Annual report pursuant to Section 13 and 15(d)

Securities (Tables)

v3.10.0.1
Securities (Tables)
 12 Months Ended
Dec. 31, 2018
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 and HTM debt securities at December 31, 2018 and 2017.
 
 
 
 
 
 
 
 
Debt Securities
 
 
 
 
 
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in millions)
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
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 (2)
203,652

 
747

 
(3,964
)
 
200,435

Total debt securities (3, 4)
$
446,527

 
$
1,418

 
$
(9,409
)
 
$
438,536

 
 
 
 
 
 
 
 
 
December 31, 2017
Available-for-sale debt securities
 
 
 
 
 
 
 
Mortgage-backed securities:
 

 
 

 
 

 
 

Agency
$
194,119

 
$
506

 
$
(1,696
)
 
$
192,929

Agency-collateralized mortgage obligations
6,846

 
39

 
(81
)
 
6,804

Commercial
13,864

 
28

 
(208
)
 
13,684

Non-agency residential (1)
2,410

 
267

 
(8
)
 
2,669

Total mortgage-backed securities
217,239

 
840

 
(1,993
)
 
216,086

U.S. Treasury and agency securities
54,523

 
18

 
(1,018
)
 
53,523

Non-U.S. securities
6,669

 
9

 
(1
)
 
6,677

Other taxable securities, substantially all asset-backed securities
5,699

 
73

 
(2
)
 
5,770

Total taxable securities
284,130

 
940

 
(3,014
)
 
282,056

Tax-exempt securities
20,541

 
138

 
(104
)
 
20,575

Total available-for-sale debt securities
304,671

 
1,078

 
(3,118
)
 
302,631

Other debt securities carried at fair value
12,273

 
252

 
(39
)
 
12,486

Total debt securities carried at fair value
316,944

 
1,330

 
(3,157
)
 
315,117

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities
125,013

 
111

 
(1,825
)
 
123,299

Total debt securities (3, 4)
$
441,957

 
$
1,441

 
$
(4,982
)
 
$
438,416

Available-for-sale marketable equity securities (5)
$
27

 
$
—

 
$
(2
)
 
$
25

(1) 
At December 31, 2018 and 2017, the underlying collateral type included approximately 68 percent and 62 percent prime, 4 percent and 13 percent Alt-A, and 28 percent and 25 percent subprime.
(2) 
During 2018, the Corporation transferred AFS debt securities with an amortized cost of $64.5 billion to held to maturity.
(3) 
Includes securities pledged as collateral of $40.6 billion and $35.8 billion at December 31, 2018 and 2017.
(4) 
The Corporation had debt securities from FNMA and FHLMC that each exceeded 10 percent of shareholders’ equity, with 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, and an amortized cost of $163.6 billion and $50.3 billion, and a fair value of $162.1 billion and $50.0 billion at December 31, 2017.
(5) 
Classified in other assets on the Consolidated Balance Sheet.
Schedule of Other Debt Securities Carried at Fair Value The following table presents the components of other debt securities carried at fair value where the changes in fair value are reported in other income. In 2018, the Corporation recorded unrealized mark-to-market net losses of $73 million and realized net gains of $140 million, and unrealized mark-to-market net gains of $243 million and realized net losses of $49 million in 2017. These amounts exclude hedge results.

 
 
 
 
Other Debt Securities Carried at Fair Value
 
 
 
December 31
(Dollars in millions)
2018
 
2017
Mortgage-backed securities
$
1,606

 
$
2,769

U.S. Treasury and agency securities
1,282

 
—

Non-U.S. securities (1)
5,844

 
9,488

Other taxable securities, substantially all asset-backed securities
3

 
229

Total
$
8,735

 
$
12,486

(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 2018, 2017 and 2016 are presented in the table below.
 
 
 
 
 
 
Gains and Losses on Sales of AFS Debt Securities
 
 
 
 
(Dollars in millions)
2018
 
2017
 
2016
Gross gains
$
169

 
$
352

 
$
520

Gross losses
(15
)
 
(97
)
 
(30
)
Net gains on sales of AFS debt securities
$
154

 
$
255

 
$
490

Income tax expense attributable to realized net gains on sales of AFS debt securities
$
37

 
$
97

 
$
186

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, 2018 and 2017.
 
 
 
 
 
 
 
 
 
 
 
 
Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities
 
 
 
 
 
 
 
 
 
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)
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
)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
Temporarily impaired AFS debt securities
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
$
73,535

 
$
(352
)
 
$
72,612

 
$
(1,344
)
 
$
146,147

 
$
(1,696
)
Agency-collateralized mortgage obligations
2,743

 
(29
)
 
1,684

 
(52
)
 
4,427

 
(81
)
Commercial
5,575

 
(50
)
 
4,586

 
(158
)
 
10,161

 
(208
)
Non-agency residential
335

 
(7
)
 
—

 
—

 
335

 
(7
)
Total mortgage-backed securities
82,188

 
(438
)
 
78,882

 
(1,554
)
 
161,070

 
(1,992
)
U.S. Treasury and agency securities
27,537

 
(251
)
 
24,035

 
(767
)
 
51,572

 
(1,018
)
Non-U.S. securities
772

 
(1
)
 
—

 
—

 
772

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

 
—

 
92

 
(2
)
 
