v2.4.0.8
Investment Securities
 9 Months Ended
Sep. 30, 2013
Investments, Debt and Equity Securities [Abstract]  
Investment Securities

5. Investment Securities

Investment securities include debt and equity securities classified as available for sale. The Company's investment securities, principally debt securities, are carried at fair value on the Consolidated Balance Sheets with unrealized gains (losses) recorded in AOCI, net of income taxes. Realized gains and losses are recognized in results of operations upon disposition of the securities using the specific identification method on a trade date basis. Refer to Note 2 for a description of the Company's methodology for determining the fair value of investment securities.

 

The following is a summary of investment securities as of September 30, 2013 and December 31, 2012:

 

    2013 2012
        Gross  Gross  Estimated     Gross  Gross  Estimated
       Unrealized Unrealized  Fair   Unrealized Unrealized  Fair
Description of Securities (Millions)  Cost Gains Losses  Value Cost Gains Losses  Value
State and municipal obligations  $ 4,197 $ 63 $ (67) $ 4,193 $ 4,280 $ 199 $ (5) $ 4,474
U.S. Government agency                         
 obligations    3   ―   ―   3   3   ―   ―   3
U.S. Government treasury                         
 obligations    228   4   ―   232   330   8   ―   338
Corporate debt securities    42   3   ―   45   73   6   ―   79
Mortgage-backed securities (a)   170   7   ―   177   210   14   ―   224
Equity securities (b)   37   131   ―   168   64   232   ―   296
Foreign government bonds and                         
 obligations    265   7   (1)   271   134   15   ―   149
Other (c)   50   ―   (2)   48   51   ―   ―   51
Total  $ 4,992 $ 215 $ (70) $ 5,137 $5,145 $474 $(5) $5,614

  • Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
  • Primarily represents the Company's investment in ICBC.
  • Other comprises investments in various mutual funds.

 

The following table provides information about the Company's investment securities with gross unrealized losses and the length of time that individual securities have been in a continuous unrealized loss position as of September 30, 2013 and December 31, 2012:

 

    2013 2012
    Less than 12 months 12 months or more Less than 12 months 12 months or more
        Gross     Gross     Gross     Gross
     Estimated Unrealized Estimated Unrealized  Estimated Unrealized Estimated Unrealized
Description of Securities (Millions)  Fair Value Losses Fair Value Losses  Fair Value Losses Fair Value Losses
State and municipal obligations  $ 1,274 $ (57) $ 68 $ (10) $ 100 $ (1) $ 73 $ (4)
Foreign government bonds and                         
 obligations    52   (1)   ―   ―   ―   ―   ―   ―
Other    21   (1)   17   (1)   ―   ―   ―   ―
Total  $ 1,347 $ (59) $ 85 $ (11) $ 100 $ (1) $ 73 $ (4)

The following table summarizes the gross unrealized losses due to temporary impairments by ratio of fair value to amortized cost as of September 30, 2013 and December 31, 2012:

 

  Less than 12 months 12 months or more Total
Ratio of Fair Value to       Gross       Gross       Gross
Amortized Cost Number of Estimated Unrealized Number of Estimated Unrealized Number of Estimated Unrealized
(Dollars in millions) Securities Fair Value Losses Securities Fair Value Losses Securities Fair Value Losses
2013:                        
90%–100% 180 $1,231 $ (42)  4 $ 27 $ (2)  184 $ 1,258 $ (44)
Less than 90% 15  116   (17)  4   58   (9)  19   174   (26)
Total as of September 30, 2013 195 $1,347 $ (59)  8 $ 85 $ (11)  203 $ 1,432 $ (70)
                          
2012:                        
90%–100% 46 $100 $(1) 4 $73 $(4) 50 $173 $(5)
Total as of December 31, 2012 46 $100 $(1) 4 $73 $(4) 50 $173 $(5)

The gross unrealized losses are attributed to overall wider credit spreads for state and municipal securities, wider credit spreads for specific issuers, adverse changes in market benchmark interest rates, or a combination thereof, all as compared to those prevailing when the investment securities were acquired.

 

Overall, for the investment securities in gross unrealized loss positions identified above, (i) the Company does not intend to sell the investment securities, (ii) it is more likely than not that the Company will not be required to sell the investment securities before recovery of the unrealized losses, and (iii) the Company expects that the contractual principal and interest will be received on the investment securities. As a result, the Company recognized no other-than-temporary impairment during the nine months ended September 30, 2013 or the year ended December 31, 2012.

 

Supplemental Information

Gross realized gains on the sales of investment securities, included in other non-interest revenues, for the three and nine months ended September 30, 2013 were $37 million and $102 million, respectively. Gross realized gains on the sales of investment securities, included in other non-interest revenues, for the three and nine months ended September 30, 2012 were $35 million and $85 million, respectively. There were no gross realized losses on sales of investment securities for the three and nine months ended September 30, 2013. Gross realized losses on sales of investment securities, included in other non-interest revenues, for the three and nine months ended September 30, 2012 were nil and $1 million, respectively.

 

Contractual maturities of investment securities, excluding equity securities and other securities, as of September 30, 2013 were as follows:

       Estimated
(Millions) Cost  Fair Value
Due within 1 year $ 571 $ 571
Due after 1 year but within 5 years   337   345
Due after 5 years but within 10 years   159   166
Due after 10 years   3,838   3,839
Total $ 4,905 $ 4,921

The expected payments on state and municipal obligations and mortgage-backed securities may not coincide with their contractual maturities because the issuers have the right to call or prepay certain obligations.