Fair Value Measurement and Fair Value of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2015

Financial Assets and Financial Liabilities Measured at Fair Value on Recurring Basis

The following tables present financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014, by major category and by valuation hierarchy level:



	September 30, 2015
(Dollars in millions)	Level 1			Level 2			Level 3			Netting Adjustment⁽¹⁾			Fair Value
Assets
Trading account assets:
U.S. government-sponsored agency securities	$	—		$	111		$	—		$	—		$	111
State and municipal securities	—			7			—			—			7
Interest rate derivative contracts	—			1,132			3			(164		)	971
Commodity derivative contracts	—			430			2			(380		)	52
Foreign exchange derivative contracts	1			109			1			(65		)	46
Equity derivative contracts	—			—			182			(169		)	13
Total trading account assets	1			1,789			188			(778		)	1,200
Securities available for sale:
Residential mortgage-backed securities:
U.S government and government-sponsored agencies	—			7,860			—			—			7,860
Privately issued	—			132			—			—			132
Privately issued - commercial mortgage-backed securities	—			1,595			—			—			1,595
Collateralized loan obligations	—			3,109			—			—			3,109
Other	—			8			—			—			8
Other debt securities:
Direct bank purchase bonds	—			—			1,594			—			1,594
Other	—			2			47			—			49
Equity securities	8			—			—			—			8
Total securities available for sale	8			12,706			1,641			—			14,355
Other assets:
Interest rate hedging contracts	—			208			—			(169		)	39
Other derivative contracts	—			1			2			(1		)	2
Total other assets	—			209			2			(170		)	41
Total assets	$	9		$	14,704		$	1,831		$	(948	)	$	15,596
Percentage of total	—		%	94		%	12		%	(6		)%	100		%
Percentage of total Company assets	—		%	13		%	2		%	(1		)%	14		%
Liabilities
Trading account liabilities:
Interest rate derivative contracts	$	4		$	1,072		$	—		$	(844	)	$	232
Commodity derivative contracts	—			418			2			(88		)	332
Foreign exchange derivative contracts	3			86			1			(26		)	64
Equity derivative contracts	—			—			181			—			181
Securities sold, not yet purchased	—			82			—			—			82
Total trading account liabilities	7			1,658			184			(958		)	891
Other liabilities:
FDIC clawback liability	—			—			110			—			110
Interest rate hedging contracts	—			—			—			—			—
Other derivative contracts	—			1			2			—			3
Total other liabilities	—			1			112			—			113
Total liabilities	$	7		$	1,659		$	296		$	(958	)	$	1,004
Percentage of total	1		%	164		%	30		%	(95		)%	100		%
Percentage of total Company liabilities	—		%	2		%	—		%	(1		)%	1		%


(1)	Amounts represent the impact of legally enforceable master netting agreements between the same counterparties that allow the Company to net settle all contracts.



	December 31, 2014
(Dollars in millions)	Level 1			Level 2			Level 3			Netting Adjustment⁽¹⁾			Fair Value
Assets
Trading account assets:
U.S. Treasury securities	$	—		$	69		$	—		$	—		$	69
U.S. government-sponsored agency securities	—			125			—			—			125
State and municipal securities	—			10			—			—			10
Interest rate derivative contracts	—			928			5			(172		)	761
Commodity derivative contracts	—			417			5			(392		)	30
Foreign exchange derivative contracts	1			104			1			(63		)	43
Equity derivative contracts	—			—			300			(224		)	76
Total trading account assets	1			1,653			311			(851		)	1,114
Securities available for sale:
Residential mortgage-backed securities:
U.S government and government-sponsored agencies	—			7,560			—			—			7,560
Privately issued	—			168			—			—			168
Privately issued - commercial mortgage-backed securities	—			1,691			—			—			1,691
Collateralized loan obligations	—			2,494			—			—			2,494
Other	—			9			—			—			9
Other debt securities:
Direct bank purchase bonds	—			—			1,741			—			1,741
Other	—			3			49			—			52
Equity securities	9			—			—			—			9
Total securities available for sale	9			11,925			1,790			—			13,724
Other assets:
Interest rate hedging contracts	—			36			—			(36		)	—
Other derivative contracts	—			—			2			—			2
Total other assets	—			36			2			(36		)	2
Total assets	$	10		$	13,614		$	2,103		$	(887	)	$	14,840
Percentage of total	—		%	92		%	14		%	(6		)%	100		%
Percentage of total Company assets	—		%	12		%	2		%	(1		)%	13		%
Liabilities
Trading account liabilities:
Interest rate derivative contracts	$	1		$	829		$	—		$	(667	)	$	163
Commodity derivative contracts	—			403			5			(93		)	315
Foreign exchange derivative contracts	1			78			1			(24		)	56
Equity derivative contracts	—			—			299			—			299
Securities sold, not yet purchased	—			61			—			—			61
Total trading account liabilities	2			1,371			305			(784		)	894
Other liabilities:
FDIC clawback liability	—			—			105			—			105
Interest rate hedging contracts	—			4			—			(3		)	1
Other derivative contracts	—			1			2			—			3
Total other liabilities	—			5			107			(3		)	109
Total liabilities	$	2		$	1,376		$	412		$	(787	)	$	1,003
Percentage of total	—		%	137		%	41		%	(78		)%	100		%
Percentage of total Company liabilities	—		%	1		%	—		%	(1		)%	—		%


