Investment Securities

Our portfolio of securities includes bonds, equity securities, asset-backed securities, commercial and residential mortgage-backed securities, and other investments. The cost, fair value, and gross unrealized gains and losses on available-for-sale and held-to-maturity investment securities were as follows.



	March 31, 2018									December 31, 2017
	Amortized cost		Gross unrealized					Fair value		Amortized cost		Gross unrealized					Fair value
($ in millions)	Amortized cost		gains		losses			Fair value		Amortized cost		gains		losses			Fair value
Available-for-sale securities
Debt securities
U.S. Treasury	$	1,855	$	—	$	(86	)	$	1,769	$	1,831	$	—	$	(54	)	$	1,777
U.S. States and political subdivisions	845		5		(19		)	831		850		11		(7		)	854
Foreign government	150		1		(2		)	149		153		2		(1		)	154
Agency mortgage-backed residential	15,316		4		(437		)	14,883		14,412		35		(156		)	14,291
Mortgage-backed residential	2,456		3		(75		)	2,384		2,517		11		(34		)	2,494
Mortgage-backed commercial	582		1		(3		)	580		541		1		(1		)	541
Asset-backed	901		2		(3		)	900		933		4		(1		)	936
Corporate debt	1,263		1		(34		)	1,230		1,262		5		(11		)	1,256
Total available-for-sale securities (a) (b) (c)	$	23,368	$	17	$	(659	)	22,726		$	22,499	$	69	$	(265	)	$	22,303
Held-to-maturity securities
Debt securities
Agency mortgage-backed residential (d)	$	1,936	$	—	$	(72	)	$	1,864	$	1,863	$	3	$	(37	)	$	1,829
Asset-backed retained notes	31		—		—			31		36		—		—			36
Total held-to-maturity securities	$	1,967	$	—	$	(72	)	$	1,895	$	1,899	$	3	$	(37	)	$	1,865


(a)	Certain entities related to our Insurance operations are required to deposit securities with state regulatory authorities. These deposited securities totaled $12 million at both March 31, 2018, and December 31, 2017.


(b)	Certain available-for-sale securities are included in fair value hedging relationships. Refer to Note 18 for additional information.

(c)

Investment securities with a fair value of $8.0 billion and $7.8 billion at March 31, 2018, and December 31, 2017, respectively, were pledged to secure advances from the Federal Home Loan Bank (FHLB), short-term borrowings or repurchase agreements, or for other purposes as required by contractual obligation or law. Under these agreements, we have granted the counterparty the right to sell or pledge $839 million and $1.0 billion of the underlying investment securities at March 31, 2018, and December 31, 2017, respectively.


(d)	Securities with a fair value of $993 million and $664 million at March 31, 2018, and December 31, 2017, respectively, were pledged to secure advances from the FHLB.

The maturity distribution of debt securities outstanding is summarized in the following tables. Call or prepayment options may cause actual maturities to differ from contractual maturities.



	Total				Due in one year or less				Due after one year through five years				Due after five years through ten years				Due after ten years
($ in millions)	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
March 31, 2018
Fair value of available-for-sale securities (a)
U.S. Treasury	$	1,769	1.8	%	$	—	—	%	$	481	1.7	%	$	1,288	1.8	%	$	—	—	%
U.S. States and political subdivisions	831		3.0		70		2.3		42		2.3		219		2.6		500		3.3
Foreign government	149		2.5		—		—		77		2.6		72		2.4		—		—
Agency mortgage-backed residential	14,883		3.2		—		—		—		—		3		2.6		14,880		3.2
Mortgage-backed residential	2,384		3.1		—		—		—		—		—		—		2,384		3.1
Mortgage-backed commercial	580		3.4		—		—		—		—		31		3.3		549		3.4
Asset-backed	900		3.2		—		—		655		3.2		121		3.3		124		2.9
Corporate debt	1,230		3.0		123		2.8		496		2.7		573		3.3		38		4.8
Total available-for-sale securities	$	22,726	3.0		$	193	2.6		$	1,751	2.6		$	2,307	2.3		$	18,475	3.2
Amortized cost of available-for-sale securities	$	23,368			$	194			$	1,776			$	2,403			$	18,995
Amortized cost of held-to-maturity securities
Agency mortgage-backed residential	$	1,936	3.1	%	$	—	—	%	$	—	—	%	$	—	—	%	$	1,936	3.1	%
Asset-backed retained notes	31		1.7		—		—		30		1.7		1		3.0		—		—
Total held-to-maturity securities	$	1,967	3.1		$	—	—		$	30	1.7		$	1	3.0		$	1,936	3.1
December 31, 2017
Fair value of available-for-sale securities (a)
U.S. Treasury	$	1,777	1.7	%	$	—	—	%	$	487	1.7	%	$	1,290	1.8	%	$	—	—	%
U.S. States and political subdivisions	854		2.9		76		1.8		36		2.3		203		2.5		539		3.3
Foreign government	154		2.5		—		—		80		2.5		74		2.4		—		—
Agency mortgage-backed residential	14,291		3.1		—		—		—		—		3		2.9		14,288		3.1
Mortgage-backed residential	2,494		3.1		—		—		—		—		—		—		2,494		3.1
Mortgage-backed commercial	541		3.2		—		—		30		3.1		31		3.1		480		3.2
Asset-backed	936		3.1		—		—		698		3.1		106		3.1		132		2.8
Corporate debt	1,256		2.9		140		2.6		513		2.6		564		3.2		39		4.7
Total available-for-sale securities	$	22,303	3.0		$	216	2.3		$	1,844	2.5		$	2,271	2.3		$	17,972	3.1
Amortized cost of available-for-sale securities	$	22,499			$	217			$	1,852			$	2,314			$	18,116
Amortized cost of held-to-maturity securities
Agency mortgage-backed residential	$	1,863	3.1	%	$	—	—	%	$	—	—	%	$	—	—	%	$	1,863	3.1	%
Asset-backed retained notes	36		1.7		—		—		35		1.7		1		3.0		—		—
Total held-to-maturity securities	$	1,899	3.1		$	—	—		$	35	1.7		$	1	3.0		$	1,863	3.1


