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Investment Securities
 9 Months Ended
Sep. 30, 2015
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
NOTE 3—INVESTMENT SECURITIES
Our investment portfolio consists primarily of the following: U.S. Treasury securities; corporate debt securities guaranteed by U.S. government agencies; U.S. government-sponsored enterprise or agency (“Agency”) and non-agency residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”); other asset-backed securities (“ABS”); and other securities. The carrying value of our investments in U.S. Treasury securities, Agency securities and other securities guaranteed by the U.S. government or U.S. government agencies represented 90% and 86% of our total investment securities as of September 30, 2015 and December 31, 2014, respectively.
Our investment portfolio includes securities available for sale and securities held to maturity. We classify securities as available for sale or held to maturity based on our investment strategy and management’s assessment of our intent and ability to hold the securities until maturity.
The table below presents the overview of our investment securities portfolio as of September 30, 2015 and December 31, 2014.
Table 3.1: Overview of Investment Securities Portfolio
(Dollars in millions)
 
September 30, 2015
 
December 31, 2014
Securities available for sale, at fair value
 
$
39,431

 
$
39,508

Securities held to maturity, at carrying value
 
23,711

 
22,500

Total investments securities
 
$
63,142

 
$
62,008


The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale as of September 30, 2015 and December 31, 2014.
Table 3.2: Investment Securities Available for Sale
 
 
September 30, 2015
(Dollars in millions)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses(1)
 
Fair
Value
Investment securities available for sale:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
4,412

 
$
33

 
$
0

 
$
4,445

Corporate debt securities guaranteed by U.S. government agencies
 
356

 
1

 
(2
)
 
355

RMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
24,409

 
274

 
(72
)
 
24,611

Non-agency
 
2,761

 
411

 
(18
)
 
3,154

Total RMBS
 
27,170

 
685

 
(90
)
 
27,765

CMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
3,431

 
45

 
(30
)
 
3,446

Non-agency
 
1,744

 
36

 
(6
)
 
1,774

Total CMBS
 
5,175

 
81

 
(36
)
 
5,220

Other ABS(3)
 
1,478

 
6

 
(1
)
 
1,483

Other securities(4)
 
162

 
2

 
(1
)
 
163

Total investment securities available for sale
 
$
38,753

 
$
808

 
$
(130
)
 
$
39,431

 
 
December 31, 2014
(Dollars in millions)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses(1)
 
Fair
Value
Investment securities available for sale:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
4,114

 
$
5

 
$
(1
)
 
$
4,118

Corporate debt securities guaranteed by U.S. government agencies
 
819

 
1

 
(20
)
 
800

RMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
21,804

 
296

 
(105
)
 
21,995

Non-agency
 
2,938

 
461

 
(13
)
 
3,386

Total RMBS
 
24,742

 
757

 
(118
)
 
25,381

CMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
3,751

 
32

 
(60
)
 
3,723

Non-agency
 
1,780

 
31

 
(15
)
 
1,796

Total CMBS
 
5,531

 
63

 
(75
)
 
5,519

Other ABS(3)
 
2,618

 
54

 
(10
)
 
2,662

Other securities(4)
 
1,035

 
6

 
(13
)
 
1,028

Total investment securities available for sale
 
$
38,859

 
$
886

 
$
(237
)
 
$
39,508

__________
(1) 
Includes non-credit-related other-than-temporary impairment (“OTTI”) that is recorded in accumulated other comprehensive income (“AOCI”) of $18 million and $8 million as of September 30, 2015 and December 31, 2014, respectively. Substantially all of this amount is related to non-agency RMBS.
(2) 
Includes Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Government National Mortgage Association (“Ginnie Mae”).
(3) 
ABS collateralized by credit card loans constituted approximately 65% and 56% of the other ABS portfolio as of September 30, 2015 and December 31, 2014, respectively, and ABS collateralized by auto dealer floor plan inventory loans and leases constituted approximately 10% and 16% of the other ABS portfolio as of September 30, 2015 and December 31, 2014, respectively.
(4) 
Includes foreign government bonds, corporate bonds, municipal securities and equity investments primarily related to activities under the Community Reinvestment Act (“CRA”).
The table below presents the carrying value, gross unrealized gains and losses, and fair value of securities held to maturity as of September 30, 2015 and December 31, 2014.
Table 3.3: Investment Securities Held to Maturity
 
 
September 30, 2015
(Dollars in millions)
 
Amortized
Cost
 
Unrealized Losses Recorded in AOCI(1)
 
Carrying Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
U.S. Treasury securities
 
$
198

 
$
0

 
$
198

 
$
2

 
$
0

 
$
200

Agency RMBS
 
21,696

 
(1,082
)
 
20,614

 
1,078

 
(18
)
 
21,674

Agency CMBS
 
3,007

 
(108
)
 
