Investments

3 Months Ended

Mar. 31, 2024

Investment Securities

Investment securities are classified as held-to-maturity (“HTM”), available-for-sale (“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 accumulated other comprehensive income (“AOCI”), net of related taxes. Trading securities are carried 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 $58 million and $65 million at March 31, 2024 and December 31, 2023, respectively. These receivables are included in “Other assets” on the consolidated balance sheet.

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 discount associated with securities previously transferred from AFS to HTM was $2.0 billion ($1.5 billion after tax) at March 31, 2024.

See Notes 3 and 5 of our 2023 Form 10-K for more information regarding our process to estimate the fair value and accounting for our investment securities, respectively. The following schedule presents the amortized cost and estimated fair values of our HTM and AFS securities:


	March 31, 2024
(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	$	92	$	—	$	7	$	85
Agency guaranteed mortgage-backed securities	9,776		17		97		9,696
Municipal securities	341		—		17		324
Total held-to-maturity	10,209		17		121		10,105
Available-for-sale
U.S. Treasury securities	584		—		103		481
U.S. Government agencies and corporations:
Agency securities	629		—		33		596
Agency guaranteed mortgage-backed securities	8,335		—		1,282		7,053
Small Business Administration loan-backed securities	543		—		25		518
Municipal securities	1,336		—		77		1,259
Other debt securities	25		—		1		24
Total available-for-sale	11,452		—		1,521		9,931
Total HTM and AFS investment securities	$	21,661	$	17	$	1,642	$	20,036


	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 debt securities	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.

Maturities

The following schedule presents the amortized cost and weighted average yields of debt securities by contractual maturity of principal payments at March 31, 2024. 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.


	March 31, 2024
	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	$	92	3.52	%	$	—	—	%	$	—	—	%	$	—	—	%	$	92	3.52	%
Agency guaranteed mortgage-backed securities	9,776		1.85		—		—		—		—		44		1.93		9,732		1.85
Municipal securities 1	341		3.19		30		2.86		129		2.91		154		3.49		28		3.17
Total held-to-maturity securities	10,209		1.91		30		2.86		129		2.91		198		3.14		9,852		1.87
Available-for-sale
U.S. Treasury securities	584		3.25		183		5.22		—		—		—		—		401		2.35
U.S. Government agencies and corporations:
Agency securities	629		2.59		142		1.55		122		2.74		202		2.84		163		3.09
Agency guaranteed mortgage-backed securities	8,335		2.02		5		1.28		150		1.70		1,412		2.12		6,768		2.01
Small Business Administration loan-backed securities	543		5.53		1		4.92		20		6.33		138		4.43		384		5.88
Municipal securities 1	1,336		2.18		147		2.72		408		2.56		713		1.85		68		2.30
Other debt securities	25		8.78		—		—		10		9.52		—		—		15		8.29
Total available-for-sale securities	11,452		2.32		478		3.32		710		2.61		2,465		2.23		7,799		2.26
Total HTM and AFS investment securities	$	21,661	2.12	%	$	508	3.29	%	$	839	2.66	%	$	2,663	2.30	%	$	17,651	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:


	March 31, 2024
	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	$	—	$	10	$	103	$	298	$	103	$	308
U.S. Government agencies and corporations:
Agency securities	—		—		33		579		33		579
Agency guaranteed mortgage-backed securities	73		312		1,209		6,665		1,282		6,977
Small Business Administration loan-backed securities	—		3		25		460		25		463
Municipal securities	1		83		76		1,154		77		1,237
Other	—		—		1		14		1		14








Total available-for-sale investment securities	$	74	$	408	$	1,447	$	9,170	$	1,521	$	9,578


	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

At March 31, 2024 and December 31, 2023, approximately 2,940 and 2,998 AFS investment securities were in an unrealized loss position, respectively.

Impairment

On a quarterly basis, we review our investment securities portfolio for the presence of impairment on an individual security basis. For additional information on our policy and impairment evaluation process for investment securities, see Note 5 of our 2023 Form 10-K.

AFS Impairment

We did not recognize any impairment on our AFS investment securities portfolio during the first three months of 2024. Unrealized losses primarily relate to higher interest rates subsequent to the purchase of securities and are not attributable to credit; as such, absent any future sales, we would expect to receive the full principal value at maturity. At March 31, 2024, 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 allowance for credit losses (“ACL”) is assessed consistent with the approach described in Note 6 for loans and leases measured at amortized cost. At March 31, 2024, 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:


	Three Months Ended March 31,
	2024				2023
(In millions)	Gross gains		Gross losses		Gross gains		Gross losses



Available-for-sale	$	—	$	—	$	1	$	1
Trading	10		9		3		3
Other noninterest-bearing investments	6		9		4		3
Total gains	16		18		8		7
Net gains (losses) 1			$	(2)			$	1

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

The following schedule presents interest income by security type:


	Three Months Ended March 31,
	2024						2023
(In millions)	Taxable		Nontaxable		Total		Taxable		Nontaxable		Total
Investment securities:
Held-to-maturity	$	56	$	1	$	57	$	60	$	1	$	61
Available-for-sale	77		8		85		69		6		75
Trading	—		—		—		1		—		1
Total securities	$	133	$	9	$	142	$	130	$	7	$	137