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AFS and HTM Debt Securities
 3 Months Ended
Mar. 31, 2020
AFS and HTM Debt Securities [Abstract]  
AFS and HTM Debt Securities
Note 5:  Available-for-Sale and Held-to-Maturity Debt Securities
Table 5.1 provides the amortized cost, net of the allowance for credit losses, and fair value by major categories of available-for-sale debt securities, which are carried at fair value, and held-to-maturity debt securities, which are carried at amortized cost, net of allowance for credit losses. The net unrealized gains (losses) for available-for-sale debt securities are reported as a component of cumulative OCI, net of the allowance for credit losses and applicable income taxes. Information on debt securities held for trading is included in Note 4 (Trading Activities).
Outstanding balances exclude accrued interest receivable on available-for-sale and held-to-maturity debt securities which are included in other assets. During the quarter ended March 31, 2020, we reversed accrued interest receivable on our available-for-sale and held-to-maturity debt securities by reversing interest income of $6 million. See Note 9 (Other Assets) for additional information on accrued interest receivable.
Table 5.1: Available-for-Sale and Held-to-Maturity Debt Securities Outstanding
(in millions)
 Amortized cost, net (1)

 
Gross
unrealized gains 

 
Gross
unrealized losses

 
Fair value

March 31, 2020
 
 
 
 
 
 
 
Available-for-sale debt securities:
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
$
10,952

 
88

 
(4
)
 
11,036

Securities of U.S. states and political subdivisions (2)
38,686

 
206

 
(748
)
 
38,144

Mortgage-backed securities:

 

 

 
 
Federal agencies
154,390

 
5,839

 
(15
)
 
160,214

Residential
820

 
—

 
(44
)
 
776

Commercial
3,897

 
10

 
(253
)
 
3,654

Total mortgage-backed securities
159,107

 
5,849

 
(312
)
 
164,644

Corporate debt securities
6,092

 
38

 
(275
)
 
5,855

Collateralized loan and other debt obligations
26,873

 
63

 
(1,768
)
 
25,168

Other (3)
6,477

 
19

 
(114
)
 
6,382

Total available-for-sale debt securities
248,187

 
6,263

 
(3,221
)
 
251,229

Held-to-maturity debt securities:
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
48,569

 
2,146

 
(24
)
 
50,691

Securities of U.S. states and political subdivisions
14,304

 
344

 
(37
)
 
14,611

Federal agency and other mortgage-backed securities (4)
107,013

 
5,268

 
(43
)
 
112,238

Other debt securities
23

 
—

 
(1
)
 
22

Total held-to-maturity debt securities
169,909

 
7,758

 
(105
)
 
177,562

Total (5)
$
418,096

 
14,021

 
(3,326
)
 
428,791

December 31, 2019
 
 
 
 
 
 
 
Available-for-sale debt securities:
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
$
14,948

 
13

 
(1
)
 
14,960

Securities of U.S. states and political subdivisions (2)
39,381

 
992

 
(36
)
 
40,337

Mortgage-backed securities:
 
 
 
 
 
 
 
Federal agencies
160,318

 
2,299

 
(164
)
 
162,453

Residential
814

 
14

 
(1
)
 
827

Commercial
3,899

 
41

 
(6
)
 
3,934

Total mortgage-backed securities
165,031

 
2,354

 
(171
)
 
167,214

Corporate debt securities
6,343

 
252

 
(32
)
 
6,563

Collateralized loan and other debt obligations
29,693

 
125

 
(123
)
 
29,695

Other (3)
4,664

 
50

 
(24
)
 
4,690

Total available-for-sale debt securities
260,060

 
3,786

 
(387
)
 
263,459

Held-to-maturity debt securities:
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
45,541

 
617

 
(19
)
 
46,139

Securities of U.S. states and political subdivisions
13,486

 
286

 
(13
)
 
13,759

Federal agency and other mortgage-backed securities (4)
94,869

 
2,093

 
(37
)
 
