| Securities |
NOTE 5 – 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 June 30, 2011 and December 31,
2010.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
| |
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
|
(Dollars in millions)
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Fair Value |
|
| |
|
Available-for-sale debt securities, June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities
|
|
$ |
49,874 |
|
|
$ |
684 |
|
|
$ |
(1,289 |
) |
|
$ |
49,269 |
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
180,151 |
|
|
|
3,128 |
|
|
|
(1,663 |
) |
|
|
181,616 |
|
|
Agency collateralized mortgage obligations
|
|
|
48,212 |
|
|
|
930 |
|
|
|
(31 |
) |
|
|
49,111 |
|
|
Non-agency residential (1)
|
|
|
19,564 |
|
|
|
568 |
|
|
|
(557 |
) |
|
|
19,575 |
|
|
Non-agency commercial
|
|
|
6,018 |
|
|
|
702 |
|
|
|
(2 |
) |
|
|
6,718 |
|
|
Non-U.S. securities
|
|
|
4,314 |
|
|
|
62 |
|
|
|
(16 |
) |
|
|
4,360 |
|
|
Corporate bonds
|
|
|
4,388 |
|
|
|
154 |
|
|
|
(4 |
) |
|
|
4,538 |
|
|
Other
taxable securities, substantially all asset-backed securities
|
|
|
12,010 |
|
|
|
79 |
|
|
|
(66 |
) |
|
|
12,023 |
|
| |
|
Total taxable securities
|
|
|
324,531 |
|
|
|
6,307 |
|
|
|
(3,628 |
) |
|
|
327,210 |
|
|
Tax-exempt securities
|
|
|
3,808 |
|
|
|
18 |
|
|
|
(165 |
) |
|
|
3,661 |
|
| |
|
Total available-for-sale debt securities
|
|
$ |
328,339 |
|
|
$ |
6,325 |
|
|
$ |
(3,793 |
) |
|
$ |
330,871 |
|
| |
|
Available-for-sale marketable equity securities, June 30, 2011 (2)
|
|
$ |
8,536 |
|
|
$ |
10,445 |
|
|
$ |
(19 |
) |
|
$ |
18,962 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 June 30, 2011, includes approximately 90 percent prime bonds, nine percent Alt-A bonds and one 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.
|
At June 30, 2011, the accumulated net unrealized gains on AFS debt securities included in
accumulated OCI were $1.6 billion, net of the related income tax expense of $944 million. At June
30, 2011 and December 31, 2010, both the amortized cost and fair value of held-to-maturity debt
securities were $181 million and $427 million. At June 30, 2011 and December 31, 2010, the
Corporation had nonperforming AFS debt securities with a fair value of $17 million and $44
million.
The Corporation recorded other-than-temporary impairment (OTTI) losses on AFS debt securities
for the three and six months ended June 30, 2011 and 2010 as presented in the table below. If the
fair value of an AFS debt security is less than its amortized cost, a security is determined to be
impaired and an OTTI loss is recorded. For AFS debt securities that the Corporation does not
intend or will not more-likely-than-not be required to sell, the OTTI loss is separated into an
amount representing a credit loss and an amount representing other factors (e.g., interest rate).
