Quarterly report pursuant to Section 13 or 15(d)

Securities (Tables)

v2.4.1.9
Securities (Tables)
 3 Months Ended
Mar. 31, 2015
Investments, Debt and Equity Securities [Abstract]  
Marketable Securities
The table below presents the amortized cost, gross unrealized gains and losses, and fair value of available-for-sale (AFS) debt securities, other debt securities carried at fair value, HTM debt securities and AFS marketable equity securities at March 31, 2015 and December 31, 2014.

Debt Securities and Available-for-Sale Marketable Equity Securities
 
March 31, 2015
(Dollars in millions)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Available-for-sale debt securities
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
58,501

 
$
1,018

 
$
(3
)
 
$
59,516

Mortgage-backed securities:
 
 
 
 
 
 
 
Agency
179,255

 
2,858

 
(275
)
 
181,838

Agency-collateralized mortgage obligations
13,696

 
296

 
(31
)
 
13,961

Non-agency residential (1)
3,791

 
295

 
(60
)
 
4,026

Commercial
3,853

 
137

 
(1
)
 
3,989

Non-U.S. securities
5,923

 
32

 
(3
)
 
5,952

Corporate/Agency bonds
356

 
10

 
(1
)
 
365

Other taxable securities, substantially all asset-backed securities
9,554

 
42

 
(18
)
 
9,578

Total taxable securities
274,929

 
4,688

 
(392
)
 
279,225

Tax-exempt securities
9,725

 
11

 
(19
)
 
9,717

Total available-for-sale debt securities
284,654

 
4,699

 
(411
)
 
288,942

Other debt securities carried at fair value
35,166

 
264

 
(198
)
 
35,232

Total debt securities carried at fair value
319,820

 
4,963

 
(609
)
 
324,174

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities
59,815

 
496

 
(422
)
 
59,889

Total debt securities
$
379,635

 
$
5,459

 
$
(1,031
)
 
$
384,063

Available-for-sale marketable equity securities (2)
$
336

 
$
59

 
$
—

 
$
395

 
 
 
 
 
 
 
 
 
December 31, 2014
Available-for-sale debt securities
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
69,267

 
$
360

 
$
(32
)
 
$
69,595

Mortgage-backed securities:
 
 
 
 
 
 
 
Agency
163,592

 
2,040

 
(593
)
 
165,039

Agency-collateralized mortgage obligations
14,175

 
152

 
(79
)
 
14,248

Non-agency residential (1)
4,244

 
287

 
(77
)
 
4,454

Commercial
3,931

 
69

 
—

 
4,000

Non-U.S. securities
6,208

 
33

 
(11
)
 
6,230

Corporate/Agency bonds
361

 
9

 
(2
)
 
368

Other taxable securities, substantially all asset-backed securities
10,774

 
39

 
(22
)
 
10,791

Total taxable securities
272,552

 
2,989

 
(816
)
 
274,725

Tax-exempt securities
9,556

 
12

 
(19
)
 
9,549

Total available-for-sale debt securities
282,108

 
3,001

 
(835
)
 
284,274

Other debt securities carried at fair value
36,524

 
261

 
(364
)
 
36,421

Total debt securities carried at fair value
318,632

 
3,262

 
(1,199
)
 
320,695

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities
59,766

 
486

 
(611
)
 
59,641

Total debt securities
$
378,398

 
$
3,748

 
$
(1,810
)
 
$
380,336

Available-for-sale marketable equity securities (2)
$
336

 
$
27

 
$
—

 
$
363

(1) 
At both March 31, 2015 and December 31, 2014, the underlying collateral type included approximately 76 percent prime, 14 percent Alt-A and 10 percent subprime.
(2) 
Classified in other assets on the Consolidated Balance Sheet.
Schedule of Other Debt Securities Carried at Fair Value
The table below presents the components of other debt securities carried at fair value where the changes in fair value are reported in other income. In the three months ended March 31, 2015, the Corporation recorded unrealized mark-to-market net gains of $189 million and realized net gains of $4 million, compared to unrealized net gains of $444 million and realized net losses of $17 million in the three months ended March 31, 2014. These amounts exclude hedge results.

