Fair Value Measurement and Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2017

Financial Assets and Financial Liabilities Measured at Fair Value on Recurring Basis

The following tables present financial assets and financial liabilities measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016, by major category and by valuation hierarchy level:



	June 30, 2017
(Dollars in millions)	Level 1			Level 2			Level 3			Netting Adjustment⁽¹⁾			Fair Value
Assets
Trading account assets:
U.S. Treasury securities	$	—		$	2,439		$	—		$	—		$	2,439
U.S. government-sponsored agency securities	—			118			—			—			118
State and municipal securities	—			3			—			—			3
Commercial paper	—			34			—			—			34
Other sovereign government obligations	—			36			—			—			36
Corporate bonds	—			997			—			—			997
Asset-backed securities	—			131			—			—			131
Mortgage-backed securities	—			5,440			—			—			5,440
Equities	51			—			—			—			51
Interest rate derivative contracts	6			965			2			(338		)	635
Commodity derivative contracts	—			101			—			(97		)	4
Foreign exchange derivative contracts	1			219			1			(97		)	124
Equity derivative contracts	—			—			168			(167		)	1
Total trading account assets	58			10,483			171			(699		)	10,013
Securities available for sale:
U.S. Treasury	—			2,242			—			—			2,242
Residential mortgage-backed securities:
U.S government and government-sponsored agencies	—			8,833			—			—			8,833
Privately issued	—			499			—			—			499
Privately issued - commercial mortgage-backed securities	—			714			—			—			714
Collateralized loan obligations	—			2,230			—			—			2,230
Other	—			7			—			—			7
Other debt securities:
Direct bank purchase bonds	—			—			1,546			—			1,546
Other	—			67			26			—			93
Equity securities	5			—			—			—			5
Total securities available for sale	5			14,592			1,572			—			16,169
Other assets:
Mortgage servicing rights	—			—			48			—			48
Interest rate hedging contracts	—			6			—			(4		)	2
Other derivative contracts	—			3			1			(3		)	1
Total other assets	—			9			49			(7		)	51
Total assets	$	63		$	25,084		$	1,792		$	(706	)	$	26,233
Percentage of total	—		%	96		%	7		%	(3		)%	100		%
Percentage of total Company assets	—		%	16		%	1		%	—		%	17		%
Liabilities
Trading account liabilities:
Securities sold, not yet purchased:
U.S. Treasury	$	—		$	2,551		$	—		$	—		$	2,551
State and municipal	—			7			—			—			7
Other sovereign government obligations	—			40			—			—			40
Corporate bonds	—			406			—			—			406
Equities	53			—			—			—			53
Trading derivatives:
Interest rate derivative contracts	2			876			—			(665		)	213
Commodity derivative contracts	—			76			—			(27		)	49
Foreign exchange derivative contracts	1			128			1			(54		)	76
Equity derivative contracts	—			—			168			—			168
Total trading account liabilities	56			4,084			169			(746		)	3,563
Other liabilities:
FDIC clawback liability	—			—			113			—			113
Interest rate hedging contracts	—			183			—			(183		)	—
Other derivative contracts	—			12			5			(11		)	6
Total other liabilities	—			195			118			(194		)	119
Total liabilities	$	56		$	4,279		$	287		$	(940	)	$	3,682
Percentage of total	2		%	116		%	8		%	(26		)%	100		%
Percentage of total Company liabilities	—		%	3		%	—		%	—		%	3		%


(1)	Amounts represent the impact of legally enforceable master netting agreements between the same counterparties that allow the Company to net settle all contracts.



