| Securities |
The table below presents the amortized cost, gross unrealized gains and losses, and fair value of debt and marketable equity securities at June 30, 2012 and December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2012 |
(Dollars in millions) |
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value |
Available-for-sale debt securities |
|
|
|
|
|
|
|
U.S. Treasury and agency securities |
$ |
30,034 |
|
|
$ |
237 |
|
|
$ |
(440 |
) |
|
$ |
29,831 |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
Agency |
189,167 |
|
|
5,075 |
|
|
(51 |
) |
|
194,191 |
|
Agency collateralized mortgage obligations |
38,553 |
|
|
752 |
|
|
(156 |
) |
|
39,149 |
|
Non-agency residential (1)
|
10,514 |
|
|
256 |
|
|
(255 |
) |
|
10,515 |
|
Non-agency commercial |
3,751 |
|
|
376 |
|
|
— |
|
|
4,127 |
|
Non-U.S. securities |
5,736 |
|
|
37 |
|
|
(8 |
) |
|
5,765 |
|
Corporate bonds |
2,073 |
|
|
75 |
|
|
(26 |
) |
|
2,122 |
|
Other taxable securities, substantially all asset-backed securities |
11,494 |
|
|
68 |
|
|
(40 |
) |
|
11,522 |
|
Total taxable securities |
291,322 |
|
|
6,876 |
|
|
(976 |
) |
|
297,222 |
|
Tax-exempt securities |
2,862 |
|
|
17 |
|
|
(52 |
) |
|
2,827 |
|
Total available-for-sale debt securities |
$ |
294,184 |
|
|
$ |
6,893 |
|
|
$ |
(1,028 |
) |
|
$ |
300,049 |
|
Held-to-maturity debt securities (2)
|
35,168 |
|
|
826 |
|
|
— |
|
|
35,994 |
|
Total debt securities |
$ |
329,352 |
|
|
$ |
7,719 |
|
|
$ |
(1,028 |
) |
|
$ |
336,043 |
|
Available-for-sale marketable equity securities (3)
|
$ |
62 |
|
|
$ |
27 |
|
|
$ |
(6 |
) |
|
$ |
83 |
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
Available-for-sale debt securities |
|
|
|
|
|
|
|
U.S. Treasury and agency securities |
$ |
43,433 |
|
|
$ |
242 |
|
|
$ |
(811 |
) |
|
$ |
42,864 |
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
Agency |
138,073 |
|
|
4,511 |
|
|
(21 |
) |
|
142,563 |
|
Agency collateralized mortgage obligations |
44,392 |
|
|
774 |
|
|
(167 |
) |
|
44,999 |
|
Non-agency residential (1)
|
14,948 |
|
|
301 |
|
|
(482 |
) |
|
14,767 |
|
Non-agency commercial |
4,894 |
|
|
629 |
|
|
(1 |
) |
|
5,522 |
|
Non-U.S. securities |
4,872 |
|
|
62 |
|
|
(14 |
) |
|
4,920 |
|
Corporate bonds |
2,993 |
|
|
79 |
|
|
(37 |
) |
|
3,035 |
|
Other taxable securities, substantially all asset-backed securities |
12,889 |
|
|
49 |
|
|
(60 |
) |
|
12,878 |
|
Total taxable securities |
266,494 |
|
|
6,647 |
|
|
(1,593 |
) |
|
271,548 |
|
Tax-exempt securities |
4,678 |
|
|
15 |
|
|
(90 |
) |
|
4,603 |
|
Total available-for-sale debt securities |
$ |
271,172 |
|
|
$ |
6,662 |
|
|
$ |
(1,683 |
) |
|
$ |
276,151 |
|
Held-to-maturity debt securities (2)
|
35,265 |
|
|
181 |
|
|
(4 |
) |
|
35,442 |
|
Total debt securities |
$ |
306,437 |
|
|
$ |
6,843 |
|
|
$ |
(1,687 |
) |
|
$ |
311,593 |
|
Available-for-sale marketable equity securities (3)
|
$ |
65 |
|
|
$ |
10 |
|
|
$ |
(7 |
) |
|
$ |
68 |
|
|
|
(1) |
At June 30, 2012, includes approximately 92 percent prime bonds, six percent Alt-A bonds and two percent subprime bonds. At December 31, 2011, includes approximately 89 percent prime bonds, nine percent Alt-A bonds and two percent subprime bonds.
|
|
|
(2) |
Substantially all U.S. agency mortgage-backed securities. |
|
|
(3) |
Classified in other assets on the Corporation’s Consolidated Balance Sheet. |
At June 30, 2012, the accumulated net unrealized gains on available-for-sale (AFS) debt securities included in accumulated OCI were $3.7 billion, net of the related income tax expense of $2.2 billion. At June 30, 2012 and December 31, 2011, the Corporation had nonperforming AFS debt securities of $109 million and $140 million.
The Corporation recorded other-than-temporary impairment (OTTI) losses on AFS debt securities for the three and six months ended June 30, 2012 and 2011 as presented in the table below. A debt security is impaired when its fair value is less than its amortized cost. If the Corporation intends or will more-likely-than-not be required to sell the debt securities prior to recovery, the entire impairment is recorded in the Corporation's Consolidated Statement of Income. For debt securities the Corporation does not intend or will not more-likely-than-not be required to sell, an analysis is performed to determine if any of the impairment is due to credit or whether it is due to other factors (e.g., interest rate). Credit losses are considered unrecoverable and are recorded in the Corporation's Consolidated Statement of Income with the remaining unrealized losses recorded in accumulated OCI. In certain instances, the credit loss on a debt security may exceed the total impairment, in which case, the portion of the credit loss that exceeds the total impairment is recorded as an unrealized gain in accumulated OCI. Balances in the table below exclude $3 million for the six months ended June 30, 2012 of unrealized gains recorded in accumulated OCI related to these securities and $3 million and $10 million for the three and six months ended June 30, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Impairment Losses Recognized in Earnings |
|
Three Months Ended June 30, 2012 |
(Dollars in millions) |
Non-agency
Residential
MBS |
|
Non-agency
Commercial
MBS |
|
Non-U.S. Securities |
|
Other
Taxable
Securities |
|
Total |
Total OTTI losses (unrealized and realized) |
$ |
(9 |
) |
|
$ |
(4 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(13 |
) |
Unrealized OTTI losses recognized in accumulated OCI |
7 |
|
|
— |
|
|
— |
|
|
— |
|
|
7 |
|
Net impairment losses recognized in earnings |
$ |
(2 |
) |
|
$ |
(4 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2011 |
Total OTTI losses (unrealized and realized) |
$ |
(48 |
) |
|
$ |
— |
|
|
$ |
(12 |
) |
|
$ |
(3 |
) |
|
$ |
(63 |
) |
Unrealized OTTI losses recognized in accumulated OCI |
17 |
|
|
— |
|
|
— |
|
|
1 |
|
|
18 |
|
Net impairment losses recognized in earnings |
$ |
(31 |
) |
|
$ |
— |
|
|
$ |
(12 |
) |
|
$ |
(2 |
) |
|
$ |
(45 |
) |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2012 |
Total OTTI losses (unrealized and realized) |
$ |
(56 |
) |
|
$ |
(6 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(62 |
) |
Unrealized OTTI losses recognized in accumulated OCI |
16 |
|
|
— |
|
|
— |
|
|
— |
|
|
16 |
|
Net impairment losses recognized in earnings |
$ |
(40 |
) |
|
$ |
(6 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(46 |
) |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2011 |
Total OTTI losses (unrealized and realized) |
$ |
(142 |
) |
|
$ |
— |
|
|
$ |
(12 |
) |
|
$ |
(3 |
) |
|
$ |
(157 |
) |
Unrealized OTTI losses recognized in accumulated OCI |
23 |
|
|
— |
|
|
— |
|
|
1 |
|
|
24 |
|
Net impairment losses recognized in earnings |
$ |
(119 |
) |
|
$ |
— |
|
|
$ |
(12 |
) |
|
$ |
(2 |
) |
|
$ |
(133 |
) |
The Corporation's net impairment losses recognized in earnings consist of write-downs to fair value on AFS securities the Corporation has the intent to sell or will more-likely-than-not be required to sell and credit losses recognized on AFS securities the Corporation does not have the intent to sell or will not more-likely-than-not be required to sell. The table below presents a rollforward of the credit losses recognized in earnings on AFS debt securities for the three and six months ended June 30, 2012 and 2011 on securities that the Corporation does not have the intent to sell or will not more-likely-than-not be required to sell.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rollforward of Credit Losses Recognized |
