6. Securities

Securities available for sale. These are securities that we intend to hold for an indefinite period of time but that may be sold in response to changes in interest rates, prepayment risk, liquidity needs or other factors. Securities available for sale are reported at fair value. Unrealized gains and losses (net of income taxes) deemed temporary are recorded in equity as a component of AOCI on the balance sheet. Unrealized losses on equity securities deemed to be “other-than-temporary,” and realized gains and losses resulting from sales of securities using the specific identification method, are included in “other income” on the income statement. Unrealized losses on debt securities deemed to be “other-than-temporary” are included in “other income” on the income statement or AOCI in accordance with the applicable accounting guidance related to the recognition of OTTI of debt securities.

“Other securities” held in the available-for-sale portfolio are primarily marketable equity securities that are traded on a public exchange such as the NYSE or NASDAQ.

Held-to-maturity securities. These are debt securities that we have the intent and ability to hold until maturity. Debt securities are carried at cost and adjusted for amortization of premiums and accretion of discounts using the interest method. This method produces a constant rate of return on the adjusted carrying amount.

“Other securities” held in the held-to-maturity portfolio consist of foreign bonds and capital securities.

Unrealized losses on equity securities deemed to be “other-than-temporary,” and realized gains and losses resulting from sales of securities using the specific identification method, are included in “other income” on the income statement. Unrealized losses on debt securities deemed to be “other-than-temporary” are included in “other income” on the income statement or AOCI in accordance with the applicable accounting guidance related to the recognition of OTTI of debt securities.

The amortized cost, unrealized gains and losses, and approximate fair value of our securities available for sale and held-to-maturity securities are presented in the following tables. Gross unrealized gains and losses represent the difference between the amortized cost and the fair value of securities on the balance sheet as of the dates indicated. Accordingly, the amount of these gains and losses may change in the future as market conditions change.


	June 30, 2013
*in millions*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

SECURITIES AVAILABLE FOR SALE
States and political subdivisions	$	43	$	1		—	$	44
Collateralized mortgage obligations		12,503		213	$	113		12,603
Other mortgage-backed securities		555		32		3		584
Other securities		19		3		—		22

Total securities available for sale	$	13,120	$	249	$	116	$	13,253


HELD-TO-MATURITY SECURITIES
Collateralized mortgage obligations	$	4,732	$	16	$	50	$	4,698
Other securities		18		—		—		18

Total held-to-maturity securities	$	4,750	$	16	$	50	$	4,716



	December 31, 2012
*in millions*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

SECURITIES AVAILABLE FOR SALE
States and political subdivisions	$	47	$	2		—	$	49
Collateralized mortgage obligations		11,148		316		—		11,464
Other mortgage-backed securities		491		47		—		538
Other securities		42		1		—		43

Total securities available for sale	$	11,728	$	366		—	$	12,094


HELD-TO-MATURITY SECURITIES
Collateralized mortgage obligations	$	3,913	$	61		—	$	3,974
Other securities		18		—		—		18

Total held-to-maturity securities	$	3,931	$	61		—	$	3,992



	June 30, 2012
*in millions*	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

SECURITIES AVAILABLE FOR SALE
States and political subdivisions	$	53	$	3		—	$	56
Collateralized mortgage obligations		12,098		379		—		12,477
Other mortgage-backed securities		597		55		—		652
Other securities		20		1	$	1		20

Total securities available for sale	$	12,768	$	438	$	1	$	13,205


HELD-TO-MATURITY SECURITIES
Collateralized mortgage obligations	$	4,334	$	44		—	$	4,378
Other securities		18		—		—		18

Total held-to-maturity securities	$	4,352	$	44		—	$	4,396

The following table summarizes our securities that were in an unrealized loss position as of June 30, 2013, December 31, 2012, and June 30, 2012.


