Securities

3 Months Ended

Mar. 31, 2012

Securities

Note 4 – Securities

The following tables present the amortized cost, the gross unrealized gains and losses and the fair value of securities at March 31, 2012 and Dec. 31, 2011.

Securities at March 31, 2012			Gross
	Amortized		unrealized				Fair
(in millions)	cost		Gains		Losses		value
Available-for-sale:
U.S. Treasury	$	14,058	$	294	$	101	$	14,251
U.S. Government agencies		1,079		29		-		1,108
State and political subdivisions		3,964		58		49		3,973
Agency RMBS		31,882		643		28		32,497
Alt-A RMBS		289		19		24		284
Prime RMBS		865		3		57		811
Subprime RMBS		593		3		175		421
Other RMBS		1,559		2		214		1,347
Commercial MBS		3,435		123		76		3,482
Asset-backed CLOs		1,357		2		21		1,338
Other asset-backed securities		576		9		3		582
Foreign covered bonds		3,171		38		2		3,207
Corporate bonds		1,642		57		3		1,696
Other debt securities		13,878		300		24		14,154	(a)
Equity securities		28		6		-		34
Money market funds		957		-		-		957
Alt-A RMBS (b)		1,734		252		24		1,962
Prime RMBS (b)		1,024		136		7		1,153
Subprime RMBS (b)		111		8		2		117
Total securities available-for-sale		82,202		1,982		810		83,374
Held-to-maturity:
U.S. Treasury		862		43		-		905
State and political subdivisions		91		3		-		94
Agency RMBS		2,000		41		-		2,041
Alt-A RMBS		143		6		14		135
Prime RMBS		117		1		7		111
Subprime RMBS		28		-		3		25
Other RMBS		1,546		52		89		1,509
Commercial MBS		29		-		3		26
Other securities		3		-		-		3
Total securities held-to-maturity		4,819		146		116		4,849
Total securities	$	87,021	$	2,128	$	926	$	88,223

(a) Includes $12.4 billion, at fair value, of government-sponsored and guaranteed entities, and sovereign debt.

(b) Previously included in the Grantor Trust. The Grantor Trust was dissolved in the first quarter of 2011.

Securities at Dec. 31, 2011	Amortized		Gross unrealized				Fair
(in millions)	cost		Gains		Losses		value
Available-for-sale:
U.S. Treasury	$	16,814	$	514	$	2	$	17,326
U.S. Government agencies		932		26		-		958
State and political subdivisions		2,724		62		47		2,739
Agency RMBS		26,232		575		11		26,796
Alt-A RMBS		306		9		42		273
Prime RMBS		916		1		102		815
Subprime RMBS		606		2		190		418
Other RMBS		1,133		-		230		903
Commercial MBS		3,327		89		77		3,339
Asset-backed CLOs		1,480		1		37		1,444
Other asset-backed securities		527		8		3		532
Foreign covered bonds		2,410		18		3		2,425
Corporate bonds		1,696		47		5		1,738
Other debt securities		14,320		292		33		14,579	(a)
Equity securities		26		4		-		30
Money market funds		973		-		-		973
Alt-A RMBS (b)		1,790		157		68		1,879
Prime RMBS (b)		1,090		106		21		1,175
Subprime RMBS (b)		122		6		3		125
Total securities available-for-sale		77,424		1,917		874		78,467
Held-to-maturity:
U.S. Treasury		813		53		-		866
State and political subdivisions		100		3		-		103
Agency RMBS		658		39		-		697
Alt-A RMBS		153		4		19		138
Prime RMBS		121		-		10		111
Subprime RMBS		28		-		3		25
Other RMBS		1,617		47		93		1,571
Commercial MBS		28		-		2		26
Other securities		3		-		-		3
Total securities held-to-maturity		3,521		146		127		3,540
Total securities	$	80,945	$	2,063	$	1,001	$	82,007

(a) Includes $13.1 billion, at fair value, of government-sponsored and guaranteed entities, and sovereign debt.

(b) Previously included in the Grantor Trust. The Grantor Trust was dissolved in the first quarter of 2011.

Net securities gains (losses) (in millions)	1Q12			4Q11			1Q11
Realized gross gains	$	62		$	91		$	19
Realized gross losses		-			(34	)		(9	)
Recognized gross impairments		(22	)		(60	)		(5	)
Total net securities gains (losses)	$	40		$	(3	)	$	5

Temporarily impaired securities

At March 31, 2012, substantially all of the un-realized losses on the investment securities portfolio were attributable to credit spreads widening since purchase, and interest rate movements. We do not intend to sell these securities and it is not more likely than not that we will have to sell.

