Investment Securities

12 Months Ended

Dec. 31, 2018

4. INVESTMENT SECURITIES

The following table provides the amortized cost, fair value and unrealized gains and losses for the major categories of the available-for-sale debt and other securities and held-to-maturity securities portfolios as of December 31:

				2018				2017
				Amortized	Unrealized	Unrealized	Fair	Amortized	Unrealized	Unrealized	Fair
($ in millions)				Cost	Gains	Losses	Value	Cost	Gains	Losses	Value
Available-for-sale debt and other securities:
	U.S. Treasury and federal agencies securities		$	98	-	(1)	97	98	-	-	98
	Obligations of states and political subdivisions securities			2	-	-	2	43	1	-	44
	Mortgage-backed securities:
		Agency residential mortgage-backed securities^(a)		16,403	86	(242)	16,247	15,281	118	(80)	15,319
		Agency commercial mortgage-backed securities		10,770	44	(164)	10,650	10,113	92	(38)	10,167
		Non-agency commercial mortgage-backed securities		3,305	9	(47)	3,267	3,247	51	(5)	3,293
	Asset-backed securities and other debt securities			1,998	27	(10)	2,015	2,183	46	(11)	2,218
	Other securities^(b)			552	-	-	552	612	-	-	612
Total available-for-sale debt and other securities			$	33,128	166	(464)	32,830	31,577	308	(134)	31,751
Held-to-maturity securities:
	Obligations of states and political subdivisions securities		$	16	-	-	16	22	-	-	22
	Asset-backed securities and other debt securities			2	-	-	2	2	-	-	2
Total held-to-maturity securities			$	18	-	-	18	24	-	-	24

Includes interest-only mortgage-backed securities of $0 and $34 as of December 31, 2018 and 2017, respectively, recorded at fair value with fair value changes recorded in securities (losses) gains, net, in the Consolidated Statements of Income.
Other securities consist of FHLB, FRB and DTCC restricted stock holdings of $184, $366 and $2, respectively, at December 31, 2018 and $248, $362 and $2, respectively, at December 31, 2017, that are carried at cost


The following table provides the fair value of trading debt securities and equity securities as of December 31:

($ in millions)		2018	2017
Trading debt securities	$	287	492
Equity securities		452	439

The Bancorp uses investment securities as a means of managing interest rate risk, providing collateral for pledging purposes and for liquidity to satisfy regulatory requirements. As part of managing interest rate risk, the Bancorp acquires securities as a component of its MSR non-qualifying hedging strategy, with net gains or losses recorded in securities (losses) gains, net – non-qualifying hedges on MSRs in the Consolidated Statements of Income.

The following table presents securities (losses) gains recognized in the Consolidated Statements of Income as of December 31:

($ in millions)			2018	2017	2016
Available-for-sale debt and other securities:
	Realized gains	$	72	85	72
	Realized losses		(82)	(36)	(49)
	OTTI		-	(54)	(15)
Net realized (losses) gains on available-for-sale debt and other securities		$	(10)	(5)	8
Total trading debt securities (losses) gains		$	(15)	2	-
Total equity securities (losses) gains^(a)		$	(44)	7	2
Total (losses) gains recognized in income from available-for-sale debt and other
	securities, trading debt securities and equity securities^(b)	$	(69)	4	10

Includes $45 of net unrealized losses for the year ended December 31, 2018 and net unrealized gains of $5 and $3 for the years ended December 31, 2017 and 2016, respectively.
Excludes an insignificant amount of securities gains (losses) included in corporate banking revenue and wealth and asset management revenue in the Consolidated Statements of Income related to securities held by FTS to facilitate the timely execution of customer transactions.

At December 31, 2018 and 2017, investment securities with a fair value of $7.0 billion and $7.8 billion, respectively, were pledged to secure borrowings, public deposits, trust funds, derivative contracts and for other purposes as required or permitted by law


The expected maturity distribution of the Bancorp’s mortgage-backed securities and the contractual maturity distribution of the remainder of the Bancorp’s available-for-sale debt and other securities and held-to-maturity investment securities as of December 31, 2018 are shown in the following table:

			Available-for-Sale Debt and Other		Held-to-Maturity
($ in millions)			Amortized Cost	Fair Value	Amortized Cost	Fair Value
Debt securities:^(a)
	Less than 1 year	$	3	3	-	-
	1-5 years		10,052	10,015	16	16
	5-10 years		18,394	18,197	-	-
	Over 10 years		4,127	4,063	2	2
Other securities			552	552	-	-
Total		$	33,128	32,830	18	18

(a) Actual maturities may differ from contractual maturities when a right to call or prepay obligations exists with or without call or prepayment penalties.


The following table provides the fair value and gross unrealized losses on available-for-sale debt and other securities in an unrealized loss position, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position as of December 31:

		Less than 12 months		12 months or more		Total
			Unrealized		Unrealized		Unrealized
($ in millions)		Fair Value	Losses	Fair Value	Losses	Fair Value	Losses
2018
U.S. Treasury and federal agencies securities	$	-	-	97	(1)	97	(1)
Agency residential mortgage-backed securities		3,235	(21)	7,892	(221)	11,127	(242)
Agency commercial mortgage-backed securities		2,022	(37)	5,260	(127)	7,282	(164)
Non-agency commercial mortgage-backed securities		884	(6)	1,621	(41)	2,505	(47)
Asset-backed securities and other debt securities		314	(6)	241	(4)	555	(10)
Total	$	6,455	(70)	15,111	(394)	21,566	(464)
2017
U.S. Treasury and federal agencies securities	$	98	-	-	-	98	-
Agency residential mortgage-backed securities		7,337	(59)	479	(21)	7,816	(80)
Agency commercial mortgage-backed securities		2,900	(22)	526	(16)	3,426	(38)
Non-agency commercial mortgage-backed securities		449	(2)	145	(3)	594	(5)
Asset-backed securities and other debt securities		317	(2)	386	(9)	703	(11)
Total	$	11,101	(85)	1,536	(49)	12,637	(134)

At both December 31, 2018 and 2017, an immaterial amount of unrealized losses in the available-for-sale debt and other securities portfolio were represented by non-rated securities