	December 31, 2016
(Dollars in millions)	Level 1			Level 2			Level 3			Netting Adjustment⁽¹⁾			Fair Value
Assets
Trading account assets:
U.S. Treasury securities	$	—		$	1,730		$	—		$	—		$	1,730
U.S. government-sponsored agency securities	—			73			—			—			73
State and municipal securities	—			18			—			—			18
Commercial paper	—			1			—			—			1
Other sovereign government obligations	—			16			—			—			16
Corporate bonds	—			841			—			—			841
Asset-backed securities	—			106			—			—			106
Mortgage-backed securities	—			5,221			—			—			5,221
Equities	85			—			—			—			85
Interest rate derivative contracts	7			1,065			2			(343		)	731
Commodity derivative contracts	—			144			1			(106		)	39
Foreign exchange derivative contracts	1			215			1			(138		)	79
Equity derivative contracts	1			—			164			(163		)	2
Total trading account assets	94			9,430			168			(750		)	8,942
Securities available for sale:
U.S. Treasury	—			2,505			—			—			2,505
Residential mortgage-backed securities:
U.S government and government-sponsored agencies	—			6,695			—			—			6,695
Privately issued	—			327			—			—			327
Privately issued - commercial mortgage-backed securities	—			664			—			—			664
Collateralized loan obligations	—			2,218			—			—			2,218
Other	—			7			—			—			7
Other debt securities:
Direct bank purchase bonds	—			—			1,613			—			1,613
Other	—			82			25			—			107
Equity securities	5			—			—			—			5
Total securities available for sale	5			12,498			1,638			—			14,141
Other assets:
Mortgage servicing rights	—			—			23			—			23
Interest rate hedging contracts	—			22			—			(20		)	2
Other derivative contracts	—			2			1			—			3
Total other assets	—			24			24			(20		)	28
Total assets	$	99		$	21,952		$	1,830		$	(770	)	$	23,111
Percentage of total	—		%	95		%	8		%	(3		)%	100		%
Percentage of total Company assets	—		%	15		%	1		%	(1		)%	15		%
Liabilities
Trading account liabilities:
Securities sold, not yet purchased:
U.S. Treasury	$	—		$	1,973		$	—		$	—		$	1,973
Other sovereign government obligations	—			11			—			—			11
Corporate bonds	—			298			—			—			298
Equities	47			—			—			—			47
Trading derivatives:
Interest rate derivative contracts	1			987			—			(718		)	270
Commodity derivative contracts	—			111			1			(68		)	44
Foreign exchange derivative contracts	1			129			1			(33		)	98
Equity derivative contracts	—			—			164			—			164
Total trading account liabilities	49			3,509			166			(819		)	2,905
Other liabilities:
FDIC clawback liability	—			—			115			—			115
Interest rate hedging contracts	—			199			—			(199		)	—
Other derivative contracts	—			84			6			(29		)	61
Total other liabilities	—			283			121			(228		)	176
Total liabilities	$	49		$	3,792		$	287		$	(1,047	)	$	3,081
Percentage of total	2		%	123		%	9		%	(34		)%	100		%
Percentage of total Company liabilities	—		%	3		%	—		%	(1		)%	2		%


(1)	Amounts represent the impact of legally enforceable master netting agreements between the same counterparties that allow the Company to net settle all contracts.

Reconciliation of Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs

The following tables present a reconciliation of the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2017 and 2016. Level 3 available for sale securities at June 30, 2017 and 2016 primarily consist of direct bank purchase bonds. The Company’s policy is to recognize transfers in and out of Level 1, 2 and 3 as of the end of a reporting period.



	For the Three Months Ended
	June 30, 2017															June 30, 2016
(Dollars in millions)	Trading Assets			Securities Available for Sale			Other Assets			Trading Liabilities			Other Liabilities			Trading Assets			Securities Available for Sale			Other Assets			Trading Liabilities			Other Liabilities
Asset (liability) balance, beginning of period	$	172		$	1,569		$	35		$	(168	)	$	(119	)	$	189		$	1,613		$	15		$	(187	)	$	(116	)
Total gains (losses) (realized/unrealized):
Included in income before taxes	11			—			(2		)	(12		)	1			19			—			(1		)	(19		)	(8		)
Included in other comprehensive income	—			9			—			—			—			—			7			—			—			—
Purchases/additions	—			1			16			—			—			—			2			1			—			—
Settlements	(12		)	(7		)	—			11			—			(21		)	(15		)	—			20			—
Asset (liability) balance, end of period	$	171		$	1,572		$	49		$	(169	)	$	(118	)	$	187		$	1,607		$	15		$	(186	)	$	(124	)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period	$	11		$	—		$	(2	)	$	(12	)	$	1		$	19		$	—		$	(1	)	$	(19	)	$	(8	)




	For the Six Months Ended
	June 30, 2017															June 30, 2016
(Dollars in millions)	Trading Assets			Securities Available for Sale			Other Assets			Trading Liabilities			Other Liabilities			Trading Assets			Securities Available for Sale			Other Assets		Trading Liabilities			Other Liabilities
Asset (liability) balance, beginning of period	$	168		$	1,638		$	24		$	(166	)	$	(121	)	$	228		$	1,603		$	1	$	(223	)	$	(114	)
Total gains (losses) (realized/unrealized):
Included in income before taxes	41			—			(2		)	(40		)	3			1			—			—		(2		)	(10		)
Included in other comprehensive income	—			12			—			—			—			—			5			—		—			—
Purchases/additions	—			2			27			—			—			—			80			1		—			—
Settlements	(38		)	(80		)	—			37			—			(42		)	(81		)	—		39			—
Transfers in (out) of level 3	—			—			—			—			—			—			—			13		—			—
Asset (liability) balance, end of period	$	171		$	1,572		$	49		$	(169	)	$	(118	)	$	187		$	1,607		$	15	$	(186	)	$	(124	)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period	$	41		$	—		$	(2	)	$	(40	)	$	3		$	1		$	—		$	—	$	(2	)	$	(10	)

Significant Unobservable Inputs Level 3 Assets and Liabilities

The following table presents information about significant unobservable inputs related to the Company’s significant Level 3 assets and liabilities at June 30, 2017.



