Fair Value Measurement (Tables)

9 Months Ended

Sep. 30, 2023

Fair Value Disclosures [Abstract]

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 September 30, 2023 and December 31, 2022.

Table 11.1: Assets and Liabilities Measured at Fair Value on a Recurring Basis

	September 30, 2023
	Fair Value Measurements Using						Netting Adjustments(1)
(Dollars in millions)	Level 1		Level 2		Level 3				Total
Assets:
Securities available for sale:
U.S. Treasury securities	$	5,205	$	0	$	0	0		$	5,205
RMBS	0		59,733		149		0		59,882
CMBS	0		7,713		126		0		7,839
Other securities	192		1,719		0		0		1,911
Total securities available for sale	5,397		69,165		275		0		74,837
Loans held for sale	0		314		0		0		314
Other assets:
Derivative assets(2)	725		1,333		1,323		$	(1,471)	1,910
Other(3)	529		3		35		0		567
Total assets	$	6,651	$	70,815	$	1,633	$	(1,471)	$	77,628
Liabilities:
Other liabilities:
Derivative liabilities(2)	$	822	$	1,622	$	1,255	$	(632)	$	3,067
Total liabilities	$	822	$	1,622	$	1,255	$	(632)	$	3,067

	December 31, 2022
	Fair Value Measurements Using						Netting Adjustments(1)
(Dollars in millions)	Level 1		Level 2		Level 3				Total
Assets:
Securities available for sale:
U.S. Treasury securities	$	5,041	$	0	$	0	0		$	5,041
RMBS	0		62,353		236		0		62,589
CMBS	0		7,728		142		0		7,870
Other securities	186		1,233		0		0		1,419
Total securities available for sale	5,227		71,314		378		0		76,919
Loans held for sale	0		191		0		0		191
Other assets:
Derivative assets(2)	474		2,545		79		$	(1,134)	1,964
Other(3)	464		3		36		0		503
Total assets	$	6,165	$	74,053	$	493	$	(1,134)	$	79,577
Liabilities:
Other liabilities:
Derivative liabilities(2)	$	823	$	3,653	$	74	$	(1,235)	$	3,315
Total liabilities	$	823	$	3,653	$	74	$	(1,235)	$	3,315

__________

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

(2)Does not reflect approximately $1 million and $4 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of September 30, 2023 and December 31, 2022, respectively. Non-performance risk is included in the measurement of derivative assets and liabilities on our consolidated balance sheets, and is recorded through non-interest income in the consolidated statements of income.

(3)As of September 30, 2023 and December 31, 2022, other includes retained interests in securitizations of $35 million and $36 million, deferred compensation plan assets of $524 million and $453 million, and equity securities of $8 million (including unrealized losses of approximately $1 million million) and $14 million (including unrealized losses of $23 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 and nine months ended September 30, 2023 and 2022. 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 11.2: Level 3 Recurring Fair Value Rollforward

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended September 30, 2023
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2023(1)
(Dollars in millions)	Balance, July 1, 2023		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2023
Securities available for sale:(2)
RMBS	$	206	$	2	$	(5)	$	0	$	0	$	0	$	(6)	$	2	$	(50)	$	149	$	2
CMBS	133		0		(6)		0		0		0		(1)		0		0		126		0
Total securities available for sale	339		2		(11)		0		0		0		(7)		2		(50)		275		2
Other assets:
Retained interests in securitizations	36		(1)		0		0		0		0		0		0		0		35		(1)
Net derivative assets (liabilities)(3)	64		(2)		0		0		0		3		18		(15)		0		68		4

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Nine Months Ended September 30, 2023
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2023(1)
(Dollars in millions)	Balance, January 1, 2023		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2023
Securities available for sale:(2)
RMBS	$	236	$	6	$	(4)	$	0	$	0	$	0	$	(17)	$	47	$	(119)	$	149	$	5
CMBS	142		0		(12)		0		0		0		(4)		0		0		126		0
Total securities available for sale	378		6		(16)		0		0		0		(21)		47		(119)		275		5
Other assets:
Retained interests in securitizations	36		(1)		0		0		0		0		0		0		0		35		(1)
Net derivative assets (liabilities)(3)(4)	5		(20)		0		0		0		176		75		(167)		(1)		68		71

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended September 30, 2022
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2022(1)
(Dollars in millions)	Balance, July 1, 2022		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2022
Securities available for sale:(2)
RMBS	$	240	$	2	$	(9)	$	0	$	0	$	0	$	(10)	$	8	$	(13)	$	218	$	2
CMBS	13		(1)		(1)		0		0		0		(8)		177		0		180		0
Total securities available for sale	253		1		(10)		0		0		0		(18)		185		(13)		398		2
Other assets:
Retained interests in securitizations	37		(1)		0		0		0		0		0		0		0		36		(1)
Net derivative assets (liabilities)(3)	(12)		(22)		0		0		0		(11)		0		0		40		(5)		(22)

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Nine Months Ended September 30, 2022
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2022(1)
(Dollars in millions)	Balance, January 1, 2022		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2022
Securities available for sale:(2)
RMBS	$	258	$	15	$	(29)	$	0	$	0	$	0	$	(53)	$	92	$	(65)	$	218	$	6
CMBS	9		(1)		(2)		0		0		0		(13)		190		(3)		180		(1)
Total securities available for sale	267		14		(31)		0		0		0		(66)		282		(68)		398		5
Other assets:
Retained interests in securitizations	41		(5)		0		0		0		0		0		0		0		36		(5)
Net derivative assets (liabilities)(3)	19		(63)		0		0		0		25		2		(28)		40		(5)		(20)

_________

(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)For the three and nine months ended September 30, 2023, included in OCI related to Level 3 securities available for sale still held as of September 30, 2023 were net unrealized losses of $9 million and $14 million. For the three and nine months ended September 30, 2022, included in OCI related to Level 3 securities available for sale still held as of September 30, 2022 were net unrealized losses of $15 million and $53 million.

