Investment securities held by us are classified as either trading account assets, AFS, HTM or equity securities held at fair value at the time of purchase and reassessed periodically, based on management’s intent.

As described in Note 1, upon adoption of ASU 2016-01 we reclassified approximately $397 million of money market funds and $46 million of equity securities to other assets, where they are held at fair value with changes to fair value recorded through our consolidated statement of income.

Generally, trading assets are debt and equity securities purchased in connection with our trading activities and, as such, are expected to be sold in the near term. Our trading activities typically involve active and frequent buying and selling with the objective of generating profits on short-term movements. AFS investment securities are those securities that we intend to hold for an indefinite period of time. AFS investment securities include securities utilized as part of our asset and liability management activities that may be sold in response to changes in interest rates, prepayment risk, liquidity needs or other factors. HTM securities are debt securities that management has the intent and the ability to hold to maturity.

Trading assets are carried at fair value. Both realized and unrealized gains and losses on trading assets are recorded in trading services revenue in our consolidated statement of income. AFS securities are carried at fair value, and after-tax net unrealized gains and losses are recorded in AOCI. Gains or losses realized on sales of AFS investment securities are computed using the specific identification method and are recorded in gains (losses) related to investment securities, net, in our consolidated statement of income. HTM investment securities are carried at cost, adjusted for amortization of premiums and accretion of discounts.

The following table presents the amortized cost, fair value and associated unrealized gains and losses of AFS and HTM investment securities as of the dates indicated:



	September 30, 2018								December 31, 2017
	Amortized Cost		Gross Unrealized				Fair Value		Amortized Cost		Gross Unrealized				Fair Value
(In millions)			Gains		Losses						Gains		Losses
Available-for-sale:
U.S. Treasury and federal agencies:
Direct obligations	$	11	$	—	$	—	$	11	$	222	$	2	$	1	$	223
Mortgage-backed securities	15,841		8		376		15,473		10,975		26		129		10,872
Total U.S. Treasury and federal agencies	15,852		8		376		15,484		11,197		28		130		11,095
Asset-backed securities:
Student loans⁽¹⁾	1,422		20		1		1,441		3,325		37		4		3,358
Credit cards	639		1		24		616		1,565		2		25		1,542
CLOs	609		3		1		611		1,440		7		—		1,447
Total asset-backed securities	2,670		24		26		2,668		6,330		46		29		6,347
Non-U.S. debt securities:
Mortgage-backed securities	2,348		4		4		2,348		6,664		36		5		6,695
Asset-backed securities	1,523		1		3		1,521		2,942		5		—		2,947
Government securities	13,080		8		115		12,973		10,754		16		49		10,721
Other⁽²⁾	4,747		14		17		4,744		6,076		38		6		6,108
Total non-U.S. debt securities	21,698		27		139		21,586		26,436		95		60		26,471
State and political subdivisions⁽³⁾	3,959		93		17		4,035		8,929		245		23		9,151
Collateralized mortgage obligations	310		—		7		303		1,060		3		9		1,054
Other U.S. debt securities	2,065		4		43		2,026		2,563		12		15		2,560
U.S. equity securities⁽⁴⁾	—		—		—		—		40		8		2		46
U.S. money-market mutual funds⁽⁴⁾	—		—		—		—		397		—		—		397
Total	$	46,554	$	156	$	608	$	46,102	$	56,952	$	437	$	268	$	57,121
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	15,168	$	—	$	325	$	14,843	$	17,028	$	—	$	143	$	16,885
Mortgage-backed securities	19,697		2		802		18,897		16,651		22		225		16,448
Total U.S. Treasury and federal agencies	34,865		2		1,127		33,740		33,679		22		368		33,333
Asset-backed securities:
Student loans⁽¹⁾	3,031		43		7		3,067		3,047		32		9		3,070
Credit cards	325		—		—		325		798		2		—		800
Other	1		—		—		1		1		—		—		1
Total asset-backed securities	3,357		43		7		3,393		3,846		34		9		3,871
Non-U.S. debt securities:
Mortgage-backed securities	672		81		6		747		939		82		6		1,015
Asset-backed securities	228		—		—		228		263		1		—		264
Government securities	357		1		—		358		474		2		—		476
Other	46		—		—		46		48		—		—		48
Total non-U.S. debt securities	1,303		82		6		1,379		1,724		85		6		1,803
Collateralized mortgage obligations	1,042		44		7		1,079		1,209		45		6		1,248
Total	$	40,567	$	171	$	1,147	$	39,591	$	40,458	$	186	$	389	$	40,255

⁽¹⁾ Primarily composed of securities guaranteed by the federal government with respect to at least 97% of defaulted principal and accrued interest on the underlying loans.

