NOTE 4 – SECURITIES AVAILABLE FOR SALE

Securities Portfolio Composition



	September 30, 2014
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$1,007		$6		$2		$1,011
Federal agency securities	986		15		31		970
U.S. states and political subdivisions	228		9		—		237
MBS - agency	22,508		501		198		22,811
MBS - private	129		3		—		132
ABS	19		2		—		21
Corporate and other debt securities	38		3		—		41
Other equity securities ¹	937		2		—		939
Total securities AFS		$25,852		$541		$231		$26,162

	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 September 30, 2014, other equity securities comprised the following: $421 million in FHLB of Atlanta stock, $402 million in Federal Reserve Bank stock, $109 million in mutual fund investments, and $7 million of other. At December 31, 2013, other equity securities comprised 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 September 30				Nine Months Ended September 30
(Dollars in millions)	2014		2013		2014		2013
Taxable interest		$142		$132		$421		$397
Tax-exempt interest	2		3		8		8
Dividends	9		8		27		24
Total interest and dividends		$153		$143		$456		$429

Securities AFS pledged to secure public deposits, repurchase agreements, trusts, and other funds had a fair value of $7.8 billion and $11.0 billion at September 30, 2014 and December 31, 2013, respectively. At September 30, 2014, $370 million of securities AFS at fair value 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 September 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		$—			$1,007			$—			$—			$1,007
Federal agency securities	75			239			531			141			986
U.S. states and political subdivisions	60			44			101			23			228
MBS - agency	2,349			9,020			6,919			4,220			22,508
MBS - private	5			124			—			—			129
ABS	14			3			2			—			19
Corporate and other debt securities	5			33			—			—			38
Total debt securities		$2,508			$10,470			$7,553			$4,384			$24,915
Fair Value:
U.S. Treasury securities		$—			$1,011			$—			$—			$1,011
Federal agency securities	75			250			506			139			970
U.S. states and political subdivisions	60			47			105			25			237
MBS - agency	2,490			9,203			6,956			4,162			22,811
MBS - private	5			127			—			—			132
ABS	14			5			2			—			21
Corporate and other debt securities	5			36			—			—			41
Total debt securities		$2,649			$10,679			$7,569			$4,326			$25,223
Weighted average yield ¹	2.47		%	2.46		%	2.89		%	3.09		%	2.70		%

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. The Company reviewed its portfolio for OTTI in accordance with the accounting policies described in the Company's 2013 Annual Report on Form 10-K and, at September 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. At September 30, 2014, the Company had no OTTI for securities in an unrealized loss position.



	September 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		$385		$2		$—		$—		$385		$2
Federal agency securities	8		—		615		31		623		31
MBS - agency	4,259		14		5,804		184		10,063		198
ABS	—		—		14		—		14		—
Total temporarily impaired securities		$4,652		$16		$6,433		$215		$11,085		$231



	December 31, 2013
	Less than twelve months				Twelve months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses ²		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 September 30, 2014, unrealized losses on securities that have been in a temporarily impaired position for longer than twelve months included federal agency securities, agency MBS, and one ABS collateralized by 2004 vintage home equity loans. Unrealized losses on 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 OTTI securities 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 or prior periods.

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



	Three Months Ended September 30					Nine Months Ended September 30
(Dollars in millions)	2014			2013		2014			2013
Gross realized gains		$3			$—		$3			$4
Gross realized losses	(12		)	—		(13		)	(1		)
OTTI losses recognized in earnings	—			—		(1		)	(1		)
Net securities (losses)/gains		($9	)		$—		($11	)		$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 nine months ended September 30, 2014, all OTTI recognized in earnings related to one private MBS collateralized by residential mortgage loans securitized in 2007.

The Company continues to reduce existing exposure to this security 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.

There was no credit impairment recognized on securities during the three months ended September 30, 2014 and 2013. The security that gave rise to credit impairments recognized during the nine months ended September 30, 2014 consisted of private MBS with a fair value of approximately $19 million at September 30, 2014. The securities that gave rise to credit impairments recognized during the nine months ended September 30, 2013 consisted of private MBS and ABS with a combined fair value of approximately $23 million at September 30, 2013. Credit impairments recognized on securities during the nine months ended September 30, 2014 and 2013, are shown below.




	Nine Months Ended September 30
(Dollars in millions)	2014		2013
OTTI ¹		$—		$—
Portion of gains recognized in OCI (before taxes)	1		1
Net impairment losses recognized in earnings		$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 nine months ended September 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 September 30					Nine Months Ended September 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
Reductions:
Increases in expected cash flows recognized over the remaining life of the securities	—		(1		)	(1		)	(1		)
Balance, end of period		$25		$31			$25			$31

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 nine months ended September 30:



	2014 ¹	2013
Default rate	2%	2 - 9%
Prepayment rate	16%	7 - 21%
Loss severity	46%	46 - 74%

¹ During the nine months ended September 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.