NOTE 2 – SECURITIES AVAILABLE FOR SALE

Securities Portfolio Composition



	June 30, 2012
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$214		$10		$—		$224
Federal agency securities	1,698		85		—		1,783
U.S. states and political subdivisions	359		19		6		372
MBS - agency	17,308		803		1		18,110
MBS - private	225		—		17		208
ABS	344		9		5		348
Corporate and other debt securities	42		3		—		45
Coke common stock	—		2,346		—		2,346
Other equity securities¹	972		1		—		973
Total securities AFS		$21,162		$3,276		$29		$24,409

	December 31, 2011
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$671		$23		$—		$694
Federal agency securities	1,843		89		—		1,932
U.S. states and political subdivisions	437		21		4		454
MBS - agency	20,480		743		—		21,223
MBS - private	252		—		31		221
CDO/CLO securities	50		—		—		50
ABS	460		11		7		464
Corporate and other debt securities	49		2		—		51
Coke common stock	—		2,099		—		2,099
Other equity securities¹	928		1		—		929
Total securities AFS		$25,170		$2,989		$42		$28,117

¹At June 30, 2012, other equity securities included the following securities at cost: $455 million in FHLB of Atlanta stock, $401 million in Federal Reserve Bank stock, and $116 million in mutual fund investments. At December 31, 2011, other equity securities included the following securities at cost: $342 million in FHLB of Atlanta stock, $398 million in Federal Reserve Bank stock, and $187 million in mutual fund investments.

Securities AFS that were pledged to secure public deposits, repurchase agreements, trusts, and other funds had a fair value of $7.6 billion and $9.1 billion as of June 30, 2012 and December 31, 2011, respectively. Further, under the Agreements, the Company pledged its shares of Coke common stock, which is hedged with derivative instruments, as discussed in Note 10, “Derivative Financial Instruments.” As of June 30, 2012 and December 31, 2011, there were no securities AFS pledged under which the transferee may repledge the collateral. The Company has also pledged $978 million and $770 million of certain marketable securities and cash equivalents to secure $930 million and $747 million of repurchase agreements as of June 30, 2012 and December 31, 2011, respectively.

The amortized cost and fair value of investments in debt securities at June 30, 2012 by estimated average life are shown below. Actual cash flows may differ from estimated average lives and contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.



	Distribution of Maturities
(Dollars in millions)	1 Year or Less		1-5 Years		5-10 Years		After 10 Years		Total
Amortized Cost:
U.S. Treasury securities		$12		$202		$—		$—		$214
Federal agency securities	117		1,372		95		114		1,698
U.S. states and political subdivisions	108		178		21		52		359
MBS - agency	901		14,304		1,827		276		17,308
MBS - private	—		136		89		—		225
ABS	123		152		2		67		344
Corporate and other debt securities	3		2		37		—		42
Total debt securities		$1,264		$16,346		$2,071		$509		$20,190
Fair Value:
U.S. Treasury securities		$12		$212		$—		$—		$224
Federal agency securities	118		1,441		105		119		1,783
U.S. states and political subdivisions	111		191		21		49		372
MBS - agency	951		14,957		1,916		286		18,110
MBS - private	—		125		83		—		208
ABS	123		152		2		71		348
Corporate and other debt securities	3		2		40		—		45
Total debt securities		$1,318		$17,080		$2,167		$525		$21,090

Securities in an Unrealized Loss Position

The Company held certain investment securities having unrealized loss positions. Market changes in interest rates and credit spreads may result in temporary unrealized losses as the market price of securities fluctuates. As of June 30, 2012, the Company did not intend to sell these securities nor was it more-likely-than-not that the Company would be required to sell these securities before their anticipated recovery or maturity. The Company has reviewed its portfolio for OTTI in accordance with the accounting policies outlined in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.



	June 30, 2012
	Less than twelve months				Twelve months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Temporarily impaired securities:
Federal agency securities		$19		$—		$—		$—		$19		$—
U.S. states and political subdivisions	1		—		24		6		25		6
MBS - agency	12		1		1		—		13		1
ABS	—		—		12		3		12		3
Total temporarily impaired securities	32		1		37		9		69		10
Other-than-temporarily impaired securities¹:
MBS - private	—		—		207		17		207		17
ABS	1		—		4		2		5		2
Total other-than-temporarily impaired securities	1		—		211		19		212		19
Total impaired securities		$33		$1		$248		$28		$281		$29

	December 31, 2011
	Less than twelve months				Twelve months or longer				Total
(Dollars in millions)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Temporarily impaired securities:
Federal agency securities		$10		$—		$—		$—		$10		$—
U.S. states and political subdivisions	1		—		28		4		29		4
MBS - agency	224		—		1		—		225		—
CDO/CLO securities	50		—		—		—		50		—
ABS	—		—		11		5		11		5
Total temporarily impaired securities	285		—		40		9		325		9
Other-than-temporarily impaired securities¹:
MBS - private	15		1		206		30		221		31
ABS	1		—		3		2		4		2
Total other-than-temporarily impaired securities	16		1		209		32		225		33
Total impaired securities		$301		$1		$249		$41		$550		$42

¹Includes OTTI securities for which credit losses have been recorded in earnings in current or prior periods.

