| Securities |
Securities
The following tables present the amortized cost, the gross unrealized gains and losses and the fair value of securities at Dec. 31, 2016, 2015 and 2014, respectively.
| | | | | | | | | | | | | | | Gross unrealized | | | Amortized cost |
| Fair value |
| (in millions) | Gains |
| Losses |
| Available-for-sale: | | | | | U.S. Treasury | $ | 14,373 |
| $ | 115 |
| $ | 181 |
| $ | 14,307 |
| U.S. government agencies | 366 |
| 2 |
| 9 |
| 359 |
| State and political subdivisions | 3,392 |
| 38 |
| 52 |
| 3,378 |
| Agency RMBS | 22,929 |
| 148 |
| 341 |
| 22,736 |
| Non-agency RMBS | 620 |
| 31 |
| 13 |
| 638 |
| Other RMBS | 517 |
| 4 |
| 8 |
| 513 |
| Commercial MBS | 931 |
| 8 |
| 11 |
| 928 |
| Agency commercial MBS | 6,505 |
| 28 |
| 84 |
| 6,449 |
| CLOs | 2,593 |
| 6 |
| 1 |
| 2,598 |
| Other asset-backed securities | 1,729 |
| 4 |
| 6 |
| 1,727 |
| Foreign covered bonds | 2,126 |
| 24 |
| 9 |
| 2,141 |
| Corporate bonds | 1,391 |
| 22 |
| 17 |
| 1,396 |
| Sovereign debt/sovereign guaranteed | 12,248 |
| 261 |
| 20 |
| 12,489 |
| Other debt securities | 1,952 |
| 19 |
| 10 |
| 1,961 |
| Equity securities | 2 |
| 1 |
| — |
| 3 |
| Money market funds | 842 |
| — |
| — |
| 842 |
| Non-agency RMBS (a) | 1,080 |
| 286 |
| 9 |
| 1,357 |
| Total securities available-for-sale (b) | $ | 73,596 |
| $ | 997 |
| $ | 771 |
| $ | 73,822 |
| Held-to-maturity: | | | | | U.S. Treasury | $ | 11,117 |
| $ | 22 |
| $ | 41 |
| $ | 11,098 |
| U.S. government agencies | 1,589 |
| — |
| 6 |
| 1,583 |
| State and political subdivisions | 19 |
| — |
| 1 |
| 18 |
| Agency RMBS | 25,221 |
| 57 |
| 299 |
| 24,979 |
| Non-agency RMBS | 78 |
| 4 |
| 2 |
| 80 |
| Other RMBS | 142 |
| — |
| 4 |
| 138 |
| Commercial MBS | 7 |
| — |
| — |
| 7 |
| Agency commercial MBS | 721 |
| 1 |
| 10 |
| 712 |
| Foreign covered bonds | 74 |
| 1 |
| — |
| 75 |
| Sovereign debt/sovereign guaranteed | 1,911 |
| 42 |
| — |
| 1,953 |
| Other debt securities | 26 |
| — |
| — |
| 26 |
| Total securities held-to-maturity | $ | 40,905 |
| $ | 127 |
| $ | 363 |
| $ | 40,669 |
| Total securities | $ | 114,501 |
| $ | 1,124 |
| $ | 1,134 |
| $ | 114,491 |
|
| | (a) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
| | (b) | Includes gross unrealized gains of $62 million and gross unrealized losses of $190 million recorded in accumulated other comprehensive income related to investment securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains and losses are primarily related to Agency RMBS and will be amortized into net interest revenue over the contractual lives of the securities. |
| | | | | | | | | | | | | | | Gross
unrealized |
|
| | Amortized cost |
| Fair value |
| (in millions) | Gains |
| Losses |
| Available-for-sale: | | | | | U.S. Treasury | $ | 12,693 |
| $ | 175 |
| $ | 36 |
| $ | 12,832 |
| U.S. government agencies | 386 |
| 2 |
| 1 |
| 387 |
| State and political subdivisions | 3,968 |
| 91 |
| 13 |
| 4,046 |
| Agency RMBS | 23,549 |
| 239 |
| 287 |
| 23,501 |
| Non-agency RMBS | 782 |
| 31 |
| 20 |
| 793 |
| Other RMBS | 1,072 |
| 10 |
| 21 |
| 1,061 |
| Commercial MBS | 1,400 |
| 8 |
| 16 |
| 1,392 |
| Agency commercial MBS | 4,031 |
| 24 |
| 35 |
| 4,020 |
| CLOs | 2,363 |
| 1 |
| 13 |
| 2,351 |
| Other asset-backed securities | 2,909 |
| 1 |
| 17 |
| 2,893 |
| Foreign covered bonds | 2,125 |
| 46 |
| 3 |
| 2,168 |
| Corporate bonds | 1,740 |
| 26 |
| 14 |
| 1,752 |
| Sovereign debt/sovereign guaranteed | 13,036 |
| 211 |
| 30 |
| 13,217 |
| Other debt securities | 2,732 |
| 46 |
| 3 |
| 2,775 |
| Equity securities | 3 |
| 1 |
| — |
| 4 |
| Money market funds | 886 |
| — |
| — |
| 886 |
| Non-agency RMBS (a) | 1,435 |
| 362 |
| 8 |
| 1,789 |
| Total securities available-for-sale (b) | $ | 75,110 |
| $ | 1,274 |
| $ | 517 |
| $ | 75,867 |
| Held-to-maturity: | | | | | U.S. Treasury | $ | 11,326 |
| $ | 25 |
| $ | 51 |
| $ | 11,300 |
| U.S. government agencies | 1,431 |
| — |
| 6 |
| 1,425 |
| State and political subdivisions | 20 |
| — |
| 1 |
| 19 |
| Agency RMBS | 26,036 |
| 134 |
| 205 |
| 25,965 |
| Non-agency RMBS | 118 |
| 5 |
| 2 |
| 121 |
| Other RMBS | 224 |
| 1 |
| 10 |
| 215 |
| Commercial MBS | 9 |
| — |
| — |
| 9 |
| Agency commercial MBS | 503 |
| — |
| 9 |
| 494 |
| Foreign covered bonds | 76 |
| — |
| — |
| 76 |
| Sovereign debt/sovereign guaranteed | 3,538 |
| 22 |
| 11 |
| 3,549 |
| Other debt securities | 31 |
| — |
| — |
| 31 |
| Total securities held-to-maturity | $ | 43,312 |
| $ | 187 |
| $ | 295 |
| $ | 43,204 |
| Total securities | $ | 118,422 |
| $ | 1,461 |
| $ | 812 |
| $ | 119,071 |
|
| | (a) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
| | (b) | Includes gross unrealized gains of $84 million and gross unrealized losses of $248 million recorded in accumulated other comprehensive income related to investment securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains and losses are primarily related to Agency RMBS and will be amortized into net interest revenue over the contractual lives of the securities. |
| | | | | | | | | | | | | | | Gross
unrealized | | | Amortized cost |
| Fair value |
| (in millions) | Gains |
| Losses |
| Available-for-sale: | | | | | U.S. Treasury | $ | 19,592 |
| $ | 420 |
| $ | 15 |
| $ | 19,997 |
| U.S. government agencies | 342 |
| 3 |
| 2 |
| 343 |
| State and political subdivisions | 5,176 |
| 95 |
| 24 |
| 5,247 |
| Agency RMBS | 32,568 |
| 357 |
| 325 |
| 32,600 |
| Non-agency RMBS | 942 |
| 37 |
| 26 |
| 953 |
| Other RMBS | 1,551 |
| 25 |
| 25 |
| 1,551 |
| Commercial MBS | 1,927 |
| 39 |
| 7 |
| 1,959 |
| Agency commercial MBS | 3,105 |
| 36 |
| 9 |
| 3,132 |
| CLOs | 2,128 |
| 9 |
| 7 |
| 2,130 |
| Other asset-backed securities | 3,241 |
| 5 |
| 6 |
| 3,240 |
| Foreign covered bonds | 2,788 |
| 80 |
| — |
| 2,868 |
| Corporate bonds | 1,747 |
| 45 |
| 7 |
| 1,785 |
| Sovereign debt/sovereign guaranteed | 17,062 |
| 224 |
| 2 |
| 17,284 |
| Other debt securities | 2,162 |
| 7 |
| — |
| 2,169 |
| Equity securities | 94 |
| 1 |
| — |
| 95 |
| Money market funds | 763 |
| — |
| — |
| 763 |
| Non-agency RMBS (a) | 1,747 |
| 471 |
| 4 |
| 2,214 |
| Total securities available-for-sale (b) | $ | 96,935 |
| $ | 1,854 |
| $ | 459 |
| $ | 98,330 |
| Held-to-maturity: | | | | | U.S. Treasury | $ | 5,047 |
| $ | 32 |
| $ | 16 |
| $ | 5,063 |
| U.S. government agencies | 344 |
| — |
| 3 |
| 341 |
| State and political subdivisions | 24 |
| 1 |
| 1 |
| 24 |
| Agency RMBS | 14,006 |
| 200 |
| 44 |
| 14,162 |
