NOTE 3 – SECURITIES AVAILABLE FOR SALE

Securities Portfolio Composition



	June 30, 2013
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$793		$7		$22		$778
Federal agency securities	2,203		57		38		2,222
U.S. states and political subdivisions	248		10		2		256
MBS - agency	18,784		453		324		18,913
MBS - private	181		1		1		181
ABS	124		2		1		125
Corporate and other debt securities	37		3		—		40
Other equity securities¹	873		1		—		874
Total securities AFS		$23,243		$534		$388		$23,389

	December 31, 2012
(Dollars in millions)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
U.S. Treasury securities		$212		$10		$—		$222
Federal agency securities	1,987		85		3		2,069
U.S. states and political subdivisions	310		15		5		320
MBS - agency	17,416		756		3		18,169
MBS - private	205		4		—		209
ABS	214		5		3		216
Corporate and other debt securities	42		4		—		46
Other equity securities¹	701		1		—		702
Total securities AFS		$21,087		$880		$14		$21,953

¹At June 30, 2013, other equity securities was comprised of the following: $334 million in FHLB of Atlanta stock, $402 million in Federal Reserve Bank stock, $137 million in mutual fund investments, and $1 million of other. At December 31, 2012, other equity securities was comprised of the following: $229 million in FHLB of Atlanta stock, $402 million in Federal Reserve Bank stock, $69 million in mutual fund investments, and $2 million of other.

The following table presents interest and dividends on securities AFS:



	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2013		2012		2013		2012
Taxable interest		$133		$153		$265		$322
Tax-exempt interest	3		4		5		8
Dividends¹	7		23		16		45
Total interest and dividends		$143		$180		$286		$375

¹Includes dividends on the Coke common stock of $15 million and $31 million for the three and six months ended June 30, 2012, respectively.

Securities AFS that were pledged to secure public deposits, repurchase agreements, trusts, and other funds had a fair value of $9.3 billion and $10.6 billion at June 30, 2013 and December 31, 2012, respectively. At June 30, 2013 and December 31, 2012, there were no securities AFS pledged under secured borrowing arrangements under which the secured party has possession of the collateral and would customarily sell or repledge that collateral, other than in an event of default of the Company.

The amortized cost and fair value of investments in debt securities at June 30, 2013, 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		$1			$201			$591			$—			$793
Federal agency securities	63			1,391			594			155			2,203
U.S. states and political subdivisions	90			102			11			45			248
MBS - agency	1,539			10,915			2,926			3,404			18,784
MBS - private	—			142			39			—			181
ABS	87			35			2			—			124
Corporate and other debt securities	—			17			20			—			37
Total debt securities		$1,780			$12,803			$4,183			$3,604			$22,370
Fair Value:
U.S. Treasury securities		$1			$208			$569			$—			$778
Federal agency securities	63			1,439			567			153			2,222
U.S. states and political subdivisions	92			108			12			44			256
MBS - agency	1,620			11,231			2,852			3,210			18,913
MBS - private	—			142			39			—			181
ABS	86			37			2			—			125
Corporate and other debt securities	—			19			21			—			40
Total debt securities		$1,862			$13,184			$4,062			$3,407			$22,515
Weighted average yield¹	3.02		%	2.87		%	2.26		%	2.68		%	2.72		%

¹Average yields are based on amortized cost and presented on a FTE basis.

Securities in an Unrealized Loss Position

The Company held certain investment securities where amortized cost exceeded fair market value, resulting in unrealized loss positions. Market changes in interest rates and credit spreads may result in temporary unrealized losses as the market price of securities fluctuates. At June 30, 2013, 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 in the Company's 2012 Annual Report on Form 10-K.



	June 30, 2013
	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:
U.S. Treasury securities		$569		$22		$—		$—		$569		$22
Federal agency securities	670		38		—		—		670		38
U.S. states and political subdivisions	1		—		20		2		21		2
MBS - agency	7,405		324		—		—		7,405		324
ABS	—		—		13		1		13		1
Total temporarily impaired securities	8,645		384		33		3		8,678		387
OTTI securities¹:
MBS - private	63		1		—		—		63		1
Total OTTI securities	63		1		—		—		63		1
Total impaired securities		$8,708		$385		$33		$3		$8,741		$388



	December 31, 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		$298		$3		$—		$—		$298		$3
U.S. states and political subdivisions	1		—		24		5		25		5
MBS - agency	1,212		3		—		—		1,212		3
ABS	—		—		13		2		13		2
Total temporarily impaired securities	1,511		6		37		7		1,548		13
OTTI securities¹:
ABS	—		—		3		1		3		1
Total OTTI securities	—		—		3		1		3		1
Total impaired securities		$1,511		$6		$40		$8		$1,551		$14

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

At June 30, 2013 and December 31, 2012, unrealized losses on securities that have been in a temporarily impaired position for longer than twelve months included 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 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 is recorded in AOCI. Losses related to credit impairment on these securities are determined through estimated cash flow analyses and have been recorded in earnings in current or prior periods.

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



	Three Months Ended June 30						Six Months Ended June 30
(Dollars in millions)	2013			2012			2013			2012
Gross realized gains		$1			$16			$4			$36
Gross realized losses	(1		)	—			(1		)	—
OTTI	—			(2		)	(1		)	(4		)
Net securities gains		$—			$14			$2			$32

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. If, based on this analysis, the security is in an unrealized loss position and 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.

The Company continues to reduce existing exposure primarily through paydowns. In certain instances, the amount of impairment losses recognized in earnings includes credit losses on debt securities that exceeds the total impairment, and as a result, the securities may have unrealized gains in AOCI relating to factors other than credit.

The securities that gave rise to credit impairments recognized during the three and six months ended June 30, 2013 and 2012, as shown in the table below, consisted of private MBS with a fair value of approximately $2 million and $140 million, respectively, at June 30, 2013 and 2012.



	Three Months Ended June 30				Six Months Ended June 30
(Dollars in millions)	2013		2012		2013		2012
OTTI¹		$—		$—		$—		$—
Portion of gains/(losses) recognized in OCI (before taxes)	—		2		1		4
Net impairment losses recognized in earnings		$—		$2		$1		$4

¹The 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 includes 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, 2013 and 2012, related to securities for which the Company does not intend to sell and it is not more-likely-than-not that the Company will be required to sell as of the end of each period presented. Subsequent credit losses may be recorded on securities without a corresponding further decline in fair value when there has been a decline in expected cash flows.



	Three Months Ended June 30					Six Months Ended June 30
(Dollars in millions)	2013		2012			2013		2012
Balance, beginning of period		$32		$27			$31		$25
Additions:
OTTI credit losses on previously impaired securities	—		2			1		4
Reductions:
Increases in expected cash flows recognized over the remaining life of the securities	—		(1		)	—		(1		)
Balance, end of period		$32		$28			$32		$28

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



	2013	2012
Default rate	6 - 9%	2 - 6%
Prepayment rate	7 - 8%	7 - 21%
Loss severity	61 - 74%	47 - 56%

Assumption ranges represent the lowest and highest lifetime average estimates of each security for which credit losses were recognized in earnings. Ranges may vary from period to period as the securities for which credit losses are recognized vary. Additionally, severity may vary widely when losses are few and large.