| Securities |
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 and held-to-maturity (HTM) debt securities at September 30, 2019 and December 31, 2018.
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Debt Securities |
|
|
|
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|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
(Dollars in millions) |
September 30, 2019 |
Available-for-sale debt securities |
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
Agency |
$ |
133,973 |
|
|
$ |
1,250 |
|
|
$ |
(274 |
) |
|
$ |
134,949 |
|
Agency-collateralized mortgage obligations |
4,877 |
|
|
103 |
|
|
(18 |
) |
|
4,962 |
|
Commercial |
14,301 |
|
|
380 |
|
|
(4 |
) |
|
14,677 |
|
Non-agency residential (1)
|
1,725 |
|
|
227 |
|
|
(9 |
) |
|
1,943 |
|
Total mortgage-backed securities |
154,876 |
|
|
1,960 |
|
|
(305 |
) |
|
156,531 |
|
U.S. Treasury and agency securities |
55,746 |
|
|
1,364 |
|
|
(163 |
) |
|
56,947 |
|
Non-U.S. securities |
11,074 |
|
|
7 |
|
|
(2 |
) |
|
11,079 |
|
Other taxable securities, substantially all asset-backed securities |
3,806 |
|
|
77 |
|
|
— |
|
|
3,883 |
|
Total taxable securities |
225,502 |
|
|
3,408 |
|
|
(470 |
) |
|
228,440 |
|
Tax-exempt securities |
16,263 |
|
|
203 |
|
|
(34 |
) |
|
16,432 |
|
Total available-for-sale debt securities |
241,765 |
|
|
3,611 |
|
|
(504 |
) |
|
244,872 |
|
Other debt securities carried at fair value (2)
|
9,284 |
|
|
205 |
|
|
(19 |
) |
|
9,470 |
|
Total debt securities carried at fair value |
251,049 |
|
|
3,816 |
|
|
(523 |
) |
|
254,342 |
|
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities |
190,252 |
|
|
4,358 |
|
|
(336 |
) |
|
194,274 |
|
Total debt securities (3, 4)
|
$ |
441,301 |
|
|
$ |
8,174 |
|
|
$ |
(859 |
) |
|
$ |
448,616 |
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
Available-for-sale debt securities |
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
Agency |
$ |
125,116 |
|
|
$ |
138 |
|
|
$ |
(3,428 |
) |
|
$ |
121,826 |
|
Agency-collateralized mortgage obligations |
5,621 |
|
|
19 |
|
|
(110 |
) |
|
5,530 |
|
Commercial |
14,469 |
|
|
11 |
|
|
(402 |
) |
|
14,078 |
|
Non-agency residential (1)
|
1,792 |
|
|
136 |
|
|
(11 |
) |
|
1,917 |
|
Total mortgage-backed securities |
146,998 |
|
|
304 |
|
|
(3,951 |
) |
|
143,351 |
|
U.S. Treasury and agency securities |
56,239 |
|
|
62 |
|
|
(1,378 |
) |
|
54,923 |
|
Non-U.S. securities |
9,307 |
|
|
5 |
|
|
(6 |
) |
|
9,306 |
|
Other taxable securities, substantially all asset-backed securities |
4,387 |
|
|
29 |
|
|
(6 |
) |
|
4,410 |
|
Total taxable securities |
216,931 |
|
|
400 |
|
|
(5,341 |
) |
|
211,990 |
|
Tax-exempt securities |
17,349 |
|
|
99 |
|
|
(72 |
) |
|
17,376 |
|
Total available-for-sale debt securities |
234,280 |
|
|
499 |
|
|
(5,413 |
) |
|
229,366 |
|
Other debt securities carried at fair value (2)
|
8,595 |
|
|
172 |
|
|
(32 |
) |
|
8,735 |
|
Total debt securities carried at fair value |
242,875 |
|
|
671 |
|
|
(5,445 |
) |
|
238,101 |
|
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities |
203,652 |
|
|
747 |
|
|
(3,964 |
) |
|
200,435 |
|
Total debt securities (3, 4)
|
$ |
446,527 |
|
|
$ |
1,418 |
|
|
$ |
(9,409 |
) |
|
$ |
438,536 |
|
|
|
(1) |
At September 30, 2019 and December 31, 2018, the underlying collateral type included approximately 66 percent and 68 percent prime, five percent and four percent Alt-A and 29 percent and 28 percent subprime.
