Investment Securities

3 Months Ended

Mar. 31, 2019

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investment Securities

Investment securities held by us are classified as either trading account assets, AFS, HTM or equity securities held at fair value at the time of purchase and reassessed periodically, based on management’s intent. For additional information on our accounting for investment securities, refer to page 137 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2018 Form 10-K.

The following table presents the amortized cost, fair value and associated unrealized gains and losses of AFS and HTM investment securities as of the dates indicated:

	March 31, 2019								December 31, 2018
	Amortized Cost		Gross Unrealized				Fair Value		Amortized Cost		Gross Unrealized				Fair Value
(In millions)			Gains		Losses						Gains		Losses
Available-for-sale:
U.S. Treasury and federal agencies:
Direct obligations	$	1,035	$	6	$	—	$	1,041	$	1,035	$	4	$	—	$	1,039
Mortgage-backed securities	20,020		132		109		20,043		16,112		37		181		15,968
Total U.S. Treasury and federal agencies	21,055		138		109		21,084		17,147		41		181		17,007
Asset-backed securities:
Student loans(1)	477		4		—		481		538		4		1		541
Credit cards	612		—		26		586		609		—		26		583
Collateralized loan obligations	889		—		3		886		594		1		2		593
Total asset-backed securities	1,978		4		29		1,953		1,741		5		29		1,717
Non-U.S. debt securities:
Mortgage-backed securities	1,520		1		4		1,517		1,687		—		5		1,682
Asset-backed securities	1,517		—		6		1,511		1,580		—		6		1,574
Government securities	12,489		97		14		12,572		12,816		22		45		12,793
Other(2)	6,520		59		3		6,576		6,600		18		16		6,602
Total non-U.S. debt securities	22,046		157		27		22,176		22,683		40		72		22,651
State and political subdivisions(3)	1,903		39		2		1,940		1,905		20		7		1,918
Collateralized mortgage obligations	130		—		1		129		200		—		3		197
Other U.S. debt securities	1,715		12		7		1,720		1,683		1		26		1,658
Total	$	48,827	$	350	$	175	$	49,002	$	45,359	$	107	$	318	$	45,148
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	13,369	$	—	$	123	$	13,246	$	14,794	$	—	$	199	$	14,595
Mortgage-backed securities	22,568		76		250		22,394		21,647		24		518		21,153
Total U.S. Treasury and federal agencies	35,937		76		373		35,640		36,441		24		717		35,748
Asset-backed securities:
Student loans(1)	3,286		26		16		3,296		3,191		35		10		3,216
Credit cards	—		—		—		—		193		—		—		193
Other	1		—		—		1		1		—		—		1
Total asset-backed securities	3,287		26		16		3,297		3,385		35		10		3,410
Non-U.S. debt securities:
Mortgage-backed securities	575		82		8		649		638		77		9		706
Asset-backed securities	98		—		—		98		223		—		—		223
Government securities	399		1		—		400		358		1		—		359
Other	44		—		—		44		46		—		—		46
Total non-U.S. debt securities	1,116		83		8		1,191		1,265		78		9		1,334
Collateralized mortgage obligations	805		40		2		843		823		38		2		859
Total	$	41,145	$	225	$	399	$	40,971	$	41,914	$	175	$	738	$	41,351

⁽¹⁾ Primarily comprised of securities guaranteed by the federal government with respect to at least 97% of defaulted principal and accrued interest on the underlying loans.

⁽²⁾ As of March 31, 2019 and December 31, 2018, the fair value of other non-U.S. debt securities included $1.05 billion and $1.30 billion, respectively, of covered bonds and $1.33 billion of corporate bonds for both periods.

⁽³⁾ As of March 31, 2019 and December 31, 2018, the fair value of state and political subdivisions includes securities in trusts of $1.06 billion and $1.05 billion, respectively. Additional information about these trusts is provided in Note 11.

Aggregate investment securities with carrying values of approximately $40.06 billion and $38.87 billion as of March 31, 2019 and December 31, 2018, respectively, were designated as pledged for public and trust deposits, short-term borrowings and for other purposes as provided by law.

