Wells Fargo 2012 Annual Report Download - page 48

Balance Sheet Analysis (continued)
Management” section of this Report for more information on
liquidity and interest rate risk.
We analyze securities for OTTI quarterly or more often if a
potential loss-triggering event occurs. Of the $416 million in
OTTI write-downs recognized in 2012, $240 million related to
debt securities. There was $16 million in OTTI write-downs for
marketable equity securities and $160 million in OTTI write-
downs related to nonmarketable equity investments. For a
discussion of our OTTI accounting policies and underlying
considerations and analysis see Note 1 (Summary of Significant
Accounting Policies – Investments) and Note 5 (Securities
Available for Sale) to Financial Statements in this Report.
At December 31, 2012, debt securities available for sale
included $38.7 billion of municipal bonds, of which 82% were
rated “A-” or better based predominantly on external and, in
some cases, internal ratings. Additionally, some of the securities
in our total municipal bond portfolio are guaranteed against loss
by bond insurers. These guaranteed bonds are predominantly
investment grade and were generally underwritten in accordance
with our own investment standards prior to the determination to
purchase, without relying on the bond insurer’s guarantee in
making the investment decision. Our municipal bond holdings
are monitored as part of our ongoing impairment analysis of our
securities available for sale.
The weighted-average expected maturity of debt securities
available for sale was 5.5 years at December 31, 2012. Because
57% of this portfolio is MBS, the expected remaining maturity is
shorter than the remaining contractual maturity because
borrowers generally have the right to prepay obligations before
the underlying mortgages mature. The estimated effect of a
200 basis point increase or decrease in interest rates on the fair
value and the expected remaining maturity of the MBS available
for sale are shown in Table 11.
Table 11: Mortgage-Backed Securities
Expected
Net remaining
Fair unrealized maturity
(in billions) value gain (loss) (in years)
At December 31, 2012
Actual $ 133.2 7.7 3.7
Assuming a 200 basis point:
Increase in interest rates 123.6 (1.9) 5.3
Decrease in interest rates 135.8 10.3 2.8
See Note 5 (Securities Available for Sale) to Financial
Statements in this Report for securities available for sale by
security type.
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