AFS and HTM Debt Securities

6 Months Ended

Jun. 30, 2024

AFS And HTM Debt Securities [Abstract]

Available-for-Sale and Held-to-Maturity Debt Securities

Note 3: Available-for-Sale and Held-to-Maturity Debt Securities

Table 3.1 provides the amortized cost, net of the allowance for credit losses (ACL) for debt securities, and fair value by major categories of available-for-sale (AFS) debt securities, which are carried at fair value, and held-to-maturity (HTM) debt securities, which are carried at amortized cost, net of the ACL. The net unrealized gains (losses) for AFS debt securities are reported as a component of accumulated other comprehensive income (AOCI), net of the ACL and applicable income taxes. Information on debt securities held for trading is included in Note 2 (Trading Activities).

Outstanding balances exclude accrued interest receivable on AFS and HTM debt securities, which are included in other assets. See Note 7 (Intangible Assets and Other Assets) for additional information on accrued interest receivable. Amounts considered to be uncollectible are reversed through interest income. The interest income reversed in the second quarter and first half of both 2024 and 2023 was insignificant.

Table 3.1: Available-for-Sale and Held-to-Maturity Debt Securities Outstanding

(in millions)	Amortized cost, net (1)		Gross unrealized gains	Gross unrealized losses	Net unrealized gains (losses)	Fair value
June 30, 2024
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	40,257	1	(1,509)	(1,508)	38,749
Securities of U.S. states and political subdivisions (2)	15,684		19	(604)	(585)	15,099
Federal agency mortgage-backed securities	96,124		126	(5,702)	(5,576)	90,548
Non-agency mortgage-backed securities (3)	2,313		2	(87)	(85)	2,228
Collateralized loan obligations	1,530		2	—	2	1,532
Other debt securities	573		26	(3)	23	596
Total available-for-sale debt securities, excluding portfolio level basis adjustments	156,481		176	(7,905)	(7,729)	148,752
Portfolio level basis adjustments (4)	(64)				64	—
Total available-for-sale debt securities	156,417		176	(7,905)	(7,665)	148,752
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	3,792		—	(1,678)	(1,678)	2,114
Securities of U.S. states and political subdivisions	18,481		—	(3,337)	(3,337)	15,144
Federal agency mortgage-backed securities	201,875		—	(36,028)	(36,028)	165,847
Non-agency mortgage-backed securities (3)	1,300		34	(102)	(68)	1,232
Collateralized loan obligations	23,562		92	(2)	90	23,652
Other debt securities	1,726		—	(74)	(74)	1,652
Total held-to-maturity debt securities	250,736		126	(41,221)	(41,095)	209,641
Total	$	407,153	302	(49,126)	(48,760)	358,393
December 31, 2023
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	47,351	2	(1,886)	(1,884)	45,467
Securities of U.S. states and political subdivisions (2)	20,654		36	(624)	(588)	20,066
Federal agency mortgage-backed securities	63,741		111	(4,274)	(4,163)	59,578
Non-agency mortgage-backed securities (3)	2,892		1	(144)	(143)	2,749
Collateralized loan obligations	1,538		—	(5)	(5)	1,533
Other debt securities	1,025		46	(16)	30	1,055
Total available-for-sale debt securities, excluding portfolio level basis adjustments	137,201		196	(6,949)	(6,753)	130,448
Portfolio level basis adjustments (4)	(46)				46	—
Total available-for-sale debt securities	137,155		196	(6,949)	(6,707)	130,448
Held-to-maturity debt securities:
Securities of U.S. Treasury and federal agencies	3,790		—	(1,503)	(1,503)	2,287
Securities of U.S. states and political subdivisions	18,624		3	(2,939)	(2,936)	15,688
Federal agency mortgage-backed securities	209,170		136	(30,918)	(30,782)	178,388
Non-agency mortgage-backed securities (3)	1,276		18	(120)	(102)	1,174
Collateralized loan obligations	28,122		75	(63)	12	28,134
Other debt securities	1,726		—	(81)	(81)	1,645
Total held-to-maturity debt securities	262,708		232	(35,624)	(35,392)	227,316
Total	$	399,863	428	(42,573)	(42,099)	357,764

(1)Represents amortized cost of the securities, net of the ACL of $7 million and $1 million related to AFS debt securities at June 30, 2024, and December 31, 2023, respectively, and $97 million and $93 million related to HTM debt securities at June 30, 2024, and December 31, 2023, respectively.

(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 the ACL, and fair value of these types of securities, was $4.5 billion at June 30, 2024, and $5.5 billion at December 31, 2023.

(3)Predominantly consists of commercial mortgage-backed securities at both June 30, 2024, and December 31, 2023.

(4)Represents fair value hedge basis adjustments related to active portfolio layer method hedges of AFS debt securities, which are not allocated to individual securities in the portfolio. For additional information, see Note 11 (Derivatives).

