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Investment Securities
 12 Months Ended
Dec. 31, 2016
Disclosure Text Block Abstract  
Investment Securities

NOTE 5

Investment Securities

Investment securities principally include debt securities the Company classifies as available-for-sale and carries at fair value on the Consolidated Balance Sheets, with unrealized gains and losses recorded in AOCI, net of income taxes. Realized gains and losses are recognized upon disposition of the securities using the specific identification method. Refer to Note 15 and Note 19 for a description of the Company’s methodology for determining the fair value of investment securities and gross realized gains on the sale of investment securities, respectively.

The following is a summary of investment securities as of December 31:

2016  2015  2014
Description of Securities (Millions)CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueCostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueCostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
State and municipal obligations $2,019  $28  $(11)$2,036  $2,813  $85  $(5)$2,893  $3,366  $129  $(2)$3,493
U.S. Government agency obligations 12  ―  ―12  2  ―  ―2  3  ―  ―3
U.S. Government treasury obligations 465  3  (8)460  406  4  (1)409  346  4  ―350
Corporate debt securities 19  ―  ―19  29  1  ―30  37  3  ―40
Mortgage-backed securities (a)92  3  ―95  117  4  ―121  128  8  ―136
Equity securities 1  ―  ―1  1  ―  ―1  ―  1  ―1
Foreign government bonds and obligations 486  1(1)486  250  6(1)255  350  9―359
Other (b)50  ―  (2)48  50  ―  (2)48  50  ―  (1)49
Total $3,144  $35  $(22)$3,157  $3,668  $100  $(9)$3,759  $4,280  $154  $(3)$4,431

  • Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
  • 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:

20162015
Less than 12 months12 months or moreLess than 12 months12 months or more
Description of Securities (Millions)Estimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized Losses
State and municipal obligations$153$(11)$―$―$100$(3)$13$(2)
U.S. Government treasury obligations298(8)――253(1)――
Foreign government bonds and obligations――――99(1)――
Other――32(2)――33(2)
Total$451$(19)$32$(2)$452$(5)$46$(4)

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 months12 months or moreTotal
Ratio of Fair Value to Amortized Cost (Dollars in millions)Number of SecuritiesEstimated Fair ValueGross Unrealized LossesNumber of SecuritiesEstimated Fair ValueGross Unrealized LossesNumber of SecuritiesEstimated Fair ValueGross Unrealized Losses
2016:
90%–100%33$411$(13)6$32$(2)39$443$(15)
Less than 90%440(6)―――440(6)
Total as of December 31, 201637$451$(19)6$32$(2)43$483$(21)
2015:
90%–100%52$450$(5)15$37$(2)67$487$(7)
Less than 90%―――29(2)29(2)
Total as of December 31, 201552$450$(5)17$46$(4)69$496$(9)

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 compared to those prevailing when the investment securities were acquired.

Overall, for the investment securities in gross unrealized loss positions, (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.

Weighted average yields and contractual maturities for investment securities with stated maturities as of December 31, 2016 were as follows:

(Millions)Due within 1 yearDue after 1 year but within 5 yearsDue after 5 years but within 10 years Due after 10 yearsTotal
State and municipal obligations(a)  $17  $92$274$1,653$2,036
U.S. Government agency obligations  ―  ――1212
U.S. Government treasury obligations  115  21012510460
Corporate debt securities19―――19
Mortgage-backed securities(a)―――9595
Foreign government bonds and obligations47112―3486
Total Estimated Fair Value  $622  $314$399$1,773$3,108
Total Cost$621  $317$394$1,761$3,093
Weighted average yields(b)2.90%2.04%5.25%4.71%4.16%

  • 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.