Citibank 2014 Annual Report Download - page 208

191
Securities Available-for-Sale
The amortized cost and fair value of AFS securities at December 31, 2014 and 2013 were as follows:
2014 2013
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 $ 35,647 $ 603 $ 159 $ 36,091 $ 42,494 $ 391 $ 888 $ 41,997
Prime 12 — — 12 33 2 3 32
Alt-A 43 1 — 44 84 10 — 94
Subprime — — — — 12 — — 12
Non-U.S. residential 8,247 67 7 8,307 9,976 95 4 10,067
Commercial 551 6 3 554 455 6 8 453
Total mortgage-backed securities $ 44,500 $ 677 $ 169 $ 45,008 $ 53,054 $ 504 $ 903 $ 52,655
U.S. Treasury and federal agency securities
U.S. Treasury $110,492 $ 353 $ 127 $110,718 $ 68,891 $ 476 $ 147 $ 69,220
Agency obligations 12,925 60 13 12,972 18,320 123 67 18,376
Total U.S. Treasury and federal agency securities $123,417 $ 413 $ 140 $123,690 $ 87,211 $ 599 $ 214 $ 87,596
State and municipal (3) $ 13,526 $ 150 $ 977 $ 12,699 $ 20,761 $ 184 $ 2,005 $ 18,940
Foreign government 90,249 734 286 90,697 96,608 403 540 96,471
Corporate 12,033 215 91 12,157 11,039 210 119 11,130
Asset-backed securities (2) 12,534 30 58 12,506 15,352 42 120 15,274
Other debt securities 661 — — 661 710 1 — 711
Total debt securities AFS $296,920 $2,219 $ 1,721 $297,418 $284,735 $ 1,943 $ 3,901 $282,777
Marketable equity securities AFS $ 2,461 $ 308 $ 44 $ 2,725 $ 3,832 $ 85 $ 183 $ 3,734
Total securities AFS $299,381 $ 2,527 $ 1,765 $300,143 $288,567 $ 2,028 $ 4,084 $286,511
(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
unrealized gains of $27 million and $36 million as of December 31, 2014 and 2013, 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 gross 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 (loss) (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, 2014, the amortized cost of approximately 7,600
investments in equity and fixed income securities exceeded their fair value by
$1,765 million. Of the $1,765 million, the gross unrealized losses on equity
securities were $44 million. Of the remainder, $400 million represented
unrealized losses on fixed income investments that have been in a gross-
unrealized-loss position for less than a year and, of these, 92% were rated
investment grade; $1,321 million represented unrealized losses on fixed
income investments that have been in a gross-unrealized-loss position for a
year or more and, of these, 95% were rated investment grade.
At December 31, 2014, the AFS mortgage-backed securities portfolio
fair value balance of $45,008 million consisted of $36,091 million of
government-sponsored agency securities, and $8,917 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 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 is recorded in earnings as OTTI. Non-credit-related impairment is
recognized in AOCI if the Company does not plan to sell and is not likely to
be required to sell. For other debt securities with OTTI, the entire impairment
is recognized in the Consolidated Statement of Income.