|
|
|
|
|
Three Months Ended June 30 |
|
Six Months Ended June 30 |
(Dollars in millions) |
2012 |
|
2011 |
|
2012 |
|
2011 |
Balance, beginning of period |
$ |
266 |
|
|
$ |
884 |
|
|
$ |
310 |
|
|
$ |
2,135 |
|
Additions for credit losses recognized on debt securities that had no previous impairment losses |
4 |
|
|
16 |
|
|
6 |
|
|
49 |
|
Additions for credit losses recognized on debt securities that had previously incurred impairment losses |
2 |
|
|
29 |
|
|
40 |
|
|
84 |
|
Reductions for debt securities sold or intended to be sold |
(26 |
) |
|
(11 |
) |
|
(110 |
) |
|
(1,350 |
) |
Balance, June 30 |
$ |
246 |
|
|
$ |
918 |
|
|
$ |
246 |
|
|
$ |
918 |
|
The Corporation estimates the portion of a security's loss attributable to credit using a discounted cash flow model and estimates the expected cash flows of the underlying collateral using internal credit, interest rate and prepayment risk models that incorporate management’s best estimate of current key assumptions such as default rates, loss severity and prepayment rates. Assumptions used for the underlying loans that support the mortgage-backed securities (MBS) can vary widely from loan to loan and are influenced by such factors as loan interest rate, geographical location of the borrower, borrower characteristics and collateral type. Based on these assumptions, the Corporation then determines how the underlying collateral cash flows will be distributed to each MBS issued from the applicable special purpose entity. Expected principal and interest cash flows on an impaired AFS debt security are discounted using the effective yield of each individual impaired AFS debt security.
Significant assumptions used in estimating the expected cash flows for measuring credit losses on non-agency residential mortgage-backed securities (RMBS) were as follows at June 30, 2012.
|
|
|
|
|
|
|
Significant Assumptions |
|
|
|
Range (1)
|
|
Weighted-average |
|
10th Percentile (2)
|
|
90th Percentile (2)
|
Annual prepayment speed |
9.4% |
|
3.0% |
|
22.1% |
Loss severity |
51.7 |
|
25.0 |
|
65.3 |
Life default rate |
59.2 |
|
3.8 |
|
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. |
Annual constant prepayment speed and loss severity rates are projected considering collateral characteristics such as loan-to-value (LTV), creditworthiness of borrowers as measured using FICO scores and geographic concentrations. The weighted-average severity by collateral type was 46 percent for prime, 53 percent for Alt-A and 62 percent for subprime at June 30, 2012. Additionally, default rates are projected by considering collateral characteristics including, but not limited to LTV, FICO and geographic concentration. Weighted-average life default rates by collateral type were 46 percent for prime, 70 percent for Alt-A and 65 percent for subprime at June 30, 2012.
The table below presents the fair value and the associated gross unrealized losses on AFS securities with gross unrealized losses at June 30, 2012 and December 31, 2011, and whether these securities have had gross unrealized losses for less than twelve months or for twelve months or longer.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporarily Impaired and Other-than-temporarily Impaired Securities |
|
|
June 30, 2012 |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities |
$ |
254 |
|
|
$ |
(1 |
) |
|
$ |
26,163 |
|
|
$ |
(439 |
) |
|
$ |
26,417 |
|
|
$ |
(440 |
) |
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
Agency |
11,060 |
|
|
(45 |
) |
|
442 |
|
|
(6 |
) |
|
11,502 |
|
|
(51 |
) |
Agency collateralized mortgage obligations |
7,748 |
|
|
(112 |
) |
|
1,861 |
|
|
(44 |
) |
|
9,609 |
