Securities

6 Months Ended

Jun. 30, 2011


Note 4—	Securities

The amortized cost, gross unrealized gains, gross unrealized losses, and fair values of securities are presented below.

Securities Available for Sale


	June 30, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in millions)	Cost		Gains		Losses		Value

U.S. government sponsored agencies	$	5,052	$	50	$	—	$	5,102
Residential mortgage-backed securities:
U.S. government and government sponsored agencies		11,063		138		57		11,144
Privately issued		893		1		40		854
Commercial mortgage-backed securities		488		2		4		486
Asset-backed securities		300		1		—		301
Other debt securities		186		6		1		191
Equity securities		20		—		—		20

Total securities available for sale	$	18,002	$	198	$	102	$	18,098


	December 31, 2010
			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(Dollars in millions)	Cost		Gains		Losses		Value

U.S. Treasury	$	150	$	—	$	—	$	150
U.S. government sponsored agencies		6,689		75		—		6,764
Residential mortgage-backed securities:
U.S. government and government sponsored agencies		12,743		138		125		12,756
Privately issued		710		4		32		682
Commercial mortgage-backed securities		3		—		1		2
Asset-backed securities		240		—		—		240
Other debt securities		151		6		—		157
Equity securities		40		1		1		40

Total securities available for sale	$	20,726	$	224	$	159	$	20,791

Securities Held to Maturity

June 30, 2011

Recognized in Other

Comprehensive

Not Recognized in

Income (OCI)

OCI

Gross

Amortized

Unrealized

Carrying

Unrealized

Fair

(Dollars in millions)

Cost

Gains

Losses

Value

Gains

Losses

Value

Collateralized loan
obligations (CLOs)

1,749

—

417

1,332

280

1,610

December 31, 2010

Recognized in

Not Recognized in

OCI

Gross

Amortized

Unrealized

Carrying

Unrealized

Fair

(Dollars in millions)

Cost

Gains

Losses

Value

Gains

Losses

Value

CLOs

1,778

—

455

1,323

238

1,560

For securities held to maturity, the amount recognized in OCI reflects the unrealized loss at date of transfer to the held to maturity classification, net of amortization, while the amount not recognized in OCI reflects the incremental change in value after such transfer. Amortized cost is defined as the original purchase cost, plus or minus any accretion or amortization of a purchase discount or premium, less principal payments and any impairment previously recognized in earnings.

The amortized cost, fair value and carrying value of securities, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because of prepayments.

Maturity Schedule of Securities

Securities Available for Sale


	June 30, 2011
	Amortized		Fair
(Dollars in millions)	Cost		Value

Due in one year or less	$	2,540	$	2,552
Due after one year through five years		2,981		3,030
Due after five years through ten years		822		851
Due after ten years		11,639		11,645
No stated maturity—equity securities		20		20

Total securities available for sale	$	18,002	$	18,098

Securities Held to Maturity


	June 30, 2011
	Amortized		Carrying		Fair
(Dollars in millions)	Cost		Value		Value

Due after one year through five years	$	278	$	229	$	276
Due after five years through ten years		1,385		1,045		1,262
Due after ten years		86		58		72

Total securities held to maturity	$	1,749	$	1,332	$	1,610

The proceeds from sales of securities available for sale and gross realized gains for the three and six months ended June 30, 2011 and 2010 are shown below. There were no gross realized losses for the same periods. The specific identification method is used to calculate realized gains and losses on sales. The table below excludes losses from other-than-temporary impairment.

Sales of Securities Available for Sale


	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
(Dollars in millions)	2011		2010		2011		2010

Proceeds from sales	$	1,918	$	1,043	$	3,831	$	2,090
Gross realized gains		29		30		58		65

Analysis of Unrealized Losses on Securities

At June 30, 2011 and December 31, 2010, the Company’s securities with a continuous unrealized loss position are shown below, separately for periods less than 12 months and 12 months or more.

Securities Available for Sale


	June 30, 2011
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in millions)	Value		Losses		Value		Losses		Value		Losses

Residential mortgage-backed securities:
U.S. government and government sponsored agencies	$	4,157	$	57	$	65	$	—	$	4,222	$	57
Privately issued		494		11		92		29		586		40
Commercial mortgage-backed securities		276		3		2		1		278		4
Asset-backed securities		23		—		—		—		23		—
Other debt securities		25		1		3		—		28		1
Equity securities		4		—		—		—		4		—

Total securities available for sale	$	4,979	$	72	$	162	$	30	$	5,141	$	102


	December 31, 2010
	Less than 12 months				12 months or more				Total
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(Dollars in millions)	Value		Losses		Value		Losses		Value		Losses

U.S. government sponsored agencies	$	240	$	—	$	—	$	—	$	240	$	—
Residential mortgage-backed securities:
U.S. government and government sponsored agencies		6,320		125		35		—		6,355		125
Privately issued		140		1		165		31		305		32
Commercial mortgage-backed securities		—		—		2		1		2		1
Asset-backed securities		110		—		—		—		110		—
Other debt securities		1		—		20		—		21		—
Equity securities		5		1		—		—		5		1

Total securities available for sale	$	6,816	$	127	$	222	$	32	$	7,038	$	159

Securities Held to Maturity


	June 30, 2011
	Less than 12 months						12 months or more						Total
			Unrealized Losses						Unrealized Losses						Unrealized Losses
	Fair		Recognized		Not Recognized		Fair		Recognized		Not Recognized		Fair		Recognized		Not Recognized
(Dollars in millions)	Value		in OCI		in OCI		Value		in OCI		in OCI		Value		in OCI		in OCI

