INVESTMENTS

Investment Securities

Securities are classified as HTM, AFS or trading. HTM securities, which management has the intent and ability to hold until maturity, are carried at amortized cost. AFS securities are carried at fair value and unrealized gains and losses are reported as net increases or decreases to AOCI. Realized gains and losses on AFS securities are determined by using the cost basis of each individual security. Trading securities are carried at fair value with gains and losses recognized in current period earnings. The purchase premiums and discounts for both HTM and AFS securities are amortized and accreted at a constant effective yield to the contractual maturity date and no assumption is made concerning prepayments. As principal prepayments occur, the portion of the unamortized premium or discount associated with the principal reduction is recognized as interest income in the period the principal is reduced. Note 3 discusses the process to estimate fair value for investment securities.



	December 31, 2017
(In millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	770	$	5	$	13	$	762
Available-for-sale
U.S. Treasury securities	25		—		—		25
U.S. Government agencies and corporations:
Agency securities	1,830		1		13		1,818
Agency guaranteed mortgage-backed securities	9,798		9		141		9,666
Small Business Administration loan-backed securities	2,227		10		15		2,222
Municipal securities	1,336		9		11		1,334
Other debt securities	25		—		1		24
Total available-for-sale debt securities	15,241		29		181		15,089
Money market mutual funds and other	72		—		—		72
Total available-for-sale	15,313		29		181		15,161
Total investment securities	$	16,083	$	34	$	194	$	15,923



	December 31, 2016
(In millions)	Amortized cost		Gross unrealized gains		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	868	$	5	$	23	$	850
Available-for-sale
U.S. Treasury securities	—		—		—		—
U.S. Government agencies and corporations:
Agency securities	1,846		2		9		1,839
Agency guaranteed mortgage-backed securities	7,986		7		110		7,883
Small Business Administration loan-backed securities	2,298		8		18		2,288
Municipal securities	1,182		1		29		1,154
Other debt securities	25		—		1		24
Total available-for-sale debt securities	13,337		18		167		13,188
Money market mutual funds and other	184		—		—		184
Total available-for-sale	13,521		18		167		13,372
Total investment securities	$	14,389	$	23	$	190	$	14,222

Maturities

The amortized cost and estimated fair value of investment debt securities are shown subsequently as of December 31, 2017 by expected timing of principal payments. Actual principal payments may differ from contractual or expected principal payments because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



	Held-to-maturity				Available-for-sale
(In millions)	Amortized cost		Estimated fair value		Amortized cost		Estimated fair value

Due in one year or less	$	180	$	90	$	2,499	$	2,054
Due after one year through five years	372		336		5,727		5,575
Due after five years through ten years	159		230		4,331		4,485
Due after ten years	59		106		2,684		2,975
Total	$	770	$	762	$	15,241	$	15,089

The following is a summary of the amount of gross unrealized losses for debt securities and the estimated fair value by length of time the securities have been in an unrealized loss position:



	December 31, 2017
	Less than 12 months				12 months or more				Total
(In millions)	Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	3	$	263	$	10	$	292	$	13	$	555
Available-for-sale
U.S. Government agencies and corporations:
Agency securities	6		808		7		808		13		1,616
Agency guaranteed mortgage-backed securities	29		3,609		112		4,721		141		8,330
Small Business Administration loan-backed securities	3		408		12		649		15		1,057
Municipal securities	6		554		5		230		11		784
Other	—		—		1		14		1		14
Total available-for-sale	44		5,379		137		6,422		181		11,801
Total	$	47	$	5,642	$	147	$	6,714	$	194	$	12,356



	December 31, 2016
	Less than 12 months				12 months or more				Total
(In millions)	Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value		Gross unrealized losses		Estimated fair value
Held-to-maturity
Municipal securities	$	15	$	467	$	8	$	61	$	23	$	528
Available-for-sale
U.S. Government agencies and corporations:
Agency securities	9		950		—		127		9		1,077
Agency guaranteed mortgage-backed securities	102		6,649		7		326		109		6,975
Small Business Administration loan-backed securities	3		527		16		841		19		1,368
Municipal securities	28		992		—		9		28		1,001
Other	—		—		2		14		2		14
Total available-for-sale	142		9,118		25		1,317		167		10,435
Total	$	157	$	9,585	$	33	$	1,378	$	190	$	10,963

At December 31, 2017 and 2016, respectively, 667 and 642 HTM and 2,262 and 2,398 AFS investment securities were in an unrealized loss position.

Other-Than-Temporary Impairment

Ongoing Policy

We review investment securities on a quarterly basis for the presence of OTTI. We assess whether OTTI is present when the fair value of a debt security is less than its amortized cost basis at the balance sheet date (the majority of the investment portfolio are debt securities). Under these circumstances, OTTI is considered to have occurred if (1) we have formed a documented intent to sell identified securities or initiated such sales; (2) it is “more likely than not” we will be required to sell the security before recovery of its amortized cost basis; or (3) the present value of expected cash flows is not sufficient to recover the entire amortized cost basis.

