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Fair Value Measures (Tables)

6 Months Ended

Jun. 30, 2024

Schedule of Financial Instruments Carried at Fair Value

The following tables present assets and liabilities that were measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	June 30, 2024
(in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets:
Mortgage-related Debt Securities Available for Sale:
GSE certificates	$	—		$	1,153	$	—	$	1,153
GSE collateralized mortgage obligations	—			7,130		—		7,130
Private label collateralized mortgage obligations	—			135		33		168
Total mortgage-related debt securities	$	—		$	8,418	$	33	$	8,451
Other Debt Securities Available for Sale:

GSE debentures	$	—		$	1,344	$	—	$	1,344
Asset-backed securities	—			269		—		269
Municipal bonds	—			6		—		6
Corporate bonds	—			341		—		341
Foreign notes	—			35		—		35
Capital trust notes	—			89		—		89
Total other debt securities	$	—		$	2,084	$	—	$	2,084
Total debt securities available for sale	$	—		$	10,502	$	33	$	10,535
Equity securities:
Mutual funds and common stock	$	—		$	14	$	—	$	14
Total equity securities	$	—		$	14	$	—	$	14
Total securities	$	—		$	10,516	$	33	$	10,549
Loans held for sale
Residential first mortgage loans	$	—		$	1,259	$	—	$	1,259
Acquisition, development, and construction	—			158		—		158
Commercial and industrial loans	—		—	34		—		34
Loans held-for-investment
Residential first mortgage loans	—			68		—		68

Derivative assets
Interest rate swaps and swaptions	—			111		—		111

Rate lock commitments (fallout-adjusted)	—			—		9		9
Mortgage-backed securities forwards	—			9		—		9
Mortgage servicing rights	—			—		1,122		1,122
Total assets at fair value	$	—		$	12,155	$	1,164	$	13,319
Derivative liabilities
Mortgage-backed securities forwards	$	—		$	9	$	—	$	9
Interest rate swaps and swaptions	—			63		—		63
Rate lock commitments (fallout-adjusted)	—			—		5		5
Total liabilities at fair value	$	—		$	72	$	5	$	77


	December 31, 2023
(in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total Fair Value
Assets:
Mortgage-related Debt Securities Available for Sale:
GSE certificates	$	—	$	1,221		$	—	$	1,221
GSE collateralized mortgage obligations	—		5,162			—		5,162
Private label collateralized mortgage obligations	—		148			32		180
Total mortgage-related debt securities	$	—	$	6,531		$	32	$	6,563
Other Debt Securities Available for Sale:
U. S. Treasury obligations	$	198	$	—		$	—	$	198
GSE debentures	—		1,609			—		1,609
Asset-backed securities	—		302			—		302
Municipal bonds	—		6			—		6
Corporate bonds	—		343			—		343
Foreign notes	—		34			—		34
Capital trust notes	—		90			—		90
Total other debt securities	$	198	$	2,384		$	—	$	2,582
Total debt securities available for sale	$	198	$	8,915		$	32	$	9,145
Equity securities:
Mutual funds and common stock	—		14			—		14
Total equity securities	$	—	$	14		$	—	$	14
Total securities	$	198	$	8,929		$	32	$	9,159
Loans held for sale
Residential first mortgage loans	$	—	$	770		$	—	$	770
Acquisition, development, and construction	—		123			—		$	123
Commercial and industrial loans	—		9			—		$	9
Derivative assets
Interest rate swaps and swaptions	—		115			—		115

Rate lock commitments (fallout-adjusted)	—		—			12		12
Mortgage-backed securities forwards	—		11			—		11
Mortgage servicing rights	—		—			1,111		1,111
Total assets at fair value	$	198	$	9,957		$	1,155	$	11,310
Derivative liabilities
Mortgage-backed securities forwards	—		32			—		32
Futures			1					1
Interest rate swaps and swaptions	—		59			—		59
Rate lock commitments (fallout-adjusted)	—		—		.	3		3
Total liabilities at fair value	$	—	$	92		$	3	$	95

