Investment Securities

12 Months Ended

Dec. 31, 2014

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Investment Securities

NOTE 5

Investment Securities

Investment securities include debt and equity securities that the Company classifies 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 15 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 December 31:

	2014								2013									2012
			Gross		Gross		Estimated				Gross		Gross		Estimated		Estimated
			Unrealized		Unrealized		Fair				Unrealized		Unrealized		Fair			Fair
Description of Securities (Millions)		Cost	Gains		Losses		Value			Cost	Gains		Losses		Value			Value
State and municipal obligations	$	3,366	$	129	$	(2)	$	3,493	$	4,060	$	54	$	(79)	$	4,035	$	4,474
U.S. Government agency obligations		3		―		―		3		3		―		―		3		3
U.S. Government treasury obligations		346		4		―		350		318		3		(1)		320		338
Corporate debt securities		37		3		―		40		43		3		―		46		79
Mortgage-backed securities(a)		128		8		―		136		160		5		(1)		164		224
Equity securities(b)		―		1		―		1		29		95		―		124		296
Foreign government bonds and obligations		350		9		―		359		272		5		(1)		276		149
Other(c)		50		―		(1)		49		50		―		(2)		48		51
Total	$	4,280	$	154	$	(3)	$	4,431	$	4,935	$	165	$	(84)	$	5,016	$	5,614

• Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
• Primarily represents the Company’s investment in the Industrial and Commercial Bank of China (ICBC) as of December 31, 2013 and 2012.
• 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 December 31:

	2014								2013
	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	$	―	$	―	$	72	$	(2)	$	1,320	$	(63)	$	106	$	(16)
Foreign government bonds and obligations		―		―		―		―		208		(1)		―		―
U.S. Government treasury obligations		―		―		―		―		166		(1)		―		―
Mortgage-backed securities		―		―		―		―		35		(1)		―		―
Other		―		―		33		(1)		30		(1)		17		(1)
Total	$	―	$	―	$	105	$	(3)	$	1,759	$	(67)	$	123	$	(17)

The following table summarizes the gross unrealized losses due to temporary impairments by ratio of fair value to amortized cost as of December 31:

	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
2014:
90%–100%	―	$	―	$	―	15	$	105	$	(3)	15	$	105	$	(3)
Total as of December 31, 2014	―	$	―	$	―	15	$	105	$	(3)	15	$	105	$	(3)
2013:
90%–100%	228	$	1,665	$	(53)	6	$	24	$	(2)	234	$	1,689	$	(55)
Less than 90%	13		94		(14)	5		99		(15)	18		193		(29)
Total as of December 31, 2013	241	$	1,759	$	(67)	11	$	123	$	(17)	252	$	1,882	$	(84)

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 periods presented.

Supplemental Information

Contractual maturities and weighted average yieldsfor investment securities, excluding equity securities and other securities, as of December 31,2014were as follows:

				Due after 1			Due after 5
		Due within		year but			years but			Due after
(Millions)	1 year			within 5 years			within 10 years			10 years				Total
State and municipal obligations(a)	$	182		$	74		$	233		$	3,004		$	3,493
U.S. Government agency obligations		―			―			―			3			3
U.S. Government treasury obligations		66			264			8			12			350
Corporate debt securities		6			34			―			―			40
Mortgage-backed securities(a)		―			2			―			134			136
Foreign government bonds and obligations		307			7			―			45			359
Total Estimated Fair Value	$	561		$	381		$	241		$	3,198			4,381
Total Cost	$	560		$	374		$	225		$	3,071			4,230
Weighted average yields(b)(c)		2.50	%		2.07	%		6.71	%		6.81	%

• 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.
• Average yields for investment securities have been calculated using the effective yield on the date of purchase.
• Yields on tax-exempt investment securities have been computed on a tax-equivalent basis using the U.S. federal statutory tax rate of 35 percent.