Securities

3 Months Ended

Mar. 31, 2021

Investments, Debt and Equity Securities [Abstract]

Securities

Securities

Our securities available-for-sale and securities held-to-maturity portfolios consisted of the following:

March 31, 2021	Amortized Cost		Allowance for Credit Losses		Unrealized Gains		Unrealized Losses		Fair Value
	(in millions)
Securities available-for-sale:
U.S. Treasury	$	13,574	$	—	$	262	$	(146)	$	13,690
U.S. Government sponsored enterprises:
Mortgage-backed securities	6,700		—		153		(103)		6,750
Collateralized mortgage obligations	1,904		—		8		(48)		1,864
Direct agency obligations	1,318		—		19		—		1,337
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	5,717		—		76		(38)		5,755
Collateralized mortgage obligations	1,824		—		18		(12)		1,830
Direct agency obligations	273		—		9		—		282
Asset-backed securities collateralized by:
Home equity	26		(1)		—		—		25
Other	108		—		—		(3)		105
Foreign debt securities(1)	3,017		—		4		—		3,021
Total available-for-sale securities	$	34,461	$	(1)	$	549	$	(350)	$	34,659
Securities held-to-maturity:
U.S. Government sponsored enterprises:
Mortgage-backed securities	$	1,001	$	—	$	39	$	—	$	1,040
Collateralized mortgage obligations	700		—		46		—		746
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	1,674		—		58		—		1,732
Collateralized mortgage obligations	4,454		—		183		—		4,637
Obligations of U.S. states and political subdivisions	8		—		1		—		9
Asset-backed securities collateralized by residential mortgages	2		(2)		2		—		2
Total held-to-maturity securities	$	7,839	$	(2)	$	329	$	—	$	8,166

December 31, 2020	Amortized Cost		Allowance for Credit Losses		Unrealized Gains		Unrealized Losses		Fair Value
	(in millions)
Securities available-for-sale:
U.S. Treasury	$	16,087	$	—	$	608	$	(47)	$	16,648
U.S. Government sponsored enterprises:
Mortgage-backed securities	5,986		—		280		(2)		6,264
Collateralized mortgage obligations	1,676		—		19		(2)		1,693
Direct agency obligations	1,236		—		17		—		1,253
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	6,993		—		152		—		7,145
Collateralized mortgage obligations	2,093		—		22		(11)		2,104
Direct agency obligations	296		—		5		—		301
Asset-backed securities collateralized by:
Home equity	28		(1)		—		—		27
Other	114		—		—		(10)		104
Foreign debt securities(1)	5,127		—		6		—		5,133
Total available-for-sale securities	$	39,636	$	(1)	$	1,109	$	(72)	$	40,672
Securities held-to-maturity:
U.S. Government sponsored enterprises:
Mortgage-backed securities	$	1,137	$	—	$	44	$	—	$	1,181
Collateralized mortgage obligations	780		—		53		—		833
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	1,947		—		76		—		2,023
Collateralized mortgage obligations	5,107		—		212		—		5,319
Obligations of U.S. states and political subdivisions	10		—		1		—		11
Asset-backed securities collateralized by residential mortgages	2		(2)		2		—		2
Total held-to-maturity securities	$	8,983	$	(2)	$	388	$	—	$	9,369

(1)Foreign debt securities represent public sector entity, bank or corporate debt.

Securities Available-for-Sale The following provides additional information about our portfolio of securities available-for-sale:

Allowance for credit losses On a quarterly basis, we perform an assessment to determine whether there have been any events or economic circumstances to indicate that a debt security available-for-sale in an unrealized loss position has suffered impairment due to credit factors. A debt security available-for-sale is considered impaired if its fair value is less than its amortized cost basis at the reporting date. If impaired, we assess whether the impairment is due to credit factors.

