NOTE 12—FAIR VALUE OF FINANCIAL INSTRUMENTS

Fair value is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date (also referred to as an exit price). The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on whether the inputs to the valuation techniques used to measure fair value are observable or unobservable. The fair value measurement of a financial asset or liability is assigned to a level based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are described below:



Level 1:		Valuation is based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:		Valuation is based on observable market-based inputs, other than quoted prices in active markets for identical assets or liabilities, quoted prices in markets that are not active, or models using inputs that are observable or can be corroborated by observable market data of substantially the full term of the assets or liabilities.
Level 3:		Valuation is generated from techniques that use significant assumptions not observable in the market. Valuation techniques include pricing models, discounted cash flow methodologies or similar techniques.

The accounting guidance for fair value measurements requires that we maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The accounting guidance provides for the irrevocable option to elect, on a contract-by-contract basis, to measure certain financial assets and liabilities at fair value at inception of the contract and record any subsequent changes in fair value in earnings. We have not made any material fair value option elections as of or for the periods disclosed herein.

Fair Value Governance and Control

We have a governance framework and a number of key controls that are intended to ensure that our fair value measurements are appropriate and reliable. Our governance framework provides for independent oversight and segregation of duties. Our control processes include review and approval of new transaction types, price verification and review of valuation judgments, methods, models, process controls and results. Groups independent from our trading and investing functions, including our Corporate Valuations Group (“CVG”), Fair Value Committee (“FVC”) and Model Validation Group (“MVG”), participate in the review and validation process. The fair valuation governance process is set up in a manner that allows the Chairperson of the FVC to escalate valuation disputes that cannot be resolved at the FVC to a more senior committee called the Valuations Advisory Committee (“VAC”) for resolution. The VAC is chaired by the Chief Financial Officer and includes other members of senior management.

The CVG performs periodic independent verification of fair value measurements to determine if assigned fair values are reasonable. For example, in cases where we rely on third-party pricing services to obtain fair value measures, we analyze pricing variances among different pricing sources and validate the final price used by comparing the information to additional sources, including dealer pricing indications in transaction results and other internal sources, where necessary. Additional validation procedures performed by the CVG include reviewing (either directly or indirectly through the reasonableness of assigned fair values) valuation inputs and assumptions and monitoring acceptable variances between recommended prices and validation prices. The CVG and the Trade Analytics and Valuation (“TAV”) team perform due diligence reviews of the third-party pricing services by comparing their prices to those from other sources and reviewing other control documentation. Additionally, when necessary, the CVG and TAV challenge prices from third-party vendors to ensure reasonableness of prices through a pricing challenge process. This may include a request for transparency of the assumptions used by the third party.

The FVC, which includes representation from our Risk Management and Finance divisions, is a forum for discussing fair market valuations, inputs, assumptions, methodologies, variance thresholds, valuation control environments and material risks or concerns related to fair market valuations. Additionally, the FVC is empowered to resolve valuation disputes between the primary valuation providers and the CVG, and provides guidance and oversight to ensure an appropriate valuation control environment. The FVC regularly reviews and approves our valuation methodologies to ensure that our methodologies and practices are consistent with industry standards and adhere to regulatory and accounting guidance. The Chief Financial Officer determines when material issues or concerns regarding valuations shall be raised to the Audit Committee or other delegated committee of the Board of Directors.

We have a model policy, established by an independent Model Risk Office, which governs the validation of models and related supporting documentation to ensure the appropriate use of models for pricing. The MVG is part of the Model Risk Office and validates all models and provides ongoing monitoring of their performance, including the validation and monitoring of the performance of all valuation models.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table displays our assets and liabilities measured on our consolidated balance sheets at fair value on a recurring basis as of September 30, 2014 and December 31, 2013:

Table 12.1: Assets and Liabilities Measured at Fair Value on a Recurring Basis



	September 30, 2014
	Fair Value Measurements Using
(Dollars in millions)	Level 1		Level 2		Level 3		Total
Assets
Securities available for sale:
U.S. Treasury debt obligations	$	4,261	$	0	$	0	$	4,261
U.S. agency debt obligations	0		1		0		1
Corporate debt securities guaranteed by U.S. government agencies	0		595		384		979
RMBS	0		23,826		657		24,483
CMBS	0		5,483		303		5,786
Other ABS	0		2,973		110		3,083
Other securities	112		948		12		1,072
Total securities available for sale	4,373		33,826		1,466		39,665
Other assets:
Consumer MSRs	0		0		58		58
Derivative assets⁽¹⁾	0		785		51		836
Retained interests in securitizations	0		0		203		203
Total assets	$	4,373	$	34,611	$	1,778	$	40,762
Liabilities
Other liabilities:
Derivative liabilities⁽¹⁾	$	1	$	329	$	39	$	369
Total liabilities	$	1	$	329	$	39	$	369



	December 31, 2013
	Fair Value Measurements Using
(Dollars in millions)	Level 1		Level 2		Level 3		Total
Assets
Securities available for sale:
U.S. Treasury debt obligations	$	833	$	0	$	0	$	833
U.S. agency debt obligations	0		1		0		1
Corporate debt securities guaranteed by U.S. government agencies	0		307		927		1,234
RMBS	0		23,775		1,304		25,079
CMBS	0		5,267		739		6,006
Other ABS	0		6,793		343		7,136
Other securities	127		1,367		17		1,511
Total securities available for sale	960		37,510		3,330		41,800
Other assets:
Consumer MSRs	0		4		69		73
Derivative assets⁽¹⁾	3		906		50		959
Retained interests in securitizations	0		0		199		199
Total assets	$	963	$	38,420	$	3,648	$	43,031
Liabilities
Other liabilities:
Derivative liabilities⁽¹⁾	$	4	$	668	$	38	$	710
Total liabilities	$	4	$	668	$	38	$	710

__________


⁽¹⁾	Does not reflect $3 million and $1 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of September 30, 2014 and December 31, 2013, respectively. Non-performance risk is reflected in other assets/liabilities on the balance sheet and offset through the income statement in other income.

The determination of the classification of financial instruments in the fair value hierarchy is performed at the end of each reporting period. We consider all available information, including observable market data, indications of market liquidity and orderliness, and our understanding of the valuation techniques and significant inputs. Based upon the specific facts and circumstances of each instrument or instrument category, judgments are made regarding the significance of the unobservable inputs to the instruments’ fair value measurement in its entirety. If unobservable inputs are considered significant, the instrument is classified as Level 3. The process for determining fair value using unobservable inputs is generally more subjective and involves a high degree of management judgment and assumptions. During the three and nine months ended September 30, 2014 we had minimal movements between Levels 1 and 2.

Level 3 Recurring Fair Value Rollforward

The tables below present a reconciliation for all assets and liabilities measured and recognized at fair value on a recurring basis using significant unobservable inputs (Level 3). When assets and liabilities are transferred between levels, we recognize the transfer as of the end of the period.

Table 12.2: Level 3 Recurring Fair Value Rollforward



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended September 30, 2014
																										Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2014⁽³⁾
			Total Gains (Losses) (Realized/Unrealized)
(Dollars in millions)	Balance, July 1, 2014		Included in Net Income⁽¹⁾			Included in OCI			Purchases		Sales			Issuances		Settlements			Transfers Into Level 3⁽²⁾		Transfers Out of Level 3⁽²⁾			Balance, September 30, 2014
Assets:
Securities available for sale:
Corporate debt securities guaranteed by U.S. government agencies	$	739	$	(5	)	$	3		$	0	$	(91	)	$	0	$	(16	)	$	0	$	(246	)	$	384	$	(1	)
RMBS	836		16			3			42		0			0		(24		)	79		(295		)	657		16
CMBS	449		0			(2		)	158		0			0		(34		)	0		(268		)	303		0
Other ABS	175		1			3			0		0			0		0			9		(78		)	110		1
Other securities	20		(1		)	0			0		0			0		(7		)	0		0			12		(1		)
Total securities available for sale	2,219		11			7			200		(91		)	0		(81		)	88		(887		)	1,466		15
Other assets:
Consumer MSRs	57		(2		)	0			0		0			4		(1		)	0		0			58		(2		)
Derivative assets	50		2			0			0		0			6		(8		)	0		1			51		2
Retained interest in securitizations	195		8			0			0		0			0		0			0		0			203		8
Liabilities:
Other liabilities:
Derivative liabilities	37		4			0			0		0			4		(6		)	0		0			39		4



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended September 30, 2013
			Total Gains (Losses) (Realized/Unrealized)																						Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2013⁽³⁾

(Dollars in millions)	Balance, July 1, 2013		Included in Net Income⁽¹⁾			Included in OCI			Purchases		Sales		Issuances		Settlements			Transfers Into Level 3⁽²⁾		Transfers Out of Level 3⁽²⁾			Balance, September 30, 2013
Assets:
Securities available for sale:
Corporate debt securities guaranteed by U.S. government agencies	$	832	$	0		$	4		$	61	$	0	$	0	$	(19	)	$	47	$	1		$	926	$	0
RMBS	1,535		(6		)	57			85		0		0		(72		)	152		(430		)	1,321		(5		)
CMBS	461		0			(2		)	96		0		0		(4		)	48		(295		)	304		0
Other ABS	109		0			6			129		0		0		0			84		(15		)	313		0
Other securities	16		0			0			30		0		0		(6		)	0		(2		)	38		0
Total securities available for sale	2,953		(6		)	65			401		0		0		(101		)	331		(741		)	2,902		(5		)
Other assets:
Consumer MSRs	61		(5		)	0			0		0		4		(2		)	0		0			58		(5		)
Derivative assets	72		(13		)	0			0		0		4		(3		)	0		(6		)	54		(13		)
Retained interest in securitizations	198		3			0			0		0		0		0			0		0			201		3
Liabilities:
Other liabilities:
Derivative liabilities	42		4			0			0		0		3		(9		)	0		(1		)	39		4



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Nine Months Ended September 30, 2014
			Total Gains (Losses) (Realized/Unrealized)																						Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2014⁽³⁾

(Dollars in millions)	Balance, January 1, 2014		Included in Net Income⁽¹⁾			Included in OCI		Purchases		Sales			Issuances		Settlements			Transfers Into Level 3⁽²⁾		Transfers Out of Level 3⁽²⁾			Balance, September 30, 2014
Assets:
Securities available for sale:
Corporate debt securities guaranteed by U.S. government agencies	$	927	$	(5	)	$	18	$	0	$	(203	)	$	0	$	(55	)	$	64	$	(362	)	$	384	$	(1	)
RMBS	1,304		53			39		1,022		0			0		(156		)	199		(1,804		)	657		53
CMBS	739		0			3		192		0			0		(64		)	66		(633		)	303		0
Other ABS	343		4			13		0		0			0		(2		)	52		(300		)	110		4
Other securities	17		(1		)	0		0		0			0		(7		)	3		0			12		(1		)
Total securities available for sale	3,330		51			73		1,214		(203		)	0		(284		)	384		(3,099		)	1,466		55
Other assets:
Consumer MSRs	69		(19		)	0		0		0			11		(3		)	0		0			58		(19		)
Derivative assets	50		5			0		0		0			13		(14		)	0		(3		)	51		5
Retained interest in securitizations	199		4			0		0		0			0		0			0		0			203		4
Liabilities:
Other liabilities:
Derivative liabilities	38		8			0		0		0			8		(14		)	0		(1		)	39		8



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Nine Months Ended September 30, 2013
			Total Gains (Losses) (Realized/Unrealized)																							Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2013⁽³⁾

(Dollars in millions)	Balance, January 1, 2013		Included in Net Income⁽¹⁾			Included in OCI			Purchases		Sales			Issuances		Settlements			Transfers Into Level 3⁽²⁾		Transfers Out of Level 3⁽²⁾			Balance, September 30, 2013
Assets:
Securities available for sale:
Corporate debt securities guaranteed by U.S. government agencies	$	650	$	0		$	(31	)	$	272	$	0		$	0	$	(47	)	$	125	$	(43	)	$	926	$	0
RMBS	1,335		(16		)	141			277		0			0		(217		)	681		(880		)	1,321		(21		)
CMBS	587		0			(49		)	643		(10		)	0		(31		)	168		(1,004		)	304		0
Other ABS	102		(1		)	12			169		(41		)	0		(2		)	98		(24		)	313		(1		)
Other securities	15		0			0			30		0			0		(6		)	1		(2		)	38		0
Total securities available for sale	2,689		(17		)	73			1,391		(51		)	0		(303		)	1,073		(1,953		)	2,902		(22		)
Other assets:
Consumer MSRs	55		25			0			0		0			9		(5		)	0		(26		)	58		25
Derivative assets	90		(20		)	0			0		0			8		(15		)	0		(9		)	54		(20		)
Retained interest in securitization	204		(3		)	0			0		0			0		0			0		0			201		(3		)
Liabilities:
Other liabilities:
Derivative liabilities	38		15			0			0		0			13		(25		)	0		(2		)	39		15

