Fair Value Measurements

12 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

The Bancorp measures certain financial assets and liabilities at fair value in accordance with U.S. GAAP, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP also establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. For more information regarding the fair value hierarchy and how the Bancorp measures fair value, refer to Note 1.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following tables summarize assets and liabilities measured at fair value on a recurring basis as of:

	Fair Value Measurements Using
December 31, 2020 ($ in millions)	Level 1		Level 2	Level 3	Total Fair Value
Assets:
Available-for-sale debt and other securities:
U.S. Treasury and federal agencies securities	$	78	—	—	78
Obligations of states and political subdivisions securities	—		17	—	17
Mortgage-backed securities:
Agency residential mortgage-backed securities	—		11,907	—	11,907
Agency commercial mortgage-backed securities	—		18,221	—	18,221
Non-agency commercial mortgage-backed securities	—		3,590	—	3,590
Asset-backed securities and other debt securities	—		3,176	—	3,176
Available-for-sale debt and other securities(a)	78		36,911	—	36,989
Trading debt securities:
U.S. Treasury and federal agencies securities	81		—	—	81
Obligations of states and political subdivisions securities	—		10	—	10
Agency residential mortgage-backed securities	—		30	—	30
Asset-backed securities and other debt securities	—		439	—	439
Trading debt securities	81		479	—	560
Equity securities	293		20	—	313
Residential mortgage loans held for sale	—		1,481	—	1,481
Residential mortgage loans(b)	—		—	161	161
Servicing rights	—		—	656	656
Derivative assets:
Interest rate contracts	1		2,227	61	2,289
Foreign exchange contracts	—		255	—	255
Commodity contracts	24		351	—	375
Derivative assets(c)	25		2,833	61	2,919
Total assets	$	477	41,724	878	43,079
Liabilities:
Derivative liabilities:
Interest rate contracts	$	16	261	8	285
Foreign exchange contracts	—		227	—	227
Equity contracts	—		—	201	201
Commodity contracts	55		304	—	359
Derivative liabilities(d)	71		792	209	1,072
Short positions:
U.S. Treasury and federal agencies securities	63		—	—	63
Asset-backed securities and other debt securities	—		392	—	392
Short positions(d)	63		392	—	455
Total liabilities	$	134	1,184	209	1,527

(a)Excludes FHLB, FRB and DTCC restricted stock holdings totaling $40, $482 and $2, respectively, at December 31, 2020.

(b)Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.

(c)Included in other assets in the Consolidated Balance Sheets.

(d)Included in other liabilities in the Consolidated Balance Sheets.

	Fair Value Measurements Using
December 31, 2019 ($ in millions)	Level 1		Level 2	Level 3	Total Fair Value
Assets:
Available-for-sale debt and other securities:
U.S. Treasury and federal agencies securities	$	75	—	—	75
Obligations of states and political subdivisions securities	—		18	—	18
Mortgage-backed securities:
Agency residential mortgage-backed securities	—		14,115	—	14,115
Agency commercial mortgage-backed securities	—		15,693	—	15,693
Non-agency commercial mortgage-backed securities	—		3,365	—	3,365
Asset-backed securities and other debt securities	—		2,206	—	2,206
Available-for-sale debt and other securities(a)	75		35,397	—	35,472
Trading debt securities:
U.S. Treasury and federal agencies securities	2		—	—	2
Obligations of states and political subdivisions securities	—		9	—	9
Agency residential mortgage-backed securities	—		55	—	55
Asset-backed securities and other debt securities	—		231	—	231
Trading debt securities	2		295	—	297
Equity securities	554		10	—	564
Residential mortgage loans held for sale	—		1,264	—	1,264
Residential mortgage loans(b)	—		—	183	183
Servicing rights	—		—	993	993
Derivative assets:
Interest rate contracts	1		1,218	18	1,237
Foreign exchange contracts	—		165	—	165
Commodity contracts	37		234	—	271
Derivative assets(c)	38		1,617	18	1,673
Total assets	$	669	38,583	1,194	40,446
Liabilities:
Derivative liabilities:
Interest rate contracts	$	5	144	8	157
Foreign exchange contracts	—		151	—	151
Equity contracts	—		—	163	163
Commodity contracts	17		253	—	270
Derivative liabilities(d)	22		548	171	741
Short positions:
U.S. Treasury and federal agencies securities	49		—	—	49
Asset-backed securities and other debt securities	—		100	—	100
Short positions(d)	$	49	100	—	149
Total liabilities	$	71	648	171	890

(a)Excludes FHLB, FRB and DTCC restricted stock holdings totaling $76, $478 and $2, respectively, at December 31, 2019.

