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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2023

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
September 30, 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	$	3,462	—	—	3,462
Obligations of states and political subdivisions securities	—		2	—	2
Mortgage-backed securities:
Agency residential mortgage-backed securities	—		9,876	—	9,876
Agency commercial mortgage-backed securities	—		24,461	—	24,461
Non-agency commercial mortgage-backed securities	—		4,325	—	4,325
Asset-backed securities and other debt securities	—		4,990	—	4,990
Available-for-sale debt and other securities(a)	3,462		43,654	—	47,116
Trading debt securities:
U.S. Treasury and federal agencies securities	610		31	—	641
Obligations of states and political subdivisions securities	—		43	—	43
Agency residential mortgage-backed securities	—		7	—	7
Asset-backed securities and other debt securities	—		531	—	531
Trading debt securities	610		612	—	1,222
Equity securities	238		12	—	250
Residential mortgage loans held for sale	—		497	—	497
Residential mortgage loans(b)	—		—	113	113
Servicing rights	—		—	1,822	1,822
Derivative assets:
Interest rate contracts	14		1,467	5	1,486
Foreign exchange contracts	—		706	—	706
Commodity contracts	89		1,026	—	1,115
Derivative assets(c)	103		3,199	5	3,307
Total assets	$	4,413	47,974	1,940	54,327
Liabilities:
Derivative liabilities:
Interest rate contracts	$	1	1,903	7	1,911
Foreign exchange contracts	—		644	—	644
Equity contracts	—		—	172	172
Commodity contracts	141		904	—	1,045
Derivative liabilities(d)	142		3,451	179	3,772
Short positions:
U.S. Treasury and federal agencies securities	108		—	—	108
Asset-backed securities and other debt securities	—		155	—	155
Short positions(d)	108		155	—	263
Total liabilities	$	250	3,606	179	4,035

(a)Excludes FHLB, FRB and DTCC restricted stock holdings totaling $281, $494 and $2, respectively, at September 30, 2023.

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

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

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


	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

(a)Excludes FHLB, FRB and DTCC restricted stock holdings totaling $381, $491 and $2, respectively, at December 31, 2022.

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

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

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

Reconciliation of Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs

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 three months ended September 30, 2023 ($ in millions)	Residential Mortgage Loans		Servicing Rights	Interest Rate Derivatives, Net(a)	Equity Derivatives	Total Fair Value
Balance, beginning of period	$	124	1,764	2	(204)	1,686
Total gains (losses) (realized/unrealized):(b)
Included in earnings	(7)		34	7	(10)	24
Purchases/originations	—		24	—	—	24
Settlements	(5)		—	(11)	42	26
Transfers into Level 3(c)	1		—	—	—	1
Balance, end of period	$	113	1,822	(2)	(172)	1,761
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 September 30, 2023	$	(7)	56	3	(10)	42

(a)Net interest rate derivatives include derivative assets and liabilities of $5 and $7, respectively, as of September 30, 2023.

(b)There were no unrealized gains or losses for the period included in other comprehensive income for instruments still held at September 30, 2023.

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


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
For the three months ended September 30, 2022 ($ in millions)	Residential Mortgage Loans		Servicing Rights	Interest Rate Derivatives, Net(a)	Equity Derivatives	Total Fair Value
Balance, beginning of period	$	133	1,582	8	(199)	1,524
Total gains (losses) (realized/unrealized):(b)
Included in earnings	(7)		48	(5)	(17)	19
Purchases/originations	—		102	(1)	—	101
Settlements	(4)		—	(9)	42	29
Transfers into Level 3(c)	3		—	—	—	3
Balance, end of period	$	125	1,732	(7)	(174)	1,676
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 September 30, 2022	$	(7)	80	(2)	(17)	54

(a)Net interest rate derivatives include derivative assets and liabilities of $7 and $14, respectively, as of September 30, 2022.

(b)There were no unrealized gains or losses for the period included in other comprehensive income for instruments still held at September 30, 2022.

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


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
For the nine months ended September 30, 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	(4)		(6)	32	(72)	(50)
Purchases/originations	—		82	(2)	—	80
Settlements	(11)		—	(31)	95	53
Transfers into Level 3(c)	5		—	—	—	5
Balance, end of period	$	113	1,822	(2)	(172)	1,761
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 September 30, 2023	$	(4)	53	3	(72)	(20)

(a)Net interest rate derivatives include derivative assets and liabilities of $5 and $7, respectively, as of September 30, 2023.

(b)There were no unrealized gains or losses for the period included in other comprehensive income for instruments still held at September 30, 2023.

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


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
For the nine months ended September 30, 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	(20)		217	8	(46)	159
Purchases/originations/acquisitions	—		394	1	—	395
Settlements	(19)		—	(20)	86	47
Transfers into Level 3(c)	10		—	—	—	10
Balance, end of period	$	125	1,732	(7)	(174)	1,676
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 September 30, 2022	$	(20)	338	1	(46)	273

(a)Net interest rate derivatives include derivative assets and liabilities of $7 and $14, respectively, as of September 30, 2022.

(b)There were no unrealized gains or losses for the period included in other comprehensive income for instruments still held at September 30, 2022.

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

Total Gains and Losses Included in Earnings for Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs

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 Condensed Consolidated Statements of Income as follows:


	For the three months ended September 30,			For the nine months ended September 30,
($ in millions)	2023		2022	2023	2022
Mortgage banking net revenue	$	33	35	19	202
Commercial banking revenue	1		1	3	3
Other noninterest income	(10)		(17)	(72)	(46)
Total (losses) gains	$	24	19	(50)	159

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 September 30, 2023 and 2022 were recorded in the Condensed Consolidated Statements of Income as follows:


	For the three months ended September 30,			For the nine months ended September 30,
($ in millions)	2023		2022	2023	2022
Mortgage banking net revenue	$	51	70	49	316
Commercial banking revenue	1		1	3	3
Other noninterest income	(10)		(17)	(72)	(46)
Total (losses) gains	$	42	54	(20)	273

Quantitative Information About Significant Unobservable Level 3 Fair Value Measurement Input, Recurring

The following tables present information as of September 30, 2023 and 2022 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 September 30, 2023 ($ in millions)
Financial Instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range of Inputs			Weighted-Average
Residential mortgage loans	$	113	Loss rate model	Interest rate risk factor	(28.7)	-	4.0%		(16.9)	%	(a)
				Credit risk factor	—	-	0.6%		0.2	%	(a)
								(Fixed)	5.0	%	(b)
Servicing rights	1,822		DCF	Prepayment speed	—	-	100.0%	(Adjustable)	20.3	%	(b)
								(Fixed)	582		(b)
				OAS (bps)	477	-	1,447	(Adjustable)	1,204		(b)
IRLCs, net	4		DCF	Loan closing rates	33.2	-	97.5%		82.3	%	(c)
Swap associated with the sale of Visa, Inc. Class B Shares	(172)		DCF	Timing of the resolution of the Covered Litigation	Q3 2024	-	Q1 2027	Q4 2025			(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 September 30, 2022 ($ in millions)
Financial Instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Range of Inputs			Weighted-Average
Residential mortgage loans	$	125	Loss rate model	Interest rate risk factor	(24.6)	-	2.6 %		(13.1)	%	(a)
				Credit risk factor	—	-	23.1 %		0.4	%	(a)
								(Fixed)	5.2	%	(b)
Servicing rights	1,732		DCF	Prepayment speed	—	-	100.0 %	(Adjustable)	20.3	%	(b)
								(Fixed)	723		(b)
				OAS (bps)	615	-	1,513	(Adjustable)	1,204		(b)
IRLCs, net	(3)		DCF	Loan closing rates	48.9	-	98.6 %		90.1	%	(c)
Swap associated with the sale of Visa, Inc. Class B Shares	(174)		DCF	Timing of the resolution of the Covered Litigation	Q4 2023	-	Q3 2026	Q1 2025			(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.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following tables provide the fair value hierarchy and carrying amount of all assets that were held as of September 30, 2023 and 2022, and for which a nonrecurring fair value adjustment was recorded during the three and nine months ended September 30, 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 September 30, 2023 ($ in millions)	Level 1		Level 2	Level 3	Total	For the three months ended September 30, 2023	For the nine months ended September 30, 2023