The following tables show the aggregate related fair value of investments that have been in a continuous unrealized loss position for less than 12 months and those that have been in a continuous unrealized loss position for 12 months or more.

Temporarily impaired securities at March 31, 2012	Less than 12 months				12 months or more				Total
(in millions)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Available-for-sale:
U.S. Treasury	$	4,727	$	101	$	-	$	-	$	4,727	$	101
State and political subdivisions		1,450		12		176		37		1,626		49
Agency RMBS		8,547		27		133		1		8,680		28
Alt-A RMBS		53		5		50		19		103		24
Prime RMBS		113		8		518		49		631		57
Subprime RMBS		22		13		382		162		404		175
Other RMBS		168		4		822		210		990		214
Commercial MBS		230		1		471		75		701		76
Asset-backed CLOs		845		12		280		9		1,125		21
Other asset-backed securities		141		1		18		2		159		3
Foreign covered bonds		321		2		161		-		482		2
Corporate bonds		120		3		-		-		120		3
Other debt securities		2,311		2		58		22		2,369		24
Alt-A RMBS (a)		266		11		99		13		365		24
Prime RMBS (a)		84		5		37		2		121		7
Subprime RMBS (a)		27		2		-		-		27		2
Total securities available-for-sale	$	19,425	$	209	$	3,205	$	601	$	22,630	$	810
Held-to-maturity:
Alt-A RMBS	$	47	$	1	$	79	$	13	$	126	$	14
Prime RMBS		-		-		57		7		57		7
Subprime RMBS		-		-		25		3		25		3
Other RMBS		698		2		672		87		1,370		89
Commercial MBS		-		-		26		3		26		3
Total securities held-to-maturity	$	745	$	3	$	859	$	113	$	1,604	$	116
Total temporarily impaired securities	$	20,170	$	212	$	4,064	$	714	$	24,234	$	926

(a) Previously included in the Grantor Trust. The Grantor Trust was dissolved in the first quarter of 2011.

Temporarily impaired securities at Dec. 31, 2011	Less than 12 months				12 months or more				Total
(in millions)	Fair value		Unrealized losses		Fair value		Unrealized losses		Fair value		Unrealized losses
Available-for-sale:
U.S. Treasury	$	118	$	2	$	-	$	-	$	118	$	2
State and political subdivisions		483		2		157		45		640		47
Agency RMBS		3,844		10		140		1		3,984		11
Alt-A RMBS		132		16		69		26		201		42
Prime RMBS		324		25		447		77		771		102
Subprime RMBS		-		-		400		190		400		190
Other RMBS		5		4		895		226		900		230
Commercial MBS		340		2		495		75		835		77
Asset-backed CLOs		1,143		26		211		11		1,354		37
Other asset-backed securities		60		1		18		2		78		3
Foreign covered bonds		368		1		406		2		774		3
Corporate bonds		254		5		-		-		254		5
Other debt securities		2,613		7		54		26		2,667		33
Alt-A RMBS (a)		595		53		29		15		624		68
Prime RMBS (a)		437		21		-		-		437		21
Subprime RMBS (a)		50		3		-		-		50		3
Total securities available-for-sale	$	10,766	$	178	$	3,321	$	696	$	14,087	$	874
Held-to-maturity:
Alt-A RMBS	$	69	$	3	$	42	$	16	$	111	$	19
Prime RMBS		-		-		56		10		56		10
Subprime RMBS		-		-		25		3		25		3
Other RMBS		107		2		573		91		680		93
Commercial MBS		-		-		26		2		26		2
Total securities held-to-maturity	$	176	$	5	$	722	$	122	$	898	$	127
Total temporarily impaired securities	$	10,942	$	183	$	4,043	$	818	$	14,985	$	1,001

(a) Previously included in the Grantor Trust. The Grantor Trust was dissolved in the first quarter of 2011.

The following table shows the maturity distribution by carrying amount and yield (on a tax equivalent basis) of our investment securities portfolio at March 31, 2012.