The credit loss portion of the OTTI loss is recorded in earnings and the remaining portion is
recorded in accumulated OCI. Subsequently, the debt securities continue to be evaluated for
additional credit losses until the fair value of the debt security increases to an amount greater
than its amortized cost which has been adjusted for any previously recognized credit losses. If
the Corporation intends or will more-likely-than-not be required to sell the AFS debt securities
prior to recovery, the entire OTTI loss is recorded in earnings. For certain securities, the
credit loss portion of the OTTI exceeded the total OTTI loss. In these instances, the portion of
the credit losses that exceeded the OTTI loss represented an unrealized gain related to other
factors and was recorded in accumulated OCI as an unrealized gain. Balances in the table exclude
$3 million and $10 million of unrealized gains recorded in accumulated OCI related to these
securities for the three and six months ended June 30, 2011 and $16 million and $49 million for
the same periods in 2010.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended June 30, 2011 |
| |
|
Non-agency |
|
|
Non-agency |
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
| |
|
Residential |
|
|
Commercial |
|
|
Non-U.S. |
|
|
Corporate |
|
|
Taxable |
|
|
|
|
|
(Dollars in millions)
|
|
MBS |
|
|
MBS |
|
|
Securities |
|
|
Bonds |
|
|
Securities |
|
|
Total |
|
| |
|
Total OTTI losses
|
|
$ |
(48 |
) |
|
$ |
- |
|
|
$ |
(12 |
) |
|
$ |
- |
|
|
$ |
(3 |
) |
|
$ |
(63 |
) |
|
OTTI losses recognized in accumulated OCI
|
|
|
17 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
18 |
|
| |
|
Net impairment losses recognized in earnings
|
|
$ |
(31 |
) |
|
$ |
- |
|
|
$ |
(12 |
) |
|
$ |
- |
|
|
$ |
(2 |
) |
|
$ |
(45 |
) |
| |
| |
| |
|
|
|
|
|
Three Months Ended June 30, 2010 |
|
|
|
|
|
| |
|
|
|
Total OTTI losses
|
|
$ |
(145 |
) |
|
$ |
(1 |
) |
|
$ |
(285 |
) |
|
$ |
- |
|
|
$ |
(31 |
) |
|
$ |
(462 |
) |
|
OTTI losses recognized in accumulated OCI
|
|
|
74 |
|
|
|
- |
|
|
|
261 |
|
|
|
- |
|
|
|
1 |
|
|
|
336 |
|
| |
|
Net impairment losses recognized in earnings
|
|
$ |
(71 |
) |
|
$ |
(1 |
) |
|
$ |
(24 |
) |
|
$ |
- |
|
|
$ |
(30 |
) |
|
$ |
(126 |
) |
| |
| |
| |
|
Six months Ended June 30, 2011 |
|
| |
|
|
|
Total OTTI losses
|
|
$ |
(142 |
) |
|
$ |
- |
|
|
$ |
(12 |
) |
|
$ |
- |
|
|
$ |
(3 |
) |
|
$ |
(157 |
) |
|
OTTI losses recognized in accumulated OCI
|
|
|
23 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
24 |
|
| |
|
Net impairment losses recognized in earnings
|
|
$ |
(119 |
) |
|
$ |
- |
|
|
$ |
(12 |
) |
|
$ |
- |
|
|
$ |
(2 |
) |
|
$ |
(133 |
) |
| |
| |
| |
|
Six months Ended June 30, 2010 |
|
| |
|
|
|
Total OTTI losses
|
|
$ |
(463 |
) |
|
$ |
(1 |
) |
|
$ |
(975 |
) |
|
$ |
(2 |
) |
|
$ |
(342 |
) |
|
$ |
(1,783 |
) |
|
OTTI losses recognized in accumulated OCI
|
|
|
119 |
|
|
|
- |
|
|
|
780 |
|
|
|
- |
|
|
|
157 |
|
|
|
1,056 |
|
| |
|
Net impairment losses recognized in earnings
|
|
$ |
(344 |
) |
|
$ |
(1 |
) |
|
$ |
(195 |
) |
|
$ |
(2 |
) |
|
$ |
(185 |
) |
|
$ |
(727 |
) |
| |
The table below presents a rollforward of the credit loss portion of OTTI losses recognized
in earnings on debt securities in which a portion of the OTTI loss remains in accumulated OCI for
the three and six months ended June 30, 2011 and 2010.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended June 30 |
|
|
Six Months Ended June 30 |
|
|
(Dollars in millions)
|
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
| |
|
Balance, beginning of period
|
|
$ |
378 |
|
|
$ |
1,084 |
|
|
$ |
326 |
|
|
$ |
706 |
|
|
Additions for the credit component on debt securities on which OTTI
losses were not previously recognized
|
|
|
14 |
|
|
|
47 |
|
|
|
47 |
|
|
|
271 |
|
|
Additions for the credit component on debt securities on which OTTI
losses were previously recognized
|
|
|
31 |
|
|
|
79 |
|
|
|
86 |
|
|
|
456 |
|
|
Reductions for debt securities sold on which OTTI losses were
previously recognized
|
|
|
(5 |
) |
|
|
(510 |
) |
|
|
(41 |
) |
|
|
(733 |
) |
| |
|
Balance, June 30
|
|
$ |
418 |
|
|
$ |
700 |
|
|
$ |
418 |
|
|
$ |
700 |
|
| |
The Corporation estimates the portion of 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 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. The
Corporation then uses a third-party vendor to determine how the underlying collateral cash flows
will be distributed to each security issued from the structure. Expected principal and interest
cash flows on an impaired debt security are discounted using the book yield of each individual
impaired debt security. Significant assumptions used in the valuation of non-agency residential
mortgage-backed securities (RMBS) were as follows at June 30, 2011.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Range (1)
|
|
| |
|
|
|
10th
|
|
90th
|
| |
|
Weighted-average
|
|
Percentile (2)
|
|
Percentile (2)
|
| |
|
Prepayment speed
|
|
|
8.2 |
% |
|
|
3.0 |
% |
|
|
16.0 |
% |
|
Loss severity
|
|
|
49.6 |
|
|
|
17.3 |
|
|
|
62.1 |
|
|
Life default rate
|
|
|
51.8 |
|
|
|
2.2 |
|
|
|
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.
