Securities

Securities Available for Sale

At June 30, 2017 and December 31, 2016, the amortized cost, gross unrealized gains, gross unrealized losses and fair values of securities available for sale are presented below.



	June 30, 2017
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Asset Liability Management securities:
U.S. Treasury	$	2,331	$	—	$	89	$	2,242
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	8,919		6		92		8,833
Privately issued	501		2		4		499
Privately issued - commercial mortgage-backed securities	712		6		4		714
Collateralized loan obligations	2,227		5		2		2,230
Other	7		—		—		7
Asset Liability Management securities	14,697		19		191		14,525
Other debt securities:
Direct bank purchase bonds	1,523		46		23		1,546
Other	93		—		—		93
Equity securities	5		—		—		5
Total securities available for sale	$	16,318	$	65	$	214	$	16,169



	December 31, 2016
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Asset Liability Management securities:
U.S. Treasury	$	2,625	$	1	$	121	$	2,505
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	6,814		3		122		6,695
Privately issued	333		1		7		327
Privately issued - commercial mortgage-backed securities	666		4		6		664
Collateralized loan obligations	2,219		4		5		2,218
Other	7		—		—		7
Asset Liability Management securities	12,664		13		261		12,416
Other debt securities:
Direct bank purchase bonds	1,601		41		29		1,613
Other	108		—		1		107
Equity securities	5		—		—		5
Total securities available for sale	$	14,378	$	54	$	291	$	14,141

The Company’s securities available for sale with a continuous unrealized loss position at June 30, 2017 and December 31, 2016 are shown below, identified for periods less than 12 months and 12 months or more.



	June 30, 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	$	2,193	$	89	$	—	$	—	$	2,193	$	89
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	6,520		85		598		7		7,118		92
Privately issued	291		3		24		1		315		4
Privately issued - commercial mortgage-backed securities	371		4		10		—		381		4
Collateralized loan obligations	558		1		79		1		637		2
Asset Liability Management securities	9,933		182		711		9		10,644		191
Other debt securities:
Direct bank purchase bonds	81		3		558		20		639		23
Other	68		—		—		—		68		—
Equity securities	—		—		5		—		5		—
Total securities available for sale	$	10,082	$	185	$	1,274	$	29	$	11,356	$	214



	December 31, 2016
	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	$	2,257	$	121	$	—	$	—	$	2,257	$	121
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	5,501		113		667		9		6,168		122
Privately issued	249		6		29		1		278		7
Privately issued - commercial mortgage-backed securities	415		6		11		—		426		6
Collateralized loan obligations	75		—		1,077		5		1,152		5
Other	—		—		1		—		1		—
Asset Liability Management securities	8,497		246		1,785		15		10,282		261
Other debt securities:
Direct bank purchase bonds	386		12		499		17		885		29
Other	36		1		—		—		36		1
Equity securities	—		—		5		—		5		—
Total securities available for sale	$	8,919	$	259	$	2,289	$	32	$	11,208	$	291

At June 30, 2017, 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 agency or a government-sponsored agency such as Fannie Mae, Freddie Mac or Ginnie 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, 2017, 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, 2017, 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, 2017, 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, 2017, 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, 2017
(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	$	—	$	49	$	2,193	$	—	$	2,242
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	2		5		280		8,546		8,833
Privately issued	—		1		—		498		499
Privately issued - commercial mortgage-backed securities	—		—		—		714		714
Collateralized loan obligations	—		—		906		1,324		2,230
Other	1		1		5		—		7
Asset Liability Management securities	3		56		3,384		11,082		14,525
Other debt securities:
Direct bank purchase bonds	8		424		723		391		1,546
Other	—		67		—		26		93
Total debt securities available for sale	$	11	$	547	$	4,107	$	11,499	$	16,164

The gross realized gains and losses from sales of available for sale securities for the six months ended June 30, 2017 and 2016 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)	2017		2016		2017		2016
Gross realized gains	$	7	$	19	$	9	$	32

Securities Held to Maturity

At June 30, 2017 and December 31, 2016, 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, 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	$	494	$	—	$	—	$	494	$	3	$	—	$	497
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	8,358		2		36		8,324		36		78		8,282
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	1,613		—		58		1,555		47		5		1,597
Total securities held to maturity	$	10,465	$	2	$	94	$	10,373	$	86	$	83	$	10,376



	December 31, 2016
			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	$	492	$	—	$	—	$	492	$	5	$	—	$	497
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	8,301		3		41		8,263		34		96		8,201
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	1,645		—		63		1,582		43		7		1,618
Total securities held to maturity	$	10,438	$	3	$	104	$	10,337	$	82	$	103	$	10,316

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, 2017 and December 31, 2016 are shown below, separately for periods less than 12 months and 12 months or more.



	June 30, 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. government agency and government-sponsored agencies - residential mortgage-backed securities	$	4,642	$	—	$	77	$	1,264	$	36	$	1	$	5,906	$	36	$	78
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	104		—		1		1,439		58		4		1,543		58		5
Total securities held to maturity	$	4,746	$	—	$	78	$	2,703	$	94	$	5	$	7,449	$	94	$	83



	December 31, 2016
	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. government agency and government-sponsored agencies - residential mortgage-backed securities	$	4,492	$	—	$	92	$	1,386	$	41	$	4	$	5,878	$	41	$	96
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	111		—		1		1,448		63		6		1,559		63		7
Total securities held to maturity	$	4,603	$	—	$	93	$	2,834	$	104	$	10	$	7,437	$	104	$	103

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, 2017
	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
U.S. Treasury	$	494	$	497	$	—	$	—	$	—	$	—	$	494	$	497
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	—		—		417		414		7,907		7,868		8,324		8,282
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	433		452		421		440		701		705		1,555		1,597
Total securities held to maturity	$	927	$	949	$	838	$	854	$	8,608	$	8,573	$	10,373	$	10,376

Securities Pledged and Received as Collateral

At both June 30, 2017 and December 31, 2016, the Company pledged $12.1 billion of available for sale and trading securities as collateral, of which $1.1 billion and $1.3 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, 2017 and December 31, 2016, the Company received $28.9 billion and $31.6 billion, respectively, of collateral, of which $28.8 billion and $31.6 billion, respectively, was permitted to be sold or repledged. Of the collateral received, the Company sold or repledged $27.6 billion and $30.5 billion at June 30, 2017 and December 31, 2016, respectively, 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 2016 Form 10-K.