Quarterly report pursuant to Section 13 or 15(d)

Securities

v3.20.1
Securities
3 Months Ended
Mar. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
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 March 31, 2020 and December 31, 2019.
 
 
 
 
 
 
 
 
Debt Securities
 
 
 
 
 
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
(Dollars in millions)
March 31, 2020
Available-for-sale debt securities
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
Agency
$
76,599

 
$
2,863

 
$
(1
)
 
$
79,461

Agency-collateralized mortgage obligations
4,348

 
212

 
(9
)
 
4,551

Commercial
14,800

 
814

 
(12
)
 
15,602

Non-agency residential (1)
882

 
130

 
(80
)
 
932

Total mortgage-backed securities
96,629

 
4,019

 
(102
)
 
100,546

U.S. Treasury and agency securities
64,353

 
4,352

 
(9
)
 
68,696

Non-U.S. securities
12,248

 
10

 
(11
)
 
12,247

Other taxable securities, substantially all asset-backed securities
6,016

 
80

 
(204
)
 
5,892

Total taxable securities
179,246

 
8,461

 
(326
)
 
187,381

Tax-exempt securities
18,752

 
163

 
(75
)
 
18,840

Total available-for-sale debt securities (3)
197,998

 
8,624

 
(401
)
 
206,221

Other debt securities carried at fair value (2)
14,791

 
317

 
(225
)
 
14,883

Total debt securities carried at fair value
212,789

 
8,941

 
(626
)
 
221,104

Held-to-maturity debt securities, substantially all U.S. agency mortgage-backed securities (3)
254,764

 
11,848

 
(17
)
 
266,595

Total debt securities (4, 5)
$
467,553

 
$
20,789

 
$
(643
)
 
$
487,699

 
 
 
 
 
 
 
 
 
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 (4, 5)
$
469,633

 
$
7,464

 
$
(809
)
 
$
476,288

(1) 
At both March 31, 2020 and December 31, 2019, the underlying collateral type included approximately 49 percent prime, six percent Alt-A and 45 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 14 – Fair Value Measurements.
(3) 
During the three months ended March 31, 2020, the Corporation reclassified AFS debt securities with a fair value of $44.4 billion to HTM. Additionally, the Corporation transferred $11.1 billion of debt securities from its trading account inventory to its Banking Book with $5.2 billion subsequently classified as AFS securities and $5.9 billion classified in other debt securities carried at fair value.
(4) 
Includes securities pledged as collateral of $71.4 billion and $67.0 billion at March 31, 2020 and December 31, 2019.
(5) 
The Corporation held debt securities from Fannie Mae and Freddie Mac that each exceeded 10 percent of shareholders’ equity, with an amortized cost of $153.3 billion and $58.8 billion, and a fair value of $161.2 billion and $61.7 billion at March 31, 2020, and 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.
At March 31, 2020, 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 $6.2 billion, net of the related income tax expense of $2.0 billion. The Corporation had nonperforming AFS debt securities of $8 million and $9 million at March 31, 2020 and December 31, 2019.
Effective January 1, 2020, the Corporation adopted the new accounting standard for credit losses that requires evaluation of AFS and HTM debt securities for any expected losses with recognition of an allowance for credit losses, when applicable. For more information, see Note 1 – Summary of Significant Accounting Principles. At March 31, 2020, the Corporation had $168.3 billion in AFS debt securities, which were primarily U.S. agency and U.S. Treasury securities that have a zero credit loss assumption. For
the remaining $37.9 billion in AFS debt securities, the amount of expected credit losses was insignificant. Substantially all of the Corporation's HTM debt securities are U.S. agency and U.S. Treasury securities and have a zero credit loss assumption.
At March 31, 2020, the Corporation held equity securities at an aggregate fair value of $835 million and other equity securities, as valued under the measurement alternative, at cost of $222 million, both of which are included in other assets. At March 31, 2020, the Corporation also held equity securities at fair value of $1.1 billion included in time deposits placed and other short-term investments.
In the three months ended March 31, 2020, the Corporation recorded gross realized gains on sales of AFS debt securities of $316 million and gross realized losses of $1 million, resulting in a net gain of $315 million, with $79 million of income taxes
attributable to the realized net gain on sales of these AFS debt securities. For the same period in 2019, the Corporation recorded gross realized gains of $117 million and gross realized losses of $111 million, resulting in a net gain of $6 million with income taxes attributable to the realized net gain on sales of these AFS debt securities not being significant.
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, 2020 and December 31, 2019.
 
 
 
 
 
 
 
 
 
 
 
 
Total AFS Debt Securities in a Continuous Unrealized Loss Position
 
 
 
 
 
 
 
 
 
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, 2020
Continuously unrealized loss-positioned AFS debt securities
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
$

 
$

 
$
704

 
$
(1
)
 
$
704

 
$
(1
)
Agency-collateralized mortgage obligations
6

 

 
582

 
(9
)
 
588

 
(9
)
Commercial
652

 
(9
)
 
348

 
(3
)
 
1,000

 
(12
)
Non-agency residential
455

 
(67
)
 
38

 
(13
)
 
493

 
(80
)
Total mortgage-backed securities
1,113

 
(76
)
 
1,672

 
(26
)
 
2,785

 
(102
)
U.S. Treasury and agency securities
(495
)
 
(7
)
 
523

 
(2
)
 
28

 
(9
)
Non-U.S. securities
2,733

 
(10
)
 
