Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018
Commission file number 001-08918
SunTrust Banks, Inc.
(Exact name of registrant as specified in its charter)
|
| | |
Georgia | | 58-1575035 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
303 Peachtree Street, N.E., Atlanta, Georgia 30308
(Address of principal executive offices) (Zip Code)
(800) 786-8787
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
| | | |
Large accelerated filer | þ | Accelerated filer | ¨ |
Non-accelerated filer | ¨ (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
| | Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ
At April 30, 2018, 464,826,552 shares of the registrant’s common stock, $1.00 par value, were outstanding.
TABLE OF CONTENTS
GLOSSARY OF DEFINED TERMS
2017 Tax Act — Tax Cuts and Jobs Act of 2017.
ABS — Asset-backed securities.
ACH — Automated clearing house.
AFS — Available for sale.
AIP — Annual Incentive Plan.
ALCO — Asset/Liability Management Committee.
ALM — Asset/Liability Management.
ALLL — Allowance for loan and lease losses.
AOCI — Accumulated other comprehensive income.
APIC — Additional paid-in capital.
ASC — Accounting Standards Codification.
ASU — Accounting Standards Update.
ATE — Additional termination event.
ATM — Automated teller machine.
Bank — SunTrust Bank.
Basel III — the Third Basel Accord, a comprehensive set of reform measures developed by the BCBS.
BCBS — Basel Committee on Banking Supervision.
BHC — Bank holding company.
Board — the Company’s Board of Directors.
bps — Basis points.
BRC — Board Risk Committee.
CCAR — Comprehensive Capital Analysis and Review.
CCB — Capital conservation buffer.
CD — Certificate of deposit (time deposit).
CDR — Conditional default rate.
CDS — Credit default swaps.
CEO — Chief Executive Officer.
CET1 — Common Equity Tier 1 Capital.
CFO — Chief Financial Officer.
CIB — Corporate and investment banking.
C&I — Commercial and industrial.
Class A shares — Visa Inc. Class A common stock.
Class B shares — Visa Inc. Class B common stock.
CME — Chicago Mercantile Exchange.
Company — SunTrust Banks, Inc.
CP — Commercial paper.
CPR — Conditional prepayment rate.
CRE — Commercial real estate.
CSA — Credit support annex.
DDA — Demand deposit account.
DOJ — Department of Justice.
DTA — Deferred tax asset.
DTL — Deferred tax liability.
DVA — Debit valuation adjustment.
EPS — Earnings per share.
ER — Enterprise Risk.
ERISA — Employee Retirement Income Security Act of 1974.
Exchange Act — Securities Exchange Act of 1934.
Fannie Mae — Federal National Mortgage Association.
FASB — Financial Accounting Standards Board.
Freddie Mac — Federal Home Loan Mortgage Corporation.
FDIC — Federal Deposit Insurance Corporation.
Federal Reserve — Federal Reserve System.
Fed Funds — Federal funds.
FHA — Federal Housing Administration.
FHLB — Federal Home Loan Bank.
FICO — Fair Isaac Corporation.
Fitch — Fitch Ratings Ltd.
FRB — Board of Governors of the Federal Reserve System.
FTE — Fully taxable-equivalent.
FVO — Fair value option.
GFO — GFO Advisory Services, LLC.
Ginnie Mae — Government National Mortgage Association.
GSE — Government-sponsored enterprise.
HAMP — Home Affordable Modification Program.
HUD — U.S. Department of Housing and Urban Development.
IPO — Initial public offering.
IRLC — Interest rate lock commitment.
ISDA — International Swaps and Derivatives Association.
LCH — LCH.Clearnet Limited.
LCR — Liquidity coverage ratio.
LGD — Loss given default.
LHFI — Loans held for investment.
LHFS — Loans held for sale.
LIBOR — London InterBank Offered Rate.
LOCOM — Lower of cost or market.
LTI — Long-term incentive.
LTV— Loan to value.
MasterCard — MasterCard International.
MBS — Mortgage-backed securities.
MD&A — Management’s Discussion and Analysis of Financial Condition and Results of Operation.
Moody’s — Moody’s Investors Service.
MRA — Master Repurchase Agreement.
MRM — Market Risk Management.
MRMG — Model Risk Management Group.
MSR — Mortgage servicing right.
MVE — Market value of equity.
NCF — National Commerce Financial Corporation.
NOL — Net operating loss.
NOW — Negotiable order of withdrawal account.
NPA — Nonperforming asset.
NPL — Nonperforming loan.
NPR — Notice of proposed rulemaking.
NSFR — Net stable funding ratio.
OCC — Office of the Comptroller of the Currency.
OCI — Other comprehensive income.
OREO — Other real estate owned.
OTC — Over-the-counter.
OTTI — Other-than-temporary impairment.
PAC — Premium Assignment Corporation.
Parent Company — SunTrust Banks, Inc. (the parent Company of SunTrust Bank and other subsidiaries).
PD — Probability of default.
Pillar — substantially all of the assets of the operating subsidiaries of Pillar Financial, LLC.
PPNR — Pre-provision net revenue.
PWM — Private Wealth Management.
REIT — Real estate investment trust.
ROA — Return on average total assets.
ROE — Return on average common shareholders’ equity.
ROTCE — Return on average tangible common shareholders' equity.
RSU — Restricted stock unit.
RWA — Risk-weighted assets.
S&P — Standard and Poor’s.
SBA — Small Business Administration.
SEC — U.S. Securities and Exchange Commission.
STAS — SunTrust Advisory Services, Inc.
STCC — SunTrust Community Capital, LLC.
STIS — SunTrust Investment Services, Inc.
STM — SunTrust Mortgage, Inc.
STRH — SunTrust Robinson Humphrey, Inc.
SunTrust — SunTrust Banks, Inc.
TDR — Troubled debt restructuring.
TRS — Total return swaps.
U.S. — United States.
U.S. GAAP — Generally Accepted Accounting Principles in the U.S.
U.S. Treasury — the U.S. Department of the Treasury.
UPB — Unpaid principal balance.
UTB — Unrecognized tax benefit.
VA — U.S. Department of Veterans Affairs.
VAR — Value at risk.
VI — Variable interest.
VIE — Variable interest entity.
Visa — the Visa, U.S.A. Inc. card association or its affiliates, collectively.
Visa Counterparty — a financial institution that purchased the Company's Visa Class B shares.
PART I - FINANCIAL INFORMATION
The following unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and accordingly do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary to comply with Regulation S-X have been included. Operating results for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2018.
|
| |
Item 1. | FINANCIAL STATEMENTS (UNAUDITED) |
SunTrust Banks, Inc.
Consolidated Statements of Income
|
| | | | | | | |
| Three Months Ended March 31 |
(Dollars in millions and shares in thousands, except per share data) (Unaudited) | 2018 | | 2017 |
Interest Income | | | |
Interest and fees on loans held for investment |
| $1,398 |
| |
| $1,289 |
|
Interest and fees on loans held for sale | 21 |
| | 24 |
|
Interest on securities available for sale 1 | 206 |
| | 182 |
|
Trading account interest and other 1 | 43 |
| | 33 |
|
Total interest income | 1,668 |
| | 1,528 |
|
Interest Expense | | | |
Interest on deposits | 131 |
| | 80 |
|
Interest on long-term debt | 74 |
| | 70 |
|
Interest on other borrowings | 22 |
| | 12 |
|
Total interest expense | 227 |
| | 162 |
|
Net interest income | 1,441 |
| | 1,366 |
|
Provision for credit losses | 28 |
| | 119 |
|
Net interest income after provision for credit losses | 1,413 |
| | 1,247 |
|
Noninterest Income | | | |
Service charges on deposit accounts | 146 |
|
| 148 |
|
Other charges and fees | 87 |
|
| 95 |
|
Card fees | 81 |
| | 82 |
|
Investment banking income | 131 |
| | 167 |
|
Trading income | 42 |
| | 51 |
|
Trust and investment management income | 75 |
| | 75 |
|
Retail investment services | 72 |
| | 68 |
|
Mortgage servicing related income | 54 |
| | 58 |
|
Mortgage production related income | 36 |
| | 53 |
|
Commercial real estate related income | 23 |
| | 20 |
|
Net securities gains | 1 |
|
| — |
|
Other noninterest income | 48 |
|
| 30 |
|
Total noninterest income | 796 |
| | 847 |
|
Noninterest Expense | | | |
Employee compensation | 707 |
| | 717 |
|
Employee benefits | 146 |
| | 135 |
|
Outside processing and software | 206 |
| | 205 |
|
Net occupancy expense | 94 |
| | 92 |
|
Marketing and customer development | 41 |
| | 42 |
|
Regulatory assessments | 41 |
| | 48 |
|
Equipment expense | 40 |
| | 39 |
|
Amortization | 15 |
| | 13 |
|
Operating losses | 6 |
| | 32 |
|
Other noninterest expense | 121 |
| | 142 |
|
Total noninterest expense | 1,417 |
| | 1,465 |
|
Income before provision for income taxes | 792 |
| | 629 |
|
Provision for income taxes | 147 |
| | 159 |
|
Net income including income attributable to noncontrolling interest | 645 |
| | 470 |
|
Less: Net income attributable to noncontrolling interest | 2 |
| | 2 |
|
Net income |
| $643 |
| |
| $468 |
|
Net income available to common shareholders |
| $612 |
| |
| $451 |
|
| | | |
Net income per average common share: | | | |
Diluted |
| $1.29 |
| |
| $0.91 |
|
Basic | 1.31 |
| | 0.92 |
|
Dividends declared per common share | 0.40 |
| | 0.26 |
|
Average common shares outstanding - diluted | 473,620 |
| | 496,002 |
|
Average common shares outstanding - basic | 468,723 |
| | 490,091 |
|
1 Beginning January 1, 2018, the Company reclassified equity securities previously presented in Securities available for sale to Other assets on the Consolidated Balance Sheets and began presenting income associated with certain of these equity securities in Trading account interest and other. For periods prior to January 1, 2018, income associated with these equity securities was presented in Interest on securities available for sale and has been reclassified to Trading account interest and other for comparability.
