Investment Securities

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure

Investment Securities

Our investment portfolio includes various debt and equity securities. Our debt securities, which are classified as available-for-sale or held-to-maturity, include government securities, corporate bonds, asset-backed securities, and mortgage-backed securities. The cost, fair value, and gross unrealized gains and losses on available-for-sale and held-to-maturity securities were as follows.

	March 31, 2020									December 31, 2019
	Amortized cost		Gross unrealized					Fair value		Amortized cost		Gross unrealized					Fair value
($ in millions)			gains		losses							gains		losses
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	$	785	$	21	$	—		$	806	$	2,059	$	6	$	(17	)	$	2,048
U.S. States and political subdivisions	691		20		(2		)	709		623		19		(1		)	641
Foreign government	175		5		—			180		184		3		(1		)	186
Agency mortgage-backed residential	20,702		831		—			21,533		21,183		257		(36		)	21,404
Mortgage-backed residential	2,968		34		(54		)	2,948		2,841		20		(11		)	2,850
Agency mortgage-backed commercial	1,333		114		—			1,447		1,344		44		(6		)	1,382
Mortgage-backed commercial	41		—		(4		)	37		41		1		—			42
Asset-backed	333		—		(4		)	329		365		3		—			368
Corporate debt	1,203		16		(27		)	1,192		1,327		37		(1		)	1,363
Total available-for-sale securities (a) (b) (c) (d) (e)	$	28,231	$	1,041	$	(91	)	$	29,181	$	29,967	$	390	$	(73	)	$	30,284
Held-to-maturity securities
Debt securities
Agency mortgage-backed residential	$	1,480	$	83	$	—		$	1,563	$	1,547	$	38	$	(6	)	$	1,579
Asset-backed retained notes	17		—		—			17		21		—		—			21
Total held-to-maturity securities (e) (f) (g)	$	1,497	$	83	$	—		$	1,580	$	1,568	$	38	$	(6	)	$	1,600

(a) Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled $12 million at both March 31, 2020, and December 31, 2019.

(b) Certain available-for-sale securities are included in fair value hedging relationships. Refer to Note 18 for additional information.

(c) Available-for-sale securities with a fair value of $3.0 billion and $1.9 billion at March 31, 2020, and December 31, 2019, respectively, were pledged to secure advances from the FHLB, repurchase agreements, other short-term borrowings, or for other purposes as required by contractual obligation or law. Under these agreements, we granted the counterparty the right to sell or pledge $668 million and $118 million of the underlying investment securities at March 31, 2020, and December 31, 2019, respectively.

(d) Totals do not include accrued interest receivable, which was $90 million and $98 million at March 31, 2020, and December 31, 2019, respectively. Accrued interest receivable is included in other assets on our Condensed Consolidated Balance Sheet.

(e) There was no allowance for credit losses recorded at March 31, 2020, as management determined that credit losses did not exist for our portfolio of available-for-sale and held-to-maturity securities.

(f) Held-to-maturity securities with a fair value of $1.2 billion and $915 million at March 31, 2020, and December 31, 2019, respectively, were pledged to secure advances from the FHLB.

(g) Totals do not include accrued interest receivable, which was $3 million at both March 31, 2020, and December 31, 2019. Accrued interest receivable is included in other assets on our Condensed Consolidated Balance Sheet.

The maturity distribution of debt securities outstanding is summarized in the following tables based upon contractual maturities. Call or prepayment options may cause actual maturities to differ from contractual maturities.

