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Investment Securities
 6 Months Ended
Jun. 30, 2012
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 Accumulated Other Comprehensive Income (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 June 30, 2012 and December 31, 2011:

   2012 2011
       Gross  Gross  Estimated     Gross  Gross  Estimated
      Unrealized Unrealized  Fair   Unrealized Unrealized  Fair
(Millions)  Cost Gains Losses  Value Cost Gains Losses  Value
State and municipal obligations $ 4,643 $ 157 $ (21) $ 4,779 $ 4,968 $ 103 $ (72) $ 4,999
U.S. Government agency                         
 obligations   3   ―   ―   3   352   2   ―   354
U.S. Government treasury                         
 obligations   330   9   ―   339   330   10   ―   340
Corporate debt securities(a)   471   5   (2)   474   626   9   (3)   632
Mortgage-backed securities(b)   241   17   ―   258   261   17   ―   278
Equity securities(c)   81   209   ―   290   95   265   ―   360
Foreign government bonds and                         
 obligations   118   12   ―   130   120   10   ―   130
Other(d)   52   1   ―   53   54   ―   ―   54
Total $ 5,939 $ 410 $ (23) $ 6,326 $6,806 $416 $(75) $7,147

(a)        The June 30, 2012 and December 31, 2011 balances include, on a cost basis, $400 million and $550 million, respectively, of corporate debt obligations issued under the Temporary Liquidity Guarantee Program that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).

(b)        Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.

(c)        Primarily represents the Company's investment in the Industrial and Commercial Bank of China (ICBC).

(d) 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 June 30, 2012 and December 31, 2011:

  2012 2011
  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 $ 96 $ (1) $ 351 $ (20) $ ― $ ― $ 1,094 $ (72)
Corporate debt securities   15   (1)   3   (1)   15   (2)   2   (1)
Total $ 111 $ (2) $ 354 $ (21) $15 $(2) $1,096 $(73)

The following table summarizes the gross unrealized losses due to temporary impairments by ratio of fair value to amortized cost as of June 30, 2012 and December 31, 2011:

  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
2012:                        
90%–100%  15 $ 111 $ (2)  31 $ 281 $ (8)  46 $ 392 $ (10)
Less than 90%  ―   ―   ―  6   73   (13)  6   73   (13)
Total as of June 30, 2012  15 $ 111 $ (2)  37 $ 354 $ (21)  52 $ 465 $ (23)
2011:                        
90%–100%  ― $ ― $ ― 114 $884 $(35) 114 $884 $(35)
Less than 90% 1  15  (2) 22  212  (38) 23  227  (40)
Total as of December 31, 2011 1 $15 $(2) 136 $1,096 $(73) 137 $1,111 $(75)

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 six months ended June 30, 2012 or the year ended December 31, 2011.

 

Supplemental Information

Gross realized gains on sales of investment securities, included in other non-interest revenues for the three and six months ended June 30, 2012, were $26 million and $52 million, respectively (there were no gross realized gains for the three and six months ended June 30, 2011). Gross realized losses on sales of investment securities, included in other non-interest revenues for both the three and six months ended June 30, 2012, were $1 million (there were no gross realized losses for the three and six months ended June 30, 2011).

 

Contractual maturities of investment securities, excluding equity securities and other securities, as of June 30, 2012 were as follows:

       Estimated
(Millions) Cost  Fair Value
Due within 1 year $ 545 $ 549
Due after 1 year but within 5 years   358   366
Due after 5 years but within 10 years   176   187
Due after 10 years   4,727   4,881
Total $ 5,806 $ 5,983

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.