Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 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 September 30, 2013 and December 31, 2012:

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

September 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

837

U.S. agency debt obligations

Corporate debt securities guaranteed by U.S. government agencies

346

926

1,272

Residential mortgage-backed securities

24,363

1,321

25,684

Commercial mortgage-backed securities

5,454

304

5,758

Other asset-backed securities

7,343

313

7,656

Other securities

134

1,752

1,924

Total securities available for sale

971

39,259

2,902

43,132

Other assets:

Mortgage servicing rights

Derivative assets⁽¹⁾

929

988

Retained interests in securitizations and other

201

Total assets

976

40,213

3,215

44,404

Liabilities

Other liabilities:

Derivative liabilities⁽¹⁾

540

587

Total liabilities

540

587


	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 securities		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⁾		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⁾	$	1	$	361	$	38	$	400

Total liabilities	$	1	$	361	$	38	$	400

⁽¹⁾

Does not reflect $5 million and $9 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of September 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.

Table 12.2: Fair Value Measurements Using Significant Unobservable Inputs (Level 3)


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Three Months Ended September 30, 2013
			Total Gains or (Losses) (Realized/Unrealized)						Purchases		Sales		Issuances		Settlements			Transfers Into Level 3⁽²⁾		Transfers Out of Level 3⁽²⁾			Balance, September 30, 2013		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2013⁽³⁾
(Dollars in millions)	Balance, July 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, September 30, 2013
Assets:
Securities available for sale:
Corporate debt securities guaranteed by U.S. government agencies	$	832	$	0		$	4		$	61	$	0	$	0	$	(19	)	$	47	$	1		$	926	$	0
Residential mortgage-backed securities		1,535		(6	)		57			85		0		0		(72	)		152		(430	)		1,321		(5	)
Commercial mortgage-backed securities		461		0			(2	)		96		0		0		(4	)		48		(295	)		304		0
Other asset-backed securities		109		0			6			129		0		0		0			84		(15	)		313		0
Other securities		16		0			0			30		0		0		(6	)		0		(2	)		38		0

Total securities available for sale		2,953		(6	)		65			401		0		0		(101	)		331		(741	)		2,902		(5	)
Other assets:
Mortgage servicing rights		61		(5	)		0			0		0		4		(2	)		0		0			58		(5	)
Derivative assets		72		(13	)		0			0		0		4		(3	)		0		(6	)		54		(13	)
Retained interest in securitization and other		198		3			0			0		0		0		0			0		0			201		3
Liabilities:
Other liabilities
Derivative liabilities		42		4			0			0		0		3		(9	)		0		(1	)		39		4


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Three Months Ended September 30, 2012
			Total Gains or (Losses) (Realized/Unrealized)						Purchases		Sales		Issuances		Settlements			Transfers Into Level 3⁽²⁾		Transfers Out of Level 3⁽²⁾			Balance, September 30, 2012		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2012⁽³⁾
(Dollars in millions)	Balance, July 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, September 30, 2012
Assets:
Securities available for sale:
Corporate debt securities guaranteed by U.S. government agencies	$	64	$	0		$	(1	)	$	85	$	0	$	0	$	(1	)	$	140	$	0		$	287	$	0
Residential mortgage-backed securities		1,170		(5	)		91			194		0		0		(76	)		74		(392	)		1,056		(5	)
Commercial mortgage-backed securities		267		0			10			204		0		0		3			50		(173	)		361		0
Other asset-backed securities		293		0			9			229		0		0		0			82		(68	)		545		0
Other securities		10		0			0			0		0		0		(1	)		0		0			9		0

Total securities available for sale		1,804		(5	)		109			712		0		0		(75	)		346		(633	)		2,258		(5	)
Other assets:
Mortgage servicing rights		84		(7	)		0			0		0		1		(2	)		0		0			76		(7	)
Derivative assets		103		10			0			0		0		8		(11	)		0		(1	)		109		10
Retained interest under utilizations and other		140		69			0			0		0		0		0			0		0			209		69
Liabilities:
Other liabilities:
Derivative liabilities		34		13			0			0		0		5		(4	)		0		(1	)		47		13
Other		13		9			0			0		0		0		0			0		0			22		9


