Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2013

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

The following table displays our assets and liabilities measured on our condensed consolidated balance sheets at fair value on a recurring basis as of June 30, 2013 and December 31, 2012:

Assets and Liabilities Measured at Fair Value on a Recurring Basis

June 30, 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

840

U.S. agency debt obligations

101

Corporate debt securities guaranteed by U.S. government agencies

372

832

1,204

Residential mortgage-backed securities

42,012

1,535

43,547

Commercial mortgage-backed securities

7,091

461

7,552

Other asset-backed securities

7,305

109

7,414

Other

295

1,633

1,944

Total securities available for sale

1,135

58,514

2,953

62,602

Other assets:

Mortgage servicing rights

Derivative assets⁽¹⁾⁽²⁾

1,059

1,144

Retained interests in securitizations and other

198

Total assets

1,148

59,599

3,284

64,031

Liabilities

Other liabilities:

Derivative liabilities⁽¹⁾⁽²⁾

590

638

Total liabilities

590

638


	December 31, 2012
	Fair Value Measurements Using
(Dollars in millions)	Level 1		Level 2		Level 3		Total
Assets
Securities available for sale:
U.S. Treasury debt obligations	$	1,552	$	0	$	0	$	1,552
U.S. agency debt obligations		0		302		0		302
Corporate debt securities guaranteed by U.S. government agencies		0		362		650		1,012
Residential mortgage-backed securities		0		42,538		1,335		43,873
Commercial mortgage-backed securities		0		7,042		587		7,629
Other asset-backed securities		0		8,356		102		8,458
Other		145		993		15		1,153

Total securities available for sale		1,697		59,593		2,689		63,979
Other assets:
Mortgage servicing rights		0		0		55		55
Derivative assets⁽¹⁾⁽²⁾		1		1,757		90		1,848
Retained interests in securitizations and other		0		0		204		204

Total assets	$	1,698	$	61,350	$	3,038	$	66,086

Liabilities
Other liabilities:
Derivative liabilities⁽¹⁾⁽²⁾	$	1	$	361	$	38	$	400

Total liabilities	$	1	$	361	$	38	$	400

⁽¹⁾

We do not offset the fair value of derivative contracts in a loss position against the fair value of contracts in a gain position. We also do not offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral arising from derivative instruments executed with the same counterparty under a master netting arrangement.

⁽²⁾

Does not reflect $1 million and $9 million recognized as a net valuation allowance on derivative assets and liabilities for non performance risk as of June 30, 2013 and December 31, 2012, respectively. Non-performance risk is reflected in other assets/liabilities on the balance sheet and offset through the income statement in other income.

Schedule of Level 3 Inputs Reconciliation for Assets and Liabilities

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.


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





			Total Gains or (Losses)
			(Realized/Unrealized)

						Included in Other Comprehensive Income
	Balance, April 1, 2013		Included in Net Income⁽¹⁾																Transfers Into Level 3⁽²⁾		Transfers Out of Level 3⁽²⁾			Balance, June 30, 2013

(Dollars in millions)									Purchases		Sales			Issuances		Settlements
Assets:
Securities available-for-sale:
Corporate debt securities guaranteed by U.S. government agencies	$	768	$	0		$	(36	)	$	123	$	0		$	0	$	(18	)	$	39	$	(44	)	$	832	$	0
Residential mortgage-backed securities		1,490		(1	)		8			94		0			0		(89	)		260		(227	)		1,535		(1	)
Commercial mortgage-backed securities		704		0			(40	)		166		(10	)		0		(8	)		71		(422	)		461		0
Other asset-backed securities		71		0			(3	)		40		0			0		(1	)		8		(6	)		109		0
Other		16		0			0			0		0			0		0			0		0			16		0

Total securities available-for-sale		3,049		(1	)		(71	)		423		(10	)		0		(116	)		378		(699	)		2,953		(1	)
Other assets:
Mortgage servicing rights		58		28			0			0		0			3		(2	)		0		(26	)		61		28
Derivative assets		83		(7	)		0			0		0			3		(6	)		0		(1	)		72		(7	)
Retained interest in securitization and other		201		(3	)		0			0		0			0		0			0		0			198		(3	)
Liabilities:
Other liabilities
Derivative liabilities		42		(4	)		0			0		0			9		(5	)		0		0			42		(4	)


						Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended June 30, 2012
																								Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2012⁽³⁾
			Total Gains or (Losses)
			(Realized/Unrealized)
(Dollars in millions)	Balance, April 1, 2012		Included in Net Income⁽¹⁾			Included in Other Comprehensive Income		Purchases		Sales		Issuances		Settlements			Transfers Into Level 3⁽²⁾		Transfers Out of Level 3⁽²⁾			Balance, June 30, 2012
Assets:
Securities available-forsale:
Corporate debt securities guaranteed by U.S. government agencies	$	0	$	0		$	1	$	50	$	0	$	0	$	(1	)	$	14	$	0		$	64	$	0
Residential mortgage-backed securities		1,821		9			13		4		0		0		(134	)		130		(673	)		1,170		9
Commercial mortgage-backed securities		387		0			8		173		0		0		(16	)		0		(285	)		267		0
Other asset-backed securities		241		0			8		50		0		0		(1	)		0		(5	)		293		0
Other		7		0			0		0		0		0		0			3		0			10		0

Total securities available for sale		2,456		9			30		277		0		0		(152	)		147		(963	)		1,804		9
Other assets:
Mortgage servicing rights		95		(12	)		0		0		0		4		(3	)		0		0			84		(12	)
Derivative assets		65		47			0		0		0		3		(12	)		0		0			103		47
Retained interest in securitizations and other		140		0			0		0		0		0		0			0		0			140		0
Liabilities:
Other liabilities:
Derivative liabilities		36		8			0		0		0		0		(10	)		0		0			34		8
Other		14		(1	)		0		0		0		0		0			0		0			13		(1	)


	Six Months Ended June 30, 2013
																										Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2013⁽³⁾
			Total Gains or (Losses)
			(Realized/Unrealized)
(Dollars in millions)	Balance, January 1, 2013		Included in Net Income⁽¹⁾			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements			Transfers Into Level 3⁽²⁾		Transfers Out of Level 3⁽²⁾			Balance, June 30, 2013
Assets:
Securities available-for-sale:
Corporate debt securities guaranteed by U.S. government agencies	$	650	$	0		$	(35	)	$	211	$	0		$	0	$	(28	)	$	78	$	(44	)	$	832	$	0
Residential mortgage-backed securities		1,335		(10	)		84			192		0			0		(145	)		529		(450	)		1,535		(10	)
Commercial mortgage-backed securities		587		0			(47	)		547		(10	)		0		(27	)		120		(709	)		461		0
Other asset-backed securities		102		(1	)		6			40		(41	)		0		(2	)		14		(9	)		109		(1	)
Other		15		0			0			0		0			0		0			1		0			16		0

Total securities available for sale		2,689		(11	)		8			990		(51	)		0		(202	)		742		(1,212	)		2,953		(11	)
Other assets:
Mortgage servicing rights		55		30			0			0		0			5		(3	)		0		(26	)		61		30
Derivative assets		90		(7	)		0			0		0			4		(12	)		0		(3	)		72		(7	)
Retained interest in securitizations and other		204		(6	)		0			0		0			0		0			0		0			198		(6	)
Liabilities:
Other liabilities:
Derivative liabilities		38		11			0			0		0			10		(16	)		0		(1	)		42		11


	Six Months Ended June 30, 2012
																											Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2012⁽³⁾
			Total Gains or (Losses)
			(Realized/Unrealized)
(Dollars in millions)	Balance, January 1, 2012		Included in Net Income⁽¹⁾			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements			Transfers Into Level 3⁽²⁾			Transfers Out of Level 3⁽²⁾			Balance, June 30, 2012
Assets:
Securities available-for-sale:
Corporate debt securities guaranteed by U.S. government agencies	$	0	$	0		$	1		$	50	$	0		$	0	$	(1	)	$	14		$	0		$	64	$	0
Residential mortgage-backed securities		195		(1	)		(13	)		2,283		(640	)		0		(150	)		228			(732	)		1,170		(1	)
Commercial mortgage-backed securities		274		5			10			470		(76	)		0		(19	)		13			(410	)		267		5
Other asset-backed securities		32		0			13			155		0			0		(3	)		132			(36	)		293		0
Other		12		0			0			0		0			0		(5	)		9			(6	)		10		0

Total securities available-for-sale		513		4			11			2,958		(716	)		0		(178	)		396			(1,184	)		1,804		4
Other assets:
Mortgage servicing rights		93		(12	)		0			0		0			8		(5	)		0			0			84		(12	)
Derivative assets		103		45			0			0		0			4		(61	)		13			(1	)		103		45
Retained interest in securitization and other		145		(5	)		0			0		0			0		0			0			0			140		(5	)
Liabilities:
Other liabilities
Derivative liabilities		279		3			0			0		0			32		(269	)		(8	)		(3	)		34		3
Other		12		1			0			0		0			0		0			0			0			13		1

⁽¹⁾

Gains (losses) related to Level 3 mortgage servicing rights and gains (losses) related to Level 3 derivative receivables and derivative payables are reported in other non-interest income, which is a component of non-interest income. Gains (losses) related to Level 3 retained interests in securitizations are reported in servicing and securitizations income, which is a component of non-interest income.

