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Investment Securities
 9 Months Ended
Sep. 30, 2016
Investments, Debt and Equity Securities [Abstract]  
Investment Securities
NOTE 3—INVESTMENT SECURITIES
Our investment portfolio consists primarily of the following: U.S. Treasury securities; U.S. government-sponsored enterprise (“Agency”) and non-agency residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”); other asset-backed securities (“ABS”); and other securities. The carrying value of our investments in U.S. Treasury and Agency securities represented 91% and 90% of our total investment securities as of September 30, 2016 and December 31, 2015, respectively.
The table below presents the overview of our investment securities portfolio as of September 30, 2016 and December 31, 2015.
Table 3.1: Overview of Investment Securities Portfolio
(Dollars in millions)
 
September 30, 2016
 
December 31, 2015
Securities available for sale, at fair value
 
$
41,511

 
$
39,061

Securities held to maturity, at carrying value
 
25,019

 
24,619

Total investment securities
 
$
66,530

 
$
63,680


The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale as of September 30, 2016 and December 31, 2015.
Table 3.2: Investment Securities Available for Sale
 
 
September 30, 2016
(Dollars in millions)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses(1)
 
Fair
Value
Investment securities available for sale:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
5,136

 
$
40

 
$
0

 
$
5,176

RMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
26,563

 
335

 
(70
)
 
26,828

Non-agency
 
2,433

 
395

 
(6
)
 
2,822

Total RMBS
 
28,996

 
730

 
(76
)
 
29,650

CMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
3,492

 
47

 
(21
)
 
3,518

Non-agency
 
1,697

 
55

 
(2
)
 
1,750

Total CMBS
 
5,189

 
102

 
(23
)
 
5,268

Other ABS(3)
 
986

 
5

 
0

 
991

Other securities(4)
 
422

 
6

 
(2
)
 
426

Total investment securities available for sale
 
$
40,729

 
$
883

 
$
(101
)
 
$
41,511

 
 
December 31, 2015
(Dollars in millions)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses(1)
 
Fair
Value
Investment securities available for sale:
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
4,664

 
$
5

 
$
(9
)
 
$
4,660

RMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
24,332

 
165

 
(212
)
 
24,285

Non-agency
 
2,680

 
368

 
(22
)
 
3,026

Total RMBS
 
27,012

 
533

 
(234
)
 
27,311

CMBS:
 
 
 
 
 
 
 
 
Agency(2)
 
3,690

 
21

 
(47
)
 
3,664

Non-agency
 
1,723

 
16

 
(24
)
 
1,715

Total CMBS
 
5,413

 
37

 
(71
)
 
5,379

Other ABS(3)
 
1,345

 
1

 
(6
)
 
1,340

Other securities(4)
 
370

 
2

 
(1
)
 
371

Total investment securities available for sale
 
$
38,804

 
$
578

 
$
(321
)
 
$
39,061

__________
(1) 
Includes non-credit-related OTTI that is recorded in accumulated other comprehensive income (“AOCI”) of $6 million and $22 million as of September 30, 2016 and December 31, 2015, respectively. All of this amount is related to non-agency RMBS.
(2) 
Includes Federal National Mortgage Corporation (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) and Government National Mortgage Association (“Ginnie Mae”) guaranteed securities.
(3) 
ABS collateralized by credit card loans constituted approximately 68% and 71% of the other ABS portfolio as of September 30, 2016 and December 31, 2015, respectively, and ABS collateralized by auto dealer floor plan inventory loans and leases constituted approximately 17% and 11% of the other ABS portfolio as of September 30, 2016 and December 31, 2015, respectively.
(4) 
Includes foreign government bonds and equity investments.
The table below presents the amortized cost, carrying value, gross unrealized gains and losses, and fair value of securities held to maturity as of September 30, 2016 and December 31, 2015.
Table 3.3: Investment Securities Held to Maturity
 
 
September 30, 2016
(Dollars in millions)
 
Amortized
Cost
 
Unrealized Losses Recorded in AOCI(1)
 
Carrying Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
U.S. Treasury securities
 
$
199

 
$
0

 
$
199

 
$
1

 
$
0

 
$
200

Agency RMBS
 
22,544

 
(939
)
 
21,605

 
1,462

 
(6
)
 
23,061

Agency CMBS
 
3,310

 
(95
)
 
3,215

 
195

 
0

 
3,410

Total investment securities held to maturity
 
$
26,053

 
$
(1,034
)
 
$
25,019

 
$
1,658

 
$
(6
)
 
$
26,671

 
 
December 31, 2015
(Dollars in millions)
 
Amortized
Cost
 
Unrealized
Losses Recorded in AOCI(1)
 