96,925

Other debt securities
37

 
—

 
—

 
37

Total held-to-maturity debt securities
153,933

 
2,996

 
(69
)
 
156,860

Total (5)
$
413,993

 
6,782

 
(456
)
 
420,319

(1)
Represents amortized cost of the securities, net of the allowance for credit losses of $161 million related to available-for-sale debt securities and $11 million related to held-to-maturity debt securities at March 31, 2020. Prior to our adoption of CECL on January 1, 2020, the allowance for credit losses related to available-for-sale and held-to-maturity debt securities was not applicable and is therefore presented as $0 at December 31, 2019. For more information, see Note 1 (Summary of Significant Accounting Policies).
(2)
Includes investments in tax-exempt preferred debt securities issued by investment funds or trusts that predominantly invest in tax-exempt municipal securities. The amortized cost net of allowance for credit losses and fair value of these types of securities was $5.8 billion at both March 31, 2020, and December 31, 2019.
(3)
Primarily includes asset-backed securities collateralized by student loans.
(4)
Predominantly consists of federal agency mortgage-backed securities at both March 31, 2020 and December 31, 2019.
(5)
We held available-for-sale and held-to-maturity debt securities from Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) that each exceeded 10% of stockholders’ equity, with an amortized cost of $102.4 billion and $88.4 billion and a fair value of $107.0 billion and $92.2 billion at March 31, 2020 and an amortized cost of $98.5 billion and $84.1 billion and a fair value of $100.3 billion and $85.5 billion at December 31, 2019, respectively.

Table 5.2 details the breakout of purchases of and transfers to held-to-maturity debt securities by major category of security.

Table 5.2: Held-to-Maturity Debt Securities Purchases and Transfers
 
Quarter ended March 31,
 
(in millions)
2020

 
2019

Purchases of held-to-maturity debt securities:
 
 
 
Securities of U.S. Treasury and federal agencies
$
3,016

 
—

Securities of U.S. states and political subdivisions
866

 
—

Federal agency and other mortgage-backed securities
15,925

 
16

Total purchases of held-to-maturity debt securities
19,807

 
16

Transfers from available-for-sale debt securities to held-to-maturity debt securities:
 
 
 
Federal agency and other mortgage-backed securities
—

 
2,407

Total transfers from available-for-sale debt securities to held-to-maturity debt securities
$
—

 
2,407


Table 5.3 shows the composition of interest income, provision for credit losses, and gross realized gains and losses
from sales and impairment write-downs included in earnings related to available-for-sale and held-to-maturity debt securities (pre-tax).



Table 5.3: Income Statement Impacts for Available-for-Sale and Held-to-Maturity Debt Securities
 
Quarter ended March 31,
 
(in millions)
2020

 
2019

Interest income:
 
 
 
Available-for-sale
$
1,726

 
2,201

Held-to-maturity
980

 
947

Total interest income (1)
2,706

 
3,148

Provision for credit losses (2):
 
 
 
Available-for-sale
168

 
—

Held-to-maturity
4

 
—

Total provision for credit losses
172

 
—

Realized gains and losses (3):
 
 
 
Gross realized gains
256

 
173

Gross realized losses
(4
)
 
(3
)
Impairment write-downs included in earnings:
 
 
 
Credit-related (4)
—

 
(16
)
Intent-to-sell
(15
)
 
(29
)
Total impairment write-downs included in earnings
(15
)
 
(45
)
Net realized gains
$
237

 
125

(1)
Total interest income from debt securities excludes interest income from trading debt securities, which is disclosed in Note 4 (Trading Activities).
(2)
Prior to our adoption of CECL on January 1, 2020, the provision for credit losses from debt securities was not applicable and is therefore presented as $0 for the prior period. For more information, see Note 1 (Summary of Significant Accounting Policies).
(3)
Realized gains and losses relate to available-for-sale debt securities. There were no realized gains or losses from held-to-maturity debt securities in all periods presented.
(4)
For the quarter ended March 31, 2020, credit-related impairment recognized in earnings is classified as provision for credit losses due to our adoption of CECL on January 1, 2020. For more information, see Note 1 (Summary of Significant Accounting Policies).
Credit Quality
We monitor credit quality of debt securities by evaluating various attributes and utilize such information in our evaluation of the appropriateness of the allowance for credit losses. The credit quality indicators that we most closely monitor include credit ratings and delinquency status and are based on information as of our financial statement date.

