Investment Securities (Tables)

9 Months Ended

Sep. 30, 2012

Investment Securities

Table 4 Investment Securities

	Available-for-Sale									Held-to-Maturity
At September 30, 2012 (Dollars in Millions)	Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (e)			Amortized Cost		Fair Value		Weighted- Average Maturity in Years		Weighted- Average Yield (e)
U.S. Treasury and Agencies
Maturing in one year or less	$	72	$	73		.5		2.57	%	$	50	$	50		.3		.61	%
Maturing after one year through five years		497		501		1.3		.84			2,447		2,473		1.4		1.00
Maturing after five years through ten years		149		158		7.5		3.11			–		–		–		–
Maturing after ten years		10		11		10.9		2.89			60		60		12.4		1.96
Total	$	728	$	743		2.6		1.51	%	$	2,557	$	2,583		1.7		1.01	%
Mortgage-Backed Securities (a)
Maturing in one year or less	$	3,312	$	3,315		.6		1.58	%	$	395	$	396		.7		1.52	%
Maturing after one year through five years		23,074		23,876		3.0		2.46			30,583		31,260		3.1		2.17
Maturing after five years through ten years		3,074		3,045		6.4		2.26			740		758		7.4		1.50
Maturing after ten years		294		299		12.5		1.49			59		60		10.4		1.22
Total	$	29,754	$	30,535		3.2		2.34	%	$	31,777	$	32,474		3.2		2.14	%
Asset-Backed Securities (a)
Maturing in one year or less	$	8	$	9		–		.24	%	$	–	$	4		.5		1.22	%
Maturing after one year through five years		36		46		3.2		6.36			11		9		3.5		.65
Maturing after five years through ten years		574		585		7.6		2.48			8		9		6.6		.73
Maturing after ten years		–		–		18.8		5.88			9		18		22.6		.86
Total	$	618	$	640		7.3		2.68	%	$	28	$	40		10.5		.75	%
Obligations of State and Political Subdivisions (b) (c)
Maturing in one year or less	$	81	$	82		.1		2.65	%	$	–	$	–		.7		8.16	%
Maturing after one year through five years		5,226		5,550		3.8		6.79			6		6		3.2		7.31
Maturing after five years through ten years		765		812		7.1		6.20			1		2		7.9		7.79
Maturing after ten years		13		13		17.2		15.83			14		14		14.6		5.42
Total	$	6,085	$	6,457		4.2		6.68	%	$	21	$	22		10.9		6.13	%
Other Debt Securities
Maturing in one year or less	$	6	$	6		.2		1.00	%	$	3	$	2		.5		1.14	%
Maturing after one year through five years		–		–		–		–			94		91		3.5		1.30
Maturing after five years through ten years		–		–		–		–			29		14		8.1		1.18
Maturing after ten years		813		709		25.3		3.21			–		–		–		–
Total	$	819	$	715		25.1		3.19	%	$	126	$	107		4.4		1.27	%
Other Investments	$	516	$	546		15.8		2.97	%	$	–	$	–		–		–	%
Total investment securities (d)	$	38,520	$	39,636		4.0		3.04	%	$	34,509	$	35,226		3.1		2.06	%

(a) Information related to asset and mortgage-backed securities included above is presented based upon weighted-average maturities anticipating future prepayments.

(b) Information related to obligations of state and political subdivisions is presented based upon yield to first optional call date if the security is purchased at a premium, yield to maturity if purchased at par or a discount.

(c) Maturity calculations for obligations of state and political subdivisions are based on the first optional call date for securities with a fair value above par and contractual maturity for securities with a fair value equal to or below par.

(d) The weighted-average maturity of the available-for-sale investment securities was 5.2 years at December 31, 2011, with a corresponding weighted-average yield of 3.19 percent. The weighted-average maturity of the held-to-maturity investment securities was 3.9 years at December 31, 2011, with a corresponding weighted-average yield of 2.21 percent.

(e) Average yields are presented on a fully-taxable equivalent basis under a tax rate of 35 percent. Yields on available-for-sale and held-to-maturity investment securities are computed based on amortized cost balances, excluding any premiums or discounts recorded related to the transfer of investment securities at fair value from available-for-sale to held-to-maturity. Average yield and maturity calculations exclude equity securities that have no stated yield or maturity.