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Nine Months Ended September 30, 2013
			Total Gains or (Losses) (Realized/Unrealized)						Purchases		Sales			Issuances		Settlements			Transfers Into Level 3⁽²⁾		Transfers Out of Level 3⁽²⁾			Balance, September 30, 2013		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2013⁽³⁾
(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, September 30, 2013
Assets:
Securities available for sale:
Corporate debt securities guaranteed by U.S. government agencies	$	650	$	0		$	(31	)	$	272	$	0		$	0	$	(47	)	$	125	$	(43	)	$	926	$	0
Residential mortgage-backed securities		1,335		(16	)		141			277		0			0		(217	)		681		(880	)		1,321		(21	)
Commercial mortgage-backed securities		587		0			(49	)		643		(10	)		0		(31	)		168		(1,004	)		304		0
Other asset-backed securities		102		(1	)		12			169		(41	)		0		(2	)		98		(24	)		313		(1	)
Other securities		15		0			0			30		0			0		(6	)		1		(2	)		38		0

Total securities available for sale		2,689		(17	)		73			1,391		(51	)		0		(303	)		1,073		(1,953	)		2,902		(22	)
Other assets:
Mortgage servicing rights		55		25			0			0		0			9		(5	)		0		(26	)		58		25
Derivative assets		90		(20	)		0			0		0			8		(15	)		0		(9	)		54		(20	)
Retained interest in securitizations and other		204		(3	)		0			0		0			0		0			0		0			201		(3	)
Liabilities:
Other liabilities:
Derivative liabilities		38		15			0			0		0			13		(25	)		0		(2	)		39		15


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3) Nine Months Ended September 30, 2012
			Total Gains or (Losses) (Realized/Unrealized)					Purchases		Sales			Issuances		Settlements			Transfers Into Level 3⁽²⁾			Transfers Out of Level 3⁽²⁾			Balance, September 30, 2012		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2012⁽³⁾
(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, September 30, 2012
Assets:
Securities available for sale:
Corporate debt securities guaranteed by U.S. government agencies	$	0	$	0		$	0	$	135	$	0		$	0	$	(2	)	$	154		$	0		$	287	$	0
Residential mortgage-backed securities		195		(6	)		78		2,477		(640	)		0		(226	)		302			(1,124	)		1,056		(6	)
Commercial mortgage-backed securities		274		5			20		674		(76	)		0		(16	)		63			(583	)		361		5
Other asset-backed securities		32		0			22		384		0			0		(3	)		214			(104	)		545		0
Other securities		12		0			0		0		0			0		(6	)		9			(6	)		9		0

Total securities available for sale		513		(1	)		120		3,670		(716	)		0		(253	)		742			(1,817	)		2,258		(1	)
Other assets:
Mortgage servicing rights		93		(18	)		0		0		0			9		(8	)		0			0			76		(18	)
Derivative assets		103		55			0		0		0			12		(73	)		13			(1	)		109		55
Retained interest in securitization and other		145		64			0		0		0			0		0			0			0			209		64
Liabilities:
Other liabilities
Derivative liabilities		279		18			0		0		0			37		(276	)		(8	)		(3	)		47		18
Other		12		10			0		0		0			0		0			0			0			22		10

⁽¹⁾

Gains (losses) related to Level 3 mortgage servicing rights and Level 3 derivative assets and derivative liabilities 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 third quarter and first nine 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 securities available for sale, 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.

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
September 30,
2013

Significant
Valuation
Techniques

Significant

Unobservable

Inputs

Range

Weighted
Average

Assets:

Securities available for sale:

Residential mortgage-backed securities

1,321

Discounted cash

flows (3rd party

pricing)

Yield

Constant prepayment rate

Default rate

Loss severity

1-25%
0-45%
0-22%
0-85%

5%
5%
8%
50%

Commercial mortgage-backed securities

304

Discounted cash

flows (3rd party

pricing)

Yield

Constant prepayment rate

2-4%
0-20%

3%
13%

Other asset-backed securities

313

Discounted cash

flows (3rd party

pricing)

Yield

Constant prepayment rate Default rate

Loss severity

3-8%
0-24%
0-20%
0-88%

4%
3%
12%
67%

U.S. government guaranteed debt and other securities

964

Discounted cash

flows (3rd party pricing)

Yield

2-3%

Other assets:

Mortgage servicing rights

Discounted cash

flows

Total prepayment rate Discount rate Servicing cost ($ per loan)