| Non-agency RMBS | 153 |
| 9 |
| 2 |
| 160 |
| Other RMBS | 315 |
| 2 |
| 8 |
| 309 |
| Commercial MBS | 13 |
| — |
| — |
| 13 |
| Sovereign debt/sovereign guaranteed | 1,031 |
| 24 |
| — |
| 1,055 |
| Total securities held-to-maturity | $ | 20,933 |
| $ | 268 |
| $ | 74 |
| $ | 21,127 |
| Total securities | $ | 117,868 |
| $ | 2,122 |
| $ | 533 |
| $ | 119,457 |
|
| | (a) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
| | (b) | Includes gross unrealized gains of $60 million and gross unrealized losses of $282 million recorded in accumulated other comprehensive income related to investment securities that were transferred from available-for-sale to held-to-maturity. The unrealized gains and losses are primarily related to Agency RMBS and will be amortized into net interest revenue over the contractual lives of the securities. |
The following table presents the gross securities gains, losses and impairments.
| | | | | | | | | | | Net securities gains (losses) | | | (in millions) | 2016 |
| 2015 |
| 2014 |
| Realized gross gains | $ | 86 |
| $ | 90 |
| $ | 114 |
| Realized gross losses | (4 | ) | (2 | ) | (4 | ) | Recognized gross impairments | (7 | ) | (5 | ) | (19 | ) | Total net securities gains | $ | 75 |
| $ | 83 |
| $ | 91 |
|
In 2015, Agency MBS, sovereign debt and U.S. Treasury securities with an aggregate amortized cost of $11.6 billion and fair value of $11.6 billion were transferred from available-for-sale securities to held-to-maturity securities. Additionally, in 2013, Agency RMBS securities with an amortized cost of $7.3 billion and fair value of $7.0 billion were transferred from available-for-sale securities to held-to-maturity securities. These actions, in addition to realizing gains on the sales of securities, are expected to mute the impact to our accumulated other comprehensive income in the event of a rise in interest rates.
Temporarily impaired securities
At Dec. 31, 2016, the unrealized losses on the investment securities portfolio were primarily attributable to an increase in interest rates from date of purchase, and for certain securities that were transferred from available-for-sale to held-to-maturity, an increase in interest rates through the date they were transferred. Specifically, $190 million of the unrealized losses at Dec. 31, 2016 and $248 million at Dec. 31, 2015 reflected in the available-for-sale sections of the tables below relate to certain securities (primarily Agency RMBS) that were transferred from available-for-sale to held-to-maturity. The unrealized losses will be amortized into net interest revenue over the contractual lives of the securities. The transfer created a new cost basis for the securities. As a result, if these securities have experienced unrealized losses since the date of transfer, the corresponding fair value and unrealized losses would be reflected in the held-to-maturity sections of the following tables. We do not intend to sell these securities and it is not more likely than not that we will have to sell these securities. The following tables show the aggregate related fair value of investments with a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or more at Dec. 31, 2016 and Dec. 31, 2015, respectively.
