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Securities
 12 Months Ended
Dec. 31, 2014
Securities  
Securities

NOTE 3. Securities

     Amortized Gross Unrealized Fair 
 December 31, 2014 Cost Gains Losses Value 
                 
     (Dollars in millions) 
 AFS securities:             
  U.S. Treasury $ 1,230 $ 1 $ — $ 1,231 
  MBS issued by GSE    16,358   93   297   16,154 
  States and political subdivisions    1,913   120   59   1,974 
  Non-agency MBS   232   32   —   264 
  Other   41   —   —   41 
  Securities acquired from FDIC   886   357   —   1,243 
   Total AFS securities $ 20,660 $ 603 $ 356 $ 20,907 
                 
 HTM securities:             
  U.S. Treasury $ 1,096 $ 23 $ — $ 1,119 
  GSE   5,394   17   108   5,303 
  MBS issued by GSE    13,120   137   12   13,245 
  States and political subdivisions    22   2   —   24 
  Other   608   14   —   622 
   Total HTM securities $ 20,240 $ 193 $ 120 $ 20,313 

     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 
  Securities acquired from FDIC   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 

The fair value of securities acquired from the FDIC included non-agency MBS of $931 million and $1.1 billion as of December 31, 2014 and December 31, 2013, respectively, and state and political subdivision securities of $312 million and $314 million as of December 31, 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 $626 million at December 31, 2014. Any further declines below the contractually-specified amount would not be covered.

 

Certain investments in marketable debt securities and MBS issued by FNMA and FHLMC exceeded ten percent of shareholders' equity at December 31, 2014. The FNMA investments had total amortized cost and fair value of $12.5 billion and $12.3 billion, respectively. The FHLMC investments had total amortized cost and fair value of $5.5 billion.

The following table reflects changes in credit losses on securities with OTTI (excluding securities acquired from the FDIC) where a portion of the unrealized loss was recognized in OCI.

     Year Ended December 31, 
     2014 2013 2012 
              
     (Dollars in millions) 
 Balance at beginning of period$ 78 $ 98 $ 130 
  Credit losses on securities without previous OTTI  6   ―   ― 
  Credit losses on securities for which OTTI was previously recognized  ―   ―   5 
  Reductions for securities sold/settled during the period  (17)   (20)   (37) 
  Credit recoveries through yield  (3)   ―   ― 
 Balance at end of period$ 64 $ 78 $ 98 

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 
 December 31, 2014 Cost Value Cost Value 
                 
     (Dollars in millions) 
 Due in one year or less  $ 612 $ 612 $ ― $ ― 
 Due after one year through five years    828   839   750   734 
 Due after five years through ten years    583   611   6,007   5,960 
 Due after ten years    18,637   18,845   13,483   13,619 
  Total debt securities  $ 20,660 $ 20,907 $ 20,240 $ 20,313 

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 
 December 31, 2014 Value Losses Value Losses Value Losses 
                        
      (Dollars in millions) 
 AFS securities:                   
  MBS issued by GSE $ 2,285 $ 19 $ 6,878 $ 278 $ 9,163 $ 297 
  States and political subdivisions    13   —   449   59   462   59 
   Total $ 2,298 $ 19 $ 7,327 $ 337 $ 9,625 $ 356 
                        
 HTM securities:                   
  GSE $ 896 $ 5 $ 3,968 $ 103 $ 4,864 $ 108 
  MBS issued by GSE   1,329   5   800   7   2,129   12 
   Total $ 2,225 $ 10 $ 4,768 $ 110 $ 6,993 $ 120 

      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 
  Securities acquired from FDIC   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 

Periodic reviews are conducted to identify and evaluate each investment with an unrealized loss for OTTI. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. Unrealized losses that are determined to be temporary in nature are recorded, net of tax, in AOCI for AFS securities. The unrealized losses on GSE securities and MBS issued by GSE were the result of increases in market interest rates compared to the date the securities were acquired rather than the credit quality of the issuers.

 

Cash flow modeling is used to evaluate non-agency MBS in an unrealized loss position for potential credit impairment. These models give consideration to long-term macroeconomic factors applied to current security default rates, prepayment rates and recovery rates and security-level performance. At December 31, 2014, one non-agency MBS had an immaterial amount of other than temporary credit impairment.

 

At December 31, 2014, $55 million of the unrealized loss on municipal securities was the result of fair value hedge basis adjustments that are a component of amortized cost. Municipal securities in an unrealized loss position are evaluated for credit impairment through a qualitative analysis of issuer performance and the primary source of repayment. At December 31, 2014, the evaluation of municipal securities indicated one municipal security had an immaterial amount of other than temporary credit impairment.