Securities

Our securities available-for-sale and securities held-to-maturity portfolios consisted of the following:



December 31, 2016	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in millions)
Securities available-for-sale:
U.S. Treasury	$	21,366	$	102	$	(559	)	$	20,909
U.S. Government sponsored enterprises:
Mortgage-backed securities	4,535		4		(122		)	4,417
Collateralized mortgage obligations	2,139		—		(36		)	2,103
Direct agency obligations	3,709		118		(10		)	3,817
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	3,102		2		(58		)	3,046
Collateralized mortgage obligations	1,370		2		(15		)	1,357
Direct agency obligations	423		1		(4		)	420
Asset-backed securities collateralized by:
Home equity	69		—		(8		)	61
Other	108		—		(3		)	105
Foreign debt securities⁽¹⁾	522		—		(1		)	521
Equity securities	159		—		(5		)	154
Total available-for-sale securities	$	37,502	$	229	$	(821	)	$	36,910
Securities held-to-maturity:
U.S. Government sponsored enterprises:
Mortgage-backed securities	$	2,465	$	11	$	(9	)	$	2,467
Collateralized mortgage obligations	1,591		59		(12		)	1,638
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	2,557		11		(10		)	2,558
Collateralized mortgage obligations	6,176		34		(56		)	6,154
Obligations of U.S. states and political subdivisions	15		1		—			16
Asset-backed securities collateralized by residential mortgages	5		—		—			5
Total held-to-maturity securities	$	12,809	$	116	$	(87	)	$	12,838



December 31, 2015	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in millions)
Securities available-for-sale:
U.S. Treasury	$	17,026	$	142	$	(270	)	$	16,898
U.S. Government sponsored enterprises:
Mortgage-backed securities	1,451		2		(12		)	1,441
Collateralized mortgage obligations	159		—		(5		)	154
Direct agency obligations	4,136		133		(26		)	4,243
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	10,645		9		(145		)	10,509
Collateralized mortgage obligations	1,293		11		(4		)	1,300
Obligations of U.S. states and political subdivisions	340		8		—			348
Asset-backed securities collateralized by:
Commercial mortgages	9		—		—			9
Home equity	83		—		(8		)	75
Other	110		—		(21		)	89
Foreign debt securities⁽¹⁾	548		—		(2		)	546
Equity securities	161		3		(3		)	161
Total available-for-sale securities	$	35,961	$	308	$	(496	)	$	35,773
Securities held-to-maturity:
U.S. Government sponsored enterprises:
Mortgage-backed securities	$	2,945	$	20	$	(9	)	$	2,956
Collateralized mortgage obligations	1,755		73		(5		)	1,823
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	3,269		19		(11		)	3,277
Collateralized mortgage obligations	6,029		63		(11		)	6,081
Obligations of U.S. states and political subdivisions	19		1		—			20
Asset-backed securities collateralized by residential mortgages	7		1		—			8
Total held-to-maturity securities	$	14,024	$	177	$	(36	)	$	14,165


⁽¹⁾	Foreign debt securities represent public sector entity, bank or corporate debt.

Net unrealized losses were higher within the available-for-sale portfolio in 2016 due primarily to increasing yields on U.S. Treasury and U.S. Government sponsored enterprises mortgage-backed securities.

The following table summarizes gross unrealized losses and related fair values at December 31, 2016 and 2015 classified as to the length of time the losses have existed:



	One Year or Less						Greater Than One Year
December 31, 2016	Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment		Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment
	(dollars are in millions)
Securities available-for-sale:
U.S. Treasury	40	$	(378	)	$	13,707	32	$	(181	)	$	3,908
U.S. Government sponsored enterprises	316	(155		)	6,474		18	(13		)	427
U.S. Government agency issued or guaranteed	57	(66		)	3,941		7	(11		)	252
Asset-backed securities	—	—			—		8	(11		)	166
Foreign debt securities	7	—			343		1	(1		)	178
Equity securities	1	(5		)	154		—	—			—
Securities available-for-sale	421	$	(604	)	$	24,619	66	$	(217	)	$	4,931
Securities held-to-maturity:
U.S. Government sponsored enterprises	434	$	(21	)	$	2,013	45	$	—		$	21
U.S. Government agency issued or guaranteed	179	(65		)	4,734		503	(1		)	112
Obligations of U.S. states and political subdivisions	1	—			—		3	—			—
Securities held-to-maturity	614	$	(86	)	$	6,747	551	$	(1	)	$	133