(b)Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.

(c)Included in other assets in the Consolidated Balance Sheets.

(d)Included in other liabilities in the Consolidated Balance Sheets.

The following is a description of the valuation methodologies used for significant instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

Available-for-sale debt and other securities, trading debt securities and equity securities

Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include U.S. Treasury securities and equity securities. If quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics or DCFs. Level 2 securities may include federal agencies securities, obligations of states and political subdivisions securities, agency residential mortgage-backed securities, agency and non-agency commercial mortgage-backed securities, asset-backed securities and other debt securities and equity securities. These securities are generally valued using a market approach based on observable prices of securities with similar characteristics.

Residential mortgage loans held for sale

For residential mortgage loans held for sale for which the fair value election has been made, fair value is estimated based upon mortgage-backed securities prices and spreads to those prices or, for certain ARM loans, DCF models that may incorporate the anticipated portfolio

composition, credit spreads of asset-backed securities with similar collateral and market conditions. The anticipated portfolio composition includes the effect of interest rate spreads and discount rates due to loan characteristics such as the state in which the loan was originated, the loan amount and the ARM margin. Residential mortgage loans held for sale that are valued based on mortgage-backed securities prices are classified within Level 2 of the valuation hierarchy as the valuation is based on external pricing for similar instruments. ARM loans classified as held for sale are also classified within Level 2 of the valuation hierarchy due to the use of observable inputs in the DCF model. These observable inputs include interest rate spreads from agency mortgage-backed securities market rates and observable discount rates.

Residential mortgage loans

Residential mortgage loans held for sale that are reclassified to held for investment are transferred from Level 2 to Level 3 of the fair value hierarchy. For residential mortgage loans for which the fair value election has been made, and that are reclassified from held for sale to held for investment, the fair value estimation is based on mortgage-backed securities prices, interest rate risk and an internally developed credit component. Therefore, these loans are classified within Level 3 of the valuation hierarchy. An adverse change in the loss rate or severity assumption would result in a decrease in fair value of the related loans.

Servicing rights

MSRs do not trade in an active, open market with readily observable prices. While sales of MSRs do occur, the precise terms and conditions typically are not readily available. Accordingly, the Bancorp estimates the fair value of MSRs using internal OAS models with certain unobservable inputs, primarily prepayment speed assumptions, OAS and weighted-average lives, resulting in a classification within Level 3 of the valuation hierarchy. Refer to Note 14 for further information on the assumptions used in the valuation of the Bancorp’s MSRs.

Derivatives

Exchange-traded derivatives valued using quoted prices and certain over-the-counter derivatives valued using active bids are classified within Level 1 of the valuation hierarchy. Most of the Bancorp’s derivative contracts are valued using DCF or other models that incorporate current market interest rates, credit spreads assigned to the derivative counterparties and other market parameters and, therefore, are classified within Level 2 of the valuation hierarchy. Such derivatives include basic and structured interest rate, foreign exchange and commodity swaps and options. Derivatives that are valued based upon models with significant unobservable market parameters are classified within Level 3 of the valuation hierarchy. During the years ended December 31, 2020 and 2019, derivatives classified as Level 3, which are valued using models containing unobservable inputs, consisted primarily of a total return swap associated with the Bancorp’s sale of Visa, Inc. Class B Shares as well as IRLCs, which utilize internally generated loan closing rate assumptions as a significant unobservable input in the valuation process.

