Securities

Our securities available-for-sale and securities held-to-maturity portfolios consisted of the following:



June 30, 2020	Amortized Cost		Allowance for Credit Losses⁽¹⁾			Unrealized Gains		Unrealized Losses			Fair Value
	(in millions)
Securities available-for-sale:
U.S. Treasury	$	17,695	$	—		$	658	$	(186	)	$	18,167
U.S. Government sponsored enterprises:
Mortgage-backed securities	4,989		—			297		—			5,286
Collateralized mortgage obligations	519		—			16		—			535
Direct agency obligations	1,877		—			9		(6		)	1,880
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	8,449		—			258		(3		)	8,704
Collateralized mortgage obligations	2,413		—			33		(1		)	2,445
Direct agency obligations	310		—			1		(7		)	304
Asset-backed securities collateralized by:
Home equity	31		(3		)	—		—			28
Other	116		—			—		(7		)	109
Foreign debt securities⁽²⁾	4,205		—			6		(1		)	4,210
Total available-for-sale securities	$	40,604	$	(3	)	$	1,278	$	(211	)	$	41,668
Securities held-to-maturity:
U.S. Government sponsored enterprises:
Mortgage-backed securities	$	1,453	$	—		$	54	$	—		$	1,507
Collateralized mortgage obligations	1,095		—			63		(1		)	1,157
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	2,614		—			91		—			2,705
Collateralized mortgage obligations	6,463		—			261		—			6,724
Obligations of U.S. states and political subdivisions	10		(1		)	2		—			11
Asset-backed securities collateralized by residential mortgages	2		(1		)	1		—			2
Total held-to-maturity securities	$	11,637	$	(2	)	$	472	$	(1	)	$	12,106



December 31, 2019	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in millions)
Securities available-for-sale:
U.S. Treasury	$	16,219	$	128	$	(269	)	$	16,078
U.S. Government sponsored enterprises:
Mortgage-backed securities	3,358		57		(13		)	3,402
Collateralized mortgage obligations	345		3		(1		)	347
Direct agency obligations	1,382		21		—			1,403
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	10,009		29		(41		)	9,997
Collateralized mortgage obligations	741		10		(4		)	747
Direct agency obligations	254		6		—			260
Asset-backed securities collateralized by:
Home equity	34		—		(2		)	32
Other	108		3		—			111
Foreign debt securities⁽²⁾	3,282		4		—			3,286
Total available-for-sale securities	$	35,732	$	261	$	(330	)	$	35,663
Securities held-to-maturity:
U.S. Government sponsored enterprises:
Mortgage-backed securities	$	1,632	$	22	$	(1	)	$	1,653
Collateralized mortgage obligations	1,418		40		(4		)	1,454
U.S. Government agency issued or guaranteed:
Mortgage-backed securities	3,004		17		—			3,021
Collateralized mortgage obligations	7,227		85		(22		)	7,290
Obligations of U.S. states and political subdivisions	10		1		—			11
Asset-backed securities collateralized by residential mortgages	2		—		—			2
Total held-to-maturity securities	$	13,293	$	165	$	(27	)	$	13,431


⁽¹⁾	As discussed in Note 21, "New Accounting Pronouncements," beginning January 1, 2020, an allowance for credit losses is recognized for debt securities while, prior to January 1, 2020, debt securities were assessed for other-than-temporary impairment. At December 31, 2019, we did not consider any of our debt securities to be other-than-temporarily impaired


⁽²⁾	Foreign debt securities represent public sector entity, bank or corporate debt.

Securities Available-for-Sale The following provides additional information about our portfolio of securities available-for-sale:

Allowance for credit losses On a quarterly basis, we perform an assessment to determine whether there have been any events or economic circumstances to indicate that a debt security available-for-sale in an unrealized loss position has suffered impairment due to credit factors. A debt security available-for-sale is considered impaired if its fair value is less than its amortized cost basis at the reporting date. If impaired, we assess whether the impairment is due to credit factors.

If we intend to sell the debt security or if it is more-likely-than-not that we will be required to sell the debt security before the recovery of its amortized cost basis, the impairment is recognized and the unrealized loss is recorded as a direct write-down of the security's amortized cost basis with an offsetting entry to earnings. If we do not intend to sell the debt security or believe we will not be required to sell the debt security before the recovery of its amortized cost basis, the impairment is assessed to determine if a credit loss component exists. We use a discounted cash flow method to determine the credit loss component. In the event a credit loss exists, an allowance for credit losses is recorded in earnings for the credit loss component of the impairment while the remaining portion of the impairment attributable to factors other than credit loss is recognized, net of tax, in other comprehensive income (loss). The amount of impairment recognized due to credit factors is limited to the excess of the amortized cost basis over the fair value of the security available-for-sale.