See accompanying Notes to Consolidated Financial Statements (unaudited).
SunTrust Banks, Inc.
Consolidated Statements of Comprehensive Income
|
| | | | | | | |
| Three Months Ended March 31 |
(Dollars in millions) (Unaudited) | 2018 | | 2017 |
Net income |
| $643 |
| |
| $468 |
|
Components of other comprehensive loss: | | | |
Change in net unrealized (losses)/gains on securities available for sale, net of tax of ($130) and $1, respectively | (425 | ) | | 2 |
|
Change in net unrealized losses on derivative instruments, net of tax of ($38) and ($24), respectively | (124 | ) | | (42 | ) |
Change in net unrealized gains on brokered time deposits, net of tax of $0 and $0, respectively | 1 |
| | — |
|
Change in credit risk adjustment on long-term debt, net of tax of $1 and ($1), respectively | 2 |
| | (1 | ) |
Change related to employee benefit plans, net of tax of $1 and ($1), respectively | (2 | ) | | (5 | ) |
Total other comprehensive loss, net of tax | (548 | ) | | (46 | ) |
Total comprehensive income |
| $95 |
| |
| $422 |
|
See accompanying Notes to Consolidated Financial Statements (unaudited).
SunTrust Banks, Inc.
Consolidated Balance Sheets
|
| | | | | | | |
(Dollars in millions and shares in thousands, except per share data) | March 31,
2018 | | December 31,
2017 |
Assets | (Unaudited) | | |
Cash and due from banks |
| $5,851 |
| |
| $5,349 |
|
Federal funds sold and securities borrowed or purchased under agreements to resell | 1,428 |
| | 1,538 |
|
Interest-bearing deposits in other banks | 25 |
| | 25 |
|
Cash and cash equivalents | 7,304 |
| | 6,912 |
|
Trading assets and derivative instruments 1 | 5,112 |
| | 5,093 |
|
Securities available for sale 2, 3 | 30,934 |
| | 30,947 |
|
Loans held for sale ($1,428 and $1,577 at fair value at March 31, 2018 and December 31, 2017, respectively) | 2,377 |
| | 2,290 |
|
Loans held for investment 4 ($188 and $196 at fair value at March 31, 2018 and December 31, 2017, respectively) | 142,618 |
| | 143,181 |
|
Allowance for loan and lease losses | (1,694 | ) | | (1,735 | ) |
Net loans held for investment | 140,924 |
| | 141,446 |
|
Premises and equipment, net | 1,628 |
| | 1,734 |
|
Goodwill | 6,331 |
| | 6,331 |
|
Other intangible assets (Residential MSRs at fair value: $1,916 and $1,710 at March 31, 2018 and December 31, 2017, respectively) | 1,996 |
| | 1,791 |
|
Other assets 3 ($143 and $56 at fair value at March 31, 2018 and December 31, 2017, respectively) | 8,279 |
| | 9,418 |
|
Total assets |
| $204,885 |
| |
| $205,962 |
|
| | | |
Liabilities | | | |
Noninterest-bearing deposits |
| $43,494 |
| |
| $42,784 |
|
Interest-bearing deposits ($302 and $236 at fair value at March 31, 2018 and December 31, 2017, respectively) | 118,885 |
| | 117,996 |
|
Total deposits | 162,379 |
| | 160,780 |
|
Funds purchased | 1,189 |
| | 2,561 |
|
Securities sold under agreements to repurchase | 1,677 |
| | 1,503 |
|
Other short-term borrowings | 706 |
| | 717 |
|
Long-term debt 5 ($209 and $530 at fair value at March 31, 2018 and December 31, 2017, respectively) | 10,692 |
| | 9,785 |
|
Trading liabilities and derivative instruments | 1,737 |
| | 1,283 |
|
Other liabilities | 2,236 |
| | 4,179 |
|
Total liabilities | 180,616 |
| | 180,808 |
|
Shareholders’ Equity | | | |
Preferred stock, no par value | 2,025 |
| | 2,475 |
|
Common stock, $1.00 par value | 552 |
| | 550 |
|
Additional paid-in capital | 8,960 |
| | 9,000 |
|
Retained earnings | 18,107 |
| | 17,540 |
|
Treasury stock, at cost, and other 6 | (3,853 | ) | | (3,591 | ) |
Accumulated other comprehensive loss, net of tax | (1,522 | ) | | (820 | ) |
Total shareholders’ equity | 24,269 |
| | 25,154 |
|
Total liabilities and shareholders’ equity |
| $204,885 |
| |
| $205,962 |
|
| | | |
Common shares outstanding 7 | 469,708 |
| | 470,931 |
|
Common shares authorized | 750,000 |
| | 750,000 |
|
Preferred shares outstanding | 20 |
| | 25 |
|
Preferred shares authorized | 50,000 |
| | 50,000 |
|
Treasury shares of common stock | 82,223 |
| | 79,133 |
|
| | | |
1 Includes trading securities pledged as collateral where counterparties have the right to sell or repledge the collateral |
| $1,248 |
| |
| $1,086 |
|
2 Includes securities AFS pledged as collateral where counterparties have the right to sell or repledge the collateral | 214 |
| | 223 |
|
3 Beginning January 1, 2018, the Company reclassified equity securities previously presented in Securities available for sale to Other assets. Reclassifications have been made to previously reported amounts for comparability. | | | |
4 Includes loans held for investment of consolidated VIEs | 171 |
| | 179 |
|
5 Includes debt of consolidated VIEs | 182 |
| | 189 |
|
6 Includes noncontrolling interest | 101 |
| | 103 |
|
7 Includes restricted shares | 9 |
| | 9 |
|
See accompanying Notes to Consolidated Financial Statements (unaudited).
SunTrust Banks, Inc.
Consolidated Statements of Shareholders’ Equity
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Dollars and shares in millions, except per share data) (Unaudited) | Preferred Stock | | Common Shares Outstanding | | Common Stock | | Additional Paid-in Capital | | Retained Earnings | | Treasury Stock and Other 1 | | Accumulated Other Comprehensive Loss | | Total |
Balance, January 1, 2017 |
| $1,225 |
| | 491 |
| |
| $550 |
| |
| $9,010 |
| |
| $16,000 |
| |
| ($2,346 | ) | |
| ($821 | ) | |
| $23,618 |
|
Net income | — |
| | — |
| | — |
| | — |
| | 468 |
| | — |
| | — |
| | 468 |
|
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (46 | ) | | (46 | ) |
Change in noncontrolling interest | — |
| | — |
| | — |
| | — |
| | — |
| | (2 | ) | | — |
| | (2 | ) |
Common stock dividends, $0.26 per share | — |
| | — |
| | — |
| | — |
| | (128 | ) | | — |
| | — |
| | (128 | ) |
Preferred stock dividends 2 | — |
| | — |
| | — |
| | — |
| | (17 | ) | | — |
| | — |
| | (17 | ) |
Repurchase of common stock | — |
| | (7 | ) | | — |
| | — |
| | — |
| | (414 | ) | | — |
| | (414 | ) |
Exercise of stock options and stock compensation expense | — |
| | 1 |
| | — |
| | (12 | ) | | — |
| | 21 |
| | — |
| | 9 |
|
Restricted stock activity | — |
| | 1 |
| | — |
| | (32 | ) | | (1 | ) | | 29 |
| | — |
| | (4 | ) |
Balance, March 31, 2017 |
| $1,225 |
| | 486 |
| |
| $550 |
| |
| $8,966 |
| |
| $16,322 |
| |
| ($2,712 | ) | |
| ($867 | ) | |
| $23,484 |
|
| | | | | | | | | | | | | | | |
Balance, January 1, 2018 |
| $2,475 |
| | 471 |
| |
| $550 |
| |
| $9,000 |
| |
| $17,540 |
| |
| ($3,591 | ) | |
| ($820 | ) | |
| $25,154 |
|
Cumulative effect adjustment related to ASU adoptions 3 | — |
| | — |
| | — |
| | — |
| | 144 |
| | — |
| | (154 | ) | | (10 | ) |
Net income | — |
| | — |
| | — |
| | — |
| | 643 |
| | — |
| | — |
| | 643 |
|
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (548 | ) | | (548 | ) |
Change in noncontrolling interest | — |
| | — |
| | — |
| | — |
| | — |
| | (2 | ) | | — |
| | (2 | ) |
Common stock dividends, $0.40 per share | — |
| | — |
| | — |
| | — |
| | (187 | ) | | — |
| | — |
| | (187 | ) |
Preferred stock dividends 2 | — |
| | — |
| | — |
| | — |
| | (31 | ) | | — |
| | — |
| | (31 | ) |
Redemption of preferred stock, Series E | (450 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (450 | ) |
Repurchase of common stock | — |
| | (5 | ) | | — |
| | — |
| | — |
| | (330 | ) | | — |
| | (330 | ) |
Exercise of stock options and stock compensation expense | — |
| | 1 |
| | — |
| | — |
| | — |
| | 32 |
| | — |
| | 32 |
|
Exercise of stock warrant | — |
| | 2 |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | 2 |
|
Restricted stock activity | — |
| | 1 |
| | — |
| | (40 | ) | | (2 | ) | | 38 |
| | — |
| | (4 | ) |
Balance, March 31, 2018 |
| $2,025 |
| | 470 |
| |
| $552 |
| |
| $8,960 |
| |
| $18,107 |
| |
| ($3,853 | ) | |
| ($1,522 | ) | |
| $24,269 |
|
1 At March 31, 2018, includes ($3,953) million for treasury stock, less than ($1) million for the compensation element of restricted stock, and $101 million for noncontrolling interest.
