Quarterly report pursuant to Section 13 or 15(d)

Securities (Tables)

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

Agency
$
141,721

 
$
101

 
$
(5,710
)
 
$
136,112

Agency-collateralized mortgage obligations
5,878

 
9

 
(209
)
 
5,678

Commercial
14,138

 
2

 
(630
)
 
13,510

Non-agency residential (1)
1,926

 
217

 
(6
)
 
2,137

Total mortgage-backed securities
163,663

 
329

 
(6,555
)
 
157,437

U.S. Treasury and agency securities
54,664

 
8

 
(2,366
)
 
52,306

Non-U.S. securities
7,076

 
5

 
(2
)
 
7,079

Other taxable securities, substantially all asset-backed securities
3,806

 
77

 
(7
)
 
3,876

Total taxable securities
229,209

 
419

 
(8,930
)
 
220,698

Tax-exempt securities
18,401

 
36

 
(87
)
 
18,350

Total available-for-sale debt securities
247,610

 
455

 
(9,017
)
 
239,048

Other debt securities carried at fair value
12,409

 
205

 
(27
)
 
12,587

Total debt securities carried at fair value
260,019

 
660

 
(9,044
)
 
251,635

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities (2)
194,472

 
1

 
(6,485
)
 
187,988

Total debt securities (3, 4)
$
454,491

 
$
661

 
$
(15,529
)
 
$
439,623

 
 
 
 
 
 
 
 
 
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 September 30, 2018 and December 31, 2017, the underlying collateral type included approximately 65 percent and 62 percent prime, seven percent and 13 percent Alt-A and 28 percent and 25 percent subprime.
(2) 
During the three and nine months ended September 30, 2018, the Corporation transferred $25 billion and $50 billion of available-for-sale debt securities to held to maturity.
(3) 
Includes securities pledged as collateral of $39.7 billion and $35.8 billion at September 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 $165.3 billion and $53.1 billion, and a fair value of $159.3 billion and $51.4 billion at September 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 nine months ended September 30, 2018, the Corporation recorded unrealized mark-to-market net losses of $106 million and $37 million, and realized net gains of $114 million and $123 million, compared to unrealized mark-to-market net gains of $124 million and $323 million and realized net losses of $11 million and $129 million for the same periods in 2017. These amounts exclude hedge results.
 
 
 
 
Other Debt Securities Carried at Fair Value
 
 
(Dollars in millions)
September 30
2018
 
December 31
2017
Mortgage-backed securities
$
1,696

 
$
2,769

Non-U.S. securities (1)
10,888

 
9,488

Other taxable securities, substantially all asset-backed securities
3

 
229

Total
$
12,587

 
$
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 nine months ended September 30, 2018 and 2017 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)
2018
 
2017
 
2018
 
2017
Gross gains
$
83

 
$
130

 
$
86

 
$
286

Gross losses
(10
)
 
(5
)
 
(10
)
 
(8
)
Net gains on sales of AFS debt securities
$
73

 
$
125

 
$
76

 
$
278

Income tax expense attributable to realized net gains on sales of AFS debt securities
$
17

 
$
48

 
$
18

 
$
106

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, 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)
September 30, 2018
Temporarily impaired AFS debt securities
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
$
45,433

 
$
(1,190
)
 
$
87,214

 
$
(4,520
)
 
$
132,647

 
$
(5,710
)
Agency-collateralized mortgage obligations
1,959

 
(47
)
 
3,344

 
(162
)
 
5,303

 
(209
)
Commercial
4,923

 
(146
)
 
7,962

 
(484
)
 
12,885

 
(630
)
Non-agency residential
23

 
(2
)
 
51

 
(4
)
 
74

 
(6
)
Total mortgage-backed securities
52,338

 
(1,385
)
 
98,571

 
(5,170
)
 
150,909

 
(6,555
)
U.S. Treasury and agency securities
10,651

 
(409
)
 
40,337

 
(1,957
)
 
50,988

 
(2,366
)
Non-U.S. securities
706

 
(1
)
 
81

 
(1
)
 
787

 
(2
)
Other taxable securities, substantially all asset-backed securities
208

 
(3
)
 
150

 
(4
)
 
358

 
(7
)
Total taxable securities
63,903

 
(1,798
)
 
139,139

 
(7,132
)
 
203,042

 
(8,930
)
Tax-exempt securities
474

 
(1
)
 
4,324

 
(86
)
 
4,798

 
(87
)
Total temporarily impaired AFS debt securities
64,377

 
(1,799
)
 
143,463

 
(7,218
)
 
207,840

 
(9,017
)
Other-than-temporarily impaired AFS debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential mortgage-backed securities
93

 
—

 
—

 
—

 
93

 
—

Total temporarily impaired and other-than-temporarily impaired
AFS debt securities
$
64,470

 
$
(1,799
)
 
$
143,463

 
$
(7,218
)
 
$
207,933

 
$
(9,017
)
 
 
 
 
 
 
 
 
 
 
 
 
 
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 September 30, 2018.
 
