NOTE 5 – SECURITIES AVAILABLE FOR SALE

Securities Portfolio Composition



	June 30, 2018
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$4,239		$—		$113		$4,126
Federal agency securities	244		1		2		243
U.S. states and political subdivisions	632		4		21		615
MBS - agency residential	22,883		134		558		22,459
MBS - agency commercial	2,664		1		97		2,568
MBS - non-agency commercial	950		—		34		916
Corporate and other debt securities	15		—		—		15
Total securities AFS		$31,627		$140		$825		$30,942

	December 31, 2017¹
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$4,361		$2		$32		$4,331
Federal agency securities	257		3		1		259
U.S. states and political subdivisions	618		7		8		617
MBS - agency residential	22,616		222		134		22,704
MBS - agency commercial	2,121		3		38		2,086
MBS - non-agency residential	55		4		—		59
MBS - non-agency commercial	862		7		3		866
ABS	6		2		—		8
Corporate and other debt securities	17		—		—		17
Total securities AFS		$30,913		$250		$216		$30,947

¹Beginning January 1, 2018, the Company reclassified equity securities previously presented in Securities available for sale to Other assets on the Consolidated Balance Sheets. Reclassifications have been made to previously reported amounts for comparability. See Note 9, "Other Assets," for additional information.

The following table presents interest on securities AFS:



	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2018		2017		2018		2017
Taxable interest		$205		$184		$407		$364
Tax-exempt interest	5		3		9		5
Total interest on securities AFS ¹		$210		$187		$416		$369

¹Beginning January 1, 2018, the Company reclassified equity securities previously presented in Securities available for sale to Other assets on the Consolidated Balance Sheets and began presenting income associated with certain of these equity securities in Trading account interest and other on the Consolidated Statements of Income. For periods prior to January 1, 2018, income associated with these equity securities was presented in Interest on securities available for sale and has been reclassified to Trading account interest and other for comparability.

Securities AFS pledged to secure public deposits, repurchase agreements, trusts, certain derivative agreements, and other funds had a fair value of $3.3 billion and $4.3 billion at June 30, 2018 and December 31, 2017, respectively.

The following table presents the amortized cost, fair value, and weighted average yield of investments in securities AFS at June 30, 2018, by remaining contractual maturity, with the exception of MBS, which are based on estimated average life. Receipt of cash flows may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.



	Distribution of Remaining Maturities
(Dollars in millions)	Due in 1 Year or Less			Due After 1 Year through 5 Years			Due After 5 Years through 10 Years			Due After 10 Years			Total
Amortized Cost:
U.S. Treasury securities		$15			$2,517			$1,707			$—			$4,239
Federal agency securities	117			40			4			83			244
U.S. states and political subdivisions	3			61			37			531			632
MBS - agency residential	1,531			6,089			14,985			278			22,883
MBS - agency commercial	1			482			1,911			270			2,664
MBS - non-agency commercial	—			12			938			—			950
Corporate and other debt securities	7			8			—			—			15
Total securities AFS		$1,674			$9,209			$19,582			$1,162			$31,627
Fair Value:
U.S. Treasury securities		$15			$2,454			$1,657			$—			$4,126
Federal agency securities	117			41			4			81			243
U.S. states and political subdivisions	4			62			38			511			615
MBS - agency residential	1,589			6,031			14,566			273			22,459
MBS - agency commercial	1			465			1,844			258			2,568
MBS - non-agency commercial	—			12			904			—			916
Corporate and other debt securities	7			8			—			—			15
Total securities AFS		$1,733			$9,073			$19,013			$1,123			$30,942
Weighted average yield ¹	3.19		%	2.36		%	2.87		%	3.12		%	2.74		%

¹Weighted average yields are based on amortized cost and presented on an FTE basis.

Securities AFS in an Unrealized Loss Position

The Company held certain investment securities AFS where amortized cost exceeded fair value, resulting in unrealized loss positions. Market changes in interest rates and credit spreads may result in temporary unrealized losses as the market prices of securities fluctuate. At June 30, 2018, the Company did not intend to sell these securities nor was it more-likely-than-not that the Company would be required to sell these securities before their anticipated recovery or maturity. The Company reviewed its portfolio for OTTI in accordance with the accounting policies described in Note 1, "Significant Accounting Policies," to the Company's 2017 Annual Report on Form 10-K.

