Quarterly report pursuant to Section 13 or 15(d)

Securities (Tables)

v2.3.0.15
Securities (Tables)
 9 Months Ended
Sep. 30, 2011
Schedule of Available-for-sale Securities [Line Items]  
Amortized cost, gross unrealized gains and losses in accumulated OCI and fair value of AFS debt and marketable equity securities
The table below presents the amortized cost, gross unrealized gains and losses in accumulated OCI, and fair value of AFS debt and marketable equity securities at September 30, 2011 and December 31, 2010.

(Dollars in millions)
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
Available-for-sale debt securities, September 30, 2011
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
59,905

 
$
874

 
$
(748
)
 
$
60,031

Mortgage-backed securities:
 
 
 
 
 
 
 
Agency
155,008

 
5,106

 
(35
)
 
160,079

Agency collateralized mortgage obligations
52,197

 
1,156

 
(115
)
 
53,238

Non-agency residential (1)
17,707

 
394

 
(507
)
 
17,594

Non-agency commercial
5,968

 
634

 
(3
)
 
6,599

Non-U.S. securities
4,914

 
61

 
(12
)
 
4,963

Corporate bonds
3,982

 
149

 
(15
)
 
4,116

Other taxable securities, substantially all asset-backed securities
12,444

 
51

 
(27
)
 
12,468

Total taxable securities
312,125

 
8,425

 
(1,462
)
 
319,088

Tax-exempt securities
5,299

 
16

 
(136
)
 
5,179

Total available-for-sale debt securities
$
317,424

 
$
8,441

 
$
(1,598
)
 
$
324,267

Available-for-sale marketable equity securities, September 30, 2011 (2)
$
3,880

 
$
2,715

 
$
(25
)
 
$
6,570

 
 
 
 
 
 
 
 
Available-for-sale debt securities, December 31, 2010
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
49,413

 
$
604

 
$
(912
)
 
$
49,105

Mortgage-backed securities:
 
 
 
 
 
 
 
Agency
190,409

 
3,048

 
(2,240
)
 
191,217

Agency collateralized mortgage obligations
36,639

 
401

 
(23
)
 
37,017

Non-agency residential (1)
23,458

 
588

 
(929
)
 
23,117

Non-agency commercial
6,167

 
686

 
(1
)
 
6,852

Non-U.S. securities
4,054

 
92

 
(7
)
 
4,139

Corporate bonds
5,157

 
144

 
(10
)
 
5,291

Other taxable securities, substantially all asset-backed securities
15,514

 
39

 
(161
)
 
15,392

Total taxable securities
330,811

 
5,602

 
(4,283
)
 
332,130

Tax-exempt securities
5,687

 
32

 
(222
)
 
5,497

Total available-for-sale debt securities
$
336,498

 
$
5,634

 
$
(4,505
)
 
$
337,627

Available-for-sale marketable equity securities, December 31, 2010 (2)
$
8,650

 
$
10,628

 
$
(13
)
 
$
19,265

(1) 
At September 30, 2011, includes approximately 89 percent prime bonds, nine percent Alt-A bonds and two percent subprime bonds. At December 31, 2010, includes approximately 90 percent prime bonds, eight percent Alt-A bonds and two percent subprime bonds.
(2) 
Classified in other assets on the Corporation’s Consolidated Balance Sheet.

Corporation recorded other-than-temporary impairment losses on AFS debt securities
Balances in the table below exclude $2 million and $6 million of unrealized gains recorded in accumulated OCI related to such securities for the three and nine months ended September 30, 2011 and $18 million and $82 million for the same periods in 2010.

 
Three Months Ended September 30, 2011
(Dollars in millions)
Non-agency
Residential
MBS
 
Non-agency
Commercial
MBS
 
Non-U.S.
Securities
 
Corporate
Bonds
 
Other
Taxable
Securities
 
Total
Total OTTI losses
$
(114
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
(114
)
OTTI losses recognized in accumulated OCI
29

 
—

 
—

 
—

 
—

 
29

Net impairment losses recognized in earnings
$
(85
)
 
$
—

 
$
—

 
$
—

 
$
—

 
$
(85
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2010
 
 
Total OTTI losses
$
(154
)
 
$
—

 
$
(2
)
 
$
—

 
$
—

 
$
(156
)
OTTI losses recognized in accumulated OCI
33

 
—

 
—

 
—

 
—

 
33

Net impairment losses recognized in earnings
$
(121
)
 
