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Fair Value Measurement (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of Assets and Liabilities Measured at Fair Value on 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 December 31, 2018 and 2017.

Table 17.1: Assets and Liabilities Measured at Fair Value on a Recurring Basis



	December 31, 2018
	Fair Value Measurements Using						Netting Adjustments⁽¹⁾
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments⁽¹⁾			Total
Assets:
Securities available for sale:
U.S. Treasury securities	$	6,144	$	0	$	0	—			$	6,144
RMBS	0		33,212		433		—			33,645
CMBS	0		4,729		10		—			4,739
Other securities	219		1,403		0		—			1,622
Total securities available for sale	6,363		39,344		443		—			46,150
Other assets:
Derivative assets⁽²⁾	0		1,501		38		$	(1,079	)	460
Other⁽³⁾	265		0		158		—			423
Total assets	$	6,628	$	40,845	$	639	$	(1,079	)	$	47,033
Liabilities:
Other liabilities:
Derivative liabilities⁽²⁾	$	0	$	1,153	$	48	$	(287	)	$	914
Total liabilities	$	0	$	1,153	$	48	$	(287	)	$	914



	December 31, 2017
	Fair Value Measurements Using						Netting Adjustments⁽¹⁾
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments⁽¹⁾			Total
Assets:
Securities available for sale:
U.S. Treasury securities	$	5,171	$	0	$	0	—			$	5,171
RMBS	0		27,178		614		—			27,792
CMBS	0		3,161		14		—			3,175
Other securities	320		1,192		5		—			1,517
Total securities available for sale	5,491		31,531		633		—			37,655
Other assets:
Derivative assets⁽²⁾	1		1,002		37		$	(275	)	765
Other⁽³⁾	281		0		264		—			545
Total assets	$	5,773	$	32,533	$	934	$	(275	)	$	38,965
Liabilities:
Other liabilities:
Derivative liabilities⁽²⁾	$	1	$	1,243	$	24	$	(662	)	$	606
Total liabilities	$	1	$	1,243	$	24	$	(662	)	$	606

__________


⁽¹⁾	Represents balance sheet netting of derivative assets and liabilities, and related payables and receivables for cash collateral held or placed with the same counterparty. See “Note 10—Derivative Instruments and Hedging Activities” for additional information.

⁽²⁾

Does not reflect $2 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of both December 31, 2018 and 2017. Non-performance risk is included in derivative assets and liabilities, which are part of other assets and liabilities on the consolidated balance sheets, and is offset through non-interest income in the consolidated statements of income.

⁽³⁾

As of December 31, 2018, other includes retained interests in securitizations of $158 million, deferred compensation plan assets of $264 million and equity securities of $1 million. As of December 31, 2017, other includes consumer MSRs of $92 million, retained interests in securitizations of $172 million and deferred compensation plan assets of $281 million

Schedule of Level 3 Inputs Reconciliation

The table below presents a reconciliation for all assets and liabilities measured and recognized at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2018, 2017 and 2016. Generally, transfers into Level 3 were primarily driven by the usage of unobservable assumptions in the pricing of these financial instruments as evidenced by wider pricing variations among pricing vendors and transfers out of Level 3 were primarily driven by the usage of assumptions corroborated by market observable information as evidenced by tighter pricing among multiple pricing sources.

Table 17.2: Level 3 Recurring Fair Value Rollforward



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended December 31, 2018
			Total Gains (Losses) (Realized/Unrealized)																								Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 2018⁽¹⁾
			Total Gains (Losses) (Realized/Unrealized)
(Dollars in millions)	Balance, January 1, 2018		Included in Net Income⁽¹⁾			Included in OCI			Purchases		Sales			Issuances		Settlements			Transfers Into Level 3		Transfers Out of Level 3			Balance, December 31, 2018
Securities available for sale:⁽²⁾
RMBS	$	614	$	32		$	(8	)	$	0	$	0		$	0	$	(74	)	$	203	$	(334	)	$	433		$	28
CMBS	14		0			0			0		0			0		(4		)	0		0			10			0
Other securities	5		0			0			0		0			0		(5		)	0		0			0			0
Total securities available for sale	633		32			(8		)	0		0			0		(83		)	203		(334		)	443			28
Other assets:
Consumer MSRs	92		3			0			0		(97		)	2		0			0		0			0			0
Retained interest in securitizations	172		(14		)	0			0		0			0		0			0		0			158			(14		)
Net derivative assets (liabilities)⁽³⁾	13		(20		)	0			0		0			13		(17		)	0		1			(10		)	(20		)



