Investment Securities

9 Months Ended

Sep. 30, 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.

	September 30, 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	$	784	$	22	$	—	$	806	$	2,059	$	6	$	(17)	$	2,048
U.S. States and political subdivisions	937		40		—		977		623		19		(1)		641
Foreign government	186		10		—		196		184		3		(1)		186
Agency mortgage-backed residential	19,887		613		(5)		20,495		21,183		257		(36)		21,404
Mortgage-backed residential	2,982		55		(1)		3,036		2,841		20		(11)		2,850
Agency mortgage-backed commercial	2,115		131		(2)		2,244		1,344		44		(6)		1,382
Mortgage-backed commercial	—		—		—		—		41		1		—		42
Asset-backed	384		5		—		389		365		3		—		368
Corporate debt	1,763		88		(5)		1,846		1,327		37		(1)		1,363
Total available-for-sale securities (a) (b) (c) (d) (e)	$	29,038	$	964	$	(13)	$	29,989	$	29,967	$	390	$	(73)	$	30,284
Held-to-maturity securities
Debt securities
Agency mortgage-backed residential	$	1,249	$	81	$	—	$	1,330	$	1,547	$	38	$	(6)	$	1,579
Asset-backed retained notes	6		—		—		6		21		—		—		21
Total held-to-maturity securities (e) (f) (g)	$	1,255	$	81	$	—	$	1,336	$	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 $13 million and $12 million at September 30, 2020, and December 31, 2019, respectively.

(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 $121 million and $1.9 billion at September 30, 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 $121 million and $118 million of the underlying investment securities at September 30, 2020, and December 31, 2019, respectively.

(d)Totals do not include accrued interest receivable, which was $91 million and $98 million at September 30, 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 September 30, 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 $915 million at December 31, 2019, were pledged to secure advances from the FHLB. We did not pledge any held-to-maturity securities at September 30, 2020.

(g)Totals do not include accrued interest receivable, which was $3 million at both September 30, 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
September 30, 2020
Fair value of available-for-sale securities (a)
U.S. Treasury and federal agencies	$	806	1.2	%	$	11	—	%	$	712	1.1	%	$	83	1.7	%	$	—	—	%
U.S. States and political subdivisions	977		3.0		33		1.4		103		2.3		201		2.9		640		3.3
Foreign government	196		1.8		35		0.5		83		2.3		78		1.9		—		—
Agency mortgage-backed residential	20,495		3.2		—		—		—		—		40		2.0		20,455		3.2
Mortgage-backed residential	3,036		3.2		—		—		—		—		—		—		3,036		3.2
Agency mortgage-backed commercial	2,244		2.3		—		—		3		3.3		1,234		2.6		1,007		1.9
Asset-backed	389		3.2		—		—		336		3.3		21		2.3		32		3.1
Corporate debt	1,846		2.8		157		2.8		633		2.9		1,008		2.7		48		2.0
Total available-for-sale securities	$	29,989	3.0		$	236	2.2		$	1,870	2.3		$	2,665	2.6		$	25,218	3.1
Amortized cost of available-for-sale securities	$	29,038			$	234			$	1,810			$	2,488			$	24,506
Amortized cost of held-to-maturity securities
Agency mortgage-backed residential	$	1,249	3.2	%	$	—	—	%	$	—	—	%	$	—	—	%	$	1,249	3.2	%
Asset-backed retained notes	6		2.5		—		—		6		2.5		—		—		—		—
Total held-to-maturity securities	$	1,255	3.2		$	—	—		$	6	2.5		$	—	—		$	1,249	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 $32 million and $73 million at September 30, 2020, and December 31, 2019, respectively, and were composed primarily of money-market funds and short-term securities, including U.S. Treasury bills.

The following table presents interest and dividends on investment securities.

	Three months ended September 30,				Nine months ended September 30,
($ in millions)	2020		2019		2020		2019
Taxable interest	$	154	$	214	$	536	$	648
Taxable dividends	4		4		14		10
Interest and dividends exempt from U.S. federal income tax	4		3		12		12
Interest and dividends on investment securities	$	162	$	221	$	562	$	670

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 September 30,				Nine months ended September 30,
($ in millions)	2020		2019		2020		2019
Available-for-sale securities
Gross realized gains	$	45	$	30	$	169	$	64
Gross realized losses (a)	(2)		(3)		(2)		(4)
Net realized gains on available-for-sale securities	43		27		167		60
Net realized gain on equity securities	7		12		88		51
Net unrealized gain (loss) on equity securities	14		(12)		(82)		63
Other gain on investments, net	$	64	$	27	$	173	$	174

(a)Certain available-for-sale securities were sold at a loss during the three months and nine months ended September 30, 2020, and September 30, 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 September 30, 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 September 30, 2020. We have not recorded any interest income reversals on our held-to-maturity securities during the nine months ended September 30, 2020.

	September 30, 2020
($ in millions)	AAA		AA		Total (a)
Debt securities
Agency mortgage-backed residential	$	—	$	1,249	$	1,249
Asset-backed retained notes	6		—		6
Total held-to-maturity securities	$	6	$	1,249	$	1,255

(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 September 30, 2020, we did not have the intent to sell the available-for-sale 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 September 30, 2020. We have not recorded any interest income reversals on our available-for-sale securities during the nine months ended September 30, 2020.

	September 30, 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	$	—	$	—	$	—	$	—	$	1,267	$	(11)	$	279	$	(6)
U.S. States and political subdivisions	63		—		—		—		72		(1)		5		—
Foreign government	4		—		—		—		40		(1)		3		—
Agency mortgage-backed residential	1,690		(5)		7		—		4,606		(23)		908		(13)
Mortgage-backed residential	258		(1)		—		—		613		(4)		203		(7)
Agency mortgage-backed commercial	188		(2)		—		—		335		(6)		—		—
Asset-backed	9		—		—		—		8		—		11		—
Corporate debt	307		(4)		14		(1)		71		—		41		(1)
Total available-for-sale securities	$	2,519	$	(12)	$	21	$	(1)	$	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 nine months ended September 30, 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.