Investments

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

The Company's investment securities consist of the following (dollars in millions):

	March 31, 2020		December 31, 2019
U.S. Treasury securities⁽¹⁾	$	10,110	$	9,906
Residential mortgage-backed securities - Agency⁽²⁾	672		689
Total investment securities	$	10,782	$	10,595


(1)	Includes $206 million and $121 million of U.S. Treasury securities pledged as swap collateral as of March 31, 2020 and December 31, 2019, respectively.


(2)	Consists of residential mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.

The amortized cost, gross unrealized gains and losses, and fair value of available-for-sale and held-to-maturity investment securities are as follows (dollars in millions):

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At March 31, 2020
Available-for-Sale Investment Securities⁽¹⁾
U.S. Treasury securities	$	9,634	$	476	$	—		$	10,110
Residential mortgage-backed securities - Agency	382		11		—			393
Total available-for-sale investment securities	$	10,016	$	487	$	—		$	10,503
Held-to-Maturity Investment Securities⁽²⁾
Residential mortgage-backed securities - Agency⁽³⁾	$	279	$	9	$	—		$	288
Total held-to-maturity investment securities	$	279	$	9	$	—		$	288

At December 31, 2019
Available-for-Sale Investment Securities⁽¹⁾
U.S. Treasury securities	$	9,759	$	155	$	(8	)	$	9,906
Residential mortgage-backed securities - Agency	414		3		—			417
Total available-for-sale investment securities	$	10,173	$	158	$	(8	)	$	10,323
Held-to-Maturity Investment Securities⁽²⁾
Residential mortgage-backed securities - Agency⁽³⁾	$	272	$	3	$	(1	)	$	274
Total held-to-maturity investment securities	$	272	$	3	$	(1	)	$	274


(1)	Available-for-sale investment securities are reported at fair value.


(2)	Held-to-maturity investment securities are reported at amortized cost.


(3)	Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives.

The Company invests in U.S. Treasury and residential mortgage-backed securities issued by government agencies, which have long histories with no credit losses and are explicitly or implicitly guaranteed by the U.S. government. Therefore, management has concluded that there is no expectation of non-payment on its investment securities and does not record an allowance for credit losses on these investments.

The following table provides information about available-for-sale investment securities with aggregate gross unrealized losses and the length of time that individual investment securities have been in a continuous unrealized loss position (dollars in millions):

	Number of Securities in a Loss Position	Less than 12 months					More than 12 months
	Number of Securities in a Loss Position	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
At December 31, 2019
Available-for-Sale Investment Securities
U.S. Treasury securities	11	$	1,402	$	(8	)	$	—	$	—

There were no proceeds from sales or recognized gains and losses on available-for-sale securities during the three months ended March 31, 2020 and 2019. See Note 7: Accumulated Other Comprehensive Income for unrealized gains and losses on available-for-sale securities during the three months ended March 31, 2020 and 2019.

Maturities of available-for-sale debt securities and held-to-maturity debt securities are provided in the following table (dollars in millions):

At March 31, 2020	One Year or Less		After One Year Through Five Years		After Five Years Through Ten Years		After Ten Years		Total
Available-for-Sale Investment Securities—Amortized Cost
U.S. Treasury securities	$	1,122	$	8,386	$	126	$	—	$	9,634
Residential mortgage-backed securities - Agency⁽¹⁾	—		74		308		—		382
Total available-for-sale investment securities	$	1,122	$	8,460	$	434	$	—	$	10,016
Held-to-Maturity Investment Securities—Amortized Cost
Residential mortgage-backed securities - Agency⁽¹⁾	$	—	$	—	$	—	$	279	$	279
Total held-to-maturity investment securities	$	—	$	—	$	—	$	279	$	279
Available-for-Sale Investment Securities—Fair Values
U.S. Treasury securities	$	1,137	$	8,837	$	136	$	—	$	10,110
Residential mortgage-backed securities - Agency⁽¹⁾	—		77		316		—		393
Total available-for-sale investment securities	$	1,137	$	8,914	$	452	$	—	$	10,503
Held-to-Maturity Investment Securities—Fair Values
Residential mortgage-backed securities - Agency⁽¹⁾	$	—	$	—	$	—	$	288	$	288
Total held-to-maturity investment securities	$	—	$	—	$	—	$	288	$	288


(1)	Maturities of residential mortgage-backed securities are reflective of the contractual maturities of the investment.

Other Investments

As a part of the Company's community reinvestment initiatives, the Company has made equity investments in certain limited partnerships and limited liability companies that finance the construction and rehabilitation of affordable rental housing, as well as stimulate economic development in low to moderate income communities. These investments are accounted for using the equity method of accounting and are recorded within other assets. The related commitment for future investments is recorded in accrued expenses and other liabilities within the condensed consolidated statements of financial condition. The portion of each investment's operating results allocable to the Company reduces the carrying value of the investments and is recorded in other expense within the condensed consolidated statements of income. The Company further reduces the carrying value of the investments by recognizing any amounts that are in excess of future net tax benefits in other expense. The Company earns a return primarily through the receipt of tax credits allocated to the affordable housing projects and the community revitalization projects. These investments are not consolidated as the Company does not have a controlling financial interest in the entities. As of March 31, 2020 and December 31, 2019, the Company had outstanding investments in these entities of $348 million and $336 million, respectively, and related contingent liabilities of $86 million and $74 million, respectively. Of the above outstanding equity investments, the Company had $310 million and $298 million of investments related to affordable housing projects as of March 31, 2020 and December 31, 2019, respectively, which had $71 million and $59 million related contingent liabilities, respectively.

The Company holds non-controlling equity positions in several payments services entities. Most of these investments are not subject to equity method accounting because the Company does not have significant influence over the investee. The common or preferred equity securities that the Company hold typically do not have readily determinable fair values. As a result, the majority of these investments are carried at cost minus impairment, if any. As of March 31, 2020 and December 31, 2019, the carrying value of these investments, which is recorded within other assets, was $26 million and $42 million, respectively.