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Investment Securities

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]


Note 4		Investment Securities

The Company’s held-to-maturity investment securities are carried at historical cost, adjusted for amortization of premiums and accretion of discounts. The Company’s available-for-sale investment securities are carried at fair value with unrealized net gains or losses reported within accumulated other comprehensive income (loss) in shareholders’ equity.

The amortized cost, gross unrealized holding gains and losses, and fair value of held-to-maturity and available-for-sale investment securities were as follows:


	June 30, 2022									December 31, 2021
(Dollars in Millions)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Held-to-maturity
U.S. Treasury and agencies	$	1,343	$	–	$	(6	)	$	1,337	$	–	$	–	$	–		$	–
Residential agency mortgage-backed securities		60,160		2		(5,842	)		54,320		41,858		2		(48	)		41,812
Total held-to-maturity	$	61,503	$	2	$	(5,848	)	$	55,657	$	41,858	$	2	$	(48	)	$	41,812
Available-for-sale
U.S. Treasury and agencies	$	25,779	$	–	$	(2,012	)	$	23,767	$	36,648	$	205	$	(244	)	$	36,609
Mortgage-backed securities
Residential agency		62,788		23		(5,059	)		57,752		76,761		665		(347	)		77,079
Commercial agency		8,756		–		(1,192	)		7,564		8,633		53		(201	)		8,485
Asset-backed securities		–		–		–			–		62		4		–			66
Obligations of state and political subdivisions		10,925		11		(1,220	)		9,716		10,130		607		(20	)		10,717
Other		7		–		–			7		7		–		–			7
Total available-for-sale	$	108,255	$	34	$	(9,483	)	$	98,806	$	132,241	$	1,534	$	(812	)	$	132,963

During the second quarter of 2022, the Company transferred $17.1 billion amortized cost ($15.7 billion fair value) of available-for-sale investment securities to the held-to-maturity category to reflect its new intent for these securities.

Investment securities with a fair value of $16.9 billion at June 30, 2022, and $30.7 billion at December 31, 2021, were pledged to secure public, private and trust deposits, repurchase agreements and for other purposes required by contractual obligation or law. Included in these amounts were securities where the Company and certain counterparties have agreements granting the counterparties the right to sell or pledge the securities. Investment securities securing these types of arrangements had a fair value of $987 million at June 30, 2022, and $557 million at December 31, 2021.

The following table provides information about the amount of interest income from taxable and non-taxable investment securities:


	Three Months Ended June 30				Six Months Ended June 30
(Dollars in Millions)	2022		2021		2022		2021
Taxable	$	732	$	554	$	1,378	$	1,009
Non-taxable		74		64		145		126
Total interest income from investment securities	$	806	$	618	$	1,523	$	1,135

The following table provides information about the amount of gross gains and losses realized through the sales of available-for-sale investment securities:


	Three Months Ended June 30					Six Months Ended June 30
(Dollars in Millions)	2022			2021		2022			2021
Realized gains	$	144		$	43	$	386		$	68
Realized losses		(125	)		–		(349	)		–
Net realized gains	$	19		$	43	$	37		$	68
Income tax on net realized gains	$	5		$	11	$	9		$	17

The Company conducts a regular assessment of its available-for-sale investment securities with unrealized losses to determine whether all or some portion of a security’s unrealized loss is related to credit and an allowance for credit losses is necessary. If the Company intends to sell or it is more likely than not the Company will be required to sell an investment security, the amortized cost of the security is written down to fair value. When evaluating credit losses, the Company considers various factors such as the nature of the investment security, the credit ratings or financial condition of the issuer, the extent of the unrealized loss, expected cash flows of underlying collateral, the existence of any government or agency guarantees, and market conditions. The Company measures the allowance for credit losses using market information where available and discounting the cash flows at the original effective rate of the investment security. The allowance for credit losses is adjusted each period through earnings and can be subsequently recovered. The allowance for credit losses on the Company’s available-for-sale investment securities was immaterial at June 30, 2022 and December 31, 2021.