|
|
(156 |
) |
Non-agency residential |
1,581 |
|
|
(39 |
) |
|
2,148 |
|
|
(186 |
) |
|
3,729 |
|
|
(225 |
) |
Non-U.S. securities |
469 |
|
|
(3 |
) |
|
657 |
|
|
(5 |
) |
|
1,126 |
|
|
(8 |
) |
Corporate bonds |
222 |
|
|
(17 |
) |
|
103 |
|
|
(9 |
) |
|
325 |
|
|
(26 |
) |
Other taxable securities |
4,449 |
|
|
(14 |
) |
|
1,813 |
|
|
(26 |
) |
|
6,262 |
|
|
(40 |
) |
Total taxable securities |
25,783 |
|
|
(231 |
) |
|
33,187 |
|
|
(715 |
) |
|
58,970 |
|
|
(946 |
) |
Tax-exempt securities |
833 |
|
|
(8 |
) |
|
1,160 |
|
|
(44 |
) |
|
1,993 |
|
|
(52 |
) |
Total temporarily impaired available-for-sale debt securities |
26,616 |
|
|
(239 |
) |
|
34,347 |
|
|
(759 |
) |
|
60,963 |
|
|
(998 |
) |
Temporarily impaired available-for-sale marketable equity securities |
3 |
|
|
(1 |
) |
|
7 |
|
|
(5 |
) |
|
10 |
|
|
(6 |
) |
Total temporarily impaired available-for-sale securities |
26,619 |
|
|
(240 |
) |
|
34,354 |
|
|
(764 |
) |
|
60,973 |
|
|
(1,004 |
) |
Other-than-temporarily impaired available-for-sale debt securities (1)
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency residential mortgage-backed securities |
43 |
|
|
(7 |
) |
|
201 |
|
|
(23 |
) |
|
244 |
|
|
(30 |
) |
Total temporarily impaired and other-than-temporarily impaired available-for-sale securities (2)
|
$ |
26,662 |
|
|
$ |
(247 |
) |
|
$ |
34,555 |
|
|
$ |
(787 |
) |
|
$ |
61,217 |
|
|
$ |
(1,034 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011 |
Temporarily impaired available-for-sale debt securities |
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities |
$ |
— |
|
|
$ |
— |
|
|
$ |
38,269 |
|
|
$ |
(811 |
) |
|
$ |
38,269 |
|
|
$ |
(811 |
) |
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
Agency |
4,679 |
|
|
(13 |
) |
|
474 |
|
|
(8 |
) |
|
5,153 |
|
|
(21 |
) |
Agency collateralized mortgage obligations |
11,448 |
|
|
(134 |
) |
|
976 |
|
|
(33 |
) |
|
12,424 |
|
|
(167 |
) |
Non-agency residential |
2,112 |
|
|
(59 |
) |
|
3,950 |
|
|
(350 |
) |
|
6,062 |
|
|
(409 |
) |
Non-agency commercial |
55 |
|
|
(1 |
) |
|
— |
|
|
— |
|
|
55 |
|
|
(1 |
) |
Non-U.S. securities |
1,008 |
|
|
(13 |
) |
|
165 |
|
|
(1 |
) |
|
1,173 |
|
|
(14 |
) |
Corporate bonds |
415 |
|
|
(29 |
) |
|
111 |
|
|
(8 |
) |
|
526 |
|
|
(37 |
) |
Other taxable securities |
4,210 |
|
|
(41 |
) |
|
1,361 |
|
|
(19 |
) |
|
5,571 |
|
|
(60 |
) |
Total taxable securities |
23,927 |
|
|
(290 |
) |
|
45,306 |
|
|
(1,230 |
) |
|
69,233 |
|
|
(1,520 |
) |
Tax-exempt securities |
1,117 |
|
|
(25 |
) |
|
2,754 |
|
|
(65 |
) |
|
3,871 |
|
|
(90 |
) |
Total temporarily impaired available-for-sale debt securities |
25,044 |
|
|
(315 |
) |
|
48,060 |
|
|
(1,295 |
) |
|
73,104 |
|
|
(1,610 |
) |
Temporarily impaired available-for-sale marketable equity securities |
31 |
|
|
(1 |
) |
|
6 |
|
|
(6 |
) |
|
37 |
|
|
(7 |
) |
Total temporarily impaired available-for-sale securities |
25,075 |
|
|
(316 |
) |
|
48,066 |
|
|
(1,301 |
) |
|
73,141 |
|
|
(1,617 |
) |
Other-than-temporarily impaired available-for-sale debt securities (1)
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency residential mortgage-backed securities |
158 |
|
|
(28 |
) |
|
489 |
|
|
(45 |
) |
|
647 |
|
|
(73 |
) |
Total temporarily impaired and other-than-temporarily impaired available-for-sale securities (2)
|
$ |
25,233 |
|
|
$ |
(344 |
) |
|
$ |
48,555 |
|
|
$ |
(1,346 |
) |
|
$ |
73,788 |
|
|
$ |
(1,690 |
) |
|
|
(1) |
Includes other-than-temporarily impaired AFS debt securities on which OTTI loss remains in OCI. |
|
|
(2) |
At June 30, 2012, the amortized cost of approximately 3,600 AFS securities exceeded their fair value by $1.0 billion. At December 31, 2011, the amortized cost of approximately 3,800 AFS securities exceeded their fair value by $1.7 billion.