|
Additionally, annual constant prepayment speed and loss severity rates are projected
considering collateral characteristics such as loan-to-value (LTV), creditworthiness of borrowers
(FICO) and geographic concentrations. The weighted-average severity by collateral type was 44
percent for prime bonds, 51 percent for Alt-A bonds and 59 percent for subprime bonds.
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 39 percent for prime bonds, 66 percent for Alt-A bonds and 69 percent for
subprime bonds.
The table below presents the fair value and the associated gross unrealized losses on
investments in securities with gross unrealized losses at June 30, 2011 and 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 |
|
| |
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Gross |
|
| |
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
|
Fair |
|
|
Unrealized |
|
| (Dollars in millions) |
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
|
Value |
|
|
Losses |
|
| |
|
Temporarily-impaired available-for-sale debt securities at
June 30, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
29,514 |
|
|
$ |
(1,289 |
) |
|
$ |
29,514 |
|
|
$ |
(1,289 |
) |
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
75,586 |
|
|
|
(1,622 |
) |
|
|
1,378 |
|
|
|
(41 |
) |
|
|
76,964 |
|
|
|
(1,663 |
) |
|
Agency collateralized mortgage obligations
|
|
|
2,042 |
|
|
|
(7 |
) |
|
|
1,072 |
|
|
|
(24 |
) |
|
|
3,114 |
|
|
|
(31 |
) |
|
Non-agency residential
|
|
|
4,165 |
|
|
|
(204 |
) |
|
|
2,354 |
|
|
|
(235 |
) |
|
|
6,519 |
|
|
|
(439 |
) |
|
Non-agency commercial
|
|
|
57 |
|
|
|
(1 |
) |
|
|
8 |
|
|
|
(1 |
) |
|
|
65 |
|
|
|
(2 |
) |
|
Non-U.S. securities
|
|
|
- |
|
|
|
- |
|
|
|
61 |
|
|
|
(16 |
) |
|
|
61 |
|
|
|
(16 |
) |
|
Corporate bonds
|
|
|
- |
|
|
|
- |
|
|
|
100 |
|
|
|
(4 |
) |
|
|
100 |
|
|
|
(4 |
) |
|
Other taxable securities
|
|
|
- |
|
|
|
- |
|
|
|
3,962 |
|
|
|
(50 |
) |
|
|
3,962 |
|
|
|
(50 |
) |
| |
|
Total taxable securities
|
|
|
81,850 |
|
|
|
(1,834 |
) |
|
|
38,449 |
|
|
|
(1,660 |
) |
|
|
120,299 |
|
|
|
(3,494 |
) |
|
Tax-exempt securities
|
|
|
1,612 |
|
|
|
(78 |
) |
|
|
1,487 |
|
|
|
(86 |
) |
|
|
3,099 |
|
|
|
(164 |
) |
| |
|
Total temporarily-impaired available-for-sale debt securities
|
|
|
83,462 |
|
|
|
(1,912 |
) |
|
|
39,936 |
|
|
|
(1,746 |
) |
|
|
123,398 |
|
|
|
(3,658 |
) |
|
Temporarily-impaired available-for-sale marketable equity
securities
|
|
|
12 |
|
|
|
(7 |
) |
|
|
22 |
|
|
|
(12 |
) |
|
|
34 |
|
|
|
(19 |
) |
| |
|
Total temporarily-impaired available-for-sale securities
|
|
|
83,474 |
|
|
|
(1,919 |
) |
|
|
39,958 |
|
|
|
(1,758 |
) |
|
|
123,432 |
|
|
|
(3,677 |
) |
| |
|
Other-than-temporarily impaired available-for-sale debt
securities (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency residential
|
|
|
175 |
|
|
|
(16 |
) |
|
|
598 |
|
|
|
(102 |
) |
|
|
773 |
|
|
|
(118 |
) |
|
Other taxable securities
|
|
|
- |
|
|
|
- |
|
|
|
