Investments

12 Months Ended

Dec. 31, 2023

Investment Securities

Investment securities are classified as HTM, AFS, or trading. HTM securities, which management has the intent and ability to hold until maturity, are carried at amortized cost. The amortized cost amounts represent the original cost of the investments, adjusted for related amortization or accretion of any purchase premiums or discounts, and for any impairment losses, including credit-related impairment. AFS securities are carried at fair value, and changes in fair value (unrealized gains and losses) are reported as net increases or decreases to AOCI, net of related taxes. Trading securities are measured at fair value with gains and losses recognized in current period earnings.

The carrying values of our securities do not include accrued interest receivables of $65 million and $75 million at December 31, 2023, and 2022, respectively. These receivables are included in “Other assets” on the consolidated balance sheet. The purchase premiums for callable debt securities classified as HTM or AFS are amortized into interest income at an effective yield to the earliest call date. The purchase premiums and discounts for all other HTM and AFS securities are recorded as interest income over the contractual life of the security using the effective yield method. As principal prepayments are received on securities, a proportionate amount of the related premium or discount is recognized in income so that the effective yield on the remaining portion of the security continues unchanged. See Note 3 for more information about the process to estimate fair value for investment securities.

When a security is transferred from AFS to HTM, the difference between its amortized cost basis and fair value at the date of transfer is amortized as a yield adjustment through interest income, and the fair value at the date of transfer results in either a premium or discount to the amortized cost basis of the HTM securities. The amortization of unrealized gains or losses reported in AOCI will offset the effect of the amortization of the premium or discount in interest income that is created by the transfer.

The following schedules present the amortized cost and estimated fair values of our HTM and AFS securities:


	December 31, 2023
(In millions)	Amortized cost		Gross unrealized gains 1		Gross unrealized losses		Estimated fair value
Held-to-maturity
U.S. Government agencies and corporations:
Agency securities	$	93	$	—	$	6	$	87
Agency guaranteed mortgage-backed securities	9,935		156		50		10,041
Municipal securities	354		—		16		338
Total held-to-maturity	10,382		156		72		10,466
Available-for-sale
U.S. Treasury securities	585		—		93		492
U.S. Government agencies and corporations:
Agency securities	663		—		33		630
Agency guaranteed mortgage-backed securities	8,530		—		1,239		7,291
Small Business Administration loan-backed securities	571		—		25		546
Municipal securities	1,385		—		67		1,318
Other	25		—		2		23


Total available-for-sale	11,759		—		1,459		10,300
Total HTM and AFS investment securities	$	22,141	$	156	$	1,531	$	20,766

1 Gross unrealized gains for the respective AFS security categories were individually less than $1 million.


	December 31, 2022
(In millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Held-to-maturity
U.S. Government agencies and corporations:
Agency securities	$	100	$	—	$	7	$	93
Agency guaranteed mortgage-backed securities	10,621		165		14		10,772
Municipal securities	405		—		31		374
Total held-to-maturity	11,126		165		52		11,239
Available-for-sale
U.S. Treasury securities	557		—		164		393
U.S. Government agencies and corporations:
Agency securities	782		—		46		736
Agency guaranteed mortgage-backed securities 1	9,652		—		1,285		8,367
Small Business Administration loan-backed securities	740		1		29		712
Municipal securities	1,732		1		99		1,634
Other 1	75		—		2		73
Total available-for-sale	13,538		2		1,625		11,915
Total HTM and AFS investment securities	$	24,664	$	167	$	1,677	$	23,154

1 Gross unrealized gains for these security categories were less than $1 million.

During the fourth quarter of 2022, we transferred approximately $10.7 billion fair value ($13.1 billion amortized cost) of mortgage-backed AFS securities to HTM. The transfer of these securities resulted in a discount to the amortized cost basis of the HTM securities equivalent to the $2.4 billion ($1.8 billion after tax) of unrealized losses in AOCI attributable to these securities. The amortization of the unrealized losses will offset the effect of the accretion of the discount created by the transfer. At December 31, 2023, the unamortized discount on the HTM securities totaled approximately $2.1 billion ($1.5 billion after tax).

Maturities

The following schedule presents the amortized cost and weighted average yields of debt securities by contractual maturity of principal payments at December 31, 2023. This schedule does not reflect the duration of the portfolio, which would incorporate amortization, expected prepayments, interest rate resets, and fair value hedges; the effects of which result in measured durations shorter than contractual maturities.


	December 31, 2023
	Total 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
(Dollar amounts in millions)	Amortized cost		Average yield		Amortized cost		Average yield		Amortized cost		Average yield		Amortized cost		Average yield		Amortized cost		Average yield
Held-to-maturity
U.S. Government agencies and corporations:
Agency securities	$	93	3.55	%	$	—	—	%	$	—	—	%	$	—	—	%	$	93	3.55	%
Agency guaranteed mortgage-backed securities	9,935		1.85		—		—		—		—		45		1.94		9,890		1.85
Municipal securities 1	354		3.15		26		2.70		127		3.00		166		3.36		35		3.08
Total held-to-maturity securities	10,382		1.91		26		2.70		127		3.00		211		3.06		10,018		1.87
Available-for-sale
U.S. Treasury securities	585		3.26		184		5.24		—		—		—		—		401		2.35
U.S. Government agencies and corporations:
Agency securities	663		2.63		116		0.93		154		3.16		207		2.73		186		3.15
Agency guaranteed mortgage-backed securities	8,530		2.01		3		1.40		174		1.63		1,459		2.11		6,894		2.00
Small Business Administration loan-backed securities	571		5.54		1		5.33		22		6.33		141		4.40		407		5.89
Municipal securities 1	1,385		2.18		138		2.54		432		2.63		717		1.84		98		2.22
Other debt securities	25		8.77		—		—		—		—		10		9.50		15		8.28