⁽²⁾As of September 30, 2018 and December 31, 2017, the fair value of other non-U.S. debt securities was primarily composed of $1,929 million and $3,537 million, respectively, of covered bonds and $1,782 million and $1,885 million, respectively, of corporate bonds.

⁽³⁾ As of September 30, 2018 and December 31, 2017, the fair value of State and Political subdivisions includes securities in trusts of $1,131 million and $1,247 million, respectively. Additional information about these trusts is provided in Note 11 to the consolidated financial statements in this Form 10-Q.

⁽⁴⁾ During the first quarter of 2018, we adopted ASU 2016-01. For additional information see Note 1.

Aggregate investment securities with carrying values of approximately $34 billion and $48 billion as of September 30, 2018 and December 31, 2017, respectively, were designated as pledged for public and trust deposits, short-term borrowings and for other purposes as provided by law.

In the nine months ended September 30, 2018, we sold approximately $16 billion of AFS, primarily asset-backed securities, municipal bonds and covered bonds, resulting in a net pre-tax gain of approximately $8 million.

The following tables present the aggregate fair values of AFS and HTM investment securities that have been in a continuous unrealized loss position for less than 12 months, and those that have been in a continuous unrealized loss position for 12 months or longer, as of the dates indicated:



	Less than 12 months				12 months or longer				Total
September 30, 2018	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
(In millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
U.S. Treasury and federal agencies:
Mortgage-backed securities	$	10,651	$	175	$	3,708	$	201	$	14,359	$	376
Total U.S. Treasury and federal agencies	10,651		175		3,708		201		14,359		376
Asset-backed securities:
Student loans	262		1		142		—		404		1
Credit cards	—		—		491		24		491		24
CLOs	357		1		—		—		357		1
Total asset-backed securities	619		2		633		24		1,252		26
Non-U.S. debt securities:
Mortgage-backed securities	1,063		4		57		—		1,120		4
Asset-backed securities	769		3		—		—		769		3
Government securities	10,408		115		—		—		10,408		115
Other	1,468		14		164		3		1,632		17
Total non-U.S. debt securities	13,708		136		221		3		13,929		139
State and political subdivisions	662		10		266		7		928		17
Collateralized mortgage obligations	217		5		77		2		294		7
Other U.S. debt securities	1,229		29		316		14		1,545		43
Total	$	27,086	$	357	$	5,221	$	251	$	32,307	$	608
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	8,963	$	222	$	5,879	$	103	$	14,842	$	325
Mortgage-backed securities	11,692		386		6,303		416		17,995		802
Total U.S. Treasury and federal agencies	20,655		608		12,182		519		32,837		1,127
Asset-backed securities:
Student loans	160		1		533		6		693		7
Total asset-backed securities	160		1		533		6		693		7
Non-U.S. debt securities:
Mortgage-backed securities	97		1		125		5		222		6
Total non-U.S. debt securities	97		1		125		5		222		6
Collateralized mortgage obligations	5		—		224		7		229		7
Total	$	20,917	$	610	$	13,064	$	537	$	33,981	$	1,147



	Less than 12 months				12 months or longer				Total
December 31, 2017	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
(In millions)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Available-for-sale:
U.S. Treasury and federal agencies:
Direct obligations	$	—	$	—	$	67	$	1	$	67	$	1
Mortgage-backed securities	5,161		31		3,341		98		8,502		129
Total U.S. Treasury and federal agencies	5,161		31		3,408		99		8,569		130
Asset-backed securities:
Student loans	—		—		769		4		769		4
Credit cards	1,289		25		—		—		1,289		25
Total asset-backed securities	1,289		25		769		4		2,058		29
Non-U.S. debt securities:
Mortgage-backed securities	1,059		4		469		1		1,528		5
Government securities	7,629		48		68		1		7,697		49
Other	816		4		289		2		1,105		6
Total non-U.S. debt securities	9,504		56		826		4		10,330		60
State and political subdivisions	734		6		901		17		1,635		23
Collateralized mortgage obligations	399		5		136		4		535		9
Other U.S. debt securities	1,007		8		345		7		1,352		15
U.S. equity securities	—		—		6		2		6		2
Total	$	18,094	$	131	$	6,391	$	137	$	24,485	$	268
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	14,439	$	109	$	2,447	$	34	$	16,886	$	143
Mortgage-backed securities	6,785		38		5,988		187		12,773		225
Total U.S. Treasury and federal agencies	21,224		147		8,435		221		29,659		368
Asset-backed securities:
Student loans	440		3		423		6		863		9
Total asset-backed securities	440		3		423		6		863		9
Non-U.S. debt securities:
Mortgage-backed securities	—		—		239		6		239		6
Total non-U.S. debt securities	—		—		239		6		239		6
Collateralized mortgage obligations	—		—		276		6		276		6
Total	$	21,664	$	150	$	9,373	$	239	$	31,037	$	389

