Annual report pursuant to Section 13 and 15(d)

Securities (Tables)

v2.4.1.9
Securities (Tables)
12 Months Ended
Dec. 31, 2014
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 December 31, 2014 and 2013.
 
 
 
 
 
 
 
 
Debt Securities and Available-for-Sale Marketable Equity Securities
 
 
 
 
 
 
 
December 31, 2014
(Dollars in millions)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
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

 
 
 
 
 
 
 
 
 
December 31, 2013
Available-for-sale debt securities
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
8,910

 
$
106

 
$
(62
)
 
$
8,954

Mortgage-backed securities:
 

 
 

 
 

 
 

Agency
170,112

 
777

 
(5,954
)
 
164,935

Agency-collateralized mortgage obligations
22,731

 
76

 
(315
)
 
22,492

Non-agency residential (1)
6,124

 
238

 
(123
)
 
6,239

Commercial
2,429

 
63

 
(12
)
 
2,480

Non-U.S. securities
7,207

 
37

 
(24
)
 
7,220

Corporate/Agency bonds
860

 
20

 
(7
)
 
873

Other taxable securities, substantially all asset-backed securities
16,805

 
30

 
(5
)
 
16,830

Total taxable securities
235,178

 
1,347

 
(6,502
)
 
230,023

Tax-exempt securities
5,967

 
10

 
(49
)
 
5,928

Total available-for-sale debt securities
241,145

 
1,357

 
(6,551
)
 
235,951

Other debt securities carried at fair value
34,145

 
34

 
(1,335
)
 
32,844

Total debt securities carried at fair value
275,290

 
1,391

 
(7,886
)
 
268,795

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities
55,150

 
20

 
(2,740
)
 
52,430

Total debt securities
$
330,440

 
$
1,411

 
$
(10,626
)
 
$
321,225

Available-for-sale marketable equity securities (2)
$
230

 
$

 
$
(7
)
 
$
223

(1) 
At December 31, 2014 and 2013, the underlying collateral type included approximately 76 percent and 89 percent prime, 14 percent and seven percent Alt-A, and 10 percent and four 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 2014, the Corporation recorded unrealized mark-to-market net gains in other income of $1.2 billion and realized gains of $275 million on other debt securities carried at fair value, which exclude the impact of certain hedges, the results of which are also reported in other income, compared to unrealized mark-to-market net losses of $1.3 billion and realized losses of $963 million in 2013.
 
 
 
 
Other Debt Securities Carried at Fair Value
 
 
 
 
 
December 31
(Dollars in millions)
2014
 
2013
U.S. Treasury and agency securities
$
1,541

 
$
4,062

Mortgage-backed securities:
 
 
 
Agency
15,704

 
16,500

Agency-collateralized mortgage obligations

 
218

Non-agency residential
3,745

 

Commercial

 
749

Non-U.S. securities (1)
15,132

 
11,315

Other taxable securities, substantially all asset-backed securities
299

 

Total
$
36,421

 
$
32,844

(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 table below presents gross realized gains and losses on sales of AFS debt securities for 2014, 2013 and 2012.
 
 
 
 
 
 
Gains and Losses on Sales of AFS Debt Securities
 
 
 
 
 
 
(Dollars in millions)
2014
 
2013
 
2012
Gross gains
$
1,366

 
$
1,302

 
$
2,128

Gross losses
(12
)
 
(31
)
 
(466
)
Net gains on sales of AFS debt securities
$
1,354

 
$
1,271

 
$
1,662

Income tax expense attributable to realized net gains on sales of AFS debt securities
$
515

 
$
470

 
$
615

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 December 31, 2014 and 2013.
 
 
 
 
 
 
 
 
Selected Securities Exceeding 10 Percent of Shareholders’ Equity
 
 
 
 
 
 
 
 
 
December 31
 
2014
 
2013
(Dollars in millions)
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Fannie Mae
$
130,725

 
$
131,418

 
$
123,813

 
$
118,708

Government National Mortgage Association
98,278

 
98,633

 
118,700

 
115,314

U.S. Treasury
68,481

 
68,801

 
10,533

 
10,428

Freddie Mac
28,288

 
28,556

 
24,908

 
24,075

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 at December 31, 2014 and 2013.
 