| | | | | | | | | | | | | | | | | | | | | | | Less than 12 months | | 12 months or more | | Total | (in millions) | Fair
value |
| Unrealized
losses |
| | Fair
value |
| Unrealized
losses |
| | Fair
value |
| Unrealized
losses |
| Available-for-sale: | | | | | | | | | U.S. Treasury | $ | 8,489 |
| $ | 181 |
| | $ | — |
| $ | — |
| | $ | 8,489 |
| $ | 181 |
| U.S. government agencies | 257 |
| 9 |
| | — |
| — |
| | 257 |
| 9 |
| State and political subdivisions | 1,058 |
| 33 |
| | 131 |
| 19 |
| | 1,189 |
| 52 |
| Agency RMBS | 14,766 |
| 141 |
| | 1,673 |
| 200 |
| | 16,439 |
| 341 |
| Non-agency RMBS | 21 |
| — |
| | 332 |
| 13 |
| | 353 |
| 13 |
| Other RMBS | 26 |
| — |
| | 136 |
| 8 |
| | 162 |
| 8 |
| Commercial MBS | 302 |
| 7 |
| | 163 |
| 4 |
| | 465 |
| 11 |
| Agency commercial MBS | 3,570 |
| 78 |
| | 589 |
| 6 |
| | 4,159 |
| 84 |
| CLOs | 443 |
| 1 |
| | 404 |
| — |
| | 847 |
| 1 |
| Other asset-backed securities | 276 |
| 1 |
| | 357 |
| 5 |
| | 633 |
| 6 |
| Corporate bonds | 594 |
| 16 |
| | 7 |
| 1 |
| | 601 |
| 17 |
| Sovereign debt/sovereign guaranteed | 1,521 |
| 20 |
| | 63 |
| — |
| | 1,584 |
| 20 |
| Non-agency RMBS (a) | 25 |
| — |
| | 47 |
| 9 |
| | 72 |
| 9 |
| Other debt securities | 742 |
| 10 |
| | 50 |
| — |
| | 792 |
| 10 |
| Foreign covered bonds | 712 |
| 9 |
| | — |
| — |
| | 712 |
| 9 |
| Total securities available-for-sale (b) | $ | 32,802 |
| $ | 506 |
| | $ | 3,952 |
| $ | 265 |
| | $ | 36,754 |
| $ | 771 |
| Held-to-maturity: | | | | | | | | | U.S. Treasury | $ | 6,112 |
| $ | 41 |
| | $ | — |
| $ | — |
| | $ | 6,112 |
| $ | 41 |
| U.S. government agencies | 1,533 |
| 6 |
| | — |
| — |
| | 1,533 |
| 6 |
| State and political subdivisions | — |
| — |
| | 4 |
| 1 |
| | 4 |
| 1 |
| Agency RMBS | 19,498 |
| 297 |
| | 102 |
| 2 |
| | 19,600 |
| 299 |
| Non-agency RMBS | 4 |
| — |
| | 48 |
| 2 |
| | 52 |
| 2 |
| Agency commercial MBS | 621 |
| 10 |
| | — |
| — |
| | 621 |
| 10 |
| Other RMBS | 15 |
| — |
| | 123 |
| 4 |
| | 138 |
| 4 |
| Total securities held-to-maturity | $ | 27,783 |
| $ | 354 |
| | $ | 277 |
| $ | 9 |
| | $ | 28,060 |
| $ | 363 |
| Total temporarily impaired securities | $ | 60,585 |
| $ | 860 |
| | $ | 4,229 |
| $ | 274 |
| | $ | 64,814 |
| $ | 1,134 |
|
| | (a) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
| | (b) | Gross unrealized losses for 12 months or more of $190 million were recorded in accumulated other comprehensive income and related to investment securities that were transferred from available-for-sale to held-to-maturity. The unrealized losses are primarily related to Agency RMBS and will be amortized into net interest revenue over the contractual lives of the securities. There were no gross unrealized losses for less than 12 months. |
| | | | | | | | | | | | | | | | | | | | | | | Less than 12 months | | 12 months or more | | Total | (in millions) | Fair value |
| Unrealized losses |
| | Fair value |
| Unrealized losses |
| | Fair value |
| Unrealized losses |
| Available-for-sale: | | | | | | | | | U.S. Treasury | $ | 6,343 |
| $ | 36 |
| | $ | — |
| $ | — |
| | $ | 6,343 |
| $ | 36 |
| U.S. government agencies | 148 |
| 1 |
| | 10 |
| — |
| | 158 |
| 1 |
| State and political subdivisions | 143 |
| 2 |
| | 117 |
| 11 |
| | 260 |