The following table presents contractual maturities of debt investment securities by carrying amount as of September 30, 2018. The maturities of certain ABS, MBS, and CMOs are based on expected principal payments. Actual maturities may differ from these expected maturities since certain borrowers have the right to prepay obligations with or without prepayment penalties.



September 30, 2018	Under 1 Year		1 to 5 Years		6 to 10 Years		Over 10 Years		Total
(In millions)	Under 1 Year		1 to 5 Years		6 to 10 Years		Over 10 Years		Total
Available-for-sale:
U.S. Treasury and federal agencies:
Direct obligations	$	11	$	—	$	—	$	—	$	11
Mortgage-backed securities	129		830		2,547		11,967		15,473
Total U.S. Treasury and federal agencies	140		830		2,547		11,967		15,484
Asset-backed securities:
Student loans	71		311		391		668		1,441
Credit cards	198		292		126		—		616
CLOs	—		449		141		21		611
Total asset-backed securities	269		1,052		658		689		2,668
Non-U.S. debt securities:
Mortgage-backed securities	175		1,638		158		377		2,348
Asset-backed securities	103		637		607		174		1,521
Government securities	2,100		5,184		5,430		259		12,973
Other	1,346		2,647		731		20		4,744
Total non-U.S. debt securities	3,724		10,106		6,926		830		21,586
State and political subdivisions	379		1,329		1,625		702		4,035
Collateralized mortgage obligations	8		—		—		295		303
Other U.S. debt securities	160		1,241		625		—		2,026
Total	$	4,680	$	14,558	$	12,381	$	14,483	$	46,102
Held-to-maturity:
U.S. Treasury and federal agencies:
Direct obligations	$	2,897	$	12,213	$	12	$	46	$	15,168
Mortgage-backed securities	8		173		1,403		18,113		19,697
Total U.S. Treasury and federal agencies	2,905		12,386		1,415		18,159		34,865
Asset-backed securities:
Student loans	32		300		185		2,514		3,031
Credit cards	58		267		—		—		325
Other	—		—		—		1		1
Total asset-backed securities	90		567		185		2,515		3,357
Non-U.S. debt securities:
Mortgage-backed securities	71		143		8		450		672
Asset-backed securities	98		130		—		—		228
Government securities	240		117		—		—		357
Other	46		—		—		—		46
Total non-U.S. debt securities	455		390		8		450		1,303
Collateralized mortgage obligations	2		438		11		591		1,042
Total	$	3,452	$	13,781	$	1,619	$	21,715	$	40,567

The following table presents a roll-forward with respect to net impairment losses that have been recognized in income for the periods indicated.



	Nine Months Ended September 30,
(In millions)	2018		2017
Balance, beginning of period	$	64	$	66
Additions:
Losses for which OTTI was previously recognized	2		—
Deductions:
Previously recognized losses related to securities sold or matured	—		(2		)
Balance, end of period	$	66	$	64

Interest income related to debt securities is recognized in our consolidated statement of income using the effective interest method, or on a basis approximating a level rate of return over the contractual or estimated life of the security. The level rate of return considers any non-refundable fees or costs, as well as purchase premiums or discounts, resulting in amortization or accretion, accordingly.

For certain debt securities acquired which are considered to be beneficial interests in securitized financial assets, the excess of our estimate of undiscounted future cash flows from these securities over their initial recorded investment is accreted into interest income on a level-yield basis over the securities’ estimated remaining terms. Subsequent decreases in these securities’ expected future cash flows are either recognized prospectively through an adjustment of the yields on the securities over their remaining terms, or are evaluated for OTTI. Increases in expected future cash flows are recognized prospectively over the securities’ estimated remaining terms through the recalculation of their yields.