Securities

Securities Available for Sale

The amortized cost, gross unrealized gains, gross unrealized losses and fair value of securities available for sale at September 30, 2020 and December 31, 2019 are presented below.



	September 30, 2020								December 31, 2019
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury and government agencies	$	3,048	$	234	$	—	$	3,282	$	5,485	$	6	$	53	$	5,438
Mortgage-backed:
U.S. agencies	5,390		74		3		5,461		5,491		13		36		5,468
Residential - non-agency	648		8		1		655		759		5		2		762
Commercial - non-agency	4,151		283		8		4,426		3,461		56		28		3,489
Collateralized loan obligations	1,387		—		16		1,371		1,499		—		8		1,491
Direct bank purchase bonds	901		45		9		937		911		43		18		936
Other	536		2		—		538		202		3		—		205
Total securities available for sale	$	16,061	$	646	$	37	$	16,670	$	17,808	$	126	$	145	$	17,789

The Company’s securities available for sale with a continuous unrealized loss position at September 30, 2020 and December 31, 2019 are shown below, identified for periods less than 12 months and 12 months or more.



	September 30, 2020
	Less Than 12 Months				12 Months or More				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury and government agencies	$	80	$	—	$	—	$	—	$	80	$	—
Mortgage-backed:
U.S. agencies	561		1		801		2		1,362		3
Residential - non-agency	162		1		16		—		178		1
Commercial - non-agency	430		8		—		—		430		8
Collateralized loan obligations	871		8		482		8		1,353		16
Direct bank purchase bonds	69		2		187		7		256		9
Total securities available for sale	$	2,173	$	20	$	1,486	$	17	$	3,659	$	37



	December 31, 2019
	Less Than 12 Months				12 Months or More				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
U.S. Treasury and government agencies	$	4,407	$	48	$	543	$	5	$	4,950	$	53
Mortgage-backed:
U.S. agencies	914		4		2,769		32		3,683		36
Residential - non-agency	127		—		155		2		282		2
Commercial - non-agency	1,669		28		12		—		1,681		28
Collateralized loan obligations	597		2		790		6		1,387		8
Direct bank purchase bonds	118		1		294		17		412		18
Other	25		—		—		—		25		—
Total securities available for sale	$	7,857	$	83	$	4,563	$	62	$	12,420	$	145

At September 30, 2020, the Company did not have the intent to sell any securities in an unrealized loss position before a recovery of the amortized cost, which may be at maturity. The Company also believes that it is more likely than not that it will not be required to sell the securities prior to recovery of amortized cost.

Agency residential and commercial mortgage-backed securities consist of securities guaranteed by a U.S. government corporation, such as Ginnie Mae, or a government-sponsored agency such as Freddie Mac or Fannie Mae. These securities are collateralized by residential and commercial mortgage loans and may be prepaid at par prior to maturity. The unrealized losses on agency residential mortgage-backed securities resulted from changes in interest rates and not from changes in credit quality. At September 30, 2020, the Company expected to recover the entire amortized cost basis of these securities because the Company determined that the strength of the issuers’ guarantees through direct obligations or support from the U.S. government is sufficient to protect the Company from losses.

Commercial mortgage-backed securities are collateralized by commercial mortgage loans and are generally subject to prepayment penalties. The unrealized losses on commercial mortgage-backed securities resulted from higher market yields since purchase. Cash flow analysis of the underlying collateral provides an estimate of other-than-temporary impairment, which is performed quarterly when the fair value of a security is lower than its amortized cost. Based on the analysis performed as of September 30, 2020, the Company expects to recover the entire amortized cost basis of these securities.

The Company’s CLOs consist of Cash Flow CLOs. A Cash Flow CLO is a structured finance product that securitizes a diversified pool of loan assets into multiple classes of notes. Cash Flow CLOs pay the note holders through the receipt of interest and principal repayments from the underlying loans unlike other types of CLOs that pay note holders through the trading and sale of underlying collateral. Unrealized losses typically arise from widening credit spreads and deteriorating credit quality of the underlying collateral. Cash flow analysis of the underlying collateral provides an estimate of other-than-temporary impairment, which is performed quarterly when the fair value of a security is lower than its amortized cost. Based on the analysis performed as of September 30, 2020, the Company expects to recover the entire amortized cost basis of these securities.

Direct bank purchase bonds are not rated by external credit rating agencies. The unrealized losses on these bonds resulted from a higher return on capital expected by the secondary market compared with the return on capital required at the time of origination when the bonds were purchased. The Company estimates the unrealized loss for each security by assessing the underlying collateral of each security. The Company estimates the portion of loss attributable to credit based on the expected cash flows of the underlying collateral using estimates of current key assumptions, such as probability of default and loss severity. Cash flow analysis of the underlying collateral provides an estimate of impairment, which is performed quarterly when the fair value of a security is lower than its amortized cost and potential impairment is identified. Based on the analysis performed as of September 30, 2020, the Company expects to recover the entire amortized cost basis of these securities.

The fair value of debt securities available for sale by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.



