NOTE 4 – SECURITIES AVAILABLE FOR SALE

Securities Portfolio Composition



	June 30, 2014
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$1,581		$10		$17		$1,574
Federal agency securities	1,005		17		32		990
U.S. states and political subdivisions	243		8		—		251
MBS - agency	19,692		555		182		20,065
MBS - private	136		4		—		140
ABS	20		2		—		22
Corporate and other debt securities	38		3		—		41
Other equity securities ¹	931		1		—		932
Total securities AFS		$23,646		$600		$231		$24,015

	December 31, 2013
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$1,334		$6		$47		$1,293
Federal agency securities	1,028		13		57		984
U.S. states and political subdivisions	232		7		2		237
MBS - agency	18,915		421		425		18,911
MBS - private	155		1		2		154
ABS	78		2		1		79
Corporate and other debt securities	39		3		—		42
Other equity securities ¹	841		1		—		842
Total securities AFS		$22,622		$454		$534		$22,542

¹At June 30, 2014, other equity securities comprised of the following: $376 million in FHLB of Atlanta stock, $402 million in Federal Reserve Bank stock, $153 million in mutual fund investments, and $1 million of other. At December 31, 2013, other equity securities comprised of the following: $336 million in FHLB of Atlanta stock, $402 million in Federal Reserve Bank stock, $103 million in mutual fund investments, and $1 million of other.

The following table presents interest and dividends on securities AFS:



	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014		2013		2014		2013
Taxable interest		$138		$133		$279		$265
Tax-exempt interest	2		3		5		5
Dividends	9		7		18		16
Total interest and dividends		$149		$143		$302		$286

Securities AFS pledged to secure public deposits, repurchase agreements, trusts, and other funds had a fair value of $10.8 billion and $11.0 billion at June 30, 2014 and December 31, 2013, respectively. At June 30, 2014, $625 million of securities AFS were pledged against repurchase arrangements under which the secured party has possession of the collateral and has the right to sell or repledge that collateral. At December 31, 2013, there were no securities AFS pledged under secured borrowing arrangements under which the secured party has possession of the collateral and would customarily sell or repledge that collateral, other than in an event of default by the Company.

The amortized cost and fair value of investments in debt securities at June 30, 2014, by estimated average life, are shown below. Actual cash flows may differ from estimated average lives and contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.



	Distribution of Maturities
(Dollars in millions)	1 Year or Less			1-5 Years			5-10 Years			After 10 Years			Total
Amortized Cost:
U.S. Treasury securities		$—			$892			$689			$—			$1,581
Federal agency securities	71			247			543			144			1,005
U.S. states and political subdivisions	65			53			102			23			243
MBS - agency	1,995			6,727			7,384			3,586			19,692
MBS - private	—			136			—			—			136
ABS	15			4			1			—			20
Corporate and other debt securities	2			20			16			—			38
Total debt securities		$2,148			$8,079			$8,735			$3,753			$22,715
Fair Value:
U.S. Treasury securities		$—			$900			$674			$—			$1,574
Federal agency securities	71			259			518			142			990
U.S. states and political subdivisions	66			56			104			25			251
MBS - agency	2,114			6,912			7,522			3,517			20,065
MBS - private	—			140			—			—			140
ABS	14			6			2			—			22
Corporate and other debt securities	2			22			17			—			41
Total debt securities		$2,267			$8,295			$8,837			$3,684			$23,083
Weighted average yield ¹	2.71		%	2.44		%	2.86		%	2.92		%	2.71		%

¹Average yields are based on amortized cost and presented on a FTE basis.

Securities in an Unrealized Loss Position

The Company held certain investment securities where amortized cost exceeded fair market value, resulting in unrealized loss positions. Market changes in interest rates and credit spreads may result in temporary unrealized losses as the market price of securities fluctuates. At June 30, 2014, the Company did not intend to sell these securities nor was it more-likely-than-not that the Company would be required to sell these securities before their anticipated recovery or maturity. The Company has reviewed its portfolio for OTTI in accordance with the accounting policies described in the Company's 2013 Annual Report on Form 10-K.



	June 30, 2014
	Less than twelve months				Twelve months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses ²		Fair Value		Unrealized Losses ²		Fair Value		Unrealized Losses ²
Temporarily impaired securities:
U.S. Treasury securities		$99		$—		$575		$17		$674		$17
Federal agency securities	3		—		615		32		618		32
MBS - agency	819		4		5,946		178		6,765		182
ABS	—		—		14		—		14		—
Total temporarily impaired securities	921		4		7,150		227		8,071		231
OTTI securities ¹:
MBS - private	—		—		46		—		46		—
Total OTTI securities	—		—		46		—		46		—
Total impaired securities		$921		$4		$7,196		$227		$8,117		$231



	December 31, 2013
	Less than twelve months				Twelve months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Temporarily impaired securities:
U.S. Treasury securities		$1,036		$47		$—		$—		$1,036		$47
Federal agency securities	398		29		264		28		662		57
U.S. states and political subdivisions	12		—		20		2		32		2
MBS - agency	9,173		358		618		67		9,791		425
ABS	—		—		13		1		13		1
Total temporarily impaired securities	10,619		434		915		98		11,534		532
OTTI securities ¹:
MBS - private	105		2		—		—		105		2
Total OTTI securities	105		2		—		—		105		2
Total impaired securities		$10,724		$436		$915		$98		$11,639		$534

¹Includes OTTI securities for which credit losses have been recorded in earnings in current or prior periods.