⁽²⁾	The transfers out of Level 3 for the second quarter and first six months of 2013 and 2012 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 (loss) for assets still held as of the reporting date primarily represents impairments for available-for-sale securities, accretion on certain fixed maturity securities, change in fair value of derivative instruments and mortgage servicing rights transaction. The impairments are reported in total other-than-temporary losses as a component of non-interest income.

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

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at
June 30,
2013

Significant
Valuation
Techniques

Significant

Unobservable

Inputs

Range

Weighted
Average

Assets:

Securities available for sale:

Residential mortgage- backed securities

1,535

Discounted cash
flows (3rd party
pricing)

Yield

Constant prepayment rate Default rate

Loss severity

0-25%

0-24%

0-20%

0-75%

50%

Commercial mortgage- backed securities

461

Discounted cash
flows (3rd party
pricing)

Yield Constant prepayment rate

2-4%

0-15%

Other asset-backed securities

109

Discounted cash
flows (3rd party
pricing)

Yield

Constant prepayment rate Default rate

Loss severity

3-9%

0-6%

2-28%

45-88%

13%

71%

U.S. government guaranteed debt and other .

848

Discounted cash
flows (3rd party
pricing)

Yield

0-4%

Other assets:

Mortgage servicing rights.

Discounted cash
flows

Total prepayment rate Discount rate

Servicing cost ($ per loan)

11.12-32.43%

9.95-17.07%

$82-$408

18.09%

11.17%

$91

Derivative assets

Discounted cash
flows

Swap rates

2.69-3.31%

3.23%

Retained interests in securitization and other

198

Discounted cash
flows

Life of receivables (months) Constant prepayment rate Discount rate

Default rate

Loss severity

35-87

1.40-15.00%

4.18-13.57%

1.39-8.39%

16.91-89.22%

71
6.67%

13.20%

5.64%

25.77%

Liabilities:

Other liabilities:

Derivative liabilities

Discounted cash
flows

Swap rates

2.71-3.29%

3.21%


	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at		Significant	Significant
	December 31,		Valuation	Unobservable		Weighted
(Dollars in millions)	2012		Techniques	Inputs	Range	Average
Assets:
Securities available for sale:

Residential mortgage-	$	1,335	Discounted	Yield	0-24%	5%
backed securities	$	1,335	cash flows	Constant prepayment rate	0-26%	6%
			(3rd party	Default rate	0-21%	9%
			pricing)	Loss severity	4-75%	52%

Commercial mortgage-	$	587	Discounted	Yield	1-3%	2%
backed securities	$	587	cash flows	Constant prepayment rate	0-15%	11%
			(3rd party
			pricing)

Other asset-backed	$	102	Discounted	Yield	1-24%	4%
securities	$	102	cash flows	Constant prepayment rate	0-5%	2%
			(3rd party	Default rate	1-28%	15%
			pricing)	Loss severity	46-88%	72%

U.S. government	$	665	Discounted	Yield	1-4%	2%
guaranteed debt and other	$	665	cash flows
			(3rd party
			pricing)
Other assets:

Mortgage servicing rights.	$	55	Discounted	Constant prepayment rate	11.77-32.99%	19.37%
	$	55	cash flows	Discount rate	9.95-37.88%	12.66%
				Servicing cost ($ per loan)	$81-$864	$302

Derivative assets.	$	90	Discounted	Swap rates	1.82-2.58%	2.46%
			cash flows

Retained interests in	$	204	Discounted	Life of receivables (months)	29-243	66
securitization and other	$	204	cash flows	Constant prepayment rate	1.25-22.21%	13.52%
				Discount rate	2.90-13.57%	12.70%
Liabilities:
Other liabilities:

Derivative liabilities	$	38	Discounted	Swap rates	1.82-2.55%	2.42%
			cash flows

Schedule of Assets Measured at Fair Value on Nonrecurring Basis

The following table presents the carrying amounts of all assets that were still held as of June 30, 2013 and December 31, 2012, and for which a nonrecurring fair value measurement was recorded during the six and twelve months then ended.


