Securities

Our securities available-for-sale and securities held-to-maturity portfolios consisted of the following:



December 31, 2015	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in millions)
Securities available-for-sale:
U.S. Treasury	$	17,026	$	142	$	(270	)	$	16,898
U.S. Government sponsored enterprises:⁽¹⁾
Mortgage-backed securities	1,451		2		(12		)	1,441
Collateralized mortgage obligations	159		—		(5		)	154
Direct agency obligations	4,136		133		(26		)	4,243
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	10,645		9		(145		)	10,509
Collateralized mortgage obligations	1,293		11		(4		)	1,300
Obligations of U.S. states and political subdivisions	340		8		—			348
Asset backed securities collateralized by:
Commercial mortgages	9		—		—			9
Home equity	83		—		(8		)	75
Other	110		—		(21		)	89
Foreign debt securities⁽²⁾	548		—		(2		)	546
Equity securities	161		3		(3		)	161
Total available-for-sale securities	$	35,961	$	308	$	(496	)	$	35,773
Securities held-to-maturity:
U.S. Government sponsored enterprises:⁽³⁾
Mortgage-backed securities	$	2,945	$	20	$	(9	)	$	2,956
Collateralized mortgage obligations	1,755		73		(5		)	1,823
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	3,269		19		(11		)	3,277
Collateralized mortgage obligations	6,029		63		(11		)	6,081
Obligations of U.S. states and political subdivisions	19		1		—			20
Asset-backed securities collateralized by residential mortgages	7		1		—			8
Total held-to-maturity securities	$	14,024	$	177	$	(36	)	$	14,165



December 31, 2014	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in millions)
Securities available-for-sale:
U.S. Treasury	$	11,793	$	276	$	(58	)	$	12,011
U.S. Government sponsored enterprises:⁽¹⁾
Mortgage-backed securities	520		5		(1		)	524
Collateralized mortgage obligations	35		—		—			35
Direct agency obligations	3,995		217		(6		)	4,206
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	7,985		101		(27		)	8,059
Collateralized mortgage obligations	329		3		(2		)	330
Obligations of U.S. states and political subdivisions	661		10		(4		)	667
Asset backed securities collateralized by:
Commercial mortgages	43		—		—			43
Home equity	97		—		(8		)	89
Other	110		—		(16		)	94
Foreign debt securities⁽²⁾	3,921		6		(12		)	3,915
Equity securities	165		3		(1		)	167
Total available-for-sale securities	$	29,654	$	621	$	(135	)	$	30,140
Securities held-to-maturity:
U.S. Government sponsored enterprises:⁽³⁾
Mortgage-backed securities	$	4,868	$	120	$	(1	)	$	4,987
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	3,700		53		(1		)	3,752
Collateralized mortgage obligations	4,867		54		(1		)	4,920
Obligations of U.S. states and political subdivisions	23		1		—			24
Asset-backed securities collateralized by residential mortgages	11		1		—			12
Total held-to-maturity securities	$	13,469	$	229	$	(3	)	$	13,695


⁽¹⁾	Includes securities at amortized cost of $1,577 million and $521 million issued or guaranteed by FNMA at December 31, 2015 and 2014, respectively, and $33 million and $34 million issued or guaranteed by the Federal Home Loan Mortgage Corporation ("FHLMC") at December 31, 2015 and 2014, respectively.


⁽²⁾	At December 31, 2015 none of our foreign debt securities were fully backed by foreign governments. At December 31, 2014, foreign debt securities consisted of $689 million of securities fully backed by foreign governments. The remainder of foreign debt securities represents public sector entity, bank or corporate debt.


⁽³⁾	Includes securities at amortized cost of $3,182 million and $3,185 million issued or guaranteed by FNMA at December 31, 2015 and 2014, respectively, and $1,518 million and $1,683 million issued and guaranteed by FHLMC at December 31, 2015 and 2014, respectively.

Net unrealized gains decreased within the available-for-sale portfolio in 2015 due primarily to rising yields on longer-term U.S. Treasury and U.S. Government agency mortgage-backed securities coupled with increased investments in these securities as well as sales of U.S. Treasury securities that were in a net unrealized gain position at December 31, 2014.

