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

6 Months Ended

Jun. 30, 2020

Investments, Debt and Equity Securities [Abstract]

AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES


NOTE 6—AVAILABLE-FOR-SALE AND HELD-TO-MATURITY SECURITIES

The following table presents the amortized cost and fair value of available-for-sale and held-to-maturity securities (dollars in millions):


	Amortized Cost		Gross Unrealized / Unrecognized Gains		Gross Unrealized / Unrecognized Losses		Fair Value
June 30, 2020:
Available-for-sale securities:
Agency mortgage-backed securities	$	14,567	$	1,151	$	(83)	$	15,635
Agency debentures	1,210		49		(4)		1,255
US Treasuries	1,202		121		—		1,323
Non-agency asset-backed securities⁽¹⁾	1,479		14		(5)		1,488

Non-agency mortgage-backed securities	272		19		—		291

Total available-for-sale securities	$	18,730	$	1,354	$	(92)	$	19,992
Held-to-maturity securities:
Agency mortgage-backed securities	$	25,579	$	870	$	(34)	$	26,415
Agency debentures	208		13		(2)		219
Other agency debt securities	1,395		67		—		1,462
Total held-to-maturity securities	$	27,182	$	950	$	(36)	$	28,096

December 31, 2019:
Available-for-sale securities:⁽²⁾
Agency mortgage-backed securities	$	16,267	$	836	$	(68)	$	17,035
Agency debentures	632		27		—		659
US Treasuries	1,233		34		(40)		1,227
Non-agency asset-backed securities⁽¹⁾	417		2		(2)		417
Non-agency mortgage-backed securities	159		4		—		163
Total available-for-sale securities	$	18,708	$	903	$	(110)	$	19,501
Held-to-maturity securities:⁽²⁾
Agency mortgage-backed securities	$	20,085	$	293	$	(49)	$	20,329
Agency debentures	267		4		—		271
Other agency debt securities	1,617		31		(2)		1,646
Total held-to-maturity securities	$	21,969	$	328	$	(51)	$	22,246

(1)Non-agency ABS collateralized by credit card, automobile loan and student loan receivables represented approximately 40%, 37% and 23% respectively, of the amortized cost of the non-agency ABS held at June 30, 2020 and approximately 54%, 18% and 28%, respectively, of the amortized cost of the non-agency ABS held at December 31, 2019.

(2)Securities with a fair value of $744 million were transferred from available-for-sale to held-to-maturity based on a change in intent and demonstrated ability to hold these to maturity in December 2019.

Contractual Maturities

The following table presents the contractual maturities of all available-for-sale and held-to-maturity debt securities (dollars in millions):


	June 30, 2020
	Amortized Cost		Fair Value
Available-for-sale debt securities:
Due within one year	$	400	$	402
Due within one to five years	1,045		1,057
Due within five to ten years	9,274		10,244
Due after ten years	8,011		8,289
Total available-for-sale debt securities	$	18,730	$	19,992
Held-to-maturity debt securities:
Due within one year	$	55	$	56
Due within one to five years	2,016		2,114
Due within five to ten years	2,780		2,992
Due after ten years	22,331		22,934
Total held-to-maturity debt securities	$	27,182	$	28,096

At June 30, 2020 and December 31, 2019, the Company had pledged $6.3 billion and $7.4 billion, respectively, of held-to-maturity debt securities, and $429 million and $456 million, respectively, of available-for-sale securities, as collateral for FHLB advances, derivatives and other purposes.

