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Debt Securities

9 Months Ended

Sep. 30, 2024

Investments, Debt and Equity Securities [Abstract]

Securities

NOTE 3. DEBT SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair value of debt securities held to maturity and debt securities available for sale are as follows:

			September 30, 2024
									Recognized in OCI (1)																		Not recognized in OCI
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Carrying Value						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value
			(In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency			$	2,718					$	—					$	(442)					$	2,276					$	—					$	(16)					$	2,260
Commercial agency			512						—						(1)						511						—						(12)						499
			$	3,230					$	—					$	(443)					$	2,787					$	—					$	(28)					$	2,759
Debt securities available for sale:
U.S. Treasury securities			$	2,102					$	13					$	(69)					$	2,046																	$	2,046
Federal agency securities			461						6						(10)						457																		457
Obligations of states and political subdivisions			2						—						—						2																		2
Mortgage-backed securities:
Residential agency			21,564						199						(1,304)						20,459																		20,459
Commercial agency			5,135						10						(223)						4,922																		4,922
Commercial non-agency			92						—						(7)						85																		85
Corporate and other debt securities			734						6						(13)						727																		727
			$	30,090					$	234					$	(1,626)					$	28,698																	$	28,698

 

			December 31, 2023
									Recognized in OCI (1)																		Not recognized in OCI
			Amortized Cost						Gross Unrealized Gains						Gross Unrealized Losses						Carrying Value						Gross Unrealized Gains						Gross Unrealized Losses						Estimated Fair Value
			(In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency			$	247					$	—					$	(8)					$	239					$	—					$	(16)					$	223
Commercial agency			516						—						(1)						515						—						(22)						493
			$	763					$	—					$	(9)					$	754					$	—					$	(38)					$	716
Debt securities available for sale:
U.S. Treasury securities			$	1,322					$	—					$	(99)					$	1,223																	$	1,223
Federal agency securities			1,085						4						(46)						1,043																		1,043
Obligations of states and political subdivisions			2						—						—						2																		2
Mortgage-backed securities:
Residential agency			19,450						52						(2,130)						17,372																		17,372
Commercial agency			7,807						2						(502)						7,307																		7,307
Commercial non-agency			93						—						(10)						83																		83
Corporate and other debt securities			1,105						4						(35)						1,074																		1,074
			$	30,864					$	62					$	(2,822)					$	28,104																	$	28,104

_________

(1)Securities held to maturity gross unrealized losses recognized in OCI resulted from transfers of securities available for sale to held to maturity.

In the third quarter of 2024, the Company reclassified securities with an amortized cost, excluding items recognized in OCI, of $2.5 billion from available for sale to held to maturity. The Company determined it has both the positive intent and ability to hold these securities to maturity. The securities were transferred at amortized cost, in addition to the amount of any remaining unrealized holding gain or loss reported in AOCI, and represented a non-cash transaction. OCI included net pre-tax unrealized losses of $436 million at the date of transfer and the offsetting OCI components are being amortized into net interest income over the remaining life of the related securities as a yield adjustment, resulting in no impact on future net income.

Debt securities with carrying values of $20.8 billion and $24.0 billion at September 30, 2024 and December 31, 2023, respectively, were pledged to secure public funds, trust deposits and other borrowing arrangements.

The amortized cost and estimated fair value of debt securities held to maturity and debt securities available for sale at September 30, 2024, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

			Amortized Cost						Estimated Fair Value
			(In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency			$	2,718					$	2,260
Commercial agency			512						499
			$	3,230					$	2,759
Debt securities available for sale:
Due in one year or less			$	411					$	405
Due after one year through five years			2,023						1,967
Due after five years through ten years			726						731
Due after ten years			139						129
Mortgage-backed securities:
Residential agency			21,564						20,459
Commercial agency			5,135						4,922
Commercial non-agency			92						85
			$	30,090					$	28,698

The following tables present gross unrealized losses and the related estimated fair value of debt securities held to maturity and debt securities available for sale at September 30, 2024 and December 31, 2023. For debt securities transferred to held to maturity from available for sale, the analysis in the tables below compares the securities' original amortized cost to its current estimated fair value. All securities in an unrealized position are segregated between investments that have been in a continuous unrealized loss position for less than twelve months and for twelve months or more.