	Total				Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years
($ in millions)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
March 31, 2020
Fair value of available-for-sale securities (a)
U.S. Treasury and federal agencies	$	806	1.2	%	$	14	0.3	%	$	708	1.2	%	$	84	1.7	%	$	—	—	%
U.S. States and political subdivisions	709		3.1		25		1.9		75		2.3		160		2.9		449		3.4
Foreign government	180		1.9		35		0.5		63		2.3		82		2.3		—		—
Agency mortgage-backed residential	21,533		3.2		—		—		1		2.9		47		2.0		21,485		3.2
Mortgage-backed residential	2,948		3.3		—		—		—		—		—		—		2,948		3.3
Agency mortgage-backed commercial	1,447		2.8		—		—		3		3.2		1,175		2.9		269		2.5
Mortgage-backed commercial	37		3.5		—		—		—		—		—		—		37		3.5
Asset-backed	329		3.5		—		—		275		3.6		14		2.9		40		3.0
Corporate debt	1,192		3.1		135		2.8		520		3.0		525		3.3		12		3.0
Total available-for-sale securities	$	29,181	3.1		$	209	2.2		$	1,645	2.2		$	2,087	2.9		$	25,240	3.2
Amortized cost of available-for-sale securities	$	28,231			$	209			$	1,636			$	1,972			$	24,414
Amortized cost of held-to-maturity securities
Agency mortgage-backed residential	$	1,480	3.2	%	$	—	—	%	$	—	—	%	$	—	—	%	$	1,480	3.2	%
Asset-backed retained notes	17		2.3		—		—		17		2.3		—		—		—		—
Total held-to-maturity securities	$	1,497	3.2		$	—	—		$	17	2.3		$	—	—		$	1,480	3.2
December 31, 2019
Fair value of available-for-sale securities (a)
U.S. Treasury and federal agencies	$	2,048	1.5	%	$	65	2.1	%	$	1,590	1.4	%	$	393	1.7	%	$	—	—	%
U.S. States and political subdivisions	641		3.1		22		2.7		75		2.3		159		2.8		385		3.4
Foreign government	186		1.9		35		0.4		65		2.3		86		2.3		—		—
Agency mortgage-backed residential	21,404		3.2		—		—		—		—		47		2.0		21,357		3.2
Mortgage-backed residential	2,850		3.2		—		—		—		—		—		—		2,850		3.2
Agency mortgage-backed commercial	1,382		2.9		—		—		3		3.2		1,109		3.0		270		2.4
Mortgage-backed commercial	42		3.5		—		—		—		—		—		—		42		3.5
Asset-backed	368		3.5		—		—		317		3.6		5		2.7		46		3.0
Corporate debt	1,363		3.2		125		2.9		580		3.0		649		3.4		9		3.3
Total available-for-sale securities	$	30,284	3.1		$	247	2.3		$	2,630	2.1		$	2,448	2.8		$	24,959	3.2
Amortized cost of available-for-sale securities	$	29,967			$	246			$	2,624			$	2,378			$	24,719
Amortized cost of held-to-maturity securities
Agency mortgage-backed residential	$	1,547	3.2	%	$	—	—	%	$	—	—	%	$	—	—	%	$	1,547	3.2	%
Asset-backed retained notes	21		2.2		—		—		21		2.2		—		—		—		—
Total held-to-maturity securities	$	1,568	3.2		$	—	—		$	21	2.2		$	—	—		$	1,547	3.2

(a) Yield is calculated using the effective yield of each security at the end of the period, weighted based on the market value. The effective yield considers the contractual coupon and amortized cost, and excludes expected capital gains and losses.

The balances of cash equivalents were $12 million and $73 million at March 31, 2020, and December 31, 2019, respectively, and were composed primarily of money-market accounts and short-term securities, including U.S. Treasury bills.

The following table presents interest and dividends on investment securities.

	Three months ended March 31,
($ in millions)	2020		2019
Taxable interest	$	205	$	214
Taxable dividends	5		3
Interest and dividends exempt from U.S. federal income tax	3		5
Interest and dividends on investment securities	$	213	$	222

The following table presents gross gains and losses realized upon the sales of available-for-sale securities, and net gains or losses on equity securities held during the period.

	Three months ended March 31,
($ in millions)	2020			2019
Available-for-sale securities
Gross realized gains	$	105		$	10
Gross realized losses (a)	—			(1		)
Net realized gains on available-for-sale securities	105			9
Net realized gain on equity securities	1			29
Net unrealized (loss) gain on equity securities	(185		)	70
Other (loss) gain on investments, net	$	(79	)	$	108

(a) Certain available-for-sale securities were sold at a loss during the three months ended March 31, 2019, as a result of identifiable market or credit events, or a loss was realized based on corporate actions outside of our control (such as a call by the issuer). Any such sales were made in accordance with our risk-management policies and practices.