At March 31, 2017, includes ($2,812) million for treasury stock, less than ($1) million for the compensation element of restricted stock, and $101 million for noncontrolling interest.
2 For the three months ended March 31, 2018, dividends were $1,000 per share for both Series A and B Preferred Stock, $1,469 per share for Series E Preferred Stock, $1,406 per share for Series F Preferred Stock, $1,038 per share for Series G Preferred Stock, and $1,281 per share for Series H Preferred Stock.
For the three months ended March 31, 2017, dividends were $1,000 per share for both Series A and B Preferred Stock, $1,469 per share for Series E Preferred Stock, and $1,406 per share for Series F Preferred Stock.
3 Related to the Company's adoption of ASU 2014-09, ASU 2016-01, ASU 2017-12, and ASU 2018-02 on January 1, 2018. See Note 1, "Significant Accounting Policies," for additional information.
See accompanying Notes to Consolidated Financial Statements (unaudited).
SunTrust Banks, Inc. Consolidated Statements of Cash Flows |
| | | | | | | |
| Three Months Ended March 31 |
(Dollars in millions) (Unaudited) | 2018 | | 2017 |
Cash Flows from Operating Activities: | | | |
Net income including income attributable to noncontrolling interest |
| $645 |
| |
| $470 |
|
Adjustments to reconcile net income to net cash (used in)/provided by operating activities: | | | |
Depreciation, amortization, and accretion | 175 |
| | 179 |
|
Origination of servicing rights | (80 | ) | | (101 | ) |
Provisions for credit losses and foreclosed property | 30 |
| | 121 |
|
Stock-based compensation | 56 |
| | 58 |
|
Net securities gains | (1 | ) | | — |
|
Net losses/(gains) on sale of loans held for sale, loans, and other assets | 11 |
| | (6 | ) |
Net (increase)/decrease in loans held for sale | (100 | ) | | 2,056 |
|
Net increase in trading assets and derivative instruments | (182 | ) | | (8 | ) |
Net increase in other assets 1 | (644 | ) | | (389 | ) |
Net decrease in other liabilities 1 | (110 | ) | | (284 | ) |
Net cash (used in)/provided by operating activities | (200 | ) | | 2,096 |
|
Cash Flows from Investing Activities: | | | |
Proceeds from maturities, calls, and paydowns of securities available for sale | 858 |
| | 993 |
|
Proceeds from sales of securities available for sale | 1,663 |
| | — |
|
Purchases of securities available for sale | (2,689 | ) | | (1,450 | ) |
Net decrease/(increase) in loans, including purchases of loans | 413 |
| | (492 | ) |
Proceeds from sales of loans | 36 |
| | 118 |
|
Net cash paid for servicing rights | (60 | ) | | — |
|
Capital expenditures | (67 | ) | | (43 | ) |
Proceeds from the sale of other real estate owned and other assets | 52 |
| | 55 |
|
Other investing activities 1 | 3 |
| | 2 |
|
Net cash provided by/(used in) investing activities | 209 |
| | (817 | ) |
Cash Flows from Financing Activities: | | | |
Net increase in total deposits | 1,599 |
| | 2,455 |
|
Net decrease in funds purchased, securities sold under agreements to repurchase, and other short-term borrowings | (1,209 | ) | | (68 | ) |
Proceeds from issuance of long-term debt | 1,311 |
| | 1,340 |
|
Repayments of long-term debt | (333 | ) | | (2,576 | ) |
Repurchase of preferred stock | (450 | ) | | — |
|
Repurchase of common stock | (330 | ) | | (414 | ) |
Common and preferred stock dividends paid | (197 | ) | | (138 | ) |
Taxes paid related to net share settlement of equity awards | (42 | ) | | (36 | ) |
Proceeds from exercise of stock options and warrants | 34 |
| | 9 |
|
Net cash provided by financing activities | 383 |
| | 572 |
|
Net increase in cash and cash equivalents | 392 |
| | 1,851 |
|
Cash and cash equivalents at beginning of period | 6,912 |
| | 6,423 |
|
Cash and cash equivalents at end of period |
| $7,304 |
| |
| $8,274 |
|
| | | |
Supplemental Disclosures: | | | |
Loans transferred from loans held for sale to loans held for investment |
| $6 |
| |
| $7 |
|
Loans transferred from loans held for investment to loans held for sale | 204 |
| | 60 |
|
Loans transferred from loans held for investment and loans held for sale to other real estate owned | 19 |
| | 15 |
|
1 Related to the Company's adoption of ASU 2016-15, certain prior period amounts have been retrospectively reclassified between operating activities and investing activities. See Note 1, "Significant Accounting Policies," for additional information.
See accompanying Notes to Consolidated Financial Statements (unaudited).
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The unaudited Consolidated Financial Statements included within this report have been prepared in accordance with U.S. GAAP to present interim financial statement information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete, consolidated financial statements. However, in the opinion of management, all adjustments, consisting only of normal recurring adjustments that are necessary for a fair presentation of the results of operations in these financial statements, have been made.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes; actual results could vary from these estimates. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. Interim Consolidated Financial Statements should be read in conjunction with the Company’s 2017 Annual Report on Form 10-K.
Changes in Significant Accounting Policies
Pursuant to the Company's adoption of certain ASUs as of January 1, 2018, the following significant accounting policies have been added to or updated from those disclosed in the Company's 2017 Annual Report on Form 10-K:
Revenue Recognition
In the ordinary course of business, the Company recognizes revenue as services are rendered, or as transactions occur, and as collectability is reasonably assured. For the Company's revenue recognition accounting policies, see Note 2, “Revenue Recognition.”
Trading Activities and Securities AFS
Trading assets and liabilities are measured at fair value with changes in fair value recognized within Noninterest income in the Company's Consolidated Statements of Income.
Securities AFS are used as part of the overall asset and liability management process to optimize income and market performance over an entire interest rate cycle. Interest income on securities AFS are recognized on an accrual basis in Interest income in the Company's Consolidated Statements of Income. Premiums and discounts on securities AFS are amortized or accreted as an adjustment to yield over the life of the security. The Company estimates principal prepayments on securities AFS for which prepayments are probable and the timing and amount of prepayments can be reasonably estimated. The estimates are informed by analyses of both historical prepayments and anticipated macroeconomic conditions, such as spot interest rates compared to implied forward interest rates. The estimate of prepayments for these securities impacts their lives and thereby the amortization or accretion of associated premiums and discounts. Securities AFS are measured at fair value with unrealized gains and losses, net of any tax effect, included in AOCI as a component of shareholders’ equity. Realized gains and losses, including OTTI, are determined using the specific identification method and are recognized as a
component of Noninterest income in the Consolidated Statements of Income.
Securities AFS are reviewed for OTTI on a quarterly basis. In determining whether OTTI exists for securities AFS in an unrealized loss position, the Company assesses whether it has the intent to sell the security or assesses the likelihood of selling the security prior to the recovery of its amortized cost basis. If the Company intends to sell the security or it is more-likely-than-not that the Company will be required to sell the security prior to the recovery of its amortized cost basis, the security is written down to fair value, and the full amount of any impairment charge is recognized as a component of Noninterest income in the Consolidated Statements of Income. If the Company does not intend to sell the security and it is more-likely-than-not that the Company will not be required to sell the security prior to recovery of its amortized cost basis, only the credit component of any impairment of a security is recognized as a component of Noninterest income in the Consolidated Statements of Income, with the remaining impairment balance recorded in OCI.
For additional information on the Company’s trading and securities AFS activities, see Note 4, “Trading Assets and Liabilities and Derivatives,” and Note 5, “Securities Available for Sale.”
Equity Securities
The Company records equity securities that are not classified as trading assets or liabilities within Other assets in its Consolidated Balance Sheets.
Investments in equity securities with readily determinable fair values are measured at fair value, with changes in the fair value recognized as a component of Noninterest income in the Company's Consolidated Statements of Income.
