Quarterly report pursuant to Section 13 or 15(d)

Securities (Tables)

v3.8.0.1
Securities (Tables)
 9 Months Ended
Sep. 30, 2017
Investments, Debt and Equity Securities [Abstract]  
Marketable Securities
The table below presents the amortized cost, gross unrealized gains and losses, and fair value of available-for-sale (AFS) debt securities, other debt securities carried at fair value, held-to-maturity (HTM) debt securities and AFS marketable equity securities at September 30, 2017 and December 31, 2016.
 
 
 
 
 
 
 
 
Debt Securities and Available-for-Sale Marketable Equity Securities
 
 
 
 
 
September 30, 2017
(Dollars in millions)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Available-for-sale debt securities
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 

Agency
$
196,530

 
$
850

 
$
(1,186
)
 
$
196,194

Agency-collateralized mortgage obligations
7,021

 
73

 
(45
)
 
7,049

Commercial
12,584

 
48

 
(168
)
 
12,464

Non-agency residential (1)
2,345

 
333

 
(21
)
 
2,657

Total mortgage-backed securities
218,480

 
1,304

 
(1,420
)
 
218,364

U.S. Treasury and agency securities
50,824

 
70

 
(626
)
 
50,268

Non-U.S. securities
5,432

 
9

 
(1
)
 
5,440

Other taxable securities, substantially all asset-backed securities
6,964

 
77

 
(3
)
 
7,038

Total taxable securities
281,700

 
1,460

 
(2,050
)
 
281,110

Tax-exempt securities
19,117

 
167

 
(92
)
 
19,192

Total available-for-sale debt securities
300,817

 
1,627

 
(2,142
)
 
300,302

Other debt securities carried at fair value
16,265

 
345

 
(48
)
 
16,562

Total debt securities carried at fair value
317,082

 
1,972

 
(2,190
)
 
316,864

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities
122,345

 
267

 
(1,427
)
 
121,185

Total debt securities (2)
$
439,427

 
$
2,239

 
$
(3,617
)
 
$
438,049

Available-for-sale marketable equity securities (3)
$
22

 
$
28

 
$
—

 
$
50

 
 
 
 
 
 
 
 
 
December 31, 2016
Available-for-sale debt securities
 
 
 
 
 
 
 
Mortgage-backed securities:
 

 
 

 
 

 
 

Agency
$
190,809

 
$
640

 
$
(1,963
)
 
$
189,486

Agency-collateralized mortgage obligations
8,296

 
85

 
(51
)
 
8,330

Commercial
12,594

 
21

 
(293
)
 
12,322

Non-agency residential (1)
1,863

 
181

 
(31
)
 
2,013

Total mortgage-backed securities
213,562

 
927

 
(2,338
)
 
212,151

U.S. Treasury and agency securities
48,800

 
204

 
(752
)
 
48,252

Non-U.S. securities
6,372

 
13

 
(3
)
 
6,382

Other taxable securities, substantially all asset-backed securities
10,573

 
64

 
(23
)
 
10,614

Total taxable securities
279,307

 
1,208

 
(3,116
)
 
277,399

Tax-exempt securities
17,272

 
72

 
(184
)
 
17,160

Total available-for-sale debt securities
296,579

 
1,280

 
(3,300
)
 
294,559

Less: Available-for-sale securities of business held for sale (4)
(619
)
 
—

 
—

 
(619
)
Other debt securities carried at fair value
19,748

 
121

 
(149
)
 
19,720

Total debt securities carried at fair value
315,708

 
1,401

 
(3,449
)
 
313,660

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities
117,071

 
248

 
(2,034
)
 
115,285

Total debt securities (2)
$
432,779

 
$
1,649

 
$
(5,483
)
 
$
428,945

Available-for-sale marketable equity securities (3)
$
325

 
$
51

 
$
(1
)
 
$
375

(1) 
At September 30, 2017 and December 31, 2016, the underlying collateral type included approximately 70 percent and 60 percent prime, 13 percent and 19 percent Alt-A, and 17 percent and 21 percent subprime.
(2) 
The Corporation had debt securities from Fannie Mae (FNMA) and Freddie Mac (FHLMC) that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $165.1 billion and $48.2 billion, and a fair value of $164.2 billion and $48.1 billion at September 30, 2017, and an amortized cost of $156.4 billion and $48.7 billion, and a fair value of $154.4 billion and $48.3 billion at December 31, 2016.
(3) 
Classified in other assets on the Consolidated Balance Sheet.
(4) 
Represents AFS debt securities of business held for sale. During the second quarter of 2017, the Corporation sold its non-U.S. consumer credit card business.
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 the three and nine months ended September 30, 2017, the Corporation recorded unrealized mark-to-market net gains of $124 million and $323 million, and realized net losses of $11 million and $129 million, compared to unrealized mark-to-market net gains of $47 million and net losses of $25 million, and realized net losses of $28 million and $65 million for the same periods in 2016. These amounts exclude hedge results.
 
