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Fair Value Measurement (Tables)

3 Months Ended

Mar. 31, 2019

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 March 31, 2019 and December 31, 2018.

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



	March 31, 2019
	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	$	4,127	$	0	$	0	—			$	4,127
RMBS	0		34,431		434		—			34,865
CMBS	0		5,313		9		—			5,322
Other securities	198		1,376		0		—			1,574
Total securities available for sale	4,325		41,120		443		—			45,888
Other assets:
Derivative assets⁽²⁾	1		1,178		42		$	(512	)	709
Other⁽³⁾	306		0		155		—			461
Total assets	$	4,632	$	42,298	$	640	$	(512	)	$	47,058
Liabilities:
Other liabilities:
Derivative liabilities⁽²⁾	$	1	$	838	$	36	$	(421	)	$	454
Total liabilities	$	1	$	838	$	36	$	(421	)	$	454



	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

__________


⁽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 9—Derivative Instruments and Hedging Activities” for additional information.

⁽²⁾

Does not reflect $7 million and $2 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of March 31, 2019 and December 31, 2018, respectively. 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 March 31, 2019 and December 31, 2018, other includes retained interests in securitizations of $155 million and $158 million, deferred compensation plan assets of $305 million and $264 million, and equity securities of $1 million and $1 million, respectively.

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 three months ended March 31, 2019 and 2018. 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 12.2: Level 3 Recurring Fair Value Rollforward



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended March 31, 2019
				Total Gains (Losses) (Realized/Unrealized)																						Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of March 31, 2019⁽¹⁾
				Total Gains (Losses) (Realized/Unrealized)
(Dollars in millions)	Balance, January 1, 2019			Included in Net Income⁽¹⁾			Included in OCI		Purchases		Sales		Issuances			Settlements			Transfers Into Level 3		Transfers Out of Level 3			Balance, March 31, 2019
Securities available for sale:⁽²⁾
RMBS	$	433		$	8		$	11	$	0	$	0	$	0		$	(12	)	$	17	$	(23	)	$	434	$	8
CMBS	10			0			0		0		0		0			(1		)	0		0			9		0
Total securities available for sale	443			8			11		0		0		0			(13		)	17		(23		)	443		8
Other assets:
Retained interest in securitizations	158			(3		)	0		0		0		0			0			0		0			155		(3		)
Net derivative assets (liabilities)⁽³⁾	(10		)	5			0		0		0		(6		)	19			0		(2		)	6		6



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended March 31, 2018
			Total Gains (Losses) (Realized/Unrealized)																								Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of March 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, March 31, 2018
Securities available for sale:
RMBS	$	614	$	9		$	(2	)	$	0	$	0		$	0	$	(21	)	$	61	$	(47	)	$	614		$	9
CMBS	14		0			0			0		0			0		(1		)	0		0			13			0
Other securities	5		0			0			0		0			0		0			0		0			5			0
Total securities available for sale	633		9			(2		)	0		0			0		(22		)	61		(47		)	632			9
Other assets:
Consumer MSRs	92		3			0			0		(97		)	2		0			0		0			0			0
Retained interest in securitizations	172		4			0			0		0			0		0			0		0			176			4
Net derivative assets (liabilities)⁽³⁾	13		(22		)	0			0		0			1		(1		)	0		0			(9		)	(22		)

__________


⁽¹⁾	Realized gains (losses) on securities available for sale are included in net securities gains (losses), and retained interests in securitizations 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 gains included in other comprehensive income related to Level 3 securities available for sale still held as of March 31, 2019 were $10 million.

⁽³⁾

Includes derivative assets and liabilities of $42 million and $36 million, respectively, as of March 31, 2019, and $36 million and $45 million, respectively, as of March 31, 2018.

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 12.3: Quantitative Information about Level 3 Fair Value Measurements

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at March 31,
2019

Significant

Valuation

Techniques

Significant

Unobservable

Inputs

Range

Weighted

Average⁽¹⁾

Securities available for sale:

RMBS

434

Discounted cash flows (vendor pricing)

Yield
Voluntary prepayment rate
Default rate
Loss severity

2-15%
0-15%
0-7%
0-85%

5%
7%
3%
69%

CMBS

Discounted cash flows (vendor pricing)

Yield

Other assets:

Retained interests in securitization⁽²⁾

155

Discounted cash flows

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

1-54
2-15%
4-6%
1-4%
52-98%

N/A

Net derivative assets (liabilities)

Discounted cash flows

Swap rates

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

__________


⁽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 March 31, 2019 and December 31, 2018, and for which a nonrecurring fair value measurement was recorded during three and twelve months then ended.

Table 12.4: Nonrecurring Fair Value Measurements



	March 31, 2019
	Estimated Fair Value Hierarchy				Total
(Dollars in millions)	Level 2		Level 3		Total
Loans held for investment	$	0	$	191	$	191
Loans held for sale	192		0		192
Other assets⁽¹⁾	0		55		55
Total	$	192	$	246	$	438



	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

__________

⁽¹⁾

As of March 31, 2019, other assets included equity investments accounted for under the measurement alternative of $5 million, repossessed assets of $49 million and long-lived assets held for sale of $1 million. As of December 31, 2018, other assets included equity investments accounted for under the measurement alternative of $24 million, foreclosed property and repossessed assets of $57 million and long-lived assets held for sale of $19 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 March 31, 2019 and 2018.

Table 12.5: Nonrecurring Fair Value Measurements Included in Earnings



	Total Gains (Losses)
	Three Months Ended March 31,
(Dollars in millions)	2019			2018
Loans held for investment	$	(75	)	$	(76	)
Loans held for sale	(1		)	0
Other assets⁽¹⁾	(49		)	(11		)
Total	$	(125	)	$	(87	)

__________

⁽¹⁾

Other assets include fair value adjustments related to equity investments accounted for under the measurement alternative, 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 March 31, 2019 and December 31, 2018.

Table 12.6: Fair Value of Financial Instruments



	March 31, 2019
	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	$	17,469	$	17,469	$	4,572	$	12,897	$	0
Restricted cash for securitization investors	1,969		1,969		1,969		0		0
Securities held to maturity	36,503		36,955		0		36,922		33
Net loans held for investment	232,960		235,081		0		0		235,081
Loans held for sale	905		920		0		920		0
Interest receivable	1,615		1,615		0		1,615		0
Other investments⁽¹⁾	1,341		1,341		0		1,341		0
Financial liabilities:
Deposits with defined maturities	39,869		39,851		0		39,851		0
Securitized debt obligations	19,273		19,371		0		19,371		0
Senior and subordinated notes	30,645		31,004		0		31,004		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	335		335		0		335		0
Other borrowings⁽²⁾	22		22		0		22		0
Interest payable	382		382		0		382		0



	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

__________


⁽¹⁾	Other investments include FHLB and Federal Reserve stock. These investments are included in other assets on our consolidated balance sheets.

⁽²⁾

Other borrowings excludes finance lease liabilities.