If we intend to sell the debt security or if it is more-likely-than-not that we will be required to sell the debt security before the recovery of its amortized cost basis, the impairment is recognized and the unrealized loss is recorded as a direct write-down of the security's amortized cost basis with an offsetting entry to earnings. If we do not intend to sell the debt security or believe we will not be required to sell the debt security before the recovery of its amortized cost basis, the impairment is assessed to determine if a credit loss component exists. We use a discounted cash flow method to determine the credit loss component. In the event a credit loss exists, an allowance for credit losses is recorded in earnings for the credit loss component of the impairment while the remaining portion of the impairment attributable to factors other than credit loss is recognized, net of tax, in other comprehensive income. The amount of impairment recognized due to credit factors is limited to the excess of the amortized cost basis over the fair value of the security available-for-sale.

In determining whether a credit loss component exists, we consider a series of factors which include:

•The extent to which the fair value is less than the amortized cost basis;

•The credit protection features embedded within the instrument, which includes but is not limited to credit subordination positions, payment structure, over collateralization, protective triggers and financial guarantees provided by third parties;

•Changes in the near term prospects of the issuer or the underlying collateral of a security such as changes in default rates, loss severities given default and significant changes in prepayment assumptions;

•The level of excess cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and

•Any adverse change to the credit conditions of the issuer, the monoline insurer or the security such as credit downgrades by external rating agencies or changes to internal ratings.

At both March 31, 2021 and December 31, 2020, the allowance for credit losses on securities available-for-sale was $1 million.

Securities in an unrealized loss position for which no allowance for credit losses has been recognized The following table summarizes gross unrealized losses and related fair values for securities available-for-sale by major security type at March 31, 2021 and December 31, 2020 classified as to the length of time the losses have existed:

	One Year or Less					Greater Than One Year
	Number of Securities	Gross Unrealized Losses		Aggregate Fair Value of Investment		Number of Securities	Gross Unrealized Losses		Aggregate Fair Value of Investment
	(dollars are in millions)
At March 31, 2021
U.S. Treasury	18	$	(96)	$	2,882	11	$	(50)	$	755
U.S. Government sponsored enterprises	58	(150)		5,120		8	(1)		45
U.S. Government agency issued or guaranteed	18	(49)		2,648		4	(1)		50
Asset-backed securities	2	(1)		48		3	(2)		57
Foreign debt securities	5	—		425		3	—		161
Securities available-for-sale	101	$	(296)	$	11,123	29	$	(54)	$	1,068
At December 31, 2020
U.S. Treasury	5	$	(5)	$	751	13	$	(42)	$	1,271
U.S. Government sponsored enterprises	15	(3)		715		8	(1)		46
U.S. Government agency issued or guaranteed	13	(11)		1,482		3	—		8
Asset-backed securities	3	(10)		104		2	—		—
Foreign debt securities	6	—		766		5	—		241
Securities available-for-sale	42	$	(29)	$	3,818	31	$	(43)	$	1,566

Gross unrealized losses increased as compared with December 31, 2020 due primarily to increasing yields on U.S. Treasury, U.S. Government sponsored mortgage-backed and U.S. Government agency mortgage-backed securities.

Although the fair value of a particular security may be below its amortized cost, it does not necessarily result in a credit loss and hence an allowance for credit losses. The decline in fair value may be caused by, among other things, the illiquidity of the market. We have reviewed the securities in an unrealized loss position for which no allowance for credit losses has been recognized in accordance with our accounting policies, discussed further above. At March 31, 2021, we do not consider any of these securities to be impaired due to credit factors as we expect to recover their amortized cost basis and we neither intend nor expect to be required to sell these securities prior to recovery, even if that equates to holding them until their individual maturities. However, impairments due to credit factors may occur in future periods if the credit quality of the securities deteriorates.