Carrying Value
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
U.S. Treasury securities
 
$
199

 
$
0

 
$
199

 
$
0

 
$
(1
)
 
$
198

Agency RMBS
 
22,561

 
(1,048
)
 
21,513

 
692

 
(72
)
 
22,133

Agency CMBS
 
3,012

 
(105
)
 
2,907

 
87

 
(8
)
 
2,986

Total investment securities held to maturity
 
$
25,772

 
$
(1,153
)
 
$
24,619

 
$
779

 
$
(81
)
 
$
25,317

__________
(1) 
Certain investment securities were transferred from the available for sale category to the held to maturity category in 2013. This amount represents the unrealized holding gain or loss at the date of transfer, net of any subsequent accretion. Any bonds purchased into the securities held to maturity portfolio rather than transferred, will not have unrealized losses recognized in AOCI.
Investment Securities in a Gross Unrealized Loss Position
The table below provides, by major security type, information about our securities available for sale in a gross unrealized loss position and the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2016 and December 31, 2015.
Table 3.4: Securities in a Gross Unrealized Loss Position
 
 
September 30, 2016
 
 
Less than 12 Months
 
12 Months or Longer
 
Total
(Dollars in millions)
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
Investment securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
4,522

 
(27
)
 
3,437

 
(43
)
 
7,959

 
(70
)
Non-agency
 
59

 
0

 
202

 
(6
)
 
261

 
(6
)
Total RMBS
 
4,581

 
(27
)
 
3,639

 
(49
)
 
8,220

 
(76
)
CMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
462

 
(2
)
 
870

 
(19
)
 
1,332

 
(21
)
Non-agency
 
110

 
0

 
152

 
(2
)
 
262

 
(2
)
Total CMBS
 
572

 
(2
)
 
1,022

 
(21
)
 
1,594

 
(23
)
Other ABS
 
71

 
0

 
12

 
0

 
83

 
0

Other securities
 
130

 
(1
)
 
20

 
(1
)
 
150

 
(2
)
Total investment securities available for sale in a gross unrealized loss position
 
$
5,354

 
$
(30
)
 
$
4,693

 
$
(71
)
 
$
10,047

 
$
(101
)
 
 
December 31, 2015
 
 
Less than 12 Months
 
12 Months or Longer
 
Total
(Dollars in millions)
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
Investment securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury securities
 
$
3,096

 
$
(9
)
 
$
1

 
$
0

 
$
3,097

 
$
(9
)
RMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
12,025

 
(110
)
 
4,420

 
(102
)
 
16,445

 
(212
)
Non-agency
 
355

 
(10
)
 
155

 
(12
)
 
510

 
(22
)
Total RMBS
 
12,380

 
(120
)
 
4,575

 
(114
)
 
16,955

 
(234
)
CMBS:
 
 
 
 
 
 
 
 
 
 
 
 
Agency
 
1,352

 
(9
)
 
1,148

 
(38
)
 
2,500

 
(47
)
Non-agency
 
739

 
(13
)
 
330

 
(11
)
 
1,069

 
(24
)
Total CMBS
 
2,091

 
(22
)
 
1,478

 
(49
)
 
3,569

 
(71
)
Other ABS
 
825

 
(5
)
 
255

 
(1
)
 
1,080

 
(6
)
Other securities
 
250

 
0

 
19

 
(1
)
 
269

 
(1
)
Total investment securities available for sale in a gross unrealized loss position
 
$
18,642

 
$
(156
)
 
$
6,328

 
$
(165
)
 
$
24,970

 
$
(321
)

As of September 30, 2016, the amortized cost of approximately 490 securities available for sale exceeded their fair value by $101 million, of which $71 million related to securities that had been in a loss position for 12 months or longer. As of September 30, 2016, our investments in non-agency RMBS and CMBS, other ABS and other securities accounted for $10 million, or 10%, of total gross unrealized losses on securities available for sale. As of September 30, 2016, the carrying value of approximately 20 securities classified as held to maturity exceeded their fair value by $6 million.
Gross unrealized losses on our investment securities have decreased since December 31, 2015. The unrealized losses related to investment securities for which we have not recognized credit impairment were primarily attributable to changes in market interest rates. As discussed in more detail below, we conduct periodic reviews of all investment securities with unrealized losses to assess whether impairment is other-than-temporary.
Maturities and Yields of Investment Securities
The following tables summarize the remaining scheduled contractual maturities, assuming no prepayments, of our investment securities as of September 30, 2016.
Table 3.5: Contractual Maturities of Securities Available for Sale

 
September 30, 2016
 (Dollars in millions)
 