At June 30, 2012 and December 31, 2011, unrealized losses on securities that have been in a temporarily impaired position for longer than twelve months include municipal ARS and one ABS collateralized by 2004 vintage home equity loans. The municipal securities are backed by investment grade rated obligors; however, the fair value of these securities continues to be impacted by the lack of a functioning ARS market and the extension of time for expected refinance and repayment. No credit loss is expected on these securities. The ABS is also highly-rated, continues to receive timely principal and interest payments, and is evaluated quarterly for credit impairment. Cash flow analysis shows that the underlying collateral can withstand highly stressed loss assumptions without incurring a credit loss.

The portion of unrealized losses on securities that have been other-than-temporarily impaired that relates to factors other than credit are recorded in AOCI. Losses related to credit impairment on these securities is determined through estimated cash flow analyses and have been recorded in earnings in current or prior periods. The unrealized OTTI loss relating to private MBS as of June 30, 2012 includes purchased and retained interests from 2007 vintage securitizations. The unrealized OTTI loss relating to ABS is related to four securities within the portfolio that are 2003 and 2004 vintage home equity issuances. The expectation of cash flows for the previously impaired ABS securities has improved since the credit-related impairment was recognized, and as a result, the amount of expected credit losses was reduced, and the expected increase in cash flows is being accreted into earnings as a yield adjustment over the remaining life of the securities.

Realized Gains and Losses and Other-than-Temporarily Impaired Securities



	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2012			2011			2012			2011
Gross realized gains		$16			$33			$36			$176
Gross realized losses	—			—			—			(78		)
OTTI	(2		)	(1		)	(4		)	(2		)
Net securities gains		$14			$32			$32			$96

The securities that gave rise to credit impairments recognized during the three and six months ended June 30, 2012 and 2011, as shown in the table below, consisted of private MBS with a fair value of $140 million and $193 million at June 30, 2012 and 2011, respectively. Credit impairment that is determined through the use of cash flow models is estimated using cash flows on security specific collateral and the transaction structure. Future expected credit losses are determined by using various assumptions, the most significant of which include default rates, prepayment rates, and loss severities. For the majority of the securities that the Company has reviewed for credit-related OTTI, credit information is available and modeled for the collateral underlying each security. As part of that analysis, the model incorporates loan level information such as loan to collateral values, FICO scores, and home price appreciation/depreciation data specific to the geography of the loan. These inputs are updated on a regular basis to ensure the most current credit and other assumptions are utilized in the analysis. If, based on this analysis, the Company does not expect to recover the entire amortized cost basis of the security, the expected cash flows are then discounted at the security’s initial effective interest rate to arrive at a present value amount. OTTI credit losses reflect the difference between the present value of cash flows expected to be collected and the amortized cost basis of these securities. During the three and six months ended June 30, 2012 and 2011, all OTTI recognized in earnings on private MBS have underlying collateral of residential mortgage loans securitized in 2007. The Company has not purchased new private MBS during the six months ended June 30, 2012, and continues to reduce existing exposure primarily through paydowns.



	Three Months Ended June 30				Six Months Ended June 30
	2012		2011		2012		2011
(Dollars in millions)	MBS - Private		MBS - Private		MBS - Private		MBS - Private
OTTI¹		$2		$1		$4		$2
Portion of losses recognized in OCI (before taxes)	—		—		—		—
Net impairment losses recognized in earnings		$2		$1		$4		$2

¹ The initial OTTI amount represents the excess of the amortized cost over the fair value of AFS debt securities. For subsequent impairments of the same security, amount represents additional declines in the fair value subsequent to the previously recorded OTTI, if applicable, until such time the security is no longer in an unrealized loss position.

The following is a rollforward of credit losses recognized in earnings for the three and six months ended June 30, 2012 and 2011, related to securities for which some portion of the OTTI loss remains in AOCI:



	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2012			2011			2012			2011
Balance, beginning of period		$27			$21			$25			$20
Additions:
OTTI credit losses on previously impaired securities	2			1			4			2
Reductions:
Increases in expected cash flows recognized over the remaining life of the securities	(1		)	(1		)	(1		)	(1		)
Balance, end of period		$28			$21			$28			$21

The following table presents a summary of the significant inputs used in determining the measurement of credit losses recognized in earnings for private MBS for the three and six months ended June 30:



	2012	2011
Default rate	2 - 6%	4 - 8%
Prepayment rate	7 - 21%	12 - 22%
Loss severity	47 - 56%	39 - 44%

Assumption ranges represent the lowest and highest lifetime average estimates of each security for which credit losses were recognized in earnings. During the first six months of 2012, there was improvement in the default estimates for certain credit impaired bonds; however, the slower prepayment speeds and higher severity rates resulted in the recognition of additional impairment.