Other Debt Securities Carried at Fair Value
 
 
 
(Dollars in millions)
March 31
2015
 
December 31
2014
U.S. Treasury and agency securities
$
1,272

 
$
1,541

Mortgage-backed securities:
 
 
 
Agency
15,670

 
15,704

Non-agency residential
3,869

 
3,745

Non-U.S. securities (1)
14,124

 
15,132

Other taxable securities, substantially all asset-backed securities
297

 
299

Total
$
35,232

 
$
36,421

(1) 
These securities are primarily used to satisfy certain international regulatory liquidity requirements.

Components of Realized Gains and Losses on Sales of Debt Securities
The gross realized gains and losses on sales of AFS debt securities for the three months ended March 31, 2015 and 2014 are presented in the table below.

Gains and Losses on Sales of AFS Debt Securities
 
Three Months Ended March 31
(Dollars in millions)
2015
 
2014
Gross gains
$
275

 
$
378

Gross losses
(7
)
 
(1
)
Net gains on sales of AFS debt securities
$
268

 
$
377

Income tax expense attributable to realized net gains on sales of AFS debt securities
$
102

 
$
143

Current Fair Value and Associated Gross Unrealized Losses on Investments
The table below presents the amortized cost and fair value of the Corporation's debt securities carried at fair value and HTM debt securities from Fannie Mae (FNMA), the Government National Mortgage Association (GNMA), U.S. Treasury and Freddie Mac (FHLMC), where the investment exceeded 10 percent of consolidated shareholders' equity at March 31, 2015 and December 31, 2014.

Selected Securities Exceeding 10 Percent of Shareholders' Equity
 
March 31, 2015
 
December 31, 2014
(Dollars in millions)
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Fannie Mae
$
139,741

 
$
141,589

 
$
130,725

 
$
131,418

Government National Mortgage Association
95,293

 
95,958

 
98,278

 
98,633

U.S. Treasury
57,571

 
58,539

 
68,481

 
68,801

Freddie Mac
37,298

 
37,887

 
28,288

 
28,556


Amortized Cost and Fair Value of Corporations Investment
The table below presents the fair value and the associated gross unrealized losses on AFS debt securities and whether these securities have had gross unrealized losses for less than 12 months or for 12 months or longer as of March 31, 2015 and December 31, 2014.

Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities
 
 
March 31, 2015
 
Less than Twelve Months
 
Twelve Months or Longer
 
Total
(Dollars in millions)
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
Temporarily impaired AFS debt securities
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
289

 
$
(1
)
 
$
300

 
$
(2
)
 
$
589

 
$
(3
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
19,107

 
(51
)
 
17,169

 
(224
)
 
36,276

 
(275
)
Agency-collateralized mortgage obligations
1,266

 
(6
)
 
1,981

 
(25
)
 
3,247

 
(31
)
Non-agency residential
660

 
(5
)
 
77

 
(42
)
 
737

 
(47
)
Commercial
14

 
(1
)
 
—

 
—

 
14

 
(1
)
Non-U.S. securities
19

 
(2
)
 
30

 
(1
)
 
49

 
(3
)
Corporate/Agency bonds
—

 
—

 
93

 
(1
)
 
93

 
(1
)
Other taxable securities, substantially all asset-backed securities
679

 
(3
)
 
981

 
(15
)
 
1,660

 
(18
)
Total taxable securities
22,034

 
(69
)
 
20,631

 
(310
)
 
42,665

 
(379
)
Tax-exempt securities
594

 
(1
)
 
1,004

 
(18
)
 
1,598

 
(19
)
Total temporarily impaired AFS debt securities
22,628

 
(70
)
 
21,635

 
(328
)
 
44,263

 
(398
)
Other-than-temporarily impaired AFS debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential mortgage-backed securities
301

 
(13
)
 
—

 
—

 
301

 
(13
)
Total temporarily impaired and other-than-temporarily impaired AFS debt securities
$
22,929

 
$
(83
)
 
$
21,635

 
$
(328
)
 
$
44,564

 
$
(411
)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
Temporarily impaired AFS debt securities
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
10,121

 
$
(22
)
 
$
667

 
$
(10
)
 
$
10,788

 
$
(32
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
1,366

 
(8
)
 
43,118

 
(585
)
 
44,484

 
(593
)
Agency-collateralized mortgage obligations
2,242

 
(19
)
 
3,075

 
(60
)
 
5,317

 
(79
)
Non-agency residential
307

 
(3
)
 
809

 
(41
)
 
