Note 4 – Securities

The following tables present the amortized cost, the gross unrealized gains and losses and the fair value of securities at June 30, 2012 and Dec. 31, 2011.

Securities at June 30, 2012

Gross

Amortized

unrealized

Fair

(in millions)

cost

Gains

Losses

value

Available-for-sale:

U.S. Treasury

13,915

555

14,470

U.S. Government agencies

1,066

1,097

State and political subdivisions

5,561

5,602

Agency RMBS

32,262

774

33,032

Alt-A RMBS

267

258

Prime RMBS

816

764

Subprime RMBS

555

136

422

Other RMBS

2,654

176

2,487

Commercial MBS

3,269

123

3,320

Asset-backed CLOs

1,103

1,080

Other asset-backed securities

1,182

1,189

Foreign covered bonds

3,870

3,928

Corporate bonds

1,571

1,628

Other debt securities

10,980

301

11,280

(a)

Equity securities

Money market funds

918

Alt-A RMBS (b)

1,677

213

1,863

Prime RMBS (b)

956

111

1,059

Subprime RMBS (b)

112

115

Total securities

available-for-sale

82,758

2,357

575

84,540

Held-to-maturity:

U.S. Treasury

862

922

State and political subdivisions

Agency RMBS

6,336

6,409

Alt-A RMBS

126

120

Prime RMBS

108

103

Subprime RMBS

Other RMBS

1,226

1,182

Commercial MBS

Other securities

Total securities held-to-maturity

8,794

188

113

8,869

Total securities

91,552

2,545

688

93,409

(a)

Includes $9.0 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

17,326

U.S. Government agencies

932

958

State and political subdivisions

2,724

2,739

Agency RMBS

26,232

575

26,796

Alt-A RMBS

306

273

Prime RMBS

916

102

815

Subprime RMBS

606

190

418

Other RMBS

1,133

230

903

Commercial MBS

3,327

3,339

Asset-backed CLOs

1,480

1,444

Other asset-backed securities

527

532

Foreign covered bonds

2,410

2,425

Corporate bonds

1,696

1,738

Other debt securities

14,320

292

14,579

(a)

Equity securities

Money market funds

973

Alt-A RMBS (b)

1,790

157

1,879

Prime RMBS (b)

1,090

106

1,175

Subprime RMBS (b)

122

125

Total securities available-for-sale

77,424

1,917

874

78,467

Held-to-maturity:

U.S. Treasury

813

866

State and political subdivisions

100

103

Agency RMBS

658

697

Alt-A RMBS

153

138

Prime RMBS

121

111

Subprime RMBS

Other RMBS

1,617

1,571

Commercial MBS

Other securities

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)	2Q12			1Q12			2Q11			YTD12			YTD11
Realized gross gains	$	122		$	62		$	67		$	184		$	86
Realized gross losses		(5	)		-			(11	)		(5	)		(20	)
Recognized gross impairments		(67	)		(22	)		(8	)		(89	)		(13	)
Total net securities gains (losses)	$	50		$	40		$	48		$	90		$	53

Temporarily impaired securities

At June 30, 2012, substantially all of the unrealized 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 June 30, 2012	Less than 12 months				12 months or more				Total
Temporarily impaired securities at June 30, 2012	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in millions)	value		losses		value		losses		value		losses
Available-for-sale:
State and political subdivisions	$	1,659	$	7	$	165	$	30	$	1,824	$	37
Agency RMBS		2,657		3		118		1		2,775		4
Alt-A RMBS		92		7		48		18		140		25
Prime RMBS		99		7		489		47		588		54
Subprime RMBS		26		11		375		125		401		136
Other RMBS		663		5		697		171		1,360		176
Commercial MBS		180		1		433		71		613		72
Asset-backed CLOs		783		13		111		12		894		25
Other asset-backed securities		435		1		8		2		443		3
Foreign covered bonds		429		2		13		-		442		2
Corporate bonds		36		2		-		-		36		2
Other debt securities		1,044		1		17		-		1,061		1
Alt-A RMBS (a)		282		15		95		12		377		27
Prime RMBS (a)		159		7		23		1		182		8
Subprime RMBS (a)		31		3		-		-		31		3
Total securities available-for-sale	$	8,575	$	85	$	2,592	$	490	$	11,167	$	575
Held-to-maturity:
Agency RMBS	$	1,652	$	6	$	-	$	-	$	1,652	$	6
Alt-A RMBS		25		2		39		10		64		12
Prime RMBS		-		-		55		6		55		6
Subprime RMBS		-		-		25		3		25		3
Other RMBS		60		2		468		81		528		83
Commercial MBS		-		-		23		3		23		3
Total securities held-to-maturity	$	1,737	$	10	$	610	$	103	$	2,347	$	113
Total temporarily impaired securities	$	10,312	$	95	$	3,202	$	593	$	13,514	$	688

