Investment Securities

6 Months Ended

Jun. 30, 2024

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 140 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2023 Form 10-K.

Trading assets are carried at fair value. Both realized and unrealized gains and losses on trading assets are recorded in other fee 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:

	June 30, 2024								December 31, 2023
	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	$	18,699	$	35	$	145	$	18,589	$	8,427	$	39	$	165	$	8,301
Mortgage-backed securities(1)	11,057		22		130		10,949		10,870		49		164		10,755
Total U.S. Treasury and federal agencies	29,756		57		275		29,538		19,297		88		329		19,056
Non-U.S. debt securities:
Mortgage-backed securities	2,355		5		4		2,356		1,861		3		7		1,857
Asset-backed securities(2)	2,235		6		3		2,238		2,148		2		13		2,137
Non-U.S. sovereign, supranational and non-U.S. agency	16,280		11		130		16,161		15,159		73		132		15,100
Other(3)	3,046		23		25		3,044		2,733		39		37		2,735
Total non-U.S. debt securities	23,916		45		162		23,799		21,901		117		189		21,829
Asset-backed securities:
Student loans(4)	99		2		—		101		113		1		—		114
Collateralized loan obligations(5)	2,607		5		—		2,612		2,530		3		6		2,527
Non-agency CMBS and RMBS(6)	137		—		1		136		252		—		3		249
Other	90		1		—		91		90		—		—		90
Total asset-backed securities	2,933		8		1		2,940		2,985		4		9		2,980
State and political subdivisions	340		—		3		337		356		—		1		355
Other U.S. debt securities(7)	145		—		4		141		314		—		8		306
Total available-for-sale securities(8)(9)	$	57,090	$	110	$	445	$	56,755	$	44,853	$	209	$	536	$	44,526
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	6,119	$	—	$	142	$	5,977	$	8,584	$	—	$	163	$	8,421
Mortgage-backed securities(10)	37,837		1		5,845		31,993		39,472		7		5,271		34,208
Total U.S. Treasury and federal agencies	43,956		1		5,987		37,970		48,056		7		5,434		42,629
Non-U.S. debt securities:
Non-U.S. sovereign, supranational and non-U.S. agency	4,273		—		141		4,132		5,757		8		153		5,612
Total non-U.S. debt securities	4,273		—		141		4,132		5,757		8		153		5,612
Asset-backed securities:
Student loans(4)	2,817		6		31		2,792		3,298		2		62		3,238
Non-agency CMBS and RMBS(11)	5		17		—		22		6		18		—		24
Total asset-backed securities	2,822		23		31		2,814		3,304		20		62		3,262
Total held-to-maturity securities(8)(12)	$	51,051	$	24	$	6,159	$	44,916	$	57,117	$	35	$	5,649	$	51,503

(1) As of June 30, 2024 and December 31, 2023, the total fair value included $5.03 billion and $5.54 billion, respectively, of agency CMBS and $5.92 billion and $5.21 billion, respectively, of agency MBS.

(2) As of June 30, 2024 and December 31, 2023, the fair value includes non-U.S. collateralized loan obligations of $0.99 billion and $1.02 billion, respectively.

(3) As of June 30, 2024 and December 31, 2023, the fair value includes non-U.S. corporate bonds of $2.49 billion and $2.36 billion, respectively.

(4) 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.

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

(6) Consists entirely of non-agency CMBS as of both June 30, 2024 and December 31, 2023.

(7) As of June 30, 2024 and December 31, 2023, the fair value of U.S. corporate bonds was $0.14 billion and $0.31 billion, respectively.

(8) An immaterial amount of accrued interest related to HTM and AFS investment securities was excluded from the amortized cost basis for the periods ended June 30, 2024 and December 31, 2023.

(9) As of both June 30, 2024 and December 31, 2023, we had no allowance for credit losses on AFS investment securities.

(10) As of June 30, 2024 and December 31, 2023, the total amortized cost included $5.20 billion and $5.23 billion of agency CMBS, respectively.

(11) Consists entirely of non-agency RMBS as of both June 30, 2024 and December 31, 2023.

(12) As of both June 30, 2024 and December 31, 2023, we had an allowance for credit losses on HTM investment securities of $1 million.

Aggregate investment securities with carrying values of approximately $85.83 billion and $71.30 billion as of June 30, 2024 and December 31, 2023, 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:

	June 30, 2024
	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	$	10,465	$	15	$	5,670	$	130	$	16,135	$	145
Mortgage-backed securities	2,021		14		5,469		116		7,490		130
Total U.S. Treasury and federal agencies	12,486		29		11,139		246		23,625		275
Non-U.S. debt securities:
Mortgage-backed securities	454		—		521		4		975		4
Asset-backed securities	178		—		851		3		1,029		3
Non-U.S. sovereign, supranational and non-U.S. agency	7,451		44		5,089		86		12,540		130
Other	378		1		660		24		1,038		25
Total non-U.S. debt securities	8,461		45		7,121		117		15,582		162
Asset-backed securities:
Non-agency CMBS and RMBS	25		—		99		1		124		1
Total asset-backed securities	25		—		99		1		124		1
State and political subdivisions	181		2		156		1		337		3
Other U.S. debt securities	—		—		133		4		133		4
Total	$	21,153	$	76	$	18,648	$	369	$	39,801	$	445

