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Fair Value

3 Months Ended

Mar. 31, 2021

FAIR VALUE

Fair Value Measurement

We measure certain financial assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or the price that would be paid to transfer a liability on the measurement date, and is determined using an exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair value hierarchy established by GAAP requires us to maximize the use of observable inputs when measuring fair value. For more information regarding the fair value hierarchy, see Note 15 Fair Value in Item 8 of our 2020 Form 10-K.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

For more information on the valuation methodologies used to measure assets and liabilities at fair value on a recurring basis, see Note 15 Fair Value in Item 8 of our 2020 Form 10-K. The following table summarizes our assets and liabilities measured at fair value on a recurring basis, including instruments for which we have elected the fair value option.

Table 60: Fair Value Measurements – Recurring Basis Summary


	March 31, 2021								December 31, 2020
In millions	Level 1		Level 2		Level 3		Total Fair Value		Level 1		Level 2		Level 3		Total Fair Value
Assets
Residential mortgage loans held for sale			$	1,087	$	165	$	1,252			$	691	$	163	$	854
Commercial mortgage loans held for sale			329		56		385				305		57		362
Securities available for sale
U.S. Treasury and government agencies	$	21,997	3,953				25,950		$	16,675	4,036				20,711
Residential mortgage-backed
Agency			51,554				51,554				48,911				48,911
Non-agency			108		1,316		1,424				136		1,365		1,501
Commercial mortgage-backed
Agency			2,284				2,284				2,688				2,688
Non-agency			4,225		11		4,236				3,678		11		3,689
Asset-backed			5,847		194		6,041				4,951		199		5,150
Other			5,238		72		5,310				4,636		72		4,708
Total securities available for sale	21,997		73,209		1,593		96,799		16,675		69,036		1,647		87,358
Loans			730		711		1,441				718		647		1,365
Equity investments (a)	1,133				1,343		2,725		1,070				1,263		2,629
Residential mortgage servicing rights					979		979						673		673
Commercial mortgage servicing rights					701		701						569		569
Trading securities (b)	576		1,012				1,588		548		1,690				2,238
Financial derivatives (b) (c)			4,853		63		4,916				6,415		118		6,533
Other assets	384		93				477		373		81				454
Total assets (d)	$	24,090	$	81,313	$	5,611	$	111,263	$	18,666	$	78,936	$	5,137	$	103,035
Liabilities
Other borrowed funds	$	790	$	46	$	2	$	838	$	661	$	44	$	2	$	707
Financial derivatives (c) (e)			2,796		227		3,023				2,483		273		2,756
Other liabilities					73		73						43		43
Total liabilities (f)	$	790	$	2,842	$	302	$	3,934	$	661	$	2,527	$	318	$	3,506

(a)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy.

(b)Included in Other assets on the Consolidated Balance Sheet.

(c)Amounts at March 31, 2021 and December 31, 2020 are presented gross and are not reduced by the impact of legally enforceable master netting agreements that allow us to net positive and negative positions and cash collateral held or placed with the same counterparty. See Note 12 Financial Derivatives for additional information related to derivative offsetting.

(d)Total assets at fair value as a percentage of total consolidated assets was 23% and 22% as of March 31, 2021 and December 31, 2020, respectively. Level 3 assets as a percentage of total assets at fair value was 5% at both March 31, 2021 and December 31, 2020. Level 3 assets as a percentage of total consolidated assets was 1% at both March 31, 2021 and December 31, 2020.

(e)Included in Other liabilities on the Consolidated Balance Sheet.

(f)Total liabilities at fair value as a percentage of total consolidated liabilities was 1% at both March 31, 2021 and December 31, 2020. Level 3 liabilities as a percentage of total liabilities at fair value was 8% and 9% as of March 31, 2021 and December 31, 2020, respectively. Level 3 liabilities as a percentage of total consolidated liabilities was less than 1% at both March 31, 2021 and December 31, 2020.

Reconciliations of assets and liabilities measured at fair value on a recurring basis using Level 3 inputs for the three months ended March 31, 2021 and 2020 follow:

Table 61: Reconciliation of Level 3 Assets and Liabilities

Three Months Ended March 31, 2021


			Total realized / unrealized gains or losses for the period (a)																				Unrealized gains / losses on assets and liabilities held on Consolidated Balance Sheet at Mar. 31, 2021 (a) (c)
Level 3 Instruments Only In millions	Fair Value Dec. 31, 2020		Included in Earnings		Included in Other comprehensive income (b)			Purchases		Sales		Issuances		Settlements		Transfers into Level 3		Transfers out of Level 3			Fair Value Mar. 31, 2021
Assets
Residential mortgage loans held for sale	$	163	$	1				$	35	$	(16)			$	(16)	$	3	$	(5)	(e)	$	165
Commercial mortgage loans held for sale	57		(1)																		56
Securities available for sale
Residential mortgage- backed non-agency	1,365		9			$	16							(74)							1,316
Commercial mortgage- backed non-agency	11																				11
Asset-backed	199		1			3								(9)							194
Other	72							1						(1)							72
Total securities available for sale	1,647		10			19		1						(84)							1,593
Loans	647		10					88		(3)				(28)				(3)		(e)	711		$	11
Equity investments	1,263		67					40		(27)											1,343		63
Residential mortgage servicing rights	673		295					71				$	13	(73)							979		295
Commercial mortgage servicing rights	569		129					13				18		(28)							701		129

Financial derivatives	118		(14)					1						(42)							63		(11)

Total assets	$	5,137	$	497		$	19	$	249	$	(46)	$	31	$	(271)	$	3	$	(8)		$	5,611	$	487
Liabilities
Other borrowed funds	$	2										$	1	$	(1)						$	2
Financial derivatives	273		$	(14)						$	2			(34)							227		$	(30)
Other liabilities	43		35									30		(35)							73		4
Total liabilities	$	318	$	21						$	2	$	31	$	(70)						$	302	$	(26)
Net gains (losses)			$	476	(f)																		$	513	(g)

Three Months Ended March 31, 2020


			Total realized / unrealized gains or losses for the period (a)																					Unrealized gains/losses on assets and liabilities held on Consolidated Balance Sheet at Mar. 31, 2020 (a) (c)
Level 3 Instruments Only In millions	Fair Value Dec. 31, 2019		Included in Earnings		Included in Other comprehensive income (b)			Purchases		Sales		Issuances		Settlements			Transfers into Level 3		Transfers out of Level 3			Fair Value Mar. 31, 2020
Assets
Residential mortgage loans held for sale	$	2						$	2	$(1)							$	4	$	(3)	(e)	$	4
Commercial mortgage loans held for sale	64		$	(1)										$	(3)							60		$	(1)
Securities available for sale
Residential mortgage- backed non-agency	1,741		16			$	(222)							(93)								1,442
Asset-backed	240		2			(29)								(11)								202
Other	74					(5)		4														73
Total securities available for sale	2,055		18			(256)		4						(104)								1,717
Loans	300		11					16		(26)				362		(d)			(8)		(e)	655		11
Equity investments	1,276		(69)					71		(58)												1,220		(64)
Residential mortgage servicing rights	995		(379)					18				$	10	(39)								605		(379)
Commercial mortgage servicing rights	649		(167)					19				11		(35)								477		(166)
Trading securities
Financial derivatives	54		101					2						(22)								135		75
Other assets
Total assets	$	5,395	$	(486)		$	(256)	$	132	$	(85)	$	21	$	159		$	4	$	(11)		$	4,873	$	(524)
Liabilities
Other borrowed funds	$	7										$	12	$	(14)							$	5
Financial derivatives	200		$	8						$	1			(24)								185		$	10
Other liabilities	137		2									11		(78)			$	2	$	(2)		72		(6)
Total liabilities	$	344	$	10						$	1	$	23	$	(116)		$	2	$	(2)		$	262	$	4
Net gains (losses)			$	(496)	(f)																			$	(528)	(g)

(a)Losses for assets are bracketed while losses for liabilities are not.

(b)The difference in unrealized gains and losses for the period included in Other comprehensive income and changes in unrealized gains and losses for the period included in Other comprehensive income for securities available for sale held at the end of the reporting period were not significant.

(c)The amount of the total gains or losses for the period included in earnings that is attributable to the change in unrealized gains or losses related to those assets and liabilities held at the end of the reporting period.

(d)Upon adoption of ASU 2016-13 - Credit Losses, we discontinued the accounting for purchased impaired loans and elected the one-time fair value option election for some of these loans and certain nonperforming loans.

(e)Residential mortgage loan transfers out of Level 3 are primarily driven by residential mortgage loans transferring to OREO as well as reclassification of mortgage loans held for sale to held for investment.

(f)Net gains (losses) realized and unrealized included in earnings related to Level 3 assets and liabilities included amortization and accretion. The amortization and accretion amounts were included in Interest income on the Consolidated Income Statement and the remaining net gains (losses) realized and unrealized were included in Noninterest income on the Consolidated Income Statement.

(g)Net unrealized gains (losses) related to assets and liabilities held at the end of the reporting period were included in Noninterest income on the Consolidated Income Statement.

An instrument’s categorization within the hierarchy is based on the lowest level of input that is significant to the fair value measurement. Changes from one quarter to the next related to the observability of inputs to a fair value measurement may result in a reclassification (transfer) of assets or liabilities between hierarchy levels.

Quantitative information about the significant unobservable inputs within Level 3 recurring assets and liabilities follows:

Table 62: Fair Value Measurements – Recurring Quantitative Information

March 31, 2021

Level 3 Instruments Only
Dollars in millions

Fair Value

Valuation Techniques

Unobservable Inputs

Range (Weighted-Average) (a)

Commercial mortgage loans held for sale

Discounted cash flow

Spread over the benchmark curve (b)

620bps - 6,350bps (4,038bps)

Residential mortgage-backed
non-agency securities

1,316

Priced by a third-party vendor using a discounted cash flow pricing model

Constant prepayment rate

1.0% - 37.6% (10.2%)

Constant default rate

0.0% - 18.8% (6.0%)

Loss severity

25.0% -95.7% (48.6%)

Spread over the benchmark curve (b)

155bps weighted-average

Asset-backed securities

194

Priced by a third-party vendor using a discounted cash flow pricing model

Constant prepayment rate

1.0% - 40.0% (8.4%)

Constant default rate

1.4% - 6.0% (2.9%)

Loss severity

30.0% - 100.0% (55.3%)

Spread over the benchmark curve (b)

197bps weighted-average

Loans - Residential real estate

429

Consensus pricing (c)

Cumulative default rate

3.6% - 100.0% (81.5%)

Loss severity

0.0% - 100.0% (10.0%)

Discount rate

4.8% - 6.8% (5.1%)

130

Discounted cash flow

Loss severity

8.0% weighted-average

Discount rate

3.2% weighted-average

Loans - Home equity

Consensus pricing (c)

Cumulative default rate

3.6% -100.0% (85.5%)

Loss severity

0.0% - 98.4% (31.5%)

Discount rate

4.8% - 6.8% (6.2%)

132

Consensus pricing (c)

Credit and liquidity discount

4.7% - 92.0% (44.0%)

Equity investments

1,343

Multiple of adjusted earnings

Multiple of earnings

4.0x - 20.1x (8.8x)

Residential mortgage servicing rights

979

Discounted cash flow

Constant prepayment rate

0.0% - 31.4% (10.7%)

Spread over the benchmark curve (b)

383bps - 2,893bps (944bps)

Commercial mortgage servicing rights

701

Discounted cash flow

Constant prepayment rate

4.1% - 13.6% (4.9%)

Discount rate

5.5% - 7.6% (7.4%)

Financial derivatives - Swaps related to
sales of certain Visa Class B
common shares

(201)

Discounted cash flow

Estimated conversion factor of Visa Class B shares into Class A shares

162.3% weighted-average

Estimated annual growth rate of Visa Class A share price

16.0%

Estimated length of litigation resolution date

Q2 2022

Insignificant Level 3 assets, net of
liabilities (d)

210

Total Level 3 assets, net of liabilities (e)

5,309

December 31, 2020

Level 3 Instruments Only
Dollars in millions

Fair Value

Valuation Techniques

Unobservable Inputs

Range (Weighted-Average) (a)

Commercial mortgage loans held for sale

Discounted cash flow

Spread over the benchmark curve (b)

630bps - 5,275bps (3,406bps)

Residential mortgage-backed
non-agency securities

1,365

Priced by a third-party vendor using a discounted cash flow pricing model

Constant prepayment rate

1.0% - 37.6% (8.6%)

Constant default rate

0.0% - 12.2% (4.7%)

Loss severity

25.0% - 95.7% (48.8%)

Spread over the benchmark curve (b)

242bps weighted-average

Asset-backed securities

199

Priced by a third-party vendor using a discounted cash flow pricing model

Constant prepayment rate

1.0% -22.0% (7.4%)

Constant default rate

1.0% - 6.0% (3.3%)

Loss severity

30.0% - 100.0% (58.1%)

Spread over the benchmark curve (b)

291bps weighted-average

Loans - Residential real estate

434

Consensus pricing (c)

