Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Hierarchy Tables Present Information about Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022:


(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments (1)		Balance at September 30, 2022
Assets:
AFS securities:
U.S. Treasury securities	$	16,845	$	—	$	—	$	—	$	16,845
U.S. agency debentures	—		100		—		—		100
Foreign government debt securities	913		—		—		—		913
Residential MBS:
Agency-issued MBS	—		6,683		—		—		6,683
Agency-issued CMO—fixed rate	—		714		—		—		714

Agency-issued CMBS	—		1,456		—		—		1,456
Total AFS securities	17,758		8,953		—		—		26,711
Non-marketable and other equity securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value	—		—		—		—		270

Other equity securities in public companies	27		2		—		—		29
Total non-marketable and other equity securities (fair value accounting)	27		2		—		—		299
Other assets:
Derivative assets	—		804		—		(495)		309
Equity warrant assets	—		6		345		—		351
Contingent conversion rights	—		—		6		—		6

Other assets	4		—		—		—		4
Total assets	$	17,789	$	9,765	$	351	$	(495)	$	27,680
Liabilities:
Derivative liabilities	$	—	$	758	$	—	$	(234)	$	524



Other liabilities	4		—		—		—		4
Total liabilities	$	4	$	758	$	—	$	(234)	$	528

(1)Amounts represent the impact of legally enforceable master netting arrangements and also cash collateral held or placed with the same counterparties

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021:


(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments (1) (2)		Balance at December 31, 2021
Assets:
AFS securities:
U.S. Treasury securities	$	15,850	$	—	$	—	$	—	$	15,850
U.S. agency debentures	—		196		—		—		196
Foreign government debt securities	61		—		—		—		61
Residential MBS:
Agency-issued MBS	—		8,589		—		—		8,589
Agency-issued CMO—fixed rate	—		982		—		—		982

Agency-issued CMBS	—		1,543		—		—		1,543


Total AFS securities	15,911		11,310		—		—		27,221
Non-marketable and other equity securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value	—		—		—		—		338

Other equity securities in public companies	43		74		—		—		117
Total non-marketable and other equity securities (fair value accounting)	43		74		—		—		455
Other assets:

Derivative assets (2)	—		288		—		(137)		151
Equity warrant assets	—		8		269		—		277


Other assets	8		—		—		—		8
Total assets	$	15,962	$	11,680	$	269	$	(137)	$	28,112
Liabilities:
Derivative liabilities (2)	$	—	$	238	$	—	$	(120)	$	118


Other liabilities	8		—		—		—		8
Total liabilities	$	8	$	238	$	—	$	(120)	$	126

Additional Information about Level 3 Assets Measured at Fair Value on a Recurring Basis

The following table presents additional information about Level 3 assets measured at fair value on a recurring basis for the three and nine months ended September 30, 2022 and 2021:


(Dollars in millions)	Beginning Balance		Total Net Gains (Losses) Included in Net Income		Sales/Exits		Issuances		Transfers Out of Level 3		Ending Balance
Three months ended September 30, 2022

Equity warrant assets (1)	$	318	$	39	$	(21)	$	9	$	—	$	345

Contingent conversion rights (2)	6		—		—		—		—		6
Three months ended September 30, 2021



Equity warrant assets (1)	257		149		(146)		6		(1)		265

Nine months ended September 30, 2022



Equity warrant assets (1)	269		124		(67)		21		(2)		345
Contingent conversion rights (2)	—		(1)		—		7		—		6

Nine months ended September 30, 2021



Equity warrant assets (1)	192		490		(431)		18		(4)		265

(1)Realized and unrealized gains (losses) are recorded in the line item “Gains on equity warrant assets, net," a component of noninterest income.

(2)Unrealized gains and losses are recorded in the line item "Other noninterest income," a component of noninterest income.

Unrealized Gains Included in Earnings Attributable to Level 3 Assets Held

The following table presents the amount of net unrealized gains and losses included in earnings attributable to Level 3 assets still held at September 30, 2022 and 2021:


	Three months ended September 30,				Nine months ended September 30,
(Dollars in millions)	2022		2021		2022		2021


Other assets:
Equity warrant assets (1)	$	26	$	21	$	84	$	113
Contingent conversion rights (2)	—		—		(1)		—
Total unrealized gains, net	$	26	$	21	$	83	$	113

(1)Unrealized gains and losses are recorded in the line item “Gains on equity warrant assets, net," a component of noninterest income.

(2)Unrealized gains and losses are recorded in the line item "Other noninterest income," a component of noninterest income.

Quantitative Information About Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for certain of our Level 3 fair value measurements at September 30, 2022 and December 31, 2021. We have not included in this table our venture capital and private equity fund investments (fair value accounting) as we use net asset value per share (as obtained from the general partners of the investments) as a practical expedient to determine fair value.


(Dollars in millions)	Fair value	Valuation Technique	Significant Unobservable Inputs	Input Range	Weighted Average
September 30, 2022:



Equity warrant assets (private portfolio)	345	Black-Scholes option pricing model	Volatility	23.8 - 51.3	42.3
			Risk-Free interest rate	3.3 - 4.4	4.2
			Marketability discount (2)	17.1	17.1
			Remaining life assumption (3)	40.0	40.0



Contingent conversion rights (private portfolio)	6	Private company equity pricing	(4)	(4)	(4)

December 31, 2021:
Equity warrant assets (public portfolio)	2	Black-Scholes option pricing model	Volatility	27.8% - 55.0%	43.7	%
			Risk-Free interest rate	0.6- 1.5	1.1
			Sales restrictions discount (1)	10.0 - 20.0	10.7
Equity warrant assets (private portfolio)	267	Black-Scholes option pricing model	Volatility	24.7 - 55.0	43.0
			Risk-Free interest rate	0.06 - 1.40	0.8
			Marketability discount (2)	20.1	20.1
			Remaining life assumption (3)	40.0	40.0

(1)We adjust quoted market prices of public companies, which are subject to certain sales restrictions. Sales restriction discounts generally range from 10 percent to 20 percent depending on the duration of the sales restrictions, which typically range from three to six months.