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended December 31, 2017
			Total Gains (Losses) (Realized/Unrealized)																							Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 2017⁽¹⁾
			Total Gains (Losses) (Realized/Unrealized)
(Dollars in millions)	Balance, January 1, 2017		Included in Net Income⁽¹⁾			Included in OCI			Purchases		Sales			Issuances		Settlements			Transfers Into Level 3		Transfers Out of Level 3			Balance, December 31, 2017
Securities available for sale:
RMBS	$	518	$	90		$	(24	)	$	0	$	(116	)	$	0	$	(92	)	$	572	$	(334	)	$	614	$	19
CMBS	51		0			0			110		(50		)	0		(4		)	0		(93		)	14		0
Other securities	9		0			0			0		0			0		(4		)	0		0			5		0
Total securities available for sale	578		90			(24		)	110		(166		)	0		(100		)	572		(427		)	633		19
Other assets:
Consumer MSRs	80		(5		)	0			0		(3		)	27		(7		)	0		0			92		(5		)
Retained interest in securitizations	201		(29		)	0			0		0			0		0			0		0			172		(29		)
Net derivative assets (liabilities)⁽³⁾	18		0			0			0		0			46		(44		)	0		(7		)	13		0



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended December 31, 2016
			Total Gains (Losses) (Realized/Unrealized)																					Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 2016⁽¹⁾
			Total Gains (Losses) (Realized/Unrealized)
(Dollars in millions)	Balance, January 1, 2016		Included in Net Income⁽¹⁾			Included in OCI		Purchases		Sales		Issuances		Settlements			Transfers Into Level 3		Transfers Out of Level 3			Balance, December 31, 2016
Securities available for sale:
RMBS	$	504	$	31		$	9	$	110	$	0	$	0	$	(98	)	$	380	$	(418	)	$	518	$	32
CMBS	97		0			0		266		0		0		(14		)	64		(362		)	51		0
Other securities	14		(9		)	0		44		0		0		(10		)	0		(30		)	9		0
Total securities available for sale	615		22			9		420		0		0		(122		)	444		(810		)	578		32
Other assets:
Consumer MSRs	68		(5		)	0		0		0		23		(6		)	0		0			80		(5		)
Retained interest in securitizations	211		(10		)	0		0		0		0		0			0		0			201		(10		)
Net derivative assets (liabilities)⁽³⁾	30		(5		)	0		0		0		36		(33		)	0		(10		)	18		(5		)

__________


⁽¹⁾	Realized gains (losses) on securities available for sale are included in net securities gains (losses), retained interests in securitizations and consumer MSRs are reported as a component of non-interest income in our consolidated statements of income. Gains (losses) on derivatives are included as a component of net interest income or non-interest income in our consolidated statements of income.


⁽²⁾	Net unrealized losses included in other comprehensive income related to Level 3 securities available for sale still held as of December 31, 2018 were $17 million.

⁽³⁾

Includes derivative assets and liabilities of $38 million and $48 million, respectively, as of December 31, 2018, $37 million and $24 million, respectively, as of December 31, 2017, and $47 million and $29 million, respectively, as of December 31, 2016.

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis Quantitative Information

The following table presents the significant unobservable inputs used to determine the fair values of our Level 3 financial instruments on a recurring basis. We utilize multiple vendor pricing services to obtain fair value for our securities. Several of our vendor pricing services are only able to provide unobservable input information for a limited number of securities due to software licensing restrictions. Other vendor 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. The unobservable input information for all other Level 3 financial instruments is based on the assumptions used in our internal valuation models.

Table 17.3: Quantitative Information about Level 3 Fair Value Measurements

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at December 31,
2018

Significant

Valuation

Techniques

Significant

Unobservable

Inputs

Range

Weighted

Average⁽¹⁾

Securities available for sale:

RMBS

433

Discounted cash flows (vendor pricing)

Yield
Voluntary prepayment rate
Default rate
Loss severity

3-11%
0-17%
0-7%
0-75%

5%
5%
3%
65%

CMBS

Discounted cash flows (vendor pricing)

Yield

Other assets:

Retained interests in securitization⁽²⁾

158

Discounted cash flows

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

3-56
3-14%
4-6%
2-4%
50-104%

N/A

Net derivative assets (liabilities)

(10

)

Discounted cash flows

Swap rates

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at

December 31,

2017

Significant

Valuation

Techniques

Significant

Unobservable

Inputs

Range

Weighted

Average

Securities available for sale:

RMBS

614

Discounted cash flows (vendor pricing)

Yield
Voluntary prepayment rate
Default rate
Loss severity

2-9%
0-15%
0-8%
0-90%

5%
4%
3%
62%

CMBS

Discounted cash flows (vendor pricing)

Yield
Voluntary prepayment rate

3%
0%

Other securities

Discounted cash flows

Yield

Other assets:

Consumer MSRs

Discounted cash flows

Total prepayment rate
Discount rate
Option-adjusted spread rate
Servicing cost ($ per loan)

7-30%
14%
200-1,500 bps
$75-$100

16%
14%
458 bps
$76

Retained interests in securitization⁽²⁾

172

Discounted cash flows

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

6-79
2-12%
3-10%
1-6%
3-115%

N/A

Net derivative assets (liabilities)

Discounted cash flows

Swap rates

__________


⁽¹⁾	Weighted averages are calculated by using the product of the input multiplied by the relative fair value of the instruments.