__________


⁽¹⁾	Gains (losses) related to Level 3 Consumer MSRs, derivative assets and derivative liabilities, and retained interests in securitizations are reported in other non-interest income, which is a component of non-interest income.


⁽²⁾	The transfers out of Level 3 for the three and nine months ended September 30, 2014 and 2013 were primarily driven by greater consistency among multiple pricing sources. The transfers into Level 3 were primarily driven by less consistency among vendor pricing on individual securities.

⁽³⁾

The amount presented for unrealized gains (losses) for assets still held as of the reporting date primarily represents impairments for securities available for sale, accretion on certain fixed maturity securities, change in fair value of derivative instruments and mortgage servicing rights transaction. Impairment is reported in total other-than-temporary impairment as a component of non-interest income.

Significant Level 3 Fair Value Asset and Liability Input Sensitivity

Changes in unobservable inputs may have a significant impact on fair value. Certain of these unobservable inputs will, in isolation, have a directionally consistent impact on the fair value of the instrument for a given change in that input. Alternatively, the fair value of the instrument may move in an opposite direction for a given change in another input. In general, an increase in the discount rate, default rates, loss severity and credit spreads, in isolation, would result in a decrease in the fair value measurement. In addition, an increase in default rates would generally be accompanied by a decrease in recovery rates, slower prepayment rates and an increase in liquidity spreads.

Techniques and Inputs for Level 3 Fair Value Measurements

The following table presents the significant unobservable inputs relied upon to determine the fair values of our recurring Level 3 financial instruments. We utilize multiple third-party pricing services to obtain fair value measures for our securities. Several of our third-party pricing services are only able to provide unobservable input information for a limited number of securities due to software licensing restrictions. Other third-party pricing services are able to provide unobservable input information for all securities for which they provide a valuation. As a result, the unobservable input information for the securities available for sale presented below represents a composite summary of all information we are able to obtain for a majority of our securities. The unobservable input information for all other Level 3 financial instruments is based on the assumptions used in our internal valuation models.

Table 12.3: Quantitative Information about Level 3 Fair Value Measurements

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at September 30,
2014

Significant

Valuation

Techniques

Significant

Unobservable

Inputs

Range

Weighted

Average

Assets:

Securities available for sale:

RMBS

657

Discounted cash flows (3rd party pricing)

Yield
Constant prepayment rate
Default rate
Loss severity

0-23%
0-23%
0-11%
0-80%

6%
3%
5%
49%

CMBS

303

Discounted cash flows (3rd party pricing)

Yield
Constant prepayment rate

0-4%
0-100%

1%
4%

Other ABS

110

Discounted cash flows (3rd party pricing)

Yield
Constant prepayment rate
Default rate
Loss severity

5-7%
0-4%
3-10%
49-88%

6%
3%
6%
75%

U.S. government guaranteed debt and other securities

396

Discounted cash flows (3rd party pricing)

Yield

1-3%

Other assets:

Consumer MSRs

Discounted cash flows

Total prepayment rate
Discount rate
Servicing cost ($ per loan)

10-27%
10-21%
$62.07-$185.22

16%
13%
$75.95

Derivative assets

Discounted cash flows

Swap rates

Retained interests in securitization⁽¹⁾

203

Discounted cash flows

Life of receivables (months) Constant prepayment rate
Discount rate
Default rate
Loss severity

28-82
1-11%
4-12%
2-7%
17-111%

N/A

Liabilities:

Other liabilities:

Derivative liabilities

Discounted cash flows

Swap rates

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at December 31,
2013

Significant

Valuation

Techniques

Significant

Unobservable

Inputs

Range

Weighted

Average

Assets:

Securities available for sale:

RMBS

1,304

Discounted cash flows (3rd party pricing)

Yield
Constant prepayment rate
Default rate
Loss severity

0-23%
0-21%
0-18%
0-95%

5%
5%
8%
49%

CMBS

739

Discounted cash flows (3rd party pricing)

Yield
Constant prepayment rate

1-4%
0-20%

2%
3%

Other ABS

343

Discounted cash flows (3rd party pricing)

Yield
Constant prepayment rate
Default rate
Loss severity

1-8%
1-6%
1-19%
44-80%

3%
2%
12%
69%

U.S. government guaranteed debt and other securities

944

Discounted cash flows (3rd party pricing)

Yield

0-3%

Other assets:

Consumer MSRs

Discounted cash flows

Total prepayment rate
Discount rate
Servicing cost ($ per loan)

9-32%
10-17%
$81.39-$393.52

14%
11%
$89.32

Derivative assets

Discounted cash flows

Swap rates

3-4%

Retained interests in securitization⁽¹⁾

199

Discounted cash flows

Life of receivables (months) Constant prepayment rate
Discount rate
Default rate
Loss severity

34-101
2-7%
5-14%
2-7%
15-89%

N/A

Liabilities:

Other liabilities:

Derivative liabilities

Discounted cash flows

Swap rates

3-4%

__________


⁽¹⁾	Due to the nature of the various mortgage securitization structures in which we have retained interests, it is not meaningful to present a consolidated weighted average for the significant unobservable inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

We are required to measure and recognize certain other assets at fair value on a nonrecurring basis in the consolidated balance sheets. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, from the application of LOCOM accounting or when we evaluate for impairment). The following table presents the carrying amount of the assets measured at fair value on a nonrecurring basis and still held as of September 30, 2014 and December 31, 2013, and for which a nonrecurring fair value measurement was recorded during the nine and twelve months then ended:

Table 12.4: Nonrecurring Fair Value Measurements Related to Assets Still Held at Period End



	September 30, 2014
	Estimated Fair Value Hierarchy						Total
(Dollars in millions)	Level 1		Level 2		Level 3		Total
Assets:
Loans held for investment	$	0	$	0	$	120	$	120
Loans held for sale	0		98		0		98
Other assets⁽¹⁾	0		0		63		63
Total	$	0	$	98	$	183	$	281



	December 31, 2013
	Estimated Fair Value Hierarchy						Total
(Dollars in millions)	Level 1		Level 2		Level 3		Total
Assets:
Loans held for investment	$	0	$	0	$	84	$	84
Loans held for sale	0		145		0		145
Other assets⁽¹⁾	0		0		64		64
Total	$	0	$	145	$	148	$	293

__________


⁽¹⁾	Includes foreclosed property and repossessed assets of $51 million and long-lived assets held for sale of $12 million as of September 30, 2014. Comparatively, includes foreclosed property and repossessed assets of $42 million and long-lived assets held for sale of $22 million as of December 31, 2013.

In the above table, loans held for investment primarily include nonperforming loans for which specific reserves or charge-offs have been recognized. These loans are classified as Level 3 as they are valued based in part on the estimated fair value of the underlying collateral and the non-recoverable rate, which is considered to be a significant unobservable input. Collateral fair value sources include the appraisal value obtained from independent appraisers, broker pricing opinions, or other available market information. The non-recoverable rate ranged from 0% to 100%, with a weighted average of 28%, and from 0% to 42%, with a weighted average of 13% as of September 30, 2014 and December 31, 2013, respectively. The fair value of the other assets classified as Level 3 is determined based on appraisal value or listing price which involves significant judgment; the significant unobservable inputs and related quantitative information are not meaningful to disclose as they vary significantly across properties and collateral.

The following table presents total nonrecurring fair value measurements for the period, included in earnings, attributable to the change in fair value relating to assets that are still held at September 30, 2014 and 2013.

Table 12.5: Nonrecurring Fair Value Measurements Included in Earnings Related to Assets Still Held at Period End



	Total Gains (Losses)
	Nine Months Ended September 30,
(Dollars in millions)	2014			2013
Assets:
Loans held for investment	$	(19	)	$	(27	)
Loans held for sale	0			0
Other assets⁽¹⁾	(6		)	(16		)
Total	$	(25	)	$	(43	)

__________


⁽¹⁾	Includes the gains and losses related to foreclosed property and repossessed assets and long-lived assets held for sale.

Fair Value of Financial Instruments

The following reflects the fair value of financial instruments, whether or not recognized on the consolidated balance sheets at fair value, as of September 30, 2014 and December 31, 2013:

Table 12.6: Fair Value of Financial Instruments



	September 30, 2014				Estimated Fair Value Hierarchy
(Dollars in millions)	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	6,148	$	6,148	$	6,148	$	0	$	0
Restricted cash for securitization investors	405		405		405		0		0
Securities available for sale	39,665		39,665		4,373		33,826		1,466
Securities held to maturity	22,182		22,928		0		22,770		158
Net loans held for investment	197,380		201,441		0		0		201,441
Loans held for sale	427		431		0		431		0
Interest receivable	1,268		1,268		0		1,268		0
Derivative assets	836		836		0		785		51
Retained interests in securitizations	203		203		0		0		203
Financial liabilities:
Non-interest bearing deposits	$	25,388	$	25,388	$	25,388	$	0	$	0
Interest-bearing deposits	178,876		172,688		0		11,341		161,347
Securitized debt obligations	10,508		10,654		0		10,654		0
Senior and subordinated notes	18,534		19,075		0		19,075		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	2,330		2,330		2,330		0		0
Other borrowings	10,871		10,876		0		10,876		0
Interest payable	249		249		0		249		0
Derivative liabilities	369		369		1		329		39



	December 31, 2013				Estimated Fair Value Hierarchy
(Dollars in millions)	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	6,291	$	6,291	$	6,291	$	0	$	0
Restricted cash for securitization investors	874		874		874		0		0
Securities available for sale	41,800		41,800		960		37,510		3,330
Securities held to maturity	19,132		19,185		0		18,895		290
Net loans held for investment	192,884		198,138		0		0		198,138
Loans held for sale	218		219		0		219		0
Interest receivable	1,418		1,418		0		1,418		0
Derivatives assets	959		959		3		906		50
Retained interests in securitizations	199		199		0		0		199
Financial liabilities:
Non-interest bearing deposits	$	22,643	$	22,643	$	22,643	$	0	$	0
Interest-bearing deposits	181,880		175,516		0		14,346		161,170
Securitized debt obligations	10,289		11,081		0		10,835		246
Senior and subordinated notes	13,134		13,715		0		13,715		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	915		915		915		0		0
Other borrowings	16,316		16,324		0		16,324		0
Interest payable	307		307		0		307		0
Derivatives liabilities	710		710		4		668		38

The following describes the valuation techniques used in estimating the fair value of our financial instruments as of September 30, 2014 and December 31, 2013. We applied the fair value provisions to the financial instruments not recognized on the consolidated balance sheets at fair value, which include securities held to maturity, loans held for investment, loans held for sale, interest receivable, interest-bearing deposits, securitized debt obligations, other borrowings and senior and subordinated notes. The provisions requiring us to maximize the use of observable inputs and to measure fair value using a notion of exit price were factored into our selection of inputs for our established valuation techniques.

Cash and Cash Equivalents

The carrying amounts of cash and due from banks, federal funds sold and securities purchased under agreements to resell and interest-bearing deposits with banks approximate fair value.

Restricted Cash for Securitization Investors

The carrying amounts of restricted cash for securitization investors approximate their fair value due to their relatively short-term nature.

Investment Securities

Quoted prices in active markets are used to measure the fair value of U.S. Treasury debt obligations. For other investment categories, we utilize multiple third-party pricing services to obtain fair value measurements for the large majority of our securities. A pricing service may be considered as the primary pricing provider for certain types of securities, and the designation of the primary pricing provider may vary depending on the type of securities. The determination of the primary pricing provider is based on our experience and validation benchmark of the pricing service’s performance in terms of providing fair value measurements for the various types of securities.

Certain securities are classified as Level 2 and 3, the majority of which are collateralized mortgage obligations and mortgage-backed securities. Level 2 and 3 classifications indicate that significant valuation assumptions are not consistently observable in the market. When significant assumptions are not consistently observable, fair values are derived using the best available data. Such data may include quotes provided by a dealer, the use of external pricing services, independent pricing models, or other model-based valuation techniques such as calculation of the present values of future cash flows incorporating assumptions such as benchmark yields, spreads, prepayment speeds, credit ratings, and losses. The techniques used by the pricing services utilize observable market data to the extent available. Pricing models may be used, which can vary by asset class and may incorporate available trade, bid and other market information. Across asset classes, information such as trader/dealer input, credit spreads, forward curves, and prepayment speeds are used to help determine appropriate valuations. Because many fixed income securities do not trade on a daily basis, the evaluated pricing applications may apply available information through processes such as benchmarking curves, like securities, sector groupings, and matrix pricing to prepare valuations. In addition, model processes are used by the pricing services to develop prepayment and interest rate scenarios.

We validate the pricing obtained from the primary pricing providers through comparison of pricing to additional sources, including other pricing services, dealer pricing indications in transaction results, and other internal sources. Pricing variances among different pricing sources are analyzed and validated. Additionally, on an on-going basis, we may select a sample of securities and test the third-party valuation by obtaining more detailed information about the pricing methodology, sources of information, and assumptions used to value the securities.

The significant unobservable inputs used in the fair value measurement of our residential, asset-backed and commercial securities include yield, prepayment rate, default rate and loss severity in the event of default. Significant increases or decreases in any of those inputs in isolation or combination would result in a significant change in fair value measurement. Generally, an increase in the yield assumption will result in a decrease in fair value measurement, however, an increase or decrease in prepayment rate, default rate or loss severity may have a different impact on the fair value given various characteristics of the security including the capital structure of the deal, credit enhancement for the security or other factors.

Net Loans Held For Investment

Loans held for investment that are individually impaired are carried at the lower of cost or fair value of the underlying collateral, less the estimated cost to sell. The fair values of credit card loans, installment loans, auto loans, home loans and commercial loans are estimated using a discounted cash flow method, which is a form of the income approach. Discount rates are determined considering rates at which similar portfolios of loans would be made under current conditions and considering liquidity spreads applicable to each loan portfolio based on the secondary market. The fair value of credit card loans excludes any value related to customer account relationships. For those loans held for investment that are recorded at fair value within our consolidated balance sheets on a nonrecurring basis, the fair value is determined using appraisal values that are obtained from independent appraisers, broker pricing opinions or other available market information, adjusted for the estimated costs to transact the sale.

Due to the use of significant unobservable inputs, loans held for investment are classified as Level 3 under the fair value hierarchy. Fair value adjustments for individually impaired collateralized loans held for investment are recorded in provision for credit losses on the consolidated statements of income.

Loans Held For Sale

Loans held for sale are carried at the lower of aggregate cost, net of deferred fees and deferred origination costs, or fair value. We originate loans with the intent to sell to government sponsored enterprises as part of a delegated underwriting and servicing (“DUS”) program. For DUS commercial loans, we believe the fair value approximates par value as this is the contractual price we receive from the purchaser. For all other loans classified as held for sale, the fair value is determined using a discounted cash flow model or current secondary market prices for loan pools with similar characteristics. Loans held for sale that are valued at par or using a discounted cash flow model are classified as Level 2. Fair value adjustments to loans held for sale are recorded in other non-interest income on our consolidated statements of income.

Interest Receivable

The carrying amount of interest receivable approximates the fair value of this asset due to its relatively short-term nature.

Derivative Assets and Liabilities

We use both exchange-traded derivatives and OTC derivatives to manage our interest rate and foreign currency risk exposure. Quoted market prices are available and used for our exchange-traded derivatives, which we classify as Level 1. However, substantially all of our derivatives are traded in OTC markets where quoted market prices are not always readily available. Therefore, we value most OTC derivatives using valuation techniques, which include internally-developed models. We primarily rely on market observable inputs for our models, such as interest rate yield curves, credit curves, option volatility and currency rates, that vary depending on the type of derivative and nature of the underlying rate, price or index upon which the derivative’s value is based. Where model inputs can be observed in a liquid market and the model does not require significant judgment, such derivatives are typically classified as Level 2 of the fair value hierarchy. When instruments are traded in less liquid markets and significant inputs are unobservable, such as interest rate swaps whose remaining terms do not correlate with market observable interest rate yield curves, the derivatives are classified as Level 3.