(2)Our marketability discount is applied to all private company warrants to account for a general lack of liquidity due to the private nature of the associated underlying company. The quantitative measure used is based upon various option-pricing models. On a quarterly basis, a sensitivity analysis is performed on our marketability discount.

(3)We adjust the contractual remaining term of private company warrants based on our estimate of the actual remaining life, which we determine by utilizing historical data on terminations and exercises. At September 30, 2022, the weighted average contractual remaining term was 6.2 years, compared to our estimated remaining life of 2.5 years. On a quarterly basis, a sensitivity analysis is performed on our remaining life assumption.

(4)In determining the fair value of our private contingent conversion rights portfolio (not valued using the Black-Scholes model), we evaluate a variety of factors related to each underlying private portfolio company including, but not limited to, actual and forecasted enterprise values, the probability of a conversion event occurring and limitations and conversion pricing outlined in the convertible debt agreement. Additionally, we have ongoing communication with the portfolio companies and relationship teams, to determine whether there is a material change in fair value. We use company provided valuation reports, if available, to support our valuation assumptions. These factors are specific to each portfolio company and a weighted average or range of values of the unobservable inputs is not meaningful.

Summary of Estimated Fair Values of Financial Instruments Not Carried at Fair Value

The following fair value hierarchy table presents the estimated fair values of our financial instruments that are not carried at fair value at September 30, 2022 and December 31, 2021:


			Estimated Fair Value
(Dollars in millions)	Carrying Amount		Total		Level 1		Level 2		Level 3
September 30, 2022:
Financial assets:
Cash and cash equivalents	$	13,968	$	13,968	$	13,968	$	—	$	—
HTM securities	93,286		77,370		—		77,370		—
Non-marketable securities not measured at net asset value	431		431		—		—		431
Non-marketable securities measured at net asset value	660		660		—		—		—
Net loans	71,572		72,489		—		—		72,489


FHLB and Federal Reserve Bank stock	665		665		—		—		665
Financial liabilities:


Short-term borrowings	13,552		13,552		—		13,552		—
Non-maturity deposits (1)	171,545		171,545		171,545		—		—
Time deposits	5,274		4,916		—		4,916		—
3.50% Senior Notes	349		336		—		336		—
3.125% Senior Notes	496		407		—		407		—
1.800% Senior Notes due 2031	495		358		—		358		—
2.100% Senior Notes due 2028	496		408		—		408		—
1.800% Senior Notes due 2026	646		559		—		559		—
4.345% Senior Notes due 2028	348		327		—		327		—
4.570% Senior Notes due 2033	447		396		—		396		—
Junior subordinated debentures	91		91		—		91		—
Off-balance sheet financial assets:
Commitments to extend credit	—		49		—		—		49
December 31, 2021:
Financial assets:
Cash and cash equivalents	$	14,586	$	14,586	$	14,586	$	—	$	—
HTM securities	98,195		97,227		—		97,227		—
Non-marketable securities not measured at net asset value	424		424		—		—		424
Non-marketable securities measured at net asset value	710		710		—		—		—
Net loans	65,854		67,335		—		—		67,335
FHLB and Federal Reserve Bank stock	107		107		—		—		107
Financial liabilities:


Short-term borrowings	71		71		—		71		—
Non-maturity deposits (1)	187,464		187,464		187,464		—		—
Time deposits	1,739		1,728		—		1,728		—
3.50% Senior Notes	349		370		—		370		—
3.125% Senior Notes	496		526		—		526		—
1.800% Senior Notes due 2031	494		474		—		474		—
2.100% Senior Notes due 2028	496		501		—		501		—
1.800% Senior Notes due 2026	645		649		—		649		—
Junior subordinated debentures	90		92		—		92		—
Off-balance sheet financial assets:
Commitments to extend credit	—		47		—		—		47

(1)Includes noninterest-bearing demand deposits, interest-bearing checking accounts, money market accounts and interest-bearing sweep deposits.

Summary of Estimated Fair Values of Investments and Remaining Unfunded Commitments for Each Major Category of Investments

The following table is a summary of the estimated fair values of these investments and remaining unfunded commitments for each major category of these investments as of September 30, 2022:


(Dollars in millions)	Carrying Amount		Fair Value		Unfunded Commitments
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)	$	270	$	270	$	13
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments (2)	639		639		11
Debt funds (2)	4		4		—
Other investments (2)	17		17		1
Total	$	930	$	930	$	25

(1)Venture capital and private equity fund investments within non-marketable securities (fair value accounting) include investments made by our managed funds of funds and one of our direct venture funds (consolidated VIEs) and investments in venture capital and private equity fund investments (unconsolidated VIEs). Collectively, these investments in venture capital and private equity funds are primarily in U.S. and global technology and life science/healthcare companies. Included in the fair value and unfunded commitments of fund investments under fair value accounting are $42 million and $2 million, respectively, attributable to noncontrolling interests. It is estimated that we will receive distributions from the fund investments over the next 10 to 13 years, depending on the age of the funds and any potential extensions of terms of the funds.

(2)Venture capital and private equity fund investments, debt funds, and other fund investments within non-marketable securities (equity method accounting) include funds that invest in or lend money to primarily U.S. and global technology and life science/healthcare companies. It is estimated that we will receive distributions from the funds over the next 5 to 8 years, depending on the age of the funds and any potential extensions of the terms of the funds.