Annual report pursuant to Section 13 and 15(d)

Securities (Tables)

v3.3.1.900
Securities (Tables)
 12 Months Ended
Dec. 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 AFS debt securities, other debt securities carried at fair value, HTM debt securities and AFS marketable equity securities at December 31, 2015 and 2014.
 
 
 
 
 
 
 
 
Debt Securities and Available-for-Sale Marketable Equity Securities
 
 
 
 
 
 
 
December 31, 2015
(Dollars in millions)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Available-for-sale debt securities
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 

Agency
$
229,847

 
$
788

 
$
(1,688
)
 
$
228,947

Agency-collateralized mortgage obligations
10,930

 
126

 
(71
)
 
10,985

Commercial
7,176

 
50

 
(61
)
 
7,165

Non-agency residential (1)
3,031

 
218

 
(70
)
 
3,179

Total mortgage-backed securities
250,984

 
1,182

 
(1,890
)
 
250,276

U.S. Treasury and agency securities
25,075

 
211

 
(9
)
 
25,277

Non-U.S. securities
5,743

 
27

 
(3
)
 
5,767

Corporate/Agency bonds
243

 
3

 
(3
)
 
243

Other taxable securities, substantially all asset-backed securities
10,238

 
50

 
(86
)
 
10,202

Total taxable securities
292,283

 
1,473

 
(1,991
)
 
291,765

Tax-exempt securities
13,978

 
63

 
(33
)
 
14,008

Total available-for-sale debt securities
306,261

 
1,536

 
(2,024
)
 
305,773

Other debt securities carried at fair value
16,678

 
103

 
(174
)
 
16,607

Total debt securities carried at fair value (2)
322,939

 
1,639

 
(2,198
)
 
322,380

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities
84,625

 
271

 
(850
)
 
84,046

Total debt securities
$
407,564

 
$
1,910

 
$
(3,048
)
 
$
406,426

Available-for-sale marketable equity securities (3)
$
326

 
$
99

 
$
—

 
$
425

 
 
 
 
 
 
 
 
 
December 31, 2014
Available-for-sale debt securities
 
 
 
 
 
 
 
Mortgage-backed securities:
 

 
 

 
 

 
 

Agency
$
163,592

 
$
2,040

 
$
(593
)
 
$
165,039

Agency-collateralized mortgage obligations
14,175

 
152

 
(79
)
 
14,248

Commercial
3,931

 
69

 
—

 
4,000

Non-agency residential (1)
4,244

 
287

 
(77
)
 
4,454

Total mortgage-backed securities
185,942

 
2,548

 
(749
)
 
187,741

U.S. Treasury and agency securities
69,267

 
360

 
(32
)
 
69,595

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 (2)
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 (3)
$
336

 
$
27

 
$
—

 
$
363

(1) 
At December 31, 2015 and 2014, the underlying collateral type included approximately 71 percent and 76 percent prime, 15 percent and 14 percent Alt-A, and 14 percent and 10 percent subprime.
(2) 
The Corporation had debt securities from FNMA and FHLMC that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $146.2 billion and $53.4 billion, and a fair value of $145.5 billion and $53.2 billion at December 31, 2015. Debt securities from FNMA and FHLMC that exceeded 10 percent of shareholders’ equity had an amortized cost of $130.7 billion and $28.3 billion, and a fair value of $131.4 billion and $28.6 billion at December 31, 2014.
(3) 
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 2015, the Corporation recorded unrealized mark-to-market net gains of $43 million and realized net losses of $313 million, compared to unrealized mark-to-market net gains of $1.2 billion and realized net gains of $275 million in 2014. These amounts exclude hedge results.
 
 
 
 
Other Debt Securities Carried at Fair Value
 
 
 
 
 
December 31
(Dollars in millions)
2015
 
2014
Mortgage-backed securities:
 
 
 
Agency
$
—

 
$
15,704

Agency-collateralized mortgage obligations
7

 
—

Non-agency residential
3,490

 
3,745

Total mortgage-backed securities
3,497

 
19,449

U.S. Treasury and agency securities
—

 
1,541

Non-U.S. securities (1)
12,843

 
15,132

Other taxable securities, substantially all asset-backed securities
267

 
299

Total
$
16,607

 
$
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 2015, 2014 and 2013 are presented in the table below.
 