(1)	Amounts represent the impact of legally enforceable master netting agreements between the same counterparties that allow the Company to net settle all contracts.

Reconciliation of Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs

The following tables present a reconciliation of the assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2015 and 2014. Level 3 available for sale securities at September 30, 2015 and 2014 primarily consist of direct bank purchase bonds. The Company’s policy is to recognize transfers in and out of Level 1, 2 and 3 as of the end of a reporting period.



	For the Three Months Ended
	September 30, 2015														September 30, 2014
(Dollars in millions)	Trading Assets			Securities Available for Sale			Other Assets		Trading Liabilities			Other Liabilities			Trading Assets			Securities Available for Sale			Other Assets			Trading Liabilities			Other Liabilities
Asset (liability) balance, beginning of period	$	283		$	1,688		$	1	$	(278	)	$	(109	)	$	303		$	1,945		$	2		$	(298	)	$	(105	)
Total gains (losses) (realized/unrealized):
Included in income before taxes	(78		)	—			1		77			(3		)	(17		)	—			(1		)	19			(1		)
Included in other comprehensive income	—			12			—		—			—			—			5			—			—			—
Purchases/additions	—			1			—		—			—			—			53			—			—			—
Sales	—			—			—		—			—			—			—			—			—			—
Settlements	(17		)	(60		)	—		17			—			(10		)	(122		)	—			10			—
Asset (liability) balance, end of period	$	188		$	1,641		$	2	$	(184	)	$	(112	)	$	276		$	1,881		$	1		$	(269	)	$	(106	)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period	$	(78	)	$	—		$	1	$	77		$	(3	)	$	(17	)	$	—		$	(1	)	$	19		$	(1	)



	For the Nine Months Ended
	September 30, 2015														September 30, 2014
(Dollars in millions)	Trading Assets			Securities Available for Sale			Other Assets		Trading Liabilities			Other Liabilities			Trading Assets			Securities Available for Sale			Other Assets		Trading Liabilities			Other Liabilities
Asset (liability) balance, beginning of period	$	311		$	1,790		$	2	$	(305	)	$	(107	)	$	271		$	2,018		$	1	$	(264	)	$	(99	)
Total gains (losses) (realized/unrealized):
Included in income before taxes	(82		)	—			—		79			(5		)	19			—			—		(18		)	(7		)
Included in other comprehensive income	—			4			—		—			—			—			20			—		—			—
Purchases/additions	1			18			—		—			—			3			190			—		—			—
Sales	—			—			—		(1		)	—			—			—			—		(4		)	—
Settlements	(42		)	(171		)	—		43			—			(17		)	(347		)	—		17			—
Asset (liability) balance, end of period	$	188		$	1,641		$	2	$	(184	)	$	(112	)	$	276		$	1,881		$	1	$	(269	)	$	(106	)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period	$	(82	)	$	—		$	—	$	79		$	(5	)	$	19		$	—		$	—	$	(18	)	$	(7	)

Significant Unobservable Inputs Level 3 Assets and Liabilities

The following table presents information about significant unobservable inputs related to the Company’s significant Level 3 assets and liabilities at September 30, 2015.



(Dollars in millions)	Level 3 Fair Value		Valuation Technique	Significant Unobservable Input(s)	Range of Inputs		Weighted Average
Securities available for sale:
Direct bank purchase bonds	$	1,594	Return on equity	Market-required return on capital	8.0 - 10.0	%	9.9	%
				Probability of default	0.0 - 25.0	%	0.5	%
				Loss severity	10.0 - 60.0	%	30.1	%
Other liabilities:
FDIC clawback liability	$	110	Discounted cash flow	Probability of default	0.1 - 100.0	%	49.9	%
				Loss severity	0.0 - 100.0	%	35.9	%

Financial Assets Measured at Fair Value on Nonrecurring Basis

For assets measured at fair value on a nonrecurring basis during the three and nine months ended September 30, 2015 and 2014 that were still held on the consolidated balance sheet as of the respective periods ended, the following tables present the fair value of such assets by the level of valuation assumptions used to determine each fair value adjustment.



	September 30, 2015								Gain (Loss) For the Three Months Ended September 30, 2015			Gain (Loss) For the Nine Months Ended September 30, 2015
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gain (Loss) For the Three Months Ended September 30, 2015			Gain (Loss) For the Nine Months Ended September 30, 2015
Loans:
Impaired loans	$	18	$	—	$	—	$	18	$	1		$	(13	)
Premises and equipment	2		—		—		2		(1		)	(1		)
Other assets:
OREO	6		—		—		6		(1		)	(2		)
Private equity investments	7		—		—		7		—			(5		)
Intangible assets	3		—		—		3		(3		)	(3		)
Total	$	36	$	—	$	—	$	36	$	(4	)	$	(24	)



	September 30, 2014								Gain (Loss) For the Three Months Ended September 30, 2014			Gain (Loss) For the Nine Months Ended September 30, 2014
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gain (Loss) For the Three Months Ended September 30, 2014			Gain (Loss) For the Nine Months Ended September 30, 2014
Loans:
Impaired loans	$	89	$	—	$	—	$	89	$	2		$	(33	)
Other assets:
OREO	13		—		—		13		(2		)	(5		)
Total	$	102	$	—	$	—	$	102	$	—		$	(38	)

Carrying Amount and Estimated Fair Value of Financial Instruments

The tables below present the carrying amount and estimated fair value of certain financial instruments, classified by valuation hierarchy level as of September 30, 2015 and as of December 31, 2014:



	September 30, 2015
(Dollars in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	4,374	$	4,374	$	4,374	$	—	$	—
Securities held to maturity	10,341		10,528		—		10,528		—
Loans held for investment ⁽¹⁾	75,353		76,858		—		—		76,858
Other assets	16		14		—		—		14
Liabilities
Deposits	$	82,693	$	82,759	$	—	$	82,759	$	—
Commercial paper and other short-term borrowings	2,338		2,338		—		2,338		—
Long-term debt	11,357		11,393		—		11,393		—
Off-Balance Sheet Instruments
Commitments to extend credit and standby and commercial letters of credit	$	220	$	220	$	—	$	—	$	220


(1)	Excludes lease financing. The carrying amount is net of the allowance for loan and lease losses.



	December 31, 2014
(Dollars in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	5,751	$	5,751	$	5,751	$	—	$	—
Securities held to maturity	8,291		8,412		—		8,412		—
Loans held for investment ⁽¹⁾	75,475		77,324		—		—		77,324
Other assets	59		11		—		—		11
Liabilities
Deposits	$	86,004	$	86,076	$	—	$	86,076	$	—
Commercial paper and other short-term borrowings	2,704		2,704		—		2,704		—
Long-term debt	6,972		7,073		—		7,073		—
Off-Balance Sheet Instruments
Commitments to extend credit and standby and commercial letters of credit	$	269	$	269	$	—	$	—	$	269


(1)	Excludes lease financing. The carrying amount is net of the allowance for loan and lease losses.