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Fair Value Measurements
12 Months Ended
Dec. 31, 2014
Fair Value Disclosures [Abstract]  
Fair Value Measurements
FAIR VALUE MEASUREMENTS
The Corporation utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The determination of fair values of financial instruments often requires the use of estimates. In cases where quoted market values in an active market are not available, the Corporation uses present value techniques and other valuation methods to estimate the fair values of its financial instruments. These valuation methods require considerable judgment and the resulting estimates of fair value can be significantly affected by the assumptions made and methods used.
Trading securities, investment securities available-for-sale, derivatives and deferred compensation plan liabilities are recorded at fair value on a recurring basis. Additionally, from time to time, the Corporation may be required to record other assets and liabilities at fair value on a nonrecurring basis, such as impaired loans, other real estate (primarily foreclosed property), nonmarketable equity securities and certain other assets and liabilities. These nonrecurring fair value adjustments typically involve write-downs of individual assets or application of lower of cost or fair value accounting.
Refer to Note 1 for further information about the fair value hierarchy, descriptions of the valuation methodologies and key inputs used to measure financial assets and liabilities recorded at fair value, as well as a description of the methods and significant assumptions used to estimate fair value disclosures for financial instruments not recorded at fair value in their entirety on a recurring basis.
ASSETS AND LIABLILITIES RECORDED AT FAIR VALUE ON A RECURRING BASIS
The following tables present the recorded amount of assets and liabilities measured at fair value on a recurring basis as of December 31, 2014 and 2013.
(in millions)
Total
 
Level 1
 
Level 2
 
Level 3
 
December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading securities:
 
 
 
 
 
 
 
 
Deferred compensation plan assets
$
94

 
$
94

 
$

 
$

 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
526

 
526

 

 

 
Residential mortgage-backed securities (a)
7,274

 

 
7,274

 

 
State and municipal securities
23

 

 

 
23

(b)
Corporate debt securities
51

 

 
50

 
1

(b)
Equity and other non-debt securities
242

 
130

 

 
112

(b)
Total investment securities available-for-sale
8,116

 
656

 
7,324

 
136

 
Derivative assets:
 
 
 
 
 
 
 
 
Interest rate contracts
328

 

 
328

 

 
Energy derivative contracts
527

 

 
527

 

 
Foreign exchange contracts
39

 

 
39

 

 
Warrants
4

 

 

 
4

 
Total derivative assets
898

 

 
894

 
4

 
Total assets at fair value
$
9,108

 
$
750

 
$
8,218

 
$
140

 
Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate contracts
$
102

 
$

 
$
102

 
$

 
Energy derivative contracts
525

 

 
525

 

 
Foreign exchange contracts
34

 

 
34

 

 
Other
1

 

 

 
1

 
Total derivative liabilities
662

 

 
661

 
1

 
Deferred compensation plan liabilities
94

 
94

 

 

 
Total liabilities at fair value
$
756

 
$
94

 
$
661

 
$
1

 
(a)
Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
(b)
Auction-rate securities.
(in millions)
Total
 
Level 1
 
Level 2
 
Level 3
 
December 31, 2013
 
 
 
 
 
 
 
 
Trading securities:
 
 
 
 
 
 
 
 
Deferred compensation plan assets
$
96

 
$
96

 
$

 
$

 
Equity and other non-debt securities
7

 
7

 

 

 
Residential mortgage-backed securities (a)
2

 

 
2

 

 
State and municipal securities
3

 

 
3

 

 
Total trading securities
108

 
103

 
5

 

 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government agency securities
45

 
45

 

 

 
Residential mortgage-backed securities (a)
8,926

 

 
8,926

 

 
State and municipal securities
22

 

 

 
22

(b)
Corporate debt securities
56

 

 
55

 
1

(b)
Equity and other non-debt securities
258

 
122

 

 
136

(b)
Total investment securities available-for-sale
9,307

 
167

 
8,981

 
159

 
Derivative assets:
 
 
 
 
 
 
 
 
Interest rate contracts
380

 

 
380

 

 
Energy derivative contracts
105

 

 
105

 

 
Foreign exchange contracts
15

 

 
15

 

 
Warrants
3

 

 

 
3

 
Total derivative assets
503

 

 
500

 
3

 
Total assets at fair value
$
9,918

 
$
270

 
$
9,486

 
$
162

 
Derivative liabilities:
 
 
 
 
 
 
 
 
Interest rate contracts
$
133

 
$

 
$
133

 
$

 
Energy derivative contracts
102

 

 
102

 

 
Foreign exchange contracts
14

 

 
14

 

 
Other
2

 

 

 
2

 
Total derivative liabilities
251

 

 
249

 
2

 
Deferred compensation plan liabilities
96

 
96

 

 

 
Total liabilities at fair value
$
347

 
$
96

 
$
249

 
$
2

 
(a)
Residential mortgage-backed securities issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.
(b)
Auction-rate securities.
There were no transfers of assets or liabilities recorded at fair value on a recurring basis into or out of Level 1, Level 2 and Level 3 fair value measurements during the years ended December 31, 2014 and 2013.
The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the years ended December 31, 2014 and 2013.
 