Table 3.2 details the breakout of purchases of and transfers to HTM debt securities by major category of security. The table excludes the transfer of HTM debt securities with a fair value of $23.2 billion to AFS debt securities in first quarter 2023 in

connection with the adoption of ASU 2022-01. For additional information, see Note 1 (Summary of Significant Accounting Policies) in our 2023 Form 10-K.

Table 3.2: Held-to-Maturity Debt Securities Purchases and Transfers

	Quarter ended June 30,			Six months ended June 30,
(in millions)	2024		2023	2024		2023
Purchases of held-to-maturity debt securities (1):
Federal agency mortgage-backed securities	—		—	$	—	4,225
Non-agency mortgage-backed securities	48		22	48		48
Total purchases of held-to-maturity debt securities	48		22	48		4,273
Transfers from available-for-sale debt securities to held-to-maturity debt securities (2):
Federal agency mortgage-backed securities	—		—	—		3,687
Total transfers from available-for-sale debt securities to held-to-maturity debt securities	$	—	—	$	—	3,687

(1)Inclusive of securities purchased but not yet settled and noncash purchases from securitization of loans held for sale (LHFS).

(2)Represents fair value as of the date of the transfers. Debt securities transferred from available-for-sale to held-to-maturity had pre-tax unrealized losses recorded in AOCI of $320 million in the first half of 2023, at the time of the transfers.

Table 3.3 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 AFS and HTM debt securities (pre-tax).

Table 3.3: Income Statement Impacts for Available-for-Sale and Held-to-Maturity Debt Securities

	Quarter ended June 30,			Six months ended June 30,
(in millions)	2024		2023	2024		2023
Interest income (1):
Available-for-sale	$	1,549	1,346	$	2,915	2,586
Held-to-maturity	1,678		1,797	3,433		3,543
Total interest income	3,227		3,143	6,348		6,129
Provision for credit losses:
Available-for-sale	7		—	16		(39)
Held-to-maturity	—		(1)	3		(9)
Total provision for credit losses	7		(1)	19		(48)
Realized gains and losses (2):
Gross realized gains	—		6	23		6
Gross realized losses	—		(2)	(48)		(2)
Net realized gains (losses)	$	—	4	$	(25)	4

(1)Excludes interest income from trading debt securities, which is disclosed in Note 2 (Trading Activities).

(2)Realized gains and losses relate to AFS debt securities. There were no realized gains or losses from HTM debt securities in all periods presented.

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 ACL for debt securities. 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 (NRSROs). Debt securities rated investment grade, that is those with ratings similar to BBB-/Baa3 or above, as defined by NRSROs, 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 NRSROs, 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. Substantially all of our debt securities were rated by NRSROs at June 30, 2024, and December 31, 2023.

Table 3.4 shows the percentage of fair value of AFS debt securities and amortized cost of HTM debt securities determined to be rated investment grade, inclusive of securities rated based on internal credit grades.

Table 3.4: Investment Grade Debt Securities

	Available-for-Sale				Held-to-Maturity
($ in millions)	Fair value		% investment grade		Amortized cost		% investment grade
June 30, 2024
Total portfolio (1)	$	148,752	99	%	$	250,833	99	%
Breakdown by category:
Securities of U.S. Treasury and federal agencies (2)	$	129,297	100	%	$	205,667	100	%
Securities of U.S. states and political subdivisions	15,099		99		18,492		100
Collateralized loan obligations (3)	1,532		100		23,588		100
All other debt securities (4)	2,824		93		3,086		63
December 31, 2023
Total portfolio (1)	$	130,448	99	%	$	262,801	99	%
Breakdown by category:
Securities of U.S. Treasury and federal agencies (2)	$	105,045	100	%	$	212,960	100	%
Securities of U.S. states and political subdivisions	20,066		99		18,635		100
Collateralized loan obligations (3)	1,533		100		28,154		100
All other debt securities (4)	3,804		95		3,052		64

(1)99% were rated AA- and above at both June 30, 2024, and December 31, 2023.

(2)Includes federal agency mortgage-backed securities.

(3)100% were rated AA- and above at both June 30, 2024, and December 31, 2023.

(4)Includes non-U.S. government, non-agency mortgage-backed, 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.

Debt securities that are past due and still accruing or in nonaccrual status were insignificant at both June 30, 2024, and December 31, 2023. Net charge-offs on debt securities were insignificant in the second quarter and first half of both 2024 and 2023.

Unrealized Losses of Available-for-Sale Debt Securities

Table 3.5 shows the gross unrealized losses and fair value of AFS 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 amortized cost basis, net of the allowance for credit losses.