	September 30, 2012					December 31, 2011
(Dollars in Millions)	Amortized Cost		Percent of Total			Amortized Cost		Percent of Total
U.S. Treasury and agencies	$	3,285		4.5	%	$	3,605		5.1	%
Mortgage-backed securities		61,531		84.2			57,561		82.0
Asset-backed securities		646		.9			949		1.4
Obligations of state and political subdivisions		6,106		8.4			6,417		9.1
Other debt securities and investments		1,461		2.0			1,701		2.4
Total investment securities	$	73,029		100.0	%	$	70,233		100.0	%

Investment Securities Held to Maturity and Available for Sale

The amortized cost, other-than-temporary impairment recorded in other comprehensive income (loss), gross unrealized holding gains and losses, and fair value of held-to-maturity and available-for-sale investment securities were as follows:

	September 30, 2012												December 31, 2011
					Unrealized Losses												Unrealized Losses
(Dollars in Millions)	Amortized Cost		Unrealized Gains		Other-than- Temporary (e)			Other (f)			Fair Value		Amortized Cost		Unrealized Gains		Other-than- Temporary (e)			Other (f)			Fair Value
Held-to-maturity (a)
U.S. Treasury and agencies	$	2,557	$	26	$	–		$	–		$	2,583	$	2,560	$	35	$	–		$	–		$	2,595
Mortgage-backed securities
Residential
Agency		31,773		700		–			(3	)		32,470		16,085		333		–			(3	)		16,415
Non-agency non-prime (d)		1		–		–			–			1		2		–		–			–			2
Commercial non-agency		3		–		–			–			3		4		–		–			(2	)		2
Asset-backed securities
Collateralized debt obligations/Collateralized loan obligations		9		16		–			–			25		52		13		–			(2	)		63
Other		19		2		(4	)		(2	)		15		23		1		(6	)		(1	)		17
Obligations of state and political subdivisions		21		1		–			–			22		23		1		–			(1	)		23
Obligations of foreign governments		7		–		–			–			7		7		–		–			–			7
Other debt securities		119		–		–			(19	)		100		121		–		–			(29	)		92
Total held-to-maturity	$	34,509	$	745	$	(4	)	$	(24	)	$	35,226	$	18,877	$	383	$	(6	)	$	(38	)	$	19,216
Available-for-sale (b)
U.S. Treasury and agencies	$	728	$	15	$	–		$	–		$	743	$	1,045	$	13	$	–		$	(1	)	$	1,057
Mortgage-backed securities
Residential
Agency		28,494		874		–			(6	)		29,362		39,337		981		–			(4	)		40,314
Non-agency
Prime (c)		679		–		(38	)		(10	)		631		911		5		(63	)		(50	)		803
Non-prime (d)		388		1		(48	)		(1	)		340		1,047		9		(247	)		(7	)		802
Commercial
Agency		193		9		–			–			202		133		7		–			–			140
Non-agency		–		–		–			–			–		42		2		–			(2	)		42
Asset-backed securities
Collateralized debt obligations/Collateralized loan obligations		33		9		–			–			42		180		31		(3	)		(2	)		206
Other		585		14		–			(1	)		598		694		16		(5	)		(24	)		681
Obligations of state and political subdivisions		6,085		372		–			–			6,457		6,394		167		–			(22	)		6,539
Obligations of foreign governments		6		–		–			–			6		6		–		–			–			6
Corporate debt securities		813		2		–			(106	)		709		1,000		1		–			(174	)		827
Perpetual preferred securities		268		29		–			(19	)		278		379		25		–			(86	)		318
Other investments		248		20		–			–			268		188		15		–			(1	)		202
Total available-for-sale	$	38,520	$	1,345	$	(86	)	$	(143	)	$	39,636	$	51,356	$	1,272	$	(318	)	$	(373	)	$	51,937

(a) Held-to-maturity investment securities are carried at historical cost or at fair value at the time of transfer from the available-for-sale to held-to-maturity category, adjusted for amortization of premiums and accretion of discounts and credit-related other-than-temporary impairment.

(b) Available-for-sale investment securities are carried at fair value with unrealized net gains or losses reported within accumulated other comprehensive income (loss) in shareholders’ equity.

