Securities

6 Months Ended

Jun. 30, 2012

Securities [Abstract]

Securities

Note 2—Securities

Securities Available for Sale

At June 30, 2012 and December 31, 2011, the amortized cost, gross unrealized gains, gross unrealized losses, and fair values of securities are presented below.

	June 30, 2012
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. government sponsored agencies	$	5,393	$	66	$	—	$	5,459
Residential mortgage-backed securities:
U.S. government and government sponsored agencies		11,125		213		1		11,337
Privately issued		653		4		34		623
Commercial mortgage-backed securities		1,503		53		2		1,554
Other debt securities		1,480		11		5		1,486
Equity securities		86		—		—		86
Total securities available for sale	$	20,240	$	347	$	42	$	20,545

Other debt securities in the table above include approximately $0.9 billion of tax-exempt conduit debt bonds. These instruments were recorded as loans held for investment in prior periods.

	December 31, 2011
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
U.S. government sponsored agencies	$	6,943	$	54	$	—	$	6,997
Residential mortgage-backed securities:
U.S. government and government sponsored agencies		13,307		182		4		13,485
Privately issued		800		1		63		738
Commercial mortgage-backed securities		1,032		29		1		1,060
Other debt securities		463		11		2		472
Equity securities		81		—		—		81
Total securities available for sale	$	22,626	$	277	$	70	$	22,833

The Company’s securities available for sale with a continuous unrealized loss position at June 30, 2012 and December 31, 2011 are shown below, identified for periods less than 12 months and 12 months or more.

	June 30, 2012
	Less than 12 months				12 months or more				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Residential mortgage-backed securities:
U.S. government and government sponsored agencies	$	232	$	1	$	25	$	—	$	257	$	1
Privately issued		87		1		247		33		334		34
Commercial mortgage-backed securities		123		—		19		2		142		2
Other debt securities		76		4		23		1		99		5
Total securities available for sale	$	518	$	6	$	314	$	36	$	832	$	42

	December 31, 2011
	Less than 12 months				12 months or more				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Residential mortgage-backed securities:
U.S. government and government sponsored agencies	$	1,106	$	4	$	59	$	—	$	1,165	$	4
Privately issued		551		23		99		40		650		63
Commercial mortgage-backed securities		95		1		—		—		95		1
Other debt securities		23		2		3		—		26		2
Total securities available for sale	$	1,775	$	30	$	161	$	40	$	1,936	$	70

At June 30, 2012, the Company did not have the intent to sell temporarily impaired securities before a recovery of the amortized cost, which may be at maturity. The Company also believes that it is more likely than not that it will not have to sell the securities prior to recovery of amortized cost.

Privately issued residential mortgage-backed securities are 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 privately issued 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 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 2012 was not significant. With respect to the remaining portfolio, at June 30, 2012, the Company expects to recover the entire amortized cost basis of these securities.

The amortized cost and fair value of debt securities available for sale by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

	June 30, 2012
(Dollars in millions)	Amortized Cost		Fair Value
Due in one year or less	$	1,539	$	1,547
Due after one year through five years		4,498		4,564
Due after five years through ten years		780		800
Due after ten years		13,337		13,548
Total debt securities available for sale	$	20,154	$	20,459

The proceeds from sales of securities available for sale and gross realized gains and losses are shown below. The specific identification method is used to calculate realized gains and losses on sales.

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Dollars in millions)	2012		2011		2012		2011
Proceeds from sales	$	2,873	$	1,918	$	4,124	$	3,831
Gross realized gains		30		29		49		58
Gross realized losses		1		—		1		—

Securities Held to Maturity

The securities held to maturity primarily consist of CLOs and U.S. government and government sponsored agencies residential mortgage-backed securities. Management has asserted the positive intent and ability to hold these securities to maturity. At June 30, 2012 and December 31, 2011, the amortized cost, gross unrealized gains and losses recognized in other comprehensive income (OCI), carrying amount, gross unrealized gains and losses not recognized in OCI, and fair values of securities held to maturity are presented below.

	June 30, 2012
			Recognized in OCI						Not Recognized in OCI
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Collateralized loan obligations (CLOs)	$	1,609	$	—	$	343	$	1,266	$	191	$	2	$	1,455
U.S. government and government sponsored agencies—residential mortgage backed securities		1,074		5		—		1,079		3		1		1,081
Total securities held to maturity	$	2,683	$	5	$	343	$	2,345	$	194	$	3	$	2,536

	December 31, 2011
			Recognized in OCI						Not Recognized in OCI
(Dollars in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Carrying Amount		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
CLOs	$	1,653	$	—	$	380	$	1,273	$	159	$	3	$	1,429

For securities held to maturity, the amount recognized in OCI primarily reflects the unrealized loss at date of transfer to the held to maturity classification, net of amortization. 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 Company’s securities held to maturity with a continuous unrealized loss position at June 30, 2012 and December 31, 2011 are shown below, separately for periods less than 12 months and 12 months or more.

	June 30, 2012
	Less than 12 months						12 months or more						Total
			Unrealized Losses						Unrealized Losses						Unrealized Losses
(Dollars in millions)	Fair Value		Recognized in OCI		Not Recognized in OCI		Fair Value		Recognized in OCI		Not Recognized in OCI		Fair Value		Recognized in OCI		Not Recognized in OCI
CLOs	$	—	$	—	$	—	$	1,447	$	343	$	2	$	1,447	$	343	$	2
U.S. government and government sponsored agencies—residential mortgage backed securities		449		—		1		—		—		—		449		—		1
Total securities held to maturity	$	449	$	—	$	1	$	1,447	$	343	$	2	$	1,896	$	343	$	3

	December 31, 2011
	Less than 12 months						12 months or more						Total
			Unrealized Losses						Unrealized Losses						Unrealized Losses
(Dollars in millions)	Fair Value		Recognized in OCI		Not Recognized in OCI		Fair Value		Recognized in OCI		Not Recognized in OCI		Fair Value		Recognized in OCI		Not Recognized in OCI
CLOs	$	—	$	—	$	—	$	1,420	$	380	$	3	$	1,420	$	380	$	3

The Company’s CLOs 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. Unrealized losses typically arise from widening credit spreads and credit quality of the underlying collateral. 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, 2012, no other-than-temporary impairment was recorded.

The amortized cost, fair value and carrying amount of securities held to maturity by contractual maturity are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to prepay obligations with or without prepayment penalties.

	June 30, 2012
(Dollars in millions)	Amortized Cost		Carrying Amount		Fair Value
Due in one year or less	$	1	$	—	$	1
Due after one year through five years		599		500		575
Due after five years through ten years		988		751		863
Due after ten years		1,095		1,094		1,097
Total securities held to maturity	$	2,683	$	2,345	$	2,536

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, 2012, the Company had $4.8 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 ($1.0 billion), to support unrealized losses on derivative transactions reported in trading liabilities ($0.6 billion) and to secure public and trust deposits ($3.2 billion).

At June 30, 2012 and December 31, 2011, the Company accepted securities as collateral that it is permitted by contract to sell or repledge of $17 million ($3 million of which has been repledged to secure borrowings) and $12 million (all 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.