1,116

 
(44
)
Non-U.S. securities
157

 
(9
)
 
32

 
(2
)
 
189

 
(11
)
Corporate/Agency bonds
43

 
(1
)
 
93

 
(1
)
 
136

 
(2
)
Other taxable securities, substantially all asset-backed securities
575

 
(3
)
 
1,080

 
(19
)
 
1,655

 
(22
)
Total taxable securities
14,811

 
(65
)
 
48,874

 
(718
)
 
63,685

 
(783
)
Tax-exempt securities
980

 
(1
)
 
680

 
(18
)
 
1,660

 
(19
)
Total temporarily impaired AFS debt securities
15,791

 
(66
)
 
49,554

 
(736
)
 
65,345

 
(802
)
Other-than-temporarily impaired AFS debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential mortgage-backed securities
555

 
(33
)
 
—

 
—

 
555

 
(33
)
Total temporarily impaired and other-than-temporarily impaired AFS debt securities
$
16,346

 
$
(99
)
 
$
49,554

 
$
(736
)
 
$
65,900

 
$
(835
)
(1)
Includes other-than-temporarily impaired AFS debt securities on which an OTTI loss, primarily related to changes in interest, remains in accumulated OCI.

Corporation Recorded Other-than-Temporary Impairment Losses on AFS Debt Securities
The Corporation recorded other-than-temporary impairment (OTTI) losses on AFS debt securities for the three months ended March 31, 2015 and 2014 as presented in the Net Credit-related Impairment Losses Recognized in Earnings table. Substantially all OTTI losses in the three months ended March 31, 2015 and 2014 consisted of credit losses on non-agency residential mortgage-backed securities (RMBS) and were recorded in other income in the Consolidated Statement of Income. The credit losses on the RMBS during the three months ended March 31, 2015 were driven by decreases in the estimated RMBS cash flows primarily due to a model change resulting in the refinement of the expected cash flows. A debt security is impaired when its fair value is less than its amortized cost. If the Corporation intends or will more-likely-than-not be required to sell a debt security prior to recovery, the entire impairment loss is recorded in the Consolidated Statement of Income. For AFS debt securities the Corporation does not intend or will not more-likely-than-not be required to sell, an analysis is performed to determine if any of the impairment is due to credit or whether it is due to other factors (e.g., interest rate). Credit losses are considered unrecoverable and are recorded in the Consolidated Statement of Income with the remaining unrealized losses recorded in OCI. In certain instances, the credit loss on a debt security may exceed the total impairment, in which case, the excess of the credit loss over the total impairment is recorded as an unrealized gain in OCI.

Net Credit-related Impairment Losses Recognized in Earnings
 
Three Months Ended March 31
(Dollars in millions)
2015
 
2014
Total OTTI losses
$
(74
)
 
$
(1
)
Less: non-credit portion of total OTTI losses recognized in OCI
4

 
—

Net credit-related impairment credit losses recognized in earnings
$
(70
)
 
$
(1
)


The table below presents a rollforward of the credit losses recognized in earnings for the three months ended March 31, 2015 and 2014 on AFS debt securities that the Corporation does not have the intent to sell or will not more-likely-than-not be required to sell.

Rollforward of OTTI Credit Losses Recognized
 
Three Months Ended March 31
(Dollars in millions)
2015
 
2014
Balance, beginning of period
$
201

 
$
184

Additions for credit losses recognized on AFS debt securities that had no previous impairment losses
14

 
—

Additions for credit losses recognized on AFS debt securities that had previously incurred impairment losses
56

 
1

Reductions for AFS debt securities matured, sold or intended to be sold
(15
)
 
—

Balance, March 31
$
256

 
$
185

Significant Assumptions Used in the Valuation of Non-Agency Residential MBS
Significant assumptions used in estimating the expected cash flows for measuring credit losses on non-agency RMBS were as follows at March 31, 2015.

Significant Assumptions
 
 
 
Range (1)
 
Weighted-
average
 
10th
Percentile (2)
 
90th
Percentile (2)
Annual prepayment speed
11.8
%
 
3.5
%
 
23.7
%
Loss severity
40.8

 
13.8

 
51.2

Life default rate
36.3

 
1.5

 
97.6

(1) 
Represents the range of inputs/assumptions based upon the underlying collateral.
(2) 
The value of a variable below which the indicated percentile of observations will fall.