CREDIT RATINGS Credit ratings express opinions about the credit quality of a debt security. We determine the credit rating of a security according to the lowest credit rating made available by national recognized statistical rating organizations (NRSRO). Debt securities rated investment grade, that is those with ratings similar to BBB-/Baa3 or above, as defined by NRSRO, are generally considered by the rating agencies and market participants to be low credit risk. Conversely, debt securities rated
below investment grade, labeled as “speculative grade” by the rating agencies, are considered to be distinctively higher credit risk than investment grade debt securities.
For debt securities not rated by the NRSRO, we determine an internal credit grade of the debt securities (used for credit risk management purposes) equivalent to the credit ratings assigned by major credit agencies. The fair value of available-for-sale debt securities categorized as investment grade based on internal credit grades was $1.2 billion at March 31, 2020, and $2.2 billion at December 31, 2019. Held-to-maturity debt securities categorized as investment grade based on internal credit grades are not significant. If an internal credit grade was not assigned, we categorized the debt security as non-investment grade.
Table 5.4 shows the percentage of fair value of available-for-sale debt securities and amortized cost of held-to-maturity debt securities determined by those rated investment grade, inclusive of those based on internal credit grades.
Table 5.4: Investment Grade Debt Securities
 
Available-for-Sale
 
 
Held-to-Maturity
 
($ in millions)
Fair value

 % investment grade

 
Amortized cost

% investment grade

March 31, 2020
 
 
 
 
 
Total portfolio
$
251,229

99
%
 
169,920

99
%
 
 
 
 
 
 
Breakdown by category:
 
 
 
 
 
Securities of U.S. Treasury and federal agencies (1)
$
171,250

100
%
 
154,734

100
%
Securities of U.S. states and political subdivisions
38,144

99

 
14,313

100

Collateralized loan obligations
24,582

100

 
N/A

N/A

All other debt securities (2)
17,253

82

 
873

7

December 31, 2019
 
 
 
 
 
Total portfolio
$
263,459

99
%
 
153,933

99
%
 
 
 
 
 
 
Breakdown by category:
 
 
 
 
 
Securities of U.S. Treasury and federal agencies (1)
$
177,413

100
%
 
139,619

100
%
Securities of U.S. states and political subdivisions
40,337

99

 
13,486

100

Collateralized loan obligations
29,055

100

 
N/A

N/A

All other debt securities (2)
16,654

82

 
828

4

(1)
Includes federal agency mortgage-backed securities.
(2)
Includes non-agency mortgage-backed, corporate, and all other debt securities.
DELINQUENCY STATUS AND NONACCRUAL DEBT SECURITIES Debt security issuers that are delinquent in payment of amounts due under contractual debt agreements have a higher probability of recognition of credit losses. As such, as part of our monitoring of the credit quality of the debt security portfolio, we consider whether debt securities we own are past due in payment of principal or interest payments and whether any securities have been placed into nonaccrual status.
We had no debt securities that were past due and still accruing at March 31, 2020 or December 31, 2019. The fair value of available-for-sale debt securities in nonaccrual status was $327 million and $110 million as of March 31, 2020 and
December 31, 2019, respectively. There were no held-to-maturity debt securities in nonaccrual status as of March 31, 2020 or December 31, 2019. Purchased debt securities with credit deterioration (PCD) are not considered to be in nonaccrual status, as payments from issuers of these securities remain current.
Table 5.5 presents detail of available-for-sale debt securities purchased with credit deterioration during the period. There were no held-to-maturity debt securities purchased with credit deterioration during the quarter ended March 31, 2020. The amounts presented are as of the date of the PCD assets were purchased.


