Investment Securities

9 Months Ended

Sep. 30, 2014

Investment Securities Disclosure [Abstract]

Note 7 Investment Securities

Table 73: Investment Securities Summary

			Amortized		Unrealized						Fair
In millions			Cost		Gains			Losses			Value
September 30, 2014

Securities Available for Sale
Debt securities
	U.S. Treasury and government agencies		$	5,176		$	167			$	5,343
	Residential mortgage-backed
		Agency		17,844			391	$	(75)		18,160
		Non-agency		4,904			336		(102)		5,138
	Commercial mortgage-backed
		Agency		1,787			22		(17)		1,792
		Non-agency		3,703			95		(10)		3,788
	Asset-backed			5,064			87		(28)		5,123
	State and municipal			1,978			80		(8)		2,050
	Other debt			1,792			44		(7)		1,829
		Total debt securities		42,248			1,222		(247)		43,223
Corporate stocks and other				391			7		(1)		397
	Total securities available for sale		$	42,639		$	1,229	$	(248)	$	43,620
Securities Held to Maturity (a)
Debt securities
	U.S. Treasury and government agencies		$	246		$	30			$	276
	Residential mortgage-backed
		Agency		5,427			122	$	(21)		5,528
		Non-agency		276			9				285
	Commercial mortgage-backed
		Agency		1,252			50				1,302
		Non-agency		1,068			14		(1)		1,081
	Asset-backed			772			2		(7)		767
	State and municipal			2,053			89				2,142
	Other debt			325			5				330
	Total securities held to maturity		$	11,419		$	321	$	(29)	$	11,711

December 31, 2013

Securities Available for Sale
Debt securities
	U.S. Treasury and government agencies		$	3,990		$	135	$	(7)	$	4,118
	Residential mortgage-backed
		Agency (b)		21,556			367		(209)		21,714
		Non-agency		5,457			308		(160)		5,605
	Commercial mortgage-backed
		Agency (b)		1,745			32		(14)		1,763
		Non-agency		3,937			123		(18)		4,042
	Asset-backed			5,754			66		(48)		5,772
	State and municipal			2,609			52		(44)		2,617
	Other debt			2,506			55		(18)		2,543
		Total debt securities		47,554			1,138		(518)		48,174
Corporate stocks and other				434					(1)		433
	Total securities available for sale		$	47,988		$	1,138	$	(519)	$	48,607
Securities Held to Maturity (a)
Debt securities
	U.S. Treasury and government agencies		$	239		$	8	$	(4)	$	243
	Residential mortgage-backed
		Agency		5,814			71		(64)		5,821
		Non-agency		293					(4)		289
	Commercial mortgage-backed
		Agency		1,251			49				1,300
		Non-agency		1,687			20		(5)		1,702
	Asset-backed			1,009			2		(10)		1,001
	State and municipal			1,055			10		(4)		1,061
	Other debt			339			9				348
	Total securities held to maturity		$	11,687		$	169	$	(91)	$	11,765
(a)	Held to maturity securities transferred from available for sale are included in held to maturity at fair value at the time of transfer. The amortized cost of held to maturity securities included net unrealized gains of $134 million and $111 million at September 30, 2014 and December 31, 2013, respectively, related to securities transferred, which are offset in Accumulated Other Comprehensive Income, net of tax.
(b)	These line items were corrected for the prior period due to a misclassification of Government National Mortgage Association (GNMA) securities collateralized by project loans. $1.1 billion was previously reported as residential mortgage-backed agency securities and was reclassified to commercial mortgage-backed agency securities.

The fair value of investment securities is impacted by interest rates, credit spreads, market volatility and liquidity conditions. Net unrealized gains and losses in the securities available for sale portfolio are included in Shareholders’ equity as Accumulated other comprehensive income or loss, net of tax, unless credit-related. Securities held to maturity are carried at amortized cost. At September 30, 2014, Accumulated other comprehensive income included pretax gains of $62 million from derivatives that hedged the purchase of investment securities classified as held to maturity. The gains will be accreted into interest income as an adjustment of yield on the securities.

