18		—		—			18		—		—		—			—
Total other investment securities, at cost		$939		$—		$—			$939		$942		$—		$—			$942

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)	2017			2016
Other-than-temporary impairment:
Total other-than-temporary impairment losses		($20	)		($41	)
Portions of loss recognized in other comprehensive income (before taxes)	19			40
Net securities impairment losses recognized in earnings		($1	)		($1	)

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:



	March 31, 2017
	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		$7		$—		—		$—		$—		1		$7		$—
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	323	15,287		(305		)	24	449		(13		)	347	15,736		(318		)
Other/non-agency	7	50		(1		)	17	229		(18		)	24	279		(19		)
Total mortgage-backed securities	330	15,337		(306		)	41	678		(31		)	371	16,015		(337		)
Total	331		$15,344		($306	)	41		$678		($31	)	372		$16,022		($337	)



	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	)

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 an 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:



	Three Months Ended March 31,
(in millions)	2017			2016
Cumulative balance at beginning of period		$75			$66
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		)	(1		)
Cumulative balance at end of period		$75			$66

⁽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 March 31, 2017 and 2016 were $75 million and $66 million, respectively. There were no credit losses recognized in earnings for the Company’s HTM portfolio as of March 31, 2017 and 2016.

For the three months ended March 31, 2017 and 2016, the Company incurred non-agency MBS credit related other-than-temporary impairment losses in earnings of $1 million. There were no credit impaired debt securities sold during the three months ended March 31, 2017 and 2016. 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, $19 million and $40 million of pre-tax non-credit related losses were deferred in OCI for the three months ended March 31, 2017 and 2016, respectively.

The amortized cost and fair value of debt securities 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.



	March 31, 2017
	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		$—		$—		$—		$15
State and political subdivisions	—		—		—		7		7
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	1		74		1,118		18,580		19,773
Other/non-agency	—		31		2		364		397
Total debt securities available for sale	16		105		1,120		18,951		20,192
Debt securities held to maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		—		—		4,075		4,075
Other/non-agency	—		—		—		917		917
Total debt securities held to maturity	—		—		—		4,992		4,992
Total amortized cost of debt securities		$16		$105		$1,120		$23,943		$25,184

Fair Value:
Debt securities available for sale
U.S. Treasury and other		$15		$—		$—		$—		$15
State and political subdivisions	—		—		—		7		7
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	1		74		1,132		18,355		19,562
Other/non-agency	—		31		2		347		380
Total debt securities available for sale	16		105		1,134		18,709		19,964
Debt securities held to maturity
Mortgage-backed securities:
Federal agencies and U.S. government sponsored entities	—		—		—		4,054		4,054
Other/non-agency	—		—		—		941		941
Total debt securities held to maturity	—		—		—		4,995		4,995
Total fair value of debt securities		$16		$105		$1,134		$23,704		$24,959

Taxable interest income from investment securities as presented on the Consolidated Statements of Operations was $160 million and $145 million for the three months ended March 31, 2017 and 2016, respectively.

Realized gains and losses on securities are presented below:



	Three Months Ended March 31,
(in millions)	2017		2016
Gains on sale of debt securities		$4		$9
Losses on sale of debt securities	—		—
Debt securities gains, net		$4		$9

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



	March 31, 2017				December 31, 2016
(in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Pledged against repurchase agreements		$538		$531		$631		$620
Pledged against FHLB borrowed funds	925		948		953		972
Pledged against derivatives, to qualify for fiduciary powers, and to secure public and other deposits as required by law	3,301		3,277		3,575		3,563

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 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 Company recognized no offsetting of short-term receivables or payables as of March 31, 2017 or December 31, 2016. The Company offsets certain derivative assets and derivative liabilities on the Consolidated Balance Sheets. For further information see Note 10 “Derivatives.”

There were $22 million in securitizations of mortgage loans retained in the investment portfolio for the three months ended March 31, 2017 and none in 2016. In 2017, the guarantors were Fannie Mae and Ginnie Mae and included a substantive guarantee by a third party. 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.