Investments

9 Months Ended

Sep. 30, 2021

Investment Securities

Investment securities are classified as held-to-maturity (“HTM”), AFS, or trading. HTM securities, which management has the intent and ability to hold until maturity, are carried at amortized cost. AFS securities are carried at fair value and changes in fair value (unrealized gains and losses) are reported as net increases or decreases to accumulated other comprehensive income (“AOCI”), net of related taxes. Trading securities are carried at fair value with gains and losses recognized in current period earnings. The carrying values of our securities do not include accrued interest receivables of $57 million and $54 million at September 30, 2021 and December 31, 2020, respectively. These receivables are presented in the Consolidated Balance Sheet within the “Other Assets” line item. See Note 5 of our 2020 Form 10-K for more information related to our accounting for investment securities. See also Note 3 of our 2020 Form 10-K for discussion on our process to estimate fair value for investment securities.

The following schedule summarizes the amortized cost and estimated fair values of our HTM and AFS securities:


	September 30, 2021
(In millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	459	$	4	$	2	$	461
Available-for-sale
U.S. Treasury securities	155		—		27		128
U.S. Government agencies and corporations:
Agency securities	874		21		—		895
Agency guaranteed mortgage-backed securities	16,841		153		175		16,819
Small Business Administration loan-backed securities	1,015		3		30		988
Municipal securities	1,513		48		5		1,556
Other debt securities	75		—		—		75
Total available-for-sale	20,473		225		237		20,461
Total HTM and AFS investment securities	$	20,932	$	229	$	239	$	20,922


	December 31, 2020
(In millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	636	$	5	$	1	$	640
Available-for-sale
U.S. Treasury securities	205		—		13		192
U.S. Government agencies and corporations:
Agency securities	1,051		40		—		1,091
Agency guaranteed mortgage-backed securities	11,439		262		8		11,693
Small Business Administration loan-backed securities	1,195		—		35		1,160
Municipal securities	1,352		68		—		1,420
Other debt securities	175		—		—		175
Total available-for-sale	15,417		370		56		15,731


Total HTM and AFS investment securities	$	16,053	$	375	$	57	$	16,371

Maturities

The following schedule shows the amortized cost and weighted average yields of investment debt securities by contractual maturity of principal payments at September 30, 2021. Actual principal payments may differ from contractual or expected principal payments because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


	September 30, 2021
	Total debt investment securities				Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years
(Dollar amounts in millions)	Amortized cost		Average yield		Amortized cost		Average yield		Amortized cost		Average yield		Amortized cost		Average yield		Amortized cost		Average yield
Held-to-maturity
Municipal securities 1	$	459	3.23	%	$	40	3.52	%	$	139	3.54	%	$	170	2.84	%	$	110	3.33	%
Available-for-sale
U.S. Treasury securities	155		1.28		—		—		—		—		—		—		155		1.28
U.S. Government agencies and corporations:
Agency securities	874		2.07		—		—		351		1.36		274		2.43		249		2.66
Agency guaranteed mortgage-backed securities	16,841		1.60		—		—		396		1.37		807		1.56		15,638		1.60
Small Business Administration loan-backed securities	1,015		1.36		—		—		50		1.38		127		1.56		838		1.33
Municipal securities 1	1,513		2.34		102		1.99		658		2.51		494		2.17		259		2.38
Other debt securities	75		2.16		—		—		—		—		60		1.99		15		2.85
Total available-for-sale securities	20,473		1.66		102		1.99		1,455		1.88		1,762		1.88		17,154		1.62
Total HTM and AFS investment securities	$	20,932	1.69	%	$	142	2.42	%	$	1,594	2.03	%	$	1,932	1.96	%	$	17,264	1.63	%

1 The yields on tax-exempt securities are calculated on a tax-equivalent basis.

The following schedule summarizes the amount of gross unrealized losses for debt securities and the estimated fair value by length of time the securities have been in an unrealized loss position:


	September 30, 2021
	Less than 12 months				12 months or more				Total
(In millions)	Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	2	$	121	$	—	$	13	$	2	$	134




Available-for-sale
U.S. Treasury securities	—		—		27		128		27		128
U.S. Government agencies and corporations:
Agency securities	—		110		—		1		—		111
Agency guaranteed mortgage-backed securities	155		10,434		20		534		175		10,968
Small Business Administration loan-backed securities	—		—		30		809		30		809
Municipal securities	5		377		—		2		5		379
Other	—		—		—		—		—		—