$
—

 
$
(2
)
 
$
—

 
$
—

 
$
(123
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2011
Total OTTI losses
$
(269
)
 
$
—

 
$
—

 
$
—

 
$
(2
)
 
$
(271
)
OTTI losses recognized in accumulated OCI
53

 
—

 
—

 
—

 
—

 
53

Net impairment losses recognized in earnings
$
(216
)
 
$
—

 
$
—

 
$
—

 
$
(2
)
 
$
(218
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30, 2010
Total OTTI losses
$
(925
)
 
$
(1
)
 
$
(213
)
 
$
(2
)
 
$
(475
)
 
$
(1,616
)
OTTI losses recognized in accumulated OCI
460

 
—

 
16

 
—

 
290

 
766

Net impairment losses recognized in earnings
$
(465
)
 
$
(1
)
 
$
(197
)
 
$
(2
)
 
$
(185
)
 
$
(850
)
Credit component recognized in earnings on debt securities for which a portion of the other than temporary impairment loss remains in OCI
The table below presents a rollforward of the credit losses recognized in earnings on debt securities that the Corporation does not have the intent to sell or will not more-likely-than-not be required to sell as of and for three and nine months ended September 30, 2011.

 
Three Months Ended September 30
 
Nine Months Ended September 30
(Dollars in millions)
2011
 
2010
 
2011
 
2010
Balance, beginning of period
$
930

 
$
2,854

 
$
2,148

 
$
3,155

Additions for credit losses recognized on debt securities that had no previous impairment losses
1

 
84

 
50

 
455

Additions for credit losses recognized on debt securities that had previously incurred impairment losses
12

 
39

 
96

 
395

Reductions for debt securities sold or intended to be sold
(672
)
 
(437
)
 
(2,023
)
 
(1,465
)
Balance, September 30
$
271

 
$
2,540

 
$
271

 
$
2,540

Significant assumptions used in the valuation of non-agency residential MBS
Significant assumptions used in the valuation of non-agency residential mortgage-backed securities (RMBS) were as follows at September 30, 2011.

 
 
 
Range (1)
 
Weighted-average
 
10th Percentile (2)
 
90th Percentile (2)
Annual prepayment speed
9.7
%
 
3.0
%
 
20.7
%
Loss severity
49.5

 
16.4

 
62.0

Life default rate
51.6

 
1.8

 
99.1

(1) 
Represents the range of inputs/assumptions based upon the underlying collateral.
(2) 
The value of a variable below which the indicated percentile of observations will fall.
Current fair value and associated gross unrealized losses on investments
The table below presents the fair value and the associated gross unrealized losses on AFS securities with gross unrealized losses at September 30, 2011 and December 31, 2010, and whether these securities have had gross unrealized losses for less than twelve months or for twelve months or longer.

 
Less than Twelve Months
 
Twelve Months or Longer
 
Total
(Dollars in millions)
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
 
Fair Value
 
Gross
Unrealized
Losses
Temporarily-impaired available-for-sale debt securities at September 30, 2011
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
642

 
$
(3
)
 
$
37,864

 
$
(745
)
 
$
38,506

 
$
(748
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
4,960

 
(25
)
 
1,273

 
(10
)
 
6,233

 
(35
)
Agency collateralized mortgage obligations
7,930

 
(82
)
 
1,027

 
(33
)
 
8,957

 
(115
)
Non-agency residential
2,799

 
(88
)
 
3,312

 
(341
)
 
6,111

 
(429
)
Non-agency commercial
42

 
(1
)
 
19

 
(2
)
 
61

 
(3
)
Non-U.S. securities
359

 
(10
)
 
102

 
(2
)
 
461

 
(12
)
Corporate bonds
389

 
(12
)
 
91

 
(3
)
 
480

 
(15
)
Other taxable securities
2,525

 
(8
)
 
3,789

 
(19
)
 
6,314

 
(27
)
Total taxable securities
19,646

 
(229
)
 
47,477

 
(1,155
)
 
67,123

 
(1,384
)
Tax-exempt securities
1,289

 
(27
)
 
3,504

 
(109
)
 
4,793

 
(136
)
Total temporarily-impaired available-for-sale debt securities
20,935

 
(256
)
 
50,981

 
(1,264
)
 
71,916

 
(1,520
)
Temporarily-impaired available-for-sale marketable equity securities
43

 
(9
)
 
22

 
(16
)
 
