Citibank 2013 Annual Report Download - page 223

205
Securities Available-for-Sale
The amortized cost and fair value of AFS securities at December 31, 2013 and 2012 were as follows:
2013 2012
In millions of dollars
Amortized
cost
Gross
unrealized
gains (1)
Gross
unrealized
losses (1)
Fair
value
Amortized
cost
Gross
unrealized
gains (1)
Gross
unrealized
losses (1)
Fair
value
Debt securities AFS
Mortgage-backed securities (2)
U.S. government-sponsored agency guaranteed $ 42,494 $ 391 $ 888 $ 41,997 $ 46,001 $ 1,507 $ 163 $ 47,345
Prime 33 2 3 32 85 1 — 86
Alt-A 84 10 — 94 1 — — 1
Subprime 12 — — 12 — — — —
Non-U.S. residential 9,976 95 4 10,067 7,442 148 — 7,590
Commercial 455 6 8 453 436 16 3 449
Total mortgage-backed securities $ 53,054 $ 504 $ 903 $ 52,655 $ 53,965 $ 1,672 $ 166 $ 55,471
U.S. Treasury and federal agency securities
U.S. Treasury $ 68,891 $ 476 $ 147 $ 69,220 $ 64,667 $ 943 $ 16 $ 65,594
Agency obligations 18,320 123 67 18,376 26,014 237 4 26,247
Total U.S. Treasury and federal agency securities $ 87,211 $ 599 $ 214 $ 87,596 $ 90,681 $ 1,180 $ 20 $ 91,841
State and municipal (3) $ 20,761 $ 184 $ 2,005 $ 18,940 $ 20,020 $ 132 $ 1,820 $ 18,332
Foreign government 96,745 403 677 96,471 93,298 903 154 94,047
Corporate 11,039 210 119 11,130 9,302 398 26 9,674
Asset-backed securities (2) 15,352 42 120 15,274 14,188 85 143 14,130
Other debt securities 710 1 — 711 256 2 — 258
Total debt securities AFS $284,872 $1,943 $4,038 $282,777 $281,710 $ 4,372 $ 2,329 $283,753
Marketable equity securities AFS $ 3,832 $ 85 $ 183 $ 3,734 $ 4,643 $ 444 $ 145 $ 4,942
Total securities AFS $288,704 $2,028 $4,221 $286,511 $286,353 $ 4,816 $ 2,474 $288,695
(1) Gross unrealized gains and losses, as presented, do not include the impact of minority investments and the related allocations and pick-up of unrealized gains and losses of AFS securities. These amounts totaled
$36 million and $32 million of unrealized gains as of December 31, 2013 and 2012, respectively.
(2) The Company invests in mortgage-backed and asset-backed securities. These securitizations are generally considered VIEs. The Company’s maximum exposure to loss from these VIEs is equal to the carrying amount
of the securities, which is reflected in the table above. For mortgage-backed and asset-backed securitizations in which the Company has other involvement, see Note 22 to the Consolidated Financial Statements.
(3) The unrealized losses on state and municipal debt securities are primarily attributable to the effects of fair value hedge accounting. Specifically, Citi hedges the LIBOR-benchmark interest rate component of certain
fixed-rate tax-exempt state and municipal debt securities utilizing LIBOR-based interest rate swaps. During the hedge period, losses incurred on the LIBOR-hedging swaps recorded in earnings were substantially offset
by gains on the state and municipal debt securities attributable to changes in the LIBOR Swap Rate being hedged. However, because the LIBOR Swap Rate decreased significantly during the hedge period while the
overall fair value of the municipal debt securities was relatively unchanged, the effect of reclassifying fair value gains on these securities from Accumulated other comprehensive income (AOCI) to earnings, attributable
solely to changes in the LIBOR Swap Rate, resulted in net unrealized losses remaining in AOCI that relate to the unhedged components of these securities.
At December 31, 2013, the amortized cost of approximately 6,300
investments in equity and fixed income securities exceeded their fair value
by $4,221 million. Of the $4,221 million, the gross unrealized loss on equity
securities was $183 million. Of the remainder, $1,553 million represented
unrealized loss on fixed-income investments that have been in a gross-
unrealized-loss position for less than a year and, of these, 98% were rated
investment grade; $2,485 million represents unrealized loss on fixed-income
investments that have been in a gross-unrealized-loss position for a year or
more and, of these, 96% were rated investment grade.
At December 31, 2013, the AFS mortgage-backed securities portfolio
fair value balance of $52,655 million consisted of $41,997 million of
government-sponsored agency securities, and $10,658 million of privately
sponsored securities, substantially all of which were backed by non-U.S.
residential mortgages.
As discussed in more detail below, the Company conducts and documents
periodic reviews of all securities with unrealized losses to evaluate whether
the impairment is other-than-temporary. Any credit-related impairment
related to debt securities that the Company does not plan to sell and is not
likely to be required to sell is recognized in the Consolidated Statement of
Income, with the non-credit-related impairment recognized in AOCI. For
other debt securities with OTTI, the entire impairment is recognized in the
Consolidated Statement of Income.