6. Securities Available for Sale and Securities Held to Maturity

The amortized cost, gross unrealized gains and losses, and fair value of securities available for sale and securities held to maturity are as follows:


December 31, 2011	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	20,666	$	269	$	14	$	20,921
Non-agency residential mortgage-backed securities		1,130		—		223		907
Certificates of deposit		3,623		2		3		3,622
Corporate debt securities		3,592		5		26		3,571
U.S. agency notes		1,795		5		—		1,800
Asset-backed and other securities		3,144		7		7		3,144

Total securities available for sale	$	33,950	$	288	$	273	$	33,965

Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	14,770	$	430	$	2	$	15,198
Other securities		338		3		—		341

Total securities held to maturity	$	15,108	$	433	$	2	$	15,539


December 31, 2010	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	12,879	$	222	$	3	$	13,098
Non-agency residential mortgage-backed securities		1,701		3		234		1,470
Certificates of deposit		1,874		1		—		1,875
Corporate debt securities		2,261		8		1		2,268
U.S. agency notes		2,757		23		—		2,780
Asset-backed securities		2,495		9		2		2,502

Total securities available for sale	$	23,967	$	266	$	240	$	23,993

Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	16,722	$	209	$	137	$	16,794
Other securities		1,040		14		—		1,054

Total securities held to maturity	$	17,762	$	223	$	137	$	17,848

A summary of securities with unrealized losses, aggregated by category and period of continuous unrealized loss, is as follows:


	Less than				12 months
	12 months				or longer				Total
December 31, 2011	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	5,551	$	14	$	—	$	—	$	5,551	$	14
Non-agency residential mortgage-backed securities		121		8		746		215		867		223
Certificates of deposit		2,158		3		—		—		2,158		3
Corporate debt securities		1,888		26		—		—		1,888		26
Asset-backed and other securities		1,376		6		152		1		1,528		7

Total	$	11,094	$	57	$	898	$	216	$	11,992	$	273

Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	384	$	2	$	—	$	—	$	384	$	2

Total	$	384	$	2	$	—	$	—	$	384	$	2

Total securities with unrealized losses ⁽¹⁾	$	11,478	$	59	$	898	$	216	$	12,376	$	275

⁽¹⁾	The number of investment positions with unrealized losses totaled 296 for securities available for sale and 3 for securities held to maturity.


	Less than				12 months
	12 months				or longer				Total
December 31, 2010	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Securities available for sale:
U.S. agency residential mortgage-backed securities	$	707	$	3	$	—	$	—	$	707	$	3
Non-agency residential mortgage-backed securities		—		—		1,207		234		1,207		234
Corporate debt securities		549		1		—		—		549		1
Asset-backed securities		873		2		—		—		873		2

Total	$	2,129	$	6	$	1,207	$	234	$	3,336	$	240

Securities held to maturity:
U.S. agency residential mortgage-backed securities	$	6,880	$	137	$	—	$	—	$	6,880	$	137

Total	$	6,880	$	137	$	—	$	—	$	6,880	$	137

Total securities with unrealized losses ⁽¹⁾	$	9,009	$	143	$	1,207	$	234	$	10,216	$	377

⁽¹⁾	The number of investment positions with unrealized losses totaled 178 for securities available for sale and 37 for securities held to maturity.

Unrealized losses in securities available for sale of $273 million as of December 31, 2011, were concentrated in non-agency residential mortgage-backed securities. Included in non-agency residential mortgage-backed securities are securities collateralized by loans that are considered to be “Prime” (defined as loans to borrowers with a Fair Isaac & Company credit score of 620 or higher at origination), and “Alt-A” (defined as Prime loans with reduced documentation at origination). At December 31, 2011, the amortized cost and fair value of Alt-A residential mortgage-backed securities were $390 million and $279 million, respectively.

Management evaluates whether securities available for sale and securities held to maturity are other-than-temporarily impaired (OTTI) on a quarterly basis as described in note “2 – Summary of Significant Accounting Policies.”

Certain Alt-A and Prime residential mortgage-backed securities experienced continued credit deterioration in 2011, including increased payment delinquency rates and losses on foreclosures of underlying mortgages. Based on the Company’s cash flow projections, management determined that it does not expect to recover all of the amortized cost of these securities and therefore determined that these securities were OTTI. The Company employs a buy and hold strategy relative to its mortgage-related securities, and does not intend to sell these securities and it will not be required to sell these securities before anticipated recovery of the unrealized losses on these securities. Further, the Company has an adequate liquidity position at December 31, 2011, with cash and cash equivalents totaling $8.7 billion, a loan-to-deposit ratio of 16%, adequate access to short-term borrowing facilities and regulatory capital ratios in excess of “well capitalized” levels. Because the Company does not intend to sell these securities and it is not “more likely than not” that the Company will be required to sell these securities, the Company recognized an impairment charge equal to the securities’ expected credit losses of $31 million in 2011. The expected credit losses were measured as the difference between the present value of expected cash flows and the amortized cost of the securities. Further deterioration in the performance of the underlying loans in the Company’s residential mortgage-backed securities portfolio could result in the recognition of additional impairment charges.

Actual credit losses on the Company’s residential mortgage-backed securities were not material in 2011 or 2010. There were no actual credit losses on the Company’s residential mortgage-backed securities in 2009.

The following table is a rollforward of the amount of credit losses recognized in earnings for OTTI securities held by the Company during the period for which a portion of the impairment was recognized in other comprehensive income:


Year Ended December 31,	2011		2010		2009
Balance at beginning of year	$	96	$	60	$	—
Credit losses recognized into current year earnings on debt securities for which an other-than-temporary impairment was not previously recognized		6		7		60
Credit losses recognized into current year earnings on debt securities for which an other-than-temporary impairment was previously recognized		25		29		—

Balance at the end of year	$	127	$	96	$	60

The maturities of securities available for sale and securities held to maturity at December 31, 2011, are as follows:


	Within 1 year		After 1 year through 5 years		After 5 years through 10 years		After 10 years		Total
Securities available for sale:
U.S. agency residential mortgage-backed securities ⁽¹⁾	$	—	$	2	$	2,950	$	17,969	$	20,921
Non-agency residential mortgage-backed securities ⁽¹⁾		—		—		13		894		907
Certificates of deposit		1,897		1,725		—		—		3,622
Corporate debt securities		954		2,517		100		—		3,571
U.S. agency notes		—		1,800		—		—		1,800
Asset-backed and other securities		225		812		534		1,573		3,144

Total fair value	$	3,076	$	6,856	$	3,597	$	20,436	$	33,965
Total amortized cost	$	3,076	$	6,871	$	3,512	$	20,491	$	33,950

Securities held to maturity:
U.S. agency residential mortgage-backed securities ⁽¹⁾	$	—	$	—	$	2,581	$	12,617	$	15,198
Other securities		117		224		—		—		341

Total fair value	$	117	$	224	$	2,581	$	12,617	$	15,539
Total amortized cost	$	116	$	222	$	2,507	$	12,263	$	15,108

⁽¹⁾

Residential mortgage-backed securities have been allocated to maturity groupings based on final contractual maturities. Actual maturities will differ from final contractual maturities because borrowers on a certain portion of loans underlying these securities have the right to prepay their obligations.

Proceeds and gross realized gains (losses) from sales of securities available for sale are as follows:


Year Ended December 31,	2011		2010		2009
Proceeds	$	500	$	871	$	107
Gross realized gains	$	1	$	1	$	1
Gross realized losses	$	—	$	—	$	(4	)