2,899

 
140

 
0

 
3,039

Total investment securities held to maturity
 
$
24,901

 
$
(1,190
)
 
$
23,711

 
$
1,220

 
$
(18
)
 
$
24,913

 
 
December 31, 2014
(Dollars in millions)
 
Amortized
Cost
 
Unrealized
Losses Recorded in AOCI(1)
 
Carrying Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Agency RMBS
 
$
21,347

 
$
(1,184
)
 
$
20,163

 
$
1,047

 
$
0

 
$
21,210

Agency CMBS
 
2,457

 
(120
)
 
2,337

 
93

 
(6
)
 
2,424

Total investment securities held to maturity
 
$
23,804

 
$
(1,304
)
 
$
22,500

 
$
1,140

 
$
(6
)
 
$
23,634

__________
(1) 
Represents the unrealized holding gain or loss at the date of transfer from available for sale to held to maturity, net of any subsequent accretion. Any bonds purchased into the securities held for maturity portfolio rather than transferred, will not have unrealized losses recognized in AOCI.
Investment Securities in a Gross Unrealized Loss Position
The table below provides, by major security type, information about our securities available for sale in a gross unrealized loss position and the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2015 and December 31, 2014.
Table 3.4: Securities in an Unrealized Loss Position
 
 
September 30, 2015
 
 
Less than 12 Months
 
12 Months or Longer
 
Total
(Dollars in millions)
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
Investment securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
Corporate debt securities guaranteed by U.S. government agencies
 
$
0

 
$
0

 
$
249

 
$
(2
)
 
$
249

 
$
(2
)
RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
5,112

 
(25
)
 
3,765

 
(47
)
 
8,877

 
(72
)
Non-agency
 
326

 
(8
)
 
152

 
(10
)
 
478

 
(18
)
Total RMBS
 
5,438

 
(33
)
 
3,917

 
(57
)
 
9,355

 
(90
)
CMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
265

 
(1
)
 
1,230

 
(29
)
 
1,495

 
(30
)
Non-agency
 
435

 
(2
)
 
327

 
(4
)
 
762

 
(6
)
Total CMBS
 
700

 
(3
)
 
1,557

 
(33
)
 
2,257

 
(36
)
Other ABS
 
400

 
0

 
166

 
(1
)
 
566

 
(1
)
Other securities
 
56

 
0

 
20

 
(1
)
 
76

 
(1
)
Total investment securities available for sale in a gross unrealized loss position
 
$
6,594

 
$
(36
)
 
$
5,909

 
$
(94
)
 
$
12,503

 
$
(130
)
 
 
December 31, 2014
 
 
Less than 12 Months
 
12 Months or Longer
 
Total
(Dollars in millions)
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
Investment securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
1,499

 
$
(1
)
 
$
0

 
$
0

 
$
1,499

 
$
(1
)
Corporate debt securities guaranteed by U.S. government agencies
 
113

 
(2
)
 
557

 
(18
)
 
670

 
(20
)
RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
3,917

 
(15
)
 
4,413

 
(90
)
 
8,330

 
(105
)
Non-agency
 
412

 
(9
)
 
90

 
(4
)
 
502

 
(13
)
Total RMBS
 
4,329

 
(24
)
 
4,503

 
(94
)
 
8,832

 
(118
)
CMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
294

 
(2
)
 
1,993

 
(58
)
 
2,287

 
(60
)
Non-agency
 
258

 
(1
)
 
681

 
(14
)
 
939

 
(15
)
Total CMBS
 
552

 
(3
)
 
2,674

 
(72
)
 
3,226

 
(75
)
Other ABS
 
783

 
(1
)
 
586

 
(9
)
 
1,369

 
(10
)
Other securities
 
106

 
0

 
551

 
(13
)
 
657

 
(13
)
Total investment securities available for sale in a gross unrealized loss position
 
$
7,382

 
$
(31
)
 
$
8,871

 
$
(206
)
 
$
16,253

 
$
(237
)

As of September 30, 2015, the amortized cost of approximately 430 securities available for sale exceeded their fair value by $130 million, of which $94 million related to securities that had been in a loss position for 12 months or longer. As of September 30, 2015, our investments in non-agency RMBS and CMBS, other ABS, and other securities accounted for $26 million, or 20%, of total gross unrealized losses on securities available for sale. As of September 30, 2015, the carrying value of approximately 30 securities classified as held to maturity exceeded their fair value by $18 million.
Gross unrealized losses on our investment securities have generally decreased since December 31, 2014. The unrealized losses related to investment securities for which we have not recognized credit impairment were primarily attributable to changes in market interest rates. As discussed in more detail below, we conduct periodic reviews of all investment securities with unrealized losses to assess whether impairment is other-than-temporary.
Maturities and Yields of Investment Securities
The following tables summarize the remaining scheduled contractual maturities, assuming no prepayments, of our investment securities as of September 30, 2015.
Table 3.5: Contractual Maturities of Securities Available for Sale