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(2) |
Primarily includes non-U.S. securities used to satisfy certain international regulatory requirements. Any changes in value are reported in other income. For detail on the components, see Note 15 – Fair Value Measurements.
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(3) |
Includes securities pledged as collateral of $42.8 billion and $40.6 billion at September 30, 2019 and December 31, 2018.
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(4) |
The Corporation held debt securities from Fannie Mae (FNMA) and Freddie Mac (FHLMC) that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $153.2 billion and $49.5 billion, and a fair value of $156.6 billion and $50.6 billion at September 30, 2019, and an amortized cost of $161.2 billion and $52.2 billion, and a fair value of $158.5 billion and $51.4 billion at December 31, 2018.
|
At September 30, 2019, the accumulated net unrealized gain on AFS debt securities, excluding the amount related to debt securities previously transferred to held to maturity, included in accumulated OCI was $2.3 billion, net of the related income tax expense of $761 million. The Corporation had nonperforming AFS debt securities of $11 million at both September 30, 2019 and December 31, 2018.
At September 30, 2019, the Corporation held equity securities at an aggregate fair value of $853 million and other equity securities, as valued under the measurement alternative, at cost of $183 million, both of which are included in other assets. At
September 30, 2019, the Corporation also held equity securities at fair value of $1.4 billion included in time deposits placed and other short-term investments.
Sales of AFS debt securities during the three months ended September 30, 2019 were not significant. In the nine months ended September 30, 2019, the Corporation recorded gross realized gains on sales of AFS debt securities of $228 million and gross realized losses of $112 million, resulting in net gains of $116 million, with $28 million of income taxes attributable to the realized net gains on sales of these AFS debt securities. For the same periods in 2018, gross gains and losses were not significant.
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 September 30, 2019 and December 31, 2018.
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Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities |
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|
|
|
|
Less than Twelve Months |
|
Twelve Months or Longer |
|
Total |
|
Fair
Value
|
|
Gross Unrealized Losses |
|
Fair
Value
|
|
Gross Unrealized Losses |
|
Fair
Value
|
|
Gross Unrealized Losses |
(Dollars in millions) |
September 30, 2019 |
Temporarily impaired AFS debt securities |
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
Agency |
$ |
7,409 |
|
|
$ |
(10 |
) |
|
$ |
28,226 |
|
|
$ |
(264 |
) |
|
$ |
35,635 |
|
|
$ |
(274 |
) |
Agency-collateralized mortgage obligations |
64 |
|
|
— |
|
|
1,014 |
|
|
(18 |
) |
|
1,078 |
|
|
(18 |
) |
Commercial |
928 |
|
|
(3 |
) |
|
114 |
|
|
(1 |
) |
|
1,042 |
|
|
(4 |
) |
Non-agency residential |
33 |
|
|
(1 |
) |
|
1 |
|
|
— |
|
|
34 |
|
|
(1 |
) |
Total mortgage-backed securities |
8,434 |
|
|
(14 |
) |
|
29,355 |
|
|
(283 |
) |
|
37,789 |
|
|
(297 |
) |