Securities Held-to-Maturity The following provides additional information about our portfolio of securities held-to-maturity:

Allowance for credit losses We exclude from our calculation of lifetime expected credit losses ("lifetime ECL") securities for which we expect that non-payment of the amortized cost basis will be zero ("Zero Expected Credit Loss Exception"). Due to the composition of our portfolio of securities held-to-maturity, substantially all of our portfolio qualifies for the Zero Expected Credit Loss Exception and has been excluded from our lifetime ECL calculation. At both March 31, 2021 and December 31, 2020, the allowance for credit losses on securities held-to-maturity was $2 million.

At March 31, 2021 and December 31, 2020, none of our securities held-to-maturity were past due or in nonaccrual status.

Credit risk profile Securities are assigned a credit rating based on the estimated probability of default. The credit ratings are used as a credit quality indicator to monitor our securities held-to-maturity portfolio. We utilize Standard and Poor's ("S&P") as

the primary source of our credit ratings. If S&P ratings are not available, ratings by Moody's and Fitch are used in that order. Investment grade includes securities with credit ratings of at least BBB- or above. At March 31, 2021 and December 31, 2020, all of our securities held-to-maturity were investment grade.

Other securities gains, net  The following table summarizes realized gains and losses on investment securities transactions attributable to available-for-sale securities:

Three Months Ended March 31,	2021		2020
	(in millions)
Gross realized gains	$	49	$	51
Gross realized losses	(20)		(23)
Net realized gains	$	29	$	28

Contractual Maturities and Yields  The following table summarizes the amortized cost and fair values of securities available-for-sale and securities held-to-maturity at March 31, 2021 by contractual maturity. Expected maturities differ from contractual maturities because borrowers have the right to prepay obligations without prepayment penalties in certain cases. The table below also reflects the distribution of maturities of debt securities held at March 31, 2021, together with the approximate yield of the portfolio. The yields shown are calculated by dividing annualized interest income, including the accretion of discounts and the amortization of premiums, by the amortized cost of securities outstanding at March 31, 2021.

	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(dollars are in millions)
Available-for-sale:
U.S. Treasury	$	1,437	2.41	%	$	3,097	1.56	%	$	5,384	1.35	%	$	3,656	2.27	%
U.S. Government sponsored enterprises	31		2.71		966		1.94		2,771		2.56		6,154		1.74
U.S. Government agency issued or guaranteed	—		—		96		1.79		1		7.87		7,717		2.12
Asset-backed securities	—		—		—		—		59		5.06		75		3.36
Foreign debt securities	1,840		.51		1,177		.68		—		—		—		—
Total amortized cost	$	3,308	1.36	%	$	5,336	1.44	%	$	8,215	1.79	%	$	17,602	2.02	%
Total fair value	$	3,326			$	5,454			$	8,286			$	17,593
Held-to-maturity:
U.S. Government sponsored enterprises	$	74	2.39	%	$	242	2.71	%	$	397	2.24	%	$	988	3.27	%
U.S. Government agency issued or guaranteed	—		—		8		4.02		11		4.76		6,109		2.56
Obligations of U.S. states and political subdivisions	1		2.72		5		3.47		2		4.21		—		—
Asset-backed securities	—		—		—		—		—		—		2		5.85
Total amortized cost	$	75	2.39	%	$	255	2.78	%	$	410	2.31	%	$	7,099	2.66	%
Total fair value	$	75			$	265			$	425			$	7,401

Equity Securities Equity securities that are not classified as trading and are included in other assets consisted of the following:

	March 31, 2021		December 31, 2020
	(in millions)
Equity securities carried at fair value	$	282	$	284
Equity securities without readily determinable fair values	14		14

On a quarterly basis, we perform an assessment to determine whether any equity securities without readily determinable fair values are impaired. In the event an equity security is deemed impaired, the security is written down to fair value with impairment recorded in earnings. During the three months ended March 31, 2021 and 2020, none of our equity securities without readily determinable fair values were determined to be impaired.

Also included in other assets were investments in Federal Home Loan Bank ("FHLB") stock and Federal Reserve Bank stock of $192 million and $559 million, respectively, at March 31, 2021 and $259 million and $559 million, respectively, at December 31, 2020.