Schedule of Roll Forward of Financial Instruments

The following tables include a roll forward of the Consolidated Statements of Condition amounts (including the change in fair value) for financial instruments classified by us within Level 3 of the valuation hierarchy:


(dollars in millions)	Balance at Beginning of Period		Total Gains / (Losses) Recorded in Earnings (1)		Purchases / Originations		Sales		Settlement		Transfers In (Out)		Balance at End of Period
Three Months Ended June 30, 2024
Assets
Mortgage servicing rights (1)	$	1,092	$	(28)	$	58	$	—	—		—		$	1,122
Private label collateralized mortgage obligations	33		—		—		—		—		—		33
Rate lock commitments (net) (1)(2)	8		(2)		17		—		—		(19)		4
Totals	$	1,133	$	(30)	$	75	$	—	$	—	$	(19)	$	1,159
Three Months Ended June 30, 2023
Assets
Mortgage servicing rights (1)	$	1,034	$	5	$	43	$	(51)	—		—		$	1,031

Rate lock commitments (net) (1)(2)	8		(17)		25						(16)		—
Totals	$	1,042	$	(12)	$	68	$	(51)	$	—	$	(16)	$	1,031

Six Months Ended June 30, 2024
Assets
Mortgage servicing rights (1)	$	1,111	$	(20)	$	100	$	(69)	$	—	$	—	$	1,122
Private label collateralized mortgage obligations	—		—		—		—		—		33		33
Rate lock commitments (net) (1)(2)	9		(3)		29		—		—		(31)		4
Totals	$	1,120	$	(23)	$	129	$	(69)	$	—	$	2	$	1,159
Six Months Ended June 30, 2023
Assets
Mortgage servicing rights (1)	$	1,033	$	(32)	$	81	$	(51)			—		$	1,031

Rate lock commitments (net) (1)(2)	(1)		(28)		60		—		—		(31)		—
Totals	$	1,032	$	(60)	$	141	$	(51)	$	—	$	(31)	$	1,031

(1)We utilized swaptions, futures, forward agency and loan sales and interest rate swaps to manage the risk associated with mortgage servicing rights and rate lock commitments. Gains and losses for individual lines do not reflect the effect of our risk management activities related to such Level 3 instruments.

(2)Rate lock commitments are reported on a fallout-adjusted basis. Transfers out of Level 3 represent the settlement value of the commitments that are transferred to loans held for sale, which are classified as Level 2 assets.

Schedule of Quantitative Information about Recurring Level 3 Fair Value Financial Instruments

The following tables present the quantitative information about recurring Level 3 fair value financial instruments and the fair value measurements as of June 30, 2024 and December 31, 2023:

June 30, 2024

Fair Value

Valuation Technique

Unobservable Input

Range

(Weighted Average)

(dollars in millions)

Assets

Mortgage servicing rights

1,122

Discounted cash flows

Option adjusted spread

4.7% - 21.6% (5.1%)

Constant prepayment rate

—% - 10.3% (7.9%)

Weighted average cost to service per loan

$65 - $90 ($68)

Private Label collateralized mortgage obligations

Discounted cash flows

Constant default rates

0.10% - 0.20%

Weighted average life

7.88 - 11.30

Rate lock commitments (net)

Consensus pricing

Origination pull-through rate

69.10%

December 31, 2023

Fair Value

Valuation Technique

Unobservable Input

Range

(Weighted Average)

(dollars in millions)

Assets

Mortgage servicing rights

1,111

Discounted cash flows

Option adjusted spread

5.0% - 21.7% (5.4%)

Constant prepayment rate

—% - 10.0% (7.9%)

Weighted average cost to service per loan

$65 - $90 ($69)

Private Label collateralized mortgage obligations

Discounted cash flows

Constant default rates

0.10% - 0.30%

Weighted average life

8.2 - 11.8

Rate lock commitments (net)