124 |
|
|
|
(16 |
) |
|
|
124 |
|
|
|
(16 |
) |
|
Tax-exempt securities
|
|
|
- |
|
|
|
- |
|
|
|
7 |
|
|
|
(1 |
) |
|
|
7 |
|
|
|
(1 |
) |
| |
|
Total temporarily-impaired and other-than-temporarily
impaired available-for-sale securities (2)
|
|
$ |
83,649 |
|
|
$ |
(1,935 |
) |
|
$ |
40,687 |
|
|
$ |
(1,877 |
) |
|
$ |
124,336 |
|
|
$ |
(3,812 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 June 30, 2011, the amortized cost of approximately 5,300 AFS securities exceeded their fair value by $3.8 billion. At December 31, 2010, the amortized
cost of approximately 8,500 AFS securities exceeded their fair value by $4.5 billion.
|
The amortized cost and fair value of the Corporation’s investment in AFS debt
securities from Fannie Mae (FNMA), the Government National Mortgage Association (GNMA) and Freddie
Mac (FHLMC), and U.S. Treasury securities where the investment exceeded 10 percent of consolidated
shareholders’ equity at June 30, 2011 and December 31, 2010 are presented in the table below.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
June 30, 2011 |
|
|
December 31, 2010 |
|
| |
|
Amortized |
|
|
Fair |
|
|
Amortized |
|
|
Fair |
|
| (Dollars in millions) |
|
Cost |
|
|
Value |
|
|
Cost |
|
|
Value |
|
| |
|
Fannie Mae
|
|
$ |
133,053 |
|
|
$ |
132,917 |
|
|
$ |
123,662 |
|
|
$ |
123,107 |
|
|
Government National Mortgage Association
|
|
|
27,833 |
|
|
|
27,894 |
|
|
|
72,863 |
|
|
|
74,305 |
|
|
Freddie Mac
|
|
|
67,477 |
|
|
|
69,916 |
|
|
|
30,523 |
|
|
|
30,822 |
|
|
U.S Treasury Securities
|
|
|
46,961 |
|
|
|
46,174 |
|
|
|
46,576 |
|
|
|
46,081 |
|
| |
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, 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.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
June 30, 2011 |
|
| |
|
|
|
|
|
|
|
|
|
Due after One |
|
|
Due after Five |
|
|
|
|
|
|
|
| |
|
Due in One |
|
|
Year through |
|
|
Years through |
|
|
Due after |
|
|
|
|
| |
|
Year or Less |
|
|
Five Years |
|
|
Ten Years |
|
|
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
|
|
$ |
492 |
|
|
|
4.80 |
% |
|
$ |
1,633 |
|
|
|
2.00 |
% |
|
$ |
12,290 |
|
|
|
3.30 |
% |
|
$ |
35,459 |
|
|
|
4.10 |
% |
|
$ |
49,874 |
|
|
|
3.90 |
% |
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
25 |
|
|
|
4.40 |
|
|
|
67,665 |
|
|
|
4.00 |
|
|
|
43,235 |
|
|
|
4.00 |
|
|
|
69,226 |
|
|
|
3.70 |
|
|
|
180,151 |
|
|
|
3.90 |
|
|
Agency-collateralized mortgage
obligations
|
|
|
62 |
|
|
|
0.60 |
|
|
|
17,650 |
|
|
|
3.00 |
|
|
|
13,115 |
|
|
|
4.20 |
|
|
|
17,385 |
|
|
|
3.50 |
|
|
|
48,212 |
|
|
|
3.50 |
|
|
Non-agency residential
|
|
|
188 |
|
|
|
7.00 |
|
|
|
3,205 |
|
|
|
5.90 |
|
|
|
1,236 |
|
|
|
5.90 |
|
|
|
14,935 |
|
|
|
4.20 |
|
|
|
19,564 |
|
|
|
4.60 |
|
|
Non-agency commercial
|
|
|
486 |
|
|
|
4.40 |
|
|
|
5,135 |
|
|
|
6.60 |
|
|
|
131 |
|
|
|
6.80 |
|
|
|
266 |
|
|
|
6.80 |
|
|
|
6,018 |
|
|
|
6.50 |
|
|
Non-U.S. securities
|
|
|
2,058 |
|
|
|
0.60 |
|
|
|
2,087 |