Noncredit-related OTTI in securities we intend to sell is recognized in earnings as is any credit-related OTTI in securities, regardless of our intent. Noncredit-related OTTI on AFS securities not expected to be sold is recognized in OCI. The amount of noncredit-related OTTI in a security is quantified as the difference in a security’s amortized cost after adjustment for credit impairment, and its lower fair value. Presentation of OTTI is made in the statement of income on a gross basis with an offset for the amount of OTTI recognized in OCI.

Our OTTI evaluation process takes into consideration current market conditions; fair value in relationship to cost; extent and nature of change in fair value; severity and duration of the impairment; recent events specific to the issuer or industry; our assessment of the creditworthiness of the issuer, including external credit ratings, changes, recent downgrades, and trends; the cash flow priority position of the instrument that we hold in the case of structured securities; volatility of earnings and trends; current analysts’ evaluations; all available information relevant to the collectability of debt securities; and other key measures. In addition, for AFS securities with fair values below amortized cost, we must determine if we intend to sell the securities or if it is more likely than not that we will be required to sell the securities before recovery of their amortized cost basis. For HTM securities, we must determine we have the ability to hold the securities to maturity. We consider any other relevant factors before concluding our evaluation for the existence of OTTI in our securities portfolio.

Other-Than-Temporary Impairment Conclusions

The Company did not recognize any OTTI on its investment securities portfolio during 2017. Unrealized losses relate to changes in interest rates subsequent to purchase and are not attributable to credit. At December 31, 2017, we did not have an intent to sell identified securities with unrealized losses or initiate such sales, and we believe it is not more likely than not we would be required to sell such securities before recovery of their amortized cost basis.

To determine the credit component of OTTI for all security types, we utilize projected cash flows. These cash flows are credit adjusted using, among other things, assumptions for default probability and loss severity. Certain other unobservable inputs such as prepayment rate assumptions are also utilized. In addition, certain internal models may be utilized. See Note 3 for further discussion. To determine the credit-related portion of OTTI in accordance with applicable accounting guidance, we use the security specific effective interest rate when estimating the present value of cash flows.

The following summarizes gains and losses, including OTTI, that were recognized in the statement of income:

	2017				2016				2015
(In millions)	Gross gains		Gross losses		Gross gains		Gross losses		Gross gains		Gross losses
Investment securities:
Available-for-sale	$	—	$	—	$	—	$	—	$	9	$	148
Other noninterest-bearing investments	22		8		21		14		25		13
Total investments	22		8		21		14		34		161
Net gains (losses)			$	14			$	7			$	(127	)
Statement of income information:
Equity securities gains, net			$	14			$	7			$	12
Fixed income securities gains (losses), net			—				—				(139		)
Net gains (losses)			$	14			$	7			$	(127	)

Interest income by security type is as follows:



(In millions)	2017						2016						2015
(In millions)	Taxable		Nontaxable		Total		Taxable		Nontaxable		Total		Taxable		Nontaxable		Total
Investment securities:
Held-to-maturity	$	10	$	13	$	23	$	10	$	13	$	23	$	13	$	11	$	24
Available-for-sale	277		24		301		166		12		178		95		3		98
Trading	2		—		2		3		—		3		2		—		2
Total	$	289	$	37	$	326	$	179	$	25	$	204	$	110	$	14	$	124

Investment securities with a carrying value of approximately $2.1 billion and $1.4 billion at December 31, 2017 and 2016, respectively, were pledged to secure public and trust deposits, advances, and for other purposes as required by law. Securities are also pledged as collateral for security repurchase agreements.

Private Equity Investments

Effect of Volcker Rule

The Company’s PEIs are subject to the provisions of the Dodd-Frank Act. The Volcker Rule of the Dodd-Frank Act prohibits banks and bank holding companies from holding PEIs, except for SBIC funds and certain other permitted exclusions, beyond a required deadline. The Federal Reserve Board announced in December 2016 that it would allow banks to apply for an additional five-year extension beyond the July 21, 2017 deadline to comply with the Dodd-Frank Act requirement for these investments. The Company applied for and was granted an extension for its eligible PEIs. All positions in the remaining portfolio of PEIs are subject to the extended deadline or other applicable exclusions.

Of the recorded PEIs of $141 million at December 31, 2017, approximately $3 million remain prohibited by the Volcker Rule. At December 31, 2017, we have $31 million of unfunded commitments for PEIs, of which approximately $4 million relate to prohibited PEIs. We currently do not believe that this divestiture requirement will ultimately have a material impact on our financial statements. See other discussions related to PEI in Note 3.