	June 30, 2017
(Dollars in millions)	Level 3 Fair Value		Valuation Technique	Significant Unobservable Input(s)	Range of Inputs		Weighted Average
Securities available for sale:
Direct bank purchase bonds	$	1,546	Return on equity	Market-required return on capital	8.0 - 10.0	%	9.7	%
				Probability of default	0.0 - 25.0	%	0.3	%
				Loss severity	10.0 - 60.0	%	28.4	%

Financial Assets Measured at Fair Value on Nonrecurring Basis

For assets measured at fair value on a nonrecurring basis during the three and six months ended June 30, 2017 and 2016 that were still held on the consolidated balance sheet as of the respective periods ended, the following tables present the fair value of such assets by the level of valuation assumptions used to determine each fair value adjustment.



	June 30, 2017								Gain (Loss) For the Three Months Ended June 30, 2017			Gain (Loss) For the Six Months Ended June 30, 2017
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gain (Loss) For the Three Months Ended June 30, 2017			Gain (Loss) For the Six Months Ended June 30, 2017
Loans:
Impaired loans	$	124	$	—	$	—	$	124	$	(5	)	$	(21	)
Other assets:
Software	—		—		—		—		—			(3		)
Loans held for sale	7		—		—		7		—			(2		)
Renewable energy investment	—		—		—		—		—			2
Consolidated LIHC VIE	91		—		—		91		(8		)	(8		)
Total	$	222	$	—	$	—	$	222	$	(13	)	$	(32	)



	June 30, 2016								Gain (Loss) For the Three Months Ended June 30, 2016			Gain (Loss) For the Six Months Ended June 30, 2016
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gain (Loss) For the Three Months Ended June 30, 2016			Gain (Loss) For the Six Months Ended June 30, 2016
Loans:
Impaired loans	$	180	$	—	$	—	$	180	$	(16	)	$	(143	)
Other assets:
Loans held for sale	—		—		—		—		—			(3		)
OREO	2		—		—		2		—			(1		)
Private equity investments	10		—		—		10		—			(12		)
Software	13		—		—		13		(1		)	(5		)
Intangible assets	—		—		—		—		—			(1		)
Total	$	205	$	—	$	—	$	205	$	(17	)	$	(165	)

Carrying Amount and Estimated Fair Value of Financial Instruments

The tables below present the carrying amount and estimated fair value of certain financial instruments, classified by valuation hierarchy level as of June 30, 2017 and as of December 31, 2016:



	June 30, 2017
(Dollars in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	4,348	$	4,348	$	4,348	$	—	$	—
Securities borrowed or purchased under resale agreements	19,820		19,820		—		19,820		—
Securities held to maturity	10,373		10,376		—		10,376		—
Loans held for investment ⁽¹⁾	76,156		77,144		—		—		77,144
Liabilities
Deposits	$	84,957	$	84,941	$	—	$	84,941	$	—
Commercial paper and other short-term borrowings	6,195		6,195		—		6,195		—
Securities loaned or sold under repurchase agreements	24,797		24,797		—		24,797		—
Long-term debt	10,556		10,556		—		10,556
Off-Balance Sheet Instruments
Commitments to extend credit and standby and commercial letters of credit	$	198	$	198	$	—	$	—	$	198


(1)	Excludes lease financing. The carrying amount is net of the allowance for loan and lease losses.



	December 31, 2016
(Dollars in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	5,753	$	5,753	$	5,753	$	—	$	—
Securities borrowed or purchased under resale agreements	19,747		19,747		—		19,747		—
Securities held to maturity	10,337		10,316		—		10,316		—
Loans held for investment ⁽¹⁾	75,112		76,257		—		—		76,257
Liabilities
Deposits	$	86,947	$	86,930	$	—	$	86,930	$	—
Commercial paper and other short-term borrowings	2,360		2,360		—		2,360		—
Securities loaned or sold under repurchase agreements	24,616		24,616		—		24,616		—
Long-term debt	11,410		11,411		—		11,411		—
Off-Balance Sheet Instruments
Commitments to extend credit and standby and commercial letters of credit	$	221	$	221	$	—	$	—	$	221


(1)	Excludes lease financing. The carrying amount is net of the allowance for loan and lease losses.