The impact of counterparty non-performance risk is considered when measuring the fair value of derivative assets. These derivatives are included in other assets on the balance sheet.

We validate the pricing obtained from the internal models through comparison of pricing to additional sources, including external valuation agents and other internal sources. Pricing variances among different pricing sources are analyzed and validated.

Mortgage Servicing Rights

We record consumer MSRs at fair value on a recurring basis, while commercial MSRs are subsequently measured at amortized cost with impairment recognized as a reduction in other non-interest income. MSRs do not trade in an active market with readily observable prices. Accordingly, we determine the fair value of MSRs using a valuation model that calculates the present value of estimated future net servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, cost to service, contractual servicing fee income, ancillary income and late fees. Fair value measurements of MSRs use significant unobservable inputs and, accordingly, are classified as Level 3.

Retained Interests in Securitizations

We have retained interests in various mortgage securitization deals from previous acquisitions. Our retained interest includes rights to future cash flows arising from the receivables, the most significant being certificated interest-only bonds issued by the trust. We record our interest in these deals at fair value using valuation models to calculate the present value of future income. The model incorporates various assumptions that market participants use in estimating future income including weighted-average life, constant prepayment rate, discount rate, default rate and severity.

Other Assets

Included in other assets are foreclosed property, other repossessed assets and long-lived assets held for sale. Foreclosed property and other repossessed assets are carried at the lower of the carrying amount or fair value less costs to sell. The fair value is determined based on the appraisal value or listing price of the property or collateral provided by independent appraisers, and is adjusted for the estimated costs to transact the sale. Due to the use of significant unobservable inputs, foreclosed property is classified as Level 3 under the fair value hierarchy. Fair value adjustments for foreclosed property are recorded in other non-interest expense on the consolidated statements of income. Foreclosed property and repossessed assets, which we report on our consolidated balance sheets under other assets, totaled $129 million and $167 million, respectively, as of September 30, 2014, compared with $113 million and $160 million, respectively, as of December 31, 2013.

Long-lived assets held for sale are also subject to fair value measurement on a nonrecurring basis, and carried at the lower of their carrying amount or fair value less costs to sell. The fair value is determined based on the appraisal value or listing price of the property or collateral provided by independent appraisers, and is adjusted for the estimated costs to transact the sale. Due to the use of significant unobservable inputs, long-lived assets held for sale are classified as Level 3 under the fair value hierarchy. Fair value adjustments for long-lived assets are recorded in other non-interest expense on the consolidated statements of income.

Non-Interest Bearing Deposits

The carrying amount of non-interest bearing deposits approximates fair value.

Interest-bearing Deposits

The fair value of interest-bearing deposits is determined based on discounted expected cash flows using discount rates consistent with current market rates for similar products with similar remaining terms.

Securitized Debt Obligations

We utilized multiple third-party pricing services to obtain fair value measurements for the large majority of our securitized debt obligations. The techniques used by the pricing services utilize observable market data to the extent available; and pricing models may be used which incorporate available trade, bid and other market information as described in the above section. We used internal pricing models, discounted cash flow models or similar techniques to estimate the fair value of certain securitization trusts where third-party pricing was not available.

Senior and Subordinated Notes

We engage multiple third-party pricing services in order to estimate the fair value of senior and subordinated notes. The pricing service utilizes a pricing model that incorporates available trade, bid and other market information. It also incorporates spread assumptions, volatility assumptions and relevant credit information into the pricing models.

Federal Funds Purchased and Securities Loaned or Sold under Agreements to Repurchase and Other Borrowings

The carrying amount of federal funds purchased and repurchase agreements approximates fair value. The fair value of FHLB advances is determined based on discounted expected cash flows using discount rates consistent with current market rates for FHLB advances with similar remaining terms.

Interest Payable

The carrying amount of interest payable approximates the fair value of this liability due to its relatively short-term nature.