| 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 HTM debt securities at December 31, 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities |
|
|
|
|
|
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
(Dollars in millions) |
December 31, 2019 |
Available-for-sale debt securities |
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
Agency |
$ |
121,698 |
|
|
$ |
1,013 |
|
|
$ |
(183 |
) |
|
$ |
122,528 |
|
Agency-collateralized mortgage obligations |
4,587 |
|
|
78 |
|
|
(24 |
) |
|
4,641 |
|
Commercial |
14,797 |
|
|
249 |
|
|
(25 |
) |
|
15,021 |
|
Non-agency residential (1)
|
948 |
|
|
138 |
|
|
(9 |
) |
|
1,077 |
|
Total mortgage-backed securities |
142,030 |
|
|
1,478 |
|
|
(241 |
) |
|
143,267 |
|
U.S. Treasury and agency securities |
67,700 |
|
|
1,023 |
|
|
(195 |
) |
|
68,528 |
|
Non-U.S. securities |
11,987 |
|
|
6 |
|
|
(2 |
) |
|
11,991 |
|
Other taxable securities, substantially all asset-backed securities |
3,874 |
|
|
67 |
|
|
— |
|
|
3,941 |
|
Total taxable securities |
225,591 |
|
|
2,574 |
|
|
(438 |
) |
|
227,727 |
|
Tax-exempt securities |
17,716 |
|
|
202 |
|
|
(6 |
) |
|
17,912 |
|
Total available-for-sale debt securities |
243,307 |
|
|
2,776 |
|
|
(444 |
) |
|
245,639 |
|
Other debt securities carried at fair value (2)
|
10,596 |
|
|
255 |
|
|
(23 |
) |
|
10,828 |
|
Total debt securities carried at fair value |
253,903 |
|
|
3,031 |
|
|
(467 |
) |
|
256,467 |
|
Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities |
215,730 |
|
|
4,433 |
|
|
(342 |
) |
|
219,821 |
|
Total debt securities (3, 4)
|
$ |
469,633 |
|
|
$ |
7,464 |
|
|
$ |
(809 |
) |
|
$ |
476,288 |
|
|
|
|
|
|
|
|
|
|
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 December 31, 2019 and 2018, the underlying collateral type included approximately 49 percent and 68 percent prime, six percent and four percent Alt-A and 45 percent and 28 percent subprime.
|
|
|
(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 21 – Fair Value Measurements.
|
|
|
(3) |
Includes securities pledged as collateral of $67.0 billion and $40.6 billion at December 31, 2019 and 2018.
|
|
|
(4) |
The Corporation held debt securities from FNMA and FHLMC that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $157.2 billion and $54.1 billion, and a fair value of $160.6 billion and $55.1 billion at December 31, 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 December 31, 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 $1.8 billion, net of the related income tax expense of $569 million. The Corporation had nonperforming AFS debt securities of $9 million and $11 million at December 31, 2019 and 2018.
At December 31, 2019, the Corporation held equity securities at an aggregate fair value of $891 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 December 31, 2019, the Corporation also held equity securities at fair value of $1.0 billion included in time deposits placed and other short-term investments.
The gross realized gains and losses on sales of AFS debt securities for 2019, 2018 and 2017 are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains and Losses on Sales of AFS Debt Securities |
|
|
|
|
(Dollars in millions) |
2019 |
|
2018 |
|
2017 |
Gross gains |
$ |
336 |
|
|
$ |
169 |
|
|
$ |
352 |
|
Gross losses |
(119 |
) |
|
(15 |
) |
|
(97 |
) |
Net gains on sales of AFS debt securities |
$ |
217 |
|
|
$ |
154 |
|
|
$ |
255 |
|
Income tax expense attributable to realized net gains on sales of AFS debt securities |
$ |
54 |
|
|
$ |
37 |
|
|
$ |
97 |
|
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, 2019 and 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2019 |
Temporarily impaired AFS debt securities |
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
Agency |
$ |
17,641 |
|
|
$ |
(41 |
) |
|
$ |
17,238 |
|
|
$ |
(142 |
) |
|
$ |
34,879 |
|
|
$ |
(183 |
) |