	One Year or Less						Greater Than One Year
December 31, 2015	Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment		Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment
	(dollars are in millions)
Securities available-for-sale:
U.S. Treasury	52	$	(227	)	$	11,046	5	$	(43	)	$	924
U.S. Government sponsored enterprises	164	(30		)	1,451		19	(13		)	282
U.S. Government agency issued or guaranteed	62	(141		)	9,725		3	(8		)	101
Obligations of U.S. states and political subdivisions	4	—			16		3	—			45
Asset-backed securities	1	—			9		8	(29		)	164
Foreign debt securities	3	(2		)	351		—	—			—
Equity securities	1	(3		)	156		—	—			—
Securities available-for-sale	287	$	(403	)	$	22,754	38	$	(93	)	$	1,516
Securities held-to-maturity:
U.S. Government sponsored enterprises	312	$	(14	)	$	1,143	49	$	—		$	—
U.S. Government agency issued or guaranteed	145	(22		)	3,303		657	—			20
Obligations of U.S. states and political subdivisions	1	—			—		3	—			1
Securities held-to-maturity	458	$	(36	)	$	4,446	709	$	—		$	21

Although the fair value of a particular security is below its amortized cost, it does not necessarily result in a credit loss and hence an other-than-temporary impairment. The decline in fair value may be caused by, among other things, the illiquidity of the market. We have reviewed the securities for which there is an unrealized loss for other-than-temporary impairment in accordance with our accounting policies, discussed further below. At December 31, 2016 and 2015, we do not consider any of our debt securities to be other-than-temporarily impaired as we expect to recover their amortized cost basis and we neither intend nor expect to be required to sell these securities prior to recovery, even if that equates to holding securities until their individual maturities. However, other-than-temporary impairments may occur in future periods if the credit quality of the securities deteriorates.

Other-Than-Temporary Impairment On a quarterly basis, we perform an assessment to determine whether there have been any events or economic circumstances to indicate that a security with an unrealized loss has suffered other-than-temporary impairment. A debt security is considered impaired if its fair value is less than its amortized cost at the reporting date. If impaired, we assess whether the impairment is other-than-temporary.

If we intend to sell the debt security or if it is more-likely-than-not that we will be required to sell the debt security before the recovery of its amortized cost basis, the impairment is considered other-than-temporary and the unrealized loss is recorded in earnings. An impairment is also considered other-than-temporary if a credit loss exists (i.e., the present value of the expected future cash flows is less than the amortized cost basis of the debt security). In the event a credit loss exists, the credit loss component of an other-than-temporary impairment is recorded in earnings while the remaining portion of the impairment loss attributable to factors other than credit loss is recognized, net of tax, in other comprehensive income (loss).

For all securities held in the available-for-sale or held-to-maturity portfolios for which unrealized losses attributed to factors other than credit existed, we do not have the intention to sell and believe we will not be required to sell the securities for contractual, regulatory or liquidity reasons as of the reporting date. In determining whether a credit loss exists and the period over which the debt security is expected to recover, we considered the following factors:


•	The length of time and the extent to which the fair value has been less than the amortized cost basis;


•	The credit protection features embedded within the instrument, which includes but is not limited to credit subordination positions, payment structure, over collateralization, protective triggers and financial guarantees provided by third parties;


•	Changes in the near term prospects of the issuer or the underlying collateral of a security such as changes in default rates, loss severities given default and significant changes in prepayment assumptions;


•	The level of excess cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and


•	Any adverse change to the credit conditions of the issuer, the monoline insurer or the security such as credit downgrades by the rating agencies.

We use a standard valuation model to measure the credit loss for non-U.S. Government asset-backed securities. The valuation model captures the composition of the underlying collateral and the cash flow structure of the security. We make reference to external forecasts on key economic data and consider internal assessments on credit quality in developing significant inputs to the impairment model. Significant inputs to the model include delinquencies, collateral types and related contractual features, estimated rates of default, loss given default and prepayment assumptions. Using the inputs, the model estimates cash flows generated from the underlying collateral and distributes those cash flows to respective tranches of securities considering credit subordination and other credit enhancement features. The projected future cash flows attributable to the debt security held are discounted using the effective interest rates determined at the original acquisition date if the security bears a fixed rate of return. The discount rate is adjusted for the floating index rate for securities which bear a variable rate of return, such as LIBOR-based instruments.