|
|
|
4.90 |
|
|
|
169 |
|
|
|
3.70 |
|
|
|
- |
|
|
|
- |
|
|
|
4,314 |
|
|
|
4.90 |
|
|
Corporate bonds
|
|
|
241 |
|
|
|
3.60 |
|
|
|
2,859 |
|
|
|
2.10 |
|
|
|
1,127 |
|
|
|
3.50 |
|
|
|
161 |
|
|
|
0.80 |
|
|
|
4,388 |
|
|
|
2.40 |
|
|
Other taxable securities
|
|
|
1,344 |
|
|
|
1.40 |
|
|
|
5,329 |
|
|
|
1.40 |
|
|
|
1,136 |
|
|
|
1.90 |
|
|
|
4,201 |
|
|
|
0.50 |
|
|
|
12,010 |
|
|
|
1.10 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total taxable securities
|
|
|
4,896 |
|
|
|
2.03 |
|
|
|
105,563 |
|
|
|
3.82 |
|
|
|
72,439 |
|
|
|
3.91 |
|
|
|
141,633 |
|
|
|
3.74 |
|
|
|
324,531 |
|
|
|
3.82 |
|
|
Tax-exempt securities
|
|
|
89 |
|
|
|
4.30 |
|
|
|
746 |
|
|
|
4.40 |
|
|
|
856 |
|
|
|
4.50 |
|
|
|
2,117 |
|
|
|
4.60 |
|
|
|
3,808 |
|
|
|
4.50 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total amortized cost of AFS debt
securities
|
|
$ |
4,985 |
|
|
|
2.07 |
|
|
$ |
106,309 |
|
|
|
3.83 |
|
|
$ |
73,295 |
|
|
|
3.92 |
|
|
$ |
143,750 |
|
|
|
3.75 |
|
|
$ |
328,339 |
|
|
|
3.83 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of AFS debt securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury and agency securities
|
|
$ |
493 |
|
|
|
|
|
|
$ |
1,676 |
|
|
|
|
|
|
$ |
12,694 |
|
|
|
|
|
|
$ |
34,406 |
|
|
|
|
|
|
$ |
49,269 |
|
|
|
|
|
|
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agency
|
|
|
27 |
|
|
|
|
|
|
|
69,599 |
|
|
|
|
|
|
|
43,866 |
|
|
|
|
|
|
|
68,124 |
|
|
|
|
|
|
|
181,616 |
|
|
|
|
|
|
Agency-collateralized mortgage
obligations
|
|
|
62 |
|
|
|
|
|
|
|
17,959 |
|
|
|
|
|
|
|
13,614 |
|
|
|
|
|
|
|
17,476 |
|
|
|
|
|
|
|
49,111 |
|
|
|
|
|
|
Non-agency residential
|
|
|
152 |
|
|
|
|
|
|
|
3,188 |
|
|
|
|
|
|
|
1,263 |
|
|
|
|
|
|
|
14,972 |
|
|
|
|
|
|
|
19,575 |
|
|
|
|
|
|
Non-agency commercial
|
|
|
490 |
|
|
|
|
|
|
|
5,782 |
|
|
|
|
|
|
|
147 |
|
|
|
|
|
|
|
299 |
|
|
|
|
|
|
|
6,718 |
|
|
|
|
|
|
Non-U.S. securities
|
|
|
2,055 |
|
|
|
|
|
|
|
2,132 |
|
|
|
|
|
|
|
173 |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
4,360 |
|
|
|
|
|
|
Corporate bonds
|
|
|
245 |
|
|
|
|
|
|
|
2,951 |
|
|
|
|
|
|
|
1,181 |
|
|
|
|
|
|
|
161 |
|
|
|
|
|
|
|
4,538 |
|
|
|
|
|
|
Other taxable securities
|
|
|
1,346 |
|
|
|
|
|
|
|
5,374 |
|
|
|
|
|
|
|
1,153 |
|
|
|
|
|
|
|
4,150 |
|
|
|
|
|
|
|
12,023 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total taxable securities
|
|
|
4,870 |
|
|
|
|
|
|
|
108,661 |
|
|
|
|
|
|
|
74,091 |
|
|
|
|
|
|
|
139,588 |
|
|
|
|
|
|
|
327,210 |
|
|
|
|
|
|
Tax-exempt securities
|
|
|
90 |
|
|
|
|
|
|
|
739 |
|
|
|
|
|
|
|
828 |
|
|
|
|
|
|
|
2,004 |
|
|
|
|
|
|
|
3,661 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of AFS debt
securities
|
|
$ |
4,960 |
|
|
|
|
|
|
$ |
109,400 |
|
|
|
|
|
|
$ |
74,919 |
|
|
|
|
|
|
$ |
141,592 |
|
|
|
|
|
|
$ |
330,871 |
|
|
|
|
|
| |
|
|
|
| (1) |
|
Yields are calculated based on the amortized cost of the securities and exclude the impact of hedging activities.
