Securities

Securities Available for Sale

At June 30, 2019 and December 31, 2018, the amortized cost, gross unrealized gains, gross unrealized losses and fair values of securities available for sale are presented below.



	June 30, 2019
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Asset Liability Management securities:
U.S. Treasury	$	2,287	$	1	$	25	$	2,263
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	8,345		34		48		8,331
Privately issued	918		7		4		921
Privately issued - commercial mortgage-backed securities	1,493		49		—		1,542
Collateralized loan obligations	1,540		1		6		1,535
Other	4		—		—		4
Asset Liability Management securities	14,587		92		83		14,596
Other debt securities:
Direct bank purchase bonds	927		34		18		943
Other	172		2		1		173
Total securities available for sale	$	15,686	$	128	$	102	$	15,712



	December 31, 2018
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Asset Liability Management securities:
U.S. Treasury	$	3,572	$	1	$	144	$	3,429
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	8,168		7		168		8,007
Privately issued	887		—		23		864
Privately issued - commercial mortgage-backed securities	1,179		3		20		1,162
Collateralized loan obligations	1,492		—		18		1,474
Other	4		—		—		4
Asset Liability Management securities	15,302		11		373		14,940
Other debt securities:
Direct bank purchase bonds	1,190		30		30		1,190
Other	188		—		4		184
Total securities available for sale	$	16,680	$	41	$	407	$	16,314

The Company’s securities available for sale with a continuous unrealized loss position at June 30, 2019 and December 31, 2018 are shown below, identified for periods less than 12 months and 12 months or more.



	June 30, 2019
	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	$	—	$	—	$	2,113	$	25	$	2,113	$	25
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	1,161		6		3,700		42		4,861		48
Privately issued	19		—		383		4		402		4
Privately issued - commercial mortgage-backed securities	32		—		29		—		61		—
Collateralized loan obligations	838		3		263		3		1,101		6
Asset Liability Management securities	2,050		9		6,488		74		8,538		83
Other debt securities:
Direct bank purchase bonds	1		1		332		17		333		18
Other	25		1		4		—		29		1
Total securities available for sale	$	2,076	$	11	$	6,824	$	91	$	8,900	$	102



	December 31, 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	$	147	$	1	$	3,182	$	143	$	3,329	$	144
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	1,941		8		4,797		160		6,738		168
Privately issued	398		7		383		16		781		23
Privately issued - commercial mortgage-backed securities	364		6		512		14		876		20
Collateralized loan obligations	1,428		18		—		—		1,428		18
Asset Liability Management securities	4,278		40		8,874		333		13,152		373
Other debt securities:
Direct bank purchase bonds	221		6		417		24		638		30
Other	178		4		4		—		182		4
Total securities available for sale	$	4,677	$	50	$	9,295	$	357	$	13,972	$	407

At June 30, 2019, 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, 2019, 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, 2019, 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, 2019, 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, 2019, 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, 2019
(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	$	—	$	1,180	$	1,083	$	—	$	2,263
Residential mortgage-backed securities:
U.S. government agency and government-sponsored agencies	—		322		1,152		6,857		8,331
Privately issued	—		—		—		921		921
Privately issued - commercial mortgage-backed securities	—		32		60		1,450		1,542
Collateralized loan obligations	—		—		473		1,062		1,535
Other	—		4		—		—		4
Asset Liability Management securities	—		1,538		2,768		10,290		14,596
Other debt securities:
Direct bank purchase bonds	—		334		496		113		943
Other	3		150		—		20		173
Total debt securities available for sale	$	3	$	2,022	$	3,264	$	10,423	$	15,712

The gross realized gains and losses from sales of available for sale securities for the three and six months ended June 30, 2019 and 2018 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)	2019		2018		2019		2018
Gross realized gains	$	22	$	3	$	23	$	3

Securities Held to Maturity

At June 30, 2019 and December 31, 2018, 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, 2019
			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	$	278	$	—	$	—	$	278	$	—	$	—	$	278
U.S. government-sponsored agencies	599		—		—		599		—		3		596
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	7,792		1		91		7,702		94		32		7,764
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	1,338		—		34		1,304		32		7		1,329
Total securities held to maturity	$	10,007	$	1	$	125	$	9,883	$	126	$	42	$	9,967



	December 31, 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	$	528	$	—	$	—	$	528	$	1	$	2	$	527
U.S. government-sponsored agencies	722		—		—		722		1		—		723
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	8,302		1		96		8,207		11		191		8,027
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	1,486		—		42		1,444		17		18		1,443
Total securities held to maturity	$	11,038	$	1	$	138	$	10,901	$	30	$	211	$	10,720

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, 2019 and December 31, 2018 are shown below, separately for periods less than 12 months and 12 months or more.



	June 30, 2019
	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	$	4	$	—	$	—	$	249	$	—	$	—	$	253	$	—	$	—
U.S. government-sponsored agencies	297		—		3		—		—		—		297		—		3
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	957		1		—		5,802		90		32		6,759		91		32
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	—		—		—		1,285		34		7		1,285		34		7
Total securities held to maturity	$	1,258	$	1	$	3	$	7,336	$	124	$	39	$	8,594	$	125	$	42



	December 31, 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	$	—	$	—	$	—	$	496	$	—	$	2	$	496	$	—	$	2
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	668		—		11		7,191		96		180		7,859		96		191
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	29		—		—		1,396		42		18		1,425		42		18
Total securities held to maturity	$	697	$	—	$	11	$	9,083	$	138	$	200	$	9,780	$	138	$	211

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, 2019
	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	$	276	$	276	$	2	$	2	$	—	$	—	$	—	$	—	$	278	$	278
U.S. government-sponsored agencies	—		—		—		—		599		596		—		—		599		596
U.S. government agency and government-sponsored agencies - residential mortgage-backed securities	—		—		—		—		892		893		6,810		6,871		7,702		7,764
U.S. government agency and government-sponsored agencies - commercial mortgage-backed securities	—		—		748		772		—		—		556		557		1,304		1,329
Total securities held to maturity	$	276	$	276	$	750	$	774	$	1,491	$	1,489	$	7,366	$	7,428	$	9,883	$	9,967

Securities Pledged and Received as Collateral

At June 30, 2019 and December 31, 2018, the Company pledged $12.3 billion and $11.9 billion of available for sale and trading securities as collateral, respectively, of which $2.3 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, and to secure public and trust department deposits.

At June 30, 2019 and December 31, 2018, the Company received $32.1 billion and $33.1 billion, respectively, of collateral for derivative asset positions and securities borrowed or purchased under resale agreements, of which $32.1 billion and $33.1 billion, respectively, was permitted to be sold or repledged. Of the collateral received, the Company sold or repledged $31.5 billion and $32.1 billion at June 30, 2019 and December 31, 2018, respectively, for securities loaned or sold under repurchase agreements.

For additional information related to the Company's significant accounting policies on securities pledged as collateral, see Note 1 "Summary of Significant Accounting Policies and Nature of Operations" to our Consolidated Financial Statements in Part II, Item 8. "Financial Statements and Supplementary Data" in our 2018 Form 10-K.