Amortized Cost
 
Fair Value
Due in 1 year or less
 
$
1,106

 
$
1,109

Due after 1 year through 5 years
 
4,201

 
4,239

Due after 5 years through 10 years
 
3,136

 
3,189

Due after 10 years(1)
 
32,286

 
32,974

Total
 
$
40,729

 
$
41,511

__________
(1) 
Investments with no stated maturities, which consist of equity securities, are included with contractual maturities due after 10 years.
Table 3.6: Contractual Maturities of Securities Held to Maturity
 
 
September 30, 2016
 (Dollars in millions)
 
Carrying Value
 
Fair Value
Due after 1 year through 5 years
 
$
199

 
$
200

Due after 5 years through 10 years
 
1,362

 
1,483

Due after 10 years
 
23,458

 
24,988

Total
 
$
25,019

 
$
26,671

Because borrowers may have the right to call or prepay certain obligations, the expected maturities of our securities are likely to differ from the scheduled contractual maturities presented above. 
The table below summarizes, by major security type, the expected maturities and weighted-average yields of our investment securities as of September 30, 2016.
Table 3.7: Expected Maturities and Weighted-Average Yields of Securities
 
 
September 30, 2016
(Dollars in millions)
 
Due in
1 Year or Less
 
Due > 1 Year
through
5 Years
 
Due > 5 Years
through
10 Years
 
Due > 10 Years
 
Total
Fair value of securities available for sale:
U.S. Treasury securities
 
$
803

 
$
2,879

 
$
1,494

 
$
0

 
$
5,176

RMBS:
 
 
 
 
 
 
 
 
 
 
Agency
 
333

 
21,314

 
5,181

 
0

 
26,828

Non-agency
 
31

 
900

 
1,478

 
413

 
2,822

Total RMBS
 
364

 
22,214

 
6,659

 
413

 
29,650

CMBS:
 
 
 
 
 
 
 
 
 
 
Agency
 
45

 
1,745

 
1,728

 
0

 
3,518

Non-agency
 
167

 
732

 
851

 
0

 
1,750

Total CMBS
 
212

 
2,477

 
2,579

 
0

 
5,268

Other ABS
 
223

 
761

 
7

 
0

 
991

Other securities
 
186

 
133

 
0

 
107

 
426

Total securities available for sale
 
$
1,788

 
$
28,464

 
$
10,739

 
$
520

 
$
41,511

Amortized cost of securities available for sale
 
$
1,789

 
$
28,057

 
$
10,414

 
$
469

 
$
40,729

Weighted-average yield for securities available for sale(1)
 
1.38
%
 
2.02
%
 
2.91
%
 
7.19
%
 
2.28
%
Carrying value of securities held to maturity:
U.S. Treasury securities
 
$
0

 
$
199

 
$
0

 
$
0

 
$
199

Agency RMBS
 
64

 
6,697

 
12,391

 
2,453

 
21,605

Agency CMBS
 
0

 
132

 
2,437

 
646

 
3,215

Total securities held to maturity
 
$
64

 
$
7,028

 
$
14,828

 
$
3,099

 
$
25,019

Fair value of securities held to maturity
 
$
63

 
$
7,338

 
$
15,844

 
$
3,426

 
$
26,671

Weighted-average yield for securities held to maturity(1)
 
2.08
%
 
2.47
%
 
2.50
%
 
3.25
%
 
2.58
%
__________
(1) 
The weighted-average yield represents the effective yield for the investment securities and is calculated based on the amortized cost of each security.
Other-Than-Temporary Impairment
We evaluate all securities in an unrealized loss position at least on a quarterly basis, and more often as market conditions require, to assess whether the impairment is other-than-temporary. Our OTTI assessment is based on a discounted cash flow analysis which requires careful use of judgments and assumptions. A number of qualitative and quantitative criteria may be considered in our assessment as applicable, including the size and the nature of the portfolio; historical and projected performance such as prepayment, default and loss severity for the RMBS portfolio; recent credit events specific to the issuer and/or industry to which the issuer belongs; the payment structure of the security; external credit ratings of the issuer and any failure or delay of the issuer to make scheduled interest or principal payments; the value of underlying collateral; our intent and ability to hold the security; and current and projected market and macro-economic conditions.
If we intend to sell a security in an unrealized loss position or it is more likely than not that we will be required to sell the security prior to recovery of its amortized cost basis, the entire difference between the amortized cost basis of the security and its fair value is recognized in earnings. As of September 30, 2016, for any securities with unrealized losses recorded in AOCI, we do not intend to sell, nor believe that we will be required to sell, these securities prior to recovery of their amortized cost.
For those securities that we do not intend to sell nor expect to be required to sell, an analysis is performed to determine if any of the impairment is due to credit-related factors or whether it is due to other factors, such as interest rates. Credit-related impairment is recognized in earnings, with the remaining unrealized non-credit-related impairment recorded in AOCI. We determine the credit component based on the difference between the security’s amortized cost basis and the present value of its expected cash flows, discounted based on the effective yield.
The table below presents a rollforward of the credit-related OTTI recognized in earnings for the three and nine months ended September 30, 2016 and 2015 on investment securities for which we had no intent to sell.
Table 3.8: Credit Impairment Rollforward
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions)
 
2016
 
2015
 
2016
 
2015
Credit loss component, beginning of period
 
$
204

 
$
192

 
$
199

 
$
175

Additions:
 
 
 
 
 
 
 
 
Initial credit impairment
 
0

 
2

 
1

 
7

Subsequent credit impairment
 
0

 
3

 
7

 
15

Total additions
 
0

 
5

 
8

 
22

Reductions due to payoffs, disposals, transfers and other
 
0

 
(1
)
 
(3
)
 
(1
)
Credit loss component, end of period
 
$
204

 
$
196

 
$
204

 
$
196

Realized Gains and Losses on Securities and OTTI Recognized in Earnings
The following table presents the gross realized gains and losses on the sale and redemption of securities available for sale, and the OTTI losses recognized in earnings for the three and nine months ended September 30, 2016 and 2015. We also present the proceeds from the sale of securities available for sale for the periods presented. We did not sell any investment securities that are classified as held to maturity.
Table 3.9: Realized Gains and Losses and OTTI Recognized in Earnings
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Dollars in millions)
 
2016
 
2015
 
2016
 
2015
Realized gains (losses):
 
 
 
 
 
 
 
 
Gross realized gains
 
$
2

 
$
3

 
$
8

 
$
20

Gross realized losses
 
(1
)
 
0

 
(5
)
 
(16
)
Net realized gains (losses)
 
1

 
3

 
3

 
4

OTTI recognized in earnings:
 
 
 
 
 
 
 
 
Credit-related OTTI
 
0

 
(5
)
 
(8
)
 
(22
)
Intent-to-sell OTTI
 
0

 
0

 
(2
)
 
(5
)
Total OTTI recognized in earnings
 
0

 
(5
)
 
(10
)
 
(27
)
Net securities gains (losses)
 
$
1

 
$
(2
)
 
$
(7
)
 
$
(23
)
Total proceeds from sales
 
$
828

 
$
898

 
$
3,528

 
$
3,211

Securities Pledged and Received
As part of our liquidity management strategy, we pledge securities to secure borrowings from counterparties including the Federal Home Loan Banks (“FHLB”). We also pledge securities to secure trust and public deposits and for other purposes as required or permitted by law. We pledged securities available for sale with a fair value of $2.1 billion and $1.7 billion as of September 30, 2016 and December 31, 2015, respectively. We also pledged securities held to maturity with a carrying value of $7.4 billion and $8.7 billion as of September 30, 2016 and December 31, 2015, respectively. Of the total securities pledged as collateral, we have encumbered $9.0 billion and $10.6 billion as of September 30, 2016 and December 31, 2015, respectively, primarily related to Public Fund deposits. We accepted pledges of securities with a fair value of $38 million and $172 million as of September 30, 2016 and December 31, 2015, respectively, primarily related to our derivative transactions.
Acquired Credit-Impaired Debt Securities
The table below presents the outstanding balance and carrying value of the acquired credit-impaired debt securities as of September 30, 2016 and December 31, 2015.
Table 3.10: Outstanding Balance and Carrying Value of Acquired Credit-Impaired Debt Securities
(Dollars in millions)
 
September 30, 2016
 
December 31, 2015
Outstanding balance
 
$
3,001

 
$
3,285

Carrying value
 
2,351

 
2,480

Changes in Accretable Yield of Acquired Credit-Impaired Debt Securities
The following table presents changes in the accretable yield related to the acquired credit-impaired debt securities for the three and nine months ended September 30, 2016.
Table 3.11: Changes in the Accretable Yield of Acquired Credit-Impaired Debt Securities
(Dollars in millions)
 
Three Months Ended September 30, 2016
 
Nine Months Ended September 30, 2016
Accretable yield, beginning of period
 
$
1,237

 
$
1,237

Accretion recognized in earnings
 
(49
)
 
(156
)
Reduction due to payoffs, disposals, transfers and other
 
0

 
(2
)
Net reclassifications from nonaccretable difference
 
13

 
122

Accretable yield, end of period
 
$
1,201

 
$
1,201