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Investment Securities
 3 Months Ended
Mar. 31, 2020
Investments, Debt and Equity Securities [Abstract]  
Investment Securities Investment Securities

Securitized HFS loans not sold

Trading securities arise as mortgage loans are securitized for sale in the normal of business. Trading securities are carried at fair value. Changes in fair value on trading securities are recorded in current period earnings. At March 31, 2020, we held $2,058 million of these securities at fair value, which were comprised of U.S. government sponsored agency MBS. We had no trading securities at December 31, 2019.

The following table presents our AFS and HTM investment securities:
 
Amortized Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair Value
 
(Dollars in millions)
March 31, 2020
 
 
 
 
Available-for-sale securities
 
 
 
 
Agency - Commercial
$
1,269

$
17

$
(1
)
$
1,285

Agency - Residential
971

33

—

1,004

Municipal obligations
30

—

—

30

Corporate debt obligations
67

1

(1
)
67

Other MBS
58

1

—

59

Certificate of deposits
1

—

—

1

Total available-for-sale securities (1)
$
2,396

$
52

$
(2
)
$
2,446

Held-to-maturity securities
 
 
 
 
Agency - Commercial
$
279

$
3

$
—

$
282

Agency - Residential
275

12

—

287

Total held-to-maturity securities (1)
$
554

$
15

$
—

$
569

December 31, 2019
 
 
 
 
Available-for-sale securities
 
 
 
 
Agency - Commercial
$
948

$
2

$
(3
)
$
947

Agency - Residential
1,015

4

(4
)
$
1,015

Corporate debt obligations
76

1

—

$
77

Municipal obligations
31

—

—

$
31

Other MBS
44

1

—

$
45

Certificate of Deposits
1

—

—

$
1

Total available-for-sale securities (1)
$
2,115

$
8

$
(7
)
$
2,116

Held-to-maturity securities
 
 
 
 
Agency - Commercial
$
306

$
—

$
(1
)
$
305

Agency - Residential
292

3

(1
)
294

Total held-to-maturity securities (1)
$
598

$
3

$
(2
)
$
599


(1)
There were no securities of a single issuer, which are not governmental or government-sponsored, that exceeded 10 percent of stockholders’ equity at March 31, 2020 or December 31, 2019.

We evaluate AFS debt securities where the value has declined below amortized cost for impairment. If we intend to sell or believe it is more likely than not that we will be required to sell the debt security, it is written down to fair value through earnings. For AFS debt securities we intend to hold, we evaluate the debt securities for expected credit losses except for debt securities that are guaranteed by the U.S. Treasury, U.S. government agencies or sovereign entities of high credit quality for which we apply a zero credit loss assumption and represented 95 percent of our AFS portfolio as of March 31, 2020. For the remaining AFS securities, credit losses are recognized as an increase to the allowance for credit losses through the credit loss provision.  If any of the decline in fair value is related to market factors, that amount is recognized in accumulated other comprehensive income (OCI). We have no unrealized credit losses as of March 31, 2020 and December 31, 2019.

We separately evaluate our HTM debt securities for any credit losses. As of March 31, 2020 and December 31, 2019, our entire HTM portfolio qualified for the zero loss assumption as all securities are guaranteed by the U.S. Treasury, U.S. government agencies or sovereign entities of high credit quality.

Investment securities transactions are recorded on the trade date for purchases and sales. Interest earned on investment securities, including the amortization of premiums and the accretion of discounts, are determined using the effective interest method over the period of maturity and recorded in interest income in the Consolidated Statements of Operations. Accrued interest receivable on investment securities totaled $7 million and $6 million at March 31, 2020 and December 31, 2019, and was reported in Other Assets on the Consolidated Statements of Financial Condition.




Available-for-sale securities

Securities available-for-sale are carried at fair value. Unrealized gains and losses on AFS securities are reported as a component of other comprehensive income.
    
We purchased $350 million and $16 million of AFS securities, which were comprised of U.S. government sponsored agency MBS, certificate of deposits, and corporate debt obligations during the three months ended March 31, 2020, and March 31, 2019 respectively. In addition, we retained $18 million of passive interests in our own private MBS during the three months ended March 31, 2020. We did not retain any interest in our own private MBS during the three months ended March 31, 2019.

There were no in sales of AFS securities during both the three months ended March 31, 2020, and March 31, 2019 other than those related to mortgage loans that had been securitized for sale in the normal course of business.

Held-to-maturity securities

Investment securities HTM are carried at amortized cost and adjusted for amortization of premiums and accretion of discounts using the interest method. Unrealized losses are not recorded to the extent they are temporary in nature.

There were no purchases or sales of HTM securities during both the three months ended March 31, 2020 and March 31, 2019.

The following table summarizes available-for-sale and held-to-maturity securities, by duration, the unrealized loss positions on investment securities: 
 
Unrealized Loss Position with
Duration 12 Months and Over
Unrealized Loss Position with
Duration Under 12 Months
 
Fair Value
Number of Securities
Unrealized Loss
Fair
Value
Number of
Securities
Unrealized
Loss
 
(Dollars in millions)
March 31, 2020
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
Agency - Commercial
$
35

4

$
—

$
91

9

$
(1
)
Municipal obligations
$
—

1

$
—

$
—

—

$
—

Corporate debt obligations
$
—

—

$
—

$
21

5

$
(1
)
Held-to-maturity securities
 
 
 
 
 
 
Agency - Commercial
$
3

1

$
—

$
5

1

$
—

December 31, 2019
 
 
 
 
 
 
Available-for-sale securities
 
 
 
 
 
 
Agency - Commercial
$
148

17

$
(3
)
$
303

19

$
—

Agency - Residential
$
266

26

$
(3
)
$
148

14

$
(1
)
Municipal obligations
$
8

3

$
—

$
—

—

$
—

Held-to-maturity securities
 
 
 
 
 
 
Agency - Commercial
$
148

13

$
(1
)
$
85

6

$
—

Agency - Residential
$
35

7

$
(1
)
$
38

10

$
—



Unrealized losses on available-for-sale securities have not been recognized into income because almost all of the portfolio held by us are issued by U.S. government entities and agencies. These securities are either explicitly or implicitly guaranteed by the U.S. government, are highly rated by major rating agencies, and have a long history of no credit losses. The remaining unrealized losses on available-for-sale securities are municipal securities and corporate debt obligations, all of which are considered investment grade or are de minimis. The fair value is expected to recover as the bonds approach maturity.
The following table shows the amortized cost and estimated fair value of securities by contractual maturity:
 
Investment Securities Available-for-Sale
Investment Securities Held-to-maturity
 
Amortized
Cost
Fair
Value
Weighted Average
Yield
Amortized
Cost
Fair
Value
Weighted Average
Yield
 
(Dollars in millions)
March 31, 2020
 
 
 
 
 
 
Due in one year or less
$
3

$
3

2.04
%
$
—

$
—

—
%
Due after one year through five years
11

11

2.68
%
9

9

2.49
%
Due after five years through 10 years
102

104

4.03
%
8

9

2.28
%
Due after 10 years
2,280

2,328

2.42
%
537

551

2.44
%
Total
$
2,396

$
2,446

 
$
554

$
569

 


We pledge investment securities, primarily agency collateralized and municipal taxable mortgage obligations, to collateralize lines of credit and/or borrowings. At March 31, 2020 and December 31, 2019, we had pledged investment securities of $828 million and $874 million, respectively.