US Bank 2011 Annual Report Download - page 86

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The following table summarizes other-than-temporary impairment by investment category:
2011 2010 2009
Year Ended December 31 (Dollars in Millions)
Losses
Recorded in
Earnings
Other Gains
(Losses) (b) Total
Losses
Recorded in
Earnings
Other Gains
(Losses) (b) Total
Losses
Recorded in
Earnings
Other Gains
(Losses) (b) Total
Held-to-maturity
Other asset-backed securities ....... $ – $ – $ – $ (2) $ – $ (2) $ – $ – $ –
Total held-to-maturity .......... $ – $ – $ – $ (2) $ – $ (2) $ – $ – $ –
Available-for-sale
Mortgage-backed securities
Non-agency residential
Prime (a) ........................ $ (3) $ (5) $ (8) $ (5) $(10) $ (15) $ (13) $(182) $ (195)
Non-prime ...................... (24) (23) (47) (63) (60) (123) (151) (304) (455)
Commercial non-agency .......... – – – – – – (1) (1) (2)
Asset-backed securities
Collateralized debt obligations/
Collaterized loan obligations . . . – – – (6) (1) (7) (17) (3) (20)
Other .............................. (4) 3 (1) (13) 4 (9) (186) 88 (98)
Obligations of state and political
subdivisions ....................... (4) – (4) – – – – – –
Corporate debt securities ............ – – – – – – (7) – (7)
Perpetual preferred securities........ – – – (1) – (1) (223) – (223)
Other debt securities................. – – – (1) 1 – – – –
Total available-for-sale ......... $(35) $(25) $(60) $(89) $(66) $(155) $(598) $(402) $(1,000)
(a) Prime securities are those designated as such by the issuer or those with underlying asset characteristics and/or credit enhancements consistent with securities designated as prime.
(b) Represents the non-credit portion of other-than-temporary impairment recorded in other comprehensive income for securities determined to be other-than-temporarily impaired during the
period.
The Company determined the other-than-temporary impairment recorded in earnings for securities by estimating the future cash
flows of each individual security, using market information where available, and discounting the cash flows at the original
effective rate of the security. Other-than-temporary impairment recorded in other comprehensive income (loss) was measured as
the difference between that discounted amount and the fair value of each security. 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 Non-Prime
Minimum Maximum Average Minimum Maximum Average
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
December 31, 2010
Estimated lifetime prepayment rates ....................... 4% 14% 13% 1% 12% 6%
Lifetime probability of default rates ........................ 3 9 3 1 20 8
Lifetime loss severity rates ................................. 40 55 41 37 71 55
Changes in the credit losses on debt securities (excludes perpetual preferred securities) are summarized as follows:
Year Ended December 31 (Dollars in Millions) 2011 2010 2009
Balance at beginning of period .................................................................................. $358 $335 $ 299
Additions to credit losses due to other-than-temporary impairments
Credit losses on securities not previously considered other-than-temporarily impaired ...................... 7 19 94
Decreases in expected cash flows on securities for which other-than-temporary impairment was previously
recognized ................................................................................................. 28 72 148
Total other-than-temporary impairment on debt securities ................................................. 35 91 242
Other changes in credit losses
Increases in expected cash flows ............................................................................. (21) (26) (49)
Realized losses (a) ............................................................................................ (73) (60) (30)
Credit losses on security sales and securities expected to be sold ........................................... (1) – (127)
Other .......................................................................................................... – 18 –
Balance at end of period ......................................................................................... $298 $358 $ 335
(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.
84 U.S. BANCORP