	June 30, 2013
	Fair Value Measurements Using						Assets at Fair Value		Significant Valuation Techniques	Significant Unobservable Inputs	Range			Weighted Average

(Dollars in millions)	Level 1		Level 2		Level 3
Assets:
Loans held for sale	$	0	$	135	$	0	$	135	N/A	N/A		N/A			N/A
Best Buy net assets held for sale⁽¹⁾		0		6,407		0		6,407	N/A	N/A		N/A			N/A
Loans held for investment		0		0		78		78	Appraisal Value	Non recoverable rate		0-84	%		16	%
Foreclosed property⁽²⁾		0		0		64		64	Appraisal Value	Cost to Sell		10-14	%		10	%
Other⁽³⁾		0		0		9		9	Appraisal Value	Cost to Sell		6-6	%		6	%

Total	$	0	$	6,542	$	151	$	6,693


	December 31, 2012
	Fair Value Measurements Using						Assets at Fair Value		Significant Valuation Techniques	Significant Unobservable Inputs	Range			Weighted Average

(Dollars in millions)	Level 1		Level 2		Level 3
Assets:
Loans held for sale	$	0	$	201	$	0	$	201	N/A	N/A		N/A			N/A
Loans held for investment		0		0		162		162	Appraisal Value	Non recoverable rate		0-100	%		13	%
Foreclosed property⁽²⁾		0		0		50		50	Appraisal Value	Cost to Sell		10-14	%		11	%
Other⁽³⁾		0		0		59		59	Appraisal Value	Cost to Sell		6-6	%		6	%

Total	$	0	$	201	$	271	$	472

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 June 30, 2013 and 2012.


	Total Gains (Losses)
	Six Months Ended June 30,
(Dollars in millions)	2013			2012
Assets:
Loans held for sale	$	(5	)	$	29
Best Buy net assets held for sale⁽¹⁾		(10	)		0
Loans held for investment		(17	)		(31	)
Foreclosed property⁽²⁾		(6	)		(14	)
Other⁽³⁾		(5	)		(4	)

Total	$	(43	)	$	(20	)

⁽¹⁾	Represents the fair value and the related losses on the Best Buy net assets held for sale. The majority of these assets are included in loans held for sale, with the remaining portion of these assets being included in other assets and other liabilities.

⁽²⁾	Represents the fair value and related losses of foreclosed properties that were written down subsequent to their initial classification as foreclosed properties.

⁽³⁾	Consists of long lived assets classified as held for sale.

Schedule of Fair Value of Financial Instruments

The following reflects the fair value of financial instruments, whether or not recognized on the condensed consolidated balance sheets at fair value, as of June 30, 2013 and December 31, 2012:

June 30, 2013

Fair Value Measurements Using

Carrying

Estimated

(Dollars in millions)

Amount

Fair Value

Level 1

Level 2

Level 3

Financial assets:

Cash and cash equivalents

4,653

Restricted cash for securitization investors

377

Securities available for sale

62,602

1,135

58,514

2,953

Loans held for sale

6,248

Net loans held for investment

187,105

191,468

Interest receivable

1,454

Derivative assets

1,144

1,059

Mortgage servicing rights

Financial liabilities:

Non-interest bearing deposits

22,097

Interest-bearing deposits

187,768

185,566

19,769

165,797

Securitized debt obligations

10,831

10,966

10,719

247

Senior and subordinated notes

12,406

12,886

Federal funds purchased and securities loaned or sold under agreements to repurchase

1,766

Other borrowings

11,228

11,236

Interest payable

324

Derivative liabilities

638

590


	December 31, 2012				Fair Value Measurements Using
	Carrying		Estimated
(Dollars in millions)	Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	11,058	$	11,058	$	11,058	$	0	$	0
Restricted cash for securitization investors		428		428		428		0		0
Securities available for sale		63,979		63,979		1,697		59,593		2,689
Loans held for sale		201		201		0		201		0
Net loans held for investment		200,733		205,000		0		0		205,000
Interest receivable		1,694		1,694		0		1,694		0
Derivatives		1,848		1,848		1		1,757		90
Mortgage servicing rights		55		55		0		0		55
Financial liabilities:
Non-interest bearing deposits	$	22,467	$	22,467	$	22,467	$	0	$	0
Interest-bearing deposits		190,018		189,423		0		22,216		167,207
Securitized debt obligations		11,398		11,590		0		11,252		338
Senior and subordinated notes		12,686		13,312		0		13,312		0
Federal funds purchased and securities loaned or sold under agreements to repurchase		1,248		1,248		1,248		0		0
Other borrowings		24,578		24,616		346		24,215		55
Interest payable		450		450		0		450		0
Derivatives		400		400		1		361		38

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

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