In determining whether a credit loss component exists, we consider a series of factors which include:


•	The extent to which the fair value is less than the amortized cost basis;


•	The credit protection features embedded within the instrument, which includes but is not limited to credit subordination positions, payment structure, over collateralization, protective triggers and financial guarantees provided by third parties;


•	Changes in the near term prospects of the issuer or the underlying collateral of a security such as changes in default rates, loss severities given default and significant changes in prepayment assumptions;


•	The level of excess cash flows generated from the underlying collateral supporting the principal and interest payments of the debt securities; and


•	Any adverse change to the credit conditions of the issuer, the monoline insurer or the security such as credit downgrades by external rating agencies or changes to internal ratings.

At both June 30, 2020 and January 1, 2020, the allowance for credit losses on securities available-for-sale was $3 million.

Securities in an unrealized loss position for which no allowance for credit losses has been recognized The following table summarizes gross unrealized losses and related fair values for securities available-for-sale by major security type at June 30, 2020 classified as to the length of time the losses have existed:



	One Year or Less						Greater Than One Year
June 30, 2020	Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment		Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment
	(dollars are in millions)
Securities available-for-sale:
U.S. Treasury	16	$	(60	)	$	2,241	19	$	(126	)	$	2,136
U.S. Government sponsored enterprises	11	(5		)	845		9	(1		)	47
U.S. Government agency issued or guaranteed	10	(9		)	1,168		5	(2		)	33
Asset-backed securities	3	(7		)	110		2	—			—
Foreign debt securities	15	(1		)	1,477		6	—			272
Securities available-for-sale	55	$	(82	)	$	5,841	41	$	(129	)	$	2,488

Gross unrealized losses improved as compared with December 31, 2019 due primarily to decreasing yields on U.S. Treasury and U.S. Government agency mortgage-backed securities.

Although the fair value of a particular security may be below its amortized cost, it does not necessarily result in a credit loss and hence an allowance for credit losses. The decline in fair value may be caused by, among other things, the illiquidity of the market. We have reviewed the securities in an unrealized loss position for which no allowance for credit losses has been recognized in accordance with our accounting policies, discussed further above. At June 30, 2020, we do not consider any of these securities to be impaired due to credit factors as we expect to recover their amortized cost basis and we neither intend nor expect to be required to sell these securities prior to recovery, even if that equates to holding them until their individual maturities. However, impairments due to credit factors may occur in future periods if the credit quality of the securities deteriorates.

For the comparative period prior to the adoption of the new accounting guidance on January 1, 2020, we have retained the following disclosure as previously reported, which included both securities available-for-sale and securities held-to-maturity. The following table summarizes gross unrealized losses and related fair values at December 31, 2019 classified as to the length of time the losses have existed:



	One Year or Less						Greater Than One Year
December 31, 2019	Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment		Number of Securities	Gross Unrealized Losses			Aggregate Fair Value of Investment
	(dollars are in millions)
Securities available-for-sale:
U.S. Treasury	22	$	(61	)	$	4,034	28	$	(208	)	$	4,962
U.S. Government sponsored enterprises	18	(8		)	772		83	(6		)	672
U.S. Government agency issued or guaranteed	27	(4		)	1,961		50	(41		)	2,508
Asset-backed securities	—	—			—		5	(2		)	33
Foreign debt securities	11	—			1,238		5	—			292
Securities available-for-sale	78	$	(73	)	$	8,005	171	$	(257	)	$	8,467
Securities held-to-maturity:
U.S. Government sponsored enterprises	15	$	—		$	63	76	$	(5	)	$	522
U.S. Government agency issued or guaranteed	46	(3		)	887		274	(19		)	1,705
Obligations of U.S. states and political subdivisions	1	—			—		1	—			—
Securities held-to-maturity	62	$	(3	)	$	950	351	$	(24	)	$	2,227

Securities Held-to-Maturity The following provides additional information about our portfolio of securities held-to-maturity:

Allowance for credit losses As discussed further in Note 6, "Allowance for Credit Losses," beginning January 1, 2020, we exclude from our calculation of lifetime expected credit losses ("lifetime ECL") securities for which we expect that non-payment of the amortized cost basis will be zero ("Zero Expected Credit Loss Exception"). Due to the composition of our portfolio of securities held-to-maturity, substantially all of our portfolio qualifies for the Zero Expected Credit Loss Exception and has been excluded from our lifetime ECL calculation. Our methodology for calculating lifetime ECL for our securities held-to-maturity which do not qualify for the Zero Expected Credit Loss Exception is consistent with our methodology for calculating lifetime ECL for loans. See Note 6, "Allowance for Credit Losses," for further discussion of this calculation including the use of probability-weighted scenarios, forward economic guidance and key model inputs. We calculate lifetime ECL for securities held-for-maturity based on the present value of expected future cash flows, discounted using the contractual interest rate which approximates the effective interest rate.

At both June 30, 2020 and January 1, 2020, the allowance for credit losses on securities held-to-maturity was $2 million.

