participant would use in pricing the financial asset or liability, and are based on the best available information, some of which may be internally developed. The following provides a more detailed discussion of our financial assets and liabilities that we may categorize in level 3 and the related valuation methodology.

•The fair value of our investment securities categorized in level 3 is measured using information obtained from third-party sources, typically non-binding broker/dealer quotes, or through the use of internally-developed pricing models. Management has evaluated its methodologies used to measure fair value and has considered the level of observable market information to be insufficient to categorize the securities in level 2.

•The fair value of certain foreign exchange contracts, primarily options, is measured using an option-pricing model. Because of a limited number of observable transactions, certain model inputs are not observable, such as implied volatility surface, but are derived from observable market information.

Our level 3 financial assets and liabilities are similar in structure and profile to our level 1 and level 2 financial instruments, but they trade in less liquid markets, and the measurement of their fair value is therefore less observable.

The following tables present information with respect to our financial assets and liabilities carried at fair value in our consolidated statement of condition on a recurring basis as of the dates indicated:


	Fair Value Measurements on a Recurring Basis
	As of December 31, 2021
(In millions)	Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)		Impact of Netting(1)		Total Net Carrying Value in Consolidated Statement of Condition
Assets:
Trading account assets:
U.S. government securities	$	39	$	—	$	—			$	39
Non-U.S. government securities	—		134		—				134
Other	—		585		—				585

Total trading account assets	39		719		—				758
Available-for-sale investment securities:
U.S. Treasury and federal agencies:
Direct obligations	17,939		—		—				17,939
Mortgage-backed securities	—		18,208		—				18,208
Total U.S. Treasury and federal agencies	17,939		18,208		—				36,147







Non-U.S. debt securities:
Mortgage-backed securities	—		1,995		—				1,995
Asset-backed securities	—		2,087		—				2,087
Non-U.S. sovereign, supranational and non-U.S. agency	—		23,547		—				23,547
Other	—		3,098		—				3,098
Total non-U.S. debt securities	—		30,727		—				30,727
Asset-backed securities:
Student loans	—		211		—				211
Collateralized loan obligations	—		2,155		—				2,155
Non-agency CMBS and RMBS(2)	—		52		—				52
Other	—		91		—				91
Total asset-backed securities	—		2,509		—				2,509
State and political subdivisions	—		1,272		—				1,272

Other U.S. debt securities	—		2,744		—				2,744





Total available-for-sale investment securities	17,939		55,460		—				73,399
Other assets:
Derivative instruments:
Foreign exchange contracts	2		15,183		—		$	(11,079)	4,106
Interest rate contracts	2		—		—		—		2

Total derivative instruments	4		15,183		—		(11,079)		4,108


Other	—		667		—		—		667
Total assets carried at fair value	$	17,982	$	72,029	$	—	$	(11,079)	$	78,932
Liabilities:
Accrued expenses and other liabilities:




Derivative instruments:
Foreign exchange contracts	$	1	$	15,824	$	—	$	(10,395)	$	5,430

Other derivative contracts	—		301		—		—		301
Total derivative instruments	1		16,125		—		(10,395)		5,731

Total liabilities carried at fair value	$	1	$	16,125	$	—	$	(10,395)	$	5,731

(1) Represents counterparty netting against level 2 financial assets and liabilities where a legally enforceable master netting agreement exists between us and the counterparty. Netting also reflects asset and liability reductions of $1.97 billion and $1.28 billion, respectively, for cash collateral received from and provided to derivative counterparties.

(2) Consists entirely of non-agency CMBS.


