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

12 Months Ended

Dec. 31, 2018

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 at December 31, 2018 and 2017, by major category and by valuation hierarchy level.



	December 31, 2018
(Dollars in millions)	Level 1			Level 2			Level 3			Netting Adjustment ⁽¹⁾			Fair Value
Assets
Trading account assets⁽²⁾:
U.S. Treasury securities	$	—		$	2,998		$	—		$	—		$	2,998
U.S. government-sponsored agency securities	—			73			—			—			73
State and municipal securities	—			10			—			—			10
Commercial paper	—			51			—			—			51
Corporate bonds	—			1,367			—			—			1,367
Asset-backed securities	—			299			—			—			299
Mortgage-backed securities	—			5,785			—			—			5,785
Equities	127			—			—			—			127
Interest rate derivative contracts	9			522			—			(130		)	401
Commodity derivative contracts	—			25			—			(24		)	1
Foreign exchange derivative contracts	1			259			—			(170		)	90
Equity derivative contracts	9			—			13			(11		)	11
Total trading account assets	146			11,389			13			(335		)	11,213
Securities available for sale⁽³⁾:
U.S. Treasury	—			3,429			—			—			3,429
Residential mortgage-backed securities:
U.S. government and government-sponsored agencies	—			8,007			—			—			8,007
Privately issued	—			864			—			—			864
Privately issued - commercial mortgage-backed securities	—			1,162			—			—			1,162
Collateralized loan obligations	—			1,474			—			—			1,474
Other	—			4			—			—			4
Other debt securities:
Direct bank purchase bonds	—			—			1,190			—			1,190
Other	—			43			141			—			184
Total securities available for sale	—			14,983			1,331			—			16,314
Other assets:
Mortgage servicing rights⁽²⁾	—			—			159			—			159
Loans held for sale⁽²⁾	—			—			117			—			117
Interest rate hedging contracts⁽³⁾	—			6			—			(3		)	3
Other derivative contracts⁽²⁾	—			26			1			(16		)	11
Equity securities⁽²⁾	9			—			—			—			9
Total other assets	9			32			277			(19		)	299
Total assets	$	155		$	26,404		$	1,621		$	(354	)	$	27,826
Percentage of total	—		%	95		%	6		%	(1		)%	100		%
Percentage of total Company assets	—		%	16		%	1		%	—		%	17		%
Liabilities
Trading account liabilities⁽²⁾:
Securities sold, not yet purchased:
U.S. Treasury	$	—		$	2,753		$	—		$	—		$	2,753
Commercial paper	—			10			—			—			10
Corporate bonds	—			717			—			—			717
Equities	70			—			—			—			70
Trading derivatives:
Interest rate derivative contracts	55			545			—			(262		)	338
Commodity derivative contracts	—			18			—			(4		)	14
Foreign exchange derivative contracts	—			168			—			(56		)	112
Equity derivative contracts	—			—			13			—			13
Total trading account liabilities	125			4,211			13			(322		)	4,027
Other liabilities:
FDIC clawback liability⁽²⁾	—			—			116			—			116
Other derivative contracts⁽²⁾	—			3			2			—			5
Total other liabilities	—			3			118			—			121
Total liabilities	$	125		$	4,214		$	131		$	(322	)	$	4,148
Percentage of total	3		%	102		%	3		%	(8		)%	100		%
Percentage of total Company liabilities	—		%	3		%	—		%	—		%	3		%