 
 
Net Realized/Unrealized Gains (Losses) (Pretax)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance 
at
Beginning
of Period
 
Recorded in Earnings
Recorded in
Other
Comprehensive
Income (Loss)
 
 
 
 
 
Balance 
at
End of 
Period
 
 
 
 
 
 
 
 
 
 
 
(in millions)
 
Realized
Unrealized
 
Sales
 
Settlements

 
Year Ended December 31, 2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
22

 
$

 
$

 
$
1

(b)
 
$

 
$

 
$
23

Corporate debt securities (a)
1

 

 

 

 
 

 

 
1

Equity and other non-debt securities (a)
136

 
2

(c)

 
7

(b)
 
(33
)
 

 
112

Total investment securities
available-for-sale
159

 
2

(c)

 
8

(b)
 
(33
)
 

 
136

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants
3

 
7

(d)
1

(d)

 
 
(7
)
 

 
4

Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
2

 
(1
)
(c)

 

 
 

 
(2
)
 
1

Year Ended December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available-for-sale:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
State and municipal securities (a)
$
23

 
$

 
$

 
$
2

(b)
 
$
(3
)
 
$

 
$
22

Corporate debt securities (a)
1

 

 

 

 
 

 

 
1

Equity and other non-debt securities (a)
156

 
1

(c)

 
(1
)
(b)
 
(20
)
 

 
136

Total investment securities
available-for-sale
180

 
1

(c)

 
1

(b)
 
(23
)
 

 
159

Derivative assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants
3

 
9

(d)
1

(d)

 
 
(4
)
 
(6
)
 
3

Derivative liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
1

 

 
(2
)
(c)

 
 

 
(1
)
 
2

(a)
Auction-rate securities.
(b)
Recorded in "net unrealized gains (losses) on investment securities available-for-sale" in other comprehensive income.
(c)
Realized and unrealized gains and losses due to changes in fair value recorded in "net securities gains (losses)" on the consolidated statements of income.
(d)
Realized and unrealized gains and losses due to changes in fair value recorded in "other noninterest income" on the consolidated statements of income.
ASSETS AND LIABILITIES RECORDED AT FAIR VALUE ON A NONRECURRING BASIS
The Corporation may be required, from time to time, to record certain assets and liabilities at fair value on a nonrecurring basis. These include assets that are recorded at the lower of cost or fair value, and were recognized at fair value since it was less than cost at the end of the period. All assets recorded at fair value on a nonrecurring basis were classified as Level 3 at December 31, 2014 and 2013 and are presented in the following table. No liabilities were recorded at fair value on a nonrecurring basis at December 31, 2014 and 2013.
(in millions)
 
Level 3
December 31, 2014
 
 
Loans:
 
 
Commercial
 
$
38

Commercial mortgage
 
26

Total loans
 
64

Nonmarketable equity securities (a)
 
2

Other real estate
 
2

Total assets at fair value
 
$
68

December 31, 2013
 
 
Loans:
 
 
Commercial
 
$
43

Real estate construction
 
20

Commercial mortgage
 
61

International
 
4

Total loans
 
128

Nonmarketable equity securities (a)
 
2

Other real estate
 
5

Total assets at fair value
 
$
135


(a)
Commitments to fund additional investments in nonmarketable equity securities recorded at fair value on a nonrecurring basis were insignificant at December 31, 2014 and 2013.
Level 3 assets recorded at fair value on a nonrecurring basis at December 31, 2014 and 2013 included loans for which a specific allowance was established based on the fair value of collateral and other real estate for which fair value of the properties was less than the cost basis. For both asset classes, the unobservable inputs were the additional adjustments applied by management to the appraised values to reflect such factors as non-current appraisals and revisions to estimated time to sell. These adjustments are determined based on qualitative judgments made by management on a case-by-case basis and are not quantifiable inputs, although they are used in the determination of fair value.
The following table presents quantitative information related to the significant unobservable inputs utilized in the Corporation's Level 3 recurring fair value measurement as of December 31, 2014 and December 31, 2013. The Corporation's Level 3 recurring fair value measurements include auction-rate securities where fair value is determined using an income approach based on a discounted cash flow model. The inputs in the table below reflect management's expectation of continued illiquidity in the secondary auction-rate securities market due to a lack of market activity for the issuers remaining in the portfolio, a lack of market incentives for issuer redemptions, and the expectation for a continuing low interest rate environment.
 
