US Bank 2013 Annual Report Download - page 94

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At December 31, 2013, certain investment securities had a fair value below amortized cost. The following table shows the
gross unrealized losses and fair value of the Company’s investment securities with unrealized losses, aggregated by
investment category and length of time the individual investment securities have been in continuous unrealized loss positions,
at December 31, 2013:
Less Than 12 Months 12 Months or Greater Total
(Dollars in Millions) Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses Fair Value
Unrealized
Losses
Held-to-maturity
U.S. Treasury and agencies ................................. $ 1,085 $ (79) $ – $ – $ 1,085 $ (79)
Mortgage-backed securities
Residential agency ....................................... 23,922 (647) 373 (18) 24,295 (665)
Other asset-backed securities ............................... – – 10 (2) 10 (2)
Obligations of state and political subdivisions ............... 3–––3–
Other debt securities ........................................ – – 12 (11) 12 (11)
Total held-to-maturity ................................... $25,010 $(726) $ 395 $ (31) $25,405 $(757)
Available-for-sale
U.S. Treasury and agencies ................................. $ 849 $ (59) $ 93 $ (8) $ 942 $ (67)
Mortgage-backed securities
Residential
Agency ................................................. 14,015 (484) 1,056 (45) 15,071 (529)
Non-agency (a)
Prime (b) ............................................. 65 (1) 182 (11) 247 (12)
Non-prime (c) ........................................ 74 (1) 57 (4) 131 (5)
Other asset-backed securities ............................... 23 – 3 – 26 –
Obligations of state and political subdivisions ............... 1,479 (51) 10 – 1,489 (51)
Corporate debt securities ................................... 223 (5) 418 (89) 641 (94)
Perpetual preferred securities ............................... – – 116 (17) 116 (17)
Total available-for-sale ................................. $16,728 $(601) $1,935 $(174) $18,663 $(775)
(a) The Company has $17 million of unrealized losses on residential non-agency mortgage-backed securities. Credit-related other-than-temporary impairment on these securities may occur if there
is further deterioration in the underlying collateral pool performance. Borrower defaults may increase if economic conditions worsen. Additionally, deterioration in home prices may increase the
severity of projected losses.
(b) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on
asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and
security market spreads).
(c) Includes all securities not meeting the conditions to be designated as prime.
The Company does not consider these unrealized
losses to be credit-related. These unrealized losses primarily
relate to changes in interest rates and market spreads
subsequent to purchase. A substantial portion of investment
securities that have unrealized losses are either corporate
debt issued with high investment grade credit ratings or
agency mortgage-backed securities. In general, the issuers
of the investment securities are contractually prohibited from
prepayment at less than par, and the Company did not pay
significant purchase premiums for these investment
securities. At December 31, 2013, the Company had no
plans to sell investment securities with unrealized losses,
and believes it is more likely than not it would not be required
to sell such investment securities before recovery of their
amortized cost.
92 U.S. BANCORP