65

 
(25
)
Total temporarily-impaired available-for-sale securities
20,978

 
(265
)
 
51,003

 
(1,280
)
 
71,981

 
(1,545
)
Other-than-temporarily impaired available-for-sale debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential
281

 
(43
)
 
393

 
(35
)
 
674

 
(78
)
Total temporarily-impaired and other-than-temporarily impaired available-for-sale securities (2)
$
21,259

 
$
(308
)
 
$
51,396

 
$
(1,315
)
 
$
72,655

 
$
(1,623
)
 
 
 
 
 
 
 
 
 
 
 
 
Temporarily-impaired available-for-sale debt securities at December 31, 2010
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
27,384

 
$
(763
)
 
2,382

 
(149
)
 
$
29,766

 
$
(912
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Agency
85,517

 
(2,240
)
 
—

 
—

 
85,517

 
(2,240
)
Agency collateralized mortgage obligations
3,220

 
(23
)
 
—

 
—

 
3,220

 
(23
)
Non-agency residential
6,385

 
(205
)
 
2,245

 
(274
)
 
8,630

 
(479
)
Non-agency commercial
47

 
(1
)
 
—

 
—

 
47

 
(1
)
Non-U.S. securities
—

 
—

 
70

 
(7
)
 
70

 
(7
)
Corporate bonds
465

 
(9
)
 
22

 
(1
)
 
487

 
(10
)
Other taxable securities
3,414

 
(38
)
 
46

 
(7
)
 
3,460

 
(45
)
Total taxable securities
126,432

 
(3,279
)
 
4,765

 
(438
)
 
131,197

 
(3,717
)
Tax-exempt securities
2,325

 
(95
)
 
568

 
(119
)
 
2,893

 
(214
)
Total temporarily-impaired available-for-sale debt securities
128,757

 
(3,374
)
 
5,333

 
(557
)
 
134,090

 
(3,931
)
Temporarily-impaired available-for-sale marketable equity securities
7

 
(2
)
 
19

 
(11
)
 
26

 
(13
)
Total temporarily-impaired available-for-sale securities
128,764

 
(3,376
)
 
5,352

 
(568
)
 
134,116

 
(3,944
)
Other-than-temporarily impaired available-for-sale debt securities (1)
 
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Non-agency residential
128

 
(11
)
 
530

 
(439
)
 
658

 
(450
)
Other taxable securities
—

 
—

 
223

 
(116
)
 
223

 
(116
)
Tax-exempt securities
68

 
(8
)
 
—

 
—

 
68

 
(8
)
Total temporarily-impaired and other-than-temporarily impaired available-for-sale securities (2)
$
128,960

 
$
(3,395
)
 
$
6,105

 
$
(1,123
)
 
$
135,065

 
$
(4,518
)
(1) 
Includes AFS debt securities on which OTTI losses were recognized and a portion of the OTTI loss was recorded as a credit loss in earnings and a portion as an unrealized loss in OCI.
(2) 
At September 30, 2011, the amortized cost of approximately 4,500 AFS securities exceeded their fair value by $1.6 billion. At December 31, 2010, the amortized cost of approximately 8,500 AFS securities exceeded their fair value by $4.5 billion.

Expected maturity distribution
The expected maturity distribution of the Corporation’s MBS and the contractual maturity distribution of the Corporation’s other AFS debt securities, and the yields on the Corporation’s AFS debt securities portfolio at September 30, 2011 are summarized in the table below. Actual maturities may differ from the contractual or expected maturities since borrowers may have the right to prepay obligations with or without prepayment penalties.

 
September 30, 2011
 
Due in One
Year or Less
 
Due after One Year
through Five Years
 
Due after Five
Years through Ten Years
 
Due after
Ten Years
 
Total
(Dollars in millions)
Amount
Yield (1)
 
Amount
Yield (1)
 
Amount
Yield (1)
 
Amount
Yield (1)
 
Amount
Yield (1)
Amortized cost of AFS debt securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
552