(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
Temporarily impaired securities at Dec. 31, 2011	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in millions)	value		losses		value		losses		value		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 June 30, 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	$	174		0.65	%	$	-		-	%	$	110		1.53	%	$	3,268		1.09	%	$	-		-	%	$	3,552
Over 1 through 5 years		9,180		0.95			1,011		1.62			2,397		1.58			10,984		1.45			-		-			23,572
Over 5 through 10 years		1,868		2.91			86		2.06			2,548		3.10			2,406		2.83			-		-			6,908
Over 10 years		3,248		3.13			-		-			547		4.15			178		2.48			-		-			3,973
Mortgage-backed securities		-		-			-		-			-		-			-		-			43,320		2.92			43,320
Asset-backed securities		-		-			-		-			-		-			-		-			2,269		1.72			2,269
Equity securities (b)		-		-			-		-			-		-			-		-			946		-			946
Total	$	14,470		1.69	%	$	1,097		1.65	%	$	5,602		2.52	%	$	16,836		1.59	%	$	46,535		2.80	%	$	84,540
Securities held-to-maturity:
One year or less	$	-		-	%	$	-		-	%	$	1		6.87	%	$	3		0.07	%	$	-		-	%	$	4
Over 1 through 5 years		559		1.82			-		-			-		-			-		-			-		-			559
Over 5 through 10 years		363		2.66			-		-			31		6.59			-		-			-		-			394
Over 10 years		-		-			-		-			50		6.55			-		-			-		-			50
Mortgage-backed securities		-		-			-		-			-		-			-		-			7,862		2.99			7,862
Total	$	922		2.15	%	$	-		-	%	$	82		6.57	%	$	3		0.07	%	$	7,862		2.99	%	$	8,869

(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 June 30, 2012 and Dec. 31, 2011.


Projected weighted-average default rates and severities
	June 30, 2012						Dec. 31, 2011
	Default Rate			Severity			Default Rate			Severity
Alt-A		43	%		57	%		44	%		57	%
Subprime		62	%		72	%		63	%		73	%
Prime		24	%		43	%		25	%		43	%

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


Net securities gains										Year-to-date
(in millions)	2Q12			1Q12			2Q11			2012			2011
U.S. Treasury	$	44		$	38		$	41		$	82		$	41
Sovereign debt		61			7			-			68			-
FDIC-insured debt		-			10			-			10			-
Corporate bonds		7			2			-			9			-
Prime RMBS		(1	)		(1	)		-			(2	)		9
Alt-A RMBS		(3	)		(10	)		(1	)		(13	)		4
Trust preferred		(18	)		-			-			(18	)		-
European floating rate notes		(22	)		(1	)		(12	)		(23	)		(15	)
Subprime RMBS		(23	)		(3	)		(6	)		(26	)		(12	)
Agency RMBS		-			-			8			-			8
Other		5			(2	)		18			3			18
Net securities gains (losses)	$	50		$	40		$	48		$	90		$	53

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)		2Q12		2Q11

Beginning balance as of March 31		$	266	$	183
Add:	Initial OTTI credit losses		38		7
	Subsequent OTTI credit losses		29		1
Less:	Realized losses for securities sold / consolidated		-		4
Ending balance as of June 30		$	333	$	187


Debt securities credit loss roll forward (in millions)		Year-to-date
		2012		2011
Beginning balance as of Jan. 1		$	253	$	182
Add:	Initial OTTI credit losses		49		9
	Subsequent OTTI credit losses		39		4
Less:	Realized losses for securities sold / consolidated		8		8
Ending balance as of June 30		$	333	$	187