Total available-for-sale	160		10,921		77		1,474		237		12,395


Total HTM and AFS investment securities	$	162	$	11,042	$	77	$	1,487	$	239	$	12,529


	December 31, 2020
	Less than 12 months				12 months or more				Total
(In millions)	Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	1	$	96	$	—	$	12	$	1	$	108




Available-for-sale
U.S. Treasury securities	13		142		—		—		13		142
U.S. Government agencies and corporations:
Agency securities	—		6		—		2		—		8
Agency guaranteed mortgage-backed securities	7		1,197		1		179		8		1,376
Small Business Administration loan-backed securities	—		15		35		1,068		35		1,083
Municipal securities	—		19		—		—		—		19
Other	—		150		—		—		—		150





Total available-for-sale	20		1,529		36		1,249		56		2,778


Total HTM and AFS investment securities	$	21	$	1,625	$	36	$	1,261	$	57	$	2,886

Approximately 122 and 119 HTM and 1,241 and 549 AFS investment securities were in an unrealized loss position at September 30, 2021, and December 31, 2020, respectively.

Impairment

We review investment securities quarterly on an individual security basis for the presence of impairment. For additional information on our policy and impairment evaluation process for investment securities, see Note 5 of our 2020 Form 10-K.

AFS Impairment

We did not recognize any impairment on our AFS investment securities portfolio during the first nine months of 2021. Unrealized losses relate to changes in interest rates subsequent to purchase and are not attributable to credit. At September 30, 2021, we had not initiated any sales of AFS securities, nor did we have an intent to sell any identified securities with unrealized losses. We do not believe it is more likely than not that we would be required to sell such securities before recovery of their amortized cost basis.

HTM Impairment

For HTM securities, the ACL is estimated consistent with the approach described in Note 6 for loans carried at amortized cost. The ACL on HTM securities was less than $1 million at September 30, 2021. No HTM securities were past due at September 30, 2021. The amortized cost basis of HTM securities categorized by year of issuance and risk classification as monitored by management is summarized as follows:


	September 30, 2021
	Amortized cost basis by year of issuance
(In millions)	2021		2020		2019		2018		2017		Prior		Total Securities
Held-to-maturity:
Pass	$	96	$	124	$	10	$	—	$	8	$	220	$	458
Accruing substandard	—		—		—		—		—		1		1
Total held-to-maturity	$	96	$	124	$	10	$	—	$	8	$	221	$	459

Securities Gains and Losses Recognized in Income

The following summarizes gains and losses recognized in income:


	Three Months Ended September 30,								Nine Months Ended September 30,
	2021				2020				2021				2020
(In millions)	Gross gains		Gross losses		Gross gains		Gross losses		Gross gains		Gross losses		Gross gains		Gross losses




Other noninterest-bearing investments	$	6	$	29	$	5	$	1	$	86	$	35	$	13	$	18

Net gains (losses) 1			$	(23)			$	4			$	51			$	(5)

1 Net gains (losses) were recognized in securities gains (losses) in the income statement.

Interest income by investment security type is as follows:


	Three Months Ended September 30,
	2021						2020
(In millions)	Taxable		Nontaxable		Total		Taxable		Nontaxable		Total
Investment securities:
Held-to-maturity	$	3	$	1	$	4	$	2	$	3	$	5
Available-for-sale	64		8		72		61		6		67
Trading	—		2		2		—		2		2
Total securities	$	67	$	11	$	78	$	63	$	11	$	74


	Nine Months Ended September 30,
	2021						2020
(In millions)	Taxable		Nontaxable		Total		Taxable		Nontaxable		Total
Investment securities:
Held-to-maturity	$	8	$	4	$	12	$	7	$	8	$	15
Available-for-sale	182		22		204		196		19		215
Trading	—		7		7		—		5		5
Total	$	190	$	33	$	223	$	203	$	32	$	235

Investment securities with a carrying value of approximately $2.4 billion and $2.3 billion at September 30, 2021 and December 31, 2020, respectively, were pledged to secure public and trust deposits, advances, and for other purposes as required by law. Securities are also pledged as collateral for security repurchase agreements.