(Address of principal executive offices) (Zip Code)
(404) 588-7711
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
ý Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x
Accelerated filer o
Non-accelerated filer o
Smaller reporting company o
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ý
At July 25, 2012, 538,484,027 shares of the Registrant’s Common Stock, $1.00 par value, were outstanding.
Dodd-Frank Act — The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
EPS — Earnings per share.
ERISA — Employee Retirement Income Security Act of 1974.
Exchange Act — Securities Exchange Act of 1934.
FASB — Financial Accounting Standards Board.
FDIC — The Federal Deposit Insurance Corporation.
Federal Reserve — The Board of Governors of the Federal Reserve System.
Fed funds — Federal funds.
FFELP — Federal Family Education Loan Program.
i
FHA — Federal Housing Administration.
FHLB — Federal Home Loan Bank.
FICO — Fair Isaac Corporation.
FINRA — Financial Industry Regulatory Authority.
Fitch — Fitch Ratings Ltd.
FRB — Federal Reserve Board.
FTE — Fully taxable-equivalent.
FVO — Fair value option.
GSE — Government-sponsored enterprise.
HARP — Home Affordable Refinance Program.
HUD — U.S. Department of Housing and Urban Development.
IFRS — International Financial Reporting Standards.
IIS — Institutional Investment Solutions.
IPO — Initial public offering.
IRLC — Interest rate lock commitment.
IRS — Internal Revenue Service.
ISDA — International Swaps and Derivatives Association.
LGD — Loss given default.
LHFI — Loans held for investment.
LHFI-FV — Loans held for investment carried at fair value.
LHFS — Loans held for sale.
LIBOR —London InterBank Offered Rate.
LOCOM – Lower of cost or market.
LTI — Long-term incentive.
LTV— Loan to value.
MBS — Mortgage-backed securities.
MD&A — Management’s Discussion and Analysis of Financial Condition and Results of Operations.
MIP — Management Incentive Plan.
Moody’s — Moody’s Investors Service.
MSR — Mortgage servicing right.
MVE — Market value of equity.
NEO — Named executive officers.
NII — Net interest income.
NOW — Negotiable order of withdrawal account.
NPL — Nonperforming loan.
NPR — Notice of Proposed Rulemaking.
OCC — Office of the Comptroller of the Currency.
OCI — Other comprehensive income.
OREO — Other real estate owned.
OTC — Over-the-counter.
OTTI — Other-than-temporary impairment.
ii
Parent Company — SunTrust Banks, Inc., the parent Company of SunTrust Bank and other subsidiaries of SunTrust Banks, Inc.
PD — Probability of default.
PPG — Playbook for profitable growth.
QSPE — Qualifying special-purpose entity.
RidgeWorth — RidgeWorth Capital Management, Inc.
ROA — Return on average total assets.
ROE — Return on average common shareholders’ equity.
RSU — Restricted stock unit.
RWA — Risk-weighted assets.
S&P — Standard and Poor’s.
SBA — Small Business Administration.
SEC — U.S. Securities and Exchange Commission.
SERP — Supplemental Executive Retirement Plan.
SPE — Special purpose entity.
STIS — SunTrust Investment Services, Inc.
STM — SunTrust Mortgage, Inc.
STRH — SunTrust Robinson Humphrey, Inc.
SunTrust — SunTrust Banks, Inc.
TARP — Troubled Asset Relief Program.
TDR — Troubled debt restructuring.
Three Pillars —Three Pillars Funding, LLC.
TRS — Total return swaps.
U.S. — United States.
U.S. GAAP — Generally Accepted Accounting Principles in the United States.
U.S. Treasury — The United States Department of the Treasury.
UTB — Unrecognized tax benefits.
VA —Veterans Administration.
VAR —Value at risk.
VI — Variable interest.
VIE — Variable interest entity.
Visa —The Visa, U.S.A. Inc. card association or its affiliates, collectively.
W&IM — Wealth and Investment Management.
PART I – FINANCIAL INFORMATION
The following unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X, and accordingly do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. However, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary to comply with Regulation S-X have been included. Operating results for the three and six months ended June 30, 2012 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2012.
iii
Item 1.