U.S. Treasury and agency securities |
4,193 |
|
|
(18 |
) |
|
18,628 |
|
|
(145 |
) |
|
22,821 |
|
|
(163 |
) |
Non-U.S. securities |
1,234 |
|
|
(2 |
) |
|
140 |
|
|
— |
|
|
1,374 |
|
|
(2 |
) |
Other taxable securities, substantially all asset-backed securities |
354 |
|
|
— |
|
|
280 |
|
|
— |
|
|
634 |
|
|
— |
|
Total taxable securities |
14,215 |
|
|
(34 |
) |
|
48,403 |
|
|
(428 |
) |
|
62,618 |
|
|
(462 |
) |
Tax-exempt securities |
233 |
|
|
— |
|
|
1,039 |
|
|
(34 |
) |
|
1,272 |
|
|
(34 |
) |
Total temporarily impaired AFS debt securities |
14,448 |
|
|
(34 |
) |
|
49,442 |
|
|
(462 |
) |
|
63,890 |
|
|
(496 |
) |
Other-than-temporarily impaired AFS debt securities (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency residential mortgage-backed securities
|
118 |
|
|
(4 |
) |
|
28 |
|
|
(4 |
) |
|
146 |
|
|
(8 |
) |
|
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
|
$ |
14,566 |
|
|
$ |
(38 |
) |
|
$ |
49,470 |
|
|
$ |
(466 |
) |
|
$ |
64,036 |
|
|
$ |
(504 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
Temporarily impaired AFS debt securities |
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
Agency |
$ |
14,771 |
|
|
$ |
(49 |
) |
|
$ |
99,211 |
|
|
$ |
(3,379 |
) |
|
$ |
113,982 |
|
|
$ |
(3,428 |
) |
Agency-collateralized mortgage obligations |
3 |
|
|
— |
|
|
4,452 |
|
|
(110 |
) |
|
4,455 |
|
|
(110 |
) |
Commercial |
1,344 |
|
|
(8 |
) |
|
11,991 |
|
|
(394 |
) |
|
13,335 |
|
|
(402 |
) |
Non-agency residential |
106 |
|
|
(8 |
) |
|
49 |
|
|
(3 |
) |
|
155 |
|
|
(11 |
) |
Total mortgage-backed securities |
16,224 |
|
|
(65 |
) |
|
115,703 |
|
|
(3,886 |
) |
|
131,927 |
|
|
(3,951 |
) |
U.S. Treasury and agency securities |
288 |
|
|
(1 |
) |
|
51,374 |
|
|
(1,377 |
) |
|
51,662 |
|
|
(1,378 |
) |
Non-U.S. securities |
773 |
|
|
(5 |
) |
|
21 |
|
|
(1 |
) |
|
794 |
|
|
(6 |
) |
Other taxable securities, substantially all asset-backed securities |
183 |
|
|
(1 |
) |
|
185 |
|
|
(5 |
) |
|
368 |
|
|
(6 |
) |
Total taxable securities |
17,468 |
|
|
(72 |
) |
|
167,283 |
|
|
(5,269 |
) |
|
184,751 |
|
|
(5,341 |
) |
Tax-exempt securities |
232 |
|
|
(2 |
) |
|
2,148 |
|
|
(70 |
) |
|
2,380 |
|
|
(72 |
) |
Total temporarily impaired AFS debt securities |
17,700 |
|
|
(74 |
) |
|
169,431 |
|
|
(5,339 |
) |
|
187,131 |
|
|
(5,413 |
) |
Other-than-temporarily impaired AFS debt securities (1)
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency residential mortgage-backed securities |
131 |
|
|
— |
|
|
3 |
|
|
— |
|
|
134 |
|
|
— |
|
|
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
|
$ |
17,831 |
|
|
$ |
(74 |
) |
|
$ |
169,434 |
|
|
$ |
(5,339 |
) |
|
$ |
187,265 |
|
|
$ |
(5,413 |
) |
|
|
(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. |
The Corporation had $12 million and $23 million of credit-related other-than-temporary impairment (OTTI) losses on AFS debt securities which were recognized in other income for the three and nine months ended September 30, 2019 and 2018. The amount of noncredit-related OTTI losses for these AFS debt securities, which is recognized in OCI, was not significant for the periods presented.
The cumulative OTTI credit losses that have been recognized in income on AFS debt securities that the Corporation does not
intend to sell were $135 million at both September 30, 2019 and 2018.