513

 
(1
)
 
3,246

 
(11
)
Other taxable securities, substantially all asset-backed securities
2,950

 
(191
)
 
293

 
(13
)
 
3,243

 
(204
)
Total taxable securities
6,301

 
(284
)
 
3,001

 
(42
)
 
9,302

 
(326
)
Tax-exempt securities
6,075

 
(46
)
 
3,090

 
(29
)
 
9,165

 
(75
)
Total AFS debt securities in a continuous
 unrealized loss position
$
12,376

 
$
(330
)
 
$
6,091

 
$
(71
)
 
$
18,467

 
$
(401
)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2019
Continuously unrealized loss-positioned 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
122

 
(6
)
 
22

 
(3
)
 
144

 
(9
)
Total mortgage-backed securities
20,198

 
(70
)
 
18,627

 
(171
)
 
38,825

 
(241
)
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
34,823

 
(141
)
 
38,552

 
(297
)
 
73,375

 
(438
)
Tax-exempt securities
4,286

 
(5
)
 
190

 
(1
)
 
4,476

 
(6
)
Total AFS debt securities in a continuous
 unrealized loss position
$
39,109

 
$
(146
)
 
$
38,742

 
$
(298
)
 
$
77,851

 
$
(444
)
(1) 
Includes continuously unrealized loss-positioned AFS debt securities on which an unrealized loss, primarily related to changes in interest rates, remains in accumulated OCI.

The remaining contractual maturity distribution and yields of the Corporation’s debt securities carried at fair value and HTM debt securities at March 31, 2020 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
$

 
%
 
$
9

 
5.42
%
 
$
65

 
4.47
%
 
$
82,426

 
3.42
%
 
$
82,500

 
3.42
%
Agency-collateralized mortgage obligations

 

 

 

 
26

 
2.50

 
4,322

 
3.16

 
4,348

 
3.16

Commercial
22

 
1.68

 
4,956

 
2.45

 
8,821

 
2.56

 
1,014

 
2.86

 
14,813

 
2.54

Non-agency residential

 

 

 

 
12

 

 
2,069

 
9.01

 
2,081

 
8.96

Total mortgage-backed securities
22

 
1.68

 
4,965

 
2.45

 
8,924

 
2.57

 
89,831

 
3.53

 
103,742

 
3.40

U.S. Treasury and agency securities
6,401

 
1.25

 
30,295

 
1.73

 
27,622

 
2.21

 
38

 
2.45

 
64,356

 
1.89

Non-U.S. securities
18,332

 
0.87

 
1,478

 
1.47

 
11

 
2.97

 
102

 
7.02

 
19,923

 
0.95

Other taxable securities, substantially all asset-backed securities
1,474

 
2.13

 
2,011

 
2.66

 
1,237

 
3.31

 
1,294

 
3.22

 
6,016

 
2.78

Total taxable securities
26,229

 
1.04

 
38,749

 
1.86

 
37,794

 
2.33

 
91,265

 
3.53

 
194,037

 
2.63

Tax-exempt securities
2,612

 
1.82

 
7,882

 
3.28

 
5,035

 
2.18

 
3,223

 
4.00

 
18,752

 
2.90

Total amortized cost of debt securities carried at fair value
$
28,841

 
1.11

 
$
46,631

 
2.10

 
$
42,829

 
2.32

 
$
94,488

 
3.54

 
$
212,789

 
2.65

Amortized cost of HTM debt securities (2)
$
595

 
2.66

 
$
46

 
3.62

 
$
1,096

 
2.56

 
$
253,027

 
3.14

 
$
254,764

 
3.14

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt securities carried at fair value
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Agency
$

 
 

 
$
9

 
 

 
$
69

 
 

 
$
85,472

 
 

 
$
85,550

 
 

Agency-collateralized mortgage obligations

 
 

 

 
 

 
26

 
 

 
4,525

 
 

 
4,551

 
 

Commercial
22

 
 

 
5,154

 
 

 
9,352

 
 

 
1,087

 
 

 
15,615

 
 

Non-agency residential

 
 

 

 
 

 
23

 
 

 
2,031

 
 

 
2,054

 
 

Total mortgage-backed securities
22

 
 
 
5,163

 
 
 
9,470

 
 
 
93,115

 
 
 
107,770

 
 
U.S. Treasury and agency securities
6,464

 
 
 
31,645

 
 
 
30,551

 
 
 
39

 
 
 
68,699

 
 
Non-U.S. securities
18,307

 
 

 
1,481

 
 

 
11

 
 

 
100

 
 

 
19,899

 
 

Other taxable securities, substantially all asset-backed securities
1,460

 
 

 
1,880

 
 

 
1,234

 
 

 
1,322

 
 

 
5,896

 
 

Total taxable securities
26,253

 
 

 
40,169

 
 

 
41,266

 
 

 
94,576

 
 

 
202,264

 
 

Tax-exempt securities
2,610

 
 

 
7,875

 
 

 
5,100

 
 

 
3,255

 
 

 
18,840

 
 

Total debt securities carried at fair value
$
28,863

 
 

 
$
48,044

 
 

 
$
46,366

 
 

 
$
97,831

 
 

 
$
221,104

 
 

Fair value of HTM debt securities (2)
$
595

 
 
 
$
46

 
 
 
$
1,164

 
 
 
$
264,790

 
 
 
$
266,595

 
 
(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.