Investment securities portfolio	U.S. Treasury					U.S. Government agency					State and political subdivisions					Other bonds, notes and debentures					Mortgage/ asset-backed and equity securities
(dollars in millions)	Amount		Yield (a)			Amount		Yield(a)			Amount		Yield (a)			Amount		Yield (a)			Amount		Yield (a)			Total
Securities available-for-sale:
One year or less	$	229		0.66	%	$	-		-	%	$	89		1.17	%	$	2,903		1.16	%	$	-		-	%	$	3,221
Over 1 through 5 years		9,233		0.98			1,009		1.61			1,784		1.68			13,889		1.47			-		-			25,915
Over 5 through 10 years		2,263		2.83			99		0.02			1,608		3.45			2,046		2.98			-		-			6,016
Over 10 years		2,526		3.13			-		-			492		5.07			219		5.09			-		-			3,237
Mortgage-backed securities		-		-			-		-			-		-			-		-			42,074		3.90			42,074
Asset-backed securities		-		-			-		-			-		-			-		-			1,920		2.02			1,920
Equity securities (b)		-		-			-		-			-		-			-		-			991		-			991
Total	$	14,251		1.65	%	$	1,108		1.65	%	$	3,973		2.80	%	$	19,057		1.62	%	$	44,985		3.74	%	$	83,374
Securities held-to-maturity:
One year or less	$	-		-	%	$	-		-	%	$	1		6.87	%	$	3		0.11	%	$	-		-	%	$	4
Over 1 through 5 years		554		1.82			-		-			-		-			-		-			-		-			554
Over 5 through 10 years		351		2.65			-		-			31		6.65			-		-			-		-			382
Over 10 years		-		-			-		-			62		6.57			-		-			-		-			62
Mortgage-backed securities		-		-			-		-			-		-			-		-			3,847		2.49			3,847
Total	$	905		2.14	%	$	-		-	%	$	94		6.60	%	$	3		0.11	%	$	3,847		2.49	%	$	4,849

(a) Yields are based upon the amortized cost of securities.

(b) Includes money market funds.

Other-than-temporary impairment

We routinely conduct periodic reviews of all securities using economic models to identify and evaluate each investment security to determine whether OTTI has occurred. Various inputs to the economic models are used to determine if an unrealized loss on securities is other-than-temporary. For example, the most significant inputs related to non-agency RMBS are:

• Default rate – the number of mortgage loans expected to go into default over the life of the transaction, which is driven by the roll rate of loans in each performance bucket that will ultimately migrate to default; and

• Severity – the loss expected to be realized when a loan defaults.

To determine if an unrealized loss is other-than-temporary, we project total estimated defaults of the underlying assets (mortgages) and multiply that calculated amount by an estimate of realizable value upon sale of these assets in the marketplace (severity) in order to determine the projected collateral loss. We also evaluate the current credit enhancement underlying the bond to determine the impact on cash flows. If we determine that a given security will be subject to a write-down or loss, we record the expected credit loss as a charge to earnings.

In addition, we have estimated the expected loss by taking into account observed performance of the underlying securities, industry studies, market forecasts, as well as our view of the economic outlook affecting collateral.

The table below shows the projected weighted-average default rates and loss severities for the 2007, 2006 and late 2005 non-agency RMBS at March 31, 2012 and Dec. 31, 2011.

Projected weighted-average default rates and severities
	March 31, 2012						Dec. 31, 2011
	Default Rate			Severity			Default Rate			Severity
Alt-A		44	%		57	%		44	%		57	%
Subprime		63	%		72	%		63	%		73	%
Prime		25	%		43	%		25	%		43	%

The following table provides pre-tax net securities gains (losses) by type.

Net securities gains (losses)
(in millions)	1Q12			4Q11			1Q11
U.S. Treasury	$	38		$	33		$	-
FDIC-insured debt		10			-			-
Alt-A RMBS		(10	)		(39	)		5
Prime RMBS		(1	)		(10	)		9
Subprime RMBS		(3	)		(8	)		(6	)
European floating rate notes		(1	)		(20	)		(3	)
Sovereign debt		7			36			-
Corporate bonds		2			-			-
Other		(2	)		5			-
Net securities gains (losses)	$	40		$	(3	)	$	5

The following table reflects investment securities credit losses recorded in earnings. The beginning balance represents the credit loss component for which OTTI occurred on debt securities in prior periods. The additions represent the first time a debt security was credit impaired or when subsequent credit impairments have occurred. The deductions represent credit losses on securities that have been sold, are required to be sold or it is our intention to sell.

Debt securities credit loss roll forward (in millions)		1Q12		1Q11
Beginning balance as of Jan. 1		$	253	$	182
Add:	Initial OTTI credit losses		9		2
	Subsequent OTTI credit losses		12		3
Less:	Realized losses for securities sold / consolidated		8		4
Ending balance as of March 31		$	266	$	183