US Bank 2012 Annual Report Download - page 95

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The following table summarizes other-than-temporary impairment by investment category:
2012 2011 2010
Year Ended December 31 (Dollars in Millions)
Losses
Recorded in
Earnings
Other Gains
(Losses) (c) Total
Losses
Recorded in
Earnings
Other Gains
(Losses) (c) Total
Losses
Recorded in
Earnings
Other Gains
(Losses) (c) 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) .............................. $(12) $ (9) $(21) $ (3) $ (5) $ (8) $ (5) $(10) $ (15)
Non-prime (b) ......................... (33) 21 (12) (24) (23) (47) (63) (60) (123)
Commercial non-agency ................ (1) (1) (2) – – – – – –
Asset-backed securities
Collateralized debt obligations/
Collateralized loan obligations ........ – – – – – – (6) (1) (7)
Other .................................... (1) 1 – (4) 3 (1) (13) 4 (9)
Obligations of state and political
subdivisions ............................. – – – (4) – (4) – – –
Perpetual preferred securities ............. (27) – (27) – – – (1) – (1)
Other debt securities ...................... – – – – – – (1) 1 –
Total available-for-sale .................. $(74) $12 $(62) $(35) $(25) $(60) $(89) $(66) $(155)
(a) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on
asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and
security market spreads).
(b) Includes all securities not meeting the conditions to be designated as prime.
(c) Losses represent the non-credit portion of other-than-temporary impairment recorded in other comprehensive income (loss) for investment securities determined to be other-than-temporarily
impaired during the period. Gains represent recoveries in the fair value of securities that have or previously had non-credit other-than-temporary impairment.
The Company determined the other-than-temporary
impairment recorded in earnings for debt securities not
intended to be sold by estimating the future cash flows of each
individual investment security, using market information
where available, and discounting the cash flows at the original
effective rate of the investment 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 investment
security. For perpetual preferred securities determined to be
other-than-temporarily impaired, the Company recorded a
loss in earnings for the entire difference between the securities’
fair value and their amortized cost.
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 (a) Non-Prime (b)
Minimum Maximum Average Minimum Maximum Average
December 31, 2012
Estimated lifetime prepayment rates ..................... 6% 22% 14% 3% 10% 6%
Lifetime probability of default rates ....................... 3 6 4 3 10 7
Lifetime loss severity rates ............................... 40 50 47 45 65 56
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
(a) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on
asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and
security market spreads).
(b) Includes all securities not meeting the conditions to be designated as prime.
U.S. BANCORP 91