|
The amortized cost and fair value of the Corporation’s investment in AFS and HTM 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 June 30, 2012 and December 31, 2011 are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Securities Exceeding 10 Percent of Shareholders' Equity |
|
June 30, 2012 |
|
December 31, 2011 |
(Dollars in millions) |
Amortized
Cost
|
|
Fair
Value
|
|
Amortized
Cost
|
|
Fair
Value
|
Fannie Mae |
$ |
124,130 |
|
|
$ |
126,482 |
|
|
$ |
87,898 |
|
|
$ |
89,243 |
|
Government National Mortgage Association |
111,777 |
|
|
114,508 |
|
|
102,960 |
|
|
106,200 |
|
U.S. Treasury Securities |
29,630 |
|
|
29,427 |
|
|
39,946 |
|
|
39,164 |
|
Freddie Mac |
26,981 |
|
|
27,517 |
|
|
26,617 |
|
|
27,129 |
|
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 June 30, 2012 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt Securities Maturities |
|
June 30, 2012 |
|
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 |
$ |
511 |
|
0.01 |
% |
|
$ |
745 |
|
1.00 |
% |
|
$ |
2,138 |
|
5.30 |
% |
|
$ |
26,640 |
|
2.50 |
% |
|
$ |
30,034 |
|
2.70 |
% |
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
31 |
|
4.40 |
|
|
65,333 |
|
3.30 |
|
|
55,484 |
|
3.20 |
|
|
68,319 |
|
2.90 |
|
|
189,167 |
|
3.10 |
|
Agency-collateralized mortgage obligations |
84 |
|
1.30 |
|
|
16,481 |
|
1.40 |
|
|
21,970 |
|
4.10 |
|
|
18 |
|
1.00 |
|
|
38,553 |
|
3.00 |
|
Non-agency residential |
1,149 |
|
4.80 |
|
|
5,889 |
|
4.60 |
|
|
3,060 |
|
4.30 |
|
|
416 |
|
3.30 |
|
|
10,514 |
|
4.50 |
|
Non-agency commercial |
275 |
|
5.60 |
|
|
3,439 |
|
5.90 |
|
|
16 |
|
4.20 |
|
|
21 |
|
5.10 |
|
|
3,751 |
|
5.90 |
|
Non-U.S. securities |
3,715 |
|
0.90 |
|
|
1,855 |
|
6.10 |
|
|
166 |
|
2.30 |
|
|
— |
|
— |
|
|
5,736 |
|
2.60 |
|
Corporate bonds |
555 |
|
1.80 |
|
|
1,007 |
|
1.90 |
|
|
385 |
|
4.70 |
|
|
126 |
|
1.00 |
|
|
2,073 |
|
1.90 |
|
Other taxable securities |
1,521 |
|
0.90 |
|
|
6,519 |
|
1.60 |
|
|
2,075 |
|
1.60 |
|
|
1,379 |
|
1.00 |
|
|
11,494 |
|
1.50 |
|
Total taxable securities |
7,841 |
|
1.66 |
|
|
101,268 |
|
3.07 |
|
|
85,294 |
|
3.49 |
|
|
96,919 |
|
2.76 |
|
|
291,322 |
|
3.02 |
|
Tax-exempt securities |
17 |
|
4.20 |
|
|
901 |
|
1.70 |
|
|
809 |
|
2.50 |
|
|
1,135 |
|
0.30 |
|
|
2,862 |
|
1.39 |
|
Total amortized cost of AFS debt securities |
$ |
7,858 |
|
1.67 |
|
|
$ |
102,169 |
|
3.05 |
|
|
$ |
86,103 |
|
3.48 |
|
|
$ |
98,054 |
|
2.73 |
|
|
$ |
294,184 |
|
3.00 |
|
Total amortized cost of held-to-maturity debt securities (2)
|
$ |
6 |
|
3.00 |
% |
|
$ |
5,230 |
|
2.20 |
% |
|
$ |
23,588 |
|
2.70 |
% |
|
$ |
6,344 |
|
2.80 |
% |
|
$ |
35,168 |
|
2.60 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of AFS debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities |
$ |
513 |
|
|
|
$ |
773 |
|
|
|
$ |
2,345 |
|
|
|
$ |
26,200 |
|
|
|
$ |
29,831 |
|
|
Mortgage-backed securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency |
32 |
|
|
|
67,155 |
|
|
|
57,249 |
|
|
|
69,755 |
|
|
|
194,191 |
|
|
Agency-collateralized mortgage obligations |
