Investment Securities

3 Months Ended

Mar. 31, 2020

Investments, Debt and Equity Securities [Abstract]

Investment securities principally include available-for-sale debt securities carried at fair value on the Consolidated Balance Sheets. The CECL methodology, which became effective January 1, 2020, requires us to estimate lifetime expected credit losses for all available-for-sale debt securities in an unrealized loss position. Comparative information continues to be reported in accordance with the methodology in effect for prior periods. When estimating a security’s probability of default and the recovery rate, we assess the security’s credit indicators, including credit ratings. If our assessment indicates that an expected credit loss exists, we determine the portion of the unrealized loss attributable to credit deterioration and record an allowance for the expected credit loss through the Consolidated Statements of Income in Other loans Provision for credit losses. Unrealized gains and any portion of a security’s unrealized loss attributable to non-credit losses are recorded in the Consolidated Statements of Comprehensive Income, net of tax.

Investment securities also include equity securities carried at fair value on the Consolidated Balance Sheets with unrealized gains and losses recorded in the Consolidated Statements of Income as Other, net expense.

Realized gains and losses are recognized upon disposition of the securities using the specific identification method.

The following is a summary of investment securities as of March 31, 2020 and December 31, 2019:


	2020														2019
Description of Securities (Millions)	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Available-for-sale debt securities:
State and municipal obligations	$	194	$	10	$	—	$	204	$	236	$	8	$	(1)	$	243
U.S. Government agency obligations	8		—		—		8		9		—		—		9
U.S. Government treasury obligations	4,001		104		—		4,105		7,395		35		(1)		7,429
Corporate debt securities	24		—		—		24		27		—		—		27
Mortgage-backed securities ^(a)	37		3		—		40		39		2		—		41
Foreign government bonds and obligations	574		2		—		576		578		1		—		579
Equity securities ^{(b) (c)}	55		22		(2)		75		55		25		(2)		78
Total	$	4,893	$	141	$	(2)	$	5,032	$	8,339	$	71	$	(4)	$	8,406

(a)Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.

(b)Equity securities comprise investments in common stock, exchange-traded funds and mutual funds.

(c)During the fourth quarter of 2019, an equity investment was transferred from Other assets to Investment securities following the completion of an initial public offering by the issuer of the security. The investment had a fair value of $25 million and $28 million as of March 31, 2020 and December 31, 2019, respectively, with an associated cost of $3 million. The gross unrealized gains include $9 million that were recognized during 2018.

The following table provides information about our available-for-sale debt securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2019. There were no available-for-sale debt securities with gross unrealized losses as of March 31, 2020.


	2019
	Less than 12 months						12 months or more
Description of Securities (Millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
State and municipal obligations	$	18	$	(1)	$	—	$	—
U.S. Government treasury obligations	—		—		324		(1)
Total	$	18	$	(1)	$	324	$	(1)

The following table summarizes the gross unrealized losses by ratio of fair value to amortized cost as of December 31, 2019. There were no available-for-sale debt securities with gross unrealized losses as of March 31, 2020.


	Less than 12 months								12 months or more							Total
Ratio of Fair Value to Amortized Cost (Dollars in millions)	Number of Securities	Estimated Fair Value		Gross Unrealized Losses		Number of Securities	Estimated Fair Value		Gross Unrealized Losses		Number of Securities	Estimated Fair Value		Gross Unrealized Losses



2019:
90%–100%	2	$	18	$	(1)	3	$	324	$	(1)	5	$	342	$	(2)
Total as of December 31, 2019	2	$	18	$	(1)	3	$	324	$	(1)	5	$	342	$	(2)

Contractual maturities for investment securities with stated maturities as of March 31, 2020 were as follows:


(Millions)	Cost		Estimated Fair Value
Due within 1 year	$	2,703	$	2,725
Due after 1 year but within 5 years	1,798		1,868
Due after 5 years but within 10 years	161		177
Due after 10 years	176		187
Total	$	4,838	$	4,957

The expected payments on state and municipal obligations, U.S. government agency obligations and mortgage-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations.