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

12 Months Ended

Dec. 31, 2019

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 at December 31, 2019 and 2018, by major category and by valuation hierarchy level.



	December 31, 2019															December 31, 2018
(Dollars in millions)	Level 1			Level 2			Level 3			Netting⁽¹⁾			Fair Value			Level 1			Level 2			Level 3			Netting⁽¹⁾			Fair Value
Assets
Trading account assets:
U.S. Treasury and government agencies	$	—		$	2,393		$	—		$	—		$	2,393		$	—		$	3,071		$	—		$	—		$	3,071
Mortgage-backed:
U.S. agencies	—			5,376			—			—			5,376			—			5,785			—			—			5,785
Corporate debt	—			1,212			—			—			1,212			—			1,367			—			—			1,367
Other debt	—			306			—			—			306			—			360			—			—			360
Equity	127			—			—			—			127			127			—			—			—			127
Derivative contracts	16			1,195			8			(256		)	963			19			806			13			(335		)	503
Total trading account assets	143			10,482			8			(256		)	10,377			146			11,389			13			(335		)	11,213
Securities available for sale:
U.S. Treasury and government agencies	—			5,438			—			—			5,438			—			3,429			—			—			3,429
Mortgage-backed:
U.S. agencies	—			5,468			—			—			5,468			—			8,007			—			—			8,007
Residential - non-agency	—			762			—			—			762			—			864			—			—			864
Commercial - non-agency	—			3,471			18			—			3,489			—			1,180			—			—			1,180
Collateralized loan obligations	—			1,491			—			—			1,491			—			1,474			—			—			1,474
Direct bank purchase bonds	—			—			936			—			936			—			—			1,190			—			1,190
Other	—			28			177			—			205			—			29			141			—			170
Total securities available for sale	—			16,658			1,131			—			17,789			—			14,983			1,331			—			16,314
Other assets:
Mortgage servicing rights	—			—			270			—			270			—			—			159			—			159
Loans held for sale	—			—			42			—			42			—			—			117			—			117
Derivative contracts	—			10			4			(8		)	6			—			32			1			(19		)	14
Equity securities	10			—			—			—			10			9			—			—			—			9
Total other assets	10			10			316			(8		)	328			9			32			277			(19		)	299
Total assets	$	153		$	27,150		$	1,455		$	(264	)	$	28,494		$	155		$	26,404		$	1,621		$	(354	)	$	27,826
Percentage of total	1		%	95		%	5		%	(1		)%	100		%	—		%	95		%	6		%	(1		)%	100		%
Percentage of total Company assets	—		%	16		%	1		%	—		%	17		%	—		%	16		%	1		%	—		%	17		%
Liabilities
Trading account liabilities:
U.S. Treasury and government agencies	$	—		$	2,299		$	—		$	—		$	2,299		$	—		$	2,753		$	—		$	—		$	2,753
Corporate debt	—			646			—			—			646			—			717			—			—			717
Other debt	—			4			—			—			4			—			10			—			—			10
Equity	105			—			—			—			105			70			—			—			—			70
Derivatives contracts	11			499			8			(306		)	212			55			731			13			(322		)	477
Total trading account liabilities	116			3,448			8			(306		)	3,266			125			4,211			13			(322		)	4,027
Other liabilities:
FDIC clawback liability	—			—			121			—			121			—			—			116			—			116
Derivatives contracts	—			2			3			—			5			—			3			2			—			5
Total other liabilities	—			2			124			—			126			—			3			118			—			121
Total liabilities	$	116		$	3,450		$	132		$	(306	)	$	3,392		$	125		$	4,214		$	131		$	(322	)	$	4,148
Percentage of total	3		%	102		%	4		%	(9		)%	100		%	3		%	102		%	3		%	(8		)%	100		%
Percentage of total Company liabilities	—		%	2		%	—		%	—		%	2		%	—		%	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.

Fair Value Assets and Liabilities Measured on Recurring Basis Unobservable Input Reconciliation

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 years ended December 31, 2019 and 2018. Level 3 securities available for sale at December 31, 2019 and 2018 largely consist of direct bank purchase bonds.