For more information on OTTI losses and significant assumptions used for the Corporation’s underlying collateral, see Note 4 – Securities to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K. Significant assumptions used in estimating the expected cash flows for measuring credit losses on non-agency residential mortgage-backed securities (RMBS) were as follows at September 30, 2019.
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Significant Assumptions |
|
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|
|
|
|
|
Range (1)
|
|
Weighted
average |
|
10th
Percentile (2)
|
|
90th
Percentile (2)
|
Prepayment speed |
16.2 |
% |
|
4.9 |
% |
|
28.1 |
% |
Loss severity |
15.5 |
|
|
8.0 |
|
|
32.3 |
|
Life default rate |
12.6 |
|
|
0.8 |
|
|
41.1 |
|
|
|
(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. |
Annual constant prepayment speed and loss severity rates are projected considering collateral characteristics such as loan-to-value (LTV), creditworthiness of borrowers as measured using Fair Isaac Corporation (FICO) scores, and geographic concentrations. The weighted-average severity by collateral type was 12.5 percent for prime, 11.5 percent for Alt-A and 20.2 percent for subprime at September 30, 2019. Default rates are projected by considering collateral characteristics including, but not limited to, LTV, FICO and geographic concentration. Weighted-average life default rates
by collateral type were 8.8 percent for prime, 11.3 percent for Alt-A and 15.4 percent for subprime at September 30, 2019.
The remaining contractual maturity distribution and yields of the Corporation’s debt securities carried at fair value and HTM debt securities at September 30, 2019 are summarized in the table below. Actual duration and yields may differ as prepayments on the loans underlying the mortgages or other asset-backed securities (ABS) are passed through to the Corporation.
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|
|
|
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|
Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
$ |
— |
|
|
— |
% |
|
$ |
120 |
|
|
2.37 |
% |
|
$ |
1,715 |
|
|
2.42 |
% |
|
$ |
132,139 |
|
|
3.29 |
% |
|
$ |
133,974 |
|
|
3.28 |
% |
Agency-collateralized mortgage obligations |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
27 |
|
|
2.56 |
|
|
4,850 |
|
|
3.17 |
|
|
4,877 |
|
|
3.17 |
|
Commercial |
— |
|
|
— |
|
|
3,326 |
|
|
2.28 |
|
|
10,100 |
|
|
2.60 |
|
|
888 |
|
|
2.99 |
|
|
14,314 |
|
|
2.55 |
|
Non-agency residential |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
12 |
|
|
— |
|
|
3,083 |
|
|
10.49 |
|
|
3,095 |
|
|
10.46 |
|
Total mortgage-backed securities |
— |
|
|
— |
|
|
3,446 |
|
|
2.28 |
|
|
11,854 |
|
|
2.57 |
|
|
140,960 |
|
|
3.44 |
|
|
156,260 |
|
|
3.35 |
|
U.S. Treasury and agency securities |
482 |
|
|
0.33 |
|
|
36,446 |
|
|
1.65 |
|
|
18,803 |
|
|
2.50 |
|
|
18 |
|
|
2.54 |