At June 30, 2022, certain investment securities had a fair value below amortized cost. The following table shows the gross unrealized losses and fair value of the Company’s available-for-sale investment securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have been in continuous unrealized loss positions, at June 30, 2022:


	Less Than 12 Months					12 Months or Greater					Total
(Dollars in Millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Treasury and agencies	$	19,590	$	(1,581	)	$	3,511	$	(431	)	$	23,101	$	(2,012	)
Residential agency mortgage-backed securities		50,819		(4,281	)		5,360		(778	)		56,179		(5,059	)
Commercial agency mortgage-backed securities		4,852		(657	)		2,711		(535	)		7,563		(1,192	)
Obligations of state and political subdivisions		8,430		(1,057	)		396		(163	)		8,826		(1,220	)
Other		6		–			–		–			6		–
Total investment securities	$	83,697	$	(7,576	)	$	11,978	$	(1,907	)	$	95,675	$	(9,483	)

These unrealized losses primarily relate to changes in interest rates and market spreads subsequent to purchase of these available-for-sale investment securities. U.S. Treasury and agencies securities and agency mortgage-backed securities are issued, guaranteed or otherwise supported by the United States government. The Company’s obligations of state and political subdivisions are generally high grade. Accordingly, the Company does not consider these unrealized losses to be credit-related and an allowance for credit losses is not necessary. In general, the issuers of the investment securities are contractually prohibited from prepayment at less than par, and the Company did not pay significant purchase premiums for these investment securities. At June 30, 2022, the Company had no plans to sell investment securities with unrealized losses, and believes it is more likely than not it would not be required to sell such investment securities before recovery o

their amortized cost.

During the six months ended June 30, 2022 and 2021, the Company did not purchase any investment securities that had more-than-insignificant credit deterioration.

All of the Company’s held-to-maturity investment securities are highly rated agency mortgage-backed securities that are guaranteed or otherwise supported by the United States government and have no history of credit losses. Accordingly the Company does not expect to incur any credit losses on held-to-maturity investment securities and has no allowance for credit losses recorded for these securities.

The following table provides information about the amortized cost, fair value and yield by maturity date of the investment securities outstanding at June 30, 2022:


(Dollars in Millions)	Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (e)
Held-to-maturity
U.S. Treasury and Agencies
Maturing in one year or less	$	–	$	–		–		–	%
Maturing after one year through five years		1,343		1,337		3.8		2.85
Maturing after five years through ten years		–		–		–		–
Maturing after ten years		–		–		–		–
Total	$	1,343	$	1,337		3.8		2.85	%
Mortgage-Backed Securities (a)
Maturing in one year or less	$	–	$	–		–		–	%
Maturing after one year through five years		–		–		–		–
Maturing after five years through ten years		23,977		22,825		9.1		2.22
Maturing after ten years		36,183		31,495		10.6		1.72
Total	$	60,160	$	54,320		10.0		1.92	%
Total held-to-maturity (d)	$	61,503	$	55,657		9.8		1.94	%
Available-for-sale
U.S. Treasury and Agencies
Maturing in one year or less	$	1,826	$	1,824		.3		1.96	%
Maturing after one year through five years		3,525		3,296		4.4		1.50
Maturing after five years through ten years		17,771		16,479		7.4		2.04
Maturing after ten years		2,657		2,168		11.8		1.99
Total	$	25,779	$	23,767		6.9		1.95	%
Mortgage-Backed Securities (a)
Maturing in one year or less	$	44	$	44		.7		2.67	%
Maturing after one year through five years		12,785		12,381		3.2		2.03
Maturing after five years through ten years		33,303		30,454		7.9		1.81
Maturing after ten years		25,412		22,437		10.6		2.11
Total	$	71,544	$	65,316		8.0		1.96	%
Obligations of State and Political Subdivisions (b) (c)
Maturing in one year or less	$	182	$	182		.3		4.63	%
Maturing after one year through five years		1,974		1,955		4.0		4.43
Maturing after five years through ten years		1,480		1,401		7.2		3.82
Maturing after ten years		7,289		6,178		16.9		3.36
Total	$	10,925	$	9,716		13.0		3.64	%
Other
Maturing in one year or less	$	–	$	–		–		–	%
Maturing after one year through five years		7		7		2.9		2.07
Maturing after five years through ten years		–		–		–		–
Maturing after ten years		–		–		–		–
Total	$	7	$	7		2.9		2.07	%
Total available-for-sale (d)	$	108,255	$	98,806		8.2		2.13	%

(a)	Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities that take into account anticipated future prepayments.

(b)	Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, and yield to maturity if the security is purchased at par or a discount.

(c)	Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and the contractual maturity date for securities with a fair value equal to or below par.

(d)

The weighted-average maturity of total held-to-maturity investment securities was 7.4 years at December 31, 2021, with a corresponding weighted-average yield of 1.45 percent. The weighted-average maturity of total available-for-sale investment securities was 5.5 years at December 31, 2021, with a corresponding weighted-average yield of 1.73 percent.

(e)

Weighted-average yields for obligations of state and political subdivisions are presented on a fully-taxable equivalent basis based on a federal income tax rate of 21 percent. Yields on investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity.