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Fair Value Measurement and Fair Value of Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
Financial Assets and Financial Liabilities Measured at Fair Value on Recurring Basis
The following table presents financial assets and financial liabilities measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019, by major category and by valuation hierarchy level.
 
 
September 30, 2020
 
December 31, 2019
(Dollars in millions)
 
Level 1
 
Level 2
 
Level 3
 
Netting(1)
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
Netting(1)
 
Fair Value
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading account assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and government agencies
 
$
—

 
$
2,357

 
$
—

 
$
—

 
$
2,357

 
$
—

 
$
2,393

 
$
—

 
$
—

 
$
2,393

Mortgage-backed:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


U.S. agencies
 
—

 
6,949

 
—

 
—

 
6,949

 
—

 
5,376

 
—

 
—

 
5,376

Corporate debt
 
—

 
721

 
—

 
—

 
721

 
—

 
1,212

 
—

 
—

 
1,212

Other debt
 
—

 
312

 
—

 
—

 
312

 
—

 
306

 
—

 
—

 
306

Equity
 
160

 
—

 
—

 
—

 
160

 
127

 
—

 
—

 
—

 
127

Derivative contracts
 
11

 
2,517

 
1

 
(525
)
 
2,004

 
16

 
1,195

 
8

 
(256
)
 
963

Total trading account assets
 
171

 
12,856

 
1

 
(525
)
 
12,503

 
143

 
10,482

 
8

 
(256
)
 
10,377

Securities available for sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and government agencies
 
—

 
3,282

 
—

 
—

 
3,282

 
—

 
5,438

 
—

 
—

 
5,438

Mortgage-backed:
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 


U.S. agencies
 
—

 
5,461

 
—

 
—

 
5,461

 
—

 
5,468

 
—

 
—

 
5,468

Residential - non-agency
 
—

 
655

 
—

 
—

 
655

 
—

 
762

 
—

 
—

 
762

Commercial - non-agency
 
—

 
4,409

 
17

 
—

 
4,426

 
—

 
3,471

 
18

 
—

 
3,489

Collateralized loan obligations
 
—

 
1,371

 
—

 
—

 
1,371

 
—

 
1,491

 
—

 
—

 
1,491

Direct bank purchase bonds
 
—

 
—

 
937

 
—

 
937

 
—

 
—

 
936

 
—

 
936

Other
 
—

 
11

 
527

 
—

 
538

 
—

 
28

 
177

 
—

 
205

Total securities available for sale
 
—

 
15,189

 
1,481

 
—

 
16,670

 
—

 
16,658

 
1,131

 
—

 
17,789

Other assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage servicing rights
 
—

 
—

 
122

 
—

 
122

 
—

 
—

 
270

 
—

 
270

Loans held for sale
 
—

 
—

 
44

 
—

 
44

 
—

 
—

 
42

 
—

 
42

Derivative contracts
 
—

 
2

 
14

 
(1
)
 
15

 
—

 
10

 
4

 
(8
)
 
6

Equity securities
 
20

 
—

 
—

 
—

 
20

 
10

 
—

 
—

 
—

 
10

Total other assets
 
20

 
2

 
180

 
(1
)
 
201

 
10

 
10

 
316

 
(8
)
 
328

Total assets
 
$
191

   
$
28,047

   
$
1,662

   
$
(526
)
 
$
29,374

 
$
153

 
$
27,150

 
$
1,455

 
$
(264
)
 
$
28,494

Percentage of total
 
1
%
 
97
%
 
4
%
 
(2
)%
 
100
%
 
1
%
 
95
%
 
5
%
 
(1
)%
 
100
%
Percentage of total Company assets
 
—
%
 
17
%
 
1
%
 
—
 %
 
18
%
 
—
%
 
16
%
 
1
%
 
—
 %
 
17
%
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading account liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and government agencies
 
$
—

 
$
1,998

 
$
—

 
$
—

 
$
1,998

 
$
—

 
$
2,299

 
$
—

 
$
—

 
$
2,299

Corporate debt
 
—

 
369

 
—

 
—

 
369

 
—

 
646

 
—

 
—

 
646

Other debt
 
—

 
71

 
—

 
—

 
71

 
—

 
4

 
—

 
—

 
4

Equity
 
96

 
—

 
—

 
—

 
96

 
105

 
—

 
—

 
—

 
105

    Derivatives contracts
 
12

 
907

 
1

 
(648
)
 
272

 
11

 
499

 
8

 
(306
)
 
212

Total trading account liabilities
 
108

 
3,345

 
1

 
(648
)
 
2,806

 
116

 
3,448

 
8

 
(306
)
 