	Fair Value Measurements on a Recurring Basis
	As of December 31, 2020
(In millions)	Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)		Impact of Netting(1)		Total Net Carrying Value in Consolidated Statement of Condition
Assets:
Trading account assets:
U.S. government securities	$	40	$	—	$	—			$	40
Non-U.S. government securities	—		239		—				239
Other	17		519		—				536
Total trading account assets	57		758		—				815
Available-for-sale investment securities:
U.S. Treasury and federal agencies:
Direct obligations	6,575		—		—				6,575
Mortgage-backed securities	—		14,305		—				14,305
Total U.S. Treasury and federal agencies	6,575		14,305		—				20,880






Non-U.S. debt securities:
Mortgage-backed securities	—		1,996		—				1,996
Asset-backed securities	—		2,291		—				2,291
Non-U.S. sovereign, supranational and non-U.S. agency	—		22,087		—				22,087
Other	—		3,355		—				3,355
Total non-U.S. debt securities	—		29,729		—				29,729
Asset-backed securities:
Student loans	—		314		—				314

Collateralized loan obligations	—		2,952		14				2,966
Non-agency CMBS and RMBS(2)	—		78		—				78
Other	—		90		—				90
Total asset-backed securities	—		3,434		14				3,448
State and political subdivisions	—		1,548		—				1,548

Other U.S. debt securities	—		3,443		—				3,443




Total available-for-sale investment securities	6,575		52,459		14				59,048
Other assets:
Derivative instruments:
Foreign exchange contracts	—		25,941		2		$	(20,140)	5,803
Interest rate contracts	1		—		—		—		1

Total derivative instruments	1		25,941		2		(20,140)		5,804
Other	—		525		—		—		525
Total assets carried at fair value	$	6,633	$	79,683	$	16	$	(20,140)	$	66,192
Liabilities:
Accrued expenses and other liabilities:
Trading account liabilities:


Other	$	4	$	—	$	—	$	—	$	4
Derivative instruments:
Foreign exchange contracts	1		25,925		1		(15,558)		10,369
Interest rate contracts	—		42		—		—		42
Other derivative contracts	—		157		—		—		157
Total derivative instruments	1		26,124		1		(15,558)		10,568

Total liabilities carried at fair value	$	5	$	26,124	$	1	$	(15,558)	$	10,572

(1) Represents counterparty netting against level 2 financial assets and liabilities where a legally enforceable master netting agreement exists between us and the counterparty. Netting also reflects asset and liability reductions of $5.87 billion and $1.29 billion, respectively, for cash collateral received from and provided to derivative counterparties.

(2) Consists entirely of non-agency CMBS.

The following tables present activity related to our level 3 financial assets during the years ended December 31, 2021 and 2020, respectively. Transfers into and out of level 3 are reported as of the beginning of the period presented. During the years ended December 31, 2021 and 2020, transfers into level 3 were primarily related to collateralized loan obligations and a U.S. corporate bond, for which fair value was measured using information obtained from third party sources, including non-binding broker/dealer quotes. During the years ended December 31, 2021 and 2020, transfers out of level 3 were mainly related to collateralized loan obligations, certain non-U.S. debt securities and a U.S. corporate bond, for which fair value was measured using prices based on observable market information.


	Fair Value Measurements Using Significant Unobservable Inputs
	Year Ended December 31, 2021
	Fair Value as of December 31, 2020		Total Realized and Unrealized Gains (Losses)				Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Fair Value as of December 31, 2021(1)		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of December 31, 2021
(In millions)			Recorded in Revenue(1)		Recorded in Other Comprehensive Income(1)
Assets:
Available-for-sale Investment securities:


Asset-backed securities:
Collateralized loan obligations	$	14	$	—	$	—	$	106	$	—	$	—	$	—	$	(120)	$	—
Total asset-backed securities	14		—		—		106		—		—		—		(120)		—







Other U.S. debt securities	—		—		—		—		—		—		15		(15)		—
Total available-for-sale investment securities	14		—		—		106		—		—		15		(135)		—
Other assets:
Derivative instruments:
Foreign exchange contracts	2		(3)		—		1		—		—		—		—		—		$	(1)


Total derivative instruments	2		(3)		—		1		—		—		—		—		—		(1)
Total assets carried at fair value	$	16	$	(3)	$	—	$	107	$	—	$	—	$	15	$	(135)	$	—	$	(1)

(1) Total realized and unrealized gains (losses) on AFS investment securities are included within gains (losses) related to investment securities, net. Total realized and unrealized gains (losses) on derivative instruments are included within foreign exchange trading services.


	Fair Value Measurements Using Significant Unobservable Inputs
	Year Ended December 31, 2020
	Fair Value as of December 31, 2019		Total Realized and Unrealized Gains (Losses)				Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Fair Value as of December 31, 2020(1)		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of December 31, 2020
(In millions)			Recorded in Revenue(1)		Recorded in Other Comprehensive Income(1)
Assets:
Available-for-sale Investment securities:

Asset-backed securities:
Collateralized loan obligations	$	1,820	$	—	$	(10)	$	864	$	(95)	$	(77)	$	50	$	(2,538)	$	14

Total asset-backed securities	1,820		—		(10)		864		(95)		(77)		50		(2,538)		14
Non-U.S. debt securities:

Asset-backed securities	887		—		35		1		—		(5)		—		(918)		—

Other	45		—		2		—		—		—		—		(47)		—
Total non-U.S. debt securities	932		—		37		1		—		(5)		—		(965)		—



Total available-for-sale investment securities	2,752		—		27		865		(95)		(82)		50		(3,503)		14
Other assets:
Derivative instruments:
Foreign exchange contracts	4		(6)		—		5		—		(1)		—		—		2		$	(3)
Total derivative instruments	4		(6)		—		5		—		(1)		—		—		2		(3)
Total assets carried at fair value	$	2,756	$	(6)	$	27	$	870	$	(95)	$	(83)	$	50	$	(3,503)	$	16	$	(3)

The following table presents quantitative information, as of the dates indicated, about the valuation techniques and significant unobservable inputs used in the valuation of our level 3 financial assets and liabilities measured at fair value on a recurring basis for which we use internally-developed pricing models. The significant unobservable inputs for our level 3 financial assets and liabilities whose fair value is measured using pricing information from non-binding broker/dealer quotes are not included in the table, as the specific inputs applied are not provided by the broker/dealer.


	Quantitative Information about Level 3 Fair Value Measurements
	Fair Value						Range			Weighted-Average
(Dollars in millions)	As of December 31, 2021		As of December 31, 2020		Valuation Technique	Significant Unobservable Input(1)	As of December 31, 2021			As of December 31, 2021		As of December 31, 2020
Significant unobservable inputs readily available to State Street:
Assets:
Derivative Instruments, foreign exchange contracts	$	—	$	2	Option model	Volatility	5.3%	-	15.9%	15.2	%	7.9	%
Total	$	—	$	2
Liabilities:
Derivative instruments, foreign exchange contracts	$	—	$	1	Option model	Volatility	14.7%	-	14.7%	14.7	%	7.7	%
Total	$	—	$	1

(1) Significant changes in these unobservable inputs may result in significant changes in fair value measurement of the derivative instrument.

Financial Instruments Not Carried at Fair Value

Estimates of fair value for financial instruments not carried at fair value in our consolidated statement of condition are generally subjective in nature, and are determined as of a specific point in time based on the characteristics of the financial instruments and relevant market information. Disclosure of fair value estimates is not required by U.S. GAAP for certain items, such as lease financing, equity- method investments, obligations for pension and other post-retirement plans, premises and equipment, other intangible assets and income-tax assets and liabilities. Accordingly, aggregate fair-value estimates presented do not purport to represent, and should not be considered representative of, our underlying “market” or franchise value. In addition, because of potential differences in methodologies and assumptions used to estimate fair values, our estimates of fair value should not be compared to those of other financial institutions.

We use the following methods to estimate the fair values of our financial instruments:

•For financial instruments that have quoted market prices, those quoted prices are used to estimate fair value;

•For financial instruments that have no defined maturity, have a remaining maturity of 180 days or less, or reprice frequently to a market rate, we assume that the fair value of these instruments approximates their reported value, after taking into consideration any applicable credit risk; and

•For financial instruments for which no quoted market prices are available, fair value is estimated using information obtained from independent third parties, or by discounting the expected cash flows using an estimated current market interest rate for the financial instrument.