FINANCIAL STATEMENTS (UNAUDITED)
SunTrust Banks, Inc.
Consolidated Statements of Income
For the Three Months Ended June 30
For the Six Months Ended June 30
(Dollars in millions and shares in thousands, except per share data) (Unaudited)
2012
2011
2012
2011
Interest Income
Interest and fees on loans
$1,263
$1,299
$2,563
$2,613
Interest and fees on loans held for sale
31
22
55
50
Interest and dividends on securities available for sale:
Taxable interest
153
177
322
342
Tax-exempt interest
4
6
8
11
Dividends1
23
21
45
41
Trading account interest and other
18
21
33
43
Total interest income
1,492
1,546
3,026
3,100
Interest Expense
Interest on deposits
118
162
245
331
Interest on long-term debt
90
113
178
237
Interest on other borrowings
10
12
18
24
Total interest expense
218
287
441
592
Net interest income
1,274
1,259
2,585
2,508
Provision for credit losses
300
392
617
839
Net interest income after provision for credit losses
974
867
1,968
1,669
Noninterest Income
Service charges on deposit accounts
167
170
332
333
Trust and investment management income
130
135
260
270
Other charges and fees
130
130
245
256
Mortgage production related income
103
4
166
3
Mortgage servicing related income
70
72
151
144
Investment banking income
75
95
147
162
Trading income
70
53
127
105
Card fees
66
105
127
205
Retail investment services
62
59
120
117
Net securities gains2
14
32
32
96
Other noninterest income
53
57
109
104
Total noninterest income
940
912
1,816
1,795
Noninterest Expense
Employee compensation
654
638
1,306
1,256
Employee benefits
108
110
254
246
Outside processing and software
180
162
356
320
Net occupancy expense
88
89
176
178
Operating losses
69
62
129
89
Credit and collection services
61
60
116
111
Regulatory assessments
60
81
111
152
Other real estate expense
52
64
103
133
Equipment expense
46
44
91
88
Marketing and customer development
32
46
59
84
Net loss/(gain) on debt extinguishment
13
(1
)
13
(2
)
Amortization of intangible assets
11
12
22
23
Other noninterest expense
172
175
351
329
Total noninterest expense
1,546
1,542
3,087
3,007
Income before provision for income taxes
368
237
697
457
Provision for income taxes
91
58
160
91
Net income including income attributable to noncontrolling interest
277
179
537
366
Net income attributable to noncontrolling interest
2
1
12
8
Net income
$275
$178
$525
$358
Net income available to common shareholders
$270
$174
$515
$212
Net income per average common share:
Diluted
$0.50
$0.33
$0.96
$0.41
Basic
0.51
0.33
0.97
0.41
Dividends declared per common share
0.05
0.01
0.10
0.02
Average common shares - diluted
537,495
535,416
536,951
519,548
Average common shares - basic
533,964
531,792
533,532
515,819
1 Includes dividends on common stock of The Coca-Cola Company of $15 million and $14 million during the three months ended June 30, 2012 and 2011, and $31 million and $28 million during the six months ended June 30, 2012 and 2011, respectively.
2 Includes credit-related OTTI losses of $2 million and $1 million for the three months ended June 30, 2012 and 2011, respectively, and $4 million and $2 million for the six months ended June 30, 2012 and 2011, respectively. There were no non-credit related unrealized OTTI losses recorded in OCI, before taxes, for the three and six months ended June 30, 2012 and 2011.
See Notes to Consolidated Financial Statements (unaudited).
1
SunTrust Banks, Inc.
Consolidated Statements of Comprehensive Income
For the Three Months Ended June 30
For the Six Months Ended June 30
(Dollars in millions) (Unaudited)
2012
2011
2012
2011
Net Income
$275
$178
$525
$358
Components of Other Comprehensive Income/(Loss):
Change in unrealized gains on securities, net of tax of $80, $110, $107 and $70, respectively
142
190
192
121
Change in unrealized gains on derivatives, net of tax of ($38), $41, ($96), and ($31), respectively
(69
)
72
(170
)
(53
)
Change related to employee benefit plans, net of tax of ($2), ($12), ($16) and ($10), respectively
(4
)
(19
)
(28
)
(16
)
Total Other Comprehensive Income/(Loss)
69
243
(6
)
52
Total Comprehensive Income
$344
$421
$519
$410
See Notes to Consolidated Financial Statements (unaudited).
2
SunTrust Banks, Inc.
Consolidated Balance Sheets
As of
(Dollars in millions and shares in thousands) (Unaudited)
June 30, 2012
December 31, 2011
Assets
Cash and due from banks
$5,781
$3,696
Securities purchased under agreements to resell
937
792
Interest-bearing deposits in other banks
21
21
Cash and cash equivalents
6,739
4,509
Trading assets (including encumbered securities of $712 and $574 as of June 30, 2012 and December 31, 2011, respectively)
6,327
6,279
Securities available for sale
24,409
28,117
Loans held for sale1 (loans at fair value: $2,940 and $2,141 as of June 30, 2012 and December 31, 2011, respectively)
3,123
2,353
Loans2 (loans at fair value: $406 and $433 as of June 30, 2012 and December 31, 2011, respectively)
124,560
122,495
Allowance for loan and lease losses
(2,300
)
(2,457
)
Net loans
122,260
120,038
Premises and equipment
1,578
1,564
Goodwill
6,376
6,344
Other intangible assets (MSRs at fair value: $865 and $921 as of June 30, 2012 and December 31, 2011, respectively)
939
1,017
Other real estate owned
331
479
Other assets
6,175
6,159
Total assets
$178,257
$176,859
Liabilities and Shareholders’ Equity
Noninterest-bearing consumer and commercial deposits
$37,394
$34,359
Interest-bearing consumer and commercial deposits
88,751
91,252
Total consumer and commercial deposits
126,145
125,611
Brokered time deposits (CDs at fair value: $914 and $1,018 as of June 30, 2012 and December 31, 2011, respectively)
2,208
2,281
Foreign deposits
50
30
Total deposits
128,403
127,922
Funds purchased
847
839
Securities sold under agreements to repurchase
1,583
1,644
Other short-term borrowings
7,098
8,983
Long-term debt 3 (debt at fair value: $2,010 and $1,997 as of June 30, 2012 and December 31, 2011, respectively)
13,076
10,908
Trading liabilities
1,782
1,806
Other liabilities
4,900
4,691
Total liabilities
157,689
156,793
Preferred stock, no par value
275
275
Common stock, $1.00 par value
550
550
Additional paid in capital
9,218
9,306
Retained earnings
9,443
8,978
Treasury stock, at cost, and other4
(661
)
(792
)
Accumulated other comprehensive income, net of tax
1,743
1,749
Total shareholders’ equity
20,568
20,066
Total liabilities and shareholders’ equity
$178,257
$176,859
Common shares outstanding
538,398
536,967
Common shares authorized
750,000
750,000
Preferred shares outstanding
3
3
Preferred shares authorized
50,000
50,000
Treasury shares of common stock
11,522
12,954
1 Includes loans held for sale, at fair value, of consolidated VIEs
$322
$315
2 Includes loans of consolidated VIEs
390
3,322
3 Includes debt of consolidated VIEs ($288 and $289 at fair value as of June 30, 2012 and December 31, 2011, respectively)
700
722
4 Includes noncontrolling interest held
111
107
See Notes to Consolidated Financial Statements (unaudited).
3
SunTrust Banks, Inc.
Consolidated Statements of Shareholders’ Equity
(Dollars and shares in millions, except per share data) (Unaudited)
Preferred
Stock
Common
Shares
Outstanding
Common
Stock
Additional
Paid in
Capital
Retained
Earnings
Treasury
Stock and
Other 1
Accumulated
Other
Comprehensive
Income 2
Total
Balance, January 1, 2011
$4,942
500
$515
$8,403
$8,542
($888
)
$1,616
$23,130
Net income
—
—
—
—
358
—
—
358
Other comprehensive income
—
—
—
—
—
—
52
52
Change in noncontrolling interest
—
—
—
—
—
1
—
1
Common stock dividends, $0.02 per share
—
—
—
—
(11
)
—
—
(11
)
Preferred stock dividends, $2,022 per share
—
—
—
—
(4
)
—
—
(4
)
U.S. Treasury preferred stock dividends, $1,236 per share
—
—
—
—
(60
)
—
—
(60
)
Accretion of discount for preferred stock issued to U.S. Treasury
6
—
—
—
(6
)
—
—
—
Repurchase of preferred stock issued to U.S. Treasury
(4,776
)
—
—
—
(74
)
—
—
(4,850
)
Issuance of common stock
—
35
35
982
—
—
—
1,017
Stock compensation expense
—
—
—
7
—
—
—
7
Restricted stock activity
—
2
—
(54
)
—
46
—
(8
)
Amortization of restricted stock compensation
—
—
—
—
—
17
—
17
Issuance of stock for employee benefit plans and other
—
—
—
(8
)
—
19
—
11
Balance, June 30, 2011
$172
537
$550
$9,330
$8,745
($805
)
$1,668
$19,660
Balance, January 1, 2012
$275
537
$550
$9,306
$8,978
($792
)
$1,749
$20,066
Net income
—
—
—
—
525
—
—
525
Other comprehensive loss
—
—
—
—
—
—
(6
)
(6
)
Change in noncontrolling interest
—
—
—
—
—
4
—
4
Common stock dividends, $0.10 per share
—
—
—
—
(54
)
—
—
(54
)
Preferred stock dividends, $2,033 per share
—
—
—
—
(6
)
—
—
(6
)
Exercise of stock options and stock compensation expense
—
—
—
(17
)
—
26
—
9
Restricted stock activity
—
1
—
(61
)
—
65
—
4
Amortization of restricted stock compensation
—
—
—
—
—
15
—
15
Issuance of stock for employee benefit plans and other
—
—
—
(10
)
—
21
—
11
Balance, June 30, 2012
$275
538
$550
$9,218
$9,443
($661
)
$1,743
$20,568
1 At June 30, 2012 includes ($707) million for treasury stock, ($65) million for compensation element of restricted stock, and $111 million for noncontrolling interest.
At June 30, 2011 includes ($869) million for treasury stock, ($67) million for compensation element of restricted stock, and $131 million for noncontrolling interest.
2 Components of AOCI at June 30, 2012 included $2,055 million in unrealized net gains on AFS securities, $399 million in unrealized net gains on derivative financial instruments, and ($711) million related to employee benefit plans. At June 30, 2011 components included $1,647 million in unrealized net gains on AFS securities, $479 million in unrealized net gains on derivative financial instruments, and ($458) million related to employee benefit plans.
See Notes to Consolidated Financial Statements (unaudited).
4
SunTrust Banks, Inc.
