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. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement. For more information regarding the fair value hierarchy, refer to Note 1 of the Notes to Consolidated Financial Statements included in the Bancorp’s Annual Report on Form 10-K for the year ended December 31, 2022.


	Fair Value Measurements Using
March 31, 2023 ($ 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	$	2,689	—	—	2,689
Obligations of states and political subdivisions securities	—		3	—	3
Mortgage-backed securities:
Agency residential mortgage-backed securities	—		11,073	—	11,073
Agency commercial mortgage-backed securities	—		26,183	—	26,183
Non-agency commercial mortgage-backed securities	—		4,550	—	4,550
Asset-backed securities and other debt securities	—		5,331	—	5,331
Available-for-sale debt and other securities(a)	2,689		47,140	—	49,829
Trading debt securities:
U.S. Treasury and federal agencies securities	669		18	—	687
Obligations of states and political subdivisions securities	—		49	—	49
Agency residential mortgage-backed securities	—		11	—	11
Asset-backed securities and other debt securities	—		427	—	427
Trading debt securities	669		505	—	1,174
Equity securities	311		12	—	323
Residential mortgage loans held for sale	—		599	—	599
Residential mortgage loans(b)	—		—	128	128
Servicing rights	—		—	1,725	1,725
Derivative assets:
Interest rate contracts	3		1,140	11	1,154
Foreign exchange contracts	—		450	—	450
Commodity contracts	125		1,028	—	1,153
Derivative assets(c)	128		2,618	11	2,757
Total assets	$	3,797	50,874	1,864	56,535
Liabilities:
Derivative liabilities:
Interest rate contracts	$	8	1,629	8	1,645
Foreign exchange contracts	—		407	—	407
Equity contracts	—		—	192	192
Commodity contracts	34		1,022	—	1,056
Derivative liabilities(d)	42		3,058	200	3,300
Short positions:
U.S. Treasury and federal agencies securities	74		—	—	74
Asset-backed securities and other debt securities	—		148	—	148
Short positions(d)	74		148	—	222
Total liabilities	$	116	3,206	200	3,522


	Fair Value Measurements Using
December 31, 2022 ($ 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	$	2,495	—	—	2,495
Obligations of states and political subdivisions securities	—		18	—	18
Mortgage-backed securities:
Agency residential mortgage-backed securities	—		11,237	—	11,237
Agency commercial mortgage-backed securities	—		26,322	—	26,322
Non-agency commercial mortgage-backed securities	—		4,715	—	4,715
Asset-backed securities and other debt securities	—		5,842	—	5,842
Available-for-sale debt and other securities(a)	2,495		48,134	—	50,629
Trading debt securities:
U.S. Treasury and federal agencies securities	23		22	—	45
Obligations of states and political subdivisions securities	—		14	—	14
Agency residential mortgage-backed securities	—		8	—	8
Asset-backed securities and other debt securities	—		347	—	347
Trading debt securities	23		391	—	414
Equity securities	306		11	—	317
Residential mortgage loans held for sale	—		600	—	600
Residential mortgage loans(b)	—		—	123	123
Servicing rights	—		—	1,746	1,746
Derivative assets:
Interest rate contracts	12		1,222	7	1,241
Foreign exchange contracts	—		454	—	454
Commodity contracts	56		1,422	—	1,478
Derivative assets(c)	68		3,098	7	3,173
Total assets	$	2,892	52,234	1,876	57,002
Liabilities:
Derivative liabilities:
Interest rate contracts	$	7	1,970	8	1,985
Foreign exchange contracts	—		422	—	422
Equity contracts	—		—	195	195
Commodity contracts	92		1,258	—	1,350
Derivative liabilities(d)	99		3,650	203	3,952
Short positions:
U.S. Treasury and federal agencies securities	66		—	—	66
Asset-backed securities and other debt securities	—		112	—	112
Short positions(d)	66		112	—	178
Total liabilities	$	165	3,762	203	4,130

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 which primarily utilize quoted prices of securities with similar characteristics. 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.

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.

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 transferred from Level 2 to 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.

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 13 for further information on the assumptions used in the valuation of the Bancorp’s MSRs.

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. At March 31, 2023 and December 31, 2022, 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 17 for additional information on the Covered Litigation.

The net asset fair value of the Bancorp’s IRLCs at March 31, 2023 was $7 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 $2 million and $4 million, respectively. Immediate increases in current interest rates of 25 bps and 50 bps would result in decreases in the fair value of the IRLCs of approximately $3 million and $6 million, respectively. The decrease in fair value of IRLCs due to immediate 10% and 20% adverse changes in the assumed loan closing rates would both be approximately $1 million, and the increase in fair value due to immediate 10% and 20% favorable changes in the assumed loan closing rates would both be approximately $1 million. 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.

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 which primarily utilize quoted prices of securities with similar characteristics and therefore are classified within Level 2 of the valuation hierarchy. Level 2 securities include asset-backed and other debt securities.