⁽²⁾

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.

Schedule of Assets Measured at Fair Value on Nonrecurring Basis

The following table presents the carrying value of the assets measured at fair value on a nonrecurring basis and still held as of December 31, 2018 and 2017, and for which a nonrecurring fair value measurement was recorded during the year then ended:

Table 17.4: Nonrecurring Fair Value Measurements



	December 31, 2018
	Estimated Fair Value Hierarchy				Total
(Dollars in millions)	Level 2		Level 3		Total
Loans held for investment	$	0	$	129	$	129
Loans held for sale	38		0		38
Other assets⁽¹⁾	0		100		100
Total	$	38	$	229	$	267



	December 31, 2017
	Estimated Fair Value Hierarchy				Total
(Dollars in millions)	Level 2		Level 3		Total
Loans held for investment	$	0	$	182	$	182
Loans held for sale	177		1		178
Other assets⁽¹⁾	0		35		35
Total	$	177	$	218	$	395

__________

⁽¹⁾

As of December 31, 2018, other assets included equity investments accounted for under measurement alternative of $24 million, foreclosed property and repossessed assets of $57 million and long-lived assets held for sale of $19 million. As of December 31, 2017, other assets included foreclosed property and repossessed assets of $17 million and long-lived assets held for sale of $18 million

Schedule of Earnings Related to Assets Measured at Fair Value on Nonrecurring Basis

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 December 31, 2018, 2017 and 2016.

Table 17.5: Nonrecurring Fair Value Measurements Included in Earnings



	Total Gains (Losses)
	Year Ended December 31,
(Dollars in millions)	2018			2017			2016
Loans held for investment	$	(85	)	$	(100	)	$	(230	)
Loans held for sale	0			(3		)	(2		)
Other assets⁽¹⁾	(74		)	(12		)	(19		)
Total	$	(159	)	$	(115	)	$	(251	)

__________

⁽¹⁾

Other assets include fair value adjustments related to equity investments accounted for under the measurement alternative, foreclosed property, repossessed assets and long-lived assets held for sale.

Schedule of Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value, including the level within the fair value hierarchy, of our financial instruments that are not measured at fair value on a recurring basis on our consolidated balance sheets as of December 31, 2018 and 2017.

Table 17.6: Fair Value of Financial Instruments



	December 31, 2018
	Carrying Value		Estimated Fair Value		Estimated Fair Value Hierarchy
(Dollars in millions)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	13,186	$	13,186	$	4,768	$	8,418	$	0
Restricted cash for securitization investors	303		303		303		0		0
Securities held to maturity	36,771		36,619		0		36,513		106
Net loans held for investment	238,679		241,556		0		0		241,556
Loans held for sale	1,192		1,218		0		1,218		0
Interest receivable	1,614		1,614		0		1,614		0
Other investments⁽¹⁾	1,725		1,725		0		1,725		0
Financial liabilities:
Deposits with defined maturities	38,471		38,279		0		38,279		0
Securitized debt obligations	18,307		18,359		0		18,359		0
Senior and subordinated notes	30,826		30,635		0		30,635		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	352		352		0		352		0
Other borrowings⁽²⁾	9,354		9,354		0		9,354		0
Interest payable	458		458		0		458		0



	December 31, 2017
	Carrying Value		Estimated Fair Value		Estimated Fair Value Hierarchy
(Dollars in millions)	Carrying Value		Estimated Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	14,040	$	14,040	$	4,458	$	9,582	$	0
Restricted cash for securitization investors	312		312		312		0		0
Securities held to maturity	28,984		29,437		200		29,217		20
Net loans held for investment	246,971		251,468		0		0		251,468
Loans held for sale	971		952		0		949		3
Interest receivable	1,536		1,536		0		1,536		0
Other investments⁽¹⁾	1,689		1,689		0		1,680		9
Financial liabilities:
Deposits	243,702		243,732		26,404		217,328		0
Securitized debt obligations	20,010		20,122		0		20,122		0
Senior and subordinated notes	30,755		31,392		0		31,392		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	576		576		0		576		0
Other borrowings⁽²⁾	8,892		8,892		0		8,892		0
Interest payable	413		413		0		413		0

__________


⁽¹⁾	Other investments as of December 31, 2018 include FHLB and Federal Reserve stock. Other investments as of December 31, 2017 include FHLB and Federal Reserve stock, as well as cost method investments. These investments are included in other assets on our consolidated balance sheets.

⁽²⁾

Other borrowings excludes capital lease obligations.