Under the terms of the total return swap, the Bancorp will make or receive payments based on subsequent changes in the conversion rate of the Visa, Inc. Class B Shares into Class A Shares. Additionally, the Bancorp will make a quarterly payment based on Visa’s stock price and the conversion rate of the Visa, Inc. Class B Shares into Class A Shares until the date on which the Covered Litigation is settled. The fair value of the total return swap was calculated using a DCF model based on unobservable inputs consisting of management’s estimate of the probability of certain litigation scenarios, the timing of the resolution of the Covered Litigation and Visa litigation loss estimates in excess, or shortfall, of the Bancorp’s proportional share of escrow funds.

An increase in the loss estimate or a delay in the resolution of the Covered Litigation would result in an increase in the fair value of the derivative liability; conversely, a decrease in the loss estimate or an acceleration of the resolution of the Covered Litigation would result in a decrease in the fair value of the derivative liability. Refer to Note 19 for additional information on the Covered Litigation.

The net asset fair value of the IRLCs at December 31, 2020 was $57 million. Immediate decreases in current interest rates of 25 bps and 50 bps would result in increases in the fair value of the IRLCs of approximately $13 million and $25 million, respectively. Immediate increases of current interest rates of 25 bps and 50 bps would result in decreases in the fair value of the IRLCs of approximately $13 million and $26 million, respectively. The decrease in fair value of IRLCs due to immediate 10% and 20% adverse changes in the assumed loan closing rates would be approximately $6 million and $12 million, respectively, and the increase in fair value due to immediate 10% and 20% favorable changes in the assumed loan closing rates would be approximately $6 million and $12 million, respectively. These sensitivities are hypothetical and should be used with caution, as changes in fair value based on a variation in assumptions typically cannot be extrapolated because the relationship of the change in assumptions to the change in fair value may not be linear.

Short positions

Where quoted prices are available in an active market, short positions are classified within Level 1 of the valuation hierarchy. Level 1 securities include U.S. Treasury securities. If quoted market prices are not available, then fair values are estimated using pricing models, quoted prices of securities with similar characteristics or DCFs and therefore are classified within Level 2 of the valuation hierarchy. Level 2 securities include asset-backed and other debt securities.

The following tables are a reconciliation of assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
For the year ended December 31, 2020 ($ in millions)	Residential Mortgage Loans		Servicing Rights	Interest Rate Derivatives, Net(a)	Equity Derivatives	Total Fair Value
Balance, beginning of period	$	183	993	10	(163)	1,023
Total (losses) gains (realized/unrealized):(d)
Included in earnings	3		(565)	272	(103)	(393)
Purchases/originations	—		228	4	—	232
Settlements	(74)		—	(233)	65	(242)
Transfers into Level 3(b)	49		—	—	—	49
Balance, end of period	$	161	656	53	(201)	669
The amount of total (losses) gains for the period    included in earnings attributable to the change in    unrealized gains or losses relating to instruments    still held at December 31, 2020(c)	$	3	(227)	58	(103)	(269)

(a)Net interest rate derivatives include derivative assets and liabilities of $61 and $8, respectively, as of December 31, 2020.

(b)Includes certain residential mortgage loans originated as held for sale that were transferred to held for investment.

(c)Includes interest income and expense.

(d)There were no unrealized gains or losses for the period included in other comprehensive income for instruments still held at December 31, 2020.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
For the year ended December 31, 2019 ($ in millions)	Residential Mortgage Loans		Servicing Rights	Interest Rate Derivatives, Net(a)	Equity Derivatives	Total Fair Value
Balance, beginning of period	$	179	938	(1)	(125)	991
Total (losses) gains (realized/unrealized):
Included in earnings	(1)		(376)	145	(107)	(339)
Purchases/originations	—		431	(3)	—	428
Settlements	(31)		—	(131)	69	(93)
Transfers into Level 3(b)	36		—	—	—	36
Balance, end of period	$	183	993	10	(163)	1,023
The amount of total (losses) gains for the period    included in earnings attributable to the change in    unrealized gains or losses relating to instruments    still held at December 31, 2019(c)	$	(1)	(250)	20	(107)	(338)

(a)Net interest rate derivatives include derivative assets and liabilities of $18 and $8, respectively, as of December 31, 2019.

