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Investment Securities
 6 Months Ended
Jun. 30, 2017
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
NOTE 3—INVESTMENT SECURITIES
Our investment portfolio consists primarily of the following: U.S. Treasury securities; U.S. government-sponsored enterprise or agency (“Agency”) and non-agency residential mortgage-backed securities (“RMBS”); Agency and non-agency commercial mortgage-backed securities (“CMBS”); other asset-backed securities (“ABS”); and other securities. The carrying value of our investments in U.S. Treasury and Agency securities represented 91% of our total investment securities as of both June 30, 2017 and December 31, 2016.
The table below presents the overview of our investment securities portfolio as of June 30, 2017 and December 31, 2016.
Table 3.1: Overview of Investment Securities Portfolio
(Dollars in millions)
 
June 30, 2017
 
December 31, 2016
Securities available for sale, at fair value
 
$
41,120

 
$
40,737

Securities held to maturity, at carrying value
 
27,720

 
25,712

Total investment securities
 
$
68,840

 
$
66,449


The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale as of June 30, 2017 and December 31, 2016.
Table 3.2: Investment Securities Available for Sale
 
 
June 30, 2017
(Dollars in millions)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses(1)
 
Fair
Value
Investment securities available for sale:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
5,218

 
$
27

 
$
(30
)
 
$
5,215

RMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
26,693

 
110

 
(292
)
 
26,511

Non-agency
 
2,163

 
458

 
(4
)
 
2,617

Total RMBS
 
28,856

 
568

 
(296
)
 
29,128

CMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
3,136

 
19

 
(31
)
 
3,124

Non-agency
 
1,777

 
28

 
(3
)
 
1,802

Total CMBS
 
4,913

 
47

 
(34
)
 
4,926

Other ABS(3)
 
626

 
1

 
0

 
627

Other securities(4)
 
1,220

 
4

 
0

 
1,224

Total investment securities available for sale
 
$
40,833

 
$
647

 
$
(360
)
 
$
41,120

 
 
December 31, 2016
(Dollars in millions)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses(1)
 
Fair
Value
Investment securities available for sale:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
5,103

 
$
11

 
$
(49
)
 
$
5,065

RMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
26,830

 
109

 
(412
)
 
26,527

Non-agency
 
2,349

 
382

 
(9
)
 
2,722

Total RMBS
 
29,179

 
491

 
(421
)
 
29,249

CMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
3,335

 
14

 
(45
)
 
3,304

Non-agency
 
1,676

 
21

 
(13
)
 
1,684

Total CMBS
 
5,011

 
35

 
(58
)
 
4,988

Other ABS(3)
 
714

 
1

 
(1
)
 
714

Other securities(4)
 
726

 
1

 
(6
)
 
721

Total investment securities available for sale
 
$
40,733

 
$
539

 
$
(535
)
 
$
40,737

__________
(1) 
Includes non-credit-related OTTI that is recorded in accumulated other comprehensive income (“AOCI”) of $4 million and $9 million as of June 30, 2017 and December 31, 2016, respectively. Substantially all of this amount is related to non-agency RMBS.
(2) 
Includes Government National Mortgage Association (“Ginnie Mae”) guaranteed securities, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) issued securities.
(3) 
ABS collateralized by credit card loans constituted approximately 49% and 57% of the other ABS portfolio as of June 30, 2017 and December 31, 2016, respectively, and ABS collateralized by auto dealer floor plan inventory loans and leases constituted approximately 23% of the other ABS portfolio as of both June 30, 2017 and December 31, 2016.
(4) 
Includes supranational bonds, foreign government bonds, mutual funds 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 June 30, 2017 and December 31, 2016.
Table 3.3: Investment Securities Held to Maturity
 
 
June 30, 2017
(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

 
$
0

 
$
199

Agency RMBS
 
24,741

 
(831
)
 
23,910

 
724

 
(97
)
 
24,537

Agency CMBS
 
3,696

 
(85
)
 
3,611

 
101

 
(25
)
 
3,687

Total investment securities held to maturity
 
$
28,636

 
$
(916
)
 
$
27,720

 
$
825

 
$
(122
)
 
$
28,423

 
 
December 31, 2016
(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

 
$
0

 
$
199

Agency RMBS
 
23,022

 
(897
)
 
22,125

 
606

 
(158
)
 
22,573

Agency CMBS
 
3,480

 
(92
)
 
3,388

 
77

 
(41
)
 
3,424

Total investment securities held to maturity
 
$
26,701

 
$
(989
)
 
$
25,712

 
$
683

 
$
(199
)
 