92

 
(2
)
Total taxable securities
110,497

 
(690
)
 
103,009

 
(2,323
)
 
213,506

 
(3,013
)
Tax-exempt securities
1,090

 
(2
)
 
7,100

 
(102
)
 
8,190

 
(104
)
Total temporarily impaired AFS debt securities
111,587

 
(692
)
 
110,109

 
(2,425
)
 
221,696

 
(3,117
)
Other-than-temporarily impaired AFS debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential mortgage-backed securities
58

 
(1
)
 
—

 
—

 
58

 
(1
)
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
$
111,645

 
$
(693
)
 
$
110,109

 
$
(2,425
)
 
$
221,754

 
$
(3,118
)
(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.
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 residential mortgage-backed securities (RMBS) were as follows at December 31, 2018.
 
 
 
 
 
 
Significant Assumptions
 
 
 
 
 
 
 
Range (1)
 
Weighted
average
 
10th
Percentile (2)
 
90th
Percentile (2)
Prepayment speed
12.9
%
 
3.3
%
 
21.5
%
Loss severity
19.8

 
8.5

 
36.4

Life default rate
16.9

 
1.4

 
64.4

(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 remaining contractual maturity distribution and yields of the Corporation’s debt securities carried at fair value and HTM debt securities at December 31, 2018 are summarized in the table below. Actual duration and yields may differ as prepayments on the loans underlying the mortgages or other ABS are passed through to the Corporation.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
$
—

 
—
%
 
$
114

 
2.42
%
 
$
1,245

 
2.39
%
 
$
123,757

 
3.34
%
 
$
125,116

 
3.33
%
Agency-collateralized mortgage obligations
—

 
—

 
—

 
—

 
30

 
2.50

 
5,591

 
3.17

 
5,621

 
3.17

Commercial
198

 
1.78

 
2,467

 
2.36

 
10,976

 
2.53

 
828

 
2.96

 
14,469

 
2.52

Non-agency residential
—

 
—

 
—

 
—

 
14

 
—

 
3,268

 
9.88

 
3,282

 
9.84

Total mortgage-backed securities
198

 
1.78

 
2,581

 
2.36

 
12,265

 
2.51

 
133,444

 
3.49

 
148,488

 
3.39

U.S. Treasury and agency securities
670

 
0.78

 
33,659

 
1.48

 
23,159

 
2.36

 
21

 
2.57

 
57,509

 
1.83

Non-U.S. securities
14,318

 
1.30

 
682

 
1.88

 
21

 
4.43

 
121

 
6.57

 
15,142

 
1.37

Other taxable securities, substantially all asset-backed securities
1,591

 
3.34

 
2,022

 
3.54

 
688

 
3.48

 
86

 
5.59

 
4,387

 
3.49

Total taxable securities
16,777

 
1.48

 
38,944

 
1.66

 
36,133

 
2.43

 
133,672

 
3.49

 
225,526

 
2.85

Tax-exempt securities
938

 
2.59

 
7,526

 
2.59

 
6,162

 
2.44

 
2,723

 
2.55

 
17,349

 
2.53

Total amortized cost of debt securities carried at fair value
$
17,715

 
1.54

 
$
46,470

 
1.81

 
$
42,295

 
2.43

 
$
136,395

 
3.47

 
$
242,875

 
2.83

Amortized cost of HTM debt securities (2)
$
657

 
5.78

 
$
18

 
3.93

 
$
1,475

 
2.89

 
$
201,502

 
3.23

 
$
203,652

 
3.24

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities carried at fair value
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
$
—

 
 

 
$
114

 
 

 
$
1,219

 
 

 
$
120,493

 
 

 
$
121,826

 
 

Agency-collateralized mortgage obligations
—

 
 

 
—

 
 

 
29

 
 

 
5,501

 
 

 
5,530

 
 

Commercial
198

 
 

 
2,425

 
 

 
10,656

 
 

 
799

 
 

 
14,078

 
 

Non-agency residential
—

 
 

 
—

 
 

 
24

 
 

 
3,499

 
 

 
3,523

 
 

Total mortgage-backed securities
198

 
 
 
2,539

 
 
 
11,928

 
 
 
130,292

 
 
 
144,957

 
 
U.S. Treasury and agency securities
669

 
 
 
32,694

 
 
 
22,821

 
 
 
21

 
 
 
56,205

 
 
Non-U.S. securities
14,315

 
 

 
692

 
 

 
19

 
 

 
124

 
 

 
15,150

 
 

Other taxable securities, substantially all asset-backed securities
1,585

 
 

 
2,043

 
 

 
698

 
 

 
87

 
 

 
4,413

 
 

Total taxable securities
16,767

 
 

 
37,968

 
 

 
35,466

 
 

 
130,524

 
 

 
220,725

 
 

Tax-exempt securities
936

 
 

 
7,537

 
 

 
6,184

 
 

 
2,719

 
 

 
17,376

 
 

Total debt securities carried at fair value
$
17,703

 
 

 
$
45,505

 
 

 
$
41,650

 
 

 
$
133,243

 
 

 
$
238,101

 
 

Fair value of HTM debt securities (2)
$
657

 
 
 
$
18

 
 
 
$
1,429

 
 
 
$
198,331

 
 
 
$
200,435

 
 
(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.