Table 5.5: Debt Securities Purchased with Credit Deterioration
(in millions)
Quarter ended March 31, 2020

Available-for-sale debt securities purchased with credit deterioration (PCD):
 
Par value
$
164

Allowance for credit losses at acquisition
(11
)
Discount (or premiums) attributable to other factors
3

        Purchase price of available-for-sale debt securities purchased with credit deterioration
$
156


Unrealized Losses of Available-for-Sale Debt Securities
Table 5.6 shows the gross unrealized losses and fair value of available-for-sale debt securities by length of time those individual securities in each category have been in a continuous loss position. Debt securities on which we have recorded credit impairment are categorized as being “less than 12 months” or
“12 months or more” in a continuous loss position based on the point in time that the fair value declined to below the (1) for the current period presented, amortized cost basis net of allowance for credit losses, or the (2) for the prior period presented, amortized cost basis.
Table 5.6: Gross Unrealized Losses and Fair Value – Available-for-Sale Debt Securities
 
Less than 12 months 
 
 
12 months or more 
 
 
Total 
 
(in millions)
Gross unrealized losses 

 
Fair value 

 
Gross unrealized losses 

 
Fair value 

 
Gross unrealized losses 

 
Fair value 

March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale debt securities:
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
$
(4
)
 
615

 
—

 
—

 
(4
)
 
615

Securities of U.S. states and political subdivisions
(678
)
 
22,740

 
(70
)
 
1,490

 
(748
)
 
24,230

Mortgage-backed securities:
 
 
 
 
 
 
 
 


 


Federal agencies
(3
)
 
594

 
(12
)
 
737

 
(15
)
 
1,331

Residential
(44
)
 
591

 
—

 
—

 
(44
)
 
591

Commercial
(228
)
 
3,275

 
(25
)
 
243

 
(253
)
 
3,518

Total mortgage-backed securities
(275
)
 
4,460

 
(37
)
 
980

 
(312
)
 
5,440

Corporate debt securities
(263
)
 
3,337

 
(12
)
 
129

 
(275
)
 
3,466

Collateralized loan and other debt obligations
(1,226
)
 
18,303

 
(542
)
 
6,442

 
(1,768
)
 
24,745

Other
(91
)
 
4,085

 
(23
)
 
618

 
(114
)
 
4,703

Total available-for-sale debt securities
$
(2,537
)
 
53,540

 
(684
)
 
9,659

 
(3,221
)
 
63,199

December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale debt securities:
 
 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
$
—

 
—

 
(1
)
 
2,423

 
(1
)
 
2,423

Securities of U.S. states and political subdivisions
(10
)
 
2,776

 
(26
)
 
2,418

 
(36
)
 
5,194

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Federal agencies
(50
)
 
16,807

 
(114
)
 
10,641

 
(164
)
 
27,448

Residential
(1
)
 
149

 
—

 
—

 
(1
)
 
149

Commercial
(3
)
 
998

 
(3
)
 
244

 
(6
)
 
1,242

Total mortgage-backed securities
(54
)
 
17,954

 
(117
)
 
10,885

 
(171
)
 
28,839

Corporate debt securities
(9
)
 
303

 
(23
)
 
216

 
(32
)
 
519

Collateralized loan and other debt obligations
(13
)
 
5,070

 
(110
)
 
16,789

 
(123
)
 
21,859

Other
(12
)
 
1,587

 
(12
)
 
492

 
(24
)
 
2,079

Total available-for-sale debt securities
$
(98
)
 
27,690

 
(289
)
 
33,223

 
(387
)
 