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


(2)	Fair value through net income


(3)	Fair value through other comprehensive income



	December 31, 2017
(Dollars in millions)	Level 1			Level 2			Level 3			Netting Adjustment ⁽¹⁾			Fair Value
Assets
Trading account assets⁽²⁾:
U.S. Treasury securities	$	—		$	1,926		$	—		$	—		$	1,926
U.S. government-sponsored agency securities	—			118			—			—			118
State and municipal securities	—			11			—			—			11
Commercial paper	—			7			—			—			7
Other sovereign government obligations	—			8			—			—			8
Corporate bonds	—			1,054			—			—			1,054
Asset-backed securities	—			199			—			—			199
Mortgage-backed securities	—			6,339			—			—			6,339
Equities	193			—			—			—			193
Interest rate derivative contracts	7			870			1			(353		)	525
Commodity derivative contracts	—			50			—			(49		)	1
Foreign exchange derivative contracts	—			249			1			(68		)	182
Equity derivative contracts	2			—			137			(135		)	4
Total trading account assets	202			10,831			139			(605		)	10,567
Securities available for sale⁽³⁾:
U.S. Treasury	—			3,252			—			—			3,252
Residential mortgage-backed securities:
U.S government and government-sponsored agencies	—			9,208			—			—			9,208
Privately issued	—			694			—			—			694
Privately issued - commercial mortgage-backed securities	—			822			—			—			822
Collateralized loan obligations	—			1,905			—			—			1,905
Other	—			5			—			—			5
Other debt securities:
Direct bank purchase bonds	—			—			1,503			—			1,503
Other	—			68			96			—			164
Equity securities	10			—			—			—			10
Total securities available for sale	10			15,954			1,599			—			17,563
Other assets:
Mortgage servicing rights⁽²⁾	—			—			64			—			64
Interest rate hedging contracts⁽³⁾	—			2			—			—			2
Other derivative contracts⁽²⁾	—			2			1			(2		)	1
Total other assets	—			4			65			(2		)	67
Total assets	$	212		$	26,789		$	1,803		$	(607	)	$	28,197
Percentage of total	1		%	95		%	6		%	(2		)%	100		%
Percentage of total Company assets	—		%	17		%	1		%	—		%	18		%
Liabilities
Trading account liabilities⁽²⁾:
Securities sold, not yet purchased:
U.S. Treasury	$	—		$	2,709		$	—		$	—		$	2,709
Other sovereign government obligations	—			7			—			—			7
Corporate bonds	—			348			—			—			348
Equities	35			—			—			—			35
Trading derivatives:
Interest rate derivative contracts	3			643			—			(382		)	264
Commodity derivative contracts	—			33			—			(20		)	13
Foreign exchange derivative contracts	1			144			1			(66		)	80
Equity derivative contracts	7			—			137			—			144
Total trading account liabilities	46			3,884			138			(468		)	3,600
Other liabilities:
FDIC clawback liability⁽²⁾	—			—			113			—			113
Interest rate hedging contracts⁽³⁾	—			149			—			(149		)	—
Other derivative contracts⁽²⁾	—			3			6			(3		)	6
Total other liabilities	—			152			119			(152		)	119
Total liabilities	$	46		$	4,036		$	257		$	(620	)	$	3,719
Percentage of total	1		%	109		%	7		%	(17		)%	100		%
Percentage of total Company liabilities	—		%	3		%	—		%	—		%	3		%


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

Fair Value Assets and Liabilities Measured on Recurring Basis Unobservable Input Reconciliation

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 years ended December 31, 2018 and 2017. Level 3 securities available for sale at December 31, 2018 primarily consist of direct bank purchase bonds.



	For the Year Ended
	December 31, 2018
(Dollars in millions)	Trading Assets			Securities Available for Sale			Other Assets			Trading Liabilities			Other Liabilities
Asset (liability) balance, beginning of period	$	139		$	1,600		$	65		$	(138	)	$	(119	)
Total gains (losses) (realized/unrealized):
Included in income before taxes	(10		)	—			(8		)	9			1
Included in other comprehensive income	—			(9		)	—			—			—
Purchases/additions	—			126			220			—			—
Settlements	(116		)	(386		)	—			116			—
Transfers in (out) of level 3	—			—			—			—			—
Asset (liability) balance, end of period	$	13		$	1,331		$	277		$	(13	)	$	(118	)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period	$	(10	)	$	—		$	(8	)	$	9		$	1



