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

6 Months Ended

Jun. 30, 2016

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 June 30, 2016 and December 31, 2015, by major category and by valuation hierarchy level:



	June 30, 2016
(Dollars in millions)	Level 1			Level 2			Level 3			Netting Adjustment⁽¹⁾			Fair Value
Assets
Trading account assets:
U.S. Treasury securities	$	—		$	30		$	—		$	—		$	30
U.S. government-sponsored agency securities	—			121			—			—			121
State and municipal securities	—			5			—			—			5
Interest rate derivative contracts	1			1,626			2			(344		)	1,285
Commodity derivative contracts	—			226			3			(191		)	38
Foreign exchange derivative contracts	1			218			2			(151		)	70
Equity derivative contracts	—			—			180			(167		)	13
Total trading account assets	2			2,226			187			(853		)	1,562
Securities available for sale:
U.S. Treasury	—			159			—			—			159
Residential mortgage-backed securities:
U.S government and government-sponsored agencies	—			6,052			—			—			6,052
Privately issued	—			248			—			—			248
Privately issued - commercial mortgage-backed securities	—			1,527			—			—			1,527
Collateralized loan obligations	—			3,238			—			—			3,238
Other	—			7			—			—			7
Other debt securities:
Direct bank purchase bonds	—			—			1,575			—			1,575
Other	—			1			32			—			33
Equity securities	7			—			—			—			7
Total securities available for sale	7			11,232			1,607			—			12,846
Other assets:
Mortgage servicing rights	—			—			13			—			13
Interest rate hedging contracts	—			344			—			(317		)	27
Other derivative contracts	—			1			2			—			3
Total other assets	—			345			15			(317		)	43
Total assets	$	9		$	13,803		$	1,809		$	(1,170	)	$	14,451
Percentage of total	—		%	95		%	13		%	(8		)%	100		%
Percentage of total Company assets	—		%	12		%	2		%	(1		)%	13		%
Liabilities
Trading account liabilities:
Interest rate derivative contracts	$	2		$	1,574		$	—		$	(1,344	)	$	232
Commodity derivative contracts	—			184			4			(81		)	107
Foreign exchange derivative contracts	1			148			1			(25		)	125
Equity derivative contracts	—			—			181			—			181
Securities sold, not yet purchased	—			31			—			—			31
Total trading account liabilities	3			1,937			186			(1,450		)	676
Other liabilities:
FDIC clawback liability	—			—			117			—			117
Other derivative contracts	—			1			7			—			8
Total other liabilities	—			1			124			—			125
Total liabilities	$	3		$	1,938		$	310		$	(1,450	)	$	801
Percentage of total	—		%	242		%	39		%	(181		)%	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, 2015
(Dollars in millions)	Level 1			Level 2			Level 3			Netting Adjustment⁽¹⁾			Fair Value
Assets
Trading account assets:
U.S. Treasury securities	$	—		$	37		$	—		$	—		$	37
U.S. government-sponsored agency securities	—			106			—			—			106
State and municipal securities	—			3			—			—			3
Commercial paper	—			25			—			—			25
Interest rate derivative contracts	—			998			4			(163		)	839
Commodity derivative contracts	—			408			1			(384		)	25
Foreign exchange derivative contracts	1			115			1			(70		)	47
Equity derivative contracts	—			—			222			(217		)	5
Total trading account assets	1			1,692			228			(834		)	1,087
Securities available for sale:
U.S. Treasury	—			594			—			—			594
Residential mortgage-backed securities:
U.S government and government-sponsored agencies	—			7,201			—			—			7,201
Privately issued	—			151			—			—			151
Privately issued - commercial mortgage-backed securities	—			1,546			—			—			1,546
Collateralized loan obligations	—			3,233			—			—			3,233
Other	—			7			—			—			7
Other debt securities:
Direct bank purchase bonds	—			—			1,572			—			1,572
Other	—			1			31			—			32
Equity securities	8			—			—			—			8
Total securities available for sale	8			12,733			1,603			—			14,344
Other assets:
Interest rate hedging contracts	—			73			—			(71		)	2
Other derivative contracts	—			4			1			(4		)	1
Total other assets	—			77			1			(75		)	3
Total assets	$	9		$	14,502		$	1,832		$	(909	)	$	15,434
Percentage of total	—		%	94		%	12		%	(6		)%	100		%
Percentage of total Company assets	—		%	12		%	2		%	(1		)%	13		%
Liabilities
Trading account liabilities:
Interest rate derivative contracts	$	1		$	947		$	—		$	(775	)	$	173
Commodity derivative contracts	—			368			1			(61		)	308
Foreign exchange derivative contracts	1			91			1			(22		)	71
Equity derivative contracts	—			—			221			—			221
Securities sold, not yet purchased	—			23			—			—			23
Total trading account liabilities	2			1,429			223			(858		)	796
Other liabilities:
FDIC clawback liability	—			—			112			—			112
Interest rate hedging contracts	—			14			—			(14		)	—
Other derivative contracts	—			—			2			—			2
Total other liabilities	—			14			114			(14		)	114
Total liabilities	$	2		$	1,443		$	337		$	(872	)	$	910
Percentage of total	—		%	159		%	37		%	(96		)%	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 six months ended June 30, 2016 and 2015. Level 3 available for sale securities at June 30, 2016 and 2015 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
	June 30, 2016															June 30, 2015
(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	$	189		$	1,613		$	15		$	(187	)	$	(116	)	$	306		$	1,694		$	3		$	(301	)	$	(109	)
Total gains (losses) (realized/unrealized):
Included in income before taxes	19			—			(1		)	(19		)	(8		)	(12		)	—			(2		)	12			—
Included in other comprehensive income	—			7			—			—			—			—			(5		)	—			—			—
Purchases/additions	—			2			1			—			—			1			8			—			—			—
Sales	—			—			—			—			—			—			—			—			(1		)	—
Settlements	(21		)	(15		)	—			20			—			(12		)	(9		)	—			12			—
Asset (liability) balance, end of period	$	187		$	1,607		$	15		$	(186	)	$	(124	)	$	283		$	1,688		$	1		$	(278	)	$	(109	)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period	$	19		$	—		$	(1	)	$	(19	)	$	(8	)	$	(12	)	$	—		$	(2	)	$	12		$	—