(b)Includes certain residential mortgage loans held for sale that were transferred to held for investment.

(c)Includes interest income and expense.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
For the year ended December 31, 2018 ($ in millions)	Residential Mortgage Loans		Servicing Rights	Interest Rate Derivatives, Net(a)	Equity Derivatives	Total Fair Value
Balance, beginning of period	$	137	858	3	(137)	861
Total (losses) gains (realized/unrealized):
Included in earnings	(3)		(83)	72	(59)	(73)
Purchases/originations	—		163	(5)	—	158
Settlements	(19)		—	(71)	71	(19)
Transfers into Level 3(b)	64		—	—	—	64
Balance, end of period	$	179	938	(1)	(125)	991
The amount of total (losses) gains for the period    included in earnings attributable to the change in    unrealized gains or losses relating to instruments    still held at December 31, 2018(c)	$	(3)	(4)	9	(59)	(57)

(a)Net interest rate derivatives include derivative assets and liabilities of $7 and $8, respectively, as of December 31, 2018.

(b)Includes certain residential mortgage loans held for sale that were transferred to held for investment.

(c)Includes interest income and expense.

The total losses and gains included in earnings for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) were recorded in the Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018 as follows:

($ in millions)	2020		2019	2018
Mortgage banking net revenue	$	(291)	(235)	(16)
Commercial banking revenue	2		3	2
Other noninterest income	(104)		(107)	(59)
Total losses	$	(393)	(339)	(73)

The total losses and gains included in earnings attributable to changes in unrealized gains and losses related to Level 3 assets and liabilities still held at December 31, 2020, 2019 and 2018 were recorded in the Consolidated Statements of Income as follows:

($ in millions)	2020		2019	2018
Mortgage banking net revenue	$	(167)	(233)	—
Commercial banking revenue	2		2	2
Other noninterest income	(104)		(107)	(59)
Total losses	$	(269)	(338)	(57)

The following tables present information about significant unobservable inputs related to the Bancorp’s material categories of Level 3 financial assets and liabilities measured at fair value on a recurring basis:

As of December 31, 2020 ($ in millions)
Financial Instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range of Inputs			Weighted-Average
Residential mortgage loans	$	161	Loss rate model	Interest rate risk factor	(8.2)	-	7.8%		1.7	%	(a)
				Credit risk factor	—	-	25.7%		0.6	%	(a)
								(Fixed)	17.8	%	(b)
Servicing rights	656		DCF	Prepayment speed	0.5	-	99.9%	(Adjustable)	22.6	%	(b)
								(Fixed)	723		(b)
				OAS (bps)	536	-	1,587	(Adjustable)	950		(b)
IRLCs, net	57		DCF	Loan closing rates	18.1	-	97.2%		60.8	%	(c)
Swap associated with the sale of Visa, Inc. Class B Shares	(201)		DCF	Timing of the resolution of the Covered Litigation	Q3 2022	-	Q3 2024		Q2 2023		(d)

(a) Unobservable inputs were weighted by the relative carrying value of the instruments.

(b) Unobservable inputs were weighted by the relative unpaid principal balance of the instruments.

(c) Unobservable inputs were weighted by the relative notional amount of the instruments.

(d) Unobservable inputs were weighted by the probability of the final funding date of the instruments.

As of December 31, 2019 ($ in millions)
Financial Instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range of Inputs			Weighted-Average
Residential mortgage loans	$	183	Loss rate model	Interest rate risk factor	(9.2)	-	9.8%		(0.2)	%
				Credit risk factor	—	-	26.5%		0.5	%
								(Fixed)	13.0	%
Servicing rights	993		DCF	Prepayment speed	0.5	-	97.0%	(Adjustable)	22.6	%
								(Fixed)	602
				OAS (bps)	507	-	1,513	(Adjustable)	921
IRLCs, net	18		DCF	Loan closing rates	7.3	-	97.1%		81.7	%
Swap associated with the sale of Visa, Inc. Class B Shares	(163)		DCF	Timing of the resolution of the Covered Litigation	Q1 2022	-	Q4 2023		Q3 2022

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.