 
 
 
 
 
 
 
 
 
 
 
Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
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 available-for-sale 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 available-for-sale debt securities
15,791

 
(66
)
 
49,554

 
(736
)
 
65,345

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

 
(33
)
 

 

 
555

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

 
$
(99
)
 
$
49,554

 
$
(736
)
 
$
65,900

 
$
(835
)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
Temporarily impaired available-for-sale debt securities
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
5,770

 
$
(61
)
 
$
19

 
$
(1
)
 
$
5,789

 
$
(62
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
132,032

 
(5,457
)
 
9,324

 
(497
)
 
141,356

 
(5,954
)
Agency-collateralized mortgage obligations
13,438

 
(210
)
 
2,661

 
(105
)
 
16,099

 
(315
)
Non-agency residential
819

 
(15
)
 
1,237

 
(106
)
 
2,056

 
(121
)
Commercial
286

 
(12
)
 

 

 
286

 
(12
)
Non-U.S. securities

 

 
45

 
(24
)
 
45

 
(24
)
Corporate/Agency bonds
106

 
(3
)
 
282

 
(4
)
 
388

 
(7
)
Other taxable securities, substantially all asset-backed securities
116

 
(2
)
 
280

 
(3
)
 
396

 
(5
)
Total taxable securities
152,567

 
(5,760
)
 
13,848

 
(740
)
 
166,415

 
(6,500
)
Tax-exempt securities
1,789

 
(30
)
 
990

 
(19
)
 
2,779

 
(49
)
Total temporarily impaired available-for-sale debt securities
154,356

 
(5,790
)
 
14,838

 
(759
)
 
169,194

 
(6,549
)
Other-than-temporarily impaired available-for-sale debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential mortgage-backed securities
2

 
(1
)
 
1

 
(1
)
 
3

 
(2
)
Total temporarily impaired and other-than-temporarily impaired
available-for-sale debt securities
$
154,358

 
$
(5,791
)
 
$
14,839

 
$
(760
)
 
$
169,197

 
$
(6,551
)
(1) 
Includes other-than-temporarily impaired AFS debt securities on which an OTTI loss, primarily related to changes in interest rates, 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 in 2014, 2013 and 2012 as presented in the Net Impairment Losses Recognized in Earnings table. Substantially all OTTI losses in 2014, 2013 and 2012 consisted of credit losses on non-agency residential mortgage-backed securities (RMBS) and were recorded in other income in the Consolidated Statement of Income. 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 Impairment Losses Recognized in Earnings
 
 
 
 
 
 
(Dollars in millions)
2014
 
2013
 
2012
Total OTTI losses (unrealized and realized)
$
(30
)
 
$
(21
)
 
$
(57
)
Unrealized OTTI losses recognized in OCI
14

 
1

 
4

Net impairment losses recognized in earnings
$
(16
)
 
$
(20
)
 
$
(53
)
The table below presents a rollforward of the credit losses recognized in earnings in 2014, 2013 and 2012 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 Credit Losses Recognized
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
2014
 
2013
 
2012
Balance, January 1
$
184

 
$
243

 
$
310

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

 
6

 
7

Additions for credit losses recognized on AFS debt securities that had previously incurred impairment losses
2

 
14

 
46

Reductions for AFS debt securities matured, sold or intended to be sold

 
(79
)
 
(120
)
Balance, December 31
$
200

 
$
184

 
$
243

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 December 31, 2014.
 
