Fair value, also referred to as an exit price, 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. The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on the markets in which the assets or liabilities trade and 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 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 Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for 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 (“DCF”) 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. 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 observable or 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. 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 measure the fair value of our U.S. Treasury securities using quoted prices in active markets. For the majority of securities in other investment categories, we utilize multiple vendor pricing services to obtain fair value measurements. We use a waterfall of pricing vendors determined using our annual assessment of pricing service performance. A pricing service may be considered as the preferred or primary pricing provider depending on how closely aligned its prices are to other vendor prices, and how consistent the prices are with other available market information. The price of each security is confirmed by comparing such price to other vendor prices before it is finalized.

RMBS and CMBS are generally classified as Level 2 or 3. When significant assumptions are not consistently observable, fair values are derived using the best available data. Such data may include quotes provided by dealers, valuation from external pricing services, independent pricing models, or other model-based valuation techniques, for example, calculation of the present values of future cash flows incorporating assumptions such as benchmark yields, spreads, prepayment speeds, credit ratings and losses. Generally, the external pricing services utilize observable market data to the extent available. Pricing models may be used, which can vary by asset class, and may also incorporate available trade, bid and other market information. Across asset classes, information such as trader/dealer inputs, 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 pricing models may apply available information through processes such as benchmarking curves, grouping securities based on their characteristics and using matrix pricing to prepare valuations. In addition, model processes are used by the pricing services to develop prepayment assumptions.

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. Additionally, on an on-going basis, we request more detailed information from the valuation vendors to understand the pricing methodology and assumptions used to value the securities.

We use both exchange-traded and OTC derivatives to manage our interest rate, foreign currency and commodity risk exposures. When quoted market prices are available and used to value our exchange-traded derivatives, we classify them as Level 1. However, the majority of our derivatives do not have readily available quoted market prices. Therefore, we value most of our derivatives using vendor-based models. We primarily rely on market observable inputs for these models, including, for example, interest rate yield curves, credit curves, option volatility and currency rates. These inputs can vary depending on the type of derivatives and nature of the underlying rate, price or index upon which the value of the derivative is based. We typically classify derivatives as Level 2 when significant inputs can be observed in a liquid market and the model itself does not require significant judgment. 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, such derivatives are classified as Level 3. We consider the impact of credit risk valuation adjustments when measuring the fair value of derivative contracts in order to reflect the credit quality of the counterparty and our own credit quality. Our internal pricing is compared against additional pricing sources such as external valuation agents and other internal sources. Pricing variances among different pricing sources are analyzed and validated. These derivatives are included in other assets or other liabilities on our consolidated balance sheets.

In our commercial business, we originate multifamily commercial real estate loans with the intent to sell them to GSEs. We elect the fair value option for such loans as part of our management of interest rate risk in our multifamily agency business. These held for sale loans are valued based on market observable inputs and are therefore classified as Level 2. Unrealized gains and losses on these loans are recorded in other non-interest income in our consolidated statements of income.

We have retained interests in various mortgage securitizations from previous acquisitions. Our retained interests primarily include interest-only bonds and negative amortization bonds. We record these retained interests at fair value using market indications and valuation models to calculate the present value of future cash flows. Due to the use of significant unobservable inputs such as prepayment and discount rate assumptions, retained interests in securitizations are classified as Level 3 under the fair value hierarchy.

We offer a voluntary non-qualified deferred compensation plan to eligible associates. In addition to participant deferrals, we make contributions to the plan. Participants invest these contributions in a variety of publicly traded mutual funds. The plan assets, which consist of those publicly traded mutual funds, are classified as Level 1.


	December 31, 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	$	5,282	$	0	$	0	0		$	5,282
RMBS	0		63,492		146		0		63,638
CMBS	0		8,191		132		0		8,323
Other securities	126		1,748		0		0		1,874
Total securities available for sale	5,408		73,431		278		0		79,117
Loans held for sale	0		347		0		0		347
Other assets:
Derivative assets(2)	788		1,001		886		$	(1,005)	1,670
Other(3)	589		3		35		0		627
Total assets	$	6,785	$	74,782	$	1,199	$	(1,005)	$	81,761
Liabilities:
Other liabilities:
Derivative liabilities(2)	$	449	$	1,655	$	828	$	(597)	$	2,335
Total liabilities	$	449	$	1,655	$	828	$	(597)	$	2,335


	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

__________

(2)Does not reflect approximately $2 million and $4 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of December 31, 2023 and 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 December 31, 2023 and 2022, other includes retained interests in securitizations of $35 million and $36 million, deferred compensation plan assets of $578 million and $453 million, and equity securities of $14 million (including unrealized gains of $5 million) and $14 million (including unrealized losses of $23 million), respectively.

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, 2023, 2022 and 2021. 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.


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended December 31, 2023
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 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, December 31, 2023
Securities available for sale:(2)
RMBS	$	236	$	8	$	(2)	$	0	$	0	$	0	$	(20)	$	49	$	(125)	$	146	$	7
CMBS	142		(1)		(4)		0		0		0		(5)		0		0		132		(1)

Total securities available for sale	378		7		(6)		0		0		0		(25)		49		(125)		278		6
Other assets:

Retained interests in securitizations	36		(1)		0		0		0		0		0		0		0		35		(1)
Net derivative assets (liabilities)(3)(4)	5		(14)		0		0		0		166		69		(167)		(1)		58		63



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended December 31, 2022
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 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, December 31, 2022
Securities available for sale:(2)
RMBS	$	258	$	18	$	(32)	$	0	$	0	$	0	$	(60)	$	123	$	(71)	$	236	$	10
CMBS	9		(1)		(3)		0		0		0		(15)		190		(38)		142		(1)

Total securities available for sale	267		17		(35)		0		0		0		(75)		313		(109)		378		9
Other assets:

Retained interests in securitizations	41		(5)		0		0		0		0		0		0		0		36		(5)
Net derivative assets (liabilities)(3)	19		(65)		0		0		0		36		3		(28)		40		5		(33)


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year Ended December 31, 2021
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 2021(1)
(Dollars in millions)	Balance, January 1, 2021		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, December 31 2021
Securities available for sale:(2)
RMBS	$	328	$	18	$	5	$	0	$	0	$	0	$	(91)	$	106	$	(108)	$	258	$	15
CMBS	111		0		(2)		0		0		0		(7)		0		(93)		9		0

Total securities available for sale	439		18		3		0		0		0		(98)		106		(201)		267		15
Other assets:

Retained interests in securitizations	55		(14)		0		0		0		0		0		0		0		41		(14)
Net derivative assets (liabilities)(3)	31		(43)		0		0		0		68		(37)		6		(6)		19		(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)Net unrealized losses included in other comprehensive income related to Level 3 securities available for sale still held as of December 31, 2023 were $5 million. Net unrealized losses included in other comprehensive income related to Level 3 securities available for sale still held as of December 31, 2022 were $57 million. Net unrealized losses included in other comprehensive income related to Level 3 securities available for sale still held as of December 31, 2021 were $4 million.

Generally, uncertainties in fair value measurements of financial instruments, such as 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 or 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, and would lead to a decrease in the fair value measurement.

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.

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at
December 31,
2023

Significant
Valuation
Techniques

Significant
Unobservable
Inputs

Range

Weighted

Average(1)

Securities available for sale:

RMBS

146

Discounted cash flows (vendor pricing)

Yield
Voluntary prepayment rate
Default rate
Loss severity

2-19%

0-12%

0-10%

30-80%

61%

CMBS

132

Discounted cash flows (vendor pricing)

Yield

5-7%

Other assets:

Retained interests in securitizations(2)

Discounted cash flows

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

33-69

5-14%

53-163%

N/A

Net derivative assets (liabilities)

Discounted cash flows

Swap rates

3-5%

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%

58%

CMBS

142

Discounted cash flows (vendor pricing)

Yield

4-5%

Other assets:

Retained interests in securitizations(2)

Discounted cash flows

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

30-43

9-18%

4-7%

62-291%

N/A

Net derivative assets (liabilities)

Discounted cash flows

Swap rates

3-4%

__________

We are required to measure and recognize certain assets at fair value on a nonrecurring basis on 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 lower of cost or fair value accounting or when we evaluate for impairment). The following describes the valuation techniques used in estimating the fair value of our financial assets and liabilities recorded at fair value on a nonrecurring basis.

Loans held for investment that are recorded at fair value on our consolidated balance sheets on a nonrecurring basis largely consist of impaired loans for which impairment is measured based upon the fair value of the underlying collateral. 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 cost to sell. Due to the use of significant unobservable inputs, these

Loans held for sale for which we have not elected the fair value option are carried at the lower of aggregate cost, net of deferred fees and deferred origination costs, or fair value. These loans held for sale are valued based on market observable inputs and are therefore classified as Level 2. Fair value adjustments to these loans are recorded in other non-interest income in our consolidated statements of income.

Other assets subject to nonrecurring fair value measurements include equity investments accounted for under the measurement alternative, other repossessed assets and long-lived assets held for sale. The assets held for sale 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, listing price of the property or collateral provided by independent appraisers, and is adjusted for the estimated costs to sell. Due to the use of significant unobservable inputs, these assets are classified as Level 3 under the fair value hierarchy. Fair value adjustments for these assets are recorded in other non-interest expense in the consolidated statements of income.

(1)As of December 31, 2023, other assets included investments accounted for under measurement alternative of $46 million, repossessed assets of $45 million, and long-lived assets held for sale and right-of-use assets totaling $123 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.

In the above table, loans held for investment are generally 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. The non-recoverable rate ranged from 0% to 100%, with a weighted average of 18%, and from 0% to 43%, with a weighted average of 20%, as of December 31, 2023 and 2022, respectively. The weighted average non-recoverable rate is calculated based on the estimated market value of the underlying collateral. The significant unobservable inputs and related quantitative information related to fair value of the other assets are not meaningful to disclose as they vary significantly across properties and collateral.


	December 31, 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	$	43,297	$	43,297	$	4,903	$	38,394	$	0
Restricted cash for securitization investors	458		458		458		0		0

Net loans held for investment	305,176		308,044		0		0		308,044
Loans held for sale	507		515		0		515		0
Interest receivable	2,478		2,478		0		2,478		0
Other investments(1)	1,329		1,329		0		1,329		0
Financial liabilities:
Deposits with defined maturities	83,014		82,990		0		82,990		0
Securitized debt obligations	18,043		18,067		0		18,067		0
Senior and subordinated notes	31,248		31,524		0		31,524		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	538		538		0		538		0

Interest payable	649		649		0		649		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

__________