Investment Securities (Tables)

9 Months Ended

Sep. 30, 2016

Investments, Debt and Equity Securities [Abstract]

Investment Securities Held-to-Maturity

The amortized cost, other-than-temporary impairment recorded in other comprehensive income (loss), gross unrealized holding gains and losses, and fair value of held-to-maturity and available-for-sale investment securities were as follows:

	September 30, 2016											December 31, 2015
					Unrealized Losses											Unrealized Losses
(Dollars in Millions)	Amortized Cost		Unrealized Gains		Other-than- Temporary (e)		Other (f)			Fair Value		Amortized Cost		Unrealized Gains		Other-than- Temporary (e)		Other (f)			Fair Value
Held-to-maturity (a)
U.S. Treasury and agencies	$	4,767	$	96	$	–	$	(1	)	$	4,862	$	2,925	$	14	$	–	$	(20	)	$	2,919
Mortgage-backed securities
Residential
Agency		38,062		453		–		(23	)		38,492		40,619		175		–		(273	)		40,521
Non-agency non-prime (d)		1		–		–		–			1		1		–		–		–			1
Asset-backed securities
Collateralized debt obligations/Collateralized loan obligations		–		5		–		–			5		–		6		–		–			6
Other		8		3		–		–			11		10		3		–		–			13
Obligations of state and political subdivisions		8		1		–		(1	)		8		8		1		–		(1	)		8
Obligations of foreign governments		9		–		–		–			9		9		–		–		–			9
Other debt securities		18		–		–		–			18		18		–		–		(2	)		16
Total held-to-maturity	$	42,873	$	558	$	–	$	(25	)	$	43,406	$	43,590	$	199	$	–	$	(296	)	$	43,493

(a) Held-to-maturity investment securities are carried at historical cost or at fair value at the time of transfer from the available-for-sale to held-to-maturity category, adjusted for amortization of premiums and accretion of discounts and credit-related other-than-temporary impairment.

(b) Available-for-sale investment securities are carried at fair value with unrealized net gains or losses reported within accumulated other comprehensive income (loss) in shareholders’ equity.

(c) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads). When the Company determines the designation, prime securities typically have a weighted-average credit score of 725 or higher and a loan-to-value of 80 percent or lower; however, other pool characteristics may result in designations that deviate from these credit score and loan-to-value thresholds.    

(d) Includes all securities not meeting the conditions to be designated as prime.    

(e) Represents impairment not related to credit for those investment securities that have been determined to be other-than-temporarily impaired.    

(f) Represents unrealized losses on investment securities that have not been determined to be other-than-temporarily impaired.    

Investment Securities Available-for-Sale

The amortized cost, other-than-temporary impairment recorded in other comprehensive income (loss), gross unrealized holding gains and losses, and fair value of held-to-maturity and available-for-sale investment securities were as follows:

	September 30, 2016										December 31, 2015
					Unrealized Losses										Unrealized Losses
(Dollars in Millions)	Amortized Cost		Unrealized Gains		Other-than- Temporary (e)		Other (f)		Fair Value		Amortized Cost		Unrealized Gains		Other-than- Temporary (e)			Other (f)			Fair Value
Available-for-sale (b)
U.S. Treasury and agencies	$	14,454	$	179		-	$	(3)	$	14,630	$	4,611	$	12	$	—		$	(27	)	$	4,596
Mortgage-backed securities
Residential
Agency		44,904		582		-		(53)		45,433		50,056		384		—			(364	)		50,076
Non-agency
Prime (c)		257		6		(3)		(1)		259		316		6		(3	)		(1	)		318
Non-prime (d)		191		18		(3)		-		206		221		20		(1	)		—			240
Commercial agency		16		-		-		-		16		52		—		—			—			52
Asset-backed securities
Collateralized debt obligations/Collateralized loan obligations		11		2		-		-		13		16		3		—			—			19
Other		516		8		-		-		524		532		9		—			—			541
Obligations of state and political subdivisions		5,232		152		-		(8)		5,376		5,149		169		—			(2	)		5,316
Corporate debt securities		628		10		-		(59)		579		677		3		—			(70	)		610
Perpetual preferred securities		36		17		-		-		53		153		20		—			(12	)		161
Other investments		31		35		-		-		66		34		34		—			—			68
Total available-for-sale	$	66,276	$	1,009	$	(6)	$	(124)	$	67,155	$	61,817	$	660	$	(4	)	$	(476	)	$	61,997

(a) Held-to-maturity investment securities are carried at historical cost or at fair value at the time of transfer from the available-for-sale to held-to-maturity category, adjusted for amortization of premiums and accretion of discounts and credit-related other-than-temporary impairment.