(a)	Yield is calculated using the effective yield of each security at the end of the period, weighted based on the market value. The effective yield considers the contractual coupon and amortized cost, and excludes expected capital gains and losses.

The balances of cash equivalents were $18 million and $10 million at March 31, 2018, and December 31, 2017, respectively, and were composed primarily of money market accounts and short-term securities, including U.S. Treasury bills.

The following table presents interest and dividends on investment securities.



	Three months ended March 31,
($ in millions)	2018		2017
Taxable interest	$	154	$	119
Taxable dividends	3		2
Interest and dividends exempt from U.S. federal income tax	6		5
Interest and dividends on investment securities	$	163	$	126

The following table presents gross gains and losses realized upon the sales of available-for-sale securities, and net gains or losses on equity securities held during the period. There were no other-than-temporary impairments of available-for-sale securities for either period.



	Three months ended March 31,
($ in millions)	2018			2017
Available-for-sale securities
Gross realized gains	$	6		$	27
Gross realized losses	—			—
Net realized gains on available-for-sale securities	6			27
Net realized gain on equity securities	22
Net unrealized loss on equity securities (a)	(40		)
Other (loss) gain on investments, net	$	(12	)	$	27

(a)

As a result of our adoption of ASU 2016-01, beginning January 1, 2018, changes in the fair value of our portfolio of equity securities are recognized in net income. Prior to adoption, equity securities were included in our available-for-sale portfolio and unrealized changes in fair value were recognized through other comprehensive (loss) income until realized, at which point we recorded a gain or loss on sale. We adopted ASU 2016-01 on January 1, 2018, on a modified retrospective basis with a cumulative effect adjustment as of the beginning of the fiscal year of initial adoption. Refer to the section titled Recently Adopted Accounting Standards in Note 1 for additional information.

The table below summarizes available-for-sale and held-to-maturity securities in an unrealized loss position, which we evaluated for other than temporary impairment applying the methodology described in Note 1. As of March 31, 2018, we did not have the intent to sell the available-for-sale or held-to-maturity securities with an unrealized loss position and we do not believe it is more likely than not that we will be required to sell these securities before recovery of their amortized cost basis. As a result of this evaluation, we believe that the securities with an unrealized loss position are not considered to be other-than-temporarily impaired at March 31, 2018.



	March 31, 2018										December 31, 2017
	Less than 12 months					12 months or longer					Less than 12 months					12 months or longer
($ in millions)	Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss			Fair value		Unrealized loss
Available-for-sale securities
Debt securities
U.S. Treasury	$	488	$	(16	)	$	1,282	$	(70	)	$	471	$	(8	)	$	1,305	$	(46	)
U.S. States and political subdivisions	436		(9		)	176		(10		)	242		(2		)	183		(5		)
Foreign government	82		(2		)	4		—			80		(1		)	4		—
Agency mortgage-backed residential	8,951		(183		)	5,395		(254		)	4,066		(19		)	5,671		(137		)
Mortgage-backed residential	1,439		(29		)	734		(46		)	857		(2		)	773		(32		)
Mortgage-backed commercial	71		(2		)	21		(1		)	76		(1		)	21		—
Asset-backed	426		(2		)	76		(1		)	220		(1		)	91		—
Corporate debt	932		(20		)	191		(14		)	529		(4		)	194		(7		)
Total temporarily impaired available-for-sale securities	$	12,825	$	(263	)	$	7,879	$	(396	)	$	6,541	$	(38	)	$	8,242	$	(227	)
Held-to-maturity securities
Agency mortgage-backed residential	$	1,147	$	(26	)	$	672	$	(46	)	$	773	$	(5	)	$	687	$	(32	)
Asset-backed retained certificates	31		—			—		—			35		—			—		—
Total held-to-maturity debt securities	$	1,178	$	(26	)	$	672	$	(46	)	$	808	$	(5	)	$	687	$	(32	)