| 13 |
| Agency RMBS | 8,500 |
| 44 |
| | 1,316 |
| 243 |
| | 9,816 |
| 287 |
| Non-agency RMBS | 72 |
| — |
| | 417 |
| 20 |
| | 489 |
| 20 |
| Other RMBS | 2 |
| — |
| | 298 |
| 21 |
| | 300 |
| 21 |
| Commercial MBS | 567 |
| 9 |
| | 224 |
| 7 |
| | 791 |
| 16 |
| Agency commercial MBS | 2,551 |
| 31 |
| | 172 |
| 4 |
| | 2,723 |
| 35 |
| CLOs | 1,599 |
| 10 |
| | 455 |
| 3 |
| | 2,054 |
| 13 |
| Other asset-backed securities | 2,001 |
| 10 |
| | 546 |
| 7 |
| | 2,547 |
| 17 |
| Corporate bonds | 338 |
| 10 |
| | 128 |
| 4 |
| | 466 |
| 14 |
| Sovereign debt/sovereign guaranteed | 2,063 |
| 30 |
| | 43 |
| — |
| | 2,106 |
| 30 |
| Non-agency RMBS (a) | 45 |
| 1 |
| | 52 |
| 7 |
| | 97 |
| 8 |
| Other debt securities | 505 |
| 3 |
| | — |
| — |
| | 505 |
| 3 |
| Foreign covered bonds | 515 |
| 3 |
| | — |
| — |
| | 515 |
| 3 |
| Total securities available-for-sale (b) | $ | 25,392 |
| $ | 190 |
|
| $ | 3,778 |
| $ | 327 |
|
| $ | 29,170 |
| $ | 517 |
| Held-to-maturity: | | | | | | | | | U.S. Treasury | $ | 9,121 |
| $ | 51 |
| | $ | — |
| $ | — |
| | $ | 9,121 |
| $ | 51 |
| U.S. government agencies | 1,122 |
| 6 |
| | — |
| — |
| | 1,122 |
| 6 |
| State and political subdivisions | 4 |
| 1 |
| | — |
| — |
| | 4 |
| 1 |
| Agency RMBS | 16,491 |
| 171 |
| | 1,917 |
| 34 |
| | 18,408 |
| 205 |
| Non-agency RMBS | 40 |
| — |
| | 29 |
| 2 |
| | 69 |
| 2 |
| Other RMBS | 9 |
| — |
| | 166 |
| 10 |
| | 175 |
| 10 |
| Agency commercial MBS | 494 |
| 9 |
| | — |
| — |
| | 494 |
| 9 |
| Sovereign debt/sovereign guaranteed | 2,161 |
| 11 |
| | — |
| — |
| | 2,161 |
| 11 |
| Total securities held-to-maturity | $ | 29,442 |
| $ | 249 |
|
| $ | 2,112 |
| $ | 46 |
|
| $ | 31,554 |
| $ | 295 |
| Total temporarily impaired securities | $ | 54,834 |
| $ | 439 |
|
| $ | 5,890 |
| $ | 373 |
|
| $ | 60,724 |
| $ | 812 |
|
| | (a) | Previously included in the Grantor Trust. The Grantor Trust was dissolved in 2011. |
| | (b) | Includes gross unrealized losses for less than 12 months of $8 million and gross unrealized losses for 12 months or more of $240 million recorded in accumulated other comprehensive income related to investment securities that were transferred from available-for-sale to held-to-maturity. The unrealized losses are primarily related to Agency RMBS and will be amortized into net interest revenue over the contractual lives of the securities. |
The following table shows the maturity distribution by carrying amount and yield (on a tax equivalent basis) of our investment securities portfolio at Dec. 31, 2016.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturity distribution and yield on investment securities at Dec. 31, 2016 | U.S. Treasury | | U.S. government agencies | | State and political subdivisions | | Other bonds, notes and debentures | | Mortgage/ asset-backed and equity securities | | | (dollars in millions) | Amount |
| Yield (a) |
| | Amount |
| Yield (a) |
| | Amount |
| Yield (a) |
| | Amount |
| Yield (a) |
| | Amount |
| Yield (a) |
| | Total |
| Securities available-for-sale: | | | | | | | | | | | | | | | | | One year or less | $ | 2,195 |
| 0.85 | % | | $ | — |
| — | % | | $ | 274 |
| 2.71 | % | | $ | 3,745 |
| 0.97 | % | | $ | — |
| — | % | | $ | 6,214 |
| Over 1 through 5 years | 5,472 |