8.18-32.52%
9.95-17.07%
$85-$420

18.83%
10.57%
$93

Derivative assets

Discounted cash flows

Swap rates

2.76-3.47%

3.36%

Retained interests in securitization and other

201

Discounted cash flows

Life of receivables (months) Constant prepayment rate Discount rate

Default rate

Loss severity

37-105
1.63-6.71%
4.25-13.57%
1.56-7.37%
14.82-89.45%

83
4.88%
13.19%
4.80%
21.98%

Liabilities:

Other liabilities:

Derivative liabilities

Discounted cash flows

Swap rates

2.76-3.43%

3.34%


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

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

Other asset-backed			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			Discounted	Yield	1-4%	2%
guaranteed debt and other securities	$	665	cash flows
			(3rd party
			pricing)
Other assets:

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

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

Retained interests in			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 September 30, 2013 and December 31, 2012, and for which a nonrecurring fair value measurement was recorded during the nine and twelve months then ended.

Table 12.4: Nonrecurring Fair Value Measurements Related to Assets Still Held at Period End


	September 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	$	51	$	0	$	51	N/A	N/A	N/A		N/A
Loans held for investment		0		0		102		102	Appraisal Value	Non- recoverable rate	0-49%		15	%
Foreclosed property⁽¹⁾		0		0		43		43	Appraisal Value	Cost to Sell	10-14%		10	%
Other⁽²⁾		0		0		13		13	Appraisal Value	Cost to Sell	6-6%		6	%

Total	$	0	$	51	$	158	$	209


	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	%
									Appraisal Value	Non- recoverable rate
Foreclosed property⁽¹⁾		0		0		50		50	Appraisal Value	Cost to Sell	10-14%		11	%
									Appraisal Value
Other⁽²⁾		0		0		59		59	Appraisal Value	Cost to Sell	6-6%		6	%
									Appraisal Value

Total	$	0	$	201	$	271	$	472

⁽¹⁾	Represents the fair value and related losses of foreclosed properties that were written down subsequent to their initial classification as foreclosed properties.

⁽²⁾	Consists of long lived assets classified as held for sale.

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, 2013 and 2012.

Table 12.5: Nonrecurring Fair Value Measurements Included in Earnings Related to Assets Still Held at Period End


	Total Gains (Losses) Nine Months Ended September 30,
(Dollars in millions)	2013			2012
Assets:
Loans held for sale	$	0		$	52
Loans held for investment		(27	)		(87	)
Foreclosed property⁽¹⁾		(8	)		(21	)
Other⁽²⁾		(8	)		(4	)

Total	$	(43	)	$	(60	)

⁽¹⁾	Represents the fair value and related losses of foreclosed properties that were written down subsequent to their initial classification as foreclosed properties.

⁽²⁾	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 September 30, 2013 and December 31, 2012:

Table 12.6: Fair Value of Financial Instruments

September 30, 2013

Fair Value Measurements Using

(Dollars in millions)

Carrying
Amount

Estimated
Fair Value

Level 1

Level 2

Level 3

Financial assets:

Cash and cash equivalents

5,718

Restricted cash for securitization investors

390

Securities available for sale

43,132

971

39,259

2,902

Securities held to maturity

18,276

18,662

18,540

122

Net loans held for investment

187,481

192,919

Loans held for sale

180

Interest receivable

1,304

Mortgage servicing rights

Derivative assets

988

929

Retained interests in securitizations and other

201

Financial liabilities:

Non-interest bearing deposits

22,281

Interest-bearing deposits

184,553

179,151

17,589

161,562

Securitized debt obligations

9,544

10,315

10,067

248

Senior and subordinated notes

12,395

12,904

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

1,686

Other borrowings

8,220

8,228

Interest payable

276

Derivative liabilities

587

540


	December 31, 2012				Fair Value Measurements Using
(Dollars in millions)	Carrying Amount		Estimated 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
Securities held to maturity		9		9		0		9		0
Net loans held for investment		200,733		205,000		0		0		205,000
Loans held for sale		201		201		0		201		0
Interest receivable		1,694		1,694		0		1,694		0
Mortgage servicing rights		55		55		0		0		55
Derivatives		1,848		1,848		1		1,757		90
Retained interests in securitizations and other		204		204		0		0		204
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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