US Bank 2009 Annual Report Download - page 86

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The following table summarizes other-than-temporary impairment by investment category:
Year Ended December 31, 2009 (Dollars in Millions)
Losses
Recorded in
Earnings
Other
Gains
(Losses) Total
Available-for-sale
Mortgage-backed securities
Non-agency residential
Prime (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (13) $(182) $ (195)
Non-prime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (151) (304) (455)
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (1) (2)
Asset-backed securities
Collateralized debt obligations/Collateralized loan obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . (17) (3) (20)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (186) 88 (98)
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) – (7)
Perpetual preferred securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (223) – (223)
Total available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(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.
The Company determined the other-than-temporary impairment recorded in earnings for securities other than perpetual
preferred 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 was measured as the difference between that discounted amount and the fair value of each security. The
following table includes the ranges for principal valuation assumptions used at December 31, 2009 for those non-agency
mortgage-backed securities determined to be other-than-temporarily impaired:
Minimum Maximum Average Minimum Maximum Average
Prime Non-Prime
Estimated lifetime prepayment rates . . . . . . . . . . . . . . . . . . . . . . . . . . . 4% 14% 13% 1% 12% 7%
Lifetime probability of default rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9 1 1 20 9
Lifetime loss severity rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 57 51 37 79 57
Changes in the amount of unrealized losses on non-agency mortgage-backed securities, including SIV-related investments, and
other debt securities attributed to credit loss are summarized as follows:
Year Ended December 31, 2009 (Dollars in Millions)
Balance at beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 299
Credit losses on securities not previously considered other-than-temporarily impaired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Decreases in expected cash flows on securities for which other-than-temporary impairment was previously recognized . . . . . . . . 148
Increases in expected cash flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (49)
Realized losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30)
Credit losses on security sales and securities expected to be sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (127)
Balance at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 335
84 U.S. BANCORP