	September 30, 2020
(Dollars in millions)	One Year or Less		Over One Year Through Five Years		Over Five Years Through Ten Years		Over Ten Years		Total Fair Value
U.S. Treasury and government agencies	$	—	$	158	$	2,963	$	161	$	3,282
Mortgage-backed:
U.S. agencies	—		66		1,017		4,378		5,461
Residential - non-agency	—		—		—		655		655
Commercial - non-agency	—		—		1,779		2,647		4,426
Collateralized loan obligations	—		7		731		633		1,371
Direct bank purchase bonds	94		369		394		80		937
Other	9		179		350		—		538
Total securities available for sale	$	103	$	779	$	7,234	$	8,554	$	16,670

The gross realized gains and losses from sales of available for sale securities for the three and nine months ended September 30, 2020 and 2019 are shown below. The specific identification method is used to calculate realized gains and losses on sales.



	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(Dollars in millions)	2020		2019		2020		2019
Gross realized gains	$	27	$	11	$	137	$	34

Securities Held to Maturity

At September 30, 2020 and December 31, 2019, the amortized cost, gross unrealized gains and losses recognized in OCI, carrying amount, gross unrealized gains and losses not recognized in OCI, and fair value of securities held to maturity are presented below. Management has asserted the positive intent and ability to hold these securities to maturity.



	September 30, 2020
			Recognized in OCI						Not Recognized in OCI
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury and government agencies	$	1,735	$	—	$	—	$	1,735	$	19	$	9	$	1,745
Mortgage-backed:
U.S. agencies	5,983		1		76		5,908		248		1		6,155
Total securities held to maturity	$	7,718	$	1	$	76	$	7,643	$	267	$	10	$	7,900



	December 31, 2019
			Recognized in OCI						Not Recognized in OCI
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. Treasury and government agencies	$	1,359	$	—	$	—	$	1,359	$	—	$	6	$	1,353
Mortgage-backed:
U.S. agencies	8,166		—		104		8,062		123		30		8,155
Total securities held to maturity	$	9,525	$	—	$	104	$	9,421	$	123	$	36	$	9,508

Amortized cost is defined as the original purchase cost, adjusted for any accretion or amortization of a purchase discount or premium, less principal payments and any impairment previously recognized in earnings. The carrying amount is the difference between the amortized cost and the amount recognized in OCI. The amount recognized in OCI primarily reflects the unrealized gain or loss at date of transfer from available for sale to the held to maturity classification, net of amortization, which is recorded in interest income on securities.

The Company’s securities held to maturity with a continuous unrealized loss position at September 30, 2020 and December 31, 2019 are shown below, separately for periods less than 12 months and 12 months or more.



	September 30, 2020
	Less Than 12 months						12 Months or More						Total
			Unrealized Losses						Unrealized Losses						Unrealized Losses
(Dollars in millions)	Fair Value		Recognized in OCI		Not Recognized in OCI		Fair Value		Recognized in OCI		Not Recognized in OCI		Fair Value		Recognized in OCI		Not Recognized in OCI
U.S. Treasury and government agencies	$	1,113	$	—	$	9	$	—	$	—	$	—	$	1,113	$	—	$	9
Mortgage-backed:
U.S. agencies	56		—		1		2,747		76		—		2,803		76		1
Total securities held to maturity	$	1,169	$	—	$	10	$	2,747	$	76	$	—	$	3,916	$	76	$	10



	December 31, 2019
	Less Than 12 Months						12 Months or More						Total
			Unrealized Losses						Unrealized Losses						Unrealized Losses
(Dollars in millions)	Fair Value		Recognized in OCI		Not Recognized in OCI		Fair Value		Recognized in OCI		Not Recognized in OCI		Fair Value		Recognized in OCI		Not Recognized in OCI
U.S. Treasury and government agencies	$	509	$	—	$	6	$	—	$	—	$	—	$	509	$	—	$	6
Mortgage-backed:
U.S. agencies	1,084		—		9		4,515		104		21		5,599		104		30
Total securities held to maturity	$	1,593	$	—	$	15	$	4,515	$	104	$	21	$	6,108	$	104	$	36

The carrying amount and fair value of securities held to maturity by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.



	September 30, 2020
	Within One Year				Over One Year Through Five Years				Over Five Years Through Ten Years				Over Ten Years				Total
(Dollars in millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
U.S. Treasury and government agencies	$	—	$	—	$	—	$	—	$	441	$	459	$	1,294	$	1,286	$	1,735	$	1,745
Mortgage-backed:
U.S. agencies	—		—		645		672		730		764		4,533		4,719		5,908		6,155
Total securities held to maturity	$	—	$	—	$	645	$	672	$	1,171	$	1,223	$	5,827	$	6,005	$	7,643	$	7,900

Securities Pledged and Received as Collateral

At September 30, 2020 and December 31, 2019, the Company pledged $11.5 billion and $10.5 billion of available for sale and trading securities as collateral, respectively, of which $1.5 billion and $1.0 billion, respectively, was permitted to be sold or repledged. These securities were pledged as collateral for derivative liability positions, and securities loaned or sold under repurchase agreements, and to secure public and trust department deposits.

At September 30, 2020 and December 31, 2019, the Company received $28.1 billion and $34.0 billion, respectively, of collateral for derivative asset positions and securities borrowed or purchased under resale agreements, of which $28.1 billion and $34.0 billion, respectively, was permitted to be sold or repledged. Of the collateral received, the Company sold or repledged $27.6 billion and $32.5 billion at September 30, 2020 and December 31, 2019, respectively, for securities loaned or sold under repurchase agreements.

For additional information related to the Company's significant accounting policies on securities pledged as collateral, see Note 1 "Summary of Significant Accounting Policies and Nature of Operations" to our Consolidated Financial Statements in Part II, Item 8. "Financial Statements and Supplementary Data" in our 2019 Form 10-K.