 
 
 
Other Debt Securities Carried at Fair Value
(Dollars in millions)
September 30
2017
 
December 31
2016
Mortgage-backed securities:
 
 
 
Agency-collateralized mortgage obligations
$
5

 
$
5

Non-agency residential
3,058

 
3,139

Total mortgage-backed securities
3,063

 
3,144

Non-U.S. securities (1)
13,260

 
16,336

Other taxable securities, substantially all asset-backed securities
239

 
240

Total
$
16,562

 
$
19,720

(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 the three and nine months ended September 30, 2017 and 2016 are presented in the table below.
 
 
 
 
 
 
 
 
Gains and Losses on Sales of AFS Debt Securities
 
Three Months Ended September 30
 
Nine Months Ended September 30
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Gross gains
$
130

 
$
57

 
$
286

 
$
513

Gross losses
(5
)
 
(6
)
 
(8
)
 
(23
)
Net gains on sales of AFS debt securities
$
125

 
$
51

 
$
278

 
$
490

Income tax expense attributable to realized net gains on sales of AFS debt securities
$
48

 
$
19

 
$
106

 
$
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 September 30, 2017 and December 31, 2016.
 
 
 
 
 
 
 
 
 
 
 
 
Temporarily Impaired and Other-than-temporarily Impaired AFS Debt Securities
 
 
 
 
 
 
 
 
 
September 30, 2017
 
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
$
96,106

 
$
(681
)
 
$
17,570

 
$
(505
)
 
$
113,676

 
$
(1,186
)
Agency-collateralized mortgage obligations
2,137

 
(15
)
 
1,051

 
(30
)
 
3,188

 
(45
)
Commercial
5,068

 
(59
)
 
2,819

 
(109
)
 
7,887

 
(168
)
Non-agency residential
140

 
(7
)
 
118

 
(8
)
 
258

 
(15
)
Total mortgage-backed securities
103,451

 
(762
)
 
21,558

 
(652
)
 
125,009

 
(1,414
)
U.S. Treasury and agency securities
20,685

 
(144
)
 
17,035

 
(482
)
 
37,720

 
(626
)
Non-U.S. securities
774

 
(1
)
 
—

 
—

 
774

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

 
—

 
384

 
(3
)
 
384

 
(3
)
Total taxable securities
124,910

 
(907
)
 
38,977

 
(1,137
)
 
163,887

 
(2,044
)
Tax-exempt securities
—

 
—

 
2,682

 
(92
)
 
2,682

 
(92
)
Total temporarily impaired AFS debt securities
124,910

 
(907
)
 
41,659

 
(1,229
)
 
166,569

 
(2,136
)
Other-than-temporarily impaired AFS debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential mortgage-backed securities
27

 
(1
)
 
30

 
(5
)
 
57

 
(6
)
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
$
124,937

 
$
(908
)
 
$
41,689

 
$
(1,234
)
 
$
166,626

 
$
(2,142
)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
Temporarily impaired AFS debt securities
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
$
135,210

 
$
(1,846
)
 
$
3,770

 
$
(117
)
 
$
138,980

 
$
(1,963
)
Agency-collateralized mortgage obligations
3,229

 
(25
)
 
1,028

 
(26
)
 
4,257

 
(51
)
Commercial
9,018

 
(293
)
 
—

 
—

 
9,018

 
(293
)
Non-agency residential
212

 
(1
)
 
204

 
(13
)
 
416

 
(14
)
Total mortgage-backed securities
147,669

 
(2,165
)
 
5,002

 
(156
)
 
152,671

 
(2,321
)
U.S. Treasury and agency securities
28,462

 
(752
)
 
—

 
—

 
28,462

 
(752
)
Non-U.S. securities
52

 
(1
)
 
142

 
(2
)
 
194

 
(3
)
Other taxable securities, substantially all asset-backed securities
762

 
(5
)
 
1,438

 
(18
)
 
2,200

 
(23
)
Total taxable securities
176,945

 
(2,923
)
 
6,582

 
(176
)
 
183,527

 
(3,099
)
Tax-exempt securities
4,782

 
(148
)
 
1,873

 
(36
)
 
6,655

 
(184
)
Total temporarily impaired AFS debt securities
181,727

 
(3,071
)
 
8,455

 
(212
)
 
190,182

 
(3,283
)
Other-than-temporarily impaired AFS debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential mortgage-backed securities
94

 
(1
)
 
401

 
(16
)
 
495

 
(17
)
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
$
181,821

 
$
(3,072
)
 
$
8,856

 
$
(228
)
 
$
190,677

 
$
(3,300
)
(1) 
Includes other-than-temporary impaired AFS debt securities on which an other-than-temporary impairment (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 RMBS were as follows at September 30, 2017.
 
