Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2011

Derivative Positions

The table below presents the Company’s derivative positions at June 30, 2011.

	As of June 30, 2011
	Asset Derivatives						Liability Derivatives
(Dollars in millions)	Balance Sheet     Classification	Notional     Amounts			Fair Value		Balance Sheet     Classification	Notional     Amounts			Fair Value
Derivatives designated in cash flow hedging relationships 5
Equity contracts hedging:
Securities AFS	Trading assets		$1,547			$-	Trading liabilities		$1,547			$154
Interest rate contracts hedging:
Floating rate loans	Trading assets		13,050			765	Trading liabilities		2,800			14
Total			14,597			765			4,347			168
Derivatives designated in fair value hedging relationships 6
Interest rate contracts hedging:
Fixed rate debt	Trading assets		1,000			19	Trading liabilities		-			-
Total			1,000			19			-			-
Derivatives not designated as hedging instruments 7
Interest rate contracts covering:
Fixed rate debt	Trading assets		437			21	Trading liabilities		60			5
MSRs	Other assets		17,955			166	Other liabilities		1,920			25
LHFS, IRLCs, LHFI-FV	Other assets		3,104	3		9	Other liabilities		1,095			7
Trading activity	Trading assets		139,529	1		4,133	Trading liabilities		104,255			3,837
Foreign exchange rate contracts covering:
Foreign-denominated debt and commercial loans	Trading assets		1,176			107	Trading liabilities		510			114
Trading activity	Trading assets		4,593			214	Trading liabilities		4,851			209
Credit contracts covering:
Loans	Trading assets		10			-	Trading liabilities		192			2
Trading activity	Trading assets		1,232	2		26	Trading liabilities		1,187	2		21
Equity contracts - Trading activity	Trading assets		6,725	1		726	Trading liabilities		8,769			847
Other contracts:
IRLCs and other	Other assets		2,438			29	Other liabilities		541	4		18	4
Trading activity	Trading assets		201			32	Trading liabilities		197			31
Total			177,400			5,463			123,577			5,116
Total derivatives			$192,997			$6,247			$127,924			$5,284

¹ Amounts include $29.7 billion and $0.6 billion of notional related to interest rate futures and equity futures, respectively. These futures contracts settle in cash daily and therefore no derivative asset or liability is recorded.

² Asset and liability amounts include $1 million and $8 million, respectively, of notional from purchased and written credit risk participation agreements, respectively, which notional is calculated as the notional of the derivative participated adjusted by the relevant risk weighted assets conversion factor.

³ Amount includes $1.0 billion of notional amounts related to interest rate futures. These futures contracts settle in cash daily and therefore no derivative asset or liability is recorded.

⁴ Includes a $17 million derivative liability recorded in other liabilities in the Consolidated Balance Sheets, related to a notional amount of $134 million. The notional amount is based on the number of Visa Class B shares, 3.2 million, the conversion ratio from Visa Class B common stock to Visa Class A common stock, and the Visa Class A common stock price at the derivative inception date of May 28, 2009. This derivative was established upon the sale of Visa Class B shares in the second quarter of 2009 as discussed in Note 18, “Reinsurance Arrangements and Guarantees,” to the Consolidated Financial Statements in the Company’s 2010 Annual Report on Form 10-K.

⁵ See “Cash Flow Hedges” in this Note for further discussion.

⁶ See “Fair Value Hedges” in this Note for further discussion.

⁷ See “Economic Hedging and Trading Activities” in this Note for further discussion.

The table below presents the Company’s derivative positions at December 31, 2010.