The following table summarizes gross unrealized losses and related fair values as of December 31, 2015 and 2014 classified as to the length of time the losses have existed:



	One Year or Less						Greater Than One Year
December 31, 2015	Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment		Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment
	(dollars are in millions)
Securities available-for-sale:
U.S. Treasury	52	$	(227	)	$	11,046	5	$	(43	)	$	924
U.S. Government sponsored enterprises	164	(30		)	1,451		19	(13		)	282
U.S. Government agency issued or guaranteed	62	(141		)	9,725		3	(8		)	101
Obligations of U.S. states and political subdivisions	4	—			16		3	—			45
Asset backed securities	1	—			9		8	(29		)	164
Foreign debt securities	3	(2		)	351		—	—			—
Equity securities	1	(3		)	156		—	—			—
Securities available-for-sale	287	$	(403	)	$	22,754	38	$	(93	)	$	1,516
Securities held-to-maturity:
U.S. Government sponsored enterprises	312	$	(14	)	$	1,143	49	$	—		$	—
U.S. Government agency issued or guaranteed	145	(22		)	3,303		657	—			20
Obligations of U.S. states and political subdivisions	1	—			—		3	—			1
Securities held-to-maturity	458	$	(36	)	$	4,446	709	$	—		$	21



	One Year or Less						Greater Than One Year
December 31, 2014	Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment		Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment
	(dollars are in millions)
Securities available-for-sale:
U.S. Treasury	6	$	(47	)	$	3,459	4	$	(11	)	$	1,546
U.S. Government sponsored enterprises	2	(1		)	128		24	(6		)	391
U.S. Government agency issued or guaranteed	30	(20		)	2,046		10	(9		)	213
Obligations of U.S. states and political subdivisions	34	(2		)	146		23	(2		)	194
Asset backed securities	1	—			3		9	(24		)	199
Foreign debt securities	5	(9		)	1,805		3	(3		)	898
Equity securities	1	(1		)	158		—	—			—
Securities available-for-sale	79	$	(80	)	$	7,745	73	$	(55	)	$	3,441
Securities held-to-maturity:
U.S. Government sponsored enterprises	144	$	(1	)	$	394	47	$	—		$	—
U.S. Government agency issued or guaranteed	103	(2		)	985		800	—			2
Obligations of U.S. states and political subdivisions	—	—			—		3	—			1
Securities held-to-maturity	247	$	(3	)	$	1,379	850	$	—		$	3

Although the fair value of a particular security is below its amortized cost, it does not necessarily result in a credit loss and hence an other-than-temporary impairment. The decline in fair value may be caused by, among other things, the illiquidity of the market. We have reviewed the securities for which there is an unrealized loss for other-than-temporary impairment in accordance with our accounting policies, discussed further below. At December 31, 2015 and 2014, we do not consider any of our debt securities to be other-than-temporarily impaired as we expect to recover their amortized cost basis and we neither intend nor expect to be required to sell these securities prior to recovery, even if that equates to holding securities until their individual maturities. However, other-than-temporary impairments may occur in future periods if the credit quality of the securities deteriorates.

Other-Than-Temporary Impairment On a quarterly basis, we perform an assessment to determine whether there have been any events or economic circumstances to indicate that a security with an unrealized loss has suffered other-than-temporary impairment. A debt security is considered impaired if its fair value is less than its amortized cost at the reporting date. If impaired, we assess whether the impairment is other-than-temporary.

If we intend to sell the debt security or if it is more-likely-than-not that we will be required to sell the debt security before the recovery of its amortized cost basis, the impairment is considered other-than-temporary and the unrealized loss is recorded in earnings. An impairment is also considered other-than-temporary if a credit loss exists (i.e., the present value of the expected future cash flows is less than the amortized cost basis of the debt security). In the event a credit loss exists, the credit loss component of an other-than-temporary impairment is recorded in earnings while the remaining portion of the impairment loss attributable to factors other than credit loss is recognized, net of tax, in other comprehensive income (loss).

For all securities held in the available-for-sale or held-to-maturity portfolios for which unrealized losses attributed to factors other than credit existed, we do not have the intention to sell and believe we will not be required to sell the securities for contractual, regulatory or liquidity reasons as of the reporting date. In determining whether a credit loss exists and the period over which the debt security is expected to recover, we considered the following factors:


•	The length of time and the extent to which the fair value has been less than the amortized cost basis;


•	The credit protection features embedded within the instrument, which includes but is not limited to credit subordination positions, payment structure, over collateralization, protective triggers and financial guarantees provided by third parties;


•	Changes in the near term prospects of the issuer or the underlying collateral of a security such as changes in default rates, loss severities given default and significant changes in prepayment assumptions;


•	The level of excess cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and


•	Any adverse change to the credit conditions of the issuer, the monoline insurer or the security such as credit downgrades by the rating agencies.

We use a standard valuation model to measure the credit loss for available-for-sale and held-to-maturity securities. The valuation model captures the composition of the underlying collateral and the cash flow structure of the security. We make reference to external forecasts on key economic data and consider internal assessments on credit quality in developing significant inputs to the impairment model. Significant inputs to the model include delinquencies, collateral types and related contractual features, estimated rates of default, loss given default and prepayment assumptions. Using the inputs, the model estimates cash flows generated from the underlying collateral and distributes those cash flows to respective tranches of securities considering credit subordination and other credit enhancement features. The projected future cash flows attributable to the debt security held are discounted using the effective interest rates determined at the original acquisition date if the security bears a fixed rate of return. The discount rate is adjusted for the floating index rate for securities which bear a variable rate of return, such as LIBOR-based instruments.

During 2015, none of our debt securities were determined to have either initial other-than-temporary impairment or changes to previous other-than-temporary impairment estimates relating to the credit component, as such, there were no other-than-temporary impairment losses recognized related to credit loss.

During 2014, none of our debt securities were determined to have initial other-than-temporary impairment while two held-to-maturity asset-backed debt securities, which were previously determined to be other-than-temporarily impaired, had changes to their other-than-temporary impairment estimates related to the credit component. The additional credit loss associated with the impaired debt securities, which reflects the excess of amortized cost over the present value of expected future cash flows, was $11 million during 2014, and was recorded as a component of net other-than-temporary impairment losses in the accompanying consolidated statement of income (loss).

The following table summarizes the rollforward of credit losses which have been recognized in income on other-than-temporary impaired securities that we do not intend to sell nor will likely be required to sell:



Year Ended December 31,	2014
	(in millions)
Beginning balance of credit losses on held-to-maturity debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss)	$	61
Increase in credit losses for which an other-than-temporary impairment was previously recognized	11
Reduction of credit losses previously recognized on held-to-maturity debt securities due to closure of a VIE	(72		)
Ending balance of credit losses on held-to-maturity debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss)	$	—

Certain asset-backed securities in the available-for-sale portfolio have an embedded financial guarantee provided by monoline insurers. Because the financial guarantee is not a separate and distinct contract from the asset-backed security, they are considered a single unit of account for fair value measurement and impairment assessment purposes. In evaluating the degree of reliance to be placed on the financial guarantee of a monoline insurer when estimating the cash flows to be collected for the purpose of recognizing and measuring impairment loss, consideration is given to our assessment of the creditworthiness of the monoline and other market factors. Based on the information available, including any actions undertaken by the regulatory agencies over the monoline insurers and their published financial results, we perform both a credit as well as a liquidity analysis on the monoline insurers each quarter. Our analysis also includes a review of market-based credit default spreads, when available, to assess the appropriateness of our assessment of the monoline insurer’s creditworthiness. A credit downgrade to non-investment grade is key but not the only factor in determining the monoline insurer’s ability to fulfill its contractual obligation under the financial guarantee. Although a monoline may have been downgraded by the credit rating agencies or ordered to commute its operations by the insurance commissioners, it may retain the ability and the obligation to continue to pay claims in the near term.

At December 31, 2015, we held 12 individual asset-backed securities in the available-for-sale portfolio, of which 5 were also wrapped by a monoline insurance company. The asset-backed securities backed by a monoline wrap comprised $164 million of the total aggregate fair value of asset-backed securities of $173 million at December 31, 2015. The gross unrealized losses on these monoline wrapped securities were $29 million at December 31, 2015. We did not take into consideration the value of the monoline wrap of any non-investment grade monoline insurers as of December 31, 2015 and, therefore, we only considered the financial guarantee of monoline insurers on securities for purposes of evaluating other-than-temporary impairment on securities with a fair value of $75 million.