Total available-for-sale securities	11,759		2.32		442		3.24		782		2.61		2,534		2.24		8,001		2.26
Total HTM and AFS investment securities	$	22,141	2.13	%	$	468	3.21	%	$	909	2.67	%	$	2,745	2.30	%	$	18,019	2.04	%

1 The yields on tax-exempt securities are calculated on a tax-equivalent basis.

The following schedule presents gross unrealized losses for AFS securities and the estimated fair value by length of time the securities have been in an unrealized loss position:


	December 31, 2023
	Less than 12 months				12 months or more				Total
(In millions)	Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value
Available-for-sale
U.S. Treasury securities	$	—	$	—	$	93	$	308	$	93	$	308
U.S. Government agencies and corporations:
Agency securities	—		5		33		605		33		610
Agency guaranteed mortgage-backed securities	71		312		1,168		6,902		1,239		7,214
Small Business Administration loan-backed securities	—		4		25		484		25		488
Municipal securities	2		229		65		1,061		67		1,290
Other	—		—		2		13		2		13







Total available-for-sale investment securities	$	73	$	550	$	1,386	$	9,373	$	1,459	$	9,923


	December 31, 2022
	Less than 12 months				12 months or more				Total
(In millions)	Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value
Available-for-sale
U.S. Treasury securities	$	94	$	308	$	70	$	85	$	164	$	393
U.S. Government agencies and corporations:
Agency securities	39		634		7		102		46		736
Agency guaranteed mortgage-backed securities	447		4,322		838		4,042		1,285		8,364
Small Business Administration loan-backed securities	8		101		21		524		29		625
Municipal securities	63		1,295		36		256		99		1,551
Other	2		13		—		—		2		13







Total available-for-sale investment securities	$	653	$	6,673	$	972	$	5,009	$	1,625	$	11,682

At December 31, 2023, and 2022, approximately 2,998 and 3,562 AFS investment securities were in an unrealized loss position, respectively.

Impairment

Ongoing Policy

On a quarterly basis, we review our investment securities portfolio for the presence of impairment on an individual security basis. For AFS securities, when the fair value of a debt security is less than its amortized cost basis at the balance sheet date, we assess for the presence of credit impairment. When determining if the fair value of an investment is less than the amortized cost basis, we have elected to exclude accrued interest from the amortized cost basis of the investment. If we have the intent to sell an identified security, or if it is more likely than not we will be required to sell the security before recovery of its amortized cost basis, we write the amortized cost down to the security’s fair value at the reporting date through earnings.

If we have the intent and ability to hold the securities, we determine whether there is any impairment attributable to credit-related factors. We analyze certain factors, primarily internal and external credit ratings, to determine if the decline in fair value below the amortized cost basis has resulted from a credit loss or other factors. If a credit impairment is determined to exist, then we measure the amount of credit loss and recognize an allowance for the credit loss. In measuring the credit loss, we generally compare the present value of cash flows expected to be collected from the security to the amortized cost basis of the security. These cash flows are credit adjusted using, among other things, assumptions for default probability and loss severity. Certain other inputs, such as prepayment rate assumptions, are also utilized. In addition, certain internal models may be utilized. To determine the credit-related portion of impairment, we use the security-specific effective interest rate when estimating the present value of cash flows. If the present value of cash flows is less than the amortized cost basis of the security, then this amount is recorded as an allowance for credit loss, limited to the amount that the fair value is less than the amortized cost basis (i.e., the credit impairment cannot result in the security being carried at an amount lower than its fair value). The assumptions used to estimate the expected cash flows depend on the particular asset class, structure, and credit rating of the security. Declines in fair value that are not recorded in the allowance are recorded in other comprehensive income, net of applicable taxes.

AFS Impairment

We did not recognize any impairment on our AFS investment securities portfolio during 2023 or 2022. Unrealized losses primarily relate to changes in interest rates subsequent to purchase and are not attributable to credit; as such, absent any future sales, we would expect to receive the full principal value at maturity. At December 31, 2023, we had not initiated any sales of AFS securities, nor did we have an intent to sell any identified securities with unrealized losses. We do not believe it is more likely than not that we would be required to sell such securities before recovery of their amortized cost basis.

HTM Impairment

For HTM securities, the ACL is assessed consistent with the approach described in Note 6 for loans and leases measured at amortized cost. At December 31, 2023, the ACL on HTM securities was less than $1 million, all HTM securities were risk-graded as “Pass” in terms of credit quality, and none were considered past due.

Securities Gains and Losses Recognized in Income

The following schedule presents securities gains and losses recognized in income:


	2023				2022				2021
(In millions)	Gross gains		Gross losses		Gross gains		Gross losses		Gross gains		Gross losses


Available-for-sale	72		72		—		—		—		—
Trading	13		11		—		—		—		—
Other noninterest-bearing investments	$	27	$	25	$	11	$	26	$	119	$	48
Total	112		108		11		26		119		48
Net gains (losses) 1			$	4			$	(15)			$	71

1 Net gains (losses) are included in “Securities gains (losses), net” on the consolidated statement of income.

The following schedule presents interest income by security type:


(In millions)	2023						2022						2021
	Taxable		Nontaxable		Total		Taxable		Nontaxable		Total		Taxable		Nontaxable		Total
Investment securities:
Held-to-maturity	$	236	$	3	$	239	$	42	$	4	$	46	$	10	$	5	$	15
Available-for-sale	291		31		322		411		40		451		256		29		285
Trading	—		2		2		—		15		15		—		11		11
Total securities	$	527	$	36	$	563	$	453	$	59	$	512	$	266	$	45	$	311