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Investment Securities
 3 Months Ended
Mar. 31, 2013
Investment 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 March 31, 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 $ 4,467 $ 190 $ (5) $ 4,652 $ 4,280 $ 199 $ (5) $ 4,474
U.S. Government agency obligations   3   ―   ―   3   3   ―   ―   3
U.S. Government treasury obligations   330   7   ―   337   330   8   ―   338
Corporate debt securities   39   5   ―   44   73   6   ―   79
Mortgage-backed securities(a)   190   12   ―   202   210   14   ―   224
Equity securities(b)   55   196   ―   251   64   232   ―   296
Foreign government bonds and                         
 obligations   242   11   ―   253   134   15   ―   149
Other(c)   51   ―   ―   51   51   ―   ―   51
Total $ 5,377 $ 421 $ (5) $ 5,793 $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 March 31, 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 $ 93 $ (2) $ 75 $ (3) $ 100 $ (1) $ 73 $ (4)
Total $ 93 $ (2) $ 75 $ (3) $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 March 31, 2013 and December 31, 2012:

  Less than 12 months 12 months or more Total
        Gross       Gross       Gross
Ratio of Fair Value to Number of Estimated Unrealized Number of Estimated Unrealized Number of Estimated Unrealized
Amortized Cost (Dollars in millions) Securities Fair Value Losses Securities Fair Value Losses Securities Fair Value Losses
2013:                        
90%–100%  22 $ 93 $ (2)  4 $ 75 $ (3)  26 $ 168 $ (5)
Total as of March 31, 2013  22 $ 93 $ (2)  4 $ 75 $ (3)  26 $ 168 $ (5)
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 three months ended March 31, 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, were $36 million and $24 million, for the three months ended March 31, 2013 and 2012, respectively. There were no gross realized losses for the three months ended March 31, 2013 and 2012.

 

Contractual maturities of investment securities, excluding equity securities and other securities, as of March 31, 2013 were as follows:

 

       Estimated
(Millions) Cost  Fair Value
Due within 1 year $ 478 $ 479
Due after 1 year but within 5 years   509   519
Due after 5 years but within 10 years   175   188
Due after 10 years   4,109   4,305
Total $ 5,271 $ 5,491

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.