Securities

9 Months Ended

Sep. 30, 2012

4. Securities

The following table provides the amortized cost, fair value and unrealized gains and losses for the major categories of the available-for-sale and held-to-maturity securities portfolios as of:

			Amortized	Unrealized	Unrealized	Fair
September 30, 2012 ($ in millions)			Cost	Gains	Losses	Value
Available-for-sale and other:
	U.S. Treasury and government agencies	$	41	-	-	41
	U.S. Government sponsored agencies		1,730	192	-	1,922
	Obligations of states and political subdivisions		203	8	-	211
	Agency mortgage-backed securities		8,534	461	(9)	8,986
	Other bonds, notes and debentures		3,055	114	(5)	3,164
	Other securities^(a)		1,078	-	-	1,078
Total		$	14,641	775	(14)	15,402
Held-to-maturity:
	Obligations of states and political subdivisions	$	285	-	-	285
	Other debt securities		2	-	-	2
Total		$	287	-	-	287


			Amortized	Unrealized	Unrealized	Fair
December 31, 2011 ($ in millions)			Cost	Gains	Losses	Value
Available-for-sale and other:
	U.S. Treasury and government agencies	$	171	-	-	171
	U.S. Government sponsored agencies		1,782	180	-	1,962
	Obligations of states and political subdivisions		96	5	-	101
	Agency mortgage-backed securities		9,743	542	(1)	10,284
	Other bonds, notes and debentures		1,792	29	(9)	1,812
	Other securities^(a)		1,030	2	-	1,032
Total		$	14,614	758	(10)	15,362
Held-to-maturity:
	Obligations of states and political subdivisions	$	320	-	-	320
	Other debt securities		2	-	-	2
Total		$	322	-	-	322

			Amortized	Unrealized	Unrealized	Fair
September 30, 2011 ($ in millions)			Cost	Gains	Losses	Value
Available-for-sale and other:
	U.S. Treasury and government agencies	$	201	1	-	202
	U.S. Government sponsored agencies		1,808	182	-	1,990
	Obligations of states and political subdivisions		101	4	-	105
	Agency mortgage-backed securities		10,413	605	(1)	11,017
	Other bonds, notes and debentures		1,567	17	(11)	1,573
	Other securities^(a)		1,337	3	-	1,340
Total		$	15,427	812	(12)	16,227
Held-to-maturity:
	Obligations of states and political subdivisions	$	335	-	-	335
	Other debt securities		2	-	-	2
Total		$	337	-	-	337

(a) Other securities consist of FHLB and FRB restricted stock holdings of $497 and $346, respectively, at September 30, 2012, and $497 and $345, respectively, at December 31, 2011 and September 30, 2011, that are carried at cost, and certain mutual fund and equity security holdings.

The following table presents realized gains and losses that were recognized in income from available-for-sale securities:

		For the three months		For the nine months
		ended September 30,		ended September 30,
($ in millions)		2012	2011	2012	2011
Realized gains	$	29	48	57	65
Realized losses		-	-	(2)	-
OTTI		(23)	(9)	(39)	(9)
Net realized gains	$	6	39	16	56

Trading securities totaled $205 million as of September 30, 2012, compared to $177 million at December 31, 2011 and $189 million at September 30, 2011. Gross realized gains on trading securities were $1 million for the three and nine months ended September 30, 2012, respectively. Gross realized gains on trading securities were immaterial for the three months ended September 30, 2011 and were $1 million for the nine months ended September 30, 2011. Gross realized losses on trading securities were immaterial to the Bancorp for the three and nine months ended September 30, 2012 and were immaterial for the three months ended September 30, 2011 and $1 million for the nine months ended September 30, 2011. Net unrealized gains on trading securities were immaterial for the three months ended September 30, 2012 and were $1 million for the nine months ended September 30, 2012 and net unrealized losses were $8 million for the three and nine months ended September 30, 2011, respectively.

At September 30, 2012, December 31, 2011, and September 30, 2011 securities with a fair value of $12.2 billion, $13.3 billion, and $11.6 billion, respectively, were pledged to secure borrowings, public deposits, trust funds, derivative contracts and for other purposes as required or permitted by law.