The following tables provide the fair value hierarchy and carrying amount of all assets that were held as of December 31, 2020 and 2019 and for which a nonrecurring fair value adjustment was recorded during the years ended December 31, 2020 and 2019, and the related gains and losses from fair value adjustments on assets sold during the period as well as assets still held as of the end of the period.

	Fair Value Measurements Using					Total (Losses) Gains
As of December 31, 2020 ($ in millions)	Level 1		Level 2	Level 3	Total	For the year ended December 31, 2020
Commercial loans held for sale	$	—	8	16	24	(5)
Commercial and industrial loans	—		—	422	422	(176)
Commercial mortgage loans	—		—	78	78	(54)
Commercial leases	—		—	4	4	(13)
Consumer loans	—		—	159	159	1
OREO	—		—	20	20	(7)
Bank premises and equipment	—		—	26	26	(30)
Operating lease equipment	—		—	35	35	(6)
Private equity investments	—		27	69	96	18
Total	$	—	35	829	864	(272)
	Fair Value Measurements Using					Total (Losses) Gains
As of December 31, 2019 ($ in millions)	Level 1		Level 2	Level 3	Total	For the year ended December 31, 2019
Commercial and industrial loans	$	—	—	169	169	(96)
Commercial mortgage loans	—		—	12	12	—
Commercial leases	—		—	20	20	(6)
OREO	—		—	13	13	(6)
Bank premises and equipment	—		—	27	27	(27)
Operating lease equipment	—		—	6	6	(3)
Private equity investments	—		11	2	13	8
Total	$	—	11	249	260	(130)

The following tables present information as of December 31, 2020 and 2019 about significant unobservable inputs related to the Bancorp’s categories of Level 3 financial assets and liabilities measured on a nonrecurring basis:

As of December 31, 2020 ($ in millions)
Financial Instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Commercial loans held for sale	$	16	Comparable company analysis	Market comparable transactions	NM	NM
Commercial and industrial loans	422		Appraised value	Collateral value	NM	NM
Commercial mortgage loans	78		Appraised value	Collateral value	NM	NM
Commercial leases	4		Appraised value	Collateral value	NM	NM
Consumer loans	159		Appraised value	Collateral value	NM	NM
OREO	20		Appraised value	Appraised value	NM	NM
Bank premises and equipment	26		Appraised value	Appraised value	NM	NM
Operating lease equipment	35		Appraised value	Appraised value	NM	NM
Private equity investments	69		Comparable company analysis	Market comparable transactions	NM	NM
As of December 31, 2019 ($ in millions)
Financial Instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Ranges of   Inputs	Weighted-Average
Commercial and industrial loans	$	169	Appraised value	Collateral value	NM	NM
Commercial mortgage loans	12		Appraised value	Collateral value	NM	NM
Commercial leases	20		Appraised value	Collateral value	NM	NM
OREO	13		Appraised value	Appraised value	NM	NM
Bank premises and equipment	27		Appraised value	Appraised value	NM	NM
Operating lease equipment	6		Appraised value	Appraised value	NM	NM
Private equity investments	2		Comparable company analysis	Market comparable transactions	NM	NM

Commercial loans held for sale

The Bancorp estimated the fair value of certain commercial loans held for sale during the year ended December 31, 2020, resulting in a negative fair value adjustment totaling $5 million. These valuations were based on quoted prices for similar assets in active markets (Level 2 of the valuation hierarchy), appraisals of the underlying collateral or by applying unobservable inputs such as an estimated market discount to the unpaid principal balance of the loans or the appraised values of the assets (Level 3 of the valuation hierarchy).

Portfolio loans and leases

During the years ended December 31, 2020 and 2019, the Bancorp recorded nonrecurring impairment adjustments to certain collateral-dependent portfolio loans and leases. When the loan is collateral-dependent, the fair value of the loan is generally based on the fair value less cost to sell of the underlying collateral supporting the loan and therefore these loans were classified within Level 3 of the valuation hierarchy. In cases where the carrying value exceeds the fair value, an impairment loss is recognized. The fair values and recognized impairment losses are reflected in the previous tables.