	For the Year Ended
	December 31, 2019															December 31, 2018
(Dollars in millions)	Trading Account Assets			Securities Available for Sale			Other Assets			Trading Account Liabilities			Other Liabilities			Trading Account Assets			Securities Available for Sale			Other Assets			Trading Account Liabilities			Other Liabilities
Asset (liability) balance, beginning of period	$	13		$	1,331		$	277		$	(13	)	$	(118	)	$	139		$	1,600		$	65		$	(138	)	$	(119	)
Total gains (losses) - (realized/unrealized):
Included in income before taxes	4			—			(88		)	(4		)	(6		)	(10		)	—			(8		)	9			1
Included in other comprehensive income	—			31			—			—			—			—			(9		)	—			—			—
Purchases/additions	—			57			396			—			—			—			126			220			—			—
Sales	—			—			(269		)	—			—			—			—			—			—			—
Settlements	(9		)	(288		)	—			9			—			(116		)	(386		)	—			116			—
Asset (liability) balance, end of period	$	8		$	1,131		$	316		$	(8	)	$	(124	)	$	13		$	1,331		$	277		$	(13	)	$	(118	)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period	$	4		$	—		$	(103	)	$	(4	)	$	(6	)	$	(10	)	$	—		$	(8	)	$	9		$	1

The

Significant Unobservable Inputs Level 3 Assets and Liabilities

following table presents information about significant unobservable inputs related to the Company's significant Level 3 assets and liabilities at December 31, 2019.



	December 31, 2019
(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	$	936	Return on equity	Market-required return on capital	8.0 - 10.0	%	9.4	%
				Probability of default	0.0 - 25.0	%	0.3	%
				Loss severity	10.0 - 45.0	%	20.0	%

The

Financial Assets Measured at Fair Value on Nonrecurring Basis

assets measured at fair value on a nonrecurring basis during the years ended December 31, 2019 and 2018 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.



	December 31, 2019								For the Year Ended December 31, 2019
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gains (Losses)
Loans held for investment	$	64	$	—	$	—	$	64	$	(20	)
Goodwill ⁽¹⁾	1,764		—		—		1,764		(1,614		)
Other assets	301		—		—		301		(36		)
Total	$	2,129	$	—	$	—	$	2,129	$	(1,670	)


(1)	For further information, see Note 5 to these Consolidated Financial Statements.



	December 31, 2018								For the Year Ended December 31, 2018
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gains (Losses)
Loans held for investment	$	151	$	—	$	—	$	151	$	(106	)
Other assets	139		—		—		139		(45		)
Total	$	290	$	—	$	—	$	290	$	(151	)

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Carrying Amount and Estimated Fair Value of Financial Instruments

tables below present the carrying amount and estimated fair value of certain financial instruments, all of which are accounted for at amortized cost, classified by valuation hierarchy level as of December 31, 2019 and 2018.



	December 31, 2019
(Dollars in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	9,641	$	9,641	$	9,641	$	—	$	—
Securities borrowed or purchased under resale agreements	23,943		23,946		—		23,946		—
Securities held to maturity	9,421		9,508		—		9,508		—
Loans held for investment ⁽¹⁾	86,687		87,506		—		—		87,506
Other assets	54		54		54		—		—
Liabilities
Time deposits	$	15,651	$	15,691	$	—	$	15,691	$	—
Securities loaned or sold under repurchase agreements	28,866		28,866		—		28,866		—
Commercial paper and other short-term borrowings	6,484		6,484		—		6,484		—
Long-term debt	17,129		17,344		—		17,344		—
Off-Balance Sheet Instruments
Commitments to extend credit and standby and commercial letters of credit	$	87	$	280	$	—	$	—	$	280


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



	December 31, 2018
(Dollars in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	8,350	$	8,350	$	8,350	$	—	$	—
Securities borrowed or purchased under resale agreements	22,368		22,368		—		22,368		—
Securities held to maturity	10,901		10,720		—		10,720		—
Loans held for investment ⁽¹⁾	84,805		84,729		—		—		84,729
Other assets	48		48		48		—		—
Liabilities
Time deposits	$	11,739	$	11,714	$	—	$	11,714	$	—
Securities loaned or sold under repurchase agreements	27,285		27,285		—		27,285		—
Commercial paper and other short-term borrowings	9,263		9,263		—		9,263		—
Long-term debt	17,918		17,961		—		17,961		—
Off-Balance Sheet Instruments
Commitments to extend credit and standby and commercial letters of credit	$	120	$	242	$	—	$	—	$	242


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