(c) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads). When the Company determines the designation, prime securities typically have a weighted average credit score of 725 or higher and a loan-to-value of 80 percent or lower; however, other pool characteristics may result in designations that deviate from these credit score and loan-to-value thresholds.

(d) Includes all securities not meeting the conditions to be designated as prime.

(e) Represents impairment not related to credit for those investment securities that have been determined to be other-than-temporarily impaired.

(f) Represents unrealized losses on investment securities that have not been determined to be other-than-temporarily impaired.

Amount of Interest Income from Taxable and Non-Taxable Investment Securities

The following table provides information about the amount of interest income from taxable and non-taxable investment securities:

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in Millions)	2012		2011		2012		2011
Taxable	$	369	$	394	$	1,166	$	1,127
Non-taxable		69		76		210		230
Total interest income from investment securities	$	438	$	470	$	1,376	$	1,357

Amount of Gross Gains and Losses Realized through Sales of Available for Sale Investment Securities

The following table provides information about the amount of gross gains and losses realized through the sales of available-for-sale investment securities:

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in Millions)	2012			2011			2012			2011
Realized gains	$	115		$	4		$	145		$	6
Realized losses		(99	)		(4	)		(99	)		(4	)
Net realized gains (losses)	$	16		$	–		$	46		$	2
Income tax (benefit) on net realized gains (losses)	$	7		$	–		$	18		$	1

Accretable Balance of Structured Investment Securities and Other Investment Securities

Changes in the accretable balance for these investment securities were as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in Millions)	2012			2011			2012			2011
Balance at beginning of period	$	93		$	117		$	100		$	139
Accretion		(3	)		(4	)		(11	)		(13	)
Disposals		(90	)		–			(90	)		–
Other (a)		–			(6	)		1			(19	)
Balance at end of period	$	–		$	107		$	–		$	107

(a) Primarily represents changes in projected future cash flows related to variable rates on certain investment securities.

Summary of Other than Temporary Impairment by Investment Category

The following tables summarize other-than-temporary impairment by investment category:

	2012										2011
Three Months Ended September 30 (Dollars in Millions)		Losses Recorded in Earnings			Other Gains (Losses) (c)			Total			Losses Recorded in Earnings			Other Gains (Losses) (c)			Total
Available-for-sale
Mortgage-backed securities
Non-agency residential
Prime (a)		$	(5	)	$	(3	)	$	(8	)	$	–		$	–		$	–
Non-prime (b)			(10	)		5			(5	)		(6	)		(4	)		(10	)
Other asset-backed securities			–			–			–			(3	)		2			(1	)
Total available-for-sale		$	(15	)	$	2		$	(13	)	$	(9	)	$	(2	)	$	(11	)

(a) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads).

(b) Includes all securities not meeting the conditions to be designated as prime.

(c) Losses represent the non-credit portion of other-than-temporary impairment recorded in other comprehensive income for investment securities determined to be other-than-temporarily impaired during the period. Gains represent recoveries in the fair value of securities that have or previously had non-credit other-than-temporary impairment.

	2012									2011
Nine Months Ended September 30 (Dollars in Millions)	Losses Recorded in Earnings			Other Gains (Losses) (c)			Total			Losses Recorded in Earnings			Other Gains (Losses) (c)			Total
Available-for-sale
Mortgage-backed securities
Non-agency residential
Prime (a)	$	(8	)	$	(12	)	$	(20	)	$	(2	)	$	(3	)	$	(5	)
Non-prime (b)		(27	)		15			(12	)		(18	)		(16	)		(34	)
Commercial non-agency		(1	)		(1	)		(2	)		–			–			–
Other asset-backed securities		(1	)		1			–			(4	)		2			(2	)
Perpetual preferred securities		(27	)		–			(27	)		–			–			–
Total available-for-sale	$	(64	)	$	3		$	(61	)	$	(24	)	$	(17	)	$	(41	)

(a) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads).

(b) Includes all securities not meeting the conditions to be designated as prime.

(c) Losses represent the non-credit portion of other-than-temporary impairment recorded in other comprehensive income for investment securities determined to be other-than-temporarily impaired during the period. Gains represent recoveries in the fair value of securities that have or previously had non-credit other-than-temporary impairment.

