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Investment Securities
 12 Months Ended
Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
NOTE 4—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 December 31, 2015 and 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 December 31, 2015 and 2014.
Table 4.1: Overview of Investment Securities Portfolio
(Dollars in millions)
 
December 31, 2015
 
December 31, 2014
Securities available for sale, at fair value
 
$
39,061

 
$
39,508

Securities held to maturity, at carrying value
 
24,619

 
22,500

Total investments securities
 
$
63,680

 
$
62,008


The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale as of December 31, 2015 and 2014.
Table 4.2: Investment Securities Available for Sale
 
 
December 31, 2015
(Dollars in millions)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses(1)
 
Fair
Value
Investment securities available for sale:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
4,664

 
$
5

 
$
(9
)
 
$
4,660

RMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
24,332

 
165

 
(212
)
 
24,285

Non-agency
 
2,680

 
368

 
(22
)
 
3,026

Total RMBS
 
27,012

 
533

 
(234
)
 
27,311

CMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
3,690

 
21

 
(47
)
 
3,664

Non-agency
 
1,723

 
16

 
(24
)
 
1,715

Total CMBS
 
5,413

 
37

 
(71
)
 
5,379

Other ABS(3)
 
1,345

 
1

 
(6
)
 
1,340

Other securities(4)
 
370

 
2

 
(1
)
 
371

Total investment securities available for sale
 
$
38,804

 
$
578

 
$
(321
)
 
$
39,061

 
 
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 OTTI that is recorded in AOCI of $22 million and $8 million as of December 31, 2015 and 2014, respectively. All of this amount is related to non-agency RMBS.
(2) 
Includes Fannie Mae, Freddie Mac, and Government National Mortgage Association (“Ginnie Mae”).
(3) 
ABS collateralized by credit card loans constituted approximately 71% and 56% of the other ABS portfolio as of December 31, 2015 and 2014, respectively, and ABS collateralized by auto dealer floor plan inventory loans and leases constituted approximately 11% and 16% of the other ABS portfolio as of December 31, 2015 and 2014, respectively.
(4) 
Includes foreign government bonds, corporate securities, municipal securities and equity investments.
The table below presents the amortized cost, carrying value, gross unrealized gains and losses, and fair value of securities held to maturity as of December 31, 2015 and 2014.
Table 4.3: Investment Securities Held to Maturity
 
 
December 31, 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
 
$
199

 
$
0

 
$
199

 
$
0

 
$
(1
)
 
$
198

Agency RMBS
 
22,561

 
(1,048
)
 
21,513

 
692

 
(72
)
 
22,133

Agency CMBS
 
3,012

 
(105
)
 
2,907

 
87

 
(8
)
 
2,986

Total investment securities held to maturity
 
$
25,772

 
$
(1,153
)
 
$
24,619

 
$
779

 
$
(81
)
 
$
25,317

 
 
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 December 31, 2015 and 2014.
Table 4.4: Securities in an Unrealized Loss Position
 
 
December 31, 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:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
3,096

 
$
(9
)
 
$
1

 
$
0

 
$
3,097

 
$
(9
)
RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
12,025

 
(110
)
 
4,420

 
(102
)
 
16,445

 
(212
)
Non-agency
 
355

 
(10
)
 
155

 
(12
)
 
510

 
(22
)
Total RMBS
 
12,380

 
(120
)
 
4,575

 
(114
)
 
16,955

 
(234
)
CMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
1,352

 
(9
)
 
1,148

 
(38
)
 
2,500

 
(47
)
Non-agency
 
739

 
(13
)
 
330

 
(11
)
 
1,069

 
(24
)
Total CMBS
 
2,091

 
(22
)
 
1,478

 
(49
)
 
3,569

 
(71
)
Other ABS
 
825

 
(5
)
 
255

 
(1
)
 
1,080

 
(6
)
Other securities
 
250

 
0

 
19

 
(1
)
 
269

 
(1
)
Total investment securities available for sale in a gross unrealized loss position
 
$
18,642

 
$
(156
)
 
$
6,328

 
$
(165
)
 
$
24,970

 
$
(321
)
 
 
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 December 31, 2015, the amortized cost of approximately 700 securities available for sale exceeded their fair value by $321 million, of which $165 million related to securities that had been in a loss position for 12 months or longer. As of December 31, 2015, our investments in non-agency RMBS and CMBS, other ABS, and other securities accounted for $53 million, or 17%, of total gross unrealized losses on securities available for sale. As of December 31, 2015, the carrying value of approximately 100 securities classified as held to maturity exceeded their fair value by $81 million.
Gross unrealized losses on our investment securities have increased 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 December 31, 2015.
Table 4.5: Contractual Maturities of Securities Available for Sale

 
December 31, 2015
 (Dollars in millions)
 
Amortized Cost
 
Fair Value
Due in 1 year or less
 
$
1,116

 
$
1,116

Due after 1 year through 5 years
 
5,592

 
5,589

Due after 5 years through 10 years
 
1,574

 
1,593

Due after 10 years(1)
 
30,522

 
30,763

Total
 
$
38,804

 
$
39,061

__________
(1) 
Investments with no stated maturities, which consist of equity securities, are included with contractual maturities due after 10 years.
Table 4.6: Contractual Maturities of Securities Held to Maturity
 
 
December 31, 2015
 (Dollars in millions)
 