4.90
%
 
$
2,377

1.70
%
 
$
12,675

2.40
%
 
$
44,301

2.80
%
 
$
59,905

2.70
%
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 

 
Agency
90

3.50

 
53,639

3.60

 
47,509

3.90

 
53,770

3.40

 
155,008

3.60

Agency-collateralized mortgage obligations
58

0.70

 
36,243

2.30

 
15,839

4.10

 
57

1.00

 
52,197

2.80

Non-agency residential
3,573

4.50

 
11,142

5.30

 
2,184

5.20

 
808

5.20

 
17,707

5.10

Non-agency commercial
449

4.30

 
5,239

6.60

 
66

6.90

 
214

6.70

 
5,968

6.50

Non-U.S. securities
2,625

0.50

 
2,109

4.90

 
180

2.60

 
—

—

 
4,914

4.70

Corporate bonds
255

3.80

 
2,449

1.80

 
1,125

2.50

 
153

1.00

 
3,982

2.00

Other taxable securities
2,248

1.20

 
6,444

1.20

 
2,200

1.70

 
1,552

1.00

 
12,444

1.50

Total taxable securities
9,850

2.64

 
119,642

3.31

 
81,778

3.66

 
100,855

3.12

 
312,125

3.35

Tax-exempt securities
98

4.80

 
915

4.50

 
782

4.50

 
3,504

0.30

 
5,299

1.73

Total amortized cost of AFS debt securities
$
9,948

2.67

 
$
120,557

3.32

 
$
82,560

3.67

 
$
104,359

3.02

 
$
317,424

3.32

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of AFS debt securities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
$
554

 
 
$
2,438

 
 
$
13,178

 
 
$
43,861

 
 
$
60,031

 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Agency
92

 
 
55,292

 
 
49,723

 
 
54,972

 
 
160,079

 
Agency-collateralized mortgage obligations
58

 
 
36,625

 
 
16,497

 
 
58

 
 
53,238

 
Non-agency residential
3,562

 
 
11,153

 
 
2,115

 
 
764

 
 
17,594

 
Non-agency commercial
451

 
 
5,838

 
 
68

 
 
242

 
 
6,599

 
Non-U.S. securities
2,552

 
 
2,226

 
 
185

 
 
—

 
 
4,963

 
Corporate bonds
258

 
 
2,515

 
 
1,192

 
 
151

 
 
4,116

 
Other taxable securities
2,250

 
 
6,931

 
 
1,731

 
 
1,556

 
 
12,468

 
Total taxable securities
9,777

 
 
123,018

 
 
84,689

 
 
101,604

 
 
319,088

 
Tax-exempt securities
99

 
 
909

 
 
780

 
 
3,391

 
 
5,179

 
Total fair value of AFS debt securities
$
9,876

 
 
$
123,927

 
 
$
85,469

 
 
$
104,995

 
 
$
324,267

 
(1) 
Average yield is computed using the effective yield of each security at the end of the period, weighted based on the amortized cost of each security. The effective yield considers the contractual coupon, amortization of premiums and accretion of discounts and excludes the effect of related hedging derivatives.

Components of realized gains and losses on sales of debt securities
The gross realized gains and losses on sales of debt securities for the three and nine months ended September 30, 2011 and 2010 are presented in the table below.

 
Three Months Ended September 30
 
Nine Months Ended September 30
(Dollars in millions)
2011
 
2010
 
2011
 
2010
Gross gains
$
745

 
$
990

 
$
2,200

 
$
2,838

Gross losses
(8
)
 
(107
)
 
(18
)
 
(1,184
)
Net gains on sales of debt securities
$
737

 
$
883

 
$
2,182

 
$
1,654

Income tax expense attributable to realized net gains on sales of debt securities
$
273

 
$
327

 
$
807

 
$
612

Us Treasury And Agency Securities Member
  
Schedule of Available-for-sale Securities [Line Items]  
Amortized cost, gross unrealized gains and losses in accumulated OCI and fair value of AFS debt and marketable equity securities
The amortized cost and fair value of the Corporation’s investment in AFS and held-to-maturity debt securities from Fannie Mae (FNMA), the Government National Mortgage Association (GNMA), Freddie Mac (FHLMC) and U.S. Treasury securities where the investment exceeded 10 percent of consolidated shareholders’ equity at September 30, 2011 and December 31, 2010 are presented in the table below.

 
September 30, 2011
 
December 31, 2010
(Dollars in millions)
Amortized
Cost
 
Fair
Value
 
Amortized
Cost
 
Fair
Value
Fannie Mae
$
112,836

 
$
115,155

 
$
123,662

 
$
123,107

Government National Mortgage Association
92,696

 
95,944

 
72,863

 
74,305

Freddie Mac
27,822

 
28,366

 
30,523

 
30,822

U.S Treasury Securities
56,480

 
56,391

 
46,576

 
46,081