Fair Value Accounting (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Gains and Losses from Fair Value Changes Included in Consolidated Statement of Operations

For the three and nine months ended September 30, 2022 and 2021, unrealized gains and losses from fair value changes on junior subordinated debt were as follows:

Fair Value of Assets and Liabilities

The fair value of assets and liabilities measured at fair value on a recurring basis was determined using the following inputs as of the periods presented: 

	Fair Value Measurements at the End of the Reporting Period Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(in millions)
September 30, 2022
Assets:
Available-for-sale debt securities
CLO	$	—	$	2,641	$	—	$	2,641
Commercial MBS issued by GSEs	—		62		—		62
Corporate debt securities	—		391		—		391
Private label residential MBS	—		1,228		—		1,228
Residential MBS issued by GSEs	—		1,694		—		1,694
Tax-exempt	—		874		—		874
Other	25		45		—		70
Total AFS debt securities	$	25	$	6,935	$	—	$	6,960
Equity securities
CRA investments	$	24	$	25	$	—	$	49
Preferred stock	116		—		—		116
Total equity securities	$	140	$	25	$	—	$	165
Loans HFS	$	—	$	2,052	$	1	$	2,053
Mortgage servicing rights	—		—		1,044		1,044
Derivative assets (1)	—		312		3		315
Liabilities:
Junior subordinated debt (2)	$	—	$	—	$	60	$	60
Derivative liabilities (1)	—		250		31		281

(1)See "Note 11. Derivatives and Hedging Activities." In addition, the carrying value of loans is decreased by $22 million as of September 30, 2022 for the effective portion of the hedge, which relates to the fair value of the hedges put in place to mitigate against fluctuations in interest rates.

(2)Includes only the portion of junior subordinated debt that is recorded at fair value at each reporting period pursuant to the election of FVO treatment.

	Fair Value Measurements at the End of the Reporting Period Using:
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Fair Value
	(in millions)
December 31, 2021
Assets:
Available-for-sale debt securities
CLO	$	—	$	926	$	—	$	926
Commercial MBS issued by GSEs	—		69		—		69
Corporate debt securities	—		383		—		383
Private label residential MBS	—		1,508		—		1,508
Residential MBS issued by GSEs	—		1,993		—		1,993
Tax-exempt	—		1,215		—		1,215
U.S. treasury securities	13		—		—		13
Other	28		54		—		82
Total AFS debt securities	$	41	$	6,148	$	—	$	6,189
Equity securities
CRA investments	$	28	$	17	$	—	$	45
Preferred stock	114		—		—		114
Total equity securities	$	142	$	17	$	—	$	159
Loans - HFS	$	—	$	3,894	$	46	$	3,940
Mortgage servicing rights	—		—		698		698
Derivative assets (1)	—		39		11		50
Liabilities:
Junior subordinated debt (2)	$	—	$	—	$	67	$	67
Derivative liabilities (1)	—		98		2		100

(1)See "Note 11. Derivatives and Hedging Activities." In addition, the carrying value of loans is increased by $39 million as of December 31, 2021 for the effective portion of the hedge, which relates to the fair value of the hedges put in place to mitigate against fluctuations in interest rates.

(2)Includes only the portion of junior subordinated debt that is recorded at fair value at each reporting period pursuant to the election of FVO treatment.

Change in Level 3 Liabilities Measured at Fair Value on Recurring Basis

For the three and nine months ended September 30, 2022 and 2021, the change in Level 3 liabilities measured at fair value on a recurring basis included in OCI was as follows:

	Junior Subordinated Debt
	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in millions)
Beginning balance	$	(61.8)	$	(66.5)	$	(67.4)	$	(65.9)
Change in fair value (1)	2.1		(0.2)		7.7		(0.8)
Ending balance	$	(59.7)	$	(66.7)	$	(59.7)	$	(66.7)

Assets Measured at Fair Value on Nonrecurring Basis

The following table presents such assets carried on the Consolidated Balance Sheet by caption and by level within the ASC 825 hierarchy:

	Fair Value Measurements at the End of the Reporting Period Using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Active Markets for Similar Assets (Level 2)		Unobservable Inputs (Level 3)
	(in millions)
As of September 30, 2022:
Loans HFI	$	254	$	—	$	—	$	254
Other assets acquired through foreclosure	11		—		—		11
As of December 31, 2021:
Loans HFI	$	216	$	—	$	—	$	216
Other assets acquired through foreclosure	12		—		—		12

Estimated Fair Value of Financial Instruments

The estimated fair value of the Company’s financial instruments is as follows:

	September 30, 2022
	Carrying Amount		Fair Value
			Level 1		Level 2		Level 3		Total
	(in millions)
Financial assets:
Investment securities:
HTM	$	1,270	$	—	$	1,084	$	—	$	1,084
AFS	6,960		25		6,935		—		6,960
Equity	165		140		25		—		165
Derivative assets	315		—		312		3		315
Loans HFS	2,204		—		2,053		152		2,205
Loans HFI, net	51,897		—		—		50,068		50,068
Mortgage servicing rights	1,044		—		—		1,044		1,044
Accrued interest receivable	313		—		313		—		313
Financial liabilities:
Deposits	$	55,589	$	—	$	55,600	$	—	$	55,600
Other borrowings	6,319		—		6,217		—		6,217
Qualifying debt	889		—		743		72		815
Derivative liabilities	281		—		250		31		281
Accrued interest payable	20		—		20		—		20

	December 31, 2021
	Carrying Amount		Fair Value
			Level 1		Level 2		Level 3		Total
	(in millions)
Financial assets:
Investment securities:
HTM	$	1,107	$	—	$	1,146	$	—	$	1,146
AFS	6,189		41		6,148		—		6,189
Equity securities	159		142		17		—		159
Derivative assets	50		—		39		11		50
Loans HFS	5,635		—		3,894		1,760		5,654
Loans HFI, net	38,823		—		—		39,218		39,218
Mortgage servicing rights	698		—		—		698		698
Accrued interest receivable	228		—		228		—		228
Financial liabilities:
Deposits	$	47,612	$	—	$	47,616	$	—	$	47,616
Other borrowings	1,502		—		1,518		—		1,518
Qualifying debt	896		—		858		81		939
Derivative liabilities	100		—		98		2		100
Accrued interest payable	9		—		9		—		9