	Duration of Unrealized Loss Position
	Less than 12 Months					12 Months or Longer					Total
			Gross					Gross					Gross
			Unrealized					Unrealized					Unrealized
in millions	Fair Value		Losses		^(a)	Fair Value		Losses		^(b)	Fair Value		Losses		^(a)

June 30, 2013
Securities available for sale:
State and political divisions		—		—			—		—			—		—
Collateralized mortgage obligations	$	5,412	$	113			—		—		$	5,412	$	113
Other mortgage-backed securities		152		3			—		—			152		3
Other securities		3		—			—		—			3		—
Held-to-maturity:
Collateralized mortgage obligations		2,998		50			—		—			2,998		50

Total temporarily impaired securities	$	8,565	$	166			—		—		$	8,565	$	166


December 31, 2012
Securities available for sale:
Other securities	$	31		—		$	3		—		$	34		—

Total temporarily impaired securities	$	31		—		$	3		—		$	34		—


June 30, 2012
Securities available for sale:
Collateralized mortgage obligations	$	1		—			—		—		$	1		—
Other securities		12	$	1			—		—			12	$	1
Held-to-maturity:
Collateralized mortgage obligations		200		—			—		—			200		—

Total temporarily impaired securities	$	213	$	1			—		—		$	213	$	1

(a)

There were less than $1 million of gross unrealized losses for the period ended December 31, 2012.

(b)

There were less than $1 million of gross unrealized losses for the period ended June 30, 2013, December 31, 2012 and June 30, 2012.

At June 30, 2013, we had $113 million of gross unrealized losses related to 53 fixed-rate collateralized mortgage obligations that were invested in as part of our overall A/LM strategy. These securities have a weighted-average maturity of 4.2 years at June 30, 2013. Since these securities have a fixed interest rate, their fair value is sensitive to movements in market interest rates. We also had $3 million of gross unrealized losses related to other mortgage-backed securities, which have a weighted-average maturity of 4.9 years at June 30, 2013.These unrealized losses are considered temporary since we expect to collect all contractually due amounts from these securities. Accordingly, these investments have been reduced to their fair value through OCI, not earnings.

We regularly assess our securities portfolio for OTTI. The assessments are based on the nature of the securities, the underlying collateral, the financial condition of the issuer, the extent and duration of the loss, our intent related to the individual securities, and the likelihood that we will have to sell securities prior to expected recovery.

The debt securities identified to have OTTI are written down to their current fair value. For those debt securities that we intend to sell, or more-likely-than-not will be required to sell, prior to the expected recovery of the amortized cost, the entire impairment (i.e., the difference between amortized cost and the fair value) is recognized in earnings. For those debt securities that we do not intend to sell, or more-likely-than-not will not be required to sell, prior to expected recovery, the credit portion of OTTI is recognized in earnings, while the remaining OTTI is recognized in equity as a component of AOCI on the balance sheet. As shown in the following table, we did not have any impairment losses recognized in earnings for the three months ended June 30, 2013.


Three months ended June 30, 2013
in millions

Balance at March 31, 2013	$	4
Impairment recognized in earnings		—

Balance at June 30, 2013	$	4

Realized gains and losses related to securities available for sale were as follows:


Six months ended June 30, 2013
in millions

Realized gains			—
Realized losses			—

Net securities gains (losses)			—

At June 30, 2013, securities available for sale and held-to-maturity securities totaling $12 billion were pledged to secure securities sold under repurchase agreements, to secure public and trust deposits, to facilitate access to secured funding, and for other purposes required or permitted by law.

The following table shows securities by remaining maturity. CMOs and other mortgage-backed securities (both of which are included in the securities available-for-sale portfolio) as well the CMOs in the held-to-maturity portfolio are presented based on their expected average lives. The remaining securities, in both the available-for-sale and held-to-maturity portfolios, are presented based on their remaining contractual maturity. Actual maturities may differ from expected or contractual maturities since borrowers have the right to prepay obligations with or without prepayment penalties.


	Securities Available for Sale				Held-to-Maturity Securities
June 30, 2013 in millions	Amortized Cost		Fair Value		Amortized Cost		Fair Value

Due in one year or less	$	650	$	660	$	10	$	10
Due after one through five years		12,207		12,335		4,740		4,706
Due after five through ten years		260		255		—		—
Due after ten years		3		3		—		—

Total	$	13,120	$	13,253	$	4,750	$	4,716