OREO

During the years ended December 31, 2020 and 2019, the Bancorp recorded nonrecurring adjustments to certain commercial and residential real estate properties classified as OREO and measured at the lower of carrying amount or fair value. These nonrecurring losses were primarily due to declines in real estate values of the properties recorded in OREO. For both the years ended December 31, 2020 and 2019, these losses include $3 million in losses recorded as charge-offs on new OREO properties transferred from loans during the respective periods and $4 million and $3 million, respectively, recorded as negative fair value adjustments on OREO in other noninterest expense in the Consolidated Statements of Income subsequent to their transfer from loans. The fair value amounts are generally based on appraisals of the property values, resulting in a classification within Level 3 of the valuation hierarchy. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized. The previous tables reflect the fair value measurements of the properties before deducting the estimated costs to sell.

Bank premises and equipment

The Bancorp performs assessments of the recoverability of long-lived assets when events or changes in circumstances indicate that their carrying values may not be recoverable. These properties were written down to their lower of cost or market values. At least annually thereafter, the Bancorp will review these properties for market fluctuations. The fair value amounts were generally based on appraisals of the property values, resulting in a classification within Level 3 of the valuation hierarchy. For further information on bank premises and equipment, refer to Note 8.

Operating lease equipment

The Bancorp performs assessments of the recoverability of long-lived assets when events or changes in circumstances indicate that their carrying values may not be recoverable. When evaluating whether an individual asset is impaired, the Bancorp considers the current fair value of the asset, the changes in overall market demand for the asset and the rate of change in advancements associated with technological improvements that impact the demand for the specific asset under review. As part of this ongoing assessment, the Bancorp determined that the carrying values of certain operating lease equipment were not recoverable and as a result, the Bancorp recorded an impairment loss equal to the amount by which the carrying value of the assets exceeded the fair value. The fair value amounts were generally based on appraised values of the assets, resulting in a classification within Level 3 of the valuation hierarchy.

Private equity investments

The Bancorp accounts for its private equity investments using the measurement alternative to fair value, except for those accounted for under the equity method of accounting. Under the measurement alternative, the Bancorp carries each investment at its cost basis minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. The Bancorp recognized gains of $23 million and $13 million during the years ended December 31, 2020 and 2019, respectively, resulting from observable price changes. The carrying value of the Bancorp’s private equity investments still held as of December 31, 2020 includes a cumulative $69 million of positive adjustments as a result of observable price changes since January 1, 2018. Because these adjustments are based on observable transactions in inactive markets, they are classified in Level 2 of the fair value hierarchy.

For private equity investments which are accounted for using the measurement alternative to fair value, the Bancorp qualitatively evaluates each investment quarterly to determine if impairment may exist. If necessary, the Bancorp then measures impairment by estimating the value of its investment and comparing that to the investment’s carrying value, whether or not the Bancorp considers the impairment to be temporary. These valuations are typically developed using a DCF method, but other methods may be used if more appropriate for the circumstances. These valuations are based on unobservable inputs and therefore are classified in Level 3 of the fair value hierarchy. The Bancorp recognized impairment of $9 million and $5 million during the years ended December 31, 2020 and 2019, respectively. During the year ended December 31, 2020, the Bancorp recognized a gain of $4 million on the sale of certain private equity investments that previously recognized an impairment. The carrying value of the Bancorp’s private equity investments still held as of December 31, 2020 includes a cumulative $21 million of impairment charges recognized since adoption of the measurement alternative to fair value on January 1, 2018.

Fair Value Option

The Bancorp elected to measure certain residential mortgage loans held for sale under the fair value option as allowed under U.S. GAAP. Electing to measure residential mortgage loans held for sale at fair value reduces certain timing differences and better matches changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets. Management’s intent to sell residential mortgage loans classified as held for sale may change over time due to such factors as changes in the overall liquidity in markets or changes in characteristics specific to certain loans held for sale. Consequently, these loans may be reclassified to loans held for investment and maintained in the Bancorp’s loan portfolio. In such cases, the loans will continue to be measured at fair value.