 
September 30, 2015
 (Dollars in millions)
 
Amortized Cost
 
Fair Value
Due in 1 year or less
 
$
785

 
$
785

Due after 1 year through 5 years
 
5,576

 
5,619

Due after 5 years through 10 years
 
1,825

 
1,865

Due after 10 years(1)
 
30,567

 
31,162

Total
 
$
38,753

 
$
39,431

__________
(1) 
Investments with no stated maturities, which consist of equity securities, are included with contractual maturities due after 10 years.
Table 3.6: Contractual Maturities of Securities Held to Maturity
 
 
September 30, 2015
 (Dollars in millions)
 
Carrying Value
 
Fair Value
Due after 1 year through 5 years
 
$
199

 
$
200

Due after 5 years through 10 years
 
1,150

 
1,244

Due after 10 years
 
22,362

 
23,469

Total
 
$
23,711

 
$
24,913


Because borrowers may have the right to call or prepay certain obligations, the expected maturities of our securities are likely to differ from the scheduled contractual maturities presented above. The table below summarizes, by major security type, the expected maturities and weighted-average yields of our investment securities as of September 30, 2015.
Table 3.7: Expected Maturities and Weighted-Average Yields of Securities
 
 
September 30, 2015
(Dollars in millions)
 
Due in
1 Year or Less
 
Due > 1 Year
through
5 Years
 
Due > 5 Years
through
10 Years
 
Due > 10 Years
 
Total
Fair value of securities available for sale:
U.S. Treasury securities
 
$
603

 
$
3,841

 
$
1

 
$
0

 
$
4,445

Corporate debt securities guaranteed by U.S. government agencies
 
0

 
326

 
29

 
0

 
355

RMBS:
 
 
 
 
 
 
 
 
 
 
Agency
 
272

 
14,756

 
9,583

 
0

 
24,611

Non-agency
 
8

 
1,038

 
1,635

 
473

 
3,154

Total RMBS
 
280

 
15,794

 
11,218

 
473

 
27,765

CMBS:
 
 
 
 
 
 
 
 
 
 
Agency
 
80

 
1,829

 
1,517

 
20

 
3,446

Non-agency
 
133

 
497

 
1,144

 
0

 
1,774

Total CMBS
 
213

 
2,326

 
2,661

 
20

 
5,220

Other ABS
 
153

 
1,135

 
195

 
0

 
1,483

Other securities
 
51

 
5

 
17

 
90

 
163

Total securities available for sale
 
$
1,300

 
$
23,427

 
$
14,121

 
$
583

 
$
39,431

Amortized cost of securities available for sale
 
$
1,303

 
$
23,143

 
$
13,787

 
$
520

 
$
38,753

Weighted-average yield for securities available for sale(1)
 
1.16
%
 
2.06
%
 
2.92
%
 
6.58
%
 
2.40
%
Carrying value of securities held to maturity:
U.S. Treasury securities
 
$
0

 
$
198

 
$
0

 
$
0

 
$
198

Agency RMBS
 
14

 
1,302

 
16,079

 
3,219

 
20,614

Agency CMBS
 
0

 
102

 
2,410

 
387

 
2,899

Total securities held for maturity
 
$
14

 
$
1,602

 
$
18,489

 
$
3,606

 
$
23,711

Fair value of securities held to maturity
 
$
15

 
$
1,649

 
$
19,459

 
$
3,790

 
$
24,913

Weighted-average yield for securities held to maturity(1)
 
5.67
%
 
2.77
%
 
2.50
%
 
3.33
%
 
2.64
%
__________
(1)
The weighted-average yield represents the effective yield for the investment securities and is calculated based on the amortized cost of each security.
Other-Than-Temporary Impairment
We evaluate all securities in an unrealized loss position at least on a quarterly basis, and more often as market conditions require, to assess whether the impairment is other-than-temporary. Our OTTI assessment is based on a discounted cash flow analysis which requires careful use of judgments and assumptions. A number of qualitative and quantitative criteria may be considered in our assessment as applicable, including the size and the nature of the portfolio; historical and projected performance such as prepayment, default and loss severity for the RMBS portfolio; recent credit events specific to the issuer and/or industry to which the issuer belongs; the payment structure of the security; external credit ratings of the issuer and any failure or delay of the issuer to make scheduled interest or principal payments; the value of underlying collateral; our intent and ability to hold the security; and current and projected market and macro-economic conditions.
If we intend to sell a security in an unrealized loss position or it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis, the entire difference between the amortized cost basis of the security and its fair value is recognized in earnings. As of September 30, 2015, for any securities with unrealized losses recorded in AOCI, we do not intend to sell nor believe that we will be required to sell these securities prior to recovery of their amortized cost.
For those securities that we do not intend to sell nor expect to be required to sell, an analysis is performed to determine if any of the impairment is due to credit-related factors or whether it is due to other factors, such as interest rates. Credit-related impairment is recognized in earnings, with the remaining unrealized non-credit-related impairment recorded in AOCI. We determine the credit component based on the difference between the security’s amortized cost basis and the present value of its expected cash flows, discounted based on the effective yield.
The table below presents a rollforward of the credit-related OTTI recognized in earnings for the three and nine months ended September 30, 2015 and 2014 on investment securities for which we had no intent to sell.
Table 3.8: Credit Impairment Rollforward
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions)
 