Investments with Unrealized or Unrecognized Losses

The following table presents the fair value and unrealized or unrecognized losses on available-for-sale and held-to-maturity securities, and the length of time that individual securities have been in a continuous unrealized or unrecognized loss position (dollars in millions):


	Less than 12 Months						12 Months or More						Total
	Fair Value		Unrealized / Unrecognized Losses		Fair Value		Unrealized / Unrecognized Losses		Fair Value		Unrealized / Unrecognized Losses
June 30, 2020:
Available-for-sale securities:
Agency mortgage-backed securities	$	2,427	$	(47)	$	1,231	$	(36)	$	3,658	$	(83)
Non-agency mortgage-backed securities	31		—		—		—		31		—
Agency debentures	296		(4)		—		—		296		(4)
US Treasuries	175		—		—		—		175		—
Non-agency asset-backed securities	330		(4)		88		(1)		418		(5)

Total temporarily impaired available-for-sale securities	$	3,259	$	(55)	$	1,319	$	(37)	$	4,578	$	(92)
Held-to-maturity securities:
Agency mortgage-backed securities	$	1,315	$	(5)	$	1,074	$	(29)	$	2,389	$	(34)
Agency debentures	99		(2)		—		—		99		(2)
Other agency debt securities	—		—		33		—		33		—
Total temporarily impaired held-to-maturity securities	$	1,414	$	(7)	$	1,107	$	(29)	$	2,521	$	(36)

December 31, 2019:
Available-for-sale securities:
Agency mortgage-backed securities	$	2,045	$	(32)	$	1,916	$	(36)	$	3,961	$	(68)
Non-agency mortgage-backed securities	50		—		—		—		50		—
US Treasuries	402		(40)		—		—		402		(40)
Non-agency asset-backed securities	251		(2)		—		—		251		(2)

Total temporarily impaired available-for-sale securities	$	2,748	$	(74)	$	1,916	$	(36)	$	4,664	$	(110)
Held-to-maturity securities:
Agency mortgage-backed securities	$	1,337	$	(4)	$	3,600	$	(45)	$	4,937	$	(49)
Other agency debt securities	181		(1)		135		(1)		316		(2)
Total temporarily impaired held-to-maturity securities	$	1,518	$	(5)	$	3,735	$	(46)	$	5,253	$	(51)

The Company does not believe that any individual unrealized loss in the available-for-sale portfolio or unrecognized loss in the held-to-maturity portfolio as of June 30, 2020 represents a credit loss. Investment securities backed by the US government or its agencies comprised 96% and 99%, respectively, of the amortized cost basis of the Company's portfolio at June 30, 2020 and December 31, 2019. The Company has no expectation of credit losses for these securities based on the credit profiles of those entities and our historical loss experience for such investments. See Note 1—Organization, Basis of Presentation and Summary of Significant Accounting Policies for additional details.

For the non-agency portfolio, the Company applied stressed cash flow scenarios and no credit losses were indicated. Unrealized losses on the non-agency securities reflect non-credit related factors such as changing interest rates and market liquidity. Further, the Company does not intend to sell any of its debt securities in an unrealized or unrecognized loss position as of the balance sheet date and it is not more likely than not that the Company will be required to sell the debt securities before the anticipated recovery of its remaining amortized cost of the debt securities in an unrealized or unrecognized loss position.

There were no impairment losses recognized in earnings on available-for-sale or held-to-maturity securities during the six months ended June 30, 2020 and 2019.

Gains (Losses) on Securities and Other, Net

The following table presents the components of gains (losses) on securities and other, net (dollars in millions):



	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Gains (losses) on available-for-sale securities, net:
Gains on available-for-sale securities	$	38	$	15	$	57	$	26
Losses on available-for-sale securities	(15)		(80)		(15)		(80)
Subtotal	23		(65)		42		(54)
Equity method investment income and other	—		1		1		1
Gains (losses) on securities and other, net	$	23	$	(64)	$	43	$	(53)

In June 2020, the Company sold $571 million of investment securities due to market conditions. Gains (losses) on securities and other, net includes $15 million of losses related to these sales. In June 2019, the Company repositioned its balance sheet through the sales of $4.5 billion of lower-yielding investment securities. Gains (losses) on securities and other, net includes $80 million of losses related to these sales in the second quarter 2019.