$
26,196

__________
(1) 
Certain investment securities were transferred from the available for sale category to the held to maturity category in 2013. This amount represents the unrealized holding gain or loss at the date of transfer, net of any subsequent accretion. Any bonds purchased into the securities held to 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 June 30, 2017 and December 31, 2016.
Table 3.4: Securities in a Gross Unrealized Loss Position
 
 
June 30, 2017
 
 
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
 
$
1,079

 
$
(30
)
 
$
0

 
$
0

 
$
1,079

 
$
(30
)
RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
14,491

 
(211
)
 
4,845

 
(81
)
 
19,336

 
(292
)
Non-agency
 
12

 
0

 
49

 
(4
)
 
61

 
(4
)
Total RMBS
 
14,503

 
(211
)
 
4,894

 
(85
)
 
19,397

 
(296
)
CMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
977

 
(9
)
 
833

 
(22
)
 
1,810

 
(31
)
Non-agency
 
374

 
(3
)
 
61

 
0

 
435

 
(3
)
Total CMBS
 
1,351

 
(12
)
 
894

 
(22
)
 
2,245

 
(34
)
Other ABS
 
113

 
0

 
17

 
0

 
130

 
0

Other securities
 
355

 
0

 
0

 
0

 
355

 
0

Total investment securities available for sale in a gross unrealized loss position
 
$
17,401

 
$
(253
)
 
$
5,805

 
$
(107
)
 
$
23,206

 
$
(360
)
 
 
December 31, 2016
 
 
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
 
$
1,060

 
$
(49
)
 
$
0

 
$
0

 
$
1,060

 
$
(49
)
RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
16,899

 
(329
)
 
4,865

 
(83
)
 
21,764

 
(412
)
Non-agency
 
128

 
(2
)
 
145

 
(7
)
 
273

 
(9
)
Total RMBS
 
17,027

 
(331
)
 
5,010

 
(90
)
 
22,037

 
(421
)
CMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
1,624

 
(21
)
 
745

 
(24
)
 
2,369

 
(45
)
Non-agency
 
826

 
(11
)
 
129

 
(2
)
 
955

 
(13
)
Total CMBS
 
2,450

 
(32
)
 
874

 
(26
)
 
3,324

 
(58
)
Other ABS
 
187

 
(1
)
 
21

 
0

 
208

 
(1
)
Other securities
 
417

 
(6
)
 
0

 
0

 
417

 
(6
)
Total investment securities available for sale in a gross unrealized loss position
 
$
21,141

 
$
(419
)
 
$
5,905

 
$
(116
)
 
$
27,046

 
$
(535
)

As of June 30, 2017, the amortized cost of approximately 750 securities available for sale exceeded their fair value by $360 million, of which $107 million related to securities that had been in a loss position for 12 months or longer. As of June 30, 2017, our investments in non-agency RMBS and CMBS, other ABS and other securities accounted for $7 million, or 2%, of total gross unrealized losses on securities available for sale. As of June 30, 2017, the carrying value of approximately 150 securities classified as held to maturity exceeded their fair value by $122 million.
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 June 30, 2017.
Table 3.5: Contractual Maturities of Securities Available for Sale

 
June 30, 2017
 (Dollars in millions)
 
Amortized Cost
 
Fair Value
Due in 1 year or less
 
$
707

 
$
709

Due after 1 year through 5 years
 
3,159

 
3,192

Due after 5 years through 10 years
 
6,572

 
6,584

Due after 10 years(1)
 
30,395

 
30,635

Total
 
$
40,833

 
$
41,120

__________
(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
 
 
June 30, 2017
 (Dollars in millions)
 
Carrying Value
 
Fair Value
Due in 1 year or less
 
$
199

 
$
199

Due after 1 year through 5 years
 
418

 
441

Due after 5 years through 10 years
 
942

 
987

Due after 10 years
 
26,161

 
26,796

Total
 
$
27,720

 
$
28,423


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 June 30, 2017.
Table 3.7: Expected Maturities and Weighted-Average Yields of Securities
 
 
June 30, 2017
(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
 
$
102

 
$
847

 
$
4,266

 
$
0

 
$
5,215

RMBS:
 
 
 
 
 
 
 
 
 
 
Agency
 
177

 
11,743

 
14,591

 
0

 
26,511

Non-agency
 
18

 
1,036

 
1,268

 
295

 
2,617

Total RMBS
 
195

 
12,779

 
15,859

 
295

 
29,128

CMBS:
 
 
 
 
 
 
 
 
 
 
Agency
 
130

 
1,544

 
1,450

 
0

 
3,124

Non-agency
 
179

 
1,064

 
559

 
0

 
1,802

Total CMBS
 
309

 
2,608

 
2,009

 
0

 
4,926

Other ABS
 
348

 
272

 
7

 
0

 
627

Other securities
 
216

 
562

 
103

 
343

 
1,224

Total securities available for sale
 
$
1,170

 
$
17,068

 
$
22,244

 
$
638

 
$
41,120

Amortized cost of securities available for sale
 
$
1,169

 
$
16,884

 
$
22,186

 
$
594

 
$
40,833

Weighted-average yield for securities available for sale(1)
 