2015
 
2014
 
2015
 
2014
Credit loss component, beginning of period
 
$
192

 
$
165

 
$
175

 
$
160

Additions:
 
 
 
 
 
 
 
 
Initial credit impairment
 
2

 
1

 
7

 
2

Subsequent credit impairment
 
3

 
2

 
15

 
6

Total additions
 
5

 
3

 
22

 
8

Reductions due to payoffs, disposals, transfers and other
 
(1
)
 
(2
)
 
(1
)
 
(2
)
Credit loss component, end of period
 
$
196

 
$
166

 
$
196

 
$
166


Realized Gains and Losses on Securities and OTTI Recognized in Earnings
The following table presents the gross realized gains and losses on the sale and redemption of securities available for sale, and the OTTI losses recognized in earnings for the three and nine months ended September 30, 2015 and 2014. We also present the proceeds from the sale of securities available for sale for the periods presented. We did not sell any investment securities that are held to maturity.
Table 3.9: Realized Gains and Losses and OTTI Recognized in Earnings
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions)
 
2015
 
2014
 
2015
 
2014
Realized gains (losses):
 
 
 
 
 
 
 
 
Gross realized gains
 
$
3

 
$
16

 
$
20

 
$
50

Gross realized losses
 
0

 
(10
)
 
(16
)
 
(32
)
Net realized gains
 
3

 
6

 
4

 
18

OTTI recognized in earnings:
 
 
 
 
 
 
 
 
Credit-related OTTI
 
(5
)
 
(3
)
 
(22
)
 
(8
)
Intent-to-sell OTTI
 
0

 
(6
)
 
(5
)
 
(7
)
Total OTTI recognized in earnings
 
(5
)
 
(9
)
 
(27
)
 
(15
)
Net securities (losses) gains
 
$
(2
)
 
$
(3
)
 
$
(23
)
 
$
3

 
 
 
 
 
 
 
 
 
Total proceeds from sales
 
$
898

 
$
3,268

 
$
3,211

 
$
6,827


Securities Pledged and Received
As part of our liquidity management strategy, we pledge securities to secure borrowings from counterparties including the Federal Home Loan Banks and the Federal Reserve. We also pledge securities to secure trust and public deposits and for other purposes as required or permitted by law. We pledged securities available for sale with a fair value of $2.1 billion and $3.5 billion as of September 30, 2015 and December 31, 2014, respectively. We also pledged securities held to maturity with a carrying value of $8.7 billion and $9.0 billion as of September 30, 2015 and December 31, 2014, respectively. Of the total securities pledged as collateral, we have encumbered $10.4 billion and $10.6 billion as of September 30, 2015 and December 31, 2014, respectively, primarily related to Public Fund deposits and our derivative transactions. We accepted pledges of securities with a fair value of $231 million and $91 million as of September 30, 2015 and December 31, 2014, respectively, primarily related to our derivative transactions.
Acquired Securities
The table below presents the outstanding balance and carrying value of the acquired credit-impaired debt securities as of September 30, 2015 and December 31, 2014.
Table 3.10: Outstanding Balance and Carrying Value of Acquired Securities
(Dollars in millions)
 
September 30, 2015
 
December 31, 2014
Outstanding balance
 
$
3,395

 
$
3,768

Carrying value
 
2,575

 
2,839


Changes in Accretable Yield of Acquired Securities
The following table presents changes in the accretable yield related to the acquired credit-impaired debt securities for the three and nine months ended September 30, 2015.
Table 3.11: Changes in the Accretable Yield of Acquired Credit-Impaired Debt Securities
(Dollars in millions)
 
Three Months Ended September 30, 2015
 
Nine Months Ended September 30, 2015
Accretable yield, beginning of period
 
$
1,192

 
$
1,250

Accretion recognized in earnings
 
(62
)
 
(185
)
Reduction due to payoffs, disposals, transfers and other
 
0

 
(1
)
Net reclassifications from nonaccretable difference
 
69

 
135

Accretable yield, end of period
 
$
1,199

 
$
1,199