	December 31, 2023
	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	$	333	$	2	$	5,416	$	163	$	5,749	$	165
Mortgage-backed securities	961		6		6,512		158		7,473		164
Total U.S. Treasury and federal agencies	1,294		8		11,928		321		13,222		329
Non-U.S. debt securities:
Mortgage-backed securities	424		1		719		6		1,143		7
Asset-backed securities	358		—		1,052		13		1,410		13
Non-U.S. sovereign, supranational and non-U.S. agency	3,972		7		5,788		125		9,760		132
Other	50		—		893		37		943		37
Total non-U.S. debt securities	4,804		8		8,452		181		13,256		189
Asset-backed securities:
Collateralized loan obligations	183		—		1,605		6		1,788		6
Non-agency CMBS and RMBS	35		—		180		3		215		3
Total asset-backed securities	218		—		1,785		9		2,003		9
State and political subdivisions	64		—		104		1		168		1
Other U.S. debt securities	3		—		303		8		306		8
Total	$	6,383	$	16	$	22,572	$	520	$	28,955	$	536

The following table presents the amortized cost and the fair value of contractual maturities of debt investment securities as of June 30, 2024. 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.

	June 30, 2024
(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	$	2,782	$	2,780	$	12,853	$	12,747	$	3,064	$	3,062	$	—	$	—	$	18,699	$	18,589
Mortgage-backed securities	36		35		2,065		2,058		2,971		2,943		5,985		5,913		11,057		10,949
Total U.S. Treasury and federal agencies	2,818		2,815		14,918		14,805		6,035		6,005		5,985		5,913		29,756		29,538
Non-U.S. debt securities:
Mortgage-backed securities	126		126		355		355		49		49		1,825		1,826		2,355		2,356
Asset-backed securities	294		293		540		540		977		978		424		427		2,235		2,238
Non-U.S. sovereign, supranational and non-U.S. agency	3,641		3,626		11,156		11,063		1,483		1,472		—		—		16,280		16,161
Other	347		346		2,564		2,560		135		138		—		—		3,046		3,044
Total non-U.S. debt securities	4,408		4,391		14,615		14,518		2,644		2,637		2,249		2,253		23,916		23,799
Asset-backed securities:
Student loans	27		28		—		—		13		13		59		60		99		101
Collateralized loan obligations	22		22		154		155		1,506		1,508		925		927		2,607		2,612
Non-agency CMBS and RMBS	—		—		—		—		—		—		137		136		137		136
Other	—		—		90		91		—		—		—		—		90		91
Total asset-backed securities	49		50		244		246		1,519		1,521		1,121		1,123		2,933		2,940
State and political subdivisions	107		107		110		108		123		122		—		—		340		337
Other U.S. debt securities	95		95		50		46		—		—		—		—		145		141
Total	$	7,477	$	7,458	$	29,937	$	29,723	$	10,321	$	10,285	$	9,355	$	9,289	$	57,090	$	56,755
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	2,803	$	2,762	$	3,284	$	3,184	$	24	$	23	$	8	$	8	$	6,119	$	5,977
Mortgage-backed securities	134		120		994		907		4,051		3,415		32,658		27,551		37,837		31,993
Total U.S. Treasury and federal agencies	2,937		2,882		4,278		4,091		4,075		3,438		32,666		27,559		43,956		37,970
Non-U.S. debt securities:
Non-U.S. sovereign, supranational and non-U.S. agency	1,139		1,123		2,830		2,725		304		284		—		—		4,273		4,132
Total non-U.S. debt securities	1,139		1,123		2,830		2,725		304		284		—		—		4,273		4,132
Asset-backed securities:
Student loans	179		176		307		305		451		450		1,880		1,861		2,817		2,792
Non-agency CMBS and RMBS	1		7		—		—		—		—		4		15		5		22
Total asset-backed securities	180		183		307		305		451		450		1,884		1,876		2,822		2,814
Total	$	4,256	$	4,188	$	7,415	$	7,121	$	4,830	$	4,172	$	34,550	$	29,435	$	51,051	$	44,916

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 page 145 to 146 in Note 3 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2023 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 June 30, 2024, over 99% of our HTM and AFS investment portfolio is publicly rated investment grade.

As of both June 30, 2024 and December 31, 2023, we had an allowance for credit losses on HTM investment securities of $1 million. In the second quarter of 2024, we recorded no provision for credit losses and no charge-offs on HTM securities.

As of both June 30, 2024 and December 31, 2023, we had no allowance for credit losses on AFS investment securities. In the second quarter of 2024, 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 aggregate decline in fair value of the investment securities portfolio and the resulting gross pre-tax unrealized losses of $6.60 billion related to 1,776 securities as of June 30, 2024 to be primarily related to changes in interest rates, and not the result of any material changes in the credit characteristics of the securities.