2005 Summary Annual Report: Form 10-K: Note 6 - Securities

The amortized cost, gross unrealized gains and losses, and fair value of AFS debt and marketable equity securities, and Held-to-maturity securities at December 31, 2005, 2004 and 2003 were:

At December 31, 2005, accumulated net unrealized losses on AFS debt and marketable equity securities included in Accumulated OCI were $3.0 billion, net of the related income tax benefit of $1.8 billion. At December 31, 2004, accumulated net unrealized losses on these securities were $196 million, net of the related income tax benefit of $146 million.

The following table presents the current fair value and the associated unrealized losses only on investments in securities with unrealized losses at December 31, 2005 and 2004. The table also discloses whether these securities have had unrealized losses for less than twelve months, or for twelve months or longer.

The unrealized losses associated with U.S. Treasury securities and agency debentures, mortgage-backed securities, certain foreign securities, other taxable securities and tax-exempt securities are not considered to be other-than-temporary because their unrealized losses are related to changes in interest rates and do not affect the expected cash flows of the underlying collateral or issuer. The Corporation has the ability and intent to hold these securities for a period of time sufficient to recover all unrealized losses. Accordingly, the Corporation has not recognized any other-than-temporary impairments for these securities.

The Corporation had investments in securities from the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) that exceeded 10 percent of consolidated Shareholders’ Equity as of December 31, 2005 and 2004. Those investments had market values of $144.1 billion and $46.9 billion at December 31, 2005 and $133.6 billion and $35.8 billion at December 31, 2004. In addition, these investments had total amortized costs of $148.0 billion and $48.3 billion at December 31, 2005 and $132.9 billion and $35.9 billion at December 31, 2004.

Pursuant to an agreement dated June 17, 2005, the Corporation committed to purchase approximately nine percent of the stock of China Construction Bank (CCB) for $3.0 billion. Under this agreement, the Corporation made an initial purchase of CCB shares for $2.5 billion in August 2005 and during CCB’s initial public offering in October 2005, made an additional purchase of $500 million. These shares are non-transferable until the third anniversary of the initial public offering. The Corporation also holds an option to increase its ownership interest in CCB to 19.9 percent over the next five years. At December 31, 2005, this $3.0 billion investment in CCB was included in Other Assets.

Securities are pledged or assigned to secure borrowed funds, government and trust deposits and for other purposes. The wcarrying value of pledged securities was $116.7 billion and $45.1 billion at December 31, 2005 and 2004.

The expected maturity distribution of the Corporation’s mortgage-backed securities and the contractual maturity distribution of the Corporation’s other securities, and the yields of the Corporation’s securities portfolio at December 31, 2005 are summarized in the following table. Actual maturities may differ from the contractual or expected maturities shown below since borrowers may have the right to prepay obligations with or without prepayment penalties.

The components of realized gains and losses on sales of debt securities for 2005, 2004 and 2003 were:

The Income Tax Expense attributable to realized net gains on debt securities sales was $400 million, $640 million and $329 million in 2005, 2004 and 2003, respectively.