 
 
 
 
 
Significant Assumptions
 
 
 
Range (1)
 
Weighted-
average
 
10th
Percentile (2)
 
90th
Percentile (2)
Prepayment speed
12.0
%
 
3.0
%
 
20.6
%
Loss severity
19.8

 
9.1

 
36.5

Life default rate
21.0

 
1.2

 
77.7

(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 September 30, 2017 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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maturities of Debt Securities Carried at Fair Value and Held-to-maturity Debt Securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2017
 
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
$
6

 
4.67
%
 
$
25

 
3.38
%
 
$
593

 
2.56
%
 
$
195,906

 
3.23
%
 
$
196,530

 
3.23
%
Agency-collateralized mortgage obligations
—

 
—

 
—

 
—

 
34

 
2.50

 
6,991

 
3.18

 
7,025

 
3.18

Commercial
48

 
8.11

 
847

 
2.06

 
11,183

 
2.44

 
506

 
2.70

 
12,584

 
2.45

Non-agency residential
—

 
—

 
—

 
—

 
26

 
0.01

 
5,106

 
9.05

 
5,132

 
9.00

Total mortgage-backed securities
54

 
7.73

 
872

 
2.10

 
11,836

 
2.44

 
208,509

 
3.37

 
221,271

 
3.32

U.S. Treasury and agency securities
516

 
0.39

 
21,254

 
1.40

 
29,033

 
1.96

 
21

 
2.42

 
50,824

 
1.71

Non-U.S. securities
16,563

 
0.50

 
1,839

 
1.24

 
110

 
1.34

 
177

 
6.52

 
18,689

 
0.63

Other taxable securities, substantially all asset-backed securities
1,747

 
2.28

 
2,865

 
2.59

 
1,418

 
2.95

 
1,151

 
3.28

 
7,181

 
2.70

Total taxable securities
18,880

 
0.68

 
26,830

 
1.54

 
42,397

 
2.13

 
209,858

 
3.37

 
297,965

 
2.86

Tax-exempt securities
1,175

 
1.46

 
6,428

 
1.77

 
9,155

 
1.66

 
2,359

 
2.03

 
19,117

 
1.73

Total amortized cost of debt securities carried at fair value
$
20,055

 
0.73

 
$
33,258

 
1.58

 
$
51,552

 
2.04

 
$
212,217

 
3.36

 
$
317,082

 
2.79

Amortized cost of HTM debt securities (2)
$
—

 
—

 
$
35

 
3.66

 
$
1,074

 
2.56

 
$
121,236

 
3.03

 
$
122,345

 
3.03

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities carried at fair value
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
$
6

 
 

 
$
25

 
 

 
$
598

 
 

 
$
195,565

 
 

 
$
196,194

 
 

Agency-collateralized mortgage obligations
—

 
 

 
—

 
 

 
33

 
 

 
7,021

 
 

 
7,054

 
 

Commercial
48

 
 

 
848

 
 

 
11,072

 
 

 
496

 
 

 
12,464

 
 

Non-agency residential
—

 
 

 
—

 
 

 
35

 
 

 
5,680

 
 

 
5,715

 
 

Total mortgage-backed securities
54

 
 
 
873

 
 
 
11,738

 
 
 
208,762

 
 
 
221,427

 
 
U.S. Treasury and agency securities
516

 
 
 
20,992

 
 
 
28,739

 
 
 
21

 
 
 
50,268

 
 
Non-U.S. securities
16,563

 
 

 
1,844

 
 

 
111

 
 

 
182

 
 

 
18,700

 
 

Other taxable securities, substantially all asset-backed securities
1,747

 
 

 
2,845

 
 

 
1,450

 
 

 
1,235

 
 

 
7,277

 
 

Total taxable securities
18,880

 
 

 
26,554

 
 

 
42,038

 
 

 
210,200

 
 

 
297,672

 
 

Tax-exempt securities
1,174

 
 

 
6,451

 
 

 
9,202

 
 

 
2,365

 
 

 
19,192

 
 

Total debt securities carried at fair value
$
20,054

 
 

 
$
33,005

 
 

 
$
51,240

 
 

 
$
212,565

 
 

 
$
316,864

 
 

Fair value of HTM debt securities (2)
$
—

 
 
 
$
27

 
 
 
$
896

 
 
 
$
120,262

 
 
 
$
121,185

 
 
(1) 
The 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.