Wells Fargo 2013 Annual Report Download - page 49

primarily collateralized by auto loans and leases, where our
intent is to hold these securities to maturity and collect the
contractual cash flows. The held-to-maturity portfolio may also
provide yield enhancement over short-term assets.
We analyze securities for OTTI quarterly or more often if a
potential loss-triggering event occurs. Of the $344 million in
OTTI write-downs recognized in 2013, $158 million related to
debt securities and $25 million related to marketable equity
securities, which are each included in available-for-sale
securities. Another $161 million in OTTI write-downs is related
to nonmarketable equity investments, which are included in
other assets. For a discussion of our OTTI accounting policies
and underlying considerations and analysis see Note 1
(Summary of Significant Accounting Policies – Investments) and
Note 5 (Investment Securities) to Financial Statements in this
Report.
At December 31, 2013, investment securities included
$42.5 billion of municipal bonds, of which 86% were rated “A-”
or better based predominantly on external and, in some cases,
internal ratings. Additionally, some of the securities in our total
municipal bond portfolio are guaranteed against loss by bond
insurers. These guaranteed bonds are predominantly investment
grade and were generally underwritten in accordance with our
own investment standards prior to the determination to
purchase, without relying on the bond insurer’s guarantee in
making the investment decision. Our municipal bond holdings
are monitored as part of our ongoing impairment analysis.
The weighted-average expected maturity of debt securities
available-for-sale was 7.5 years at December 31, 2013. Because
60% of this portfolio is MBS, the expected remaining maturity is
shorter than the remaining contractual maturity because
borrowers generally have the right to prepay obligations before
the underlying mortgages mature. The estimated effects of a
200 basis point increase or decrease in interest rates on the fair
value and the expected remaining maturity of the MBS available-
for-sale are shown in Table 11.
Table 11: Mortgage-Backed Securities
(in billions)
Fair
value
Net
unrealized
gain (loss)
Expected
remaining
maturity
(in years)
At December 31, 2013
Actual $ 148.8 0.7 6.4
Assuming a 200 basis point:
Increase in interest rates 133.7 (14.4) 7.5
Decrease in interest rates 159.1 11.0 3.6
See Note 5 (Investment Securities) to Financial Statements in
this Report for a summary of investment securities by security
type.
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