Fair Value

3 Months Ended

Mar. 31, 2023

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. For more information about our valuation methodologies for assets and liabilities measured at fair value and the fair value hierarchy, see Note 3 of our 2022 Form 10-K.

Quantitative Disclosure by Fair Value Hierarchy

Assets and liabilities measured at fair value by class on a recurring basis are summarized as follows:


(In millions)	March 31, 2023
	Level 1		Level 2		Level 3		Total
ASSETS
Available-for-sale securities:
U.S. Treasury, agencies and corporations	$	511	$	9,612	$	—	$	10,123
Municipal securities			1,447				1,447

Other debt securities			24				24
Total available-for-sale	511		11,083		—		11,594
Trading securities			12				12
Other noninterest-bearing investments:
Bank-owned life insurance			547				547
Private equity investments 1	3				82		85
Other assets:
Agriculture loan servicing and interest-only strips					18		18
Deferred compensation plan assets	109						109
Derivatives			369				369
Total assets	$	623	$	12,011	$	100	$	12,734
LIABILITIES
Securities sold, not yet purchased	$	281	$	—	$	—	$	281
Other liabilities:
Derivatives			353				353
Total liabilities	$	281	$	353	$	—	$	634

1 The Level 1 private equity investments (“PEIs”) relate to the portion of our Small Business Investment Company (“SBIC”) investments that are publicly traded.


(In millions)	December 31, 2022
	Level 1		Level 2		Level 3		Total
ASSETS
Available-for-sale securities:
U.S. Treasury, agencies and corporations	$	393	$	9,815	$	—	$	10,208
Municipal securities			1,634				1,634

Other debt securities			73				73

Total available-for-sale	393		11,522		—		11,915
Trading securities	395		70				465
Other noninterest-bearing investments:
Bank-owned life insurance			546				546
Private equity investments 1	4				81		85
Other assets:
Agriculture loan servicing and interest-only strips					14		14
Deferred compensation plan assets	114						114
Derivatives			386				386
Total assets	$	906	$	12,524	$	95	$	13,525
LIABILITIES
Securities sold, not yet purchased	$	187	$	—	$	—	$	187
Other liabilities:
Derivatives			451				451
Total liabilities	$	187	$	451	$	—	$	638

1 The Level 1 PEIs relate to the portion of our SBIC investments that are publicly traded.

Level 3 Valuations

Our Level 3 holdings include PEIs, agriculture loan servicing, and interest-only strips. For additional information regarding our Level 3 financial instruments, including the methods and significant assumptions used to estimate their fair value, see Note 3 of our 2022 Form 10-K.

Rollforward of Level 3 Fair Value Measurements

The following schedule presents a rollforward of assets and liabilities that are measured at fair value on a recurring basis using Level 3 inputs:


	Level 3 Instruments
	Three Months Ended
	March 31, 2023				March 31, 2022
(In millions)	Private equity investments		Ag loan servicing & interest-only strips		Private equity investments		Ag loan servicing & interest-only strips

Balance at beginning of period	$	81	$	14	$	66	$	12
Unrealized securities gains (losses), net	—		—		5		—
Other noninterest income (expense)	—		4		—		—
Purchases	1		—		6		—
Cost of investments sold	—		—		(3)		—

Transfers out 1	—		—		—		—
Balance at end of period	$	82	$	18	$	74	$	12

1 Represents the transfer of SBIC investments out of Level 3 and into Level 1 because they are publicly traded.

The rollforward of Level 3 instruments includes the following realized gains and losses recognized in securities gains (losses) on the consolidated statement of income for the periods presented:


(In millions)	Three Months Ended
	March 31, 2023		March 31, 2022


Securities gains (losses), net	$	—	$	(2)

Nonrecurring Fair Value Measurements

Certain assets and liabilities may be recorded at fair value on a nonrecurring basis, including impaired loans that have been measured based on the fair value of the underlying collateral, other real estate owned (“OREO”), and equity investments without readily determinable fair values. Nonrecurring fair value adjustments generally include changes in value resulting from observable price changes for equity investments without readily determinable fair values, write-downs of individual assets, or the application of lower of cost or fair value accounting. At March 31, 2023, and December 31, 2022, we had insignificant amounts of assets or liabilities that had fair value changes measured on a nonrecurring basis. For additional information regarding the measurement of fair value for impaired loans, collateral-dependent loans, and OREO, see Note 3 of our 2022 Form 10-K.

Fair Value of Certain Financial Instruments

The following schedule presents the carrying values and estimated fair values of certain financial instruments:


	March 31, 2023					December 31, 2022
(In millions)	Carrying value		Fair value		Level	Carrying value		Fair value		Level
Financial assets:
Held-to-maturity investment securities	$	10,961	$	11,210	2	$	11,126	$	11,239	2
Loans and leases (including loans held for sale), net of allowance	55,718		53,226		3	55,086		53,093		3
Financial liabilities:
Time deposits	7,337		7,319		2	2,309		2,269		2


Long-term debt	663		577		2	651		635		2

The schedule above does not include certain financial instruments that are recorded at fair value on a recurring basis, as well as certain financial assets and liabilities for which the carrying value approximates fair value. For additional information regarding the financial instruments within the scope of this disclosure, and the methods and significant assumptions used to estimate their fair value, see Note 3 of our 2022 Form 10-K.

- 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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