Investments in equity investments that do not have readily determinable fair values are accounted for at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer, also referred to as the measurement alternative. Any adjustments to the carrying value of these investments are recorded in Noninterest income in the Company's Consolidated Statements of Income.
For additional information on the Company's equity securities, see Note 9, “Other Assets,” and Note 16, “Fair Value Election and Measurement.”
Derivative Instruments and Hedging Activities
The Company records derivative contracts at fair value in the Consolidated Balance Sheets. Accounting for changes in the fair value of a derivative depends upon whether or not it has been designated in a formal, qualifying hedging relationship.
Changes in the fair value of derivatives not designated in a hedging relationship are recorded in noninterest income. This includes derivatives that the Company enters into in a dealer capacity to facilitate client transactions and as a risk management tool to economically hedge certain identified risks, along with certain IRLCs on residential mortgage and commercial loans that are a normal part of the Company’s operations. The Company also evaluates contracts, such as brokered deposits and debt, to
Notes to Consolidated Financial Statements (Unaudited), continued
determine whether any embedded derivatives are required to be bifurcated and separately accounted for as freestanding derivatives.
Certain derivatives used as risk management tools are designated as accounting hedges of the Company’s exposure to changes in interest rates or other identified market risks. The Company prepares written hedge documentation for all derivatives which are designated as hedges of (i) changes in the fair value of a recognized asset or liability (fair value hedge) attributable to a specified risk or (ii) a forecasted transaction, such as the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge). The written hedge documentation includes identification of, among other items, the risk management objective, hedging instrument, hedged item and methodologies for assessing and measuring hedge effectiveness, along with support for management’s assertion that the hedge will be highly effective. Methodologies related to hedge effectiveness include (i) statistical regression analysis of changes in the cash flows of the actual derivative and a perfectly effective hypothetical derivative, or (ii) statistical regression analysis of changes in the fair values of the actual derivative and the hedged item.
For designated hedging relationships, subsequent to the initial assessment of hedge effectiveness, the Company generally performs retrospective and prospective effectiveness testing using a qualitative approach. Assessments of hedge effectiveness are performed at least quarterly. Changes in the fair value of a derivative that is highly effective and that has been designated and qualifies as a fair value hedge are recorded in current period earnings, in the same line item with the changes in the fair value of the hedged item that are attributable to the hedged risk. The changes in the fair value of a derivative that is highly effective and that has been designated and qualifies as a cash flow hedge is initially recorded in AOCI and reclassified to earnings in the same period that the hedged item impacts earnings. The amount
reclassified to earnings is recorded in the same line item as the earnings effect of the hedged item.
Hedge accounting ceases for hedging relationships that are no longer deemed effective, or for which the derivative has been terminated or de-designated. For discontinued fair value hedges where the hedged item remains outstanding, the hedged item would cease to be remeasured at fair value attributable to changes in the hedged risk and any existing basis adjustment would be recognized as an adjustment to earnings over the remaining life of the hedged item. For discontinued cash flow hedges, the unrealized gains and losses recorded in AOCI would be reclassified to earnings in the period when the previously designated hedged cash flows occur unless it was determined that transaction was probable to not occur, whereby any unrealized gains and losses in AOCI would be immediately reclassified to earnings.
It is the Company's policy to offset derivative transactions with a single counterparty as well as any cash collateral paid to and received from that counterparty for derivative contracts that are subject to ISDA or other legally enforceable netting arrangements and meet accounting guidance for offsetting treatment. For additional information on the Company’s derivative activities, see Note 15, “Derivative Financial Instruments,” and Note 16, “Fair Value Election and Measurement.”
Subsequent Events
The Company evaluated events that occurred between March 31, 2018 and the date the accompanying financial statements were issued, and there were no material events, other than those already discussed in this Form 10-Q, that would require recognition in the Company's Consolidated Financial Statements or disclosure in the accompanying Notes.
Accounting Pronouncements
The following table summarizes ASUs issued by the FASB that were adopted during the current year or not yet adopted as of March 31, 2018, that could have a material effect on the Company's financial statements:
|
| | | |
Standard | Description | Required Date of Adoption | Effect on the Financial Statements or Other Significant Matters |
Standards Adopted in 2018 |
ASU 2014-09, Revenue from Contracts with Customers (ASC Topic 606) and subsequent related ASUs
| These ASUs comprise ASC Topic 606, Revenue from Contracts with Customers, which supersede the revenue recognition requirements in ASC Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of these ASUs is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. | January 1, 2018 | The Company adopted these ASUs on a modified retrospective basis beginning January 1, 2018. Upon adoption, the Company recognized an immaterial cumulative effect adjustment that resulted in a decrease to the beginning balance of retained earnings as of January 1, 2018. Furthermore, the Company prospectively changed the presentation of certain types of revenue and expenses, such as underwriting revenue within investment banking income which is shown on a gross basis, and certain cash promotions and card network expenses, which were reclassified from noninterest expense to service charges on deposit accounts, card fees, and other charges and fees. The net quantitative impact of these presentation changes decreased both revenue and expenses by $3 million for the three months ended March 31, 2018; however, these presentation changes did not have an impact on net income. Prior period balances have not been restated to reflect these presentation changes. See Note 2, “Revenue Recognition,” for disclosures relating to ASC Topic 606.
|
Notes to Consolidated Financial Statements (Unaudited), continued
|
| | | |
Standard | Description | Required Date of Adoption | Effect on the Financial Statements or Other Significant Matters |
Standards Adopted in 2018 (continued) |
ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities; and
ASU 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities | These ASUs amend ASC Topic 825, Financial Instruments-Overall, and address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The main provisions require most investments in equity securities to be measured at fair value through net income, unless they qualify for a measurement alternative, and require fair value changes arising from changes in instrument-specific credit risk for financial liabilities that are measured under the fair value option to be recognized in other comprehensive income. With the exception of disclosure requirements and the application of the measurement alternative for certain equity investments that was adopted prospectively, these ASUs must be adopted on a modified retrospective basis. | January 1, 2018
Early adoption was permitted for the provision related to changes in instrument-specific credit risk for financial liabilities under the FVO.
| The Company early adopted the provision related to changes in instrument-specific credit risk beginning January 1, 2016, which resulted in an immaterial cumulative effect adjustment from retained earnings to AOCI. See Note 1, “Significant Accounting Policies,” to the Company's 2016 Annual Report on Form 10-K for additional information regarding the early adoption of this provision.
Additionally, the Company adopted the remaining provisions of these ASUs beginning January 1, 2018, which resulted in an immaterial cumulative effect adjustment to the beginning balance of retained earnings. In connection with the adoption of these ASUs, an immaterial amount of equity securities previously classified as securities AFS were reclassified to other assets, as the AFS classification is no longer permitted for equity securities under these ASUs.
Subsequent to adoption of these ASUs, an observable transaction occurred relating to an equity investment without a readily determinable fair value. As a result, the Company recognized a $23 million increase in Other assets on its Consolidated Balance Sheets and in Other noninterest income on its Consolidated Statements of Income. See Note 9, “Other Assets,” and Note 16, “Fair Value Election and Measurement,” for additional information.
The remaining provisions and disclosure requirements of these ASUs did not have a material impact on the Company's Consolidated Financial Statements and related disclosures upon adoption.
|
ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments | The ASU amends ASC Topic 230, Statement of Cash Flows, to clarify the classification of certain cash receipts and payments within the Company's Consolidated Statements of Cash Flows. These items include: cash payments for debt prepayment or debt extinguishment costs; cash outflows for the settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned and bank-owned life insurance policies; distributions received from equity method investees; and beneficial interests acquired in securitization transactions. The ASU also clarifies that when no specific U.S. GAAP guidance exists and the source of the cash flows are not separately identifiable, the predominant source of cash flow should be used to determine the classification for the item. The ASU must be adopted on a retrospective basis.
| January 1, 2018 | The Company adopted this ASU on a retrospective basis effective January 1, 2018 and changed the presentation of certain cash payments and receipts within its Consolidated Statements of Cash Flows. Specifically, the Company changed the presentation of proceeds from the settlement of bank-owned life insurance policies from operating activities to investing activities. The Company also changed the presentation of cash payments related to premiums paid for bank-owned life insurance policies from operating activities to investing activities. Lastly, for contingent consideration payments made more than three months after a business combination, the Company changed the presentation for the portion of the cash payment up to the acquisition date fair value of the contingent consideration as a financing activity and any amount paid in excess of the acquisition date fair value as an operating activity. For both the three months ending March 31, 2018 and 2017, the amount of cash payments and receipts relating to these changes were immaterial to the Company’s Consolidated Statements of Cash Flows.
|
ASU 2017-09, Stock Compensation (Topic 718): Scope of Modification Accounting | This ASU amends ASC Topic 718, Stock Compensation, to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting per ASC Topic 718, Stock Compensation. The amendments clarify that modification accounting only applies to an entity if the fair value, vesting conditions, or classification of the award changes as a result of changes in the terms or conditions of a share-based payment award. The ASU should be applied prospectively to awards modified on or after the adoption date.