(b) Available-for-sale investment securities are carried at fair value with unrealized net gains or losses reported within accumulated other comprehensive income (loss) in shareholders’ equity.

(c) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads). When the Company determines the designation, prime securities typically have a weighted-average credit score of 725 or higher and a loan-to-value of 80 percent or lower; however, other pool characteristics may result in designations that deviate from these credit score and loan-to-value thresholds.    

(d) Includes all securities not meeting the conditions to be designated as prime. 

(e) Represents impairment not related to credit for those investment securities that have been determined to be other-than-temporarily impaired.    

(f) Represents unrealized losses on investment securities that have not been determined to be other-than-temporarily impaired.   

Investment Securities

Table 4  Investment Securities

	Available-for-Sale									Held-to-Maturity
At September 30, 2016 (Dollars in Millions)	Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (e)			Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (e)
U.S. Treasury and Agencies
Maturing in one year or less	$	2,729	$	2,731		.5		.88	%	$	424	$	426		.7		.97	%
Maturing after one year through five years		7,529		7,575		2.9		1.08			734		750		2.8		1.76
Maturing after five years through ten years		4,195		4,322		6.2		1.89			3,609		3,686		6.7		1.81
Maturing after ten years		1		2		10.9		4.15			–		–		–		–
Total	$	14,454	$	14,630		3.4		1.28	%	$	4,767	$	4,862		5.6		1.73	%
Mortgage-Backed Securities (a)
Maturing in one year or less	$	697	$	703		.6		2.39	%	$	479	$	481		.6		2.30	%
Maturing after one year through five years		41,085		41,592		3.9		1.84			35,952		36,368		3.5		1.94
Maturing after five years through ten years		3,489		3,522		6.3		1.97			1,595		1,607		5.8		1.55
Maturing after ten years		97		97		12.5		1.74			37		37		12.2		1.42
Total	$	45,368	$	45,914		4.1		1.85	%	$	38,063	$	38,493		3.6		1.92	%
Asset-Backed Securities (a)
Maturing in one year or less	$	11	$	13		.4		6.96	%	$	–	$	–		.1		1.17	%
Maturing after one year through five years		294		298		4.0		3.19			4		7		2.7		1.25
Maturing after five years through ten years		222		226		5.6		2.78			4		4		5.9		1.20
Maturing after ten years		–		–		–		–			–		5		17.6		1.29
Total	$	527	$	537		4.6		3.10	%	$	8	$	16		4.2		1.23	%
Obligations of State and Political Subdivisions (b) (c)
Maturing in one year or less	$	2,175	$	2,206		.4		7.10	%	$	–	$	–		.4		7.58	%
Maturing after one year through five years		674		713		2.4		6.40			1		1		2.7		8.15
Maturing after five years through ten years		1,743		1,810		8.2		5.17			7		7		9.1		2.60
Maturing after ten years		640		647		19.5		5.11			–		–		10.2		8.07
Total	$	5,232	$	5,376		5.6		6.12	%	$	8	$	8		8.6		3.18	%
Other Debt Securities
Maturing in one year or less	$	–	$	–		–		–	%	$	6	$	6		.4		2.00	%
Maturing after one year through five years		–		–		–		–			21		21		3.7		1.55
Maturing after five years through ten years		–		–		–		–			–		–		–		–
Maturing after ten years		628		579		15.8		2.62			–		–		–		–
Total	$	628	$	579		15.8		2.62	%	$	27	$	27		3.0		1.65	%
Other Investments	$	67	$	119		5.2		5.89	%	$	–	$	–		–		—	%
Total investment securities (d)	$	66,276	$	67,155		4.2		2.09	%	$	42,873	$	43,406		3.8		1.90	%

(a) Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities anticipating future prepayments.

(b) Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, yield to maturity if purchased at par or a discount.

(c) Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and contractual maturity for securities with a fair value equal to or below par.

(d) The weighted-average maturity of the available-for-sale investment securities was 4.7 years at December 31, 2015, with a corresponding weighted-average yield of 2.21 percent. The weighted-average maturity of the held-to-maturity investment securities was 4.2 years at December 31, 2015, with a corresponding weighted-average yield of 1.92 percent.

