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Investment Securities | 6 Months Ended
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Jun. 30, 2020
Investments, Debt and Equity Securities [Abstract] |
Investment Securities |
NOTE 2—INVESTMENT SECURITIES
Our investment securities portfolio consists of the following: U.S. Treasury securities, U.S. government-sponsored enterprise or agency (“Agency”) and non-agency residential mortgage-backed securities (“RMBS”), Agency commercial mortgage-backed securities (“CMBS”), and other securities. Agency securities include Government National Mortgage Association (“Ginnie Mae”) guaranteed securities, Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”) issued securities. The carrying value of our investments in U.S. Treasury and Agency securities represented 97% and 96% of our total investment securities portfolio as of June 30, 2020 and December 31, 2019, respectively. In the first quarter of 2020, we adopted the CECL standard. For purchased credit-deteriorated (“PCD”) securities, this resulted in an increase of their amortized cost basis and related allowance for credit losses. However, the allowance for credit losses for PCD securities is limited to the amount by which the amortized cost basis of the PCD security exceeds its fair value. This limitation resulted in an increase of $11 million to our retained earnings with a corresponding decrease in AOCI at adoption. We exclude accrued interest receivable from the amortized cost disclosed in this note. Our disclosures below reflect these adoption changes. Prior period presentation was not reclassified to conform to the current period presentation. See “Note 1—Summary of Significant Accounting Policies” for additional information. The table below presents the amortized cost, gross unrealized gains and losses, and fair value of securities available for sale as of June 30, 2020 and December 31, 2019. Accrued interest receivable of $233 million as of June 30, 2020 is not included in the below table. Table 2.1: Investment Securities Available for Sale
|  | June 30, 2020
(Dollars in millions) |  | Amortized Cost |  | Allowance for Credit Losses |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Investment securities available for sale: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 4,353 |  |  | $ | 0 |  |  | $ | 12 |  |  | $ | (3 | ) |  | $ | 4,362 |
RMBS: |  |  |  |  |  |  |  |  |  |
Agency |  | 68,223 |  |  | 0 |  |  | 2,541 |  |  | (77 | ) |  | 70,687 |
Non-agency |  | 1,144 |  |  | (3 | ) |  | 187 |  |  | (1 | ) |  | 1,327 |
Total RMBS |  | 69,367 |  |  | (3 | ) |  | 2,728 |  |  | (78 | ) |  | 72,014 |
Agency CMBS |  | 9,940 |  |  | 0 |  |  | 469 |  |  | (9 | ) |  | 10,400 |
Other securities(1) |  | 1,082 |  |  | 0 |  |  | 2 |  |  | (1 | ) |  | 1,083 |
Total investment securities available for sale |  | $ | 84,742 |  |  | $ | (3 | ) |  | $ | 3,211 |  |  | $ | (91 | ) |  | $ | 87,859 |
|  | December 31, 2019
(Dollars in millions) |  | Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Fair Value
Investment securities available for sale: |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 4,122 |  |  | $ | 6 |  |  | $ | (4 | ) |  | $ | 4,124 |
RMBS: |  |  |  |  |  |  |  |
Agency |  | 62,003 |  |  | 1,120 |  |  | (284 | ) |  | 62,839 |
Non-agency |  | 1,235 |  |  | 266 |  |  | (2 | ) |  | 1,499 |
Total RMBS |  | 63,238 |  |  | 1,386 |  |  | (286 | ) |  | 64,338 |
Agency CMBS |  | 9,303 |  |  | 165 |  |  | (42 | ) |  | 9,426 |
Other securities(1) |  | 1,321 |  |  | 4 |  |  | 0 |  |  | 1,325 |
Total investment securities available for sale |  | $ | 77,984 |  |  | $ | 1,561 |  |  | $ | (332 | ) |  | $ | 79,213 |
__________
(1) | Includes primarily supranational bonds, foreign government bonds and other asset-backed securities.
