Securities

9 Months Ended

Sep. 30, 2014

Securities

Securities

NOTE 3.Securities

			Amortized		Gross Unrealized				Fair
September 30, 2014			Cost		Gains		Losses		Value
			(Dollars in millions)
AFS securities:
	U.S. Treasury		$	993	$	—	$	1	$	992
	MBS issued by GSE			16,952		69		408		16,613
	States and political subdivisions			1,894		119		48		1,965
	Non-agency MBS			239		38		—		277
	Other			42		—		—		42
	Covered			910		375		—		1,285
		Total AFS securities	$	21,030	$	601	$	457	$	21,174
HTM securities:
	U.S. Treasury		$	1,096	$	8	$	1	$	1,103
	GSE			5,394		11		200		5,205
	MBS issued by GSE			13,587		35		87		13,535
	States and political subdivisions			23		2		—		25
	Other			617		17		—		634
		Total HTM securities	$	20,717	$	73	$	288	$	20,502

			Amortized		Gross Unrealized				Fair
December 31, 2013			Cost		Gains		Losses		Value
			(Dollars in millions)
AFS securities:
	U.S. Treasury		$	595	$	—	$	—	$	595
	MBS issued by GSE			18,397		78		546		17,929
	States and political subdivisions			1,877		65		91		1,851
	Non-agency MBS			264		27		—		291
	Other			46		—		1		45
	Covered			989		404		—		1,393
		Total AFS securities	$	22,168	$	574	$	638	$	22,104
HTM securities:
	U.S. Treasury		$	392	$	—	$	8	$	384
	GSE			5,603		2		397		5,208
	MBS issued by GSE			11,636		38		220		11,454
	States and political subdivisions			33		2		—		35
	Other			437		12		—		449
		Total HTM securities	$	18,101	$	54	$	625	$	17,530

Covered securities included non-agency MBS of $1.0 billion and $1.1 billion as of September 30, 2014 and December 31, 2013, respectively, and state and political subdivision securities of $314 million as of September 30, 2014 and December 31, 2013. Effective October 1, 2014, securities subject to the commercial loss sharing agreement with the FDIC related to the Colonial acquisition were no longer covered by loss sharing; however, any gains on the sale of these securities through September 30, 2017 would be shared with the FDIC. Since these securities are in a significant unrealized gain position, they continue to be effectively covered as any declines in the unrealized gains of the securities down to a contractually specified amount would reduce the liability to the FDIC at the applicable percentage. The contractually-specified amount is the acquisition date fair value less any paydowns, redemptions or maturities and OTTI and totaled approximately $663 million at September 30, 2014. Any further declines below the contractually-specified amount would not be subject to loss sharing.

Certain investments in marketable debt securities and MBS issued by FNMA and FHLMC exceeded ten percent of shareholders' equity at September 30, 2014. The FNMA investments had total amortized cost and fair value of $12.6 billion and $12.3 billion, respectively. The FHLMC investments had total amortized cost and fair value of $5.7 billion and $5.5 billion, respectively.

The following table reflects changes in credit losses on securities with OTTI (excluding covered), which were primarily non-agency MBS, where a portion of the unrealized loss was recognized in OCI.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
		2014		2013		2014		2013
	(Dollars in millions)
Balance at beginning of period	$	72	$	86	$	78	$	98
Credit losses on securities without previously recognized OTTI		―		―		1		―
Credit losses on securities with previously recognized OTTI		4		―		4		―
Reductions for securities sold/settled during the period		(5)		(4)		(11)		(16)
Credit recoveries through yield		(1)		―		(2)		―
Balance at end of period	$	70	$	82	$	70	$	82

The amortized cost and estimated fair value of the securities portfolio by contractual maturity are shown in the following table.The expected life of MBS may differ from contractual maturities because borrowers have the right to prepay the underlying mortgage loans with or without prepayment penalties.

		AFS				HTM
		Amortized		Fair		Amortized		Fair
September 30, 2014		Cost		Value		Cost		Value
		(Dollars in millions)
Due in one year or less		$	522	$	523	$	―	$	―
Due after one year through five years			678		688		200		194
Due after five years through ten years			545		578		6,440		6,268
Due after ten years			19,285		19,385		14,077		14,040
	Total debt securities	$	21,030	$	21,174	$	20,717	$	20,502

The following tables present the fair values and gross unrealized losses of investments based on the length of time that individual securities have been in a continuous unrealized loss position:
				Less than 12 months				12 months or more				Total
				Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
	September 30, 2014			Value		Losses		Value		Losses		Value		Losses
				(Dollars in millions)
	AFS securities:
		U.S. Treasury securities		$	476	$	1	$	—	$	—	$	476	$	1
		MBS issued by GSE			3,472		54		6,977		354		10,449		408
		States and political subdivisions			4		—		487		48		491		48
			Total	$	3,952	$	55	$	7,464	$	402	$	11,416	$	457
	HTM securities:
		U.S. Treasury		$	392	$	1	$	—	$	—	$	392	$	1
		GSE			—		—		4,791		200		4,791		200
		MBS issued by GSE			8,957		77		824		10		9,781		87
			Total	$	9,349	$	78	$	5,615	$	210	$	14,964	$	288

			Less than 12 months				12 months or more				Total
			Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
December 31, 2013			Value		Losses		Value		Losses		Value		Losses
			(Dollars in millions)
AFS securities:
	MBS issued by GSE		$	10,259	$	406	$	1,935	$	140	$	12,194	$	546
	States and political subdivisions			232		8		441		83		673		91
	Other			34		1		―		―		34		1
		Total	$	10,525	$	415	$	2,376	$	223	$	12,901	$	638
HTM securities:
	U.S. Treasury		$	384	$	8	$	―	$	―	$	384	$	8
	GSE			4,996		397		―		―		4,996		397
	MBS issued by GSE			8,800		219		48		1		8,848		220
		Total	$	14,180	$	624	$	48	$	1	$	14,228	$	625

The unrealized losses on GSE securities and MBS issued by GSE werethe result of increases in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers or underlying loans.

At September 30, 2014, $44 million of the unrealized loss on states and political subdivisions securities was the result of fair value hedge basis adjustments that are a component of amortized cost. States and political subdivisions securities in an unrealized loss position are evaluated for credit impairment through a qualitative analysis of issuer performance and the primary source of repayment. The evaluation of state and political subdivision securitiesresulted in the OTTI recognized during the nine months ended September 30, 2014.