3,266

Other liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FDIC clawback liability
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
121

 
—

 
121

Derivatives contracts
 
—

 
3

 
5

 
(1
)
 
7

 
—

 
2

 
3

 
—

 
5

Total other liabilities
 
—

 
3

 
5

 
(1
)
 
7

 
—

 
2

 
124

 
—

 
126

Total liabilities
 
$
108

  
$
3,348

  
$
6

  
$
(649
)
 
$
2,813

 
$
116

 
$
3,450

 
$
132

 
$
(306
)
 
$
3,392

Percentage of total
 
4
%
 
119
%
 
—
%
 
(23
)%
 
100
%
 
3
%
 
102
%
 
4
%
 
(9
)%
 
100
%
Percentage of total Company liabilities
 
—
%
 
2
%
 
—
%
 
—
 %
 
2
%
 
—
%
 
2
%
 
—
%
 
—
 %
 
2
%
 
 
(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, 2020 and 2019. Level 3 securities available for sale at September 30, 2020 and 2019 primarily consist of direct bank purchase bonds.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended
 
 
September 30, 2020
 
September 30, 2019
(Dollars in millions)
 
Trading Account Assets
 
Securities Available for Sale
 
Other Assets
 
Trading Account Liabilities
 
Other Liabilities
 
Trading Account Assets
 
Securities Available for Sale
 
Other Assets
 
Trading Account Liabilities
 
Other Liabilities
Asset (liability) balance, beginning of period
 
$
2

 
$
1,125

 
$
200

 
$
(2
)
 
$
(108
)
 
$
12

 
$
1,088

 
$
519

 
$
(12
)
 
$
(125
)
Total gains (losses) - realized/unrealized:
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
  
 
Included in income before taxes
 
1

 
—

 
(23
)
 
(1
)
 
(5
)
 
—

 
—

 
(18
)
 
—

 
—

Included in other comprehensive income
 
—

 
10

 
—

 
—

 
—

 
—

 
5

 
—

 
—

 
—

Purchases/additions
 
—

 
350

 
3

 
—

 
—

 
—

 
52

 
76

 
—

 
—

Sales
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(269
)
 
—

 
—

Settlements
 
(2
)
 
(4
)
 
—

 
2

 
108

 
—

 
(4
)
 
—

 
—

 
—

Transfers in (out) of level 3
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Asset (liability) balance, end of period
 
$
1

 
$
1,481

 
$
180

 
$
(1
)
 
$
(5
)
 
$
12

 
$
1,141

 
$
308

 
$
(12
)
 
$
(125
)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period
 
$
1

 
$
—

 
$
(23
)
 
$
(1
)
 
$
(5
)
 
$
—

 
$
—

 
$
(33
)
 
$
—

 
$
—

 
 
For the Nine Months Ended
 
 
September 30, 2020
 
September 30, 2019
(Dollars in millions)
 
Trading Account Assets
 
Securities Available for Sale
 
Other Assets
 
Trading Account Liabilities
 
Other Liabilities
 
Trading Account Assets
 
Securities Available for Sale
 
Other Assets
 
Trading Account Liabilities
 
Other Liabilities
Asset (liability) balance, beginning of period
 
$
8

 
$
1,131

 
$
316

 
$
(8
)
 
$
(124
)
 
$
13

 
$
1,331

 
$
277

 
$
(13
)
 
$
(118
)
Total gains (losses) - realized/unrealized):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Included in income before taxes
 
(2
)
 
—

 
(147
)
 
2

 
(3
)
 
2

 
—

 
(94
)
 
(2
)
 
(7
)
Included in other comprehensive income
 
—

 
11

 
—

 
—

 
—

 
—

 
25

 
—

 
—

 
—

Purchases/additions
 
—

 
380

 
11

 
—

 
—

 
—

 
56

 
394

 
—

 
—

Sales
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(269
)
 
—

 
—

Settlements
 
(5
)
 
(41
)
 
—

 
5

 
122

 
(3
)
 
(271
)
 
—

 
3

 
—

Transfers in (out) of level 3
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Asset (liability) balance, end of period
 
$
1

 
$
1,481

 
$
180

 
$
(1
)
 
$
(5
)
 
$
12

 
$
1,141

 
$
308

 
$
(12
)
 
$
(125
)
Changes in unrealized gains (losses) included in income before taxes for assets and liabilities still held at end of period
 
$
(2
)
 
$
—

 
$
(147
)
 
$
2

 
$
(3
)
 
$
2

 
$
—

 
$
(109
)
 
$
(2
)
 
$
(7
)
Significant Unobservable Inputs Level 3 Assets and Liabilities
he following table presents information about significant unobservable inputs related to the Company’s significant Level 3 assets and liabilities at September 30, 2020.
 