Consensus pricing

Origination pull-through rate

64.30%

Schedule of Assets Measured at Fair Value on a Nonrecurring Basis

The following tables present assets that were measured at fair value on a non-recurring basis as of June 30, 2024 and December 31, 2023, and that were included in the Company’s Consolidated Statements of Condition at those dates:


	Fair Value Measurements at June 30, 2024 Using
(in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Certain impaired loans (2)					$	1,951	$	1,951
Other assets(1)					52		52
Total	$	—	$	—	$	2,003	$	2,003

(1)Represents the fair value of repossessed assets, based on the appraised value of the collateral subsequent to its initial classification as repossessed assets and equity securities without readily determinable fair values. These equity securities are classified as Level 3 due to the infrequency of the observable prices and/or the restrictions on the shares.

(2)Represents the fair value of impaired loans, based on the value of the collateral.


	Fair Value Measurements at December 31, 2023 Using
(in millions)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Fair Value
Certain impaired loans (2)	$	—	$	—	$	197	$	197
Other assets (1)	—		—		50		50
Total	$	—	$	—	$	247	$	247

(2)Represents the fair value of impaired loans, based on the value of the collateral.

Schedule of Carrying Amount and Estimated Fair Value of Financial Instruments

The following tables summarize the carrying values, estimated fair values, and fair value measurement levels of financial instruments that were not carried at fair value on the Company’s Consolidated Statements of Condition at June 30, 2024 and December 31, 2023:


	June 30, 2024
					Fair Value Measurement Using
(in millions)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets:
Cash and cash equivalents	$	18,990	$	18,990	$	18,990
FHLB and FRB stock (1)	1,565		1,565		—			1,565
Loans and leases held for investment, net	73,284		68,431		—						68,431
Financial Liabilities:
Deposits	$	79,032	$	78,660	$	50,252	(2)	$	28,408	(3)
Borrowed funds	28,892		28,770					28,770

(1)Carrying value and estimated fair value are at cost.

(2)Interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts.

(3)Certificates of deposit.


	December 31, 2023
					Fair Value Measurement Using
(in millions)	Carrying Value		Estimated Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Financial Assets:
Cash and cash equivalents	$	11,475	$	11,475	$	11,475		$	—		$	—
FHLB and FRB stock (1)	1,392		1,392		—			1,392			—
Loans and leases held for investment, net	83,627		79,333		—			—			79,333
Financial Liabilities:
Deposits	$	81,526	$	81,247	$	59,972	(2)	$	21,275	(3)	$	—
Borrowed funds	21,267		21,082		—			21,082			—

(1)Carrying value and estimated fair value are at cost.

(2)Interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts.

(3)Certificates of deposit.

Schedule of Changes in Fair Value Included in Earnings - Fair Value Option

The following table reflects the change in fair value included in earnings of financial instruments for which the fair value option has been elected:


(in millions)	Three Months Ended,				Six Months Ended,
	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Assets
Loans held for sale
Net gain on loan sales	$	12	$	1	$	15	$	29

Schedule of Differences Between Aggregate Fair Value and Aggregate Remaining Contractual Principal Balance Outstanding - Fair Value Option

The following table reflects the difference between the aggregate fair value and aggregate remaining contractual principal balance outstanding for assets and liabilities for which the fair value option has been elected:


	June 30, 2024						December 31, 2023
(dollars in millions)	Unpaid Principal Balance		Fair Value		Fair Value Over / (Under) UPB		Unpaid Principal Balance			Fair Value		Fair Value Over / (Under) UPB
Assets:
Non-accrual loans:
Loans held for sale	$	16	$	16	$	—	$	2		$	2	$	—

Total non-accrual loans	16		16		—		2			2		—
Other performing loans:
Loans held for sale	1,410		1,435		25		869			894		25
Loans held-for-investment	70		68		(2)		—			—		—
Total other performing loans	1,480		1,503		23		869			894		25
Total loans:
Loans held for sale	1,426		1,451		25		871			896		25
Loans held-for-investment	70		68		(2)		—		—	—		—
Total loans	$	1,496	$	1,519	$	23	$	871		$	896	$	25

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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