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
For the three months ended March 31, 2023 ($ in millions)	Residential Mortgage Loans		Servicing Rights	Interest Rate Derivatives, Net(a)	Equity Derivatives	Total Fair Value
Balance, beginning of period	$	123	1,746	(1)	(195)	1,673
Total (losses) gains (realized/unrealized):(b)
Included in earnings	3		(53)	14	(31)	(67)
Purchases/originations	—		32	(2)	—	30
Settlements	(2)		—	(8)	34	24
Transfers into Level 3(c)	4		—	—	—	4
Balance, end of period	$	128	1,725	3	(192)	1,664
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 March 31, 2023	$	3	(35)	7	(31)	(56)


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
For the three months ended March 31, 2022 ($ in millions)	Residential Mortgage Loans		Servicing Rights	Interest Rate Derivatives, Net(a)	Equity Derivatives	Total Fair Value
Balance, beginning of period	$	154	1,121	4	(214)	1,065
Total gains (losses) (realized/unrealized):(b)
Included in earnings	(6)		137	2	(11)	122
Purchases/originations	—		186	(2)	—	184
Settlements	(9)		—	(6)	27	12
Transfers into Level 3(c)	6		—	—	—	6
Balance, end of period	$	145	1,444	(2)	(198)	1,389
The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains or losses relating to instruments still held at March 31, 2022	$	(6)	207	7	(11)	197


As of March 31, 2023 ($ in millions)
Financial Instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range of Inputs			Weighted-Average
Residential mortgage loans	$	128	Loss rate model	Interest rate risk factor	(22.2)	-	5.7%		(10.3)	%	(a)
				Credit risk factor	—	-	23.2%		0.5	%	(a)
								(Fixed)	5.6	%	(b)
Servicing rights	1,725		DCF	Prepayment speed	—	-	100.0%	(Adjustable)	20.3	%	(b)
								(Fixed)	629		(b)
				OAS (bps)	477	-	1,447	(Adjustable)	1,204		(b)
IRLCs, net	7		DCF	Loan closing rates	22.3	-	97.5%		82.5	%	(c)
Swap associated with the sale of Visa, Inc. Class B Shares	(192)		DCF	Timing of the resolution of the Covered Litigation	Q1 2024	-	Q1 2027	Q2 2025			(d)


As of March 31, 2022 ($ in millions)
Financial Instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range of Inputs			Weighted-Average
Residential mortgage loans	$	145	Loss rate model	Interest rate risk factor	(13.2)	-	5.9 %		(3.7)	%	(a)
				Credit risk factor	—	-	20.7 %		0.2	%	(a)
								(Fixed)	6.7	%	(b)
Servicing rights	1,444		DCF	Prepayment speed	—	-	100.0 %	(Adjustable)	19.7	%	(b)
								(Fixed)	749		(b)
				OAS (bps)	615	-	1,513	(Adjustable)	1,092		(b)
IRLCs, net	6		DCF	Loan closing rates	42.0	-	98.3 %		85.9	%	(c)
Swap associated with the sale of Visa, Inc. Class B Shares	(198)		DCF	Timing of the resolution of the Covered Litigation	Q1 2023	-	Q2 2025	Q2 2024			(d)

The following tables provide the fair value hierarchy and carrying amount of all assets that were held as of March 31, 2023 and 2022, and for which a nonrecurring fair value adjustment was recorded during the three months ended March 31, 2023 and 2022, 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
As of March 31, 2023 ($ in millions)	Level 1		Level 2	Level 3	Total	For the three months ended March 31, 2023
Commercial loans held for sale	$	—	—	21	21	—
Commercial loans and leases	—		—	160	160	(76)
Consumer and residential mortgage loans	—		—	138	138	(2)
OREO	—		—	2	2	—
Bank premises and equipment	—		—	5	5	(1)

Private equity investments	—		—	2	2	(1)
Total	$	—	—	328	328	(80)


	Fair Value Measurements Using					Total (Losses) Gains
As of March 31, 2022 ($ in millions)	Level 1		Level 2	Level 3	Total	For the three months ended March 31, 2022

Commercial loans and leases	—		—	178	178	(32)
Consumer and residential mortgage loans	—		—	117	117	—
OREO	—		—	1	1	1
Bank premises and equipment	—		—	1	1	—
Operating lease equipment	—		—	6	6	(2)
Private equity investments	—		9	2	11	(6)
Total	$	—	9	305	314	(39)

As of March 31, 2023 ($ in millions)

Financial Instrument

Fair Value

Valuation Technique

Significant Unobservable Inputs

Ranges of
Inputs

Weighted-Average

Commercial loans held for sale

Comparable company analysis

Market comparable transactions

Commercial loans and leases

160

Appraised value

Collateral value

Consumer and residential mortgage loans

138

Appraised value

Collateral value

OREO

Appraised value

Bank premises and equipment

Appraised value

Private equity investments

Comparable company analysis

Market comparable transactions

As of March 31, 2022 ($ in millions)