(3)Includes derivative assets and liabilities of $1.3 billion and $1.3 billion, respectively, as of September 30, 2023 and $110 million and $115 million, respectively, as of September 30, 2022.

(4)Transfers into Level 3 primarily consist of term SOFR-indexed interest rate derivatives.

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 11.3: Quantitative Information about Level 3 Fair Value Measurements

	Quantitative Information about Level 3 Fair Value Measurements
(Dollars in millions)	Fair Value at September 30, 2023		Significant Valuation Techniques	Significant Unobservable Inputs	Range	Weighted Average(1)
Securities available for sale:
RMBS	$	149	Discounted cash flows (vendor pricing)	Yield Voluntary prepayment rate Default rate Loss severity	3-15% 0-12% 0-10% 20-80%	8% 7% 2% 61%
CMBS	126		Discounted cash flows (vendor pricing)	Yield	6-7%	6%
Other assets:
Retained interests in securitizations(2)	35		Discounted cash flows	Life of receivables (months) Voluntary prepayment rate Discount rate Default rate Loss severity	33-64 9-11% 5-13% 1-2% 39-163%	N/A
Net derivative assets (liabilities)	68		Discounted cash flows	Swap rates	4-5%	4%

	Quantitative Information about Level 3 Fair Value Measurements
(Dollars in millions)	Fair Value at December 31, 2022		Significant Valuation Techniques	Significant Unobservable Inputs	Range	Weighted Average(1)
Securities available for sale:
RMBS	$	236	Discounted cash flows (vendor pricing)	Yield Voluntary prepayment rate Default rate Loss severity	3-12% 4-20% 0-11% 30-80%	7% 8% 2% 58%
CMBS	142		Discounted cash flows (vendor pricing)	Yield	4-5%	5%
Other assets:
Retained interests in securitizations(2)	36		Discounted cash flows	Life of receivables (months) Voluntary prepayment rate Discount rate Default rate Loss severity	30-43 9-18% 4-7% 1% 62-291%	N/A
Net derivative assets (liabilities)	5		Discounted cash flows	Swap rates	3-4%	4%

__________

(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 September 30, 2023 and December 31, 2022, and for which a nonrecurring fair value measurement was recorded during the nine and twelve months then ended.

Table 11.4: Nonrecurring Fair Value Measurements

	September 30, 2023
	Estimated Fair Value Hierarchy				Total
(Dollars in millions)	Level 2		Level 3
Loans held for investment	$	0	$	424	$	424
Loans held for sale	0		0		0
Other assets(1)	0		212		212
Total	$	0	$	636	$	636

	December 31, 2022
	Estimated Fair Value Hierarchy				Total
(Dollars in millions)	Level 2		Level 3
Loans held for investment	$	0	$	284	$	284
Loans held for sale	11		0		11
Other assets(1)	0		220		220
Total	$	11	$	504	$	515

__________

(1)As of September 30, 2023, other assets included investments accounted for under measurement alternative of $38 million, repossessed assets of $54 million, and long-lived assets held for sale and right-of-use assets totaling $120 million. As of December 31, 2022, other assets included investments

accounted for under measurement alternative of $4 million, cost method investments of $3 million, repossessed assets of $55 million and long-lived assets held for sale and right-of-use assets totaling $158 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 September 30, 2023 and 2022.

Table 11.5: Nonrecurring Fair Value Measurements Included in Earnings

	Total Gains (Losses)
	Nine Months Ended September 30,
(Dollars in millions)	2023		2022
Loans held for investment	$	(315)	$	24
Loans held for sale	0		0
Other assets(1)	(52)		(33)
Total	$	(367)	$	(9)

__________

(1)Other assets include fair value adjustments related to repossessed assets, long-lived assets held for sale and right-of-use assets, and equity investments accounted for under the measurement alternative.

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 September 30, 2023 and December 31, 2022.

Table 11.6: Fair Value of Financial Instruments

	September 30, 2023
	Carrying Value		Estimated Fair Value		Estimated Fair Value Hierarchy
(Dollars in millions)					Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	44,869	$	44,869	$	4,620	$	40,249	$	0
Restricted cash for securitization investors	435		435		435		0		0
Net loans held for investment	299,825		305,810		0		0		305,810
Loans held for sale	428		440		0		440		0
Interest receivable	2,469		2,469		0		2,469		0
Other investments(1)	1,329		1,329		0		1,329		0
Financial liabilities:
Deposits with defined maturities	79,176		78,833		0		78,833		0
Securitized debt obligations	17,417		17,409		0		17,409		0
Senior and subordinated notes	31,283		31,051		0		31,051		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	522		522		0		522		0
Interest payable	685		685		0		685		0

	December 31, 2022
	Carrying Value		Estimated Fair Value		Estimated Fair Value Hierarchy
(Dollars in millions)					Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	30,856	$	30,856	$	5,193	$	25,663	$	0
Restricted cash for securitization investors	400		400		400		0		0
Net loans held for investment	299,091		302,920		0		0		302,920
Loans held for sale	11		11		0		11		0
Interest receivable	2,104		2,104		0		2,104		0
Other investments(1)	1,326		1,326		0		1,326		0
Financial liabilities:
Deposits with defined maturities	45,858		45,531		0		45,531		0
Securitized debt obligations	16,973		16,918		0		16,918		0
Senior and subordinated notes	30,826		30,744		0		30,744		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	883		883		0		883		0
Interest payable	527		527		0		527		0

__________

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