Table 3.5: 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 (1)		Fair value	Gross unrealized losses (1)	Fair value	Gross unrealized losses (1)	Fair value
June 30, 2024
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	(6)	752	(1,503)	37,709	(1,509)	38,461
Securities of U.S. states and political subdivisions	(15)		925	(589)	8,541	(604)	9,466
Federal agency mortgage-backed securities	(304)		29,107	(5,398)	45,164	(5,702)	74,271
Non-agency mortgage-backed securities	—		—	(87)	2,177	(87)	2,177
Other debt securities	—		—	(3)	119	(3)	119
Total available-for-sale debt securities	$	(325)	30,784	(7,580)	93,710	(7,905)	124,494
December 31, 2023
Available-for-sale debt securities:
Securities of U.S. Treasury and federal agencies	$	(5)	942	(1,881)	43,722	(1,886)	44,664
Securities of U.S. states and political subdivisions	(12)		1,405	(612)	11,247	(624)	12,652
Federal agency mortgage-backed securities	(76)		7,149	(4,198)	41,986	(4,274)	49,135
Non-agency mortgage-backed securities	(1)		42	(143)	2,697	(144)	2,739
Collateralized loan obligations	—		—	(5)	979	(5)	979
Other debt securities	—		—	(16)	420	(16)	420
Total available-for-sale debt securities	$	(94)	9,538	(6,855)	101,051	(6,949)	110,589

(1)Gross unrealized losses exclude portfolio level basis adjustments.

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. Credit impairment is recorded as an ACL for debt securities.

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) in our 2023 Form 10-K.

Contractual Maturities

Table 3.6 and Table 3.7 show the remaining contractual maturities, amortized cost, net of the ACL, fair value and weighted average effective yields of AFS and HTM debt securities, respectively. The remaining contractual principal

maturities for mortgage-backed securities (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 3.6: 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
June 30, 2024
Available-for-sale debt securities (1)(2):
Securities of U.S. Treasury and federal agencies
Amortized cost, net	$	40,257		11,417	27,214	224	1,402
Fair value	38,749			11,320	25,906	204	1,319
Weighted average yield	1.66		%	2.26	1.43	1.81	1.44
Securities of U.S. states and political subdivisions
Amortized cost, net	$	15,684		1,248	3,680	4,262	6,494
Fair value	15,099			1,247	3,637	3,934	6,281
Weighted average yield	3.41		%	4.60	3.81	3.14	3.14
Federal agency mortgage-backed securities
Amortized cost, net	$	96,124		5	113	684	95,322
Fair value	90,548			5	110	641	89,792
Weighted average yield	4.26		%	2.92	2.26	2.61	4.28
Non-agency mortgage-backed securities
Amortized cost, net	$	2,313		—	—	102	2,211
Fair value	2,228			—	—	75	2,153
Weighted average yield	4.99		%	—	—	5.44	4.97
Collateralized loan obligations
Amortized cost, net	$	1,530		—	—	824	706
Fair value	1,532			—	—	825	707
Weighted average yield	6.96		%	—	—	7.03	6.87
Other debt securities
Amortized cost, net	$	573		56	164	329	24
Fair value	596			56	167	332	41
Weighted average yield	5.65		%	3.33	6.96	5.67	1.91
Total available-for-sale debt securities
Amortized cost, net	$	156,481		12,726	31,171	6,425	106,159
Fair value	148,752			12,628	29,820	6,011	100,293
Weighted average yield	3.55		%	2.48	1.72	3.70	4.20

(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.

(2)Amortized cost, net excludes portfolio level basis adjustments of $(64) million.

Table 3.7: 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
June 30, 2024
Held-to-maturity debt securities (1):
Securities of U.S. Treasury and federal agencies
Amortized cost, net	$	3,792		—	—	—	3,792
Fair value	2,114			—	—	—	2,114
Weighted average yield	1.59		%	—	—	—	1.59
Securities of U.S. states and political subdivisions
Amortized cost, net	$	18,481		198	501	603	17,179
Fair value	15,144			197	484	569	13,894
Weighted average yield	2.36		%	1.27	1.97	2.74	2.37
Federal agency mortgage-backed securities
Amortized cost, net	$	201,875		—	—	—	201,875
Fair value	165,847			—	—	—	165,847
Weighted average yield	2.36		%	—	—	—	2.36
Non-agency mortgage-backed securities
Amortized cost, net	$	1,300		—	30	49	1,221
Fair value	1,232			—	34	50	1,148
Weighted average yield	3.36		%	—	4.64	5.22	3.25
Collateralized loan obligations
Amortized cost, net	$	23,562		—	98	13,464	10,000
Fair value	23,652			—	98	13,528	10,026
Weighted average yield	7.00		%	—	6.90	7.13	6.83
Other debt securities
Amortized cost, net	$	1,726		—	1,726	—	—
Fair value	1,652			—	1,652	—	—
Weighted average yield	4.47		%	—	4.47	—	—
Total held-to-maturity debt securities
Amortized cost, net	$	250,736		198	2,355	14,116	234,067
Fair value	209,641			197	2,268	14,147	193,029
Weighted average yield	2.80		%	1.27	4.04	6.93	2.54

(1)Weighted average yields displayed by maturity bucket are weighted based on amortized cost, excluding unamortized basis adjustments related to the transfer of certain debt securities from AFS to HTM, and are shown pre-tax.