²Securities with unrealized losses less than $0.5 million are shown as zero.

At June 30, 2014, unrealized losses on securities that have been in a temporarily impaired position for longer than twelve months included U.S. Treasury securities, federal agency securities, agency MBS, and one ABS collateralized by 2004 vintage home equity loans. Unrealized losses on U.S. Treasury securities, federal agency securities, and agency MBS securities are due to an increase in market interest rates. The ABS continues to receive timely principal and interest payments, and is evaluated quarterly for credit impairment. Cash flow analysis shows that the underlying collateral can withstand highly stressed loss assumptions without incurring a credit loss.

The portion of unrealized losses on securities that have been OTTI that relates to factors other than credit is recorded in AOCI. Losses related to credit impairment on these securities are determined through estimated cash flow analyses and have been recorded in earnings in current and prior periods.

Realized Gains and Losses and Other-than-Temporarily Impaired Securities



	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2014			2013			2014			2013
Gross realized gains		$—			$1			$—			$4
Gross realized losses	—			(1		)	(1		)	(1		)
OTTI	(1		)	—			(1		)	(1		)
Net securities(losses)/gains		($1	)		$—			($2	)		$2

Credit impairment that is determined through the use of models is estimated using cash flows on security specific collateral and the transaction structure. Future expected credit losses are determined by using various assumptions, the most significant of which include default rates, prepayment rates, and loss severities. If, based on this analysis, the security is in an unrealized loss position and the Company does not expect to recover the entire amortized cost basis of the security, the expected cash flows are then discounted at the security’s initial effective interest rate to arrive at a present value amount. OTTI credit losses reflect the difference between the present value of cash flows expected to be collected and the amortized cost basis of these securities. During the three and six months ended June 30, 2014, all OTTI recognized in earnings related to one private MBS that has underlying collateral of residential mortgage loans securitized in 2007.

The Company continues to reduce existing exposure primarily through paydowns. In certain instances, the amount of impairment losses recognized in earnings includes credit losses on debt securities that exceeds the total unrealized losses, and as a result, the securities may have unrealized gains in AOCI relating to factors other than credit.

The securities that gave rise to credit impairments recognized during the three and six months ended June 30, 2014, consisted of private MBS with a fair value of approximately $19 million at June 30, 2014. The securities that gave rise to credit impairments recognized during the three and six months ended June 30, 2013, consisted of private MBS and ABS with a combined fair value of approximately $2 million at June 30, 2013. Credit impairments recognized on securities during the three and six months ended June 30, 2014 and 2013, are shown below.




	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2014		2013		2014		2013
OTTI ¹		$—		$—		$—		$—
Portion of gains recognized in OCI (before taxes)	1		—		1		1
Net impairment losses recognized in earnings		$1		$—		$1		$1

¹The initial OTTI amount represents the excess of the amortized cost over the fair value of AFS debt securities. For subsequent impairments of the same security, amount includes additional declines in the fair value subsequent to the previously recorded OTTI, if applicable, until such time the security is no longer in an unrealized loss position.

The following is a rollforward of credit losses recognized in earnings for the three and six months ended June 30, 2014 and 2013, related to securities for which the Company does not intend to sell and it is not more-likely-than-not that the Company will be required to sell as of the end of each period presented. Subsequent credit losses may be recorded on securities without a corresponding further decline in fair value when there has been a decline in expected cash flows.



	Three Months Ended June 30					Six Months Ended June 30
(Dollars in millions)	2014			2013		2014			2013
Balance, beginning of period		$25			$32		$25			$31
Additions:
OTTI credit losses on previously impaired securities	1			—		1			1
Reductions:
Increases in expected cash flows recognized over the remaining life of the securities	(1		)	—		(1		)	—
Balance, end of period		$25			$32		$25			$32

The following table presents a summary of the significant inputs used in determining the measurement of credit losses recognized in earnings for private MBS and ABS for the six months ended June 30:



	2014 ¹	2013
Default rate	2%	6 - 9%
Prepayment rate	16%	7 - 8%
Loss severity	46%	61 - 74%

¹ During the six months ended June 30, 2014, all OTTI recognized in earnings related to one private MBS security.

Assumption ranges represent the lowest and highest lifetime average estimates of each security for which credit losses were recognized in earnings. Ranges may vary from period to period as the securities for which credit losses are recognized vary. Additionally, severity may vary widely when losses are few and large.