Investment Securities

12 Months Ended

Dec. 31, 2017

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 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:

	2017								2016									2015
Description of Securities (Millions)		Cost	Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value			Cost	Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value			Cost	Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
State and municipal obligations	$	1,369	$	11	$	(3)	$	1,377	$	2,019	$	28	$	(11)	$	2,036	$	2,813	$	85	$	(5)	$	2,893
U.S. Government agency obligations		11		―		―		11		12		―		―		12		2		―		―		2
U.S. Government treasury obligations		1,051		3		(9)		1,045		465		3		(8)		460		406		4		(1)		409
Corporate debt securities		28		―		―		28		19		―		―		19		29		1		―		30
Mortgage-backed securities ^(a)		67		2		―		69		92		3		―		95		117		4		―		121
Foreign government bonds and obligations		581		―		―		581		486		1		(1)		486		250		6		(1)		255
Equity securities ^(b)		51		―		(3)		48		51		―		(2)		49		51		―		(2)		49
Total	$	3,158	$	16	$	(15)	$	3,159	$	3,144	$	35	$	(22)	$	3,157	$	3,668	$	100	$	(9)	$	3,759

Represents mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
Equity securities comprise investments in common stock and 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:

	2017								2016
	Less than 12 months				12 months or more				Less than 12 months				12 months or more
Description of Securities (Millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
State and municipal obligations	$	157	$	(3)	$	―	$	―	$	153	$	(11)	$	―	$	―
U.S. Government treasury obligations		650		(3)		175		(6)		298		(8)		―		―
Equity securities		―		―		36		(2)		―		―		32		(2)
Total	$	807	$	(6)	$	211	$	(8)	$	451	$	(19)	$	32	$	(2)

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
Ratio of Fair Value to Amortized Cost (Dollars in millions)	Number of Securities	Estimated Fair Value		Gross Unrealized Losses		Number of Securities	Estimated Fair Value		Gross Unrealized Losses		Number of Securities	Estimated Fair Value		Gross Unrealized Losses
2017:
90%–100%	34	$	807	$	(6)	13	$	211	$	(8)	47	$	1,018	$	(14)
Total as of December 31, 2017	34	$	807	$	(6)	13	$	211	$	(8)	47	$	1,018	$	(14)
2016:
90%–100%	33	$	411	$	(13)	6	$	32	$	(2)	39	$	443	$	(15)
Less than 90%	4		40		(6)	―		―		―	4		40		(6)
Total as of December 31, 2016	37	$	451	$	(19)	6	$	32	$	(2)	43	$	483	$	(21)

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

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, 2017 were as follows:

(Millions)	Due within 1 year			Due after 1 year but within 5 years			Due after 5 years but within 10 years			Due after 10 years				Total
State and municipal obligations^(a)	$	18		$	87		$	98		$	1,174		$	1,377
U.S. Government agency obligations		―			―			―			11			11
U.S. Government treasury obligations		30			879			125			11			1,045
Corporate debt securities		4			24			―			―			28
Mortgage-backed securities^(a)		―			―			―			69			69
Foreign government bonds and obligations		573			4			―			4			581
Total Estimated Fair Value	$	625		$	994		$	223		$	1,269		$	3,111

Total Cost	$	625		$	1,000		$	222		$	1,260		$	3,107
Weighted average yields^(b)		3.65	%		1.95	%		4.39	%		4.47	%		3.49	%

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. Effective January 1, 2018, the U.S. federal statutory tax rate was reduced to 21 percent. Refer to Note 21 for additional information.