Cumulative default rate

3.6% - 100.0% (82.1%)

Loss severity

0.0% - 100.0% (11.2%)

Discount rate

4.8% - 6.8% (5.1%)

132

Discounted cash flow

Loss severity

8.0% weighted-average

Discount rate

3.2% weighted-average

Loans - Home equity

Consensus pricing (c)

Cumulative default rate

3.6% - 100.0% (88.5%)

Loss severity

0.0% -98.4% (33.3%)

Discount rate

4.8% - 6.8% (6.3%)

Consensus pricing (c)

Credit and Liquidity discount

17.5% -97.0% (57.7%)

Equity investments

1,263

Multiple of adjusted earnings

Multiple of earnings

5.0x - 15.9x (8.7x)

Residential mortgage servicing rights

673

Discounted cash flow

Constant prepayment rate

0.0% - 77.5% (21.1%)

Spread over the benchmark curve (b)

325bps - 2,783bps (922bps)

Commercial mortgage servicing rights

569

Discounted cash flow

Constant prepayment rate

4.0% - 16.1% (4.9%)

Discount rate

4.7% - 7.8% (7.3%)

Financial derivatives - Swaps related to
sales of certain Visa Class B
common shares

(252)

Discounted cash flow

Estimated conversion factor of Visa Class B shares into Class A shares

162.3% weighted-average

Estimated annual growth rate of Visa Class A share price

16.0%

Estimated length of litigation
resolution date

Q2 2022

Insignificant Level 3 assets, net of
liabilities (d)

298

Total Level 3 assets, net of liabilities (e)

4,819

(a)Unobservable inputs were weighted by the relative fair value of the instruments.

(b)The assumed yield spread over the benchmark curve for each instrument is generally intended to incorporate non-interest rate risks, such as credit and liquidity risks.

(c)Consensus pricing refers to fair value estimates that are generally internally developed using information such as dealer quotes or other third-party provided valuations or comparable asset prices.

(d)Represents the aggregate amount of Level 3 assets and liabilities measured at fair value on a recurring basis that are individually and in the aggregate insignificant. The amount includes certain financial derivative assets and liabilities, trading securities, other securities, residential mortgage loans held for sale, other assets, other borrowed funds and other liabilities.

(e)Consisted of total Level 3 assets of $5.6 billion and total Level 3 liabilities of $0.3 billion as of March 31, 2021 and $5.1 billion and $0.3 billion as of December 31, 2020, respectively.

Financial Assets Accounted for at Fair Value on a Nonrecurring Basis

We may be required to measure certain financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the application of lower of amortized cost or fair value accounting or write-downs of individual assets due to impairment and are included in Table 63. For more information regarding the valuation methodologies of our financial assets measured at fair value on a nonrecurring basis, see Note 15 Fair Value in Item 8 of our 2020 Form 10-K.

Assets measured at fair value on a nonrecurring basis follow:

Table 63: Fair Value Measurements – Nonrecurring (a) (b) (c)


	Fair Value				Gains (Losses) Three months ended
In millions	March 31 2021		December 31 2020		March 31 2021		March 31 2020
Assets
Nonaccrual loans	$	345	$	332	$	(17)	$	(28)
Loans held for sale	243				(17)
OREO and foreclosed assets	2		18				(1)
Long-lived assets	6		20		(2)		(1)
Total assets	$	596	$	370	$	(36)	$	(30)

(a)All Level 3 as of March 31, 2021 and December 31, 2020, except for $243 million included in Loans held for sale which was categorized as Level 2 as of March 31, 2021.

(b)Valuation techniques applied were fair value of property or collateral.

(c)Unobservable inputs used were appraised value/sales price, broker opinions or projected income/required improvement costs. Additional quantitative information was not meaningful for the periods presented.

Financial Instruments Accounted for under Fair Value Option

We elect the fair value option to account for certain financial instruments. For more information on these financial instruments for which the fair value option election has been made, see Note 15 Fair Value in Item 8 of our 2020 Form 10-K.