	As of December 31, 2010
	Asset Derivatives						Liability Derivatives
(Dollars in millions)	Balance Sheet     Classification	Notional     Amounts			Fair Value		Balance Sheet Classification		Notional     Amounts			Fair Value
Derivatives designated in cash flow hedging relationships 5
Equity contracts hedging:
Securities AFS	Trading assets		$1,547			$-		Trading liabilities		$1,547			$145
Interest rate contracts hedging:
Floating rate loans	Trading assets		15,350			947		Trading liabilities		500			10
Total			16,897			947				2,047			155
Derivatives not designated as hedging instruments 6
Interest rate contracts covering:
Fixed rate debt	Trading assets		1,273			41		Trading liabilities		60			4
Corporate bonds and loans			-			-		Trading liabilities		5			-
MSRs	Other assets		20,474			152		Other liabilities		6,480			73
LHFS, IRLCs, LHFI-FV	Other assets		7,269	3		92		Other liabilities		2,383			20
Trading activity	Trading assets		132,286	1		4,211		Trading liabilities		105,926			3,884
Foreign exchange rate contracts covering:
Foreign-denominated debt and commercial loans	Trading assets		1,083			17		Trading liabilities		495			128
Trading activity	Trading assets		2,691			92		Trading liabilities		2,818			91
Credit contracts covering:
Loans	Trading assets		15			-		Trading liabilities		227			2
Trading activity	Trading assets		1,094	2		39		Trading liabilities		1,039	2		34
Equity contracts - Trading activity	Trading assets		5,010	1		583		Trading liabilities		8,012			730
Other contracts:
IRLCs and other	Other assets		2,169			18		Other liabilities		2,196	4		42	4
Trading activity	Trading assets		111			11		Trading liabilities		111			11
Total			173,475			5,256				129,752			5,019
Total derivatives			$190,372			$6,203				$131,799			$5,174

¹ Amounts include $25.0 billion and $0.5 billion of notional related to interest rate futures and equity futures, respectively. These futures contracts settle in cash daily and therefore no derivative asset or liability is recorded.

² Asset and liability amounts include $1 million and $8 million, respectively, of notional from purchased and written interest rate swap risk participation agreements, respectively, which notional is calculated as the notional of the interest rate swap participated adjusted by the relevant risk weighted assets conversion factor.

³ Amount includes $1.4 billion of notional amounts related to interest rate futures. These futures contracts settle in cash daily and therefore no derivative asset or liability is recorded.

⁴ Includes a $23 million derivative liability recorded in other liabilities in the Consolidated Balance Sheets, related to a notional amount of $134 million. The notional amount is based on the number of Visa Class B shares, 3.2 million, the conversion ratio from Visa Class B common stock to Visa Class A common stock, and the Visa Class A common stock price at the derivative inception date of May 28, 2009. This derivative was established upon the sale of Visa Class B shares in the second quarter of 2009 as discussed in Note 18, “Reinsurance Arrangements and Guarantees,” to the Consolidated Financial Statements in the Company’s 2010 Annual Report on Form 10-K.

⁵ See “Cash Flow Hedges” in this Note for further discussion.

⁶ See “Economic Hedging and Trading Activities” in this Note for further discussion.

Impacts of Derivative Financial Instruments on the Consolidated Statements of Income/(Loss) and the Consolidated Statements of Shareholders' Equity

The impacts of derivatives on the Consolidated Statements of Income/(Loss) and the Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2011 and 2010 are presented below. The impacts are segregated between those derivatives that are designated in hedging relationships and those that are used for economic hedging or trading purposes, with further identification of the underlying risks in the derivatives and the hedged items, where appropriate. The tables do not disclose the financial impact of the activities that these derivative instruments are intended to hedge, for both economic hedges and those instruments designated in formal, qualifying hedging relationships.

	Three Months Ended June 30, 2011
(Dollars in millions)	Amount of pre-tax gain recognized in OCI on Derivatives (Effective Portion)		Classification of gain reclassified from     AOCI into Income (Effective Portion)	Amount of pre-tax gain     reclassified from AOCI into Income (Effective Portion) 1
Derivatives in cash flow hedging relationships
Equity contracts hedging Securities AFS		$6			$-
Interest rate contracts hedging Floating rate loans		261	Interest and fees on loans		105
Total		$267			$105
	Six Months Ended June 30, 2011
(Dollars in millions)	Amount of pre-tax gain/(loss)     recognized in OCI on Derivatives (Effective Portion)		Classification of gain reclassified from     AOCI into Income (Effective Portion)	Amount of pre-tax gain     reclassified from AOCI into Income (Effective Portion) 1
Derivatives in cash flow hedging relationships
Equity contracts hedging Securities AFS		($10)			$-
Interest rate contracts hedging Floating rate loans		234	Interest and fees on loans		218
Total		$224			$218
1 During the three and six months ended June 30, 2011, the Company reclassified $49 million and $90 million, respectively, in pre-tax gains from AOCI into net interest income. These gains related to hedging relationships that have been previously terminated or de-designated.
	Three Months Ended June 30, 2011
(Dollars in millions)	Amount of gain on Derivatives recognized in Income		Amount of loss on related Hedged Items recognized in Income	Amount of gain/(loss) recognized in Income on Hedges (Ineffective Portion)
Derivatives in fair value hedging relationships
Interest rate contracts hedging Fixed rate debt ¹		$15	($15)		$-
	Six Months Ended June 30, 2011
(Dollars in millions)	Amount of gain on Derivatives recognized in Income		Amount of loss on related Hedged Items recognized in Income	Amount of gain/(loss) recognized in Income on Hedges (Ineffective Portion)
Derivatives in fair value hedging relationships
Interest rate contracts hedging Fixed rate debt ¹		$15	($15)		$-