60,913


We have assessed each debt security with gross unrealized losses included in the previous table for credit impairment. As part of that assessment we evaluated and concluded that we do not intend to sell any of the debt securities, and that it is more likely than not that we will not be required to sell, prior to recovery of the amortized cost basis. We evaluate, where necessary, whether credit impairment exists by comparing the present value of the expected cash flows to the debt securities’ amortized cost basis. In prior periods, credit impairment was recorded as a write-down to the amortized cost basis of the security. In the current period, credit impairment is recorded as an allowance for credit losses.
For descriptions of the factors we consider when analyzing debt securities for impairment as well as methodology and significant inputs used to measure credit losses, see Note 1 (Summary of Significant Accounting Policies).
Allowance for Credit Losses for Debt Securities
Table 5.7 presents the allowance for credit losses on available-for-sale and held-to-maturity debt securities.
Table 5.7: Allowance for Credit Losses for Debt Securities
 
Quarter ended March 31, 2020
 
(in millions)
Available-for-Sale

Held-to-Maturity

Balance, beginning of period (1)
$
—

—

Cumulative effect from change in accounting policies (2)
24

7

Balance, beginning of period, adjusted
24

7

Provision for credit losses
168

4

Securities purchased with credit deterioration
11

—

Reduction due to intent to sell
(11
)
—

Charge-offs
(32
)
—

Interest income (3)
1

—

Balance, end of period (4)
$
161

11

(1)
Prior to our adoption of CECL on January 1, 2020, the allowance for credit losses related to available-for-sale and held-to-maturity debt securities was not applicable and is therefore presented as $0 at December 31, 2019. For more information, see Note 1 (Summary of Significant Accounting Policies).
(2)
Represents the impact of adoption of CECL on January 1, 2020. For more information, see Note 1 (Summary of Significant Accounting Policies).
(3)
Certain debt securities with an allowance for credit losses calculated by discounting expected cash flows using the securities’ effective interest rate over its remaining life, recognize changes in the allowance for credit losses attributable to the passage of time as interest income.
(4)
Substantially all of allowance for credit losses for debt securities relates to corporate debt securities as of March 31, 2020.

Contractual Maturities
Table 5.8 shows the remaining contractual maturities, amortized cost net of allowance for credit losses, fair value and weighted-average effective yields of available-for-sale debt securities. The remaining contractual principal maturities for MBS do not consider prepayments. Remaining expected maturities will differ
from contractual maturities because borrowers may have the right to prepay obligations before the underlying mortgages mature. 


Table 5.8: Contractual Maturities – Available-for-Sale Debt Securities
By remaining contractual maturity ($ in millions)
Total

 
Within one year

 
After one year
through five years

 
After five years
through ten years

 
After ten years

March 31, 2020
 
 
 
 
 
 
 
 
 
Available-for-sale debt securities (1): 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
 
 
 
 
 
 
 
 
 
Amortized cost, net
$
10,952

 
8,023

 
28

 
45

 
2,856

Fair value
11,036

 
8,029

 
29

 
49

 
2,929

Weighted average yield
2.10
%
 
2.32

 
1.97

 
1.84

 
1.49

Securities of U.S. states and political subdivisions
 
 
 
 
 
 
 
 
 
Amortized cost, net
38,686

 
3,940

 
4,196

 
4,034

 
26,516

Fair value
38,144

 
3,963

 
4,244

 
4,039

 
25,898

Weighted average yield
3.15

 
4.58

 
3.20

 
2.78

 
2.98

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Federal agencies
 
 
 
 
 
 
 
 
 
Amortized cost, net
154,390

 
2

 
123

 
1,944

 
152,321

Fair value
160,214

 
2

 
128

 
2,005

 
158,079

Weighted average yield
3.19

 
1.93

 
3.06

 
2.44

 
3.20

Residential
 
 
 
 
 
 
 
 
 
Amortized cost, net
820

 
—

 
—

 
—

 
820

Fair value
776

 
—

 
—

 
—

 
776

Weighted average yield
3.19

 
—

 
—

 
—

 
3.19

Commercial
 
 
 
 
 
 
 
 
 
Amortized cost, net
3,897

 
—

 
32

 
194

 
3,671

Fair value
3,654

 
—

 
31

 
187

 
3,436

Weighted average yield
2.62

 
—

 
2.49

 
2.71

 
2.62

Total mortgage-backed securities
 
 
 
 
 
 
 