During the second quarter of 2014, we transferred securities with a fair value of $1.4 billion from available for sale to held to maturity. The securities transferred included $1.0 billion of state and municipal securities, $.2 billion of agency residential and commercial mortgage-backed securities, and $.2 billion of non-agency commercial mortgage-backed securities. The non-agency commercial mortgage-backed and state and municipal securities were all rated either AAA or AA. We changed our intent and committed to hold these high-quality securities to maturity in order to reduce the impact of price volatility on Accumulated other comprehensive income and certain capital measures, after taking into consideration market conditions. The securities were reclassified at fair value at the time of transfer and the transfer represented a non-cash transaction. Accumulated other comprehensive income included net pretax unrealized gains of $44 million at transfer, which are being accreted over the remaining life of the related securities as an adjustment of yield in a manner consistent with the amortization of the net premium on the same transferred securities, resulting in no impact on net income.

Table 74 presents gross unrealized losses on securities available for sale at September 30, 2014 and December 31, 2013. The securities are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and twelve months or more based on the point in time that the fair value declined below the amortized cost basis. The table includes debt securities where a portion of other-than-temporary impairment (OTTI) has been recognized in Accumulated other comprehensive income (loss).

Table 74: Gross Unrealized Loss and Fair Value of Securities Available for Sale

				Unrealized loss position less						Unrealized loss position 12
In millions				than 12 months						months or more					Total
				Unrealized				Fair		Unrealized			Fair		Unrealized			Fair
				Loss				Value		Loss			Value		Loss			Value
September 30, 2014
Debt securities
	U.S. Treasury and government agencies						(a)	$	371								(a)	$	371
	Residential mortgage-backed
		Agency			$	(7)			977	$	(68)		$	2,283	$	(75)			3,260
		Non-agency				(2)			255		(100)			1,552		(102)			1,807
	Commercial mortgage-backed
		Agency				(4)			605		(13)			333		(17)			938
		Non-agency				(5)			651		(5)			211		(10)			862
	Asset-backed					(3)			814		(25)			1,002		(28)			1,816
	State and municipal						(a)		75		(8)			290		(8)			365
	Other debt					(3)			476		(4)			215		(7)			691
			Total debt securities			(24)			4,224		(223)			5,886		(247)			10,110
	Corporate stocks and other										(1)			15		(1)			15
			Total		$	(24)		$	4,224	$	(224)		$	5,901	$	(248)		$	10,125

December 31, 2013
Debt securities
	U.S. Treasury and government agencies				$	(7)		$	1,066						$	(7)		$	1,066
	Residential mortgage-backed
		Agency (b)				(198)			7,519	$	(11)		$	287		(209)			7,806
		Non-agency				(18)			855		(142)			1,719		(160)			2,574
	Commercial mortgage-backed
		Agency (b)				(13)			454		(1)			6		(14)			460
		Non-agency				(18)			1,315			(a)		14		(18)			1,329
	Asset-backed					(11)			1,752		(37)			202		(48)			1,954
	State and municipal					(23)			897		(21)			286		(44)			1,183
	Other debt					(17)			844		(1)			12		(18)			856
			Total debt securities			(305)			14,702		(213)			2,526		(518)			17,228
	Corporate stocks and other					(1)			15							(1)			15
			Total		$	(306)		$	14,717	$	(213)		$	2,526	$	(519)		$	17,243
(a)	The unrealized loss on these securities was less than $.5 million.
(b)	These line items were corrected for the prior period due to a misclassification of Government National Mortgage Association (GNMA) securities collateralized by project loans. $1.1 billion was previously reported as residential mortgage-backed agency securities and was reclassified to commercial mortgage-backed agency securities.

The gross unrealized loss on debt securities held to maturity was $41 million at September 30, 2014 and $98 million at December 31, 2013. The majority of the gross unrealized loss at September 30, 2014 related to agency residential mortgage-backed securities. The fair value of debt securities held to maturity that were in a continuous loss position for less than 12 months was $.1 billion and $3.6 billion at September 30, 2014 and December 31, 2013, respectively, and positions that were in a continuous loss position for 12 months or more were $2.0 billion and $48 million at September 30, 2014 and December 31, 2013, respectively. For securities transferred to held to maturity from available for sale, the unrealized loss for purposes of this analysis is determined by comparing the security’s original amortized cost to its current estimated fair value.

Evaluating Investment Securities for Other-than-Temporary Impairments

For the securities in the preceding Table 74, as of September 30, 2014 we do not intend to sell and believe we will not be required to sell the securities prior to recovery of the amortized cost basis.

At least quarterly, we conduct a comprehensive security-level assessment on all securities. For those securities in an unrealized loss position we determine if OTTI exists. An unrealized loss exists when the current fair value of an individual security is less than its amortized cost basis. An OTTI loss must be recognized for a debt security in an unrealized loss position if we intend to sell the security or it is more likely than not we will be required to sell the security prior to recovery of its amortized cost basis. In this situation, the amount of loss recognized in income is equal to the difference between the fair value and the amortized cost basis of the security. Even if we do not expect to sell the security, we must evaluate the expected cash flows to be received to determine if we believe a credit loss has occurred. In the event of a credit loss, only the amount of impairment associated with the credit loss is recognized in income. The portion of the unrealized loss relating to other factors, such as liquidity conditions in the market or changes in market interest rates, is recorded in accumulated other comprehensive income (loss).

The security-level assessment is performed on each security, regardless of the classification of the security as available for sale or held to maturity. Our assessment considers the security structure, recent security collateral performance metrics if applicable, external credit ratings, failure of the issuer to make scheduled interest or principal payments, our judgment and expectations of future performance, and relevant independent industry research, analysis and forecasts. Results of the periodic assessment are reviewed by a cross-functional senior management team representing Asset & Liability Management, Finance, and Market Risk Management. The senior management team considers the results of the assessments, as well as other factors, in determining whether the impairment is other-than-temporary.

Substantially all of the credit impairment we have recognized relates to non-agency residential mortgage-backed securities and asset-backed securities collateralized by first-lien and second-lien non-agency residential mortgage loans. Potential credit losses on these securities are evaluated on a security-by-security basis. Collateral performance assumptions are developed for each security after reviewing collateral composition and collateral performance statistics. This includes analyzing recent delinquency roll rates, loss severities, voluntary prepayments and various other collateral and performance metrics. This information is then combined with general expectations on the housing market, employment and other macroeconomic factors to develop estimates of future performance.

Security level assumptions for prepayments, loan defaults and loss given default are applied to each non-agency residential mortgage-backed security and asset-backed security collateralized by first-lien and second-lien non-agency residential mortgage loans using a third-party cash flow model. The third-party cash flow model then generates projected cash flows according to the structure of each security. Based on the results of the cash flow analysis, we determine whether we expect that we will recover the amortized cost basis of our security.

The following table provides detail on the significant assumptions used to determine credit impairment for non-agency residential mortgage-backed and asset-backed securities collateralized by first-lien and second-lien non-agency residential mortgage loans.

Table 75: Credit Impairment Assessment Assumptions - Non-Agency Residential Mortgage-Backed and Asset-Backed Securities

						Weighted-
September 30, 2014			Range			average (a)
Long-term prepayment rate (annual CPR)
	Prime			7 - 20	%	13	%
	Alt-A			5 - 12		6
	Option ARM			3 - 6		3
Remaining collateral expected to default
	Prime			1 - 34	%	13	%
	Alt-A			6 - 53		27
	Option ARM			11 - 56		37
Loss severity
	Prime			20 - 95	%	41	%
	Alt-A			30 - 82		59
	Option ARM			45 - 71		61
(a)		Calculated by weighting the relevant assumption for each individual security by the current outstanding cost basis of the security.

The following table presents a rollforward of the cumulative OTTI credit losses recognized in earnings for all debt securities for which a portion of an OTTI loss was recognized in Accumulated other comprehensive income (loss).

