Investment Securities

6 Months Ended

Jun. 30, 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 40 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in the 2018 Annual Financial Statements.

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:

	June 30, 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	$	10	$	—	$	1,045	$	1,035	$	4	$	—	$	1,039
Mortgage-backed securities	21,050		226		43		21,233		16,112		37		181		15,968
Total U.S. Treasury and federal agencies	22,085		236		43		22,278		17,147		41		181		17,007
Asset-backed securities:
Student loans(1)	596		3		1		598		538		4		1		541
Credit cards	251		—		11		240		609		—		26		583
Collateralized loan obligations	1,454		—		2		1,452		594		1		2		593
Total asset-backed securities	2,301		3		14		2,290		1,741		5		29		1,717
Non-U.S. debt securities:
Mortgage-backed securities	1,872		1		3		1,870		1,687		—		5		1,682
Asset-backed securities	1,656		1		2		1,655		1,580		—		6		1,574
Government securities	13,662		162		6		13,818		12,816		22		45		12,793
Other(2)	7,010		96		2		7,104		6,600		18		16		6,602
Total non-U.S. debt securities	24,200		260		13		24,447		22,683		40		72		22,651
State and political subdivisions(3)	1,852		52		2		1,902		1,905		20		7		1,918
Collateralized mortgage obligations	122		—		—		122		200		—		3		197
Other U.S. debt securities	2,176		28		1		2,203		1,683		1		26		1,658
Total	$	52,736	$	579	$	73	$	53,242	$	45,359	$	107	$	318	$	45,148
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	12,433	$	10	$	24	$	12,419	$	14,794	$	—	$	199	$	14,595
Mortgage-backed securities	21,466		190		52		21,604		21,647		24		518		21,153
Total U.S. Treasury and federal agencies	33,899		200		76		34,023		36,441		24		717		35,748
Asset-backed securities:
Student loans(1)	3,603		20		23		3,600		3,191		35		10		3,216
Credit cards	—		—		—		—		193		—		—		193
Other	—		—		—		—		1		—		—		1
Total asset-backed securities	3,603		20		23		3,600		3,385		35		10		3,410
Non-U.S. debt securities:
Mortgage-backed securities	501		84		8		577		638		77		9		706
Asset-backed securities	95		—		—		95		223		—		—		223
Government securities	362		1		—		363		358		1		—		359
Other	1		—		—		1		46		—		—		46
Total non-U.S. debt securities	959		85		8		1,036		1,265		78		9		1,334
Collateralized mortgage obligations	775		40		1		814		823		38		2		859
Total	$	39,236	$	345	$	108	$	39,473	$	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 June 30, 2019 and December 31, 2018, the fair value of other non-U.S. debt securities included $920 million and $1.30 billion, respectively, of covered bonds and $1.44 billion and $1.33 billion of corporate bonds, respectively.

⁽³⁾ As of June 30, 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 $45.30 billion and $38.87 billion as of June 30, 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 June 30, 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	$	2,428	$	4	$	2,618	$	39	$	5,046	$	43
Total U.S. Treasury and federal agencies	2,428		4		2,618		39		5,046		43
Asset-backed securities:
Student loans	10		—		183		1		193		1
Credit cards	90		—		151		11		241		11
Collateralized loan obligations	305		1		189		1		494		2
Total asset-backed securities	405		1		523		13		928		14
Non-U.S. debt securities:
Mortgage-backed securities	708		2		155		1		863		3
Asset-backed securities	679		2		—		—		679		2
Government securities	4,635		6		—		—		4,635		6
Other	1,159		2		122		—		1,281		2
Total non-U.S. debt securities	7,181		12		277		1		7,458		13
State and political subdivisions	59		—		182		2		241		2
Collateralized mortgage obligations	—		—		11		—		11		—
Other U.S. debt securities	46		—		242		1		288		1
Total	$	10,119	$	17	$	3,853	$	56	$	13,972	$	73
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	776	$	1	$	7,131	$	23	$	7,907	$	24
Mortgage-backed securities	1,166		6		5,570		46		6,736		52
Total U.S. Treasury and federal agencies	1,942		7		12,701		69		14,643		76
Asset-backed securities:
Student loans	1,700		13		494		10		2,194		23
Total asset-backed securities	1,700		13		494		10		2,194		23
Non-U.S. debt securities:
Mortgage-backed securities	86		2		114		6		200		8
Total non-U.S. debt securities	86		2		114		6		200		8
Collateralized mortgage obligations	100		—		37		1		137		1
Total	$	3,828	$	22	$	13,346	$	86	$	17,174	$	108

	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 June 30, 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 June 30, 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	$	810	$	—	$	—	$	1,045
Mortgage-backed securities	70		984		2,798		17,381		21,233
Total U.S. Treasury and federal agencies	305		1,794		2,798		17,381		22,278
Asset-backed securities:
Student loans	80		312		144		62		598
Credit cards	—		151		89		—		240
Collateralized loan obligations	30		534		793		95		1,452
Total asset-backed securities	110		997		1,026		157		2,290
Non-U.S. debt securities:
Mortgage-backed securities	273		640		225		732		1,870
Asset-backed securities	441		548		451		215		1,655
Government securities	4,611		7,803		1,404		—		13,818
Other	918		5,652		513		21		7,104
Total non-U.S. debt securities	6,243		14,643		2,593		968		24,447
State and political subdivisions	201		720		545		436		1,902
Collateralized mortgage obligations	—		—		—		122		122
Other U.S. debt securities	409		1,568		226		—		2,203
Total	$	7,268	$	19,722	$	7,188	$	19,064	$	53,242
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	4,198	$	8,193	$	7	$	35	$	12,433
Mortgage-backed securities	30		225		1,760		19,451		21,466
Total U.S. Treasury and federal agencies	4,228		8,418		1,767		19,486		33,899
Asset-backed securities:
Student loans	44		245		367		2,947		3,603
Credit cards	—		—		—		—		—
Other	—		—		—		—		—
Total asset-backed securities	44		245		367		2,947		3,603
Non-U.S. debt securities:
Mortgage-backed securities	103		38		4		356		501
Asset-backed securities	95		—		—		—		95
Government securities	248		114		—		—		362
Other	1		—		—		—		1
Total non-U.S. debt securities	447		152		4		356		959
Collateralized mortgage obligations	—		308		13		454		775
Total	$	4,719	$	9,123	$	2,151	$	23,243	$	39,236

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:

	Six Months Ended June 30,
(In millions)	2019			2018
Balance, beginning of period	$	78		$	77
Additions(1):
Other-than-temporary-impairment recognized	1			1
Realized losses on securities sold or matured	(1		)	—
Balance, end of period	$	78		$	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 45 to 47 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in the 2018 Annual Financial Statements.

We recorded approximately $1 million of OTTI in both the six months ended June 30, 2019 and 2018, 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 $181 million related to 577 securities as of June 30, 2019 to be temporary, and not the result of any material changes in the credit characteristics of the securities.