Commercial loans and leases	$	—	—	154	154	(21)	(118)
Consumer and residential mortgage loans	—		—	188	188	(2)	(10)
OREO	—		—	18	18	(7)	(8)
Bank premises and equipment	—		—	4	4	—	(2)

Private equity investments	—		—	—	—	—	(2)
Total	$	—	—	364	364	(30)	(140)


	Fair Value Measurements Using					Total Losses
As of September 30, 2022 ($ in millions)	Level 1		Level 2	Level 3	Total	For the three months ended September 30, 2022	For the nine months ended September 30, 2022

Commercial loans and leases	$	—	—	161	161	(42)	(89)
Consumer and residential mortgage loans	—		—	120	120	—	—
OREO	—		—	3	3	—	—
Bank premises and equipment	—		—	3	3	(1)	(2)
Operating lease equipment	—		—	2	2	—	(2)
Private equity investments	—		9	1	10	(1)	(8)
Total	$	—	9	290	299	(44)	(101)

Quantitative Information About Significant Unobservable Level 3 Fair Value Measurement Input, Nonrecurring

As of September 30, 2023 ($ in millions)

Financial Instrument

Fair Value

Valuation Technique

Significant Unobservable Inputs

Ranges of
Inputs

Weighted-Average

Commercial loans and leases

154

Appraised value

Collateral value

Consumer and residential mortgage loans

188

Appraised value

Collateral value

OREO

Appraised value

Bank premises and equipment

Appraised value

Private equity investments

—

Comparable company analysis

Market comparable transactions

As of September 30, 2022 ($ in millions)

Financial Instrument

Fair Value

Valuation Technique

Significant Unobservable Inputs

Ranges of
Inputs

Weighted-Average

Commercial loans and leases

161

Appraised value

Collateral value

Consumer and residential mortgage loans

120

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

Difference Between the Fair Value and the Unpaid Principal Balance for Loans

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:


September 30, 2023 ($ in millions)	Aggregate Fair Value		Aggregate Unpaid Principal Balance	Difference
Residential mortgage loans measured at fair value	$	610	634	(24)

Nonaccrual loans	2		2	—
December 31, 2022
Residential mortgage loans measured at fair value	$	723	733	(10)
Past due loans of 30-89 days	1		1	—
Nonaccrual loans	2		2	—

Carrying Amounts and Estimated Fair Values for 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 Amount		Fair Value Measurements Using			Total Fair Value
As of September 30, 2023 ($ in millions)			Level 1	Level 2	Level 3
Financial assets:
Cash and due from banks	$	2,837	2,837	—	—	2,837
Other short-term investments	18,923		18,923	—	—	18,923
Other securities	777		—	777	—	777
Held-to-maturity securities	2		—	—	2	2
Loans and leases held for sale	117		—	—	117	117
Portfolio loans and leases:
Commercial loans and leases	73,931		—	—	73,820	73,820
Consumer and residential mortgage loans	43,704		—	—	39,539	39,539
Total portfolio loans and leases, net	$	117,635	—	—	113,359	113,359
Financial liabilities:
Deposits	$	167,672	—	167,610	—	167,610
Federal funds purchased	205		205	—	—	205
Other short-term borrowings	4,594		—	4,600	—	4,600
Long-term debt	16,562		14,038	1,904	—	15,942


	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