Investment Securities

3 Months Ended

Mar. 31, 2022

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 144 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2021 Form 10-K.

Trading assets are carried at fair value. Both realized and unrealized gains and losses on trading assets are recorded in foreign exchange trading services revenue in our consolidated statement of income. AFS securities are carried at fair value, with any allowance for credit losses recorded through the consolidated statement of income and after-tax net unrealized gains and losses are recorded in AOCI. Gains or losses realized on sales of AFS investment securities are computed using the specific identification method and are recorded in gains (losses) related to investment securities, net, in our consolidated statement of income. HTM investment securities are carried at cost, adjusted for amortization of premiums and accretion of discounts, with any allowance for credit losses recorded through the consolidated statement of income.

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, 2022								December 31, 2021
	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	$	21,687	$	14	$	758	$	20,943	$	18,111	$	24	$	196	$	17,939
Mortgage-backed securities	19,204		17		480		18,741		18,154		148		94		18,208
Total U.S. Treasury and federal agencies	40,891		31		1,238		39,684		36,265		172		290		36,147
Non-U.S. debt securities:
Mortgage-backed securities	2,272		6		10		2,268		1,986		12		3		1,995
Asset-backed securities(1)	2,073		1		8		2,066		2,087		2		2		2,087
Non-U.S. sovereign, supranational and non-U.S. agency	21,123		15		409		20,729		23,533		114		100		23,547
Other(2)	3,494		5		110		3,389		3,113		17		32		3,098
Total non-U.S. debt securities	28,962		27		537		28,452		30,719		145		137		30,727
Asset-backed securities:
Student loans(3)	186		2		1		187		209		2		—		211
Collateralized loan obligations(4)	2,420		—		9		2,411		2,155		2		2		2,155
Non-agency CMBS and RMBS(5)	170		—		2		168		52		—		—		52
Other	90		—		—		90		90		1		—		91
Total asset-backed securities	2,866		2		12		2,856		2,506		5		2		2,509
State and political subdivisions	1,197		12		7		1,202		1,216		59		3		1,272
Other U.S. debt securities(6)	2,201		2		49		2,154		2,734		23		13		2,744
Total available-for-sale securities(7)(9)	$	76,117	$	74	$	1,843	$	74,348	$	73,440	$	404	$	445	$	73,399
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	720	$	2	$	—	$	722	$	2,170	$	10	$	—	$	2,180
Mortgage-backed securities	35,784		18		2,309		33,493		33,481		362		578		33,265
Total U.S. Treasury and federal agencies	36,504		20		2,309		34,215		35,651		372		578		35,445
Non-U.S. debt securities:
Non-U.S. sovereign, supranational and non-U.S. agency	3,763		—		70		3,693		1,564		—		9		1,555
Total non-U.S. debt securities	3,763		—		70		3,693		1,564		—		9		1,555
Asset-backed securities:
Student loans(3)	4,651		16		47		4,620		4,908		48		14		4,942
Non-agency CMBS and RMBS(8)	285		21		—		306		307		22		—		329
Total asset-backed securities	4,936		37		47		4,926		5,215		70		14		5,271
Total held-to-maturity securities(7)	$	45,203	$	57	$	2,426	$	42,834	$	42,430	$	442	$	601	$	42,271

(1) As of March 31, 2022 and December 31, 2021, the fair value includes non-U.S. collateralized loan obligations of $0.92 billion and $0.83 billion, respectively.

(2) As of March 31, 2022 and December 31, 2021, the fair value includes non-U.S. corporate bonds of $1.80 billion and $1.53 billion, respectively.

(3) 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.

(4) Excludes collateralized loan obligations in loan form. Refer to Note 4 for additional information.

(5) Consists entirely of non-agency CMBS as of both March 31, 2022 and December 31, 2021.

(6) As of March 31, 2022 and December 31, 2021, the fair value of U.S. corporate bonds was $2.03 billion and $2.44 billion, respectively.

(7) An immaterial amount of accrued interest related to HTM and AFS investment securities was excluded from the amortized cost basis for the period ended March 31, 2022.

(8) As of March 31, 2022 and December 31, 2021, the total amortized cost included $273 million and $292 million, respectively, of non-agency CMBS and $12 million and $14 million of non-agency RMBS, respectively.

(9) As of March 31, 2022 and December 31, 2021, total amortized cost included an allowance for credit losses on AFS investment securities of $2 million and $2 million, respectively.

Aggregate investment securities with carrying values of approximately $88.81 billion and $80.81 billion as of March 31, 2022 and December 31, 2021, 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 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, 2022
	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:
Direct obligations	$	16,587	$	644	$	3,454	$	114	$	20,041	$	758
Mortgage-backed securities	11,858		391		880		89		12,738		480
Total U.S. Treasury and federal agencies	28,445		1,035		4,334		203		32,779		1,238
Non-U.S. debt securities:
Mortgage-backed securities	1,376		10		37		—		1,413		10
Asset-backed securities	1,650		8		76		—		1,726		8
Non-U.S. sovereign, supranational and non-U.S. agency	12,826		275		1,744		134		14,570		409
Other	1,675		57		665		53		2,340		110
Total non-U.S. debt securities	17,527		350		2,522		187		20,049		537
Asset-backed securities:
Student loans	93		1		25		—		118		1
Collateralized loan obligations	2,021		9		49		—		2,070		9
Non-agency CMBS and RMBS	124		2		—		—		124		2
Total asset-backed securities	2,238		12		74		—		2,312		12
State and political subdivisions	361		3		44		4		405		7
Other U.S. debt securities	1,107		32		244		17		1,351		49
Total	$	49,678	$	1,432	$	7,218	$	411	$	56,896	$	1,843