Expected Maturity Distribution
The expected maturity distribution of the Corporation's MBS, the contractual maturity distribution of the Corporation's other debt securities carried at fair value and HTM debt securities, and the yields on the Corporation's debt securities carried at fair value and HTM debt securities at March 31, 2015 are summarized in the table below. Actual maturities may differ from the contractual or expected maturities since borrowers may have the right to prepay obligations with or without prepayment penalties.

Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities
 
March 31, 2015
 
Due in One
Year or Less
 
Due after One Year
through Five Years
 
Due after Five
Years through Ten Years
 
Due after
Ten Years
 
Total
(Dollars in millions)
Amount
Yield (1)
 
Amount
Yield (1)
 
Amount
Yield (1)
 
Amount
Yield (1)
 
Amount
Yield (1)
Amortized cost of debt securities carried at fair value
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
581

0.39
%
 
$
51,591

1.60
%
 
$
6,327

2.20
%
 
$
1,242

2.70
%
 
$
59,741

1.69
%
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
36

4.50

 
51,571

2.50

 
142,841

2.80

 
444

2.90

 
194,892

2.70

Agency-collateralized mortgage obligations
653

0.50

 
7,815

2.40

 
5,227

2.80

 
1

0.60

 
13,696

2.50

Non-agency residential
500

4.10

 
1,620

4.79

 
1,180

4.48

 
4,362

7.99

 
7,662

6.48

Commercial
111

7.43

 
593

2.22

 
3,146

2.80

 
3

2.83

 
3,853

2.88

Non-U.S. securities
18,213

0.96

 
1,828

3.28

 
6

2.93

 
—

—

 
20,047

1.37

Corporate/Agency bonds
58

2.98

 
101

3.94

 
101

3.71

 
96

1.31

 
356

3.01

Other taxable securities, substantially all asset-backed securities
2,393

1.18

 
5,378

1.31

 
1,330

1.94

 
747

3.75

 
9,848

1.98

Total taxable securities
22,545

1.24

 
120,497

2.16

 
160,158

2.70

 
6,895

6.14

 
310,095

2.48

Tax-exempt securities
1,108

0.78

 
3,565

1.08

 
3,638

1.04

 
1,414

0.94

 
9,725

1.03

Total amortized cost of debt securities carried at fair value
$
23,653

1.23

 
$
124,062

2.13

 
$
163,796

2.66

 
$
8,309

5.25

 
$
319,820

2.44

Amortized cost of HTM debt securities (2)
$
58

1.34

 
$
27,843

2.30

 
$
31,878

2.20

 
$
36

4.37

 
$
59,815

2.30

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities carried at fair value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
582

 
 
$
52,450

 
 
$
6,481

 
 
$
1,275

 
 
$
60,788

 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
37

 
 
52,587

 
 
144,437

 
 
447

 
 
197,508

 
Agency-collateralized mortgage obligations
655

 
 
7,926

 
 
5,379

 
 
1

 
 
13,961

 
Non-agency residential
523

 
 
1,610

 
 
1,265

 
 
4,497

 
 
7,895

 
Commercial
111

 
 
602

 
 
3,273

 
 
3

 
 
3,989

 
Non-U.S. securities
18,199

 
 
1,871

 
 
6

 
 
—

 
 
20,076

 
Corporate/Agency bonds
58

 
 
107

 
 
105

 
 
95

 
 
365

 
Other taxable securities, substantially all asset-backed securities
2,396

 
 
5,381

 
 
1,350

 
 
748

 
 
9,875

 
Total taxable securities
22,561

 
 
122,534

 
 
162,296

 
 
7,066

 
 
314,457

 
Tax-exempt securities
1,109

 
 
3,566

 
 
3,634

 
 
1,408

 
 
9,717

 
Total debt securities carried at fair value
$
23,670

 
 
$
126,100

 
 
$
165,930

 
 
$
8,474

 
 
$
324,174

 
Fair value of HTM debt securities (2)
$
58

 
 
$
28,178

 
 
$
31,618

 
 
$
35

 
 
$
59,889

 
(1) 
Average yield is computed using the effective yield of each security at the end of the period, weighted based on the amortized cost of each security. The effective yield considers the contractual coupon, amortization of premiums and accretion of discounts, and excludes the effect of related hedging derivatives.
(2) 
Substantially all U.S. agency MBS.