At December 31, 2014, we held 15 individual asset-backed securities in the available-for-sale portfolio, of which 5 were also wrapped by a monoline insurance company. The asset-backed securities backed by a monoline wrap comprised $183 million of the total aggregate fair value of asset-backed securities of $226 million at December 31, 2014. The gross unrealized losses on these monoline wrapped securities were $23 million at December 31, 2014. We did not take into consideration the value of the monoline wrap of any non-investment grade monoline insurers as of December 31, 2014 and, therefore, we only considered the financial guarantee of monoline insurers on securities with a fair value of $89 million for purposes of evaluating other-than-temporary impairment.

Other securities gains (losses), net The following table summarizes realized gains and losses on investment securities transactions attributable to available-for-sale securities:



Year Ended December 31,	2015			2014			2013
	(in millions)
Gross realized gains	$	126		$	201		$	314
Gross realized losses	(78		)	(79		)	(120		)
Net realized gains	$	48		$	122		$	194

During 2014, the securities underlying Bryant Park were sold and the related agreements, which had a total carrying value of $76 million, were terminated and we recognized a loss of $9 million. These sales were in response to requests we received from the other participants to sell the securities underlying Bryant Park and were executed in connection with the closure of the Bryant Park facility. Therefore, these sales did not affect our intent and ability to hold our remaining held-to-maturity portfolio until maturity.

During 2013, we sold six asset-backed securities out of our held-to-maturity portfolio with a total carrying value of $71 million and recognized a gain of $8 million. These sales were in response to the significant credit deterioration which had occurred on these securities which had been classified as substandard for regulatory reporting purposes and, therefore, these disposals did not affect our intent and ability to hold our remaining held-to-maturity portfolio until maturity.

Contractual Maturities and Yields The following table summarizes the amortized cost and fair values of securities available-for-sale and securities held-to-maturity at December 31, 2015 by contractual maturity. Expected maturities differ from contractual maturities because borrowers have the right to prepay obligations without prepayment penalties in certain cases. Securities available-for-sale amounts exclude equity securities as they do not have stated maturities. The table below also reflects the distribution of maturities of debt securities held at December 31, 2015, together with the approximate taxable equivalent yield of the portfolio. The yields shown are calculated by dividing annualized interest income, including the accretion of discounts and the amortization of premiums, by the amortized cost of securities outstanding at December 31, 2015. Yields on tax-exempt obligations have been computed on a taxable equivalent basis using applicable statutory tax rates.



	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years
Taxable Equivalent Basis	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(dollars are in millions)
Available-for-sale:
U.S. Treasury	$	1,320	.83	%	$	5,529	1.16	%	$	6,301	2.22	%	$	3,876	3.05	%
U.S. Government sponsored enterprises	—		—		3,045		3.01		927		2.21		1,774		2.95
U.S. Government agency issued or guaranteed	—		—		6		4.20		33		3.89		11,899		2.58
Obligations of U.S. states and political subdivisions	—		—		30		4.60		120		2.67		190		3.51
Asset backed securities	—		—		—		—		—		—		202		3.22
Foreign debt securities	185		1.42		363		1.36		—		—		—		—
Total amortized cost	$	1,505	.90	%	$	8,973	1.81	%	$	7,381	2.24	%	$	17,941	2.74	%
Total fair value	$	1,507			$	9,047			$	7,385			$	17,673
Held-to-maturity:
U.S. Government sponsored enterprises	$	—	—	%	$	113	1.27	%	$	597	2.70	%	$	3,991	2.95	%
U.S. Government agency issued or guaranteed	—		—		13		1.43		30		3.97		9,254		2.38
Obligations of U.S. states and political subdivisions	3		3.96		6		4.08		5		3.41		5		5.32
Asset backed securities	—		—		—		—		—		—		7		6.49
Total amortized cost	$	3	4.03	%	$	132	1.42	%	$	632	2.76	%	$	13,257	2.55	%
Total fair value	$	3			$	132			$	638			$	13,392

Investments in Federal Home Loan Bank stock and Federal Reserve Bank stock of $323 million and $632 million, respectively, were included in other assets at December 31, 2015. Investments in Federal Home Loan Bank stock and Federal Reserve Bank stock of $108 million and $483 million, respectively, were included in other assets at December 31, 2014.