Quarterly report pursuant to Section 13 or 15(d)

Securities (Tables)

v3.10.0.1
Securities (Tables)
 6 Months Ended
Jun. 30, 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 June 30, 2018 and December 31, 2017.
 
 
 
 
 
 
 
 
Debt Securities
 
 
 
 
 
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in millions)
June 30, 2018
Available-for-sale debt securities
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 

Agency
$
162,301

 
$
125

 
$
(5,426
)
 
$
157,000

Agency-collateralized mortgage obligations
6,194

 
13

 
(172
)
 
6,035

Commercial
14,156

 
2

 
(558
)
 
13,600

Non-agency residential (1)
2,283

 
262

 
(11
)
 
2,534

Total mortgage-backed securities
184,934

 
402

 
(6,167
)
 
179,169

U.S. Treasury and agency securities
54,758

 
12

 
(2,036
)
 
52,734

Non-U.S. securities
6,659

 
7

 
(1
)
 
6,665

Other taxable securities, substantially all asset-backed securities
4,412

 
81

 
(7
)
 
4,486

Total taxable securities
250,763

 
502

 
(8,211
)
 
243,054

Tax-exempt securities
19,085

 
82

 
(102
)
 
19,065

Total available-for-sale debt securities
269,848

 
584

 
(8,313
)
 
262,119

Other debt securities carried at fair value
12,853

 
306

 
(22
)
 
13,137

Total debt securities carried at fair value
282,701

 
890

 
(8,335
)
 
275,256

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities (2)
163,013

 
131

 
(4,913
)
 
158,231

Total debt securities (3, 4)
$
445,714

 
$
1,021

 
$
(13,248
)
 
$
433,487

 
 
 
 
 
 
 
 
 
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 both June 30, 2018 and December 31, 2017, the underlying collateral type included approximately 62 percent prime, 13 percent Alt-A and 25 percent subprime.
(2) 
During the three months ended June 30, 2018, the Corporation transferred $25 billion of available-for-sale debt securities to held to maturity.
(3) 
Includes securities pledged as collateral of $42.4 billion and $35.8 billion at June 30, 2018 and December 31, 2017.
(4) 
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 $165.6 billion and $52.8 billion, and a fair value of $160.6 billion and $51.2 billion at June 30, 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 the three and six months ended June 30, 2018, the Corporation recorded unrealized mark-to-market net gains of $28 million and $69 million, and realized net gains of $15 million and $9 million, compared to unrealized mark-to-market net gains of $83 million and $199 million and realized net losses of $14 million and $118 million for the same periods in 2017. These amounts exclude hedge results.
 
 
 
 
Other Debt Securities Carried at Fair Value
 
 
(Dollars in millions)
June 30
2018
 
December 31
2017
Mortgage-backed securities:
 
 
 
Agency-collateralized mortgage obligations
$
—

 
$
5

Non-agency residential
2,535

 
2,764

Total mortgage-backed securities
2,535

 
2,769

Non-U.S. securities (1)
10,400

 
9,488

Other taxable securities, substantially all asset-backed securities
202

 
229

Total
$
13,137

 
$
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 and six months ended June 30, 2018 and 2017 are presented in the table below.
 
 
 
 
 
 
 
 
Gains and Losses on Sales of AFS Debt Securities
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
(Dollars in millions)
2018
 
2017
 
2018
 
2017
Gross gains
$
1

 
$
102

 
$
3

 
$
156

Gross losses
—

 
(1
)
 
—

 
(3
)
Net gains on sales of AFS debt securities
$
1

 
$
101

 
$
3

 
$
153

Income tax expense attributable to realized net gains on sales of AFS debt securities
$
1

 
$
38

 
$
1

 
$
58

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 June 30, 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)
June 30, 2018
Temporarily impaired AFS debt securities
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
$
93,123

 
$
(2,718
)
 
$
59,404

 
$
(2,708
)
 
$
152,527

 
$
(5,426
)
Agency-collateralized mortgage obligations
3,706

 
(93
)
 
1,698

 
(79
)
 
5,404

 
(172
)
Commercial
8,325

 
(250
)
 
4,486

 
(308
)
 
12,811

 
(558
)
Non-agency residential
154

 
(6
)
 
—

 
—

 
154

 
(6
)
Total mortgage-backed securities
105,308

 
(3,067
)
 
65,588

 
(3,095
)
 
170,896

 
(6,162
)
U.S. Treasury and agency securities
27,277

 
(918
)
 
23,856

 
(1,118
)
 
51,133

 
(2,036
)
Non-U.S. securities
—

 
—

 
86

 
(1
)
 
86

 
(1
)
Other taxable securities, substantially all asset-backed securities
152

 
(4
)
 
113

 
(3
)
 
265

 
(7
)
Total taxable securities
132,737

 
(3,989
)
 
89,643

 
(4,217
)
 
222,380

 
(8,206
)
Tax-exempt securities
303

 
(2
)
 
3,990

 
(100
)
 
4,293

 
(102
)
Total temporarily impaired AFS debt securities
133,040

 
(3,991
)
 
93,633

 
(4,317
)
 
226,673

 
(8,308
)
Other-than-temporarily impaired AFS debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential mortgage-backed securities
150

 
(5
)
 
—

 
—

 
150

 
(5
)
Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
$
133,190

 
$
(3,996
)
 
$
93,633

 
$
(4,317
)
 
$
226,823

 
$
(8,313
)
 
 
 
 
 
 
 
 
 
 
 
 
 
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 June 30, 2018.
 
 
 
 
 
 
Significant Assumptions
 
 
 
 
 
 
 
Range (1)
 
Weighted
average
 
10th
Percentile (2)
 
90th
Percentile (2)
Prepayment speed
13.0
%
 
3.2
%
 
21.4
%
Loss severity
19.9

 
9.0

 
36.9

Life default rate
17.9

 
1.5

 
67.1

(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.
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 June 30, 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)
June 30, 2018
Amortized cost of debt securities carried at fair value
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
$
2

 
3.50
%
 
$
26

 
3.98
%
 
$
492

 
2.61
%
 
$
161,781

 
3.26
%
 
$
162,301

 
3.26
%
Agency-collateralized mortgage obligations
—

 
—

 
—

 
—

 
31

 
2.55

 
6,163

 
3.17

 
6,194

 
3.17

Commercial
54

 
9.55

 
2,155

 
2.22

 
11,052

 
2.48

 
895

 
2.81

 
14,156

 
2.49

Non-agency residential
—

 
—

 
—

 
—

 
21

 
0.01

 
4,543

 
9.82

 
4,564

 
9.77

Total mortgage-backed securities
56

 
9.33

 
2,181

 
2.24

 
11,596

 
2.48

 
173,382

 
3.43

 
187,215

 
3.36

U.S. Treasury and agency securities
542

 
0.45

 
32,638

 
1.47

 
21,549

 
2.24

 
29

 
2.70

 
54,758

 
1.76

Non-U.S. securities
15,118

 
0.79

 
1,787

 
1.53

 
2

 
3.56

 
140

 
6.55

 
17,047

 
0.91

Other taxable securities, substantially all asset-backed securities
576

 
3.39

 
2,886

 
3.34

 
874

 
3.24

 
260

 
8.56

 
4,596

 
3.62

Total taxable securities
16,292

 
0.90

 
39,492

 
1.65

 
34,021

 
2.35

 
173,811

 
3.44

 
263,616

 
2.87

Tax-exempt securities
894

 
1.71

 
8,332

 
2.27

 
7,252

 
2.22

 
2,607

 
2.64

 
19,085

 
2.28

Total amortized cost of debt securities carried at fair value
$
17,186

 
0.94

 
$
47,824

 
1.76

 
$
41,273

 
2.32

 
$
176,418

 
3.42

 
$
282,701

 
2.83

Amortized cost of HTM debt securities (2)
$
4

 
3.36

 
$
63

 
3.56

 
$
1,427

 
2.78

 
$
161,519

 
3.15

 
$
163,013

 
3.15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities carried at fair value
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
$
2

 
 

 
$
26

 
 

 
$
484

 
 

 
$
156,488

 
 

 
$
157,000

 
 

Agency-collateralized mortgage obligations
—

 
 

 
—

 
 

 
30

 
 

 
6,005

 
 

 
6,035

 
 

Commercial
54

 
 

 
2,108

 
 

 
10,592

 
 

 
846

 
 

 
13,600

 
 

Non-agency residential
—

 
 

 
—

 
 

 
33

 
 

 
5,036

 
 

 
5,069

 
 

Total mortgage-backed securities
56

 
 
 
2,134

 
 
 
11,139

 
 
 
168,375

 
 
 
181,704

 
 
U.S. Treasury and agency securities
542

 
 
 
31,381

 
 
 
20,783

 
 
 
28

 
 
 
52,734

 
 
Non-U.S. securities
15,121

 
 

 
1,798

 
 

 
2

 
 

 
144

 
 

 
17,065

 
 

Other taxable securities, substantially all asset-backed securities
571

 
 

 
2,905

 
 

 
916

 
 

 
296

 
 

 
4,688

 
 

Total taxable securities
16,290

 
 

 
38,218

 
 

 
32,840

 
 

 
168,843

 
 

 
256,191

 
 

Tax-exempt securities
894

 
 

 
8,347

 
 

 
7,230

 
 

 
2,594

 
 

 
19,065

 
 

Total debt securities carried at fair value
$
17,184

 
 

 
$
46,565

 
 

 
$
40,070

 
 

 
$
171,437

 
 

 
$
275,256

 
 

Fair value of HTM debt securities (2)
$
4

 
 
 
$
63

 
 
 
$
1,363

 
 
 
$
156,801

 
 
 
$
158,231

 
 
(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.