Investment Securities in a Gross Unrealized Loss Position The table below provides the gross unrealized losses and fair value of our securities available for sale aggregated by major security type and the length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2020 and December 31, 2019. The amounts as of June 30, 2020 only include securities available for sale without an allowance for credit losses. Table 2.2: Securities in a Gross Unrealized Loss Position
|  | June 30, 2020
|  | Less than 12 Months |  | 12 Months or Longer |  | Total
(Dollars in millions) |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses
Investment securities available for sale without an allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 2,812 |  |  | $ | (3 | ) |  | $ | 0 |  |  | $ | 0 |  |  | $ | 2,812 |  |  | $ | (3 | )
RMBS: |  |  |  |  |  |  |  |  |  |  |  |
Agency |  | 2,732 |  |  | (30 | ) |  | 3,210 |  |  | (47 | ) |  | 5,942 |  |  | (77 | )
Non-agency |  | 14 |  |  | 0 |  |  | 2 |  |  | 0 |  |  | 16 |  |  | 0 |
Total RMBS |  | 2,746 |  |  | (30 | ) |  | 3,212 |  |  | (47 | ) |  | 5,958 |  |  | (77 | )
Agency CMBS |  | 644 |  |  | (3 | ) |  | 724 |  |  | (6 | ) |  | 1,368 |  |  | (9 | )
Other securities(1) |  | 677 |  |  | (1 | ) |  | 5 |  |  | 0 |  |  | 682 |  |  | (1 | )
Total investment securities available for sale in a gross unrealized loss position without an allowance for credit losses(2) |  | $ | 6,879 |  |  | $ | (37 | ) |  | $ | 3,941 |  |  | $ | (53 | ) |  | $ | 10,820 |  |  | $ | (90 | )
|  | December 31, 2019
|  | Less than 12 Months |  | 12 Months or Longer |  | Total
(Dollars in millions) |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses |  | Fair Value |  | Gross Unrealized Losses
Investment securities available for sale: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 2,647 |  |  | $ | (4 | ) |  | $ | 0 |  |  | $ | 0 |  |  | $ | 2,647 |  |  | $ | (4 | )
RMBS: |  |  |  |  |  |  |  |  |  |  |  |
Agency |  | 10,494 |  |  | (92 | ) |  | 10,567 |  |  | (192 | ) |  | 21,061 |  |  | (284 | )
Non-agency |  | 35 |  |  | (1 | ) |  | 16 |  |  | (1 | ) |  | 51 |  |  | (2 | )
Total RMBS |  | 10,529 |  |  | (93 | ) |  | 10,583 |  |  | (193 | ) |  | 21,112 |  |  | (286 | )
Agency CMBS |  | 2,580 |  |  | (23 | ) |  | 1,563 |  |  | (19 | ) |  | 4,143 |  |  | (42 | )
Other securities(1) |  | 126 |  |  | 0 |  |  | 106 |  |  | 0 |  |  | 232 |  |  | 0 |
Total investment securities available for sale in a gross unrealized loss position |  | $ | 15,882 |  |  | $ | (120 | ) |  | $ | 12,252 |  |  | $ | (212 | ) |  | $ | 28,134 |  |  | $ | (332 | )
__________
(1) | Includes primarily supranational bonds,foreign government bonds, and other asset-backed securities.
(2) | Consists of approximately 350 securities in gross unrealized loss positions as of June 30, 2020.
Maturities and Yields of Investment Securities The table below summarizes, by major security type, the contractual maturities and weighted-average yields of our investment securities as of June 30, 2020. Because borrowers may have the right to call or prepay certain obligations, the expected maturities of our securities are likely to differ from the scheduled contractual maturities presented below. The weighted-average yield below represents the effective yield for the investment securities and is calculated based on the amortized cost of each security. Table 2.3: Contractual Maturities and Weighted-Average Yields of Securities
|  | June 30, 2020
(Dollars in millions) |  | Due in 1 Year or Less |  | Due > 1 Year through 5 Years |  | Due > 5 Years through 10 Years |  | Due > 10 Years |  | Total
Fair value of securities available for sale: |  |  |  |  |  |  |  |  |  |
U.S. Treasury securities |  | $ | 0 |  |  | $ | 4,362 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 4,362 |
RMBS(1): |  |  |  |  |  |  |  |  |  |
Agency |  | 0 |  |  | 82 |  |  | 963 |  |  | 69,642 |  |  | 70,687 |
Non-agency |  | 0 |  |  | 0 |  |  | 0 |  |  | 1,327 |  |  | 1,327 |
Total RMBS |  | 0 |  |  | 82 |  |  | 963 |  |  | 70,969 |  |  | 72,014 |
Agency CMBS(1) |  | 6 |  |  | 2,550 |  |  | 4,262 |  |  | 3,582 |  |  | 10,400 |
Other securities |  | 265 |  |  | 534 |  |  | 284 |  |  | 0 |  |  | 1,083 |
Total securities available for sale |  | $ | 271 |  |  | $ | 7,528 |  |  | $ | 5,509 |  |  | $ | 74,551 |  |  | $ | 87,859 |
Amortized cost of securities available for sale |  | $ | 270 |  |  | $ | 7,486 |  |  | $ | 5,271 |  |  | $ | 71,715 |  |  | $ | 84,742 |
Weighted-average yield for securities available for sale |  | 1.15 | % |  | 1.52 | % |  | 2.38 | % |  | 2.61 | % |  | 2.49 | %
__________
(1) | As of June 30, 2020, the weighted-average expected maturities of RMBS and Agency CMBS are 3.6 years and 5.0 years, respectively.
Net Securities Gains or Losses and Process from Sales We had no sales of securities for the three months ended June 30, 2020. For the six months ended June 30, 2020, total proceeds from the sale of our securities were $144 million and we recognized less than $1 million of gains. For the three and six months ended June 30, 2019, total proceeds from sale of our securities were $909 million and $4.0 billion, with gains of $15 million and $39 million, respectively. Securities Pledged and Received We pledged investment securities totaling $12.6 billion and $14.0 billion as of June 30, 2020 and December 31, 2019, respectively. These securities are primarily pledged to secure Federal Home Loan Banks (“FHLB”) advances and Public Funds deposits, as well as for other purposes as required or permitted by law. We accepted pledges of securities with a fair value of approximately $1 million as of both June 30, 2020 and December 31, 2019, related to our derivative transactions.

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