 
 
 
 
 
Significant Assumptions
 
 
 
 
 
 
 
Range (1)
 
Weighted
average
 
10th
Percentile (2)
 
90th
Percentile (2)
Prepayment speed
12.0
%
 
3.1
%
 
23.3
%
Loss severity
18.1

 
8.4

 
31.0

Life default rate
20.1

 
0.7

 
73.5

(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.
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, 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
(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
$
—

 
—
%
 
$
24

 
4.12
%
 
$
463

 
2.62
%
 
$
141,234

 
3.31
%
 
$
141,721

 
3.31
%
Agency-collateralized mortgage obligations
—

 
—

 
—

 
—

 
31

 
2.48

 
5,847

 
3.17

 
5,878

 
3.17

Commercial
314

 
1.74

 
2,391

 
2.36

 
10,658

 
2.50

 
775

 
2.97

 
14,138

 
2.49

Non-agency residential
—

 
—

 
—

 
—

 
19

 
n/m

 
3,439

 
9.66

 
3,458

 
9.61

Total mortgage-backed securities
314

 
1.74

 
2,415

 
2.38

 
11,171

 
2.50

 
151,295

 
3.45

 
165,195

 
3.36

U.S. Treasury and agency securities
643

 
0.71

 
33,567

 
1.47

 
20,418

 
2.27

 
36

 
2.70

 
54,664

 
1.76

Non-U.S. securities
16,518

 
0.77

 
1,305

 
1.08

 
2

 
3.56

 
128

 
6.15

 
17,953

 
0.83

Other taxable securities, substantially all asset-backed securities
685

 
3.88

 
2,236

 
3.28

 
789

 
3.47

 
96

 
4.68

 
3,806

 
3.46

Total taxable securities
18,160

 
0.90

 
39,523

 
1.61

 
32,380

 
2.38

 
151,555

 
3.45

 
241,618

 
2.82

Tax-exempt securities
1,737

 
2.57

 
7,234

 
2.42

 
6,929

 
2.38

 
2,501

 
2.78

 
18,401

 
2.47

Total amortized cost of debt securities carried at fair value
$
19,897

 
1.05

 
$
46,757

 
1.74

 
$
39,309

 
2.38

 
$
154,056

 
3.44

 
$
260,019

 
2.79

Amortized cost of HTM debt securities (2)
$
4

 
3.36

 
$
55

 
3.62

 
$
1,484

 
2.76

 
$
192,929

 
3.22

 
$
194,472

 
3.22

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities carried at fair value
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
$
—

 
 

 
$
25

 
 

 
$
452

 
 

 
$
135,635

 
 

 
$
136,112

 
 

Agency-collateralized mortgage obligations
—

 
 

 
—

 
 

 
29

 
 

 
5,649

 
 

 
5,678

 
 

Commercial
312

 
 

 
2,323

 
 

 
10,138

 
 

 
737

 
 

 
13,510

 
 

Non-agency residential
—

 
 

 
—

 
 

 
36

 
 

 
3,797

 
 

 
3,833

 
 

Total mortgage-backed securities
312

 
 
 
2,348

 
 
 
10,655

 
 
 
145,818

 
 
 
159,133

 
 
U.S. Treasury and agency securities
642

 
 
 
32,106

 
 
 
19,523

 
 
 
35

 
 
 
52,306

 
 
Non-U.S. securities
16,519

 
 

 
1,314

 
 

 
2

 
 

 
132

 
 

 
17,967

 
 

Other taxable securities, substantially all asset-backed securities
681

 
 

 
2,255

 
 

 
829

 
 

 
114

 
 

 
3,879

 
 

Total taxable securities
18,154

 
 

 
38,023

 
 

 
31,009

 
 

 
146,099

 
 

 
233,285

 
 

Tax-exempt securities
1,736

 
 

 
7,235

 
 

 
6,897

 
 

 
2,482

 
 

 
18,350

 
 

Total debt securities carried at fair value
$
19,890

 
 

 
$
45,258

 
 

 
$
37,906

 
 

 
$
148,581

 
 

 
$
251,635

 
 

Fair value of HTM debt securities (2)
$
4

 
 
 
$
55

 
 
 
$
1,415

 
 
 
$
186,514

 
 
 
$
187,988

 
 
(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.
n/m = not meaningful