1.36
%
 
2.45
%
 
2.45
%
 
4.96
%
 
2.45
%
Carrying value of securities held to maturity:
U.S. Treasury securities
 
$
199

 
$
0

 
$
0

 
$
0

 
$
199

Agency RMBS
 
28

 
1,608

 
17,865

 
4,409

 
23,910

Agency CMBS
 
0

 
819

 
1,743

 
1,049

 
3,611

Total securities held to maturity
 
$
227

 
$
2,427

 
$
19,608

 
$
5,458

 
$
27,720

Fair value of securities held to maturity
 
$
225

 
$
2,501

 
$
20,092

 
$
5,605

 
$
28,423

Weighted-average yield for securities held to maturity(1)
 
0.60
%
 
2.57
%
 
2.68
%
 
3.36
%
 
2.78
%
__________
(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 June 30, 2017, 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 six months ended June 30, 2017 and 2016 on investment securities for which we had no intent to sell.
Table 3.8: Credit Impairment Rollforward
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
 
2017
 
2016
 
2017
 
2016
Credit loss component, beginning of period
 
$
206

 
$
204

 
$
207

 
$
199

Additions:
 
 
 
 
 
 
 
 
Initial credit impairment
 
0

 
1

 
0

 
1

Subsequent credit impairment
 
1

 
1

 
1

 
7

Total additions
 
1

 
2

 
1

 
8

Reductions due to payoffs, disposals, transfers and other
 
0

 
(2
)
 
(1
)
 
(3
)
Credit loss component, end of period
 
$
207

 
$
204

 
$
207

 
$
204

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 six months ended June 30, 2017 and 2016. 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 3.9: Realized Gains and Losses and OTTI Recognized in Earnings
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(Dollars in millions)
 
2017
 
2016
 
2017
 
2016
Realized gains (losses):
 
 
 
 
 
 
 
 
Gross realized gains
 
$
0

 
$
3

 
$
5

 
$
6

Gross realized losses
 
0

 
(1
)
 
(5
)
 
(4
)
Net realized gains
 
0

 
2

 
0

 
2

OTTI recognized in earnings:
 
 
 
 
 
 
 
 
Credit-related OTTI
 
(1
)
 
(2
)
 
(1
)
 
(8
)
Intent-to-sell OTTI
 
(3
)
 
0

 
(3
)
 
(2
)
Total OTTI recognized in earnings
 
(4
)
 
(2
)
 
(4
)
 
(10
)
Net securities gains (losses)
 
$
(4
)
 
$
0

 
$
(4
)
 
$
(8
)
Total proceeds from sales
 
$
235

 
$
776

 
$
3,123

 
$
2,699

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 (“FHLB”). 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 $1.6 billion and $1.9 billion as of June 30, 2017 and December 31, 2016, respectively. We also pledged securities held to maturity with a carrying value of $8.2 billion and $8.1 billion as of June 30, 2017 and December 31, 2016, respectively. Of the total securities pledged as collateral, we have encumbered a fair value of $9.2 billion and $9.3 billion as of June 30, 2017 and December 31, 2016, respectively, primarily related to Public Fund deposits. We accepted pledges of securities with a fair value of $1 million and $16 million as of June 30, 2017 and December 31, 2016, respectively, primarily related to our derivative transactions.
Purchased Credit-Impaired Debt Securities
The table below presents the outstanding balance and carrying value of the purchased credit-impaired debt securities as of June 30, 2017 and December 31, 2016.
Table 3.10: Outstanding Balance and Carrying Value of Acquired Credit-Impaired Debt Securities
(Dollars in millions)
 
June 30, 2017
 
December 31, 2016
Outstanding balance
 
$
2,669

 
$
2,899

Carrying value
 
2,221

 
2,277

Changes in Accretable Yield of Purchased Credit-Impaired Debt Securities
The following table presents changes in the accretable yield related to the purchased credit-impaired debt securities for the three and six months ended June 30, 2017.
Table 3.11: Changes in the Accretable Yield of Purchased Credit-Impaired Debt Securities
(Dollars in millions)
 
Three Months Ended June 30, 2017
 
Six Months Ended June 30, 2017
Accretable yield, beginning of period
 
$
1,118

 
$
1,173

Accretion recognized in earnings
 
(49
)
 
(98
)
Reduction due to payoffs, disposals, transfers and other
 
1

 
(3
)
Net reclassifications from nonaccretable difference
 
23

 
21

Accretable yield, end of period
 
$
1,093

 
$
1,093