Consolidated Statements of Cash Flows
Six Months Ended June 30
(Dollars in millions) (Unaudited)
2012
2011
Cash Flows from Operating Activities
Net income including income attributable to noncontrolling interest
$537
$366
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion
382
372
Origination of mortgage servicing rights
(161
)
(136
)
Provisions for credit losses and foreclosed property
706
930
Mortgage repurchase provision
330
170
Stock option compensation and amortization of restricted stock compensation
17
24
Net loss/(gain) on extinguishment of debt
13
(2
)
Net securities gains
(32
)
(96
)
Net gain on sale of assets
(518
)
(141
)
Net decrease in loans held for sale
782
1,718
Net increase in other assets
(282
)
(358
)
Net increase in other liabilities
18
251
Net cash provided by operating activities
1,792
3,098
Cash Flows from Investing Activities
Proceeds from maturities, calls, and paydowns of securities available for sale
3,179
2,414
Proceeds from sales of securities available for sale
2,210
10,763
Purchases of securities available for sale
(1,451
)
(12,603
)
Proceeds from maturities, calls, and paydowns of trading securities
—
124
Proceeds from sales of trading securities
—
102
Net increase in loans, including purchases of loans
(4,621
)
(1,109
)
Proceeds from sales of loans
477
287
Capital expenditures
(112
)
(9
)
Contingent consideration and other payments related to acquisitions
(9
)
(18
)
Proceeds from the sale of other assets
259
360
Net cash (used in)/provided by investing activities
(68
)
311
Cash Flows from Financing Activities
Net increase in total deposits
481
1,877
Net (decrease)/increase in funds purchased, securities sold under agreements
to repurchase, and other short-term borrowings
(1,938
)
162
Proceeds from the issuance of long-term debt
4,000
1,039
Repayment of long-term debt
(1,991
)
(1,170
)
Proceeds from the exercise of stock options
5
—
Excess tax benefits from stock-based compensation
9
—
Proceeds from the issuance of common stock
—
1,017
Repurchase of preferred stock
—
(4,850
)
Common and preferred dividends paid
(60
)
(75
)
Net cash provided by/(used in) financing activities
506
(2,000
)
Net increase in cash and cash equivalents
2,230
1,409
Cash and cash equivalents at beginning of period
4,509
5,378
Cash and cash equivalents at end of period
$6,739
$6,787
Supplemental Disclosures:
Loans transferred from loans held for sale to loans
$31
$46
Loans transferred from loans to loans held for sale
1,116
198
Loans transferred from loans to other real estate owned
200
367
Accretion of discount for preferred stock issued to the U.S. Treasury
—
80
See Notes to Consolidated Financial Statements (unaudited).
5
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the results of operations in these financial statements, have been made.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could vary from these estimates. Certain reclassifications have been made to prior period amounts to conform to the current period presentation.
The Company evaluated subsequent events through the date its financial statements were issued.
These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. Except for accounting policies that have been recently adopted as described below, there have been no significant changes to the Company’s accounting policies as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.
Accounting Policies Recently Adopted and Pending Accounting Pronouncements
In May 2011, the FASB issued ASU 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The primary purpose of the ASU was to conform the language in the fair value measurements guidance in U.S. GAAP and IFRS. The ASU also clarified how to apply existing fair value measurement and disclosure requirements. Further, the ASU required additional disclosures about transfers between level 1 and 2 of the fair value hierarchy, quantitative information for level 3 inputs, and the level of the fair value measurement hierarchy for items that are not measured at fair value in the statement of financial position but for which the fair value is required to be disclosed. The ASU was effective for the interim reporting period ending March 31, 2012. The Company adopted the standard as of January 1, 2012, and the required disclosures are included in Note 12, “Fair Value Election and Measurement.” The adoption did not impact the Company’s financial position, results of operations, or EPS.
In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” The ASU requires presentation of the components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. The update does not change the items presented in OCI and does not affect the calculation or reporting of EPS. In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items out of Accumulated Other Comprehensive Income in ASU 2011-05,” which deferred the effective date for the amendments to the reclassification of items out of AOCI. In June 2012, the FASB decided that the presentation requirements deferred in ASU 2011-12 would not be reinstated. The guidance, with the exception of reclassification adjustments, was effective on January 1, 2012 and must be applied retrospectively for all periods presented. The Company adopted the standard as of January 1, 2012, and the required disclosures are included in the Consolidated Statements of Comprehensive Income. The adoption did not impact the Company’s financial position, results of operations, or EPS.
In September 2011, the FASB issued ASU 2011-08, “Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment.” The ASU amends interim and annual goodwill impairment testing requirements such that an entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The guidance was effective for annual and interim goodwill impairment tests beginning on or after January 1, 2012. The Company adopted the standard as of January 1, 2012 and has applied the guidance to interim goodwill impairment testing. The adoption did not have an impact on the Company's financial position, results of operations, or EPS.
In July 2012, the FASB issued ASU 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment." The ASU permits entities to perform an optional qualitative assessment for determining whether it is more likely than not that an indefinite-lived intangible asset is impaired. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company is evaluating the impact of the ASU; however, it is not expected to have a significant impact on the Company's financial position, results of operations, or EPS.
