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

3 Months Ended

Mar. 31, 2020

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 March 31, 2020 and December 31, 2019, by major category and by valuation hierarchy level.



	March 31, 2020															December 31, 2019
(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	$	—		$	1,706		$	—		$	—		$	1,706		$	—		$	2,393		$	—		$	—		$	2,393
Mortgage-backed:
U.S. agencies	—			6,611			—			—			6,611			—			5,376			—			—			5,376
Corporate debt	—			1,110			—			—			1,110			—			1,212			—			—			1,212
Other debt	—			361			—			—			361			—			306			—			—			306
Equity	40			—			—			—			40			127			—			—			—			127
Derivative contracts	28			2,616			3			(676		)	1,971			16			1,195			8			(256		)	963
Total trading account assets	68			12,404			3			(676		)	11,799			143			10,482			8			(256		)	10,377
Securities available for sale:
U.S. Treasury and government agencies	—			3,551			—			—			3,551			—			5,438			—			—			5,438
Mortgage-backed:
U.S. agencies	—			4,778			—			—			4,778			—			5,468			—			—			5,468
Residential - non-agency	—			701			—			—			701			—			762			—			—			762
Commercial - non-agency	—			3,647			16			—			3,663			—			3,471			18			—			3,489
Collateralized loan obligations	—			1,328			—			—			1,328			—			1,491			—			—			1,491
Direct bank purchase bonds	—			—			940			—			940			—			—			936			—			936
Other	—			12			167			—			179			—			28			177			—			205
Total securities available for sale	—			14,017			1,123			—			15,140			—			16,658			1,131			—			17,789
Other assets:
Mortgage servicing rights	—			—			164			—			164			—			—			270			—			270
Loans held for sale	—			—			46			—			46			—			—			42			—			42
Derivative contracts	—			39			11			(29		)	21			—			10			4			(8		)	6
Equity securities	10			—			—			—			10			10			—			—			—			10
Total other assets	10			39			221			(29		)	241			10			10			316			(8		)	328
Total assets	$	78		$	26,460		$	1,347		$	(705	)	$	27,180		$	153		$	27,150		$	1,455		$	(264	)	$	28,494
Percentage of total	—		%	97		%	5		%	(2		)%	100		%	1		%	95		%	5		%	(1		)%	100		%
Percentage of total Company assets	—		%	15		%	1		%	—		%	16		%	—		%	16		%	1		%	—		%	17		%
Liabilities
Trading account liabilities:
U.S. Treasury and government agencies	$	—		$	1,284		$	—		$	—		$	1,284		$	—		$	2,299		$	—		$	—		$	2,299
Corporate debt	—			625			—			—			625			—			646			—			—			646
Other debt	—			5			—			—			5			—			4			—			—			4
Equity	37			—			—			—			37			105			—			—			—			105
Derivatives contracts	35			1,110			3			(643		)	505			11			499			8			(306		)	212
Total trading account liabilities	72			3,024			3			(643		)	2,456			116			3,448			8			(306		)	3,266
Other liabilities:
FDIC clawback liability	—			—			122			—			122			—			—			121			—			121
Derivatives contracts	—			34			2			(20		)	16			—			2			3			—			5
Total other liabilities	—			34			124			(20		)	138			—			2			124			—			126
Total liabilities	$	72		$	3,058		$	127		$	(663	)	$	2,594		$	116		$	3,450		$	132		$	(306	)	$	3,392
Percentage of total	3		%	118		%	5		%	(26		)%	100		%	3		%	102		%	4		%	(9		)%	100		%
Percentage of total Company liabilities	—		%	2		%	—		%	—		%	2		%	—		%	2		%	—		%	—		%	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 table presents a reconciliation of the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2020 and 2019. Level 3 securities available for sale at March 31, 2020 and 2019 primarily consist of direct bank purchase bonds.



	For the Three Months Ended
	March 31, 2020															March 31, 2019
(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	$	8		$	1,131		$	316		$	(8	)	$	(124	)	$	13		$	1,331		$	277		$	(13	)	$	(118	)
Total gains (losses) - realized/unrealized):
Included in income before taxes	(3		)	—			(100		)	3			—			2			—			(31		)	(2		)	(1		)
Included in other comprehensive income	—			(3		)	—			—			—			—			11			—			—			—
Purchases/additions	—			1			5			—			—			—			2			140			—			—
Settlements	(2		)	(6		)	—			2			—			(3		)	(76		)	—			3			—
Asset (liability) balance, end of period	$	3		$	1,123		$	221		$	(3	)	$	(124	)	$	12		$	1,268		$	386		$	(12	)	$	(119	)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period	$	(3	)	$	—		$	(100	)	$	3		$	—		$	2		$	—		$	(31	)	$	(2	)	$	(1	)

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 March 31, 2020.



	March 31, 2020
(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	$	940	Return on equity	Market-required return on capital	8.0 - 10.0	%	9.9	%
				Probability of default	0.0 - 25.0		0.4
				Loss severity	10.0 - 45.0		20.1

Financial Assets Measured at Fair Value on Nonrecurring Basis

For assets measured at fair value on a nonrecurring basis during the three months ended March 31, 2020 and 2019 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.



	March 31, 2020								For the Three Months Ended March 31, 2020
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gains (Losses)
Loans held for investment	$	70	$	—	$	—	$	70	$	(9	)
Other assets	416		—		—		416		(43		)
Total	$	486	$	—	$	—	$	486	$	(52	)



	March 31, 2019								For the Three Months Ended March 31, 2019
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gains (Losses)
Loans held for investment	$	346	$	—	$	—	$	346	$	(15	)
Other assets	7		—		—		7		(5		)
Total	$	353	$	—	$	—	$	353	$	(20	)

Carrying Amount and Estimated Fair Value of Financial Instruments

The 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 at March 31, 2020 and December 31, 2019.



	March 31, 2020
(Dollars in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	11,985	$	11,985	$	11,985	$	—	$	—
Securities borrowed or purchased under resale agreements	15,715		15,723		—		15,723		—
Securities held to maturity	8,868		9,185		—		9,185		—
Loans held for investment⁽¹⁾	87,678		88,816		—		—		88,816
Other assets	46		46		46		—		—
Liabilities
Time deposits	$	14,157	$	14,236	$	—	$	14,236	$	—
Securities loaned or sold under repurchase agreements	22,623		22,626		—		22,626		—
Commercial paper and other short-term borrowings	5,607		5,607		—		5,607		—
Long-term debt	16,686		16,893		—		16,893		—
Off-Balance Sheet Instruments
Commitments to extend credit and standby and commercial letters of credit	$	84	$	252	$	—	$	—	$	252


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



	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.