Fair values and aggregate unpaid principal balances of certain items for which we elected the fair value option follow:

Table 64: Fair Value Option – Fair Value and Principal Balances


	March 31, 2021						December 31, 2020
In millions	Fair Value		Aggregate Unpaid Principal Balance		Difference		Fair Value		Aggregate Unpaid Principal Balance		Difference
Assets
Residential mortgage loans held for sale
Accruing loans less than 90 days past due	$	1,204	$	1,172	$	32	$	831	$	793	$	38
Accruing loans 90 days or more past due	3		3				4		4
Nonaccrual loans	45		54		(9)		20		24		(4)
Total	$	1,252	$	1,229	$	23	$	855	$	821	$	34
Commercial mortgage loans held for sale (a)
Accruing loans less than 90 days past due	$	380	$	396	$	(16)	$	357	$	370	$	(13)
Nonaccrual loans	5		6		(1)		5		6		(1)
Total	$	385	$	402	$	(17)	$	362	$	376	$	(14)
Loans
Accruing loans less than 90 days past due	$	622	$	632	$	(10)	$	519	$	530	$	(11)
Accruing loans 90 days or more past due	246		260		(14)		283		295		(12)
Nonaccrual loans	573		845		(272)		563		820		(257)
Total	$	1,441	$	1,737	$	(296)	$	1,365	$	1,645	$	(280)
Other assets	$	93	$	91	$	2	$	81	$	69	$	12
Liabilities
Other borrowed funds	$	28	$	28			$	32	$	33	$	(1)

(a)There were no accruing loans 90 days or more past due within this category at March 31, 2021 or December 31, 2020.

The changes in fair value for items for which we elected the fair value option are as follows:

Table 65: Fair Value Option – Changes in Fair Value (a)


	Gains (Losses)
	Three months ended
	March 31		March 31
In millions	2021		2020
Assets
Residential mortgage loans held for sale	$	16	$	46
Commercial mortgage loans held for sale	$	20	$	48
Loans	$	14	$	18
Other assets	$	14	$	(36)

(a)The impact on earnings of offsetting hedged items or hedging instruments is not reflected in these amounts.

Additional Fair Value Information Related to Financial Instruments Not Recorded at Fair Value

The following table presents the carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of all other financial instruments that are not recorded on our Consolidated Balance Sheet at fair value as of March 31, 2021 and December 31, 2020. For more information regarding the methods and assumptions used to estimate the fair values of financial instruments included in Table 66, see Note 15 Fair Value in Item 8 of our 2020 Form 10-K.

Table 66: Additional Fair Value Information Related to Other Financial Instruments


	Carrying		Fair Value
In millions	Amount		Total		Level 1		Level 2		Level 3
March 31, 2021
Assets
Cash and due from banks	$	7,455	$	7,455	$	7,455
Interest-earning deposits with banks	86,161		86,161				$	86,161
Securities held to maturity	1,459		1,559		874		485		$	200
Net loans (excludes leases)	224,468		228,650						228,650
Other assets	3,783		3,782				3,780		2
Total assets	$	323,326	$	327,607	$	8,329	$	90,426	$	228,852
Liabilities
Time deposits	$	18,813	$	18,651			$	18,651
Borrowed funds	32,192		32,790				31,129		$	1,661
Unfunded lending related commitments	507		507						507
Other liabilities	486		486				486
Total liabilities	$	51,998	$	52,434			$	50,266	$	2,168
December 31, 2020
Assets
Cash and due from banks	$	7,017	$	7,017	$	7,017
Interest-earning deposits with banks	85,173		85,173				$	85,173
Securities held to maturity	1,445		1,604		920		489		$	195
Net loans (excludes leases)	228,788		233,688						233,688
Other assets	3,601		3,600				3,559		41
Total assets	$	326,024	$	331,082	$	7,937	$	89,221	$	233,924
Liabilities
Time deposits	$	19,692	$	19,662			$	19,662
Borrowed funds	36,488		37,192				35,571		$	1,621
Unfunded lending related commitments	584		584						584
Other liabilities	413		413				413
Total liabilities	$	57,177	$	57,851			$	55,646	$	2,205

The aggregate fair values in Table 66 represent only a portion of the total market value of our assets and liabilities as, in accordance with the guidance related to fair values about financial instruments, we exclude the following:

•financial instruments recorded at fair value on a recurring basis (as they are disclosed in Table 60);

•investments accounted for under the equity method,

•equity securities without a readily determinable fair value that apply for the alternative measurement approach to fair value under ASU 2016-01,

•real and personal property,

•lease financing,

•loan customer relationships,

•deposit customer intangibles,

•mortgage servicing rights (MSRs),

•retail branch networks,

•fee-based businesses, such as asset management and brokerage,

•trademarks and brand names,

•trade receivables and payables due in one year or less, and

•deposit liabilities with no defined or contractual maturities under ASU 2016-01, and

•insurance contracts.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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