Fair value changes recognized in earnings for residential mortgage loans held at December 31, 2020 and 2019 for which the fair value option was elected, as well as the changes in fair value of the underlying IRLCs, included gains of $75 million and $37 million, respectively. These gains are reported in mortgage banking net revenue in the Consolidated Statements of Income.

Valuation adjustments related to instrument-specific credit risk for residential mortgage loans measured at fair value negatively impacted the fair value of those loans by $1 million at both December 31, 2020 and 2019. Interest on loans measured at fair value is accrued as it is earned using the effective interest method and is reported as interest income in the Consolidated Statements of Income.

The following table summarizes the difference between the fair value and the unpaid principal balance for residential mortgage loans measured at fair value as of:

($ in millions)	Aggregate  Fair Value		Aggregate Unpaid Principal Balance	Difference
December 31, 2020
Residential mortgage loans measured at fair value	$	1,642	1,567	75
Past due loans of 90 days or more	3		3	—
Nonaccrual loans	—		—	—
December 31, 2019
Residential mortgage loans measured at fair value	$	1,447	1,410	37
Past due loans of 90 days or more	2		2	—
Nonaccrual loans	1		1	—

Fair Value of Certain Financial Instruments

The following tables summarize the carrying amounts and estimated fair values for certain financial instruments, excluding financial instruments measured at fair value on a recurring basis:

	Net Carrying		Fair Value Measurements Using			Total
As of December 31, 2020 ($ in millions)	Amount		Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	3,147	3,147	—	—	3,147
Other short-term investments	33,399		33,399	—	—	33,399
Other securities	524		—	524	—	524
Held-to-maturity securities	11		—	—	11	11
Loans and leases held for sale	3,260		—	—	3,269	3,269
Portfolio loans and leases:
Commercial and industrial loans	48,764		—	—	49,140	49,140
Commercial mortgage loans	10,200		—	—	9,968	9,968
Commercial construction loans	5,691		—	—	5,860	5,860
Commercial leases	2,886		—	—	2,842	2,842
Residential mortgage loans	15,473		—	—	16,884	16,884
Home equity	4,982		—	—	5,275	5,275
Indirect secured consumer loans	13,522		—	—	13,331	13,331
Credit card	1,755		—	—	1,934	1,934
Other consumer loans	2,895		—	—	3,098	3,098
Total portfolio loans and leases, net	$	106,168	—	—	108,332	108,332
Financial liabilities:
Deposits	$	159,081	—	159,094	—	159,094
Federal funds purchased	300		300	—	—	300
Other short-term borrowings	1,192		—	1,192	—	1,192
Long-term debt	14,973		15,606	923	—	16,529
	Net Carrying		Fair Value Measurements Using			Total
As of December 31, 2019 ($ in millions)	Amount		Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	3,278	3,278	—	—	3,278
Other short-term investments	1,950		1,950	—	—	1,950
Other securities	556		—	556	—	556
Held-to-maturity securities	17		—	—	17	17
Loans and leases held for sale	136		—	—	136	136
Portfolio loans and leases:
Commercial and industrial loans	49,981		—	—	51,128	51,128
Commercial mortgage loans	10,876		—	—	10,823	10,823
Commercial construction loans	5,045		—	—	5,249	5,249
Commercial leases	3,346		—	—	3,133	3,133
Residential mortgage loans	16,468		—	—	17,509	17,509
Home equity	6,046		—	—	6,315	6,315
Indirect secured consumer loans	11,485		—	—	11,331	11,331
Credit card	2,364		—	—	2,774	2,774
Other consumer loans	2,683		—	—	2,866	2,866
Unallocated ALLL	(121)		—	—	—	—
Total portfolio loans and leases, net	$	108,173	—	—	111,128	111,128
Financial liabilities:
Deposits	$	127,062	—	127,059	—	127,059
Federal funds purchased	260		260	—	—	260
Other short-term borrowings	1,011		—	1,011	—	1,011
Long-term debt	14,970		15,244	700	—	15,944