|
|
55,749 |
|
|
1.92 |
|
Non-U.S. securities |
18,097 |
|
|
1.07 |
|
|
762 |
|
|
1.50 |
|
|
11 |
|
|
4.38 |
|
|
101 |
|
|
6.24 |
|
|
18,971 |
|
|
1.12 |
|
Other taxable securities, substantially all asset-backed securities |
520 |
|
|
3.36 |
|
|
2,175 |
|
|
3.20 |
|
|
436 |
|
|
3.29 |
|
|
675 |
|
|
3.61 |
|
|
3,806 |
|
|
3.31 |
|
Total taxable securities |
19,099 |
|
|
1.12 |
|
|
42,829 |
|
|
1.78 |
|
|
31,104 |
|
|
2.54 |
|
|
141,754 |
|
|
3.44 |
|
|
234,786 |
|
|
2.83 |
|
Tax-exempt securities |
724 |
|
|
1.98 |
|
|
7,169 |
|
|
2.22 |
|
|
5,483 |
|
|
2.20 |
|
|
2,887 |
|
|
2.33 |
|
|
16,263 |
|
|
2.23 |
|
Total amortized cost of debt securities carried at fair value |
$ |
19,823 |
|
|
1.16 |
|
|
$ |
49,998 |
|
|
1.84 |
|
|
$ |
36,587 |
|
|
2.49 |
|
|
$ |
144,641 |
|
|
3.42 |
|
|
$ |
251,049 |
|
|
2.79 |
|
Amortized cost of HTM debt securities (2)
|
$ |
354 |
|
|
3.96 |
|
|
$ |
50 |
|
|
3.80 |
|
|
$ |
1,112 |
|
|
2.53 |
|
|
$ |
188,736 |
|
|
3.24 |
|
|
$ |
190,252 |
|
|
3.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities carried at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
$ |
— |
|
|
|
|
|
$ |
120 |
|
|
|
|
|
$ |
1,719 |
|
|
|
|
|
$ |
133,111 |
|
|
|
|
|
$ |
134,950 |
|
|
|
|
Agency-collateralized mortgage obligations |
— |
|
|
|
|
|
— |
|
|
|
|
|
28 |
|
|
|
|
|
4,934 |
|
|
|
|
|
4,962 |
|
|
|
|
Commercial |
— |
|
|
|
|
|
3,364 |
|
|
|
|
|
10,395 |
|
|
|
|
|
931 |
|
|
|
|
|
14,690 |
|
|
|
|
Non-agency residential |
— |
|
|
|
|
|
— |
|
|
|
|
|
26 |
|
|
|
|
|
3,459 |
|
|
|
|
|
3,485 |
|
|
|
|
Total mortgage-backed securities |
— |
|
|
|
|
3,484 |
|
|
|
|
12,168 |
|
|
|
|
142,435 |
|
|
|
|
158,087 |
|
|
|
U.S. Treasury and agency securities |
483 |
|
|
|
|
36,629 |
|
|
|
|
19,820 |
|
|
|
|
18 |
|
|
|
|
56,950 |
|
|
|
Non-U.S. securities |
18,099 |
|
|
|
|
|
772 |
|
|
|
|
|
12 |
|
|
|
|
|
104 |
|
|
|
|
|
18,987 |
|
|
|
|
Other taxable securities, substantially all asset-backed securities |
527 |
|
|
|
|
|
2,214 |
|
|
|
|
|
463 |
|
|
|
|
|
682 |
|
|
|
|
|
3,886 |
|
|
|
|
Total taxable securities |
19,109 |
|
|
|
|
|
43,099 |
|
|
|
|
|
32,463 |
|
|
|
|
|
143,239 |
|
|
|
|
|
237,910 |
|
|
|
|
Tax-exempt securities |
724 |
|
|
|
|
|
7,186 |
|
|
|
|
|
5,608 |
|
|
|
|
|
2,914 |
|
|
|
|
|
16,432 |
|
|
|
|
Total debt securities carried at fair value |
$ |
19,833 |
|
|
|
|
|
$ |
50,285 |
|
|
|
|
|
$ |
38,071 |
|
|
|
|
|
$ |
146,153 |
|
|
|
|
|
$ |
254,342 |
|
|
|
|
Fair value of HTM debt securities (2)
|
$ |
354 |
|
|
|
|
$ |
50 |
|
|
|
|
$ |
1,139 |
|
|
|
|
$ |
192,731 |
|
|
|
|
$ |
194,274 |
|
|
|
|
|
(1) |
The weighted-average yield is computed based on a constant effective interest rate over the contractual life of each security. The average yield considers the contractual coupon and the amortization of premiums and accretion of discounts, excluding the effect of related hedging derivatives. |
(2)
Substantially all U.S. agency MBS.
|