¹ Amounts are recorded in trading account profits/(losses) and commissions in the Consolidated Statements of Income/(Loss).

(Dollars in millions)	Classification of gain/(loss) recognized     in Income on Derivatives	Amount of gain/(loss) recognized in Income on Derivatives for the three months ended June 30, 2011		Amount of gain/(loss) recognized in Income on Derivatives for the six months ended June 30, 2011
Derivatives not designated as hedging instruments
Interest rate contracts covering:
Fixed rate debt	Trading account profits and commissions		$-		$1
MSRs	Mortgage servicing related income		134		91
LHFS, IRLCs, LHFI-FV	Mortgage production related income/(loss)		(67)		(93)
Trading activity	Trading account profits and commissions		33		37
Foreign exchange rate contracts covering:
Foreign-denominated debt and commercial loans	Trading account profits and commissions		29		110
Trading activity	Trading account profits and commissions		(5)		(6)
Credit contracts covering:
Loans	Trading account profits and commissions		-		(1)
Other	Trading account profits and commissions		4		8
Equity contracts - trading activity	Trading account profits and commissions		5		8
Other contracts:
IRLCs	Mortgage production related income/(loss)		48		84
Total			$181		$239

The impacts of derivatives on the Consolidated Statements of Income/(Loss) and the Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2010 are presented below.

	Three Months Ended June 30, 2010
(Dollars in millions)	Amount of pre-tax gain          recognized in OCI on Derivatives (Effective Portion)		Classification of gain reclassified from            AOCI into Income (Effective Portion)	Amount of pre-tax gain     reclassified from AOCI into Income (Effective Portion) 1
Derivatives in cash flow hedging relationships
Equity contracts hedging Securities AFS		$106			$-
Interest rate contracts hedging Floating rate loans		447	Interest and fees on loans		124
Total		$553			$124
	Six Months Ended June 30, 2010
(Dollars in millions)	Amount of pre-tax gain recognized in OCI on Derivatives (Effective Portion)		Classification of gain reclassified from AOCI into Income (Effective Portion)	Amount of pre-tax gain reclassified from AOCI into Income (Effective Portion) 1
Derivatives in cash flow hedging relationships
Equity contracts hedging Securities AFS		$167			$-
Interest rate contracts hedging Floating rate loans		735	Interest and fees on loans		251
Total		$902			$251

¹ During the three and six months ended June 30, 2010, the Company reclassified $24 million and $53 million, respectively, in pre-tax gains from AOCI into net interest income. These gains related to hedging relationships that have been previously terminated or de-designated.

(Dollars in millions)	Classification of gain/(loss) recognized     in Income on Derivatives	Amount of gain/(loss) recognized in Income on Derivatives for  the three months ended June 30, 2010		Amount of gain/(loss) recognized in Income on Derivatives for  the six months ended June 30, 2010
Derivatives not designated as hedging instruments
Interest rate contracts covering:
Fixed rate debt	Trading account profits and commissions		$80		$125
Corporate bonds and loans	Trading account profits and commissions		-		(1)
MSRs	Mortgage servicing related income		392		468
LHFS, IRLCs, LHFI-FV	Mortgage production related income/(loss)		(140)		(210)
Trading activity	Trading account profits and commissions		-		30
Foreign exchange rate contracts covering:
Foreign-denominated debt and commercial loans	Trading account profits and commissions		(107)		(202)
Trading activity	Trading account profits and commissions		19		26
Credit contracts covering:
Loans	Trading account profits and commissions		1		1
Trading activity	Trading account profits and commissions		3		4
Equity contracts - trading activity	Trading account profits and commissions		(1)		6
Other contracts:
IRLCs	Mortgage production related income/(loss)		119		211
Total			$366		$458