Agency-collateralized mortgage obligations |
255 |
|
|
(1 |
) |
|
925 |
|
|
(23 |
) |
|
1,180 |
|
|
(24 |
) |
Commercial |
2,180 |
|
|
(22 |
) |
|
442 |
|
|
(3 |
) |
|
2,622 |
|
|
(25 |
) |
Non-agency residential |
19 |
|
|
(1 |
) |
|
1 |
|
|
— |
|
|
20 |
|
|
(1 |
) |
Total mortgage-backed securities |
20,095 |
|
|
(65 |
) |
|
18,606 |
|
|
(168 |
) |
|
38,701 |
|
|
(233 |
) |
U.S. Treasury and agency securities |
12,836 |
|
|
(71 |
) |
|
18,866 |
|
|
(124 |
) |
|
31,702 |
|
|
(195 |
) |
Non-U.S. securities |
851 |
|
|
— |
|
|
837 |
|
|
(2 |
) |
|
1,688 |
|
|
(2 |
) |
Other taxable securities, substantially all asset-backed securities |
938 |
|
|
— |
|
|
222 |
|
|
— |
|
|
1,160 |
|
|
— |
|
Total taxable securities |
34,720 |
|
|
(136 |
) |
|
38,531 |
|
|
(294 |
) |
|
73,251 |
|
|
(430 |
) |
Tax-exempt securities |
4,286 |
|
|
(5 |
) |
|
190 |
|
|
(1 |
) |
|
4,476 |
|
|
(6 |
) |
Total temporarily impaired AFS debt securities |
39,006 |
|
|
(141 |
) |
|
38,721 |
|
|
(295 |
) |
|
77,727 |
|
|
(436 |
) |
Other-than-temporarily impaired AFS debt securities (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency residential mortgage-backed securities
|
103 |
|
|
(5 |
) |
|
21 |
|
|
(3 |
) |
|
124 |
|
|
(8 |
) |
|
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
|
$ |
39,109 |
|
|
$ |
(146 |
) |
|
$ |
38,742 |
|
|
$ |
(298 |
) |
|
$ |
77,851 |
|
|
$ |
(444 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
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. |
In 2019, 2018 and 2017, the Corporation had $24 million, $33 million and $41 million, respectively, of credit-related OTTI losses on AFS debt securities which were recognized in other income. The amount of non-credit related OTTI losses for these AFS debt securities, which is recognized in OCI, was not significant for all periods presented.
The cumulative OTTI credit losses recognized in income on AFS debt securities that the Corporation does not intend to sell were $85 million, $120 million and $274 million at December 31, 2019, 2018 and 2017, respectively.
The Corporation estimates the portion of a loss on a security that is attributable to credit using a discounted cash flow model and estimates the expected cash flows of the underlying collateral using internal credit, interest rate and prepayment risk models that incorporate management’s best estimate of current key
assumptions such as default rates, loss severity and prepayment rates. Assumptions used for the underlying loans that support the MBS can vary widely from loan to loan and are influenced by such factors as loan interest rate, geographic location of the borrower, borrower characteristics and collateral type. Based on these assumptions, the Corporation then determines how the underlying collateral cash flows will be distributed to each MBS issued from the applicable special purpose entity. Expected principal and interest cash flows on an impaired AFS debt security are discounted using the effective yield of each individual impaired AFS debt security.
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, 2019.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant Assumptions |
|
|
|
|
|
|
|
Range (1)
|
|
Weighted
average |
|
10th
Percentile (2)
|
|
90th
Percentile (2)
|
Prepayment speed |
16.6 |
% |
|
5.5 |
% |
|
27.8 |
% |
Loss severity |
14.7 |
|
|
8.0 |
|
|
30.7 |
|
Life default rate |
11.9 |
|
|
1.0 |
|
|
36.5 |
|
|
|
(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 LTV, creditworthiness of borrowers as measured using Fair Isaac Corporation (FICO) scores, and geographic concentrations. The weighted-average severity by collateral type was 12.9 percent for prime, 11.1 percent for Alt-A and 18.8 percent for subprime at December 31, 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 7.8 percent for prime, 11.6 percent for Alt-A and 13.6 percent for subprime at December 31, 2019.
The remaining contractual maturity distribution and yields of the Corporation’s debt securities carried at fair value and HTM debt securities at December 31, 2019 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 |
$ |
— |
|
|
— |
% |
|
$ |
11 |
|
|
5.25 |
% |
|
$ |
66 |
|
|
4.56 |
% |
|
$ |
124,618 |
|
|
3.24 |
% |
|
$ |
124,695 |
|
|
3.24 |
% |
Agency-collateralized mortgage obligations |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
27 |
|
|
2.48 |
|
|
4,560 |
|
|
3.16 |
|
|
4,587 |
|
|
3.16 |
|
Commercial |
— |
|
|
— |
|
|
3,806 |
|
|
2.37 |
|
|
10,136 |
|
|
2.57 |
|
|
868 |
|
|
2.99 |
|
|
14,810 |
|
|
2.54 |
|
Non-agency residential |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
12 |
|
|
— |
|
|
2,157 |
|
|
9.26 |
|
|
2,169 |
|
|
9.22 |
|
Total mortgage-backed securities |
— |
|
|
— |
|
|
3,817 |
|
|
2.38 |
|
|
10,241 |
|
|
2.58 |
|
|
132,203 |
|
|
3.33 |
|
|
146,261 |
|
|
3.25 |
|
U.S. Treasury and agency securities |
1,350 |
|
|
0.92 |
|
|
35,544 |
|
|
1.67 |
|
|
30,789 |
|
|
2.25 |
|
|
20 |
|
|
2.45 |
|
|
67,703 |
|
|
1.92 |
|
Non-U.S. securities |
15,648 |
|
|
1.17 |
|
|
2,598 |
|
|
1.03 |
|
|
7 |
|
|
4.17 |
|
|
96 |
|
|
6.74 |
|
|
18,349 |
|
|
1.18 |
|
Other taxable securities, substantially all asset-backed securities |
1,189 |
|
|
2.80 |
|
|
1,650 |
|
|
3.02 |
|
|
440 |
|
|
3.32 |
|
|
595 |
|
|
2.91 |
|
|
3,874 |
|
|
2.97 |
|
Total taxable securities |
18,187 |
|
|
1.26 |
|
|
43,609 |
|
|
1.74 |
|
|
41,477 |
|
|
2.34 |
|
|
132,914 |
|
|
3.34 |
|
|
236,187 |
|
|
2.70 |
|
Tax-exempt securities |
2,189 |
|
|
1.72 |
|
|
7,472 |
|
|
2.10 |
|
|
4,849 |
|
|
2.06 |
|
|
3,206 |
|
|
2.44 |
|
|
17,716 |
|
|
2.10 |
|
Total amortized cost of debt securities carried at fair value |
$ |
20,376 |
|
|
1.31 |
|
|
$ |
51,081 |
|
|
1.79 |
|
|
$ |
46,326 |
|
|
2.31 |
|
|
$ |
136,120 |
|
|
3.32 |
|
|
$ |
253,903 |
|
|
2.67 |
|
Amortized cost of HTM debt securities (2)
|
$ |
1,025 |
|
|
2.83 |
|
|
$ |
48 |
|
|
3.57 |
|
|
$ |
1,102 |
|
|
2.57 |
|
|
$ |
213,555 |
|
|
3.19 |
|
|
$ |
215,730 |
|
|
3.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities carried at fair value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
$ |
— |
|
|
|
|
|
$ |
11 |
|
|
|
|
|
$ |
71 |
|
|
|
|
|
$ |
125,449 |
|
|
|
|
|
$ |
125,531 |
|
|
|
|
Agency-collateralized mortgage obligations |
— |
|
|
|
|
|
— |
|
|
|
|
|
26 |
|
|
|
|
|
4,615 |
|
|
|
|
|
4,641 |
|
|
|
|
Commercial |
— |
|
|
|
|
|
3,854 |
|
|
|
|
|
10,287 |
|
|
|
|
|
893 |
|
|
|
|
|
15,034 |
|
|
|
|
Non-agency residential |
— |
|
|
|
|
|
— |
|
|
|
|
|
25 |
|
|
|
|
|
2,386 |
|
|
|
|
|
2,411 |
|
|
|
|
Total mortgage-backed securities |
— |
|
|
|
|
3,865 |
|
|
|
|
10,409 |
|
|
|
|
133,343 |
|
|
|
|
147,617 |
|
|
|
U.S. Treasury and agency securities |
1,347 |
|
|
|
|
35,686 |
|
|
|
|
31,478 |
|
|
|
|
20 |
|
|
|
|
68,531 |
|
|
|
Non-U.S. securities |
15,751 |
|
|
|
|
|
2,606 |
|
|
|
|
|
8 |
|
|
|
|
|
98 |
|
|
|
|
|
18,463 |
|
|
|
|
Other taxable securities, substantially all asset-backed securities |
1,196 |
|
|
|
|
|
1,687 |
|
|
|
|
|
465 |
|
|
|
|
|
596 |
|
|
|
|
|
3,944 |
|
|
|
|
Total taxable securities |
18,294 |
|
|
|
|
|
43,844 |
|
|
|
|
|
42,360 |
|
|
|
|
|
134,057 |
|
|
|
|
|
238,555 |
|
|
|
|
Tax-exempt securities |
2,192 |
|
|
|
|
|
7,509 |
|
|
|
|
|
4,976 |
|
|
|
|
|
3,235 |
|
|
|
|
|
17,912 |
|
|
|
|
Total debt securities carried at fair value |
$ |
20,486 |
|
|
|
|
|
$ |
51,353 |
|
|
|
|
|
$ |
47,336 |
|
|
|
|
|
$ |
137,292 |
|
|
|
|
|
$ |
256,467 |
|
|
|
|
Fair value of HTM debt securities (2)
|
$ |
1,025 |
|
|
|
|
$ |
48 |
|
|
|
|
$ |
1,113 |
|
|
|
|
$ |
217,635 |
|
|
|
|
$ |
219,821 |
|
|
|
|
|
(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.
|