NOTE 2 – SECURITIES AVAILABLE FOR SALE
Securities Portfolio Composition
June 30, 2012
(Dollars in millions)
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
U.S. Treasury securities
$214
$10
$—
$224
Federal agency securities
1,698
85
—
1,783
U.S. states and political subdivisions
359
19
6
372
MBS - agency
17,308
803
1
18,110
MBS - private
225
—
17
208
ABS
344
9
5
348
Corporate and other debt securities
42
3
—
45
Coke common stock
—
2,346
—
2,346
Other equity securities1
972
1
—
973
Total securities AFS
$21,162
$3,276
$29
$24,409
December 31, 2011
(Dollars in millions)
Amortized
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
U.S. Treasury securities
$671
$23
$—
$694
Federal agency securities
1,843
89
—
1,932
U.S. states and political subdivisions
437
21
4
454
MBS - agency
20,480
743
—
21,223
MBS - private
252
—
31
221
CDO/CLO securities
50
—
—
50
ABS
460
11
7
464
Corporate and other debt securities
49
2
—
51
Coke common stock
—
2,099
—
2,099
Other equity securities1
928
1
—
929
Total securities AFS
$25,170
$2,989
$42
$28,117
1At June 30, 2012, other equity securities included the following securities at cost: $455 million in FHLB of Atlanta stock, $401 million in Federal Reserve Bank stock, and $116 million in mutual fund investments. At December 31, 2011, other equity securities included the following securities at cost: $342 million in FHLB of Atlanta stock, $398 million in Federal Reserve Bank stock, and $187 million in mutual fund investments.
Securities AFS that were pledged to secure public deposits, repurchase agreements, trusts, and other funds had a fair value of $7.6 billion and $9.1 billion as of June 30, 2012 and December 31, 2011, respectively. Further, under the Agreements, the Company pledged its shares of Coke common stock, which is hedged with derivative instruments, as discussed in Note 10, “Derivative Financial Instruments.” As of June 30, 2012 and December 31, 2011, there were no securities AFS pledged under which the transferee may repledge the collateral. The Company has also pledged $978 million and $770 million of certain marketable securities and cash equivalents to secure $930 million and $747 million of repurchase agreements as of June 30, 2012 and December 31, 2011, respectively.
6
Notes to Consolidated Financial Statements (Unaudited), continued
The amortized cost and fair value of investments in debt securities at June 30, 2012 by estimated average life are shown below. Actual cash flows may differ from estimated average lives and contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
Distribution of Maturities
(Dollars in millions)
1 Year
or Less
1-5
Years
5-10
Years
After 10
Years
Total
Amortized Cost:
U.S. Treasury securities
$12
$202
$—
$—
$214
Federal agency securities
117
1,372
95
114
1,698
U.S. states and political subdivisions
108
178
21
52
359
MBS - agency
901
14,304
1,827
276
17,308
MBS - private
—
136
89
—
225
ABS
123
152
2
67
344
Corporate and other debt securities
3
2
37
—
42
Total debt securities
$1,264
$16,346
$2,071
$509
$20,190
Fair Value:
U.S. Treasury securities
$12
$212
$—
$—
$224
Federal agency securities
118
1,441
105
119
1,783
U.S. states and political subdivisions
111
191
21
49
372
MBS - agency
951
14,957
1,916
286
18,110
MBS - private
—
125
83
—
208
ABS
123
152
2
71
348
Corporate and other debt securities
3
2
40
—
45
Total debt securities
$1,318
$17,080
$2,167
$525
$21,090
Securities in an Unrealized Loss Position
The Company held certain investment securities having unrealized loss positions. Market changes in interest rates and credit spreads may result in temporary unrealized losses as the market price of securities fluctuates. As of June 30, 2012, the Company did not intend to sell these securities nor was it more-likely-than-not that the Company would be required to sell these securities before their anticipated recovery or maturity. The Company has reviewed its portfolio for OTTI in accordance with the accounting policies outlined in the Company's Annual Report on Form 10-K for the year ended December 31, 2011.
7
Notes to Consolidated Financial Statements (Unaudited), continued