 
September 30, 2020
(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
 
$
937

 
Return on equity
 
Market-required return on capital
 
8.0-10.0
%
 
9.8
%
 
 
 
 
 
 
Probability of default
 
0.0-25.0

 
0.5

 
 
 
 
 
 
Loss severity
 
10.0-65.0

 
21.7
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, 2020 and 2019 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, 2020
 
For the Three Months Ended September 30, 2020
 
 For the Nine Months Ended September 30, 2020
(Dollars in millions)
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
Gains (Losses)
 
Gains (Losses)
Loans held for investment
 
$
106

 
$
—

 
$
—

 
$
106

 
$
(31
)
 
$
(98
)
Goodwill impairment
 
1,407

 
—

 
—

 
1,407

 
(357
)
 
(357
)
Other assets
 
101

 
—

 
—

 
101

 
(15
)
 
(70
)
Total
 
$
1,614

 
$
—

 
$
—

 
$
1,614

 
$
(403
)
 
$
(525
)
 
 
September 30, 2019
 
For the Three Months Ended September 30, 2019
 
 For the Nine Months Ended September 30, 2019
(Dollars in millions)
 
Fair Value
 
Level 1
 
Level 2
 
Level 3
 
Gains (Losses)
 
Gains (Losses)
Loans held for investment
 
$
36

 
$
—

 
$
—

 
$
36

 
$
(17
)
 
$
(20
)
Goodwill impairment
 
1,764

 
—

 
—

 
1,764

 
(1,614
)
 
(1,614
)
Other assets
 
260

 
—

 
—

 
260

 
(6
)
 
(21
)
Total
 
$
2,060

 
$
—

 
$
—

 
$
2,060

 
$
(1,637
)
 
$
(1,655
)
Carrying Amount and Estimated Fair Value of Financial Instruments
The 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 at September 30, 2020 and December 31, 2019.
 
 
September 30, 2020
(Dollars in millions)
 
Carrying
Amount
 
Fair
Value
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
15,187

 
$
15,187

 
$
15,187

 
$
—

 
$
—

Securities borrowed or purchased under resale agreements
 
17,535

 
17,537

 
—

 
17,537

 
—

Securities held to maturity
 
7,643

 
7,900

 
—

 
7,900

 
—

Loans held for investment(1)
 
82,662

 
84,404

 
—

 
—

 
84,404

Other assets
 
46

 
46

 
46

 
—

 
—

Liabilities
 
 
 
 
 
 
 
 
 
 
Time deposits
 
$
8,402

 
$
8,449

 
$
—

 
$
8,449

 
$
—

Securities loaned or sold under repurchase agreements
 
23,432

 
23,433

 
—

 
23,433

 
—

Commercial paper and other short-term borrowings
 
849

 
849

 
—

 
849

 
—

Long-term debt
 
15,150

 
15,520

 
—

 
15,520

 
—

Off-Balance Sheet Instruments
 
 
 
 
 
 
 
 
 
 
Commitments to extend credit and standby and commercial letters of credit
 
$
74

 
$
310

 
$
—

 
$
—

 
$
310

 
 
(1)
Excludes lease financing. The carrying amount is net of the allowance for loan losses.
 
 
December 31, 2019
(Dollars in millions)
 
Carrying
Amount
 
Fair
Value
 
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
9,641

 
$
9,641

 
$
9,641

 
$
—

 
$
—

Securities borrowed or purchased under resale agreements
 
23,943

 
23,946

 
—

 
23,946

 
—

Securities held to maturity
 
9,421

 
9,508

 
—

 
9,508

 
—

Loans held for investment(1)
 
86,687

 
87,506

 
—

 
—

 
87,506

Other assets
 
54

 
54

 
54

 
—

 
—

Liabilities
 
 
 
 
 
 
 
 
 
 
Time deposits
 
$
15,651

 
$
15,691

 
$
—

 
$
15,691

 
$
—

Securities loaned or sold under repurchase agreements
 
28,866

 
28,866

 
—

 
28,866

 
—

Commercial paper and other short-term borrowings
 
6,484

 
6,484

 
—

 
6,484

 
—

Long-term debt
 
17,129

 
17,344

 
—

 
17,344

 
—

Off-Balance Sheet Instruments
 
 
 
 
 
 
 
 
 
 
Commitments to extend credit and standby and commercial letters of credit
 
$
87

 
$
280

 
$
—

 
$
—

 
$
280

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