Table 76: Rollforward of Cumulative OTTI Credit Losses Recognized in Earnings

Three months ended September 30,
In millions	2014			2013
Balance at beginning of period		$	(1,158)		$	(1,164)
Additional loss where credit impairment was previously recognized			(1)			(2)
Reduction due to credit impaired securities sold or matured						7
Balance at end of period		$	(1,159)		$	(1,159)

Nine months ended September 30,
In millions	2014			2013
Balance at beginning of period		$	(1,160)		$	(1,201)
Additional loss where credit impairment was previously recognized			(4)			(16)
Reduction due to credit impaired securities sold or matured			5			58
Balance at end of period		$	(1,159)		$	(1,159)

Information relating to gross realized securities gains and losses from the sales of securities is set forth in the following table.

Table 77: Gains (Losses) on Sales of Securities Available for Sale

			Gross		Gross		Net		Tax
In millions	Proceeds		Gains		Losses		Gains		Expense
Nine months ended September 30
2014	$	3,606	$	29	$	(25)	$	4	$	1
2013		7,141		142		(46)		96		33

The following table presents, by remaining contractual maturity, the amortized cost, fair value and weighted-average yield of debt securities at September 30, 2014.

Table 78: Contractual Maturity of Debt Securities

September 30, 2014					After 1 Year			After 5 Years			After 10
Dollars in millions		1 Year or Less			through 5 Years			through 10 Years			Years			Total
Securities Available for Sale
U.S. Treasury and government agencies		$	2		$	1,311		$	3,387		$	476		$	5,176
Residential mortgage-backed
	Agency					115			455			17,274			17,844
	Non-agency					7			1			4,896			4,904
Commercial mortgage-backed
	Agency		121			253			20			1,393			1,787
	Non-agency											3,703			3,703
Asset-backed			12			906			1,889			2,257			5,064
State and municipal			4			116			331			1,527			1,978
Other debt			98			1,041			427			226			1,792
Total debt securities available for sale		$	237		$	3,749		$	6,510		$	31,752		$	42,248
Fair value		$	238		$	3,843		$	6,628		$	32,514		$	43,223
Weighted-average yield, GAAP basis			3.33	%		2.60	%		2.36	%		3.00	%		2.87	%
Securities Held to Maturity
U.S. Treasury and government agencies											$	246		$	246
Residential mortgage-backed
	Agency											5,427			5,427
	Non-agency											276			276
Commercial mortgage-backed
	Agency				$	1,047		$	146			59			1,252
	Non-agency					6						1,062			1,068
Asset-backed						17			414			341			772
State and municipal		$	20			21			739			1,273			2,053
Other debt									325						325
Total debt securities held to maturity		$	20		$	1,091		$	1,624		$	8,684		$	11,419
Fair value		$	20		$	1,130		$	1,679		$	8,882		$	11,711
Weighted-average yield, GAAP basis			4.42	%		3.43	%		3.24	%		3.71	%		3.62	%

Based on current interest rates and expected prepayment speeds, the weighted-average expected maturity of the investment securities portfolio (excluding corporate stocks and other) was 4.6 years at September 30, 2014 and 4.9 years at December 31, 2013. The weighted-average expected maturity of mortgage and other asset-backed debt securities were as follows as of September 30, 2014:

Table 79: Weighted-Average Expected Maturity of Mortgage and Other Asset-Backed Debt Securities

September 30, 2014		Years
Agency residential mortgage-backed securities		4.3
Non-agency residential mortgage-backed securities		5.8
Agency commercial mortgage-backed securities		3.2
Non-agency commercial mortgage-backed securities		3.1
Asset-backed securities		3.6

Weighted-average yields are based on historical cost with effective yields weighted for the contractual maturity of each security. At September 30, 2014, there were no securities of a single issuer, other than FNMA, that exceeded 10% of Total shareholders’ equity.

The following table presents the fair value of securities that have been either pledged to or accepted from others to collateralize outstanding borrowings.

Table 80: Fair Value of Securities Pledged and Accepted as Collateral

		September 30			December 31
In millions		2014			2013
Pledged to others			$	17,934		$	18,772
Accepted from others:
	Permitted by contract or custom to sell or repledge			1,567			1,571
	Permitted amount repledged to others			1,358			1,343

The securities pledged to others include positions held in our portfolio of investment securities, trading securities, and securities accepted as collateral from others that we are permitted by contract or custom to sell or repledge, and were used to secure public and trust deposits, repurchase agreements, and for other purposes.