84 |
|
|
|
16,471 |
|
|
|
22,576 |
|
|
|
18 |
|
|
|
39,149 |
|
|
Non-agency residential |
1,139 |
|
|
|
5,953 |
|
|
|
3,009 |
|
|
|
414 |
|
|
|
10,515 |
|
|
Non-agency commercial |
285 |
|
|
|
3,804 |
|
|
|
17 |
|
|
|
21 |
|
|
|
4,127 |
|
|
Non-U.S. securities |
3,710 |
|
|
|
1,887 |
|
|
|
168 |
|
|
|
— |
|
|
|
5,765 |
|
|
Corporate bonds |
559 |
|
|
|
1,025 |
|
|
|
421 |
|
|
|
117 |
|
|
|
2,122 |
|
|
Other taxable securities |
1,526 |
|
|
|
6,610 |
|
|
|
2,079 |
|
|
|
1,307 |
|
|
|
11,522 |
|
|
Total taxable securities |
7,848 |
|
|
|
103,678 |
|
|
|
87,864 |
|
|
|
97,832 |
|
|
|
297,222 |
|
|
Tax-exempt securities |
17 |
|
|
|
901 |
|
|
|
810 |
|
|
|
1,099 |
|
|
|
2,827 |
|
|
Total fair value of AFS debt securities |
$ |
7,865 |
|
|
|
$ |
104,579 |
|
|
|
$ |
88,674 |
|
|
|
$ |
98,931 |
|
|
|
$ |
300,049 |
|
|
|
Total fair value of held-to-maturity debt
securities (2)
|
$ |
6 |
|
|
|
$ |
5,311 |
|
|
|
$ |
24,202 |
|
|
|
$ |
6,475 |
|
|
|
$ |
35,994 |
|
|
|
|
(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. |
|
|
(2) |
Substantially all U.S. agency mortgage-backed securities. |
The gross realized gains and losses on sales of debt securities for the three and six months ended June 30, 2012 and 2011 are presented in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains and Losses on Sales of AFS Debt Securities |
|
|
|
|
|
Three Months Ended June 30 |
|
Six Months Ended June 30 |
(Dollars in millions) |
2012 |
|
2011 |
|
2012 |
|
2011 |
Gross gains |
$ |
423 |
|
|
$ |
901 |
|
|
$ |
1,596 |
|
|
$ |
1,455 |
|
Gross losses |
(23 |
) |
|
(2 |
) |
|
(444 |
) |
|
(10 |
) |
Net gains on sales of debt securities |
$ |
400 |
|
|
$ |
899 |
|
|
$ |
1,152 |
|
|
$ |
1,445 |
|
Income tax expense attributable to realized net gains on sales of debt securities |
$ |
148 |
|
|
$ |
333 |
|
|
$ |
426 |
|
|
$ |
535 |
|
|
|
Certain Corporate and Strategic Investments |
At June 30, 2012 and December 31, 2011, the Corporation owned 2.0 billion shares representing approximately one percent of China Construction Bank Corporation (CCB). Sales restrictions on these shares continue until August 2013, and accordingly, these shares are carried at cost and recorded in other assets. Beginning in the three months ending September 30, 2012, because the sales restrictions on these shares will expire within one year, these securities will be classified as marketable equity securities and carried at fair value with the unrealized gain recorded in accumulated OCI, net-of-tax. The carrying value and cost basis of the investment at both June 30, 2012 and December 31, 2011 was $716 million, and the fair value was $1.4 billion at both June 30, 2012 and December 31, 2011. There is a strategic assistance agreement between the Corporation and CCB, which includes cooperation in specific business areas.
The Corporation's 49 percent investment in a merchant services joint venture had a carrying value of $3.3 billion and $3.4 billion at June 30, 2012 and December 31, 2011.
|