Securities AFS in an unrealized loss position at period end are presented in the following tables:



	June 30, 2018
	Less than twelve months				Twelve months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses ¹		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses ¹
Temporarily impaired securities AFS:
U.S. Treasury securities		$3,441		$87		$685		$26		$4,126		$113
Federal agency securities	24		—		51		2		75		2
U.S. states and political subdivisions	396		15		106		6		502		21
MBS - agency residential	13,786		355		4,351		203		18,137		558
MBS - agency commercial	1,554		45		882		52		2,436		97
MBS - non-agency commercial	797		28		89		6		886		34
Corporate and other debt securities	9		—		—		—		9		—
Total temporarily impaired securities AFS	20,007		530		6,164		295		26,171		825
OTTI securities AFS ²:
Total OTTI securities AFS	—		—		—		—		—		—
Total impaired securities AFS		$20,007		$530		$6,164		$295		$26,171		$825

¹ Unrealized losses less than $0.5 million are presented as zero within the table.

² OTTI securities AFS are impaired securities for which OTTI credit losses have been previously recognized in earnings.



	December 31, 2017 ¹
	Less than twelve months				Twelve months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses ²		Fair Value		Unrealized Losses ²		Fair Value		Unrealized Losses ²
Temporarily impaired securities AFS:
U.S. Treasury securities		$1,993		$12		$841		$20		$2,834		$32
Federal agency securities	23		—		60		1		83		1
U.S. states and political subdivisions	267		3		114		5		381		8
MBS - agency residential	8,095		38		4,708		96		12,803		134
MBS - agency commercial	887		9		915		29		1,802		38
MBS - non-agency commercial	134		1		93		2		227		3
ABS	—		—		4		—		4		—
Corporate and other debt securities	10		—		—		—		10		—
Total temporarily impaired securities AFS	11,409		63		6,735		153		18,144		216
OTTI securities AFS ³:
ABS	—		—		1		—		1		—
Total OTTI securities AFS	—		—		1		—		1		—
Total impaired securities AFS		$11,409		$63		$6,736		$153		$18,145		$216

² Unrealized losses less than $0.5 million are presented as zero within the table.

³ OTTI securities AFS are impaired securities for which OTTI credit losses have been previously recognized in earnings.

At June 30, 2018, temporarily impaired securities AFS that have been in an unrealized loss position for twelve months or longer included residential and commercial agency MBS, U.S. Treasury securities, municipal securities, commercial non-agency MBS, and federal agency securities. Unrealized losses on temporarily impaired securities were due to market interest rates being higher than the securities' stated coupon rates. Unrealized losses on securities AFS that relate to factors other than credit are recorded in AOCI, net of tax.

Realized Gains and Losses and Other-Than-Temporarily Impaired Securities AFS

Net securities gains or losses are comprised of gross realized gains, gross realized losses, and OTTI credit losses recognized in earnings.



	Three Months Ended June 30					Six Months Ended June 30
(Dollars in millions)	2018			2017		2018			2017
Gross realized gains		$6			$1		$7			$1
Gross realized losses	(6		)	—		(6		)	—
OTTI credit losses recognized in earnings	—			—		—			—
Net securities gains		$—			$1		$1			$1

Securities AFS in an unrealized loss position are evaluated quarterly for other-than-temporary credit impairment, which is determined using cash flow analyses that take into account security specific collateral and transaction structure. Future expected credit losses are determined using various assumptions, the most significant of which include default rates, prepayment rates, and loss severities. If, based on this analysis, a security is in an unrealized loss position and the Company does not expect to recover the entire amortized cost basis of the security, the expected cash flows are then discounted at the security’s initial effective interest rate to arrive at a present value amount. Credit losses on the OTTI security are recognized in earnings and reflect the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security. See Note 1, "Significant Accounting Policies," to the Company's 2017 Annual Report on Form 10-K for additional information regarding the Company's policy on securities AFS and related impairments.

During the three and six months ended June 30, 2018 and 2017, there were no credit impairment losses recognized on securities AFS held at the end of each period. During the three and six months ended June 30, 2018, the Company sold securities AFS that had accumulated OTTI credit losses of $23 million and recognized an associated gain on sale of $6 million in Net securities gains on the Consolidated Statements of Income. The accumulated balance of OTTI credit losses recognized in earnings on securities AFS held at period end was $22 million at June 30, 2017.