	As of December 31, 2021
	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:
Direct obligations	$	14,749	$	194	$	1,624	$	2	$	16,373	$	196
Mortgage-backed securities	10,417		80		369		14		10,786		94
Total U.S. Treasury and federal agencies	25,166		274		1,993		16		27,159		290
Non-U.S. debt securities:
Mortgage-backed securities	577		3		30		—		607		3
Asset-backed securities	1,021		2		127		—		1,148		2
Non-U.S. sovereign, supranational and non-U.S. agency	10,406		97		63		3		10,469		100
Other	1,570		31		19		1		1,589		32
Total non-U.S. debt securities	13,574		133		239		4		13,813		137
Asset-backed securities:
Collateralized loan obligations	1,268		2		—		—		1,268		2
Total asset-backed securities	1,268		2		—		—		1,268		2
State and political subdivisions	10		—		45		3		55		3
Other U.S. debt securities	1,214		13		—		—		1,214		13
Total	$	41,232	$	422	$	2,277	$	23	$	43,509	$	445

The following table presents the amortized cost and the fair value of contractual maturities of debt investment securities as of March 31, 2022. The maturities of certain ABS, MBS and collateralized mortgage obligations 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, 2022
(In millions)	Under 1 Year				1 to 5 Years				6 to 10 Years				Over 10 Years				Total
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Available-for-sale:
U.S. Treasury and federal agencies:
Direct obligations	$	2,427	$	2,417	$	18,654	$	17,907	$	606	$	619	$	—	$	—	$	21,687	$	20,943
Mortgage-backed securities	63		63		760		761		8,443		8,409		9,938		9,508		19,204		18,741
Total U.S. Treasury and federal agencies	2,490		2,480		19,414		18,668		9,049		9,028		9,938		9,508		40,891		39,684
Non-U.S. debt securities:
Mortgage-backed securities	141		140		501		501		31		31		1,599		1,596		2,272		2,268
Asset-backed securities	283		281		963		961		433		432		394		392		2,073		2,066
Non-U.S. sovereign, supranational and non-U.S. agency	4,660		4,661		12,768		12,434		3,679		3,620		16		14		21,123		20,729
Other	1,008		1,009		2,321		2,232		110		101		55		47		3,494		3,389
Total non-U.S. debt securities	6,092		6,091		16,553		16,128		4,253		4,184		2,064		2,049		28,962		28,452
Asset-backed securities:
Student loans	95		97		—		—		—		—		91		90		186		187
Collateralized loan obligations	110		110		412		410		1,246		1,241		652		650		2,420		2,411
Non-agency CMBS and RMBS	—		—		—		—		—		—		170		168		170		168
Other	—		—		—		—		90		90		—		—		90		90
Total asset-backed securities	205		207		412		410		1,336		1,331		913		908		2,866		2,856
State and political subdivisions	178		178		494		496		468		475		57		53		1,197		1,202
Other U.S. debt securities	708		707		1,452		1,406		41		41		—		—		2,201		2,154
Total	$	9,673	$	9,663	$	38,325	$	37,108	$	15,147	$	15,059	$	12,972	$	12,518	$	76,117	$	74,348
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	701	$	702	$	2	$	2	$	1	$	1	$	16	$	17	$	720	$	722
Mortgage-backed securities	133		130		428		418		4,619		4,245		30,604		28,700		35,784		33,493
Total U.S. Treasury and federal agencies	834		832		430		420		4,620		4,246		30,620		28,717		36,504		34,215
Non-U.S. debt securities:
Non-U.S. sovereign, supranational and non-U.S. agency	233		233		3,529		3,459		1		1		—		—		3,763		3,693
Total non-U.S. debt securities	233		233		3,529		3,459		1		1		—		—		3,763		3,693
Asset-backed securities:
Student loans	338		330		29		28		988		990		3,296		3,272		4,651		4,620
Non-agency CMBS and RMBS	86		93		124		125		—		—		75		88		285		306
Total asset-backed securities	424		423		153		153		988		990		3,371		3,360		4,936		4,926
Total	$	1,491	$	1,488	$	4,112	$	4,032	$	5,609	$	5,237	$	33,991	$	32,077	$	45,203	$	42,834

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, adjusted as prepayments occur, resulting in amortization or accretion, accordingly.

Allowance for Credit Losses on Debt Securities and Impairment of AFS Securities

We conduct quarterly reviews of HTM and AFS securities on a collective (pool) basis when similar risk characteristics exist to determine whether an allowance for credit losses should be recognized. We review individual AFS securities periodically to assess if additional impairment is required. For additional information about the Current Expected Credit Loss methodology and the review of investment securities for expected credit losses or impairment, refer to pages 148 to 149 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2021 Form 10-K.

We monitor the credit quality of the HTM and AFS investment securities using a variety of methods, including both external and internal credit ratings. As of March 31, 2022, 99% of our HTM and AFS investment portfolio is publicly rated investment grade.

We had no allowance for credit losses on our HTM securities as of March 31, 2022 and December 31, 2021.

Our allowance for credit losses on our AFS securities was approximately $2 million as of both March 31, 2022 and December 31, 2021. In the first quarter of 2022, we recorded no provision for credit losses and no charge-offs on AFS securities.

We have elected to not record an allowance on accrued interest for HTM and AFS securities. Accrued interest on these securities is reversed against interest income when payment on a security is delinquent for greater than 90 days from the date of payment.

After a review of the investment portfolio, taking into consideration then-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 considered the resulting gross pre-tax unrealized losses of $4.27 billion related to 1,703 securities as of March 31, 2022 to be primarily related to changes in interest rates, and not the result of any material changes in the credit characteristics of the securities.