Investment Securities

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

The following table presents our investment securities:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(Dollars in millions)
September 30, 2021
Available-for-sale securities
Agency - Commercial	$	708	$	18	$	—	$	726
Agency - Residential	749		14		(2)		761
Corporate debt obligations	70		3		—		73
Municipal obligations	22		—		—		22
Other MBS	219		—		—		219
Certificate of deposits	1		—		—		1
Total available-for-sale securities (1)	$	1,769	$	35	$	(2)	$	1,802
Held-to-maturity securities
Agency - Commercial	$	117	$	3	$	—	$	120
Agency - Residential	119		5		—		124
Total held-to-maturity securities (1)	$	236	$	8	$	—	$	244
December 31, 2020
Available-for-sale securities
Agency - Commercial	$	1,018	$	43	$	—	$	1,061
Agency - Residential	707		28		—		735
Corporate debt obligations	75		2		—		77
Municipal obligations	27		1		—		28
Other MBS	42		—		—		42
Certificate of deposits	1		—		—		1
Total available-for-sale securities (1)	$	1,870	$	74	$	—	$	1,944
Held-to-maturity securities
Agency - Commercial	$	193	$	7	$	—	$	200
Agency - Residential	184		9		—		193
Total held-to-maturity securities (1)	$	377	$	16	$	—	$	393

(1)There were no securities of a single issuer, which are not governmental or government-sponsored, that exceeded 10 percent of stockholders’ equity at September 30, 2021 or December 31, 2020.

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 loss assumption, comprised 85 percent of our AFS portfolio as of September 30, 2021. For the remaining AFS securities, credit losses are recognized as an increase to the ACL through the credit loss provision. If any of the decline in fair value is related to market factors, that amount is recognized in OCI. We had no unrealized credit losses as of September 30, 2021 and December 31, 2020.

We separately evaluate our HTM debt securities for any credit losses. As of September 30, 2021 and December 31, 2020, our entire HTM portfolio qualified for the zero loss assumption as all securities are guaranteed by the U.S. Treasury or U.S. government agencies.

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 $5 million at both September 30, 2021 and December 31, 2020, and was reported in other assets on the Consolidated Statements of Financial Condition.

Available-for-sale securities

Securities AFS are carried at fair value. Unrealized gains and losses on AFS securities are reported as a component of other comprehensive income.

We purchased $0 million and $283 million of AFS securities, which were comprised of U.S. government sponsored agency MBS, CD, and corporate debt obligations during the three and nine months ended September 30, 2021. In addition, we retained $137 million and $195 million of passive interests in our own private MBS during the three and nine months ended September 30, 2021. We retained $0 million and $18 million of passive interests in our own private MBS during the three and nine months ended September 30, 2020, respectively.

There were no sales of AFS securities during both the three and nine months ended September 30, 2021 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 and nine months ended September 30, 2021 and September 30, 2020.

The following table summarizes the unrealized loss positions on AFS and HTM investment securities, by duration of the unrealized loss:


	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)
September 30, 2021
Available-for-sale securities
Agency - Commercial	$	4	2	$	—	$	11	4	$	—
Agency - Residential	—		—	—		274		13	(2)

Corporate debt obligations	—		—	—		3		1	—
Other mortgage-backed securities	—		1	—		32		3	—
Held-to-maturity securities
Agency - Residential	$	—	—	$	—	$	—	1	$	—
December 31, 2020
Available-for-sale securities
Agency - Commercial	$	3	1	$	—	$	7	2	$	—
Agency - Residential	—		—	—		—		1	—
Corporate debt obligations	—		—	—		10		3	—
Other mortgage-backed securities	—		—	—		—		1	—
Held-to-maturity securities
Agency - Residential	$	—	—	$	—	$	2	3	$	—

Unrealized losses on AFS 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 AFS securities are private securitizations, all of which are considered 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 (1)		Amortized Cost		Fair Value		Weighted Average Yield (1)
	(Dollars in millions)
September 30, 2021
Due in one year or less	$	6	$	6	2.24	%	$	—	$	—	—	%
Due after one year through five years	9		9		3.91	%	10		10		2.51	%
Due after five years through 10 years	119		125		3.65	%	3		3		1.99	%
Due after 10 years	1,635		1,662		2.23	%	223		231		2.52	%
Total	$	1,769	$	1,802			$	236	$	244

(1) Weighted-average yields are based on amortized cost weighted for the contractual maturity of each security.

We pledge investment securities, primarily agency collateralized and municipal taxable mortgage obligations, to collateralize lines of credit and/or borrowings. At September 30, 2021 and December 31, 2020, we had pledged investment securities of $268 million and $202 million, respectively.