 
 
 
 
 
Significant Assumptions
 
 
 
 
 
 
 
 
 
Range (1)
 
Weighted-
average
 
10th
Percentile (2)
 
90th
Percentile (2)
Prepayment speed
15.3
%
 
3.1
%
 
29.9
%
Loss severity
35.2

 
11.8

 
44.7

Life default rate
39.6

 
1.5

 
98.6

(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 December 31, 2014 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
 
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
$
577

 
0.41
%
 
$
51,153

 
1.60
%
 
$
17,535

 
2.10
%
 
$
1,480

 
3.00
%
 
$
70,745

 
1.78
%
Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
28

 
4.60

 
24,283

 
2.70

 
152,950

 
2.80

 
2,175

 
3.00

 
179,436

 
2.80

Agency-collateralized mortgage obligations
794

 
0.40

 
2,874

 
2.00

 
10,488

 
2.80

 
19

 
0.60

 
14,175

 
2.50

Non-agency residential
517

 
5.09

 
1,834

 
5.39

 
1,236

 
4.78

 
4,443

 
10.61

 
8,030

 
8.15

Commercial
188

 
9.69

 
590

 
2.32

 
3,150

 
2.80

 
3

 
2.83

 
3,931

 
3.07

Non-U.S. securities
18,991

 
0.98

 
2,261

 
3.83

 
68

 
6.23

 

 

 
21,320

 
1.30

Corporate/Agency bonds
59

 
1.79

 
112

 
3.77

 
94

 
3.74

 
96

 
0.63

 
361

 
2.43

Other taxable securities, substantially all asset-backed securities
3,199

 
1.34

 
5,707

 
1.22

 
1,376

 
1.81

 
796

 
4.36

 
11,078

 
1.59

Total taxable securities
24,353

 
1.16

 
88,814

 
2.07

 
186,897

 
2.80

 
9,012

 
6.86

 
309,076

 
2.56

Tax-exempt securities
929

 
0.97

 
3,768

 
1.13

 
3,082

 
1.15

 
1,777

 
0.86

 
9,556

 
1.14

Total amortized cost of debt securities carried at fair value
$
25,282

 
1.16

 
$
92,582

 
2.03

 
$
189,979

 
2.77

 
$
10,789

 
5.87

 
$
318,632

 
2.51

Amortized cost of held-to-maturity debt securities (2)
$
108

 
0.84

 
$
19,513

 
2.40

 
$
39,917

 
2.30

 
$
228

 
3.31

 
$
59,766

 
2.40

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities carried at fair value
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

U.S. Treasury and agency securities
$
577

 
 

 
$
51,383

 
 

 
$
17,633

 
 

 
$
1,543

 
 

 
$
71,136

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
29

 
 

 
24,859

 
 

 
153,649

 
 

 
2,206

 
 

 
180,743

 
 

Agency-collateralized mortgage obligations
795

 
 

 
2,838

 
 

 
10,596

 
 

 
19

 
 

 
14,248

 
 

Non-agency residential
521

 
 

 
1,849

 
 

 
1,316

 
 

 
4,513

 
 

 
8,199

 
 

Commercial
191

 
 

 
594

 
 

 
3,212

 
 

 
3

 
 

 
4,000

 
 

Non-U.S. securities
18,982

 
 

 
2,309

 
 

 
71

 
 

 

 
 

 
21,362

 
 

Corporate/Agency bonds
60

 
 

 
117

 
 

 
96

 
 

 
95

 
 

 
368

 
 

Other taxable securities, substantially all asset-backed securities
3,202

 
 

 
5,699

 
 

 
1,399

 
 

 
790

 
 

 
11,090

 
 

Total taxable securities
24,357

 
 

 
89,648

 
 

 
187,972

 
 

 
9,169

 
 

 
311,146

 
 

Tax-exempt securities
929

 
 

 
3,770

 
 

 
3,078

 
 

 
1,772

 
 

 
9,549

 
 

Total debt securities carried at fair value
$
25,286

 
 

 
$
93,418

 
 

 
$
191,050

 
 

 
$
10,941

 
 

 
$
320,695

 
 

Fair value of held-to-maturity debt securities (2)
$
108

 
 
 
$
19,762

 
 
 
$
39,538

 
 
 
$
233

 
 
 
$
59,641

 
 
(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.