XML 60 R46.htm IDEA: XBRL DOCUMENT v3.10.0.1
Goodwill and Mortgage Servicing Rights (Tables)
 9 Months Ended
Sep. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill attributed to the business segments The following table presents goodwill attributed to the business segments.
(in millions)
September 30,
2018

December 31,
2017

Consumer & Community Banking
$
30,995

$
31,013

Corporate & Investment Bank
6,771

6,776

Commercial Banking
2,860

2,860

Asset & Wealth Management
6,857

6,858

Total goodwill
$
47,483

$
47,507


The following table presents changes in the carrying amount of goodwill.
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)
2018

 
2017

 
2018

 
2017

Balance at beginning
of period
$
47,488

 
$
47,300

 
$
47,507

 
$
47,288

Changes during the period from:
 
 
 
 
 
 
 
Other(a)
(5
)
 
9

 
(24
)
 
21

Balance at September 30,
$
47,483

 
$
47,309

 
$
47,483

 
$
47,309

(a)
Includes foreign currency remeasurement and other adjustments.
Mortgage servicing rights activity The following table summarizes MSR activity for the three and nine months ended September 30, 2018 and 2017.
 
As of or for the three months
ended September 30,
 
As of or for the nine months
ended September 30,
 
(in millions, except where otherwise noted)
2018

 
2017

 
2018

 
2017

 
Fair value at beginning of period
$
6,241

 
$
5,753

 
$
6,030

 
$
6,096

 
MSR activity:
 
 
 
 
 
 
 
 
Originations of MSRs
278

 
253

 
611

 
624

 
Purchase of MSRs
13

 
—

 
159

 
—

 
Disposition of MSRs(a)
(2
)
 
(2
)
 
(401
)
 
(140
)
 
Net additions/(dispositions)
289

 
251

 
369

 
484

 
 
 
 
 
 
 
 
 
 
Changes due to collection/realization of expected cash flows
(195
)
 
(200
)
 
(542
)
 
(619
)
 
 
 
 
 
 
 
 
 
 
Changes in valuation due to inputs and assumptions:
 
 
 
 
 
 
 
 
Changes due to market interest rates and other(b)
150

 
(67
)
 
635

 
(188
)
 
Changes in valuation due to other inputs and assumptions:
 
 
 
 
 
 
 
 
Projected cash flows (e.g., cost to service)
14

 
(116
)
 
14

 
(102
)
 
Discount rates
—

 
—

 
24

 
(19
)
 
Prepayment model changes and other(c)
(66
)
 
117

 
(97
)
 
86

 
Total changes in valuation due to other inputs and assumptions
(52
)
 
1

 
(59
)
 
(35
)
 
Total changes in valuation due to inputs and assumptions
98

 
(66
)
 
576

 
(223
)
 
Fair value at September 30,
$
6,433

 
$
5,738

 
$
6,433

 
$
5,738

 
 
 
 
 
 
 
 
 
 
Change in unrealized gains/(losses) included in income related to MSRs held at September 30,
$
98

 
$
(66
)
 
$
576

 
$
(223
)
 
Contractual service fees, late fees and other ancillary fees included in income
428

 
463

 
1,339

 
1,427

 
Third-party mortgage loans serviced at September 30, (in billions)
528

 
558

 
528

 
558

 
Net servicer advances at September 30, (in billions)(d)
3.1

 
3.9

 
3.1

 
3.9

 
(a)
Includes excess MSRs transferred to agency-sponsored trusts in exchange for stripped mortgage backed securities (“SMBS”). In each transaction, a portion of the SMBS was acquired by third parties at the transaction date; the Firm acquired the remaining balance of those SMBS as trading securities.
(b)
Represents both the impact of changes in estimated future prepayments due to changes in market interest rates, and the difference between actual and expected prepayments.
(c)
Represents changes in prepayments other than those attributable to changes in market interest rates.
(d)
Represents amounts the Firm pays as the servicer (e.g., scheduled principal and interest, taxes and insurance), which will generally be reimbursed within a short period of time after the advance from future cash flows from the trust or the underlying loans. The Firm’s credit risk associated with these servicer advances is minimal because reimbursement of the advances is typically senior to all cash payments to investors. In addition, the Firm maintains the right to stop payment to investors if the collateral is insufficient to cover the advance. However, certain of these servicer advances may not be recoverable if they were not made in accordance with applicable rules and agreements.
CCB mortgage fees and related income The following table presents the components of mortgage fees and related income (including the impact of MSR risk management activities) for the three and nine months ended September 30, 2018 and 2017.
 
 
Three months ended September 30,
 
Nine months ended September 30,
(in millions)
 
2018

 
2017

 
2018

 
2017

CCB mortgage fees and related income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net production revenue
 
$
108

 
$
158

 
$
296

 
$
451

 
 
 
 
 
 
 
 
 
Net mortgage servicing revenue:
 
 
 
 
 
 
 
 
Operating revenue:
 
 
 
 
 
 
 
 
Loan servicing revenue
 
435

 
493

 
1,389

 
1,533

Changes in MSR asset fair value due to collection/realization of expected cash flows
 
(195
)
 
(200
)
 
(542
)
 
(617
)
Total operating revenue
 
240

 
293

 
847

 
916

Risk management:
 
 
 
 
 
 
 
 
Changes in MSR asset fair value due to market interest rates and other(a)
 
150

 
(67
)
 
636

 
(188
)
Other changes in MSR asset fair value due to other inputs and assumptions
in model(b)
 
(52
)
 
1

 
(59
)
 
(35
)
Change in derivative fair value and other
 
(186
)
 
43

 
(671
)
 
91

Total risk management
 
(88
)
 
(23
)
 
(94
)
 
(132
)
Total net mortgage servicing revenue
 
152

 
270

 
753

 
784

 
 
 
 
 
 
 
 
 
Total CCB mortgage fees and related income
 
260

 
428

 
1,049

 
1,235

 
 
 
 
 
 
 
 
 
All other
 
2

 
1

 
2

 
4

Mortgage fees and related income
 
$
262

 
$
429

 
$
1,051

 
$
1,239

(a)
Represents both the impact of changes in estimated future prepayments due to changes in market interest rates, and the difference between actual and expected prepayments.
(b)
Represents the aggregate impact of changes in model inputs and assumptions such as projected cash flows (e.g., cost to service), discount rates and changes in prepayments other than those attributable to changes in market interest rates (e.g., changes in prepayments due to changes in home prices).
Key economic assumptions used to determine FV of MSRs
The table below outlines the key economic assumptions used to determine the fair value of the Firm’s MSRs at September 30, 2018, and December 31, 2017, and outlines hypothetical sensitivities of those fair values to immediate adverse changes in those assumptions, as defined below.
(in millions, except rates)
Sep 30,
2018

 
Dec 31,
2017

Weighted-average prepayment speed assumption (“CPR”)
8.40
%
 
9.35
%
Impact on fair value of 10% adverse change
$
(194
)
 
$
(221
)
Impact on fair value of 20% adverse change
(376
)
 
(427
)
Weighted-average option adjusted spread
8.65
%
 
9.04
%
Impact on fair value of a 100 basis point adverse change
$
(251
)
 
$
(250
)
Impact on fair value of a 200 basis point adverse change
(483
)
 
(481
)
CPR: Constant prepayment rate.