			September 30, 2024
			Less Than Twelve Months												Twelve Months or More												Total
			Estimated Fair Value						Gross Unrealized Losses						Estimated Fair Value						Gross Unrealized Losses						Estimated Fair Value						Gross Unrealized Losses
			(In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency			$	—					$	—					$	2,260					$	(458)					$	2,260					$	(458)
Commercial agency			—						—						499						(13)						499						(13)
			$	—					$	—					$	2,759					$	(471)					$	2,759					$	(471)
Debt securities available for sale:
U.S Treasury securities			$	92					$	—					$	1,122					$	(69)					$	1,214					$	(69)
Federal agency securities			—						—						200						(10)						200						(10)
Mortgage-backed securities:
Residential agency			1,216						(6)						12,079						(1,298)						13,295						(1,304)
Commercial agency			383						(3)						3,709						(220)						4,092						(223)
Commercial non-agency			—						—						84						(7)						84						(7)
Corporate and other debt securities			18						—						444						(13)						462						(13)
			$	1,709					$	(9)					$	17,638					$	(1,617)					$	19,347					$	(1,626)

 

			December 31, 2023
			Less Than Twelve Months												Twelve Months or More												Total
			Estimated Fair Value						Gross Unrealized Losses						Estimated Fair Value						Gross Unrealized Losses						Estimated Fair Value						Gross Unrealized Losses
			(In millions)
Debt securities held to maturity:
Mortgage-backed securities:
Residential agency			$	—					$	—					$	223					$	(23)					$	223					$	(23)
Commercial agency			—						—						493						(23)						493						(23)
			$	—					$	—					$	716					$	(46)					$	716					$	(46)
Debt securities available for sale:
U.S. Treasury securities			$	6					$	—					$	1,201					$	(99)					$	1,207					$	(99)
Federal agency securities			237						(5)						666						(41)						903						(46)
Mortgage-backed securities:
Residential agency			241						(3)						15,144						(2,127)						15,385						(2,130)
Commercial agency			612						(7)						6,583						(495)						7,195						(502)
Commercial non-agency			—						—						82						(10)						82						(10)
Corporate and other debt securities			23						—						879						(35)						902						(35)
			$	1,119					$	(15)					$	24,555					$	(2,807)					$	25,674					$	(2,822)

The number of individual debt positions in an unrealized loss position in the tables above decreased to 1,540 at September 30, 2024 from 1,703 at December 31, 2023. The decrease in the total amount of unrealized losses was impacted by changes in market interest rates. In instances where an unrealized loss existed, there was no indication of an adverse change in credit on the underlying positions in the tables above. As it relates to these positions, management believes no individual unrealized loss represented credit impairment as of those dates. At September 30, 2024, the Company does not intend to sell, and it is not more likely than not that the Company will be required to sell, the positions before the recovery of their amortized cost bases, which may be at maturity.

Gross realized losses on sales of debt securities available for sale for the three and nine months ended September 30, 2024 totaled $92 million and $192 million, respectively, while gross realized gains totaled $14 million for both the three and nine months ended September 30, 2024. Therefore, the Company recognized net realized losses of $78 million and $178 million for the three and nine months ended September 30, 2024, respectively. Gross realized gains and losses on sales of debt securities available for sale were immaterial for three and nine months ended September 30, 2023. The cost of securities sold is based on the specific identification method. As part of the Company's normal process for evaluating impairment, including credit-related impairment, impairment identified by management was immaterial for the three and nine months ended September 30, 2024 and 2023.

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- Definition

The entire disclosure for investments in certain debt and equity securities.

+ References

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-Topic 940
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