STI 2018 Annual Report

Notes to Consolidated Financial Statements, continued 106 Realized Gains and Losses and Other-Than-Temporarily Impaired Securities Net securities gains or losses are comprised of gross realized gains, gross realized losses, and OTTI credit losses recognized in earnings. Year Ended December 31 (Dollars in millions) 2018 2017 2016 Gross realized gains $9 $3 $4 Gross realized losses (8) (110) — OTTI credit losses recognized in earnings — (1) — Net securities gains/(losses) $1 ($108) $4 Investment securities in an unrealized loss position are evaluated quarterly for other-than-temporary credit impairment, which is determined using cash flow analyses that take into account security specific collateral and transaction structure. Future expected credit losses are determined using various assumptions, the most significant of which include default rates, prepayment rates, and loss severities. If, based on this analysis, a security is in an unrealized loss position and the Company does not expect to recover the entire amortized cost basis of the security, the expected cash flows are then discounted at the security’s initial effective interest rate to arrive at a present value amount. Credit losses on theOTTI security are recognized in earnings and reflect the difference between the present value of cash flows expected to be collected and the amortized cost basis of the security. Subsequent credit losses may be recorded on OTTI securities without a corresponding further decline in fair value when there has been a decline in expected cash flows. See Note 1, "Significant Accounting Policies," for additional information regarding the Company's accounting policy on securities AFS and related impairments. During the year ended December 31, 2018, there were no credit impairment losses recognized on securities AFS held at the end of the period. During the years endedDecember 31, 2017 and 2016, credit impairment losses recognized on securitiesAFS held at the end of each period were immaterial. During the year endedDecember 31, 2018, the Company sold securitiesAFS that had accumulated OTTI credit losses of $23 million and recognized an associated gain on sale of $6 million in Net securities gains/(losses) on the Consolidated Statements of Income. The accumulated balance of OTTI credit losses recognized in earnings on securities AFS held at period end was zero, $23 million, and $23 million at December 31, 2018, 2017, and 2016, respectively.