Fair Value Measurements

9 Months Ended

Sep. 30, 2019

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.

Equity securities, investment securities available-for-sale, derivatives and deferred compensation plan assets and 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 to the consolidated financial statements in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2018 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 Liabilities 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 September 30, 2019 and December 31, 2018.

(in millions)	Total		Level 1		Level 2		Level 3
September 30, 2019
Deferred compensation plan assets	$	92	$	92	$	—	$	—
Equity securities	49		49		—		—
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities	2,796		2,796		—		—
Residential mortgage-backed securities (a)	9,633		—		9,633		—
Total investment securities available-for-sale	12,429		2,796		9,633		—
Derivative assets:
Interest rate contracts	275		—		247		28
Energy derivative contracts	160		—		160		—
Foreign exchange contracts	13		—		13		—
Total derivative assets	448		—		420		28
Total assets at fair value	$	13,018	$	2,937	$	10,053	$	28
Derivative liabilities:
Interest rate contracts	$	43	$	—	$	43	$	—
Energy derivative contracts	156		—		156		—
Foreign exchange contracts	10		—		10		—
Total derivative liabilities	209		—		209		—
Deferred compensation plan liabilities	92		92		—		—
Total liabilities at fair value	$	301	$	92	$	209	$	—
December 31, 2018
Deferred compensation plan assets	$	88	$	88	$	—	$	—
Equity securities	43		43		—		—
Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities	2,727		2,727		—		—
Residential mortgage-backed securities (a)	9,318		—		9,318		—
Total investment securities available-for-sale	12,045		2,727		9,318		—
Derivative assets:
Interest rate contracts	67		—		58		9
Energy derivative contracts	189		—		189		—
Foreign exchange contracts	19		—		19		—
Total derivative assets	275		—		266		9
Total assets at fair value	$	12,451	$	2,858	$	9,584	$	9
Derivative liabilities:
Interest rate contracts	$	70	$	—	$	70	$	—
Energy derivative contracts	186		—		186		—
Foreign exchange contracts	13		—		13		—
Total derivative liabilities	269		—		269		—
Deferred compensation plan liabilities	88		88		—		—
Total liabilities at fair value	$	357	$	88	$	269	$	—

(a) Issued and/or guaranteed by U.S. government agencies or U.S. government-sponsored enterprises.

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 each of the three- and nine-month periods ended September 30, 2019 and 2018.

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three- and nine-month periods ended September 30, 2019 and 2018.

						Net Realized/Unrealized Gains (Losses) (Pretax) Recorded in Earnings (b)
	Balance  at Beginning of Period		Change in Classification (a)											Balance at End of Period
											Payments, Sales and Redemptions
(in millions)						Realized		Unrealized
Three Months Ended September 30, 2019
Derivative assets:
Interest rate contracts	$	21	$	—		$	1	$	7		$	(1	)	$	28
Three Months Ended September 30, 2018
Derivative assets:
Interest rate contracts	$	6	$	—		$	—	$	(4	)	$	—		$	2
Nine Months Ended September 30, 2019
Derivative assets:
Interest rate contracts	$	9	—			1		19			(1		)	28
Nine Months Ended September 30, 2018
Equity securities	$	—	$	44		$	—	$	—		$	(44	)	$	—
Investment securities available-for-sale:
State and municipal securities (c)	5		—			—		—			(5		)	—
Equity and other non-debt securities (c)	44		(44		)	—		—			—			—
Total investment securities available-for-sale	49		(44		)	—		—			(5		)	—
Derivative assets:
Interest rate contracts	14		—			—		(12		)	—			2

(a) Reflects the reclassification of equity securities resulting from the adoption of ASU 2016-01.

(b) Realized and unrealized gains and losses due to changes in fair value are recorded in other noninterest income on the Consolidated Statements of Comprehensive Income.

(c) Auction-rate securities.

Assets and Liabilities at Fair Value on a Nonrecurring Basis

The Corporation may be required 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.

The following table presents assets recorded at fair value on a nonrecurring basis at September 30, 2019 and December 31, 2018. No liabilities were recorded at fair value on a nonrecurring basis at September 30, 2019 and December 31, 2018.

(in millions)	Level 3
September 30, 2019
Loans:
Commercial	$	25
Total assets at fair value	$	25
December 31, 2018
Loans:
Commercial	$	33
Commercial mortgage	2
Total assets at fair value	$	35

Level 3 assets recorded at fair value on a nonrecurring basis at September 30, 2019 and December 31, 2018 included loans for which a specific allowance was established based on the fair value of collateral. 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.

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
September 30, 2019
Assets
Cash and due from banks	$	1,229		$	1,229		$	1,229	$	—	$	—
Interest-bearing deposits with banks	2,888			2,888			2,888		—		—
Loans held-for-sale	4			4			—		4		—
Total loans, net of allowance for loan losses (a)	50,839			51,008			—		—		51,008
Customers’ liability on acceptances outstanding	2			2			2		—		—
Restricted equity investments	248			248			248		—		—
Nonmarketable equity securities (b)	6			10			—		—		—
Liabilities
Demand deposits (noninterest-bearing)	27,134			27,134			—		27,134		—
Interest-bearing deposits	26,175			26,175			—		26,175		—
Customer certificates of deposit	2,853			2,842			—		2,842		—
Other time deposits	647			647			—		647		—
Total deposits	56,809			56,798			—		56,798		—
Short-term borrowings	51			51			51		—		—
Acceptances outstanding	2			2			2		—		—
Medium- and long-term debt	7,311			7,316			—		7,316		—
Credit-related financial instruments	(56		)	(56		)	—		—		(56		)
December 31, 2018
Assets
Cash and due from banks	$	1,390		$	1,390		$	1,390	$	—	$	—
Interest-bearing deposits with banks	3,171			3,171			3,171		—		—
Loans held-for-sale	3			3			—		3		—
Total loans, net of allowance for loan losses (a)	49,492			48,889			—		—		48,889
Customers’ liability on acceptances outstanding	4			4			4		—		—
Restricted equity investments	248			248			248		—		—
Nonmarketable equity securities (b)	6			11
Liabilities
Demand deposits (noninterest-bearing)	28,690			28,690			—		28,690		—
Interest-bearing deposits	24,740			24,740			—		24,740		—
Certificates of deposit	2,131			2,100			—		2,100		—
Total deposits	55,561			55,530			—		55,530		—
Short-term borrowings	44			44			44		—		—
Acceptances outstanding	4			4			4		—		—
Medium- and long-term debt	6,463			6,436			—		6,436		—
Credit-related financial instruments	(57		)	(57		)	—		—		(57		)

(a) Included $25 million and $35 million of impaired loans recorded at fair value on a nonrecurring basis at September 30, 2019 and December 31, 2018, respectively.

(b)

Certain investments that are measured at fair value using the net asset value have not been classified in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Balance Sheets.