Quarterly report pursuant to Section 13 or 15(d)

Securities (Tables)

v3.8.0.1
Securities (Tables)
 3 Months Ended
Mar. 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 held-to-maturity (HTM) debt securities at March 31, 2018 and December 31, 2017.
 
 
 
 
 
 
 
 
Debt Securities
 
 
 
 
 
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in millions)
March 31, 2018
Available-for-sale debt securities
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 

Agency
$
189,426

 
$
168

 
$
(5,483
)
 
$
184,111

Agency-collateralized mortgage obligations
6,525

 
15

 
(142
)
 
6,398

Commercial
13,998

 
1

 
(440
)
 
13,559

Non-agency residential (1)
2,354

 
260

 
(10
)
 
2,604

Total mortgage-backed securities
212,303

 
444

 
(6,075
)
 
206,672

U.S. Treasury and agency securities
54,753

 
13

 
(1,794
)
 
52,972

Non-U.S. securities
6,918

 
7

 
—

 
6,925

Other taxable securities, substantially all asset-backed securities
4,619

 
100

 
(5
)
 
4,714

Total taxable securities
278,593

 
564

 
(7,874
)
 
271,283

Tax-exempt securities
19,133

 
58

 
(114
)
 
19,077

Total available-for-sale debt securities
297,726

 
622

 
(7,988
)
 
290,360

Other debt securities carried at fair value
12,682

 
291

 
(35
)
 
12,938

Total debt securities carried at fair value
310,408

 
913

 
(8,023
)
 
303,298

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities
123,539

 
12

 
(4,419
)
 
119,132

Total debt securities (2, 3)
$
433,947

 
$
925

 
$
(12,442
)
 
$
422,430

 
 
 
 
 
 
 
 
 
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 (2, 3)
$
441,957

 
$
1,441

 
$
(4,982
)
 
$
438,416

Available-for-sale marketable equity securities (4)
$
27

 
$
—

 
$
(2
)
 
$
25

(1) 
At both March 31, 2018 and December 31, 2017, the underlying collateral type included approximately 62 percent prime, 13 percent Alt-A, and 25 percent subprime.
(2) 
Includes securities pledged as collateral of $36.9 billion and $35.8 billion at March 31, 2018 and December 31, 2017.
(3) 
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 $161.1 billion and $49.3 billion, and a fair value of $156.0 billion and $48.0 billion at March 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.
(4) 
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 the three months ended March 31, 2018, the Corporation recorded unrealized mark-to-market net gains of $41 million and realized net losses of $6 million compared to unrealized mark-to-market net gains of $117 million and realized net losses of $103 million in the three months ended March 31, 2017. These amounts exclude hedge results.

 
 
 
 
Other Debt Securities Carried at Fair Value
 
 
(Dollars in millions)
March 31
2018
 
December 31
2017
Mortgage-backed securities:
 
 
 
Agency-collateralized mortgage obligations
$
—

 
$
5

Non-agency residential
2,736

 
2,764

Total mortgage-backed securities
2,736

 
2,769

Non-U.S. securities (1)
9,976

 
9,488

Other taxable securities, substantially all asset-backed securities
226

 
229

Total
$
12,938

 
$
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 the three months ended March 31, 2018 and 2017 are presented in the table below.
 
 
 
 
Gains and Losses on Sales of AFS Debt Securities
 
 
 
Three Months Ended March 31
(Dollars in millions)
2018
 
2017
Gross gains
$
2

 
$
54

Gross losses
—

 
(2
)
Net gains on sales of AFS debt securities
$
2

 
$
52

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

 
$
20

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 March 31, 2018 and December 31, 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)
March 31, 2018
Temporarily impaired AFS debt securities
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
$
109,535

 
$
(2,608
)
 
$
68,632

 
$
(2,875
)
 
$
178,167

 
$
(5,483
)
Agency-collateralized mortgage obligations
3,635

 
(77
)
 
1,579

 
(65
)
 
5,214

 
(142
)
Commercial
8,794

 
(182
)
 
4,480

 
(258
)
 
13,274

 
(440
)
Non-agency residential
241

 
(8
)
 
—

 
—

 
241

 
(8
)
Total mortgage-backed securities
122,205

 
(2,875
)
 
74,691

 
(3,198
)
 
196,896

 
(6,073
)
U.S. Treasury and agency securities
27,813

 
(760
)
 
23,792

 
(1,034
)
 
51,605

 
(1,794
)
Other taxable securities, substantially all asset-backed securities
135

 
(3
)
 
102

 
(2
)
 
237

 
(5
)
Total taxable securities
150,153

 
(3,638
)
 
98,585

 
(4,234
)
 
248,738

 
(7,872
)
Tax-exempt securities
251

 
(1
)
 
5,667

 
(113
)
 
5,918

 
(114
)
Total temporarily impaired AFS debt securities
150,404

 
(3,639
)
 
104,252

 
(4,347
)
 
254,656

 
(7,986
)
Other-than-temporarily impaired AFS debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential mortgage-backed securities
103

 
(2
)
 
—

 
—

 
103

 
(2
)
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
$
150,507

 
$
(3,641
)
 
$
104,252

 
$
(4,347
)
 
$
254,759

 
$
(7,988
)
 
 
 
 
 
 
 
 
 
 
 
 
 
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 (OTTI) 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 March 31, 2018.
 