Carrying Value
 
Fair Value
Due after 1 year through 5 years
 
$
199

 
$
198

Due after 5 years through 10 years
 
1,183

 
1,248

Due after 10 years
 
23,237

 
23,871

Total
 
$
24,619

 
$
25,317


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 December 31, 2015.
Table 4.7: Expected Maturities and Weighted-Average Yields of Securities
 
 
December 31, 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
 
$
701

 
$
3,958

 
$
1

 
$
0

 
$
4,660

RMBS:
 
 
 
 
 
 
 
 
 
 
Agency
 
214

 
13,813

 
10,258

 
0

 
24,285

Non-agency
 
42

 
928

 
1,582

 
474

 
3,026

Total RMBS
 
256

 
14,741

 
11,840

 
474

 
27,311

CMBS:
 
 
 
 
 
 
 
 
 
 
Agency
 
48

 
2,042

 
1,555

 
19

 
3,664

Non-agency
 
164

 
456

 
1,095

 
0

 
1,715

Total CMBS
 
212

 
2,498

 
2,650

 
19

 
5,379

Other ABS
 
215

 
1,044

 
81

 
0

 
1,340

Other securities
 
263

 
5

 
0

 
103

 
371

Total securities available for sale
 
$
1,647

 
$
22,246

 
$
14,572

 
$
596

 
$
39,061

Amortized cost of securities available for sale
 
$
1,651

 
$
22,169

 
$
14,444

 
$
540

 
$
38,804

Weighted-average yield for securities available for sale(1)
 
0.80
%
 
1.92
%
 
3.01
%
 
8.82
%
 
2.37
%
Carrying value of securities held to maturity:
U.S. Treasury securities
 
$
0

 
$
199

 
$
0

 
$
0

 
$
199

Agency RMBS
 
10

 
1,336

 
16,697

 
3,470

 
21,513

Agency CMBS
 
0

 
134

 
2,387

 
386

 
2,907

Total securities held to maturity
 
$
10

 
$
1,669

 
$
19,084

 
$
3,856

 
$
24,619

Fair value of securities held to maturity
 
$
10

 
$
1,689

 
$
19,707

 
$
3,911

 
$
25,317

Weighted-average yield for securities held to maturity(1)
 
5.73
%
 
2.77
%
 
2.48
%
 
3.29
%
 
2.62
%
__________
(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 December 31, 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 years ended December 31, 2015, 2014 and 2013 on investment securities for which we had no intent to sell.
Table 4.8: Credit Impairment Rollforward
 
 
Year Ended December 31,
(Dollars in millions)
 
2015
 
2014
 
2013
Credit loss component, beginning of period
 
$
175

 
$
160

 
$
120

Additions:
 
 
 
 
 
 
Initial credit impairment
 
7

 
5

 
14

Subsequent credit impairment
 
18

 
12

 
27

Total additions
 
25

 
17

 
41

Reductions due to payoffs, disposals, transfers and other
 
(1
)
 
(2
)
 
(1
)
Credit loss component, end of period
 
$
199

 
$
175

 
$
160


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 years ended December 31, 2015, 2014 and 2013. 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 classified as held to maturity.
Table 4.9: Realized Gains and Losses and OTTI Recognized in Earnings
 
 
Year Ended December 31,
(Dollars in millions)
 
2015
 
2014
 
2013
Realized gains (losses):
 
 
 
 
 
 
Gross realized gains
 
$
23

 
$
55

 
$
8

Gross realized losses
 
(25
)
 
(34
)
 
(1
)
Net realized (losses) gains
 
(2
)
 
21

 
7

OTTI recognized in earnings:
 
 
 
 
 
 
Credit-related OTTI
 
(25
)
 
(17
)
 
(41
)
Intent-to-sell OTTI
 
(5
)
 
(7
)
 
0

Total OTTI recognized in earnings
 
(30
)
 
(24
)
 
(41
)
Net securities losses
 
$
(32
)
 
$
(3
)
 
$
(34
)
Total proceeds from sales
 
$
4,379

 
$
7,417

 
$
2,539


Securities Pledged and Received
As part of our liquidity management strategy, we pledge securities to secure borrowings from counterparties including the FHLB 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 $1.7 billion and $3.5 billion as of December 31, 2015 and 2014, respectively. We also pledged securities held to maturity with a carrying value of $8.7 billion and $9.0 billion as of December 31, 2015 and 2014, respectively. Of the total securities pledged as collateral, we have encumbered $10.6 billion as of both December 31, 2015 and 2014, primarily related to Public Fund deposits. We accepted pledges of securities with a fair value of $172 million and $91 million as of December 31, 2015 and 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 December 31, 2015 and 2014.
Table 4.10: Outstanding Balance and Carrying Value of Acquired Securities
(Dollars in millions)
 
December 31, 2015
 
December 31, 2014
Outstanding balance
 
$
3,285

 
$
3,768

Carrying value
 
2,480

 
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 years ended December 31, 2015, 2014 and 2013.
Table 4.11: Changes in the Accretable Yield of Acquired Credit-Impaired Debt Securities
 
 
Year Ended December 31,
(Dollars in millions)
 
2015
 
2014
 
2013
Accretable yield, beginning of period
 
$
1,250

 
$
1,423

 
$
1,512

Additions from new acquisitions
 
0

 
34

 
88

Accretion recognized in earnings
 
(240
)
 
(243
)
 
(247
)
Reduction due to payoffs, disposals, transfers and other
 
(1
)
 
(3
)
 
(2
)
Net reclassifications from nonaccretable difference
 
228

 
39

 
72

Accretable yield, end of period
 
$
1,237

 
$
1,250

 
$
1,423