| January 1, 2018 | The Company adopted this ASU on January 1, 2018 and upon adoption, the ASU did not have a material impact on the Company's Consolidated Financial Statements and related disclosures. |
Notes to Consolidated Financial Statements (Unaudited), continued
|
| | | |
Standard | Description | Required Date of Adoption | Effect on the Financial Statements or Other Significant Matters |
Standards Adopted in 2018 (continued) |
ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities | The ASU amends ASC Topic 815, Derivatives and Hedging, to simplify the requirements for hedge accounting. Key amendments include: eliminating the requirement to separately measure and report hedge ineffectiveness, requiring changes in the value of the hedging instrument to be presented in the same income statement line as the earnings effect of the hedged item, and the ability to measure the hedged item based on the benchmark interest rate component of the total contractual coupon for fair value hedges. These changes expand the types of risk management strategies eligible for hedge accounting. The ASU also permits entities to qualitatively assert that a hedging relationship was and continues to be highly effective. New incremental disclosures are also required for reporting periods subsequent to the date of adoption. All transition requirements and elections should be applied to hedging relationships existing on the date of adoption using a modified retrospective approach.
| January 1, 2019
Early adoption is permitted. | The Company early adopted this ASU beginning January 1, 2018 and modified its measurement methodology for certain hedged items designated under fair value hedge relationships. The Company elected to perform its subsequent assessments of hedge effectiveness using a qualitative, rather than a quantitative, approach. The adoption resulted in an immaterial cumulative effect adjustment to the opening balance of retained earnings and a basis adjustment to the related hedged items. For additional information on the Company’s derivative and hedging activities, see Note 15, “Derivative Financial Instruments.”
|
ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from AOCI
| This ASU amends ASC Topic 220, Income Statement - Reporting Comprehensive Income, to allow for a reclassification from AOCI to Retained earnings for the tax effects stranded in AOCI as a result of the remeasurement of DTAs and DTLs for the change in the federal corporate tax rate pursuant to the 2017 Tax Act, which was recognized through the income tax provision in 2017. The Company may apply this ASU at the beginning of the period of adoption or retrospectively to all periods in which the 2017 Tax Act is enacted.
| January 1, 2019
Early adoption is permitted. | The Company early adopted this ASU as of January 1, 2018. Upon adoption of this ASU, the Company elected to reclassify $182 million of stranded tax effects relating to securities AFS, derivative instruments, credit risk on long-term debt, and employee benefit plans from AOCI to retained earnings. This amount was offset by $28 million of stranded tax effects relating to equity securities previously classified as securities AFS, resulting in a net $154 million increase to retained earnings.
|
Standards Not Yet Adopted |
ASU 2016-02, Leases | The ASU creates ASC Topic 842, Leases, which supersedes ASC Topic 840, Leases. ASC Topic 842 requires lessees to recognize right-of-use assets and associated liabilities that arise from leases, with the exception of short-term leases. The ASU does not make significant changes to lessor accounting; however, there were certain improvements made to align lessor accounting with the lessee accounting model and ASC Topic 606, Revenue from Contracts with Customers. There are several new qualitative and quantitative disclosures required. Upon transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.
| January 1, 2019
Early adoption is permitted. | The Company has formed a cross-functional team to oversee the implementation of this ASU. The Company's implementation efforts are ongoing, including the review of its lease portfolios and related lease accounting policies, the review of its service contracts for embedded leases, and the deployment of a new lease software solution. The Company's adoption of this ASU, which is expected to occur on January 1, 2019, will result in an increase in right-of-use assets and associated lease liabilities, arising from operating leases in which the Company is the lessee, on its Consolidated Balance Sheets.
The amount of the right-of-use assets and associated lease liabilities recorded upon adoption will be based primarily on the present value of unpaid future minimum lease payments, the amount of which will depend on the population of leases in effect at the date of adoption. At March 31, 2018, the Company’s estimate of right-of-use assets and lease liabilities that would be recorded on its Consolidated Balance Sheets upon adoption is in excess of $1 billion. Additionally, the Company is currently evaluating the estimated impact that this ASU may have on its Consolidated Statements of Income.
|
Notes to Consolidated Financial Statements (Unaudited), continued
|
| | | |
Standard | Description | Required Date of Adoption | Effect on the Financial Statements or Other Significant Matters |
Standards Not Yet Adopted (continued) |
ASU 2016-13, Measurement of Credit Losses on Financial Instruments | The ASU adds ASC Topic 326, Financial Instruments-Credit Losses, to replace the incurred loss impairment methodology with a current expected credit loss methodology for financial instruments measured at amortized cost and other commitments to extend credit. For this purpose, expected credit losses reflect losses over the remaining contractual life of an asset, considering the effect of voluntary prepayments and considering available information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The resulting allowance for credit losses is deducted from the amortized cost basis of the financial assets to reflect the net amount expected to be collected on the financial assets. Additional quantitative and qualitative disclosures are required upon adoption. The change to the allowance for credit losses at the time of the adoption will be made with a cumulative effect adjustment to Retained earnings.
The current expected credit loss model does not apply to AFS debt securities; however, the ASU requires entities to record an allowance when recognizing credit losses for AFS securities, rather than recording a direct write-down of the carrying amount.
| January 1, 2020
Early adoption is permitted beginning January 1, 2019. | The Company has formed a cross-functional team to oversee the implementation of this ASU and has identified the changes necessary to its credit loss estimation methodologies in order to comply with the new accounting standard requirements. Substantial progress has been made to date on implementing these changes, including the development of models, updates to business processes and technology systems, and the documentation of accounting policy decisions. Additionally, the Company is evaluating the impact that this ASU will have on its Consolidated Financial Statements and related disclosures, and the Company currently anticipates that an increase to the allowance for credit losses will be recognized upon adoption to provide for the expected credit losses over the estimated life of the financial assets. However, since the magnitude of the anticipated increase in the allowance for credit losses will be impacted by economic conditions and trends in the Company’s portfolio at the time of adoption, the quantitative impact cannot yet be reasonably estimated.
|
ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment | The ASU amends ASC Topic 350, Intangibles - Goodwill and Other, to simplify the subsequent measurement of goodwill, by eliminating Step 2 from the goodwill impairment test. The amendments require an entity to perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. Entities should recognize an impairment charge for the amount by which a reporting unit's carrying amount exceeds its fair value, but the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU must be applied on a prospective basis.
| January 1, 2020
Early adoption is permitted. | Based on the Company's most recent annual goodwill impairment test performed as of October 1, 2017, there were no reporting units for which the carrying amount of the reporting unit exceeded its fair value; therefore, this ASU would not currently have an impact on the Company's Consolidated Financial Statements and related disclosures. However, if upon the adoption date, which is expected to occur on January 1, 2020, the carrying amount of a reporting unit exceeds its fair value, the Company would be required to recognize an impairment charge for the amount that the carrying value exceeds the fair value. |
NOTE 2 – REVENUE RECOGNITION
Pursuant to the adoption of ASU 2014-09, the following disclosures discuss the Company's revenue recognition accounting policies. The Company recognizes two primary types of revenue, interest income and noninterest income.
Interest Income
The Company’s principal source of revenue is interest income from loans and securities, which is recognized on an accrual basis using the effective interest method. For additional information on the Company’s policies for recognizing interest income on loans and securities, see Note 1, “Significant Accounting Policies,” in the Company’s 2017 Annual Report on Form 10-K. Interest income is not within the scope of ASC Topic 606, Revenues from Contracts with Customers.
Noninterest Income
Noninterest income includes revenue from various types of transactions and services provided to Consumer and Wholesale clients. The following tables reflect the Company’s noninterest income disaggregated by financial statement line item, business segment, and by the amount of each revenue stream that is in scope or out of scope of ASC Topic 606. The commentary following the tables describes the nature, amount, and timing of the related revenue streams.
Notes to Consolidated Financial Statements (Unaudited), continued
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2018 1 |
(Dollars in millions) | Consumer 2 | | Wholesale 2 | | Out of Scope 2, 3 | | Total |
Noninterest income | | | | | | | |
Service charges on deposit accounts |
| $104 |
| |
| $42 |
| |
| $— |
| |
| $146 |
|
Other charges and fees | 28 |
| | 3 |
| | 56 |
| | 87 |
|
Card fees | 54 |
| | 26 |
| | 1 |
| | 81 |
|
Investment banking income | — |
| | 84 |
| | 47 |
| | 131 |
|
Trading income | — |
| | — |
| | 42 |
| | 42 |
|
Trust and investment management income | 75 |
| | — |
| | — |
| | 75 |
|
Retail investment services | 71 |
| | 1 |
| | — |
| | 72 |
|
Mortgage servicing related income | — |
| | — |
| | 54 |
| | 54 |
|
Mortgage production related income | — |
| | — |
| | 36 |
| | 36 |
|
Commercial real estate related income | — |
| | — |
| | 23 |
| | 23 |
|
Net securities gains | — |
| | — |
| | 1 |
| | 1 |
|
Other noninterest income | 6 |
| | — |
| | 42 |
| | 48 |
|
Total noninterest income |
| $338 |
| |
| $156 |
| |
| $302 |
| |
| $796 |
|
1 Amounts are presented in accordance with ASC Topic 606, Revenue from Contracts with Customers.
2 Consumer and Wholesale totals exclude $105 million and $215 million of out of scope noninterest income, respectively, that is included in the business segment results presented on a management accounting basis in Note 18, "Business Segment Reporting." Total out of scope noninterest income includes these amounts as well as ($18) million of Corporate Other noninterest income that is out of scope of ASC Topic 606.
