INVESTMENT SECURITIES

A summary of the Corporation’s investment securities available-for-sale follows:



(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
December 31, 2012
U.S. Treasury and other U.S. government agency securities	$	20	$	—	$	—	$	20
Residential mortgage-backed securities (a)	9,687		248		—		9,935
State and municipal securities (b)	27		—		4		23
Corporate debt securities:
Auction-rate debt securities	1		—		—		1
Other corporate debt securities	57		—		—		57
Equity and other non-debt securities:
Auction-rate preferred securities	163		—		7		156
Money market and other mutual funds	105		—		—		105
Total investment securities available-for-sale	$	10,060	$	248	$	11	$	10,297

December 31, 2011
U.S. Treasury and other U.S. government agency securities	$	20	$	—	$	—	$	20
Residential mortgage-backed securities (a)	9,289		224		1		9,512
State and municipal securities (b)	29		—		5		24
Corporate debt securities:
Auction-rate debt securities	1		—		—		1
Other corporate debt securities	46		—		—		46
Equity and other non-debt securities:
Auction-rate preferred securities	423		—		15		408
Money market and other mutual funds	93		—		—		93
Total investment securities available-for-sale	$	9,901	$	224	$	21	$	10,104


(a)	Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.


(b)	Primarily auction-rate securities.

A summary of the Corporation’s investment securities available-for-sale in an unrealized loss position as of December 31, 2012 and 2011 follows:



	Temporarily Impaired
	Less than 12 Months				12 Months or more					Total
(in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
December 31, 2012
State and municipal securities (b)	$	—	$	—	$	23	$	4		$	23	$	4
Corporate debt securities:
Auction-rate debt securities	—		—		1		—		(c)	1		—		(c)
Equity and other non-debt securities:
Auction-rate preferred securities	—		—		156		7			156		7
Total impaired securities	$	—	$	—	$	180	$	11		$	180	$	11
December 31, 2011
Residential mortgage-backed securities (a)	$	249	$	1	$	—	$	—		$	249	$	1
State and municipal securities (b)	—		—		24		5			24		5
Corporate debt securities:
Auction-rate debt securities	—		—		1		—		(c)	1		—		(c)
Equity and other non-debt securities:
Auction-rate preferred securities	88		1		320		14			408		15
Total impaired securities	$	337	$	2	$	345	$	19		$	682	$	21


(a)	Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.


(b)	Primarily auction-rate securities.


(c)	Unrealized losses less than $0.5 million.

At December 31, 2012, the Corporation had 77 securities in an unrealized loss position with no credit impairment, including 54 auction-rate preferred securities, 22 state and municipal auction-rate securities and one auction-rate debt security. As of December 31, 2012, approximately 95 percent of the auction-rate securities that have been redeemed or sold since acquisition were redeemed or sold at or above cost. Approximately 85 percent of the aggregate auction-rate securities par value have been redeemed or sold since acquisition as of December 31, 2012. The unrealized losses for these securities resulted from changes in market interest rates and liquidity. The Corporation ultimately expects full collection of the carrying amount of these securities, does not intend to sell the securities in an unrealized loss position, and it is not more-likely-than-not that the Corporation will be required to sell the securities in an unrealized loss position prior to recovery of amortized cost. The Corporation does not consider these securities to be other-than-temporarily impaired at December 31, 2012.

Sales, calls and write-downs of investment securities available-for-sale resulted in the following gains and losses, recorded in “net securities gains” on the consolidated statements of income, computed based on the adjusted cost of the specific security.



(in millions)
Years Ended December 31	2012			2011			2010
Securities gains	$	14		$	22		$	13
Securities losses (a)	(2		)	(8		)	(10		)
Total net securities gains	$	12		$	14		$	3

(a) Primarily charges related to a derivative contract tied to the conversion rate of Visa Class B shares.

The following table summarizes the amortized cost and fair values of debt securities by contractual maturity. Securities with multiple maturity dates are classified in the period of final maturity. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.



(in millions)
December 31, 2012	Amortized Cost		Fair Value
Contractual maturity
Within one year	$	86	$	86
After one year through five years	551		557
After five years through ten years	125		124
After ten years	9,030		9,269
Subtotal	9,792		10,036
Equity and other nondebt securities:
Auction-rate preferred securities	163		156
Money market and other mutual funds	105		105
Total investment securities available-for-sale	$	10,060	$	10,297

Included in the contractual maturity distribution in the table above were auction-rate securities with a total amortized cost and fair value of $28 million and $24 million, respectively. Auction-rate securities are long-term, floating rate instruments for which interest rates are reset at periodic auctions. At each successful auction, the Corporation has the option to sell the security at par value. Additionally, the issuers of auction-rate securities generally have the right to redeem or refinance the debt. As a result, the expected life of auction-rate securities may differ significantly from the contractual life. Also included in the table above were residential mortgage-backed securities with a total amortized cost and fair value of $9.7 billion and $9.9 billion, respectively. The actual cash flows of mortgage-backed securities may differ from contractual maturity as the borrowers of the underlying loans may exercise prepayment options.

At December 31, 2012, investment securities with a carrying value of $2.8 billion were pledged where permitted or required by law to secure $2.1 billion of liabilities, primarily public and other deposits of state and local government agencies and derivative instruments.

The following table summarizes auction-rate securities activity for the years ended December 31, 2012 and 2011.



(in millions)	Par Value			Fair Value (a)
Balance at January 1, 2011	$	677		$	610
Redemptions	(201		)	(201		)
Net securities gains				10
Net unrealized gains (b)				14
Balance at December 31, 2011	$	476		$	433
Redemptions	(276		)	(276		)
Net securities gains				14
Net unrealized gains (b)				9
Balance at December 31, 2012	$	200		$	180


(a)	Recorded in “investment securities available-for-sale” on the consolidated balance sheets.


(b)	Changes in fair value recognized in accumulated other comprehensive income (loss).