During 2016 and 2015, none of our debt securities were determined to have either initial other-than-temporary impairment or changes to previous other-than-temporary impairment estimates relating to the credit component, as such, there were no other-than-temporary impairment losses recognized related to credit loss.

During 2014, none of our debt securities were determined to have initial other-than-temporary impairment while two held-to-maturity asset-backed debt securities, which were previously determined to be other-than-temporarily impaired, had changes to their other-than-temporary impairment estimates related to the credit component. The additional credit loss associated with the impaired debt securities, which reflects the excess of amortized cost over the present value of expected future cash flows, was $11 million during 2014, and was recorded as a component of net other-than-temporary impairment losses in the accompanying consolidated statement of income.

The following table summarizes the rollforward of credit losses which have been recognized in income on other-than-temporary impaired securities that we do not intend to sell nor will likely be required to sell:



Year Ended December 31,	2014
	(in millions)
Beginning balance of credit losses on held-to-maturity debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss)	$	61
Increase in credit losses for which an other-than-temporary impairment was previously recognized	11
Reduction of credit losses previously recognized on held-to-maturity debt securities due to closure of a VIE	(72		)
Ending balance of credit losses on held-to-maturity debt securities for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss)	$	—

Other securities gains (losses), net The following table summarizes realized gains and losses on investment securities transactions attributable to available-for-sale securities:



Year Ended December 31,	2016			2015			2014
	(in millions)
Gross realized gains	$	142		$	126		$	201
Gross realized losses	(72		)	(78		)	(79		)
Net realized gains	$	70		$	48		$	122

During 2014, the securities underlying Bryant Park were sold and the related agreements, which had a total carrying value of $76 million, were terminated and we recognized a loss of $9 million. These sales were in response to requests we received from the other participants to sell the securities underlying Bryant Park and were executed in connection with the closure of the Bryant Park facility. Therefore, these sales did not affect our intent and ability to hold our remaining held-to-maturity portfolio until maturity.

Contractual Maturities and Yields The following table summarizes the amortized cost and fair values of securities available-for-sale and securities held-to-maturity at December 31, 2016 by contractual maturity. Expected maturities differ from contractual maturities because borrowers have the right to prepay obligations without prepayment penalties in certain cases. Securities available-for-sale amounts exclude equity securities as they do not have stated maturities. The table below also reflects the distribution of maturities of debt securities held at December 31, 2016, together with the approximate taxable equivalent yield of the portfolio. The yields shown are calculated by dividing annualized interest income, including the accretion of discounts and the amortization of premiums, by the amortized cost of securities outstanding at December 31, 2016. Yields on tax-exempt obligations have been computed on a taxable equivalent basis using applicable statutory tax rates.



	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years
Taxable Equivalent Basis	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(dollars are in millions)
Available-for-sale:
U.S. Treasury	$	—	—	%	$	7,169	1.66	%	$	10,018	1.97	%	$	4,179	2.89	%
U.S. Government sponsored enterprises	200		3.25		3,146		2.81		1,180		2.41		5,857		2.32
U.S. Government agency issued or guaranteed	—		—		116		2.92		94		2.49		4,685		2.31
Asset-backed securities	—		—		—		—		—		—		177		3.48
Foreign debt securities	276		.90		67		.00		—		—		179		1.29
Total amortized cost	$	476	1.89	%	$	10,498	2.01	%	$	11,292	2.02	%	$	15,077	2.48	%
Total fair value	$	478			$	10,627			$	10,978			$	14,673
Held-to-maturity:
U.S. Government sponsored enterprises	$	—	—	%	$	299	2.15	%	$	393	2.78	%	$	3,364	2.85	%
U.S. Government agency issued or guaranteed	—		—		6		1.91		36		3.28		8,691		2.28
Obligations of U.S. states and political subdivisions	3		3.83		3		3.74		5		3.33		4		5.63
Asset-backed securities	—		—		—		—		—		—		5		7.03
Total amortized cost	$	3	3.83	%	$	308	2.16	%	$	434	2.83	%	$	12,064	2.44	%
Total fair value	$	3			$	309			$	436			$	12,090

Investments in Federal Home Loan Bank stock and Federal Reserve Bank stock of $338 million and $631 million, respectively, were included in other assets at December 31, 2016. Investments in Federal Home Loan Bank stock and Federal Reserve Bank stock of $323 million and $632 million, respectively, were included in other assets at December 31, 2015.