Securities

Securities Available for Sale

At June 30, 2018 and December 31, 2017, the amortized cost, gross unrealized gains, gross unrealized losses and fair values of securities available for sale are presented below.



	June 30, 2018
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Asset Liability Management securities:
U.S. Treasury	$	3,570	$	—	$	203	$	3,367
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	8,005		2		215		7,792
Privately issued	896		1		23		874
Privately issued - commercial mortgage-backed securities	972		—		28		944
Collateralized loan obligations	1,485		3		1		1,487
Other	5		—		—		5
Asset Liability Management securities	14,933		6		470		14,469
Other debt securities:
Direct bank purchase bonds	1,409		29		39		1,399
Other	148		1		—		149
Total securities available for sale	$	16,490	$	36	$	509	$	16,017



	December 31, 2017
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Asset Liability Management securities:
U.S. Treasury	$	3,370	$	—	$	118	$	3,252
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	9,338		2		132		9,208
Privately issued	695		3		4		694
Privately issued - commercial mortgage-backed securities	823		4		5		822
Collateralized loan obligations	1,895		10		—		1,905
Other	5		—		—		5
Asset Liability Management securities	16,126		19		259		15,886
Other debt securities:
Direct bank purchase bonds	1,495		38		30		1,503
Other	163		1		—		164
Equity securities	10		—		—		10
Total securities available for sale	$	17,794	$	58	$	289	$	17,563

The Company’s securities available for sale with a continuous unrealized loss position at June 30, 2018 and December 31, 2017 are shown below, identified for periods less than 12 months and 12 months or more.



	June 30, 2018
	Less than 12 months				12 months or more				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Asset Liability Management securities:
U.S. Treasury	$	1,289	$	45	$	2,078	$	158	$	3,367	$	203
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	3,789		68		3,378		147		7,167		215
Privately issued	600		16		152		7		752		23
Privately issued - commercial mortgage-backed securities	800		23		99		5		899		28
Collateralized loan obligations	415		1		—		—		415		1
Asset Liability Management securities	6,893		153		5,707		317		12,600		470
Other debt securities:
Direct bank purchase bonds	329		10		449		29		778		39
Other	22		—		—		—		22		—
Total securities available for sale	$	7,244	$	163	$	6,156	$	346	$	13,400	$	509



	December 31, 2017
	Less than 12 months				12 months or more				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Asset Liability Management securities:
U.S. Treasury	$	1,074	$	14	$	2,128	$	104	$	3,202	$	118
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	3,606		22		4,651		110		8,257		132
Privately issued	275		1		164		3		439		4
Privately issued - commercial mortgage-backed securities	447		3		80		2		527		5
Collateralized loan obligations	12		—		—		—		12		—
Asset Liability Management securities	5,414		40		7,023		219		12,437		259
Other debt securities:
Direct bank purchase bonds	58		4		563		26		621		30
Other	79		—		—		—		79		—
Equity securities	10		—		—		—		10		—
Total securities available for sale	$	5,561	$	44	$	7,586	$	245	$	13,147	$	289

At June 30, 2018, 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 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 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 June 30, 2018, the Company expects 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 June 30, 2018, 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 June 30, 2018, the Company expects to recover the entire amortized cost basis of these securities.

Other debt securities primarily consist of direct bank purchase bonds, which 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 other-than-temporary 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 June 30, 2018, 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.



	June 30, 2018
(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
Asset Liability Management securities:
U.S. Treasury	$	—	$	96	$	3,271	$	—	$	3,367
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	—		228		1,340		6,224		7,792
Privately issued	—		1		1		872		874
Privately issued - commercial mortgage-backed securities	—		—		42		902		944
Collateralized loan obligations	—		—		361		1,126		1,487
Other	—		5		—		—		5
Asset Liability Management securities	—		330		5,015		9,124		14,469
Other debt securities:
Direct bank purchase bonds	74		443		643		239		1,399
Other	8		120		—		21		149
Total debt securities available for sale	$	82	$	893	$	5,658	$	9,384	$	16,017

The gross realized gains and losses from sales of available for sale securities for the three and six months ended June 30, 2018 and 2017 are shown below. The specific identification method is used to calculate realized gains and losses on sales.



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Dollars in millions)	2018		2017		2018		2017
Gross realized gains	$	3	$	7	$	3	$	9

Securities Held to Maturity

At June 30, 2018 and December 31, 2017, the amortized cost, gross unrealized gains and losses recognized in OCI, carrying amount, gross unrealized gains and losses not recognized in OCI, and fair values of securities held to maturity are presented below. Management has asserted the positive intent and ability to hold these securities to maturity.



	June 30, 2018
			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	$	527	$	—	$	—	$	527	$	2	$	3	$	526
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	9,076		1		106		8,971		6		267		8,710
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	1,547		—		48		1,499		12		18		1,493
Total securities held to maturity	$	11,150	$	1	$	154	$	10,997	$	20	$	288	$	10,729



	December 31, 2017
			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	$	525	$	—	$	—	$	525	$	3	$	1	$	527
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	7,870		2		31		7,841		15		130		7,726
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	1,571		—		52		1,519		36		9		1,546
Total securities held to maturity	$	9,966	$	2	$	83	$	9,885	$	54	$	140	$	9,799

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 June 30, 2018 and December 31, 2017 are shown below, separately for periods less than 12 months and 12 months or more.



	June 30, 2018
	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	$	494	$	—	$	3	$	—	$	—	$	—	$	494	$	—	$	3
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	3,841		32		79		4,686		74		188		8,527		106		267
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	47		—		1		1,447		48		17		1,494		48		18
Total securities held to maturity	$	4,382	$	32	$	83	$	6,133	$	122	$	205	$	10,515	$	154	$	288



	December 31, 2017
	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	$	494	$	—	$	1	$	—	$	—	$	—	$	494	$	—	$	1
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	2,649		—		31		4,000		31		99		6,649		31		130
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	19		—		—		1,496		52		9		1,515		52		9
Total securities held to maturity	$	3,162	$	—	$	32	$	5,496	$	83	$	108	$	8,658	$	83	$	140

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.



					June 30, 2018
	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	$	251	$	250	$	276	$	276	$	—	$	—	$	—	$	—	$	527	$	526
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	—		—		—		—		830		806		8,141		7,904		8,971		8,710
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	49		49		803		809		—		—		647		635		1,499		1,493
Total securities held to maturity	$	300	$	299	$	1,079	$	1,085	$	830	$	806	$	8,788	$	8,539	$	10,997	$	10,729

Securities Pledged and Received as Collateral

At June 30, 2018 and December 31, 2017, the Company pledged $13.8 billion and $12.3 billion of available for sale and trading securities as collateral, respectively, of which $3.0 billion and $1.2 billion, respectively, was permitted to be sold or repledged. These securities were pledged as collateral for derivative liability positions, securities loaned or sold under repurchase agreements, short-term borrowings and to secure public and trust department deposits.

At June 30, 2018 and December 31, 2017, the Company received $31.3 billion and $31.8 billion, respectively, of collateral, of which $31.3 billion and $31.8 billion, respectively, was permitted to be sold or repledged. Of the collateral received, the Company sold or repledged $30.4 billion at June 30, 2018 and December 31, 2017 for derivative asset positions and securities borrowed or purchased under resale agreements.

For further information related to the Company's significant accounting policies on securities pledged as collateral, see Note 1 to the Consolidated Financial Statements in Part II, Item 8. "Financial Statements and Supplementary Data" in our 2017 Form 10-K.