NOTE 5 – INVESTMENT SECURITIES

Investment Securities Portfolio Composition



	September 30, 2018
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Securities AFS:
U.S. Treasury securities		$4,275		$—		$142		$4,133
Federal agency securities	224		2		3		223
U.S. states and political subdivisions	621		3		22		602
MBS - agency residential	23,112		111		718		22,505
MBS - agency commercial	2,713		1		112		2,602
MBS - non-agency commercial	943		—		38		905
Corporate and other debt securities	14		—		—		14
Total securities AFS		$31,902		$117		$1,035		$30,984

	December 31, 2017¹
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Securities AFS:
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 September 30				Nine Months Ended September 30
(Dollars in millions)	2018		2017		2018		2017
Taxable interest		$207		$187		$614		$551
Tax-exempt interest	5		4		14		9
Total interest on securities AFS ¹		$212		$191		$628		$560

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, this income was previously presented in Interest on securities available for sale and has been reclassified to Trading account interest and other for comparability.

Investment securities pledged to secure public deposits, repurchase agreements, trusts, certain derivative agreements, and other funds had a fair value of $3.4 billion and $4.3 billion at September 30, 2018 and December 31, 2017, respectively.

The following table presents the amortized cost, fair value, and weighted average yield of the Company's investment securities at September 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:
Securities AFS:
U.S. Treasury securities		$15			$2,695			$1,565			$—			$4,275
Federal agency securities	113			28			8			75			224
U.S. states and political subdivisions	3			72			25			521			621
MBS - agency residential	1,619			6,488			14,736			269			23,112
MBS - agency commercial	1			467			1,937			308			2,713
MBS - non-agency commercial	—			12			931			—			943
Corporate and other debt securities	—			14			—			—			14
Total securities AFS		$1,751			$9,776			$19,202			$1,173			$31,902
Fair Value:
Securities AFS:
U.S. Treasury securities		$15			$2,615			$1,503			$—			$4,133
Federal agency securities	114			28			8			73			223
U.S. states and political subdivisions	3			75			25			499			602
MBS - agency residential	1,674			6,341			14,230			260			22,505
MBS - agency commercial	1			448			1,859			294			2,602
MBS - non-agency commercial	—			12			893			—			905
Corporate and other debt securities	—			14			—			—			14
Total securities AFS		$1,807			$9,533			$18,518			$1,126			$30,984
Weighted average yield ¹	3.22		%	2.38		%	2.94		%	3.12		%	2.79		%

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

Investment Securities in an Unrealized Loss Position

The Company held certain investment securities 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 September 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.

Investment securities in an unrealized loss position at period end are presented in the following tables:



	September 30, 2018
	Less than twelve months				Twelve months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses ¹		Fair Value		Unrealized Losses ¹		Fair Value		Unrealized Losses ¹
Temporarily impaired securities AFS:
U.S. Treasury securities		$2,554		$77		$1,579		$65		$4,133		$142
Federal agency securities	16		—		62		3		78		3
U.S. states and political subdivisions	210		7		280		15		490		22
MBS - agency residential	10,347		276		8,772		442		19,119		718
MBS - agency commercial	1,029		25		1,519		87		2,548		112
MBS - non-agency commercial	781		30		124		8		905		38
Corporate and other debt securities	—		—		9		—		9		—
Total temporarily impaired securities AFS	14,937		415		12,345		620		27,282		1,035
OTTI securities AFS ²:
Total OTTI securities AFS	—		—		—		—		—		—
Total impaired securities AFS		$14,937		$415		$12,345		$620		$27,282		$1,035

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.

The Company does not consider the unrealized losses on temporarily impaired securities AFS to be credit-related. These unrealized losses were due primarily to market interest rates being higher than the securities' stated coupon rates, and therefore, are recorded in AOCI, net of tax.

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

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



	Three Months Ended September 30					Nine Months Ended September 30
(Dollars in millions)	2018		2017			2018			2017
Gross realized gains		$—		$1			$7			$2
Gross realized losses	—		(1		)	(6		)	(1		)
OTTI credit losses recognized in earnings	—		—			—			—
Net securities gains		$—		$—			$1			$1

Investment securities 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. Subsequent credit losses may be recorded on OTTI securities without a corresponding further decline in fair value when there has been a decline in expected cash flows. 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 nine months ended September 30, 2018 and 2017, there were no credit impairment losses recognized on securities AFS held at the end of each period. During the nine months ended September 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 zero and $22 million at September 30, 2018 and 2017, respectively.