 
 
 
 
 
Significant Assumptions
 
 
 
 
 
 
 
Range (1)
 
Weighted
average
 
10th
Percentile (2)
 
90th
Percentile (2)
Prepayment speed
11.7
%
 
2.9
%
 
20.9
%
Loss severity
21.6

 
9.1

 
40.6

Life default rate
20.1

 
1.3

 
72.3

(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 March 31, 2018 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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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
 
Amount
 
Yield (1)
 
Amount
 
Yield (1)
 
Amount
 
Yield (1)
 
Amount
 
Yield (1)
 
Amount
 
Yield (1)
(Dollars in millions)
March 31, 2018
Amortized cost of debt securities carried at fair value
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
$
2

 
5.50
%
 
$
26

 
3.94
%
 
$
519

 
2.57
%
 
$
188,879

 
3.22
%
 
$
189,426

 
3.22
%
Agency-collateralized mortgage obligations
—

 
—

 
—

 
—

 
32

 
2.53

 
6,493

 
3.17

 
6,525

 
3.17

Commercial
54

 
9.55

 
1,662

 
2.15

 
11,350

 
2.44

 
932

 
2.61

 
13,998

 
2.44

Non-agency residential
—

 
—

 
—

 
—

 
22

 
0.01

 
4,843

 
9.44

 
4,865

 
9.40

Total mortgage-backed securities
56

 
9.40

 
1,688

 
2.18

 
11,923

 
2.44

 
201,147

 
3.37

 
214,814

 
3.31

U.S. Treasury and agency securities
543

 
0.41

 
26,339

 
1.41

 
27,849

 
2.12

 
22

 
2.57

 
54,753

 
1.76

Non-U.S. securities
14,405

 
0.95

 
2,110

 
0.92

 
214

 
1.17

 
153

 
6.64

 
16,882

 
1.00

Other taxable securities, substantially all asset-backed securities
972

 
3.12

 
2,496

 
3.21

 
1,072

 
3.43

 
286

 
8.13

 
4,826

 
3.54

Total taxable securities
15,976

 
1.10

 
32,633

 
1.55

 
41,058

 
2.24

 
201,608

 
3.37

 
291,275

 
2.89

Tax-exempt securities
691

 
1.58

 
6,922

 
2.10

 
8,626

 
2.07

 
2,894

 
1.94

 
19,133

 
2.04

Total amortized cost of debt securities carried at fair value
$
16,667

 
1.12

 
$
39,555

 
1.65

 
$
49,684

 
2.21

 
$
204,502

 
3.35

 
$
310,408

 
2.83

Amortized cost of HTM debt securities (2)
$
2

 
4.35

 
$
67

 
3.84

 
$
1,358

 
2.74

 
$
122,112

 
3.04

 
$
123,539

 
3.04

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities carried at fair value
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
$
2

 
 

 
$
27

 
 

 
$
512

 
 

 
$
183,570

 
 

 
$
184,111

 
 

Agency-collateralized mortgage obligations
—

 
 

 
—

 
 

 
31

 
 

 
6,367

 
 

 
6,398

 
 

Commercial
54

 
 

 
1,635

 
 

 
10,973

 
 

 
897

 
 

 
13,559

 
 

Non-agency residential
—

 
 

 
—

 
 

 
32

 
 

 
5,308

 
 

 
5,340

 
 

Total mortgage-backed securities
56

 
 
 
1,662

 
 
 
11,548

 
 
 
196,142

 
 
 
209,408

 
 
U.S. Treasury and agency securities
541

 
 
 
25,460

 
 
 
26,950

 
 
 
21

 
 
 
52,972

 
 
Non-U.S. securities
14,403

 
 

 
2,125

 
 

 
214

 
 

 
159

 
 

 
16,901

 
 

Other taxable securities, substantially all asset-backed securities
967

 
 

 
2,493

 
 

 
1,122

 
 

 
358

 
 

 
4,940

 
 

Total taxable securities
15,967

 
 

 
31,740

 
 

 
39,834

 
 

 
196,680

 
 

 
284,221

 
 

Tax-exempt securities
691

 
 

 
6,930

 
 

 
8,582

 
 

 
2,874

 
 

 
19,077

 
 

Total debt securities carried at fair value
$
16,658

 
 

 
$
38,670

 
 

 
$
48,416

 
 

 
$
199,554

 
 

 
$
303,298

 
 

Fair value of HTM debt securities (2)
$
2

 
 
 
$
67

 
 
 
$
1,307

 
 
 
$
117,756

 
 
 
$
119,132

 
 
(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.