The following tables present the aggregate fair values of AFS and HTM investment securities that have been in a continuous unrealized loss position for less than 12 months, and those that have been in a continuous unrealized loss position for 12 months or longer, as of the dates indicated:

	As of March 31, 2019
	Less than 12 months				12 months or longer				Total
(In millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
U.S. Treasury and federal agencies:
Mortgage-backed securities	$	2,565	$	4	$	5,147	$	105	$	7,712	$	109
Total U.S. Treasury and federal agencies	2,565		4		5,147		105		7,712		109
Asset-backed securities:
Student loans	10		—		212		—		222		—
Credit cards	89		1		497		25		586		26
Collateralized loan obligations	586		3		—		—		586		3
Total asset-backed securities	685		4		709		25		1,394		29
Non-U.S. debt securities:
Mortgage-backed securities	890		3		111		1		1,001		4
Asset-backed securities	992		6		—		—		992		6
Government securities	3,345		14		—		—		3,345		14
Other	721		2		189		1		910		3
Total non-U.S. debt securities	5,948		25		300		2		6,248		27
State and political subdivisions	—		—		254		2		254		2
Collateralized mortgage obligations	—		—		129		1		129		1
Other U.S. debt securities	116		2		500		5		616		7
Total	$	9,314	$	35	$	7,039	$	140	$	16,353	$	175
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	2,210	$	25	$	11,036	$	98	$	13,246	$	123
Mortgage-backed securities	357		1		14,205		249		14,562		250
Total U.S. Treasury and federal agencies	2,567		26		25,241		347		27,808		373
Asset-backed securities:
Student loans	1,155		7		507		9		1,662		16
Total asset-backed securities	1,155		7		507		9		1,662		16
Non-U.S. debt securities:
Mortgage-backed securities	99		2		116		6		215		8
Total non-U.S. debt securities	99		2		116		6		215		8
Collateralized mortgage obligations	101		—		48		2		149		2
Total	$	3,922	$	35	$	25,912	$	364	$	29,834	$	399

	As of December 31, 2018
	Less than 12 months				12 months or longer				Total
(In millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
U.S. Treasury and federal agencies:
Mortgage-backed securities	$	5,058	$	21	$	5,089	$	160	$	10,147	$	181
Total U.S. Treasury and federal agencies	5,058		21		5,089		160		10,147		181
Asset-backed securities:
Student loans	106		—		218		1		324		1
Credit cards	90		—		493		26		583		26
Collateralized loan obligations	548		2		—		—		548		2
Total asset-backed securities	744		2		711		27		1,455		29
Non-U.S. debt securities:
Mortgage-backed securities	1,407		4		118		1		1,525		5
Asset-backed securities	1,479		6		—		—		1,479		6
Government securities	5,478		45		—		—		5,478		45
Other	2,167		12		226		4		2,393		16
Total non-U.S. debt securities	10,531		67		344		5		10,875		72
State and political subdivisions	365		3		244		4		609		7
Collateralized mortgage obligations	181		3		14		—		195		3
Other U.S. debt securities	861		14		484		12		1,345		26
Total	$	17,740	$	110	$	6,886	$	208	$	24,626	$	318
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	2,192	$	45	$	12,403	$	154	$	14,595	$	199
Mortgage-backed securities	6,502		103		10,648		415		17,150		518
Total U.S. Treasury and federal agencies	8,694		148		23,051		569		31,745		717
Asset-backed securities:
Student loans	481		4		536		6		1,017		10
Total asset-backed securities	481		4		536		6		1,017		10
Non-U.S. debt securities:
Mortgage-backed securities	184		2		119		7		303		9
Total non-U.S. debt securities	184		2		119		7		303		9
Collateralized mortgage obligations	102		1		51		1		153		2
Total	$	9,461	$	155	$	23,757	$	583	$	33,218	$	738

The following table presents contractual maturities of debt investment securities by carrying amount as of March 31, 2019. The maturities of certain ABS, MBS, and CMOs are based on expected principal payments. Actual maturities may differ from these expected maturities since certain borrowers have the right to prepay obligations with or without prepayment penalties.