Summary of Ranges used in Valuation of Non-Agency Mortgage-Backed Securities Other than Temporarily Impaired

The following table includes the ranges for principal assumptions used for those available-for-sale non-agency mortgage-backed securities determined to be other-than-temporarily impaired:

	Prime (a)									Non-Prime (b)
	Minimum			Maximum			Average			Minimum			Maximum			Average
September 30, 2012
Estimated lifetime prepayment rates		7	%		18	%		14	%		3	%		10	%		6	%
Lifetime probability of default rates		2			4			3			2			10			6
Lifetime loss severity rates		25			50			40			20			60			51
December 31, 2011
Estimated lifetime prepayment rates		4	%		15	%		14	%		2	%		11	%		6	%
Lifetime probability of default rates		2			9			3			1			20			5
Lifetime loss severity rates		40			50			46			8			70			52

(a) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads).

(b) Includes all securities not meeting the conditions to be designated as prime.

Changes in Credit Losses on Debt Securities Excluding Perpetual Preferred Securities

Changes in the credit losses on debt securities (excludes perpetual preferred securities) are summarized as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in Millions)	2012			2011			2012			2011
Balance at beginning of period	$	277		$	319		$	298		$	358
Additions to credit losses due to other-than-temporary impairments
Credit losses on securities not previously considered other-than-temporarily impaired		2			1			5			3
Decreases in expected cash flows on securities for which other-than-temporary impairment was previously recognized		13			8			32			21
Total other-than-temporary impairment on debt securities		15			9			37			24
Other changes in credit losses
Increases in expected cash flows		–			(3	)		(14	)		(20	)
Realized losses (a)		(4	)		(19	)		(33	)		(55	)
Credit losses on security sales and securities expected to be sold		(142	)		–			(142	)		(1	)
Balance at end of period	$	146		$	306		$	146		$	306

(a) Primarily represents principal losses allocated to mortgage and asset-backed securities in the Company’s portfolio under the terms of the securitization transaction documents.

Gross Unrealized Losses and Fair Value of Company's Investments with Unrealized Losses

The following table shows the gross unrealized losses and fair value of the Company’s investment securities with unrealized losses, aggregated by investment category and length of time the individual investment securities have been in continuous unrealized loss positions, at September 30, 2012:

	Less Than 12 Months					12 Months or Greater					Total
(Dollars in Millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Held-to-maturity
Mortgage-backed securities
Residential
Agency	$	1,563	$	(3	)	$	7	$	–		$	1,570	$	(3	)
Non-agency non-prime (a)(c)		–		–			1		–			1		–
Commercial non-agency		–		–			3		–			3		–
Other asset-backed securities		1		–			11		(6	)		12		(6	)
Obligations of state and political subdivisions		–		–			5		–			5		–
Other debt securities		–		–			99		(19	)		99		(19	)
Total held-to-maturity	$	1,564	$	(3	)	$	126	$	(25	)	$	1,690	$	(28	)
Available-for-sale
U.S. Treasury and agencies	$	10	$	–		$	–	$	–		$	10	$	–
Mortgage-backed securities
Residential
Agency		3,005		(6	)		153		–			3,158		(6	)
Non-agency (a)
Prime (b)		–		–			625		(48	)		625		(48	)
Non-prime (c)		–		–			311		(49	)		311		(49	)
Other asset-backed securities		–		–			2		(1	)		2		(1	)
Obligations of state and political subdivisions		89		–			4		–			93		–
Obligations of foreign governments		6		–			–		–			6		–
Corporate debt securities		–		–			624		(106	)		624		(106	)
Perpetual preferred securities		22		–			140		(19	)		162		(19	)
Other investments		–		–			3		–			3		–
Total available-for-sale	$	3,132	$	(6	)	$	1,862	$	(223	)	$	4,994	$	(229	)

(a) The Company has $97 million of unrealized losses on residential non-agency mortgage-backed securities. Credit-related other-than-temporary impairment on these securities may occur if there is further deterioration in the underlying collateral pool performance. Borrower defaults may increase if current economic conditions persist or worsen. Additionally, further deterioration in home prices may increase the severity of projected losses.

(b) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads).

(c) Includes all securities not meeting the conditions to be designated as prime.