Fair Value

3 Months Ended

Mar. 31, 2023

Fair Value Measurements

We carry trading account assets and liabilities, AFS debt securities, certain equity securities and various types of derivative financial instruments, at fair value in our consolidated statement of condition on a recurring basis. Changes in the fair values of these financial assets and liabilities are recorded either as components of our consolidated statement of income or as components of AOCI within shareholders' equity in our consolidated statement of condition.

We measure fair value for the above-described financial assets and liabilities in conformity with U.S. GAAP that governs the measurement of the fair value of financial instruments. Management believes that its valuation techniques and underlying assumptions used to measure fair value conform to the provisions of U.S. GAAP. We categorize the financial assets and liabilities that we carry at fair value based on a prescribed three-level valuation hierarchy. For information about our valuation techniques for financial assets and financial liabilities measured at fair value and the fair value hierarchy, refer to pages 133 to 139 in Note 2 to the consolidated financial statements included under Item 8, Financial Statements and Supplementary Data, in our 2022 Form 10-K.

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 March 31, 2023
(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	$	36	$	—	$	—			$	36
Non-U.S. government securities	—		137		—				137
Other	—		522		—				522

Total trading account assets	36		659		—				695
Available-for-sale investment securities:
U.S. Treasury and federal agencies:
Direct obligations	7,627		—		—				7,627
Mortgage-backed securities	—		9,180		—				9,180
Total U.S. Treasury and federal agencies	7,627		9,180		—				16,807
Non-U.S. debt securities:
Mortgage-backed securities	—		1,563		—				1,563
Asset-backed securities	—		1,678		—				1,678
Non-U.S. sovereign, supranational and non-U.S. agency	—		15,850		—				15,850
Other	—		2,315		—				2,315
Total non-U.S. debt securities	—		21,406		—				21,406
Asset-backed securities:
Student loans	—		110		—				110



Collateralized loan obligations	—		2,406		—				2,406
Non-agency CMBS and RMBS(2)	—		260		—				260
Other	—		90		—				90
Total asset-backed securities	—		2,866		—				2,866






State and political subdivisions	—		777		—				777

Other U.S. debt securities	—		985		—				985





Total available-for-sale investment securities	7,627		35,214		—				42,841
Other assets:
Derivative instruments:
Foreign exchange contracts	—		15,993		4		$	(11,336)	4,661


Total derivative instruments	—		15,993		4		(11,336)		4,661


Other	10		557		—		—		567
Total assets carried at fair value	$	7,673	$	52,423	$	4	$	(11,336)	$	48,764
Liabilities:
Accrued expenses and other liabilities:




Derivative instruments:
Foreign exchange contracts	$	4	$	15,379	$	2	$	(10,754)	$	4,631
Interest rate contracts	2		—		—		—		2
Other derivative contracts	—		223		—		—		223
Total derivative instruments	6		15,602		2		(10,754)		4,856

Total liabilities carried at fair value	$	6	$	15,602	$	2	$	(10,754)	$	4,856

(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 $1.81 billion and $1.23 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, 2022
(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	—		142		—				142
Other	—		468		—				468
Total trading account assets	40		610		—				650
Available-for-sale investment securities:
U.S. Treasury and federal agencies:
Direct obligations	7,981		—		—				7,981
Mortgage-backed securities	—		8,509		—				8,509
Total U.S. Treasury and federal agencies	7,981		8,509		—				16,490
Non-U.S. debt securities:
Mortgage-backed securities	—		1,623		—				1,623
Asset-backed securities	—		1,669		—				1,669
Non-U.S. sovereign, supranational and non-U.S. agency	—		14,089		—				14,089
Other	—		2,091		—				2,091
Total non-U.S. debt securities	—		19,472		—				19,472
Asset-backed securities:
Student loans	—		115		—				115


Collateralized loan obligations	—		2,355		—				2,355
Non-agency CMBS and RMBS(2)	—		231		—				231
Other	—		88		—				88
Total asset-backed securities	—		2,789		—				2,789






State and political subdivisions	—		823		—				823

Other U.S. debt securities	—		1,005		—				1,005




Total available-for-sale investment securities	7,981		32,598		—				40,579
Other assets:
Derivative instruments:
Foreign exchange contracts	9		26,173		4		$	(18,522)	7,664
Interest rate contracts	—		—		—		—		—

Total derivative instruments	9		26,173		4		(18,522)		7,664
Other	6		600		—		—		606
Total assets carried at fair value	$	8,036	$	59,981	$	4	$	(18,522)	$	49,499
Liabilities:
Accrued expenses and other liabilities:
Trading account liabilities:



Derivative instruments:
Foreign exchange contracts	2		25,745		2		(17,951)		7,798
Interest rate contracts	1		—		—		—		1
Other derivative contracts	—		216		—		—		216
Total derivative instruments	3		25,961		2		(17,951)		8,015

Total liabilities carried at fair value	$	3	$	25,961	$	2	$	(17,951)	$	8,015

(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 $3.30 billion and $2.73 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 three months ended March 31, 2023 and 2022, respectively. Transfers into and out of level 3 are reported as of the beginning of the period presented. During both the three months ended March 31, 2023 and 2022, there were no transfers into and out of level 3.


	Fair Value Measurements Using Significant Unobservable Inputs
	Three Months Ended March 31, 2023
	Fair Value as of December 31, 2022		Total Realized and Unrealized Gains (Losses)(1)				Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Fair Value as of March 31, 2023(1)		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of March 31, 2023
(In millions)			Recorded in Revenue(1)		Recorded in Other Comprehensive Income(1)
Assets:















Other assets:
Derivative instruments:
Foreign exchange contracts	$	4	$	(2)	$	—	$	5	$	—	$	(3)	$	—	$	—	$	4	$	(2)


Total derivative instruments	4		(2)		—		5		—		(3)		—		—		4		(2)
Total assets carried at fair value	$	4	$	(2)	$	—	$	5	$	—	$	(3)	$	—	$	—	$	4	$	(2)

(1) Total realized and unrealized gains (losses) on derivative instruments are included within foreign exchange trading services.


	Fair Value Measurements Using Significant Unobservable Inputs
	Three Months Ended March 31, 2022
	Fair Value as of December 31, 2021		Total Realized and Unrealized Gains (Losses)(1)				Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Fair Value as of March 31, 2022(1)		Change in Unrealized Gains (Losses) Related to Financial Instruments Held as of March 31, 2022
(In millions)			Recorded in Revenue(1)		Recorded in Other Comprehensive Income(1)
Assets:
















Other assets:
Derivative instruments:
Foreign exchange contracts	$	—	$	3	$	—	$	3	$	—	$	—	$	—	$	—	$	6	$	3
Total derivative instruments	—		3		—		3		—		—		—		—		6		3
Total assets carried at fair value	$	—	$	3	$	—	$	3	$	—	$	—	$	—	$	—	$	6	$	3

(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.

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 March 31, 2023		As of December 31, 2022		Valuation Technique	Significant Unobservable Input(1)	As of March 31, 2023				As of March 31, 2023		As of December 31, 2022
Significant unobservable inputs readily available to State Street:
Assets:
Derivative Instruments, foreign exchange contracts	$	4	$	4	Option model	Volatility	5.6	%	-	17.4%	10.9	%	11.4	%
Total	$	4	$	4
Liabilities:
Derivative instruments, foreign exchange contracts	$	2	$	2	Option model	Volatility	8.1	%	-	16.4%	10.1	%	9.8	%
Total	$	2	$	2

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

Fair Value Estimates

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.

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)
March 31, 2023
Financial Assets:
Cash and due from banks	$	3,698	3,698		$	3,698	$	—	$	—
Interest-bearing deposits with banks	87,935		87,935		—		87,935		—
Securities purchased under resale agreements	1,134		1,134		—		1,134		—

Investment securities held-to-maturity	65,027		59,139		11,475		47,664		—
Net loans(1)	33,801		33,581		—		31,541		2,040
Other(2)	3,626		3,626		—		3,626		—
Financial Liabilities:
Deposits:
Non-interest-bearing	$	45,856	$	45,856	$	—	$	45,856	$	—
Interest-bearing - U.S.	108,623		108,623		—		108,623		—
Interest-bearing - non-U.S.	69,152		69,152		—		69,152		—
Securities sold under repurchase agreements	3,695		3,695		—		3,695		—

Other short-term borrowings	8		8		—		8		—

Long-term debt	16,305		15,590		—		15,428		162
Other(2)	3,626		3,626		—		3,626		—

(1) Includes $12 million of loans classified as held-for-sale that were measured at fair value in level 2 as of March 31, 2023.

(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, 2022
Financial Assets:
Cash and due from banks	$	3,970	$	3,970	$	3,970	$	—	$	—
Interest-bearing deposits with banks	101,593		101,593		—		101,593		—
Securities purchased under resale agreements	5,215		5,215		—		5,215		—

Investment securities held-to-maturity	64,700		57,913		11,336		46,577		—
Net loans(1)	32,053		31,794		—		29,679		2,115
Other(2)	3,626		3,626		—		3,626		—
Financial Liabilities:
Deposits:
Non-interest-bearing	$	46,755	$	46,755	$	—	$	46,755	$	—
Interest-bearing - U.S.	111,384		111,384		—		111,384		—
Interest-bearing - non-U.S.	77,325		77,325		—		77,325		—
Securities sold under repurchase agreements	1,177		1,177		—		1,177		—

Other short-term borrowings	2,097		2,097		—		2,097		—
Long-term debt	14,996		14,273		—		14,102		171
Other(2)	3,626		3,626		—		3,626		—

(1) Includes $5 million of loans classified as held-for-sale that were measured at fair value in level 2 as of December 31, 2022.

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

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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