| 1.49 |
| | 113 |
| 1.30 |
| | 1,738 |
| 2.92 |
| | 11,688 |
| 1.02 |
| | — |
| — |
| | 19,011 |
| Over 5 through 10 years | 3,292 |
| 1.71 |
| | 246 |
| 2.34 |
| | 1,147 |
| 3.51 |
| | 2,378 |
| 1.13 |
| | — |
| — |
| | 7,063 |
| Over 10 years | 3,348 |
| 3.11 |
| | — |
| — |
| | 219 |
| 1.90 |
| | 176 |
| 1.67 |
| | — |
| — |
| | 3,743 |
| Mortgage-backed securities | — |
| — |
| | — |
| — |
| | — |
| — |
| | — |
| — |
| | 32,621 |
| 2.59 |
| | 32,621 |
| Asset-backed securities | — |
| — |
| | — |
| — |
| | — |
| — |
| | — |
| — |
| | 4,325 |
| 1.95 |
| | 4,325 |
| Equity securities (b) | — |
| — |
| | — |
| — |
| | — |
| — |
| | — |
| — |
| | 845 |
| — |
| | 845 |
| Total | $ | 14,307 |
| 1.82 | % | | $ | 359 |
| 2.01 | % | | $ | 3,378 |
| 3.04 | % | | $ | 17,987 |
| 1.03 | % | | $ | 37,791 |
| 2.46 | % | | $ | 73,822 |
| Securities held-to-maturity: | | | | | | | | | | | | | | | | | One year or less | $ | 1,327 |
| 0.86 | % | | $ | 350 |
| 0.83 | % | | $ | — |
| — | % | | $ | 511 |
| 0.57 | % | | $ | — |
| — | % | | $ | 2,188 |
| Over 1 through 5 years | 7,890 |
| 1.23 |
| | 1,189 |
| 1.19 |
| | 1 |
| 7.03 |
| | 847 |
| 0.61 |
| | — |
| — |
| | 9,927 |
| Over 5 through 10 years | 1,900 |
| 1.91 |
| | 50 |
| 2.02 |
| | 3 |
| 6.76 |
| | 653 |
| 0.71 |
| | — |
| — |
| | 2,606 |
| Over 10 years | — |
| — |
| | — |
| — |
| | 15 |
| 5.34 |
| | — |
| — |
| | — |
| — |
| | 15 |
| Mortgage-backed securities | — |
| — |
| | — |
| — |
| | — |
| — |
| | — |
| — |
| | 26,169 |
| 2.73 |
| | 26,169 |
| Total | $ | 11,117 |
| 1.30 | % | | $ | 1,589 |
| 1.13 | % | | $ | 19 |
| 5.69 | % | | $ | 2,011 |
| 0.63 | % | | $ | 26,169 |
| 2.73 | % | | $ | 40,905 |
|
| | (a) | Yields are based upon the amortized cost of securities. |
| | (b) | Includes money market funds. |
Other-than-temporary impairment
We routinely conduct periodic reviews of all securities to determine whether OTTI has occurred. Such reviews may incorporate the use of economic models. Various inputs to the economic models are used to determine if an unrealized loss on securities is other-than-temporary. For example, the most significant inputs related to non-agency RMBS are:
| | • | Default rate - the number of mortgage loans expected to go into default over the life of the transaction, which is driven by the roll rate of loans in each performance bucket that will ultimately migrate to default; and |
| | • | Severity - the loss expected to be realized when a loan defaults. |
To determine if an unrealized loss is other-than-temporary, we project total estimated defaults of the underlying assets (mortgages) and multiply that calculated amount by an estimate of realizable value upon sale of these assets in the marketplace (severity) in order to determine the projected collateral loss. In determining estimated default rate and severity assumptions, we review the performance of the underlying securities, industry studies, market forecasts, as well as our view of the economic outlook affecting collateral. We also evaluate the current credit enhancement underlying the bond to determine the impact on cash flows. If we determine that a given security will be subject to a write-down or loss, we record the expected credit loss as a charge to earnings.
