Wells Fargo 2009 Annual Report Download - page 117

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
The fair values of our investment securities could decline
in the future if the underlying performance of the collateral
for the residential and commercial MBS or other securities
deteriorate and our credit enhancement levels do not provide
sufficient protection to our contractual principal and interest.
As a result, there is a risk that significant OTTI may occur in
the future given the current economic environment.
The following table shows the gross unrealized losses
and fair value of debt and perpetual preferred securities avail-
able for sale by those rated investment grade and those rated
less than investment grade, according to their lowest credit
rating by Standard & Poor’s Rating Services (S&P) or Moody’s
Investors Service (Moody’s). Credit ratings express opinions
about the credit quality of a security. Securities rated invest-
ment grade, that is those rated BBB- or higher by S&P or
Baa3 or higher by Moody’s, are generally considered by the
rating agencies and market participants to be low credit risk.
Conversely, securities rated below investment grade, labeled
as “speculative grade” by the rating agencies, are considered
to be distinctively higher credit risk than investment grade
securities. We have also included securities not rated by S&P
or Moody’s in the table below based on the internal credit
grade of the securities (used for credit risk management
purposes) equivalent to the credit rating assigned by major
credit agencies. There were no unrated securities included in
investment grade in a loss position as of December 31, 2009.
The unrealized losses and fair value of unrated securities
categorized as investment grade were $543 million and
$8.1 billion as of December 31, 2008. Substantially all of the
unrealized losses on unrated securities classified as investment
grade as of December 31, 2008, were related to investments
in asset-backed securities collateralized by auto leases and
cash reserves that appreciated to an unrealized gain position
at December 31, 2009, due to spread tightening. If an internal
credit grade was not assigned, we categorized the security
as non-investment grade.
Investment grade Non-investment grade
Gross Gross
unrealized Fair unrealized Fair
(in millions) losses value losses value
December 31, 2008
Securities of U.S. Treasury and federal agencies $ — — — —
Securities of U.S. states and political subdivisions (1,464) 5,028 (56) 157
Mortgage-backed securities:
Federal agencies (3) 83 — —
Residential (4,574) 10,045 (143) 153
Commercial (3,863) 6,427 (15) 27
Total mortgage-backed securities (8,440) 16,555 (158) 180
Corporate debt securities (36) 579 (503) 946
Collateralized debt obligations (478) 373 (92) 22
Other (549) 8,612 (53) 64
Total debt securities (10,967) 31,147 (862) 1,369
Perpetual preferred securities (311) 604 (16) 21
Total $(11,278) 31,751 (878) 1,390
December 31, 2009
Securities of U.S. Treasury and federal agencies $ (14) 530 — —
Securities of U.S. states and political subdivisions (275) 3,621 (90) 325
Mortgage-backed securities:
Federal agencies (9) 767 — —
Residential (480) 5,661 (1,563) 7,027
Commercial (1,247) 6,543 (615) 643
Total mortgage-backed securities (1,736) 12,971 (2,178) 7,670
Corporate debt securities (31) 260 (46) 463
Collateralized debt obligations (104) 471 (263) 439
Other (85) 644 (160) 388
Total debt securities (2,245) 18,497 (2,737) 9,285
Perpetual preferred securities (65) 620 — —
Total $ (2,310) 19,117 (2,737) 9,285