(e) Weighted-average yields are presented on a fully-taxable equivalent basis under a tax rate of 35 percent. Yields on available-for-sale and held-to-maturity investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity. Weighted-average yield and maturity calculations exclude equity securities that have no stated yield or maturity.

	September 30, 2016					December 31, 2015
(Dollars in Millions)	Amortized Cost		Percent of Total			Amortized Cost		Percent of Total
U.S. Treasury and agencies	$	19,221		17.6	%	$	7,536		7.2	%
Mortgage-backed securities		83,431		76.4			91,265		86.6
Asset-backed securities		535		.5			558		.5
Obligations of state and political subdivisions		5,240		4.8			5,157		4.9
Other debt securities and investments		722		.7			891		.8
Total investment securities	$	109,149		100.0	%	$	105,407		100.0	%

Amount of Interest Income from Taxable and Non-Taxable Investment Securities

The following table provides information about the amount of interest income from taxable and non-taxable investment securities:

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in Millions)	2016		2015		2016		2015
Taxable	$	467	$	448	$	1,403	$	1,333
Non-taxable		48		54		152		169
Total interest income from investment securities	$	515	$	502	$	1,555	$	1,502

Amount of Gross Gains and Losses Realized through Sales of Available-for-sale Investment Securities

The following table provides information about the amount of gross gains and losses realized through the sales of available-for-sale investment securities:

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in Millions)	2016		2015		2016			2015
Realized gains	$	12	$	–	$	31		$	1
Realized losses		–		–		(12	)		(1	)
Net realized gains (losses)	$	12	$	–	$	19		$	–
Income tax (benefit) on net realized gains (losses)	$	4	$	–	$	7		$	–

Changes in Credit Losses on Debt Securities

Changes in the credit losses on debt securities are summarized as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in Millions)	2016			2015			2016			2015
Balance at beginning of period	$	79		$	91		$	84		$	101
Additions to Credit Losses Due to Other-than-temporary Impairments
Decreases in expected cash flows on securities for which other-than-temporary impairment was previously recognized		2			1			3			1
Total other-than-temporary impairment on debt securities		2			1			3			1
Other Changes in Credit Losses
Increases in expected cash flows		–			(1	)		(1	)		(3	)
Realized losses (a)		(2	)		(3	)		(7	)		(11	)
Balance at end of period	$	79		$	88		$	79		$	88

(a) Primarily represents principal losses allocated to mortgage and asset-backed securities in the Company’s portfolio under the terms of the securitization transaction documents.

Gross Unrealized Losses and Fair Value of Company's Investment Securities

The following table shows the gross unrealized losses and fair value of the Company’s investment securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have been in continuous unrealized loss positions, at September 30, 2016:

	Less Than 12 Months					12 Months or Greater					Total
(Dollars in Millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Held-to-maturity
U.S. Treasury and agencies	$	250	$	(1	)	$	–	$	–		$	250	$	(1	)
Residential agency mortgage-backed securities		3,728		(7	)		2,237		(16	)		5,965		(23	)
Other asset-backed securities		–		–			5		–			5		–
Obligations of state and political subdivisions		–		–			3		(1	)		3		(1	)
Other debt securities		–		–			18		–			18		–
Total held-to-maturity	$	3,978	$	(8	)	$	2,263	$	(17	)	$	6,241	$	(25	)
Available-for-sale
U.S. Treasury and agencies	$	1,611	$	(3	)	$	–	$	–		$	1,611	$	(3	)
Residential mortgage-backed securities
Agency		9,743		(35	)		2,885		(18	)		12,628		(53	)
Non-agency (a)
Prime (b)		48		–			91		(4	)		139		(4	)
Non-prime (c)		19		–			12		(3	)		31		(3	)
Commercial agency		10		–			–		–			10		–
Other asset-backed securities		–		–			2		–			2		–
Obligations of state and political subdivisions		687		(8	)		2		–			689		(8	)
Corporate debt securities		–		–			437		(59	)		437		(59	)
Total available-for-sale	$	12,118	$	(46	)	$	3,429	$	(84	)	$	15,547	$	(130	)

(a) The Company had $7 million of unrealized losses on residential non-agency mortgage-backed securities. Credit-related other-than-temporary impairment on these securities may occur if there is further deterioration in the underlying collateral pool performance. Borrower defaults may increase if economic conditions worsen. Additionally, deterioration in home prices may increase the severity of projected losses.

(b) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads).

(c) Includes all securities not meeting the conditions to be designated as prime.