|
The gross realized gains and losses on sales of debt securities for the three and six
months ended June 30, 2011 and 2010 are presented in the table below.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended June 30 |
|
|
Six Months Ended June 30 |
|
| (Dollars in millions) |
|
2011 |
|
|
2010 |
|
|
2011 |
|
|
2010 |
|
| |
|
Gross gains
|
|
$ |
901 |
|
|
$ |
942 |
|
|
$ |
1,455 |
|
|
$ |
1,848 |
|
|
Gross losses
|
|
|
(2 |
) |
|
|
(905 |
) |
|
|
(10 |
) |
|
|
(1,077 |
) |
| |
|
Net gains on sales of debt securities
|
|
$ |
899 |
|
|
$ |
37 |
|
|
$ |
1,445 |
|
|
$ |
771 |
|
| |
|
Income tax expense attributable to realized net gains on sales
of debt securities
|
|
$ |
333 |
|
|
$ |
14 |
|
|
$ |
535 |
|
|
$ |
285 |
|
| |
Certain Corporate and Strategic Investments
At both June 30, 2011 and December 31, 2010, the Corporation owned 25.6 billion shares
representing approximately 10 percent of China Construction Bank (CCB). Of the Corporation’s
investment in CCB, 23.6 billion shares are classified as AFS. Sales restrictions on the remaining
two billion CCB shares continue until August 2013 and accordingly these shares continue to be
carried at cost. At June 30, 2011, the cost basis of the Corporation’s total investment in CCB was
$9.2 billion, the carrying value was $19.6 billion and the fair value was $20.5 billion. At
December 31, 2010, the cost basis was $9.2 billion, the carrying value was $19.7 billion and the
fair value was $20.8 billion. This investment is recorded in other assets. Dividend income on this
investment is recorded in equity investment income and during the six months ended June 30, 2011
and 2010, the Corporation recorded dividends of $837 million and $535 million from CCB. The
Corporation remains a significant shareholder in CCB and intends to continue the important
long-term strategic alliance with CCB originally entered into in 2005.
In June 2011, the Corporation sold its remaining ownership interest of approximately 13.6
million preferred shares, or seven percent of BlackRock, Inc. The investment was recorded in other
assets at cost. In connection with the sale, the Corporation recorded a pre-tax gain of $377
million.
A joint venture was formed in 2009 with First Data Corporation (First Data) creating Banc of
America Merchant Services, LLC. Under the terms of the agreement, the Corporation contributed its
merchant processing business to the joint venture and First Data contributed certain merchant
processing contracts and personnel resources. The Corporation‘s investment in the joint venture,
which was initially recorded at a fair value of $4.7 billion, is accounted for under the equity
method of accounting with income recorded in equity investment income. In the three months ended
June 30, 2011, the Corporation recorded a $500 million impairment write-down on the joint venture.
The joint venture had a carrying value at June 30, 2011 and December 31, 2010 of $4.1 billion and
$4.7 billion with the reduction in carrying value primarily the result of the impairment mentioned
above.
|