CLOs	$	58	$	—	$	2	$	1,542	$	417	$	—	$	1,600	$	417	$	2


	December 31, 2010
	Less than 12 months						12 months or more						Total
			Unrealized Losses						Unrealized Losses						Unrealized Losses
	Fair		Recognized		Not Recognized		Fair		Recognized		Not Recognized		Fair		Recognized		Not Recognized
(Dollars in millions)	Value		in OCI		in OCI		Value		in OCI		in OCI		Value		in OCI		in OCI

CLOs	$	—	$	—	$	—	$	1,558	$	455	$	1	$	1,558	$	455	$	1

At June 30, 2011, the Company did not have the intent to sell temporarily impaired securities until a recovery of the amortized cost, which may be at maturity. The Company also believes it is more likely than not that it will not have to sell the securities prior to recovery of amortized cost.

The following describes the nature of the Company’s investments, the causes of impairment, the severity and duration of the impairment, if applicable, and the conclusions reached on the temporary or other-than-temporary status of the unrealized losses.

Residential Mortgage-Backed Securities—U.S. Government and Government Sponsored Agencies

Agency residential mortgage-backed securities consist of securities guaranteed by the U.S. government or government sponsored agencies such as Fannie Mae and Freddie Mac. These securities are collateralized by residential mortgage loans and may be prepaid at par prior to maturity. The unrealized losses on agency residential mortgage-backed securities resulted from changes in interest rates and not credit quality. As a result, the securities were not other-than-temporarily impaired at June 30, 2011.

Residential Mortgage-Backed Securities—Privately Issued

Non-agency residential mortgage-backed securities are privately issued by financial institutions with no guarantee from government sponsored entities. These securities are collateralized by residential mortgage loans and may be prepaid at par prior to maturity. The securities are primarily rated investment grade. The unrealized losses on non-agency residential mortgage-backed securities resulted from declining credit quality of underlying collateral and additional credit spread widening since purchase. The Company estimated loss projections for each security by assessing the loans collateralizing each security. The Company estimates the portion of loss attributable to credit based on the expected cash flows of the underlying collateral using industry consensus estimates of current key assumptions, such as default rates, loss severity and prepayment rates. Based on this assessment of expected credit losses of each security, impairment recognized during the first half of 2011 was not significant. With respect to the remaining portfolio at June 30, 2011, the Company expects to recover the entire amortized cost basis of these securities.

Collateralized Loan Obligations

The Company’s CLOs primarily consist of Cash Flow CLOs. A Cash Flow CLO is a structured finance product that securitizes a diversified pool of loan assets into multiple classes of notes. Cash Flow CLOs pay the note holders through the receipt of interest and principal repayments from the underlying loans unlike other types of CLOs that pay note holders through the trading and sale of underlying collateral. Certain of these CLOs are illiquid securities for which fair values are difficult to obtain. Unrealized losses arise from widening credit spreads, credit quality of the underlying collateral, uncertainty regarding the valuation of such securities and the market’s opinion of the performance of the fund managers. Cash flow analysis of the underlying collateral provides an estimate of other-than-temporary impairment, which is performed quarterly when the fair value of a security is lower than its amortized cost. Based on the analysis performed as of June 30, 2011, no other-than-temporary impairment was recorded.

Securities Pledged as Collateral

Transactions involving purchases of securities under agreements to resell (reverse repurchase agreements or reverse repos) or sales of securities under agreements to repurchase (repurchase agreements or repos) are accounted for as collateralized financings except where the Company does not have an agreement to sell (or purchase) the same or substantially the same securities before maturity at a fixed or determinable price. The Company’s policy is to obtain possession of collateral with a market value equal to or in excess of the principal amount loaned under resale agreements. Collateral is valued daily, and the Company may require counterparties to deposit additional collateral or return collateral pledged, when appropriate.

The Company separately identifies in the consolidated balance sheets, securities pledged as collateral in secured borrowings and other arrangements when the secured party can sell or repledge the securities. If the secured party cannot resell or repledge the securities that have been placed as collateral, those securities are not separately identified. At June 30, 2011, the Company had $4.7 billion of securities available for sale pledged as collateral where the secured party cannot resell or repledge such securities. These available for sale securities have been pledged to secure borrowings ($1.3 billion), to support unrealized losses on derivative transactions reported in trading liabilities ($0.5 billion) and to secure public and trust department deposits ($2.9 billion).

At June 30, 2011 and December 31, 2010, the Company accepted securities as collateral that it is permitted by contract to sell or repledge of $74 million ($63 million of which has been repledged to cover short sales) and $12 million ($1 million of which has been repledged to secure public agency or bankruptcy deposits and to cover short sales), respectively. These securities were received as collateral for secured lending and to obtain qualified securities to meet the Company’s collateral needs.

- Definition

Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27405-111563

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 310
-SubTopic 30
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6379141&loc=d3e15032-111544

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Equity Security
-URI http://asc.fasb.org/extlink&oid=6511694
-Topic 320

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27161-111563

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Glossary Debt Security
-URI http://asc.fasb.org/extlink&oid=6509901
-Topic 320

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 115
-Paragraph 3, 19, 20, 21, 22, 137
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27232-111563

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27357-111563

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 320
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6957658&loc=d3e62557-112803

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 320
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=6872113&loc=d3e27290-111563

+ Details