At June 30, 2020, none of our securities held-to-maturity were past due or in nonaccrual status.

Credit risk profile Securities are assigned a credit rating based on the estimated probability of default. The credit ratings are used as a credit quality indicator to monitor our securities held-to-maturity portfolio. We utilize Standard and Poor's ("S&P") as the primary source of our credit ratings. If S&P ratings are not available, ratings by Moody's and Fitch are used in that order. Investment grade includes securities with credit ratings of at least BBB- or above. The following table shows the credit risk profile of our securities held-to-maturity portfolio:



At June 30, 2020	Investment Grade		Non-Investment Grade		Total
	(in millions)
U.S. Government sponsored enterprises	$	2,548	$	—	$	2,548
U.S. Government agency issued or guaranteed	9,077		—		9,077
Obligations of U.S. states and political subdivisions	10		—		10
Asset-backed securities collateralized by residential mortgages	2		—		2
Total securities held-to-maturity	$	11,637	$	—	$	11,637

Other securities gains, net The following table summarizes realized gains and losses on investment securities transactions attributable to available-for-sale securities:



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(in millions)
Gross realized gains	$	36		$	27		$	87		$	43
Gross realized losses	(5		)	(4		)	(28		)	(13		)
Net realized gains	$	31		$	23		$	59		$	30

As discussed in Note 21, "New Accounting Pronouncements," we adopted new accounting guidance during the second quarter of 2020 that allows entities to make a one-time election to sell and/or transfer held-to-maturity debt securities that reference a rate affected by reference rate reform (e.g., the London Interbank Offered Rate ("LIBOR")). During the second quarter of 2020, we elected to sell all of our LIBOR-linked variable rate held-to-maturity securities maturing beyond 2021, consisting of U.S. Government agency and U.S. Government sponsored securities with a total carrying value of $340 million, and recognized a gain of less than $1 million. These sales did not affect our intent and ability to hold our remaining held-to-maturity portfolio until maturity.

Contractual Maturities and Yields The following table summarizes the amortized cost and fair values of securities available-for-sale and securities held-to-maturity at June 30, 2020 by contractual maturity. Expected maturities differ from contractual maturities because borrowers have the right to prepay obligations without prepayment penalties in certain cases. The table below also reflects the distribution of maturities of debt securities held at June 30, 2020, together with the approximate yield of the portfolio. The yields shown are calculated by dividing annualized interest income, including the accretion of discounts and the amortization of premiums, by the amortized cost of securities outstanding at June 30, 2020.



	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(dollars are in millions)
Available-for-sale:
U.S. Treasury	$	1,020	.43	%	$	4,687	1.50	%	$	6,579	1.38	%	$	5,409	1.80	%
U.S. Government sponsored enterprises	735		2.82		663		1.92		3,085		2.55		2,902		2.37
U.S. Government agency issued or guaranteed	—		—		99		1.84		1		7.88		11,072		2.38
Asset-backed securities	—		—		—		—		62		4.84		85		3.02
Foreign debt securities	2,696		.51		1,509		1.24		—		—		—		—
Total amortized cost	$	4,451	.87	%	$	6,958	1.49	%	$	9,727	1.78	%	$	19,468	2.22	%
Total fair value	$	4,458			$	7,127			$	10,277			$	19,806
Held-to-maturity:
U.S. Government sponsored enterprises	$	18	2.73	%	$	445	2.66	%	$	531	2.27	%	$	1,554	3.21	%
U.S. Government agency issued or guaranteed	—		—		12		3.76		16		4.60		9,049		2.62
Obligations of U.S. states and political subdivisions	—		—		6		3.56		4		4.17		—		—
Asset-backed securities	—		—		—		—		—		—		2		5.94
Total amortized cost	$	18	2.74	%	$	463	2.70	%	$	551	2.35	%	$	10,605	2.71	%
Total fair value	$	18			$	477			$	569			$	11,042

Equity Securities Equity securities that are not classified as trading and are included in other assets consisted of the following:



	June 30, 2020		December 31, 2019
	(in millions)
Equity securities carried at fair value	$	282	$	283
Equity securities without readily determinable fair values	14		12

On a quarterly basis, we perform an assessment to determine whether any equity securities without readily determinable fair values are impaired. In the event an equity security is deemed impaired, the security is written down to fair value with impairment recorded in earnings. During the second quarter of 2020, we determined that certain equity securities without readily determinable fair values were impaired and, as a result, we recorded an impairment loss of $2 million as a component of other income (loss) in the consolidated statement of income (loss). At December 31, 2019, none of our equity securities without readily determinable fair values were determined to be impaired.

Also included in other assets were investments in Federal Home Loan Bank ("FHLB") stock and Federal Reserve Bank stock of $327 million and $559 million, respectively, at June 30, 2020 and $110 million and $559 million, respectively, at December 31, 2019.