	For the Six Months Ended
	June 30, 2016														June 30, 2015
(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	$	228		$	1,603		$	1	$	(223	)	$	(114	)	$	311		$	1,790		$	2		$	(305	)	$	(107	)
Total gains (losses) (realized/unrealized):
Included in income before taxes	1			—			—		(2		)	(10		)	(4		)	—			(1		)	2			(2		)
Included in other comprehensive income	—			5			—		—			—			—			(8		)	—			—			—
Purchases/additions	—			80			1		—			—			1			17			—			—			—
Sales	—			—			—		—			—			—			—			—			(1		)	—
Settlements	(42		)	(81		)	—		39			—			(25		)	(111		)	—			26			—
Transfers in (out) of level 3	—			—			13		—			—			—			—			—			—			—
Asset (liability) balance, end of period	$	187		$	1,607		$	15	$	(186	)	$	(124	)	$	283		$	1,688		$	1		$	(278	)	$	(109	)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period	$	1		$	—		$	—	$	(2	)	$	(10	)	$	(4	)	$	—		$	(1	)	$	2		$	(2	)

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 June 30, 2016.



	June 30, 2016
(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	$	1,575	Return on equity	Market-required return on capital	8.0 - 10.0	%	9.8	%
				Probability of default	0.0 - 25.0	%	0.4	%
				Loss severity	10.0 - 60.0	%	28.9	%
Other liabilities:
FDIC clawback liability	$	117	Discounted cash flow	Probability of default	0.2 - 100.0	%	57.2	%
				Loss severity	0.0 - 100.0	%	38.1	%

Financial Assets Measured at Fair Value on Nonrecurring Basis

For assets measured at fair value on a nonrecurring basis during the three and six months ended June 30, 2016 and 2015 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.



	June 30, 2016								Gain (Loss) For the Three Months Ended June 30, 2016			Gain (Loss) For the Six Months Ended June 30, 2016
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gain (Loss) For the Three Months Ended June 30, 2016			Gain (Loss) For the Six Months Ended June 30, 2016
Loans:
Loans held for sale	$	—	$	—	$	—	$	—	$	—		$	(3	)
Impaired loans	180		—		—		180		(16		)	(143		)
Other assets:
OREO	2		—		—		2		—			(1		)
Private equity investments	10		—		—		10		—			(12		)
Software	13		—		—		13		(1		)	(5		)
Intangible assets	—		—		—		—		—			(1		)
Total	$	205	$	—	$	—	$	205	$	(17	)	$	(165	)



	June 30, 2015								Gain (Loss) For the Three Months Ended June 30, 2015			Gain (Loss) For the Six Months Ended June 30, 2015
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gain (Loss) For the Three Months Ended June 30, 2015			Gain (Loss) For the Six Months Ended June 30, 2015
Loans:
Impaired loans	$	35	$	—	$	—	$	35	$	(7	)	$	(13	)
Other assets:
OREO	5		—		—		5		(1		)	(1		)
Private equity investments	7		—		—		7		—			(5		)
Total	$	47	$	—	$	—	$	47	$	(8	)	$	(19	)

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 June 30, 2016 and as of December 31, 2015:



	June 30, 2016
(Dollars in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	3,865	$	3,865	$	3,865	$	—	$	—
Securities held to maturity	10,259		10,573		—		10,573		—
Loans held for investment ⁽¹⁾	77,931		79,833		—		—		79,833
Liabilities
Deposits	$	82,692	$	82,739	$	—	$	82,739	$	—
Commercial paper and other short-term borrowings	4,703		4,703		—		4,703		—
Long-term debt	10,445		10,523		—		10,523		—
Off-Balance Sheet Instruments
Commitments to extend credit and standby and commercial letters of credit	$	238	$	238	$	—	$	—	$	238


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



	December 31, 2015
(Dollars in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	4,529	$	4,529	$	4,529	$	—	$	—
Securities held to maturity	10,158		10,207		—		10,207		—
Loans held for investment ⁽¹⁾	76,150		77,640		—		—		77,640
Other assets	16		17		—		—		17
Liabilities
Deposits	$	84,340	$	84,375	$	—	$	84,375	$	—
Commercial paper and other short-term borrowings	1,038		1,038		—		1,038		—
Long-term debt	12,349		12,351		—		12,351		—
Off-Balance Sheet Instruments
Commitments to extend credit and standby and commercial letters of credit	$	243	$	243	$	—	$	—	$	243


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