3 The Company presents out of scope noninterest income for the purpose of reconciling noninterest income amounts within the scope of ASC Topic 606 to noninterest income amounts presented on the Company's Consolidated Statements of Income.
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2017 1 |
(Dollars in millions) | Consumer 2 | | Wholesale 2 | | Out of Scope 2, 3 | | Total |
Noninterest income | | | | | | | |
Service charges on deposit accounts |
| $103 |
| |
| $45 |
| |
| $— |
| |
| $148 |
|
Other charges and fees | 31 |
| | 3 |
| | 61 |
| | 95 |
|
Card fees | 54 |
| | 27 |
| | 1 |
| | 82 |
|
Investment banking income | — |
| | 96 |
| | 71 |
| | 167 |
|
Trading income | — |
| | — |
| | 51 |
| | 51 |
|
Trust and investment management income | 75 |
| | — |
| | — |
| | 75 |
|
Retail investment services | 67 |
| | 1 |
| | — |
| | 68 |
|
Mortgage servicing related income | — |
| | — |
| | 58 |
| | 58 |
|
Mortgage production related income | — |
| | — |
| | 53 |
| | 53 |
|
Commercial real estate related income | — |
| | — |
| | 20 |
| | 20 |
|
Net securities gains | — |
| | — |
| | — |
| | — |
|
Other noninterest income | 7 |
| | — |
| | 23 |
| | 30 |
|
Total noninterest income |
| $337 |
| |
| $172 |
| |
| $338 |
| |
| $847 |
|
1 Amounts for periods prior to January 1, 2018 are presented in accordance with ASC Topic 605, Revenue Recognition, and have not been restated to conform with ASC Topic 606, Revenue from Contracts with Customers.
2 Consumer and Wholesale totals exclude $127 million and $229 million of out of scope noninterest income, respectively, that is included in the business segment results presented on a management accounting basis in Note 18, "Business Segment Reporting." Total out of scope noninterest income includes these amounts as well as ($18) million of Corporate Other noninterest income that is out of scope of ASC Topic 606.
3 The Company presents out of scope noninterest income for the purpose of reconciling noninterest income amounts within the scope of ASC Topic 606 to noninterest income amounts presented on the Company's Consolidated Statements of Income.
Service Charges on Deposit Accounts
Service charges on deposit accounts represent fees relating to the Company’s various deposit products. These fees include account maintenance, cash management, treasury management, wire transfers, overdraft and other deposit-related fees. The Company’s execution of the services related to these fees represents its related performance obligations. Each of these performance obligations are either satisfied over time or at a point in time as the services are provided to the customer. The Company is the principal when rendering these services.
Payments for services provided are either withdrawn from the customer’s account as services are rendered or in the billing period following the completion of the service. The transaction price for each of these fees is based on the Company’s predetermined fee schedule.
Other Charges and Fees
Other charges and fees consist primarily of loan commitment and letter of credit fees, operating lease revenue, ATM fees, insurance revenue, and miscellaneous service charges including
Notes to Consolidated Financial Statements (Unaudited), continued
wire fees and check cashing fees. Loan commitment and letter of credit fees and operating lease revenue are out of scope of ASC Topic 606.
The Company’s execution of the services related to the fees within the scope of ASC Topic 606 represents its related performance obligations, which are either satisfied at a point in time or over time as services are rendered. ATM fees and miscellaneous service charges are recognized at a point in time as the services are provided.
Insurance commission revenue is earned through the sale of insurance products. The commissions are recognized as revenue when the customer executes an insurance policy with the insurance carrier. In some cases, the Company receives payment of trailing commissions each year when the customer pays its annual premium. For the three months ended March 31, 2018, the Company recognized an immaterial amount of insurance trailing commissions related to performance obligations satisfied in prior periods.
Card Fees
Card fees consist of interchange fees from credit and debit cards, merchant acquirer revenue, and other card related services. Interchange fees are earned by the Company each time a request for payment is initiated by a customer at a merchant for which the Company transfers the funds on behalf of the customer. Interchange rates are set by the payment network and are based on purchase volumes and other factors. Interchange fees are received daily and recognized at a point in time when the card transaction is processed. The Company is considered an agent of the customer and incurs costs with the payment network to facilitate the interchange with the merchant; therefore, the related payment network expense is recognized as a reduction of card fees. Prior to the adoption of ASC Topic 606, these expenses were recognized in Outside processing and software in the Company's Consolidated Statements of Income. The Company offers rewards and/or rebates to its customers based on card usage. The costs associated with these programs are also recognized as a reduction of card fees.
The Company also has a revenue sharing agreement with a merchant acquirer. The Company’s referral of a merchant to the merchant acquirer represents its related performance obligations, which is satisfied at a point in time when the referral is made. Monthly revenue is estimated based on the expected amount of transactions processed. Payments are generally made by the merchant acquirer quarterly, the month following the quarter in which the services are rendered.
Investment Banking Income
Investment banking income is comprised primarily of securities underwriting fees, advisory fees, and loan syndication fees. The Company assists corporate clients in raising capital by offering equity or debt securities to potential investors. The underwriting fees are earned on the trade date when the Company, as a member of an underwriting syndicate, purchases the securities from the issuer and sells the securities to third party investors. Each member of the syndicate is responsible for selling its portion of the underwriting and is liable for the proportionate costs of the underwriting; therefore, the Company’s portion of underwriting revenue and expense is presented gross within noninterest income and noninterest expense. Prior to the adoption of ASC
Topic 606, underwriting expense was recorded as a reduction of investment banking income. The transaction price is based on a percentage of the total transaction amount and payments are settled shortly after the trade date.
Loan syndication fees are typically recognized at the closing of a loan syndication transaction. These fees are out of the scope of ASC Topic 606.
The Company also provides merger and acquisition advisory services, including various activities such as business valuation, identification of potential targets or acquirers, and the issuance of fairness opinions. The Company’s execution of these advisory services represents its related performance obligations. The performance obligations relating to advisory services are fulfilled at a point in time upon completion of the contractually specified merger or acquisition transaction. The transaction price is based on contractually specified terms agreed upon with the client for each advisory service. Additionally, payments for advisory services consist of upfront retainer fees and success fees at the date the related merger or acquisition is closed. The retainer fees are typically paid upfront, which creates a contract liability. At March 31, 2018, the contract liability relating to these retainer fees was immaterial.
Revenue related to trade execution services is earned on the trade date and recognized at a point in time. The fees related to trade execution services are due on the settlement date.
Trading Income
The Company recognizes trading income as a result of gains and losses from the sales of trading account assets and liabilities. The Company’s trading accounts include various types of investment securities and debt investments, trading loans, and derivative instruments. For additional information relating to trading income, see Note 15, “Derivative Financial Instruments,” and Note 16, “Fair Value Election and Measurement.”
Trust and Investment Management Income
Trust and investment management income includes revenue from custodial services, trust administration, financial advisory services, employee benefit solutions, and other services provided to customers within the Consumer business segment.
The Company generally recognizes trust and investment management revenue over time as services are rendered. Revenue is based on either a percentage of the market value of the assets under management, or advisement, or fixed based on the services provided to the customer. Fees are generally swept from the customer’s account one billing period in arrears based on the prior period’s assets under management or advisement.
Retail Investment Services
Retail investment services consists primarily of investment management, selling and distribution services, and trade execution services. The Company’s execution of these services represents its related performance obligations.
Investment management fees are generally recognized over time as services are rendered and are based on either a percentage of the market value of the assets under management, or advisement, or fixed based on the services provided to the customer. The fees are calculated quarterly and are usually collected at the beginning of the period from the customer’s account and recognized ratably over the related billing period.
Notes to Consolidated Financial Statements (Unaudited), continued
The Company also offers selling and distribution services and earns commissions through the sale of annuity and mutual fund products. The Company acts as an agent in these transactions and recognizes revenue at a point in time when the customer enters into an agreement with the product carrier. The Company may also receive trailing commissions and 12b-1 fees related to mutual fund and annuity products, and recognizes this revenue in the period that they are realized since the revenue cannot be accurately predicted at the time the policy becomes effective. The Company recognized revenue of $13 million for the three months ended March 31, 2018, which relates to mutual fund 12b-1 fees and annuity trailing commissions from performance obligations satisfied in periods prior to March 31, 2018.
Trade execution commissions are earned and recognized on the trade date, when the Company executes a trade for a customer. Payment for the trade execution is due on the settlement date.
Mortgage Servicing Related Income
The Company recognizes as assets the rights to service mortgage loans, either when the loans are sold and the associated servicing rights are retained or when servicing rights are purchased from a third party. Mortgage servicing related income includes servicing fees, modification fees, fees for ancillary services, gains or losses from hedging, changes in fair value, and other fees customarily associated with servicing arrangements. For additional information relating to mortgage servicing related income, see Note 1, “Significant Accounting Policies,” in the Company’s 2017 Annual Report on Form 10-K, and Note 8, “Goodwill and Other Intangible Assets,” Note 15, “Derivative Financial Instruments,” and Note 16, “Fair Value Election and Measurement,” in this Form 10-Q.