 
 
Amortized cost, net
159,107

 
2

 
155

 
2,138

 
156,812

Fair value
164,644

 
2

 
159

 
2,192

 
162,291

Weighted average yield
3.18

 
1.93

 
2.94

 
2.46

 
3.19

Corporate debt securities
 
 
 
 
 
 
 
 
 
Amortized cost, net
6,092

 
373

 
2,048

 
2,847

 
824

Fair value
5,855

 
355

 
1,973

 
2,755

 
772

Weighted average yield
4.97

 
4.12

 
5.18

 
5.03

 
4.67

Collateralized loan and other debt obligations
 
 
 
 
 
 
 
 
 
Amortized cost, net
26,873

 
—

 
—

 
12,014

 
14,859

Fair value
25,168

 
—

 
—

 
11,362

 
13,806

Weighted average yield
3.21

 
—

 
—

 
3.29

 
3.15

Other
 
 
 
 
 
 
 
 
 
Amortized cost, net
6,477

 
2,021

 
704

 
1,296

 
2,456

Fair value
6,382

 
2,021

 
685

 
1,287

 
2,389

Weighted average yield
1.51

 
(0.22
)
 
2.95

 
1.41

 
2.57

Total available-for-sale debt securities
 
 
 
 
 
 
 
 
 
Amortized cost, net
$
248,187

 
14,359

 
7,131

 
22,374

 
204,323

Fair value
251,229

 
14,370

 
7,090

 
21,684

 
208,085

Weighted average yield
3.13
%
 
2.63

 
3.75

 
3.24

 
3.14

(1)
Weighted-average yields displayed by maturity bucket are weighted based on amortized cost without effect for any related hedging derivatives and are shown pre-tax.

Table 5.9 shows the remaining contractual maturities, amortized cost net of allowance for credit losses, fair value, and
weighted-average effective yields of held-to-maturity debt securities.
Table 5.9: Contractual Maturities – Held-to-Maturity Debt Securities
By remaining contractual maturity ($ in millions)
Total

 
Within one year

 
After one year
through five years

 
After five years
through ten years

 
After ten years

March 31, 2020
 
 
 
 
 
 
 
 
 
Held-to-maturity debt securities (1): 
 
 
 
 
 
 
 
 
 
Securities of U.S. Treasury and federal agencies
 
 
 
 
 
 
 
 
 
Amortized cost, net
$
48,569

 
8,336

 
36,454

 
—

 
3,779

Fair value
50,691

 
8,494

 
38,170

 
—

 
4,027

Weighted average yield
2.14
%
 
2.24

 
2.18

 
—

 
1.56

Securities of U.S. states and political subdivisions
 
 
 
 
 
 
 
 
 
Amortized cost, net
14,304

 
11

 
713

 
1,724

 
11,856

Fair value
14,611

 
11

 
731

 
1,794

 
12,075

Weighted average yield
2.71

 
1.95

 
2.22

 
2.86

 
2.72

Federal agency and other mortgage-backed securities
 
 
 
 
 
 
 
 
 
Amortized cost, net
107,013

 
—

 
15

 
104

 
106,894

Fair value
112,238

 
—

 
13

 
111

 
112,114

Weighted average yield
2.96

 
—

 
2.99

 
1.37

 
2.96

Other debt securities
 
 
 
 
 
 
 
 
 
Amortized cost, net
23

 
—

 
—

 
23

 
—

Fair value
22

 
—

 
—

 
22

 
—

Weighted average yield
3.01

 
—

 
—

 
3.01

 
—

Total held-to-maturity debt securities
 
 
 
 
 
 
 
 
 
Amortized cost, net
$
169,909

 
8,347

 
37,182

 
1,851

 
122,529

Fair value
177,562

 
8,505

 
38,914

 
1,927

 
128,216

Weighted average yield
2.70
%
 
2.24

 
2.18

 
2.78

 
2.89

(1)
Weighted-average yields displayed by maturity bucket are weighted based on amortized cost and are shown pre-tax.