 
 
Discounted Cash Flow Model
 
 
 
Unobservable Input
 
Fair Value
(in millions)
 
Discount Rate
 
Workout Period (in years)
December 31, 2014
 
 
 
 
 
State and municipal securities (a)
$
23

 
3% - 9%
 
1 - 3
Equity and other non-debt securities (a)
112

 
4% - 8%
 
1 - 2
December 31, 2013
 
 
 
 
 
State and municipal securities (a)
$
22

 
5% - 10%
 
3 - 4
Equity and other non-debt securities (a)
136

 
5% - 8%
 
2 - 3
(a)
Auction-rate securities.
ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS NOT RECORDED AT FAIR VALUE ON A RECURRING BASIS
The Corporation typically holds the majority of its financial instruments until maturity and thus does not expect to realize many of the estimated fair value amounts disclosed. The disclosures also do not include estimated fair value amounts for items that are not defined as financial instruments, but which have significant value. These include such items as core deposit intangibles, the future earnings potential of significant customer relationships and the value of trust operations and other fee generating businesses. The Corporation believes the imprecision of an estimate could be significant.
The carrying amount and estimated fair value of financial instruments not recorded at fair value in their entirety on a recurring basis on the Corporation’s consolidated balance sheets are as follows:
 
Carrying
Amount
 
Estimated Fair Value
(in millions)
 
Total
 
Level 1
 
Level 2
 
Level 3
December 31, 2014
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
1,026

 
$
1,026

 
$
1,026

 
$

 
$

Interest-bearing deposits with banks
5,045

 
5,045

 
5,045

 

 

Investment securities held-to-maturity
1,935

 
1,933

 

 
1,933

 

Loans held-for-sale
5

 
5

 

 
5

 

Total loans, net of allowance for loan losses (a)
47,999

 
47,932

 

 

 
47,932

Customers’ liability on acceptances outstanding
10

 
10

 
10

 

 

Nonmarketable equity securities (b)
11

 
18

 

 

 
18

Restricted equity investments
92

 
92

 
92

 

 

Liabilities
 
 
 
 
 
 
 
 
 
Demand deposits (noninterest-bearing)
27,224

 
27,224

 

 
27,224

 

Interest-bearing deposits
25,841

 
25,841

 

 
25,841

 

Customer certificates of deposit
4,421

 
4,411

 

 
4,411

 

Total deposits
57,486

 
57,476

 

 
57,476

 

Short-term borrowings
116

 
116

 
116

 

 

Acceptances outstanding
10

 
10

 
10

 

 

Medium- and long-term debt
2,679

 
2,681

 

 
2,681

 

Credit-related financial instruments
(85
)
 
(85
)
 

 

 
(85
)
December 31, 2013
 
 
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
 
 
Cash and due from banks
$
1,140

 
$
1,140

 
$
1,140

 
$

 
$

Interest-bearing deposits with banks
5,311

 
5,311

 
5,311

 

 

Loans held-for-sale
4

 
4

 

 
4

 

Total loans, net of allowance for loan losses (a)
44,872

 
44,801

 

 

 
44,801

Customers’ liability on acceptances outstanding
11

 
11

 
11

 

 

Nonmarketable equity securities (b)
12

 
19

 

 

 
19

Restricted equity investments
133

 
133

 
133

 

 

Liabilities
 
 
 
 
 
 
 
 
 
Demand deposits (noninterest-bearing)
23,875

 
23,875

 

 
23,875

 

Interest-bearing deposits
24,354

 
24,354

 

 
24,354

 

Customer certificates of deposit
5,063

 
5,055

 

 
5,055

 

Total deposits
53,292

 
53,284

 

 
53,284

 

Short-term borrowings
253

 
253

 
253

 

 

Acceptances outstanding
11

 
11

 
11

 

 

Medium- and long-term debt
3,543

 
3,540

 

 
3,540

 

Credit-related financial instruments
(88
)
 
(88
)
 

 

 
(88
)
(a)
Included $64 million and $128 million of impaired loans recorded at fair value on a nonrecurring basis at December 31, 2014 and 2013, respectively.
(b)
Included $2 million of nonmarketable equity securities recorded at fair value on a nonrecurring basis at both December 31, 2014 and 2013.