The expected maturity distribution of the Bancorp’s agency mortgage-backed securities and the contractual maturity distribution of the Bancorp’s other available-for-sale and held-to-maturity securities as of September 30, 2012 are shown in the following table.

			Available-for-Sale and Other		Held-to-Maturity
($ in millions)			Amortized Cost	Fair Value	Amortized Cost	Fair Value
Debt securities:^(a)
	Under 1 year	$	605	619	18	18
	1-5 years		9,411	10,003	239	239
	5-10 years		1,722	1,812	20	20
	Over 10 years		1,825	1,890	10	10
Other securities			1,078	1,078	-	-
Total		$	14,641	15,402	287	287

The following table provides the fair value and gross unrealized losses on available-for-sale securities in an unrealized loss position, aggregated by investment category and length of time the individual securities have been in a continuous unrealized loss position as of:

		Less than 12 months		12 months or more		Total
			Unrealized		Unrealized		Unrealized
($ in millions)		Fair Value	Losses	Fair Value	Losses	Fair Value	Losses
September 30, 2012
U.S. Treasury and government agencies	$	-	-	-	-	-	-
U.S. Government sponsored agencies		-	-	-	-	-	-
Obligations of states and political subdivisions		-	-	-	-	-	-
Agency mortgage-backed securities		185	(9)	5	-	190	(9)
Other bonds, notes and debentures		418	(5)	-	-	418	(5)
Other securities		-	-	-	-	-	-
Total	$	603	(14)	5	-	608	(14)

December 31, 2011
U.S. Treasury and government agencies	$	70	-	1	-	71	-
U.S. Government sponsored agencies		-	-	-	-	-	-
Obligations of states and political subdivisions		-	-	2	-	2	-
Agency mortgage-backed securities		34	(1)	6	-	40	(1)
Other bonds, notes and debentures		523	(4)	38	(5)	561	(9)
Other securities		6	-	-	-	6	-
Total	$	633	(5)	47	(5)	680	(10)

September 30, 2011
U.S. Treasury and government agencies	$	100	-	-	-	100	-
U.S. Government sponsored agencies		-	-	-	-	-	-
Obligations of states and political subdivisions		-	-	3	-	3	-
Agency mortgage-backed securities		27	-	11	(1)	38	(1)
Other bonds, notes and debentures		622	(6)	45	(5)	667	(11)
Other securities		-	-	-	-	-	-
Total	$	749	(6)	59	(6)	808	(12)

Other-Than-Temporary Impairments

The Bancorp recognized $23 million and $39 million of OTTI, included in securities gains, net, in the Bancorp's Condensed Consolidated Statements of Income, on its available-for-sale debt securities for the three and nine months ended September 30, 2012, respectively. The OTTI for the three and nine months ended September 30, 2012 was primarily related to interest-only mortgage-backed securities, as a decline in primary mortgage rates resulted in lower estimated cash flows and a decrease in fair value for certain securities. During the three and nine months ended September 30, 2011 the Bancorp recognized $9 million of OTTI on its available-for-sale debt securities. No OTTI was recognized on the Bancorp's held-to-maturity debt securities during the three and nine months ended September 30, 2012 and the comparable prior year periods. The Bancorp did not recognize OTTI on any of its available-for-sale equity securities during the three and nine months ended September 30, 2012 and 2011. Less than one percent of unrealized losses in the available-for-sale securities portfolio were represented by non-rated securities at September 30, 2012, December 31, 2011, and September 30, 2011.

- Definition

Tabular disclosure of investments in certain debt and equity securities (and certain other trading assets) which include all debt and equity securities (other than those equity securities accounted for under the equity or cost methods of accounting) with readily determinable fair values. Other trading assets include assets that are carried on the balance sheet at fair value and held for trading purposes. A debt security represents a creditor relationship with an enterprise that is in the form of a security. Debt securities include, among other items, US Treasury securities, US government securities, municipal securities, corporate bonds, convertible debt, commercial paper, and all securitized debt instruments. An equity security represents an ownership interest in an enterprise or the right to acquire or dispose of an ownership interest in an enterprise at fixed or determinable prices. Equity securities include, among other things, common stock, certain preferred stock, warrant rights, call options, and put options, but do not include convertible debt. An entity may opt to provide the reader with additional narrative text to better understand the nature of investments in debt and equity securities (and other trading assets).

+ References

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