The following table presents the credit quality of our held-to-maturity securities, based on the latest available information as of March 31, 2020. The credit ratings are sourced from nationally recognized statistical rating organizations, which include S&P, Moody’s, and Fitch, and represent a composite of the ratings or, where credit ratings cannot be sourced from the agencies, are presented based on the asset type. All our held-to-maturity securities were current in their payment of principal and interest as of March 31, 2020. We have not recorded any interest income reversals on our held-to-maturity securities during the three months ended March 31, 2020.

	March 31, 2020
($ in millions)	AAA		AA		Total (a)
Debt securities
Agency mortgage-backed residential	$	—	$	1,480	$	1,480
Asset-backed retained notes	17		—		17
Total held-to-maturity securities	$	17	$	1,480	$	1,497

(a) Rating agencies indicate that they base their ratings on many quantitative and qualitative factors, which may include capital adequacy, liquidity, asset quality, business mix, level and quality of earnings, and the current operating, legislative, and regulatory environment. A credit rating is not a recommendation to buy, sell, or hold securities, and the ratings are subject to revision or withdrawal at any time by the assigning rating agency.

The following table summarizes held-to-maturity securities in an unrealized loss position at December 31, 2019, prior to the date of adoption of the amendments to the credit loss standard, and as defined by the previous accounting guidance in effect at that time.

	December 31, 2019
	Less than 12 months					12 months or longer
($ in millions)	Fair value		Unrealized loss			Fair value		Unrealized loss
Held-to-maturity securities
Debt securities
Agency mortgage-backed residential	$	283	$	(6	)	$	—	$	—
Asset-backed retained notes	—		—			3		—
Total held-to-maturity debt securities	$	283	$	(6	)	$	3	$	—

The table below summarizes available-for-sale securities in an unrealized loss position, which we evaluated to determine if a credit loss exists requiring the recognition of an allowance for credit losses. For additional information on our methodology, refer to Note 1. As of March 31, 2020, we did not have the intent to sell the available-for-sale or held-to-maturity securities with an unrealized loss position and we do not believe it is more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. As a result of this evaluation, management determined that no credit reserves were required at March 31, 2020. We have not recorded any interest income reversals on our available-for-sale securities during the three months ended March 31, 2020.

	March 31, 2020										December 31, 2019
	Less than 12 months					12 months or longer					Less than 12 months					12 months or longer
($ in millions)	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
Available-for-sale securities
Debt securities
U.S. Treasury and federal agencies	$	3	$	—		$	—	$	—		$	1,267	$	(11	)	$	279	$	(6	)
U.S. States and political subdivisions	96		(1		)	5		(1		)	72		(1		)	5		—
Foreign government	—		—			—		—			40		(1		)	3		—
Agency mortgage-backed residential	22		—			11		—			4,606		(23		)	908		(13		)
Mortgage-backed residential	1,459		(51		)	22		(3		)	613		(4		)	203		(7		)
Agency mortgage-backed commercial	3		—			—		—			335		(6		)	—		—
Mortgage-backed commercial	37		(4		)	—		—			—		—			—		—
Asset-backed	256		(4		)	2		—			8		—			11		—
Corporate debt	570		(25		)	13		(2		)	71		—			41		(1		)
Total available-for-sale securities	$	2,446	$	(85	)	$	53	$	(6	)	$	7,012	$	(46	)	$	1,450	$	(27	)

We adopted ASU 2016-13 on January 1, 2020, on a modified retrospective basis, as further described in Note 1. Under the new guidance, once it is determined that a credit loss has occurred, an allowance for credit losses is established on our available-for-sale and held-to-maturity securities. Prior to adoption of this standard, when a decline in fair value of a debt security was determined to be other than temporary, an impairment charge for the credit component was recorded, and a new cost basis in the investment was established. During the first quarter of 2020, management determined that credit losses did not exist for securities in an unrealized loss position. This analysis considered a variety of factors including, but not limited to, performance indicators of the issuer, default rates, industry analyst reports, credit ratings, and other relevant information, which indicated that contractual cash flows are expected to occur.