Mortgage Production Related Income
Mortgage production related income is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees. For additional information relating to mortgage production related income, see Note 1, “Significant Accounting Policies,” in the Company’s 2017 Annual Report on Form 10-K, and Note 15, “Derivative Financial Instruments,” and Note 16, “Fair Value Election and Measurement,” in this Form 10-Q.
Commercial Real Estate Related Income
Commercial real estate related income consists primarily of origination fees, such as loan placement and broker fees, gains and losses on the sale of commercial loans, commercial mortgage loan servicing fees, income from community development investments, gains and losses from the sale of structured real estate, and other fee income, such as asset advisory fees. The Company earns loan placement and broker fees for arranging financing between third party investors/lenders and borrowers. Additionally, the Company also aids customers in due diligence
and valuation advisory services for potential real estate services. For additional information relating to commercial real estate related income, see Note 1, “Significant Accounting Policies,” in the Company’s 2017 Annual Report on Form 10-K, and Note 8, “Goodwill and Other Intangible Assets,” Note 15, “Derivative Financial Instruments,” and Note 16, “Fair Value Election and Measurement,” in this Form 10-Q.
Net Securities Gains or Losses
The Company recognizes net securities gains or losses primarily as a result of the sale of securities AFS and the recognition of any OTTI on securities AFS. For additional information relating to net securities gains or losses, see Note 5, “Securities Available for Sale.”
Other Noninterest Income
Other noninterest income within the scope of ASC Topic 606 consists primarily of fees from the sale of custom checks. The Company serves as an agent for customers by connecting them with a third party check provider. Revenue from such sales are earned in the form of commissions from the third party check provider and is recognized at a point in time on the date the customer places an order. Commissions for personal check orders are credited to revenue on an ongoing basis, and commissions for commercial check orders are received quarterly in arrears.
Other noninterest income also includes income from bank-owned life insurance policies that is not within the scope of ASC Topic 606. Income from bank-owned life insurance primarily represents changes in the cash surrender value of such life insurance policies held on certain key employees, for which the Company is the owner and beneficiary. Revenue is recognized in each period based on the change in the cash surrender value during the period.
Practical Expedients and Other
The Company pays sales commissions as a cost to obtain certain contracts within the scope of ASC Topic 606; however, sales commissions relating to these contracts are generally expensed when incurred because the amortization period would be one year or less. Sales commissions are recognized as employee compensation within Noninterest expense on the Company’s Consolidated Statements of Income.
The Company has elected the practical expedient to exclude disclosure of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which the Company has the right to invoice for services performed.
The Company does not have any material contract assets, liabilities, or other receivables recorded on its Consolidated Balance Sheets, relating to its revenue streams within the scope of ASC Topic 606, at March 31, 2018.
Notes to Consolidated Financial Statements (Unaudited), continued
NOTE 3 - FEDERAL FUNDS SOLD AND SECURITIES FINANCING ACTIVITIES
Federal Funds Sold and Securities Borrowed or Purchased Under Agreements to Resell
Fed Funds sold and securities borrowed or purchased under agreements to resell were as follows:
|
| | | | | | | |
(Dollars in millions) | March 31, 2018 | | December 31, 2017 |
Fed funds sold |
| $20 |
| |
| $65 |
|
Securities borrowed | 449 |
| | 298 |
|
Securities purchased under agreements to resell | 959 |
| | 1,175 |
|
Total Fed funds sold and securities borrowed or purchased under agreements to resell |
| $1,428 |
| |
| $1,538 |
|
Securities purchased under agreements to resell are primarily collateralized by U.S. government or agency securities and are carried at the amounts at which the securities will be subsequently resold, plus accrued interest. Securities borrowed are primarily collateralized by corporate securities. The Company borrows securities and purchases securities under agreements to resell as part of its securities financing activities. On the acquisition date of these securities, the Company and the
related counterparty agree on the amount of collateral required to secure the principal amount loaned under these arrangements. The Company monitors collateral values daily and calls for additional collateral to be provided as warranted under the respective agreements. At March 31, 2018 and December 31, 2017, the total market value of collateral held was $1.4 billion and $1.5 billion, of which $150 million and $177 million was repledged, respectively.
Securities Sold Under Agreements to Repurchase
Securities sold under agreements to repurchase are accounted for as secured borrowings. The following table presents the Company’s related activity, by collateral type and remaining contractual maturity:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 31, 2018 | | December 31, 2017 |
(Dollars in millions) | Overnight and Continuous | | Up to 30 days | | 30-90 days | | Total | | Overnight and Continuous | | Up to 30 days | | 30-90 days | | Total |
U.S. Treasury securities |
| $46 |
| |
| $— |
| |
| $— |
| |
| $46 |
| |
| $95 |
| |
| $— |
| |
| $— |
| |
| $95 |
|
Federal agency securities | 114 |
| | 18 |
| | 1 |
| | 133 |
| | 101 |
| | 15 |
| | — |
| | 116 |
|
MBS - agency | 857 |
| | 81 |
| | — |
| | 938 |
| | 694 |
| | 135 |
| | — |
| | 829 |
|
CP | 36 |
| | — |
| | — |
| | 36 |
| | 19 |
| | — |
| | — |
| | 19 |
|
Corporate and other debt securities | 336 |
| | 149 |
| | 39 |
| | 524 |
| | 316 |
| | 88 |
| | 40 |
| | 444 |
|
Total securities sold under agreements to repurchase |
| $1,389 |
| |
| $248 |
| |
| $40 |
| |
| $1,677 |
| |
| $1,225 |
| |
| $238 |
| |
| $40 |
| |
| $1,503 |
|
For securities sold under agreements to repurchase, the Company would be obligated to provide additional collateral in the event of a significant decline in fair value of the collateral pledged. This risk is managed by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions.
Netting of Securities - Repurchase and Resell Agreements
The Company has various financial assets and financial liabilities that are subject to enforceable master netting agreements or similar agreements. The Company's derivatives that are subject to enforceable master netting agreements or similar agreements are discussed in Note 15, "Derivative Financial Instruments."
The following table presents the Company's securities borrowed or purchased under agreements to resell and securities
sold under agreements to repurchase that are subject to MRAs. Generally, MRAs require collateral to exceed the asset or liability recognized on the balance sheet. Transactions subject to these agreements are treated as collateralized financings, and those with a single counterparty are permitted to be presented net on the Company's Consolidated Balance Sheets, provided certain criteria are met that permit balance sheet netting. At March 31, 2018 and December 31, 2017, there were no such transactions subject to legally enforceable MRAs that were eligible for balance sheet netting. The following table includes the amount of collateral pledged or received related to exposures subject to enforceable MRAs. While these agreements are typically over-collateralized, the amount of collateral presented in this table is limited to the amount of the related recognized asset or liability for each counterparty.
Notes to Consolidated Financial Statements (Unaudited), continued
|
| | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | Gross Amount | | Amount Offset | | Net Amount Presented in Consolidated Balance Sheets | | Held/Pledged Financial Instruments | | Net Amount |
March 31, 2018 | | | | | | | | | |
Financial assets: | | | | | | | | | |
Securities borrowed or purchased under agreements to resell |
| $1,408 |
| |
| $— |
| |
| $1,408 |
| 1 |
| $1,394 |
| |
| $14 |
|
Financial liabilities: | | | | | | | | | |
Securities sold under agreements to repurchase | 1,677 |
| | — |
| | 1,677 |
| | 1,677 |
| | — |
|
| | | | | | | | | |
December 31, 2017 | | | | | | | | | |
Financial assets: | | | | | | | | | |
Securities borrowed or purchased under agreements to resell |
| $1,473 |
| |
| $— |
| |
| $1,473 |
| 1 |
| $1,462 |
| |
| $11 |
|
Financial liabilities: | | | | | | | | | |
Securities sold under agreements to repurchase | 1,503 |
| | — |
| | 1,503 |
| | 1,503 |
| | — |
|
1 Excludes $20 million and $65 million of Fed Funds sold, which are not subject to a master netting agreement at March 31, 2018 and December 31, 2017, respectively.
NOTE 4 - TRADING ASSETS AND LIABILITIES AND DERIVATIVE INSTRUMENTS
The fair values of the components of trading assets and liabilities and derivative instruments are presented in the following table:
|
| | | | | | | |
(Dollars in millions) | March 31, 2018 | | December 31, 2017 |
Trading Assets and Derivative Instruments: | | | |
U.S. Treasury securities |
| $182 |
| |
| $157 |
|
Federal agency securities | 238 |
| | 395 |
|
U.S. states and political subdivisions | 123 |
| | 61 |
|
MBS - agency | 699 |
| | 700 |
|
Corporate and other debt securities | 804 |
| | 655 |
|
CP | 169 |
| | 118 |
|
Equity securities | 51 |
| | 56 |
|
Derivative instruments 1 | 657 |
| | 802 |
|
Trading loans 2 | 2,189 |
| | 2,149 |
|
Total trading assets and derivative instruments |
| $5,112 |
| |
| $5,093 |
|
| | | |
Trading Liabilities and Derivative Instruments: | | | |
U.S. Treasury securities |
| $698 |
| |
| $577 |
|
MBS - agency | 1 |
| | — |
|
Corporate and other debt securities | 453 |
| | 289 |
|
Equity securities | 5 |
| | 9 |
|
Derivative instruments 1 | 580 |
| | 408 |
|
Total trading liabilities and derivative instruments |
| $1,737 |
| |
| $1,283 |
|
1 Amounts include the impact of offsetting cash collateral received from and paid to the same derivative counterparties, and the impact of netting derivative assets and derivative liabilities when a legally enforceable master netting agreement or similar agreement exists.