 
 
 
 
 
Gains and Losses on Sales of AFS Debt Securities
 
 
 
 
 
 
(Dollars in millions)
2015
 
2014
 
2013
Gross gains
$
1,118

 
$
1,366

 
$
1,302

Gross losses
(27
)
 
(12
)
 
(31
)
Net gains on sales of AFS debt securities
$
1,091

 
$
1,354

 
$
1,271

Income tax expense attributable to realized net gains on sales of AFS debt securities
$
415

 
$
515

 
$
470

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, 2015 and 2014.
 
 
 
 
 
 
 
 
 
 
 
 
Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 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
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
$
131,511

 
$
(1,245
)
 
$
14,895

 
$
(443
)
 
$
146,406

 
$
(1,688
)
Agency-collateralized mortgage obligations
1,271

 
(9
)
 
1,637

 
(62
)
 
2,908

 
(71
)
Commercial
4,066

 
(61
)
 
—

 
—

 
4,066

 
(61
)
Non-agency residential
553

 
(5
)
 
723

 
(32
)
 
1,276

 
(37
)
Total mortgage-backed securities
137,401

 
(1,320
)
 
17,255

 
(537
)
 
154,656

 
(1,857
)
U.S. Treasury and agency securities
1,172

 
(5
)
 
190

 
(4
)
 
1,362

 
(9
)
Non-U.S. securities
—

 
—

 
134

 
(3
)
 
134

 
(3
)
Corporate/Agency bonds
107

 
(3
)
 
—

 
—

 
107

 
(3
)
Other taxable securities, substantially all asset-backed securities
5,071

 
(69
)
 
792

 
(17
)
 
5,863

 
(86
)
Total taxable securities
143,751

 
(1,397
)
 
18,371

 
(561
)
 
162,122

 
(1,958
)
Tax-exempt securities
4,400

 
(12
)
 
1,877

 
(21
)
 
6,277

 
(33
)
Total temporarily impaired AFS debt securities
148,151

 
(1,409
)
 
20,248

 
(582
)
 
168,399

 
(1,991
)
Other-than-temporarily impaired AFS debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential mortgage-backed securities
481

 
(19
)
 
98

 
(14
)
 
579

 
(33
)
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
$
148,632

 
$
(1,428
)
 
$
20,346

 
$
(596
)
 
$
168,978

 
$
(2,024
)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2014
Temporarily impaired AFS debt securities
 
 
 
 
 
 
 
 
 
 
 
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
)
Total mortgage-backed securities
3,915

 
(30
)
 
47,002

 
(686
)
 
50,917

 
(716
)
U.S. Treasury and agency securities
10,121

 
(22
)
 
667

 
(10
)
 
10,788

 
(32
)
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 rates, remains in accumulated OCI.
Corporation Recorded Other-than-Temporary Impairment Losses on AFS Debt Securities
The Corporation recorded OTTI losses on AFS debt securities in 2015, 2014 and 2013 as presented in the Net Credit-related Impairment Losses Recognized in Earnings table. Substantially all OTTI losses in 2015, 2014 and 2013 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 in 2015 were driven by decreases in the estimated RMBS cash flows primarily due to a model change resulting in the refinement of 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
 
 
 
 
 
 
(Dollars in millions)
2015
 
2014
 
2013
Total OTTI losses
$
(111
)
 
$
(30
)
 
$
(21
)
Less: non-credit portion of total OTTI losses recognized in OCI
30

 
14

 
1

Net credit-related impairment losses recognized in earnings
$
(81
)
 
$
(16
)
 
$
(20
)
The table below presents a rollforward of the credit losses recognized in earnings in 2015, 2014 and 2013 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
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
2015
 
2014
 
2013
Balance, January 1
$
200

 
$
184

 
$
243

Additions for credit losses recognized on AFS debt securities that had no previous impairment losses
52

 
14

 
6

Additions for credit losses recognized on AFS debt securities that had previously incurred impairment losses
29

 
2

 
14

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

 
(79
)
Balance, December 31
$
266

 
$
200

 
$
184

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, 2015.
 