The table below shows the projected weighted-average default rates and loss severities for the 2007, 2006 and late 2005 non-agency RMBS and the securities previously held in the Grantor Trust that we established in connection with the restructuring of our investment securities portfolio in 2009, at Dec. 31, 2016 and Dec. 31, 2015.
| | | | | | | | | | | Projected weighted-average default rates and loss severities | | | | | | Default rate |
| Severity |
| | Default rate |
| Severity |
| Alt-A | 30 | % | 54 | % | | 33 | % | 57 | % | Subprime | 49 | % | 70 | % | | 52 | % | 72 | % | Prime | 18 | % | 39 | % | | 18 | % | 40 | % |
The following table presents pre-tax net securities gains by type.
| | | | | | | | | | | Net securities gains | | | (in millions) | 2016 |
| 2015 |
| 2014 |
| Agency RMBS | $ | 22 |
| $ | 10 |
| $ | 13 |
| Foreign covered bonds | 10 |
| 2 |
| 3 |
| Non-agency RMBS | 8 |
| 7 |
| 17 |
| U.S. Treasury | 4 |
| 45 |
| 25 |
| Other | 31 |
| 19 |
| 33 |
| Total net securities gains | $ | 75 |
| $ | 83 |
| $ | 91 |
|
The following tables reflect investment securities credit losses recorded in earnings. The beginning balance represents the credit loss component for which OTTI occurred on debt securities in prior periods. The additions represent the first time a debt security was credit impaired or when subsequent credit impairments have occurred. The deductions represent credit losses on securities that have been sold, are required to be sold, or for which it is our intention to sell.
| | | | | | | | Debt securities credit loss roll forward | | (in millions) | 2016 |
| 2015 |
| Beginning balance as of Jan. 1 | $ | 91 |
| $ | 93 |
| Add: Initial OTTI credit losses | — |
| — |
| Subsequent OTTI credit losses | 7 |
| 5 |
| Less: Realized losses for securities sold | 10 |
| 7 |
| Ending balance as of Dec. 31 | $ | 88 |
| $ | 91 |
|
Pledged assets
At Dec. 31, 2016, BNY Mellon had pledged assets of $102 billion, including $84 billion pledged as collateral for potential borrowings at the Federal Reserve Discount Window. The components of the assets pledged at Dec. 31, 2016 included $87 billion of securities, $8 billion of loans, $4 billion of interest-bearing deposits with banks and $3 billion of trading assets.
If there has been no borrowing at the Federal Reserve Discount Window, the Federal Reserve generally allows banks to freely move assets in and out of their pledged assets account to sell or repledge the assets for other purposes. BNY Mellon regularly moves assets in and out of its pledged assets account at the Federal Reserve.
At Dec. 31, 2015, BNY Mellon had pledged assets of $101 billion, including $84 billion pledged as collateral for potential borrowing at the Federal Reserve Discount Window. The components of the assets pledged at Dec. 31, 2015 included $88 billion of securities, $8 billion of loans, $3 billion of trading assets and $2 billion of interest-bearing deposits with banks.
At Dec. 31, 2016 and Dec. 31, 2015, pledged assets included $6 billion and $7 billion, respectively, for which the recipients were permitted to sell or repledge the assets delivered.
We also obtain securities as collateral including receipts under resale agreements, securities borrowed, derivative contracts and custody agreements on terms which permit us to sell or repledge the securities to others. At Dec. 31, 2016 and Dec. 31, 2015, the market value of the securities received that can be sold or repledged was $50 billion and $52 billion, respectively. We routinely sell or repledge these securities through delivery to third parties. As of Dec. 31, 2016 and Dec. 31, 2015, the market value of securities collateral sold or repledged was $20 billion and $17 billion, respectively.
Restricted cash and securities
Cash and securities may also be segregated under federal and other regulations or requirements. At Dec. 31, 2016 and Dec. 31, 2015, cash segregated under federal and other regulations or requirements was $3 billion and $4 billion, respectively. Restricted cash is included in interest-bearing deposits with banks on the consolidated balance sheet. Securities segregated for these purposes were $2 billion at Dec. 31, 2016 and $1 billion at Dec. 31, 2015. Restricted securities were sourced from securities purchased under resale agreements at Dec. 31, 2016 and are included in federal funds sold and securities purchased under resale agreements on the consolidated balance sheet. Restricted securities are included in trading assets on the consolidated balance sheet at Dec. 31, 2015. |