2 Includes loans related to TRS.
Various trading and derivative instruments are used as part of the Company’s overall balance sheet management strategies and to support client requirements executed through the Bank and/or STRH, a broker/dealer subsidiary of the Company. The Company manages the potential market volatility associated with trading instruments by using appropriate risk management strategies. The size, volume, and nature of the trading products and derivative instruments can vary based on economic conditions as well as client-specific and Company-specific asset or liability positions.
Product offerings to clients include debt securities, loans traded in the secondary market, equity securities, derivative contracts, and other similar financial instruments. Other trading-
related activities include acting as a market maker for certain debt and equity security transactions, derivative instrument transactions, and foreign exchange transactions. The Company also uses derivatives to manage its interest rate and market risk from non-trading activities. The Company has policies and procedures to manage market risk associated with client trading and non-trading activities, and assumes a limited degree of market risk by managing the size and nature of its exposure. For valuation assumptions and additional information related to the Company's trading products and derivative instruments, see Note 15, “Derivative Financial Instruments,” and the “Trading Assets and Derivative Instruments and Securities Available for Sale” section of Note 16, “Fair Value Election and Measurement.”
Notes to Consolidated Financial Statements (Unaudited), continued
Pledged trading assets are presented in the following table:
|
| | | | | | | |
(Dollars in millions) | March 31, 2018 | | December 31, 2017 |
Pledged trading assets to secure repurchase agreements 1 |
| $1,151 |
| |
| $1,016 |
|
Pledged trading assets to secure certain derivative agreements | 97 |
| | 72 |
|
Pledged trading assets to secure other arrangements | 40 |
| | 41 |
|
1 Repurchase agreements secured by collateral totaled $1.1 billion and $975 million at March 31, 2018 and December 31, 2017, respectively.
NOTE 5 – SECURITIES AVAILABLE FOR SALE
Securities Portfolio Composition
|
| | | | | | | | | | | | | | | |
| March 31, 2018 |
(Dollars in millions) | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Fair
Value |
U.S. Treasury securities |
| $4,437 |
| |
| $— |
| |
| $97 |
| |
| $4,340 |
|
Federal agency securities | 248 |
| | 3 |
| | 2 |
| | 249 |
|
U.S. states and political subdivisions | 644 |
| | 5 |
| | 13 |
| | 636 |
|
MBS - agency residential | 22,837 |
| | 146 |
| | 470 |
| | 22,513 |
|
MBS - agency commercial | 2,320 |
| | 1 |
| | 79 |
| | 2,242 |
|
MBS - non-agency residential | 53 |
| | 4 |
| | — |
| | 57 |
|
MBS - non-agency commercial | 897 |
| | — |
| | 23 |
| | 874 |
|
ABS | 6 |
| | 1 |
| | — |
| | 7 |
|
Corporate and other debt securities | 16 |
| | — |
| | — |
| | 16 |
|
Total securities AFS |
| $31,458 |
| |
| $160 |
| |
| $684 |
| |
| $30,934 |
|
| | | | | | | |
| December 31, 2017 1 |
(Dollars in millions) | Amortized
Cost | | Unrealized
Gains | | Unrealized
Losses | | Fair
Value |
U.S. Treasury securities |
| $4,361 |
| |
| $2 |
| |
| $32 |
| |
| $4,331 |
|
Federal agency securities | 257 |
| | 3 |
| | 1 |
| | 259 |
|
U.S. states and political subdivisions | 618 |
| | 7 |
| | 8 |
| | 617 |
|
MBS - agency residential | 22,616 |
| | 222 |
| | 134 |
| | 22,704 |
|
MBS - agency commercial | 2,121 |
| | 3 |
| | 38 |
| | 2,086 |
|
MBS - non-agency residential | 55 |
| | 4 |
| | — |
| | 59 |
|
MBS - non-agency commercial | 862 |
| | 7 |
| | 3 |
| | 866 |
|
ABS | 6 |
| | 2 |
| | — |
| | 8 |
|
Corporate and other debt securities | 17 |
| | — |
| | — |
| | 17 |
|
Total securities AFS |
| $30,913 |
| |
| $250 |
| |
| $216 |
| |
| $30,947 |
|
1 Beginning January 1, 2018, the Company reclassified equity securities previously presented in Securities available for sale to Other assets on the Consolidated Balance Sheets. Reclassifications have been made to previously reported amounts for comparability. See Note 9, "Other Assets," for additional information.
The following table presents interest on securities AFS:
|
| | | | | | | |
| Three Months Ended March 31 |
(Dollars in millions) | 2018 | | 2017 |
Taxable interest |
| $201 |
| |
| $180 |
|
Tax-exempt interest | 5 |
| | 2 |
|
Total interest on securities AFS 1 |
| $206 |
| |
| $182 |
|
1 Beginning January 1, 2018, the Company reclassified equity securities previously presented in Securities available for sale to Other assets on the Consolidated Balance Sheets and began presenting income associated with certain of these equity securities in Trading account interest and other on the Consolidated Statements of Income. For periods prior to January 1, 2018, income associated with these equity securities was presented in Interest on securities available for sale and has been reclassified to Trading account interest and other for comparability.
Notes to Consolidated Financial Statements (Unaudited), continued
Securities AFS pledged to secure public deposits, repurchase agreements, trusts, certain derivative agreements, and other funds had a fair value of $3.8 billion and $4.3 billion at March 31, 2018 and December 31, 2017, respectively.
The following table presents the amortized cost, fair value, and weighted average yield of investments in securities AFS at
March 31, 2018, by remaining contractual maturity, with the exception of MBS and ABS, which are based on estimated average life. Receipt of cash flows may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
|
| | | | | | | | | | | | | | | | | | | |
| Distribution of Remaining Maturities |
(Dollars in millions) | Due in 1 Year or Less | | Due After 1 Year through 5 Years | | Due After 5 Years through 10 Years | | Due After 10 Years | | Total |
Amortized Cost: | | | | | | | | | |
U.S. Treasury securities |
| $— |
| |
| $2,731 |
| |
| $1,706 |
| |
| $— |
| |
| $4,437 |
|
Federal agency securities | 116 |
| | 40 |
| | 4 |
| | 88 |
| | 248 |
|
U.S. states and political subdivisions | 6 |
| | 59 |
| | 63 |
| | 516 |
| | 644 |
|
MBS - agency residential | 1,462 |
| | 4,771 |
| | 16,222 |
| | 382 |
| | 22,837 |
|
MBS - agency commercial | 1 |
| | 414 |
| | 1,643 |
| | 262 |
| | 2,320 |
|
MBS - non-agency residential | — |
| | 49 |
| | — |
| | 4 |
| | 53 |
|
MBS - non-agency commercial | — |
| | 13 |
| | 884 |
| | — |
| | 897 |
|
ABS | — |
| | — |
| | 5 |
| | 1 |
| | 6 |
|
Corporate and other debt securities | 7 |
| | 9 |
| | — |
| | — |
| | 16 |
|
Total securities AFS |
| $1,592 |
| |
| $8,086 |
| |
| $20,527 |
| |
| $1,253 |
| |
| $31,458 |
|
Fair Value: | | | | | | | | | |
U.S. Treasury securities |
| $— |
| |
| $2,673 |
| |
| $1,667 |
| |
| $— |
| |
| $4,340 |
|
Federal agency securities | 118 |
| | 41 |
| | 4 |
| | 86 |
| | 249 |
|
U.S. states and political subdivisions | 6 |
| | 61 |
| | 65 |
| | 504 |
| | 636 |
|
MBS - agency residential | 1,517 |
| | 4,747 |
| | 15,877 |
| | 372 |
| | 22,513 |
|
MBS - agency commercial | 1 |
| | 400 |
| | 1,589 |
| | 252 |
| | 2,242 |
|
MBS - non-agency residential | — |
| | 53 |
| | — |
| | 4 |
| | 57 |
|
MBS - non-agency commercial | — |
| | 12 |
| | 862 |
| | — |
| | 874 |
|
ABS | — |
| | — |
| | 6 |
| | 1 |
| | 7 |
|
Corporate and other debt securities | 7 |
| | 9 |
| | — |
| | — |
| | 16 |
|
Total securities AFS |
| $1,649 |
| |
| $7,996 |
| |
| $20,070 |
| |
| $1,219 |
| |
| $30,934 |
|
Weighted average yield 1 | 3.31 | % | | 2.18 | % | | 2.86 | % | | 3.04 | % | | 2.72 | % |
1 Weighted average yields are based on amortized cost and presented on an FTE basis.
Notes to Consolidated Financial Statements (Unaudited), continued
Securities AFS in an Unrealized Loss Position