Fair Value Measurements

6 Months Ended

Jun. 30, 2021

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.

Investment securities available-for-sale, derivatives, deferred compensation plans and equity securities with readily determinable fair values (primarily money market mutual funds) 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, 2020 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 June 30, 2021 and December 31, 2020.


(in millions)	Total		Level 1		Level 2		Level 3
June 30, 2021

Deferred compensation plan assets	$	112	$	112	$	—	$	—
Equity securities	63		63		—		—


Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities	3,844		3,844		—		—
Residential mortgage-backed securities (a)	11,993		—		11,993		—



Total investment securities available-for-sale	15,837		3,844		11,993		—
Derivative assets:
Interest rate contracts	367		—		338		29
Energy contracts	573		—		573		—
Foreign exchange contracts	15		—		15		—
Total derivative assets	955		—		926		29
Total assets at fair value	$	16,967	$	4,019	$	12,919	$	29
Derivative liabilities:
Interest rate contracts	$	67	$	—	$	67	$	—
Energy contracts	570		—		570		—
Foreign exchange contracts	10		—		10		—

Total derivative liabilities	647		—		647		—
Deferred compensation plan liabilities	112		112		—		—
Total liabilities at fair value	$	759	$	112	$	647	$	—
December 31, 2020
Deferred compensation plan assets	$	107	$	107	$	—	$	—
Equity securities	60		60		—		—

Investment securities available-for-sale:
U.S. Treasury and other U.S. government agency securities	4,658		4,658		—		—
Residential mortgage-backed securities (a)	10,370		—		10,370		—



Total investment securities available-for-sale	15,028		4,658		10,370		—
Derivative assets:
Interest rate contracts	531		—		492		39
Energy contracts	151		—		151		—
Foreign exchange contracts	18		—		18		—

Total derivative assets	700		—		661		39
Total assets at fair value	$	15,895	$	4,825	$	11,031	$	39
Derivative liabilities:
Interest rate contracts	$	61	$	—	$	61	$	—
Energy contracts	149		—		149		—
Foreign exchange contracts	19		—		19		—

Total derivative liabilities	229		—		229		—
Deferred compensation plan liabilities	107		107		—		—
Total liabilities at fair value	$	336	$	107	$	229	$	—

(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 3 fair value measurements during each of the three- and six-month periods ended June 30, 2021 and 2020.

The following table summarizes the changes in Level 3 assets and liabilities measured at fair value on a recurring basis for the three- and six-month periods ended June 30, 2021 and 2020.


			Net Realized/Unrealized Gains (Losses) (Pretax) Recorded in Earnings (a)
	Balance at Beginning of Period											Balance at End of Period
									Sales
(in millions)			Realized		Unrealized
Three Months Ended June 30, 2021






Derivative assets:
Interest rate contracts	$	24	$	—	$	5	$	—		$	29

Three Months Ended June 30, 2020






Derivative assets:
Interest rate contracts	$	43	$	—	$	1	$	—		$	44

Six Months Ended June 30, 2021






Derivative assets:
Interest rate contracts	$	39	$	—	$	(10)	$	—		$	29

Six Months Ended June 30, 2020






Derivative assets:
Interest rate contracts	$	22	$	—	$	22	$	—		$	44

(a)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.

Assets and Liabilities Recorded 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 June 30, 2021 and December 31, 2020. No liabilities were recorded at fair value on a nonrecurring basis at June 30, 2021 and December 31, 2020.


(in millions)	Level 3
June 30, 2021


Loans:
Commercial	$	114
Real estate construction	3
Commercial mortgage	14







Total assets at fair value	$	131
December 31, 2020


Loans:
Commercial	$	134

Commercial mortgage	16







Total assets at fair value	$	150

Level 3 assets recorded at fair value on a nonrecurring basis at June 30, 2021 and December 31, 2020 included both nonaccrual loans and TDRs 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
June 30, 2021
Assets
Cash and due from banks	$	1,008	$	1,008	$	1,008	$	—	$	—

Interest-bearing deposits with banks	15,493		15,493		15,493		—		—

Loans held-for-sale	8		8		—		8		—
Total loans, net of allowance for loan losses (a)	49,576		50,187		—		—		50,187
Customers’ liability on acceptances outstanding	4		4		4		—		—
Restricted equity investments	92		92		92		—		—
Nonmarketable equity securities (b)	6		10
Liabilities
Demand deposits (noninterest-bearing)	40,514		40,514		—		40,514		—
Interest-bearing deposits	33,437		33,437		—		33,437		—
Customer certificates of deposit	2,115		2,114		—		2,114		—
Total deposits	76,066		76,065		—		76,065		—

Acceptances outstanding	4		4		4		—		—
Medium- and long-term debt	2,854		2,919		—		2,919		—
Credit-related financial instruments	(51)		(51)		—		—		(51)
December 31, 2020
Assets
Cash and due from banks	$	1,031	$	1,031	$	1,031	$	—	$	—

Interest-bearing deposits with banks	14,736		14,736		14,736		—		—

Loans held-for-sale	5		5		—		5		—
Total loans, net of allowance for loan losses (a)	51,343		50,601		—		—		50,601
Customers’ liability on acceptances outstanding	1		1		1		—		—
Restricted equity investments	207		207		207		—		—
Nonmarketable equity securities (b)	5		9
Liabilities
Demand deposits (noninterest-bearing)	39,420		39,420		—		39,420		—
Interest-bearing deposits	31,316		31,316		—		31,316		—
Customer certificates of deposit	2,133		2,133		—		2,133		—

Total deposits	72,869		72,869		—		72,869		—

Acceptances outstanding	1		1		1		—		—
Medium- and long-term debt	5,728		5,790		—		5,790		—
Credit-related financial instruments	(68)		(68)		—		—		(68)

(a)Included $131 million and $150 million of loans recorded at fair value on a nonrecurring basis at June 30, 2021 and December 31, 2020, 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.

- 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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