Financial Instrument

Fair Value

Valuation Technique

Significant Unobservable Inputs

Ranges of
Inputs

Weighted-Average

Commercial loans and leases

178

Appraised value

Collateral value

Consumer and residential mortgage loans

117

Appraised value

Collateral value

OREO

Appraised value

Bank premises and equipment

Appraised value

Operating lease equipment

Appraised value

Private equity investments

Comparable company analysis

Market comparable transactions

The Bancorp estimated the fair value of certain commercial loans held for sale during the three months ended March 31, 2023 and 2022. These valuations were based on 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).

During the three months ended March 31, 2023 and 2022, the Bancorp recorded nonrecurring adjustments to certain collateral-dependent portfolio loans and leases. When a 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 amortized cost basis of the loan or lease exceeds the estimated net realizable value of the collateral, then an ALLL is recognized, or a charge-off once the remaining amount is considered uncollectible.

During the three months ended March 31, 2023 and 2022, the Bancorp recorded nonrecurring adjustments to certain commercial and residential real estate properties and branch-related real estate no longer intended to be used for banking purposes 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. These losses include an immaterial amount in losses recorded as charge-offs on new OREO properties transferred from loans, during both the three months ended March 31, 2023 and 2022. These losses also included an immaterial amount recorded as negative fair value adjustments and $1 million recorded as positive fair value adjustments for properties subsequent to their transfer into OREO for the three months ended March 31, 2023 and 2022, respectively. 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.

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 7.

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.

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 did not recognize gains during the three months ended March 31, 2023 and recognized gains of $4 million during the three months ended March 31, 2022 resulting from observable price changes. The carrying value of the Bancorp’s private equity investments still held as of March 31, 2023 includes a cumulative $40 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 impairments of $1 million and $10 million for the three months ended March 31, 2023 and 2022, respectively. The carrying value of the Bancorp’s private equity investments still held as of March 31, 2023 includes a cumulative $35 million of impairment charges recognized since adoption of the measurement alternative to fair value on January 1, 2018.

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 March 31, 2023 and 2022 for which the fair value option was elected, as well as the changes in fair value of the underlying IRLCs, included losses of $8 million and $10 million, respectively. These losses are reported in mortgage banking net revenue in the Condensed 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 March 31, 2023 and December 31, 2022. 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 Condensed Consolidated Statements of Income.

The Bancorp may invest in certain hybrid financial instruments with embedded derivatives that are not clearly and closely related to the host contracts. The Bancorp elected to measure the entire instrument at fair value with changes in fair value recognized in earnings. The Bancorp did not hold these investments as of March 31, 2023 and December 31, 2022. Fair value changes recognized in earnings included gains of zero and $11 million for the three months ended March 31, 2023 and 2022, respectively, reported in securities (losses) gains, net in the Condensed Consolidated Statements of Income.


	Net Carrying Amount		Fair Value Measurements Using			Total Fair Value
As of March 31, 2023 ($ in millions)			Level 1	Level 2	Level 3
Financial assets:
Cash and due from banks	$	2,780	2,780	—	—	2,780
Other short-term investments	9,794		9,794	—	—	9,794
Other securities	890		—	890	—	890
Held-to-maturity securities	2		—	—	2	2
Loans and leases held for sale	150		—	—	154	154
Portfolio loans and leases:
Commercial loans and leases	76,096		—	—	76,271	76,271
Consumer and residential mortgage loans	44,418		—	—	43,170	43,170
Total portfolio loans and leases, net	$	120,514	—	—	119,441	119,441
Financial liabilities:
Deposits	$	162,975	—	162,924	—	162,924
Federal funds purchased	177		177	—	—	177
Other short-term borrowings	7,364		—	7,362	—	7,362
Long-term debt	12,868		11,900	394	—	12,294


	Net Carrying Amount		Fair Value Measurements Using			Total Fair Value
As of December 31, 2022 ($ in millions)			Level 1	Level 2	Level 3
Financial assets:
Cash and due from banks	$	3,466	3,466	—	—	3,466
Other short-term investments	8,351		8,351	—	—	8,351
Other securities	874		—	874	—	874
Held-to-maturity securities	5		—	—	5	5
Loans and leases held for sale	407		—	—	414	414
Portfolio loans and leases:
Commercial loans and leases	75,262		—	—	75,104	75,104
Consumer and residential mortgage loans	43,901		—	—	42,193	42,193
Total portfolio loans and leases, net	$	119,163	—	—	117,297	117,297
Financial liabilities:
Deposits	$	163,690	—	163,634	—	163,634
Federal funds purchased	180		180	—	—	180
Other short-term borrowings	4,838		—	4,829	—	4,829
Long-term debt	13,778		13,218	411	—	13,629