The generally short duration of certain of our assets and liabilities results in a significant number of financial instruments for which fair value equals or closely approximates the amount recorded in our consolidated statement of condition. These financial instruments are reported in the following captions in our consolidated statement of condition: cash and due from banks; interest-bearing deposits with banks; securities purchased under resale agreements; accrued interest and fees receivable; deposits; securities sold under repurchase agreements; and other short-term borrowings.

In addition, due to the relatively short duration of certain of our loans, we consider fair value for these loans to approximate their reported value. The fair value of other types of loans, such as leveraged loans, commercial real estate loans, purchased receivables and municipal loans is estimated using information obtained from independent third parties or by discounting expected future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities. Commitments to lend have no reported value because their terms are at prevailing market rates.

The following tables present the reported amounts and estimated fair values of the financial assets and liabilities not carried at fair value, as they would be categorized within the fair value hierarchy, as of the dates indicated:


					Fair Value Hierarchy
(In millions)	Reported Amount		Estimated Fair Value		Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)
December 31, 2021
Financial Assets:
Cash and due from banks	$	3,631	$	3,631	$	3,631	$	—	$	—
Interest-bearing deposits with banks	106,358		106,358		—		106,358		—
Securities purchased under resale agreements	3,012		3,012		—		3,012		—

Investment securities held-to-maturity	42,430		42,271		2,160		40,111		—
Net loans(1)	32,445		32,528		—		29,862		2,666
Other(2)	1		1		—		1		—
Financial Liabilities:
Deposits:
Non-interest-bearing	$	56,461	$	56,461	$	—	$	56,461	$	—
Interest-bearing - U.S.	102,985		102,985		—		102,985		—
Interest-bearing - non-U.S.	95,589		95,589		—		95,589		—
Securities sold under repurchase agreements	1,575		1,575		—		1,575		—

Other short-term borrowings	128		128		—		128		—

Long-term debt	13,475		13,552		—		13,385		167
Other(2)	1		1		—		1		—

(1) Includes $8 million of loans classified as held-for-sale that were measured at fair value in level 2 as of December 31, 2021.

(2) Represents a portion of underlying client assets related to our enhanced custody business, which clients have allowed us to transfer and re-pledge.


					Fair Value Hierarchy
(In millions)	Reported Amount		Estimated Fair Value		Quoted Market Prices in Active Markets (Level 1)		Pricing Methods with Significant Observable Market Inputs (Level 2)		Pricing Methods with Significant Unobservable Market Inputs (Level 3)
December 31, 2020
Financial Assets:
Cash and due from banks	$	3,467	$	3,467	$	3,467	$	—	$	—
Interest-bearing deposits with banks	116,960		116,960		—		116,960		—
Securities purchased under resale agreements	3,106		3,106		—		3,106		—
HTM securities purchased under the MMLF program	3,299		3,304		—		3,304		—
Investment securities held-to-maturity	48,929		50,003		6,115		43,888		—
Net loans	27,803		27,884		—		25,668		2,216
Other(1)	4,753		4,753		—		4,753		—
Financial Liabilities:
Deposits:
Non-interest-bearing	$	49,439	$	49,439	$	—	$	49,439	$	—
Interest-bearing - U.S.	102,331		102,331		—		102,331		—
Interest-bearing - non-U.S.	88,028		88,028		—		88,028		—
Securities sold under repurchase agreements	3,413		3,413		—		3,413		—
Short-term borrowings under the MMLF program	3,302		3,302		—		3,302		—
Other short-term borrowings	685		685		—		685		—
Long-term debt	13,805		14,162		—		14,049		113
Other(1)	4,753		4,753		—		4,753		—

(1) Represents a portion of underlying client assets related to our enhanced custody business, which clients have allowed us to transfer and re-pledge.