	As of March 31, 2019
(In millions)	Under 1 Year		1 to 5 Years		6 to 10 Years		Over 10 Years		Total
Available-for-sale:
U.S. Treasury and federal agencies:
Direct obligations	$	235	$	806	$	—	$	—	$	1,041
Mortgage-backed securities	44		991		2,490		16,518		20,043
Total U.S. Treasury and federal agencies	279		1,797		2,490		16,518		21,084
Asset-backed securities:
Student loans	94		160		161		66		481
Credit cards	200		297		89		—		586
Collateralized loan obligations	—		418		423		45		886
Total asset-backed securities	294		875		673		111		1,953
Non-U.S. debt securities:
Mortgage-backed securities	266		552		171		528		1,517
Asset-backed securities	368		561		446		136		1,511
Government securities	3,178		6,802		2,592		—		12,572
Other	1,141		4,860		554		21		6,576
Total non-U.S. debt securities	4,953		12,775		3,763		685		22,176
State and political subdivisions	180		791		525		444		1,940
Collateralized mortgage obligations	—		—		—		129		129
Other U.S. debt securities	152		1,292		276		—		1,720
Total	$	5,858	$	17,530	$	7,727	$	17,887	$	49,002
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	3,225	$	10,096	$	11	$	37	$	13,369
Mortgage-backed securities	31		236		1,538		20,763		22,568
Total U.S. Treasury and federal agencies	3,256		10,332		1,549		20,800		35,937
Asset-backed securities:
Student loans	7		255		383		2,641		3,286
Credit cards	—		—		—		—		—
Other	—		—		—		1		1
Total asset-backed securities	7		255		383		2,642		3,287
Non-U.S. debt securities:
Mortgage-backed securities	134		40		7		394		575
Asset-backed securities	98		—		—		—		98
Government securities	286		113		—		—		399
Other	44		—		—		—		44
Total non-U.S. debt securities	562		153		7		394		1,116
Collateralized mortgage obligations	1		313		14		477		805
Total	$	3,826	$	11,053	$	1,953	$	24,313	$	41,145

Interest income related to debt securities is recognized in our consolidated statement of income using the effective interest method, or on a basis approximating a level rate of return over the contractual or estimated life of the security. The level rate of return considers any non-refundable fees or costs, as well as purchase premiums or discounts, resulting in amortization or accretion, accordingly.

For certain debt securities acquired which are considered to be beneficial interests in securitized financial assets, the excess of our estimate of undiscounted future cash flows from these securities over their initial recorded investment is accreted into interest income on a level-yield basis over the securities’ estimated remaining terms. Subsequent decreases in these securities’ expected future cash flows are either recognized prospectively through an adjustment of the yields on the securities over their remaining terms, or are evaluated for OTTI. Increases in expected future cash flows are recognized prospectively over the securities’ estimated remaining terms through the recalculation of their yields.Impairment

The following table presents a roll-forward with respect to net impairment losses that have been recognized in income for the periods indicated:

	Three Months Ended March 31,
(In millions)	2019		2018
Balance, beginning of period	$	78	$	77
Additions(1):
Other-than-temporary-impairment recognized	1		1
Balance, end of period	$	79	$	78

⁽¹⁾ Additions represent securities with a first time credit impairment realized or when a subsequent credit impairment has occurred.

We conduct periodic reviews of individual securities to assess whether OTTI exists. For additional information about the review of securities for impairment, refer to pages 142 to 144 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2018 Form 10-K.

We recorded approximately $1 million of OTTI in both the first quarter of 2019 and 2018, on non-U.S. residential MBS, which resulted from adverse changes in the timing of expected future cash flows from the securities.

After a review of the investment portfolio, taking into consideration current economic conditions, adverse situations that might affect our ability to fully collect principal and interest, the timing of future payments, the credit quality and performance of the collateral underlying MBS and ABS and other relevant factors, management considers the aggregate decline in fair value of the investment securities portfolio and the resulting gross pre-tax unrealized losses of $574 million related to 832 securities as of March 31, 2019 to be temporary, and not the result of any material changes in the credit characteristics of the securities.