 
 
 
 
 
Significant Assumptions
 
 
 
 
 
 
 
 
 
Range (1)
 
Weighted-
average
 
10th
Percentile (2)
 
90th
Percentile (2)
Prepayment speed
12.6
%
 
3.8
%
 
25.5
%
Loss severity
32.6

 
12.9

 
34.8

Life default rate
26.0

 
0.8

 
86.1

(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 and yields of the Corporation’s debt securities carried at fair value and HTM debt securities at December 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 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
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
$
57

 
4.40
%
 
$
28,943

 
2.40
%
 
$
197,797

 
2.80
%
 
$
3,050

 
2.90
%
 
$
229,847

 
2.75
%
Agency-collateralized mortgage obligations
157

 
1.10

 
3,077

 
2.20

 
7,702

 
2.80

 
—

 
—

 
10,936

 
2.61

Commercial
205

 
2.16

 
615

 
2.10

 
6,356

 
2.70

 
—

 
—

 
7,176

 
2.63

Non-agency residential
320

 
5.00

 
1,123

 
4.99

 
1,165

 
4.18

 
3,989

 
7.90

 
6,597

 
6.60

Total mortgage-backed securities
739

 
3.31

 
33,758

 
2.46

 
213,020

 
2.80

 
7,039

 
5.73

 
254,556

 
3.03

U.S. Treasury and agency securities
516

 
0.19

 
23,103

 
1.70

 
1,454

 
3.14

 
2

 
4.57

 
25,075

 
1.75

Non-U.S. securities
16,707

 
0.82

 
1,864

 
3.08

 
6

 
2.79

 
—

 
—

 
18,577

 
1.04

Corporate/Agency bonds
40

 
3.97

 
69

 
4.20

 
131

 
3.41

 
3

 
3.67

 
243

 
3.93

Other taxable securities, substantially all asset-backed securities
2,918

 
1.11

 
4,596

 
1.28

 
2,268

 
2.38

 
728

 
3.96

 
10,510

 
1.67

Total taxable securities
20,920

 
0.94

 
63,390

 
2.13

 
216,879

 
2.81

 
7,772

 
5.57

 
308,961

 
2.61

Tax-exempt securities
836

 
1.27

 
5,127

 
1.31

 
5,879

 
1.35

 
2,136

 
1.55

 
13,978

 
1.36

Total amortized cost of debt securities carried at fair value
$
21,756

 
0.95

 
$
68,517

 
2.06

 
$
222,758

 
2.77

 
$
9,908

 
4.70

 
$
322,939

 
2.56

Amortized cost of HTM debt securities (2)
$
568

 
0.01

 
$
18,325

 
2.30

 
$
62,978

 
2.50

 
$
2,754

 
2.82

 
$
84,625

 
2.45

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities carried at fair value
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
$
59

 
 

 
$
29,150

 
 

 
$
196,720

 
 

 
$
3,018

 
 

 
$
228,947

 
 

Agency-collateralized mortgage obligations
157

 
 

 
3,056

 
 

 
7,779

 
 

 
—

 
 

 
10,992

 
 

Commercial
223

 
 

 
618

 
 

 
6,324

 
 

 
—

 
 

 
7,165

 
 

Non-agency residential
354

 
 

 
1,102

 
 

 
1,263

 
 

 
3,950

 
 

 
6,669

 
 

Total mortgage-backed securities
793

 
 
 
33,926

 
 
 
212,086

 
 
 
6,968

 
 
 
253,773

 
 
U.S. Treasury and agency securities
516

 
 
 
23,266

 
 
 
1,493

 
 
 
2

 
 
 
25,277

 
 
Non-U.S. securities
16,720

 
 

 
1,884

 
 

 
6

 
 

 
—

 
 

 
18,610

 
 

Corporate/Agency bonds
41

 
 

 
70

 
 

 
128

 
 

 
4

 
 

 
243

 
 

Other taxable securities, substantially all asset-backed securities
3,102

 
 

 
4,349

 
 

 
2,296

 
 

 
722

 
 

 
10,469

 
 

Total taxable securities
21,172

 
 

 
63,495

 
 

 
216,009

 
 

 
7,696

 
 

 
308,372

 
 

Tax-exempt securities
836

 
 

 
5,161

 
 

 
5,882

 
 

 
2,129

 
 

 
14,008

 
 

Total debt securities carried at fair value
$
22,008

 
 

 
$
68,656

 
 

 
$
221,891

 
 

 
$
9,825

 
 

 
$
322,380

 
 

Fair value of HTM debt securities (2)
$
569

 
 
 
$
18,356

 
 
 
$
62,360

 
 
 
$
2,761

 
 
 
$
84,046

 
 
(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.