	For the Year Ended
	December 31, 2017
(Dollars in millions)	Trading Assets			Securities Available for Sale			Other Assets			Trading Liabilities			Other Liabilities
Asset (liability) balance, beginning of period	$	168		$	1,638		$	24		$	(166	)	$	(121	)
Total gains (losses) (realized/unrealized):
Included in income before taxes	73			—			(3		)	(72		)	2
Included in other comprehensive income	—			(3		)	—			—			—
Purchases/additions	—			83			44			—			—
Settlements	(102		)	(118		)	—			100			—
Asset (liability) balance, end of period	$	139		$	1,600		$	65		$	(138	)	$	(119	)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period	$	73		$	—		$	(3	)	$	(72	)	$	2

The

Significant Unobservable Inputs Level 3 Assets and Liabilities

following table presents information about significant unobservable inputs related to the Company's significant Level 3 assets and liabilities at December 31, 2018.



	December 31, 2018
(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	$	1,190	Return on equity	Market-required return on capital	8.0 - 10.0	%	9.5	%
				Probability of default	0.0 - 25.0	%	0.3	%
				Loss severity	10.0 - 60.0	%	22.4	%

The

Financial Assets Measured at Fair Value on Nonrecurring Basis

assets measured at fair value on a nonrecurring basis during the years ended December 31, 2018 and 2017 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.



	December 31, 2018								For the Year Ended December 31, 2018
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gains (Losses)
Loans:
Impaired loans	$	151	$	—	$	—	$	151	$	(106	)
Other assets:
Loans held for sale	85		—		—		85		(29		)
Private equity investments	11		—		—		11		(2		)
Renewable energy investments	—		—		—		—		(2		)
Software	—		—		—		—		(4		)
Consolidated LIHC VIE	43		—		—		43		(8		)
Total	$	290	$	—	$	—	$	290	$	(151	)



	December 31, 2017								For the Year Ended December 31, 2017
(Dollars in millions)	Fair Value		Level 1		Level 2		Level 3		Gains (Losses)
Loans:
Impaired loans	$	79	$	—	$	—	$	79	$	(34	)
Other assets:
Loans held for sale	—		—		—		—		(3		)
Renewable energy investments	—		—		—		—		2
Software	—		—		—		—		(22		)
Consolidated LIHC VIE	66		—		—		66		(21		)
Total	$	145	$	—	$	—	$	145	$	(78	)

Fai

Carrying Amount and Estimated Fair Value of Financial Instruments

tables below present the carrying amount and estimated fair value of certain financial instruments, all of which are accounted for at amortized cost, classified by valuation hierarchy level as of December 31, 2018 and 2017.



	December 31, 2018
(Dollars in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	8,350	$	8,350	$	8,350	$	—	$	—
Securities borrowed or purchased under resale agreements	22,368		22,368		—		22,368		—
Securities held to maturity	10,901		10,720		—		10,720		—
Loans held for investment ⁽¹⁾	84,805		84,729		—		—		84,729
Other assets	48		48		48		—		—
Liabilities
Time deposits	$	11,739	$	11,714	$	—	$	11,714	$	—
Securities loaned or sold under repurchase agreements	27,285		27,285		—		27,285		—
Commercial paper and other short-term borrowings	9,263		9,263		—		9,263		—
Long-term debt	17,918		17,961		—		17,961		—
Off-Balance Sheet Instruments
Commitments to extend credit and standby and commercial letters of credit	$	120	$	242	$	—	$	—	$	242


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



	December 31, 2017
(Dollars in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Assets
Cash and cash equivalents	$	3,392	$	3,392	$	3,392	$	—	$	—
Securities borrowed or purchased under resale agreements	20,894		20,894		—		20,894		—
Securities held to maturity	9,885		9,799		—		9,799		—
Loans held for investment ⁽¹⁾	78,023		79,051		—		—		79,051
Liabilities
Deposits	$	84,787	$	84,743	$	—	$	84,743	$	—
Securities loaned or sold under repurchase agreements	26,437		26,437		—		26,437		—
Commercial paper and other short-term borrowings	7,066		7,066		—		7,066		—
Long-term debt	12,162		12,162		—		12,162		—
Off-Balance Sheet Instruments
Commitments to extend credit and standby and commercial letters of credit	$	174	$	174	$	—	$	—	$	174


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