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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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, including residential mortgage loans held for sale for which the Bancorp has elected the fair value option as of:

	Fair Value Measurements Using
September 30, 2014 ($ in millions)		Level 1^(c)	Level 2^(c)	Level 3	Total Fair Value
Assets:
Available-for-sale securities:
U.S. Treasury and federal agencies	$	123	1,616	-	1,739
Obligations of states and political subdivisions		-	193	-	193
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	13,060	-	13,060
Agency commercial mortgage-backed securities		-	4,255	-	4,255
Non-agency commercial mortgage-backed securities		-	1,569	-	1,569
Asset-backed securities and other debt securities		-	1,370	-	1,370
Equity securities^(a)		84	42	-	126
Available-for-sale securities^(a)		207	22,105	-	22,312

Trading securities:
U.S. Treasury and federal agencies		-	14	-	14
Obligations of states and political subdivisions		-	31	1	32
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	9	-	9
Asset-backed securities and other debt securities		-	19	-	19
Equity securities		315	-	-	315
Trading securities		315	73	1	389

Residential mortgage loans held for sale		-	579	-	579
Residential mortgage loans^(b)		-	-	109	109
Derivative assets:
Interest rate contracts		1	767	10	778
Foreign exchange contracts		-	313	-	313
Equity contracts		-	-	358	358
Commodity contracts		12	71	-	83
Derivative assets		13	1,151	368	1,532
Total assets	$	535	23,908	478	24,921

Liabilities:
Derivative liabilities:
Interest rate contracts	$	2	281	3	286
Foreign exchange contracts		-	258	-	258
Equity contracts		-	-	53	53
Commodity contracts		8	72	-	80
Derivative liabilities		10	611	56	677

Short positions		26	4	-	30
Total liabilities	$	36	615	56	707


	Fair Value Measurements Using
December 31, 2013 ($ in millions)		Level 1^(c)	Level 2^(c)	Level 3	Total Fair Value
Assets:
Available-for-sale securities:
U.S. Treasury and federal agencies	$	26	1,644	-	1,670
Obligations of states and political subdivisions		-	192	-	192
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	12,284	-	12,284
Non-agency commercial mortgage-backed securities		-	1,395	-	1,395
Asset-backed securities and other debt securities		-	2,187	-	2,187
Equity securities^(a)		89	29	-	118
Available-for-sale securities^(a)		115	17,731	-	17,846

Trading securities:
U.S. Treasury and federal agencies		1	4	-	5
Obligations of states and political subdivisions		-	12	1	13
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	3	-	3
Asset-backed securities and other debt securities		-	7	-	7
Equity securities		315	-	-	315
Trading securities		316	26	1	343

Residential mortgage loans held for sale		-	890	-	890
Residential mortgage loans^(b)		-	-	92	92
Derivative assets:
Interest rate contracts		13	802	12	827
Foreign exchange contracts		-	276	-	276
Equity contracts		-	-	384	384
Commodity contracts		18	48	-	66
Derivative assets		31	1,126	396	1,553
Total assets	$	462	19,773	489	20,724

Liabilities:
Derivative liabilities:
Interest rate contracts	$	1	384	4	389
Foreign exchange contracts		-	252	-	252
Equity contracts		-	-	48	48
Commodity contracts		9	56	-	65
Derivative liabilities		10	692	52	754

Short positions		4	4	-	8
Total liabilities	$	14	696	52	762

Excludes FHLB and FRB restricted stock totaling $249 and $351, respectively, at September 30, 2014 and $402 and $349, respectively, at December 31, 2013.
Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.
During the three and nine months ended September 30, 2014 and for the year ended December 31, 2013, no assets or liabilities were transferred between Level 1 and Level 2

Reconciliation of Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

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)
			Residential	Interest Rate	Equity
For the three months ended September 30, 2014		Trading	Mortgage	Derivatives,	Derivatives,	Total
($ in millions)		Securities	Loans	Net^(a)	Net^(a)	Fair Value
Beginning balance	$	1	99	15	358		473
Total gains or losses (realized/unrealized):
Included in earnings		-	1	18	(57)		(38)
Settlements		-	(3)	(26)	4		(25)
Transfers into Level 3^(b)		-	12	-	-		12
Ending balance	$	1	109	7	305		422
The amount of total gains or losses for the period
included in earnings attributable to the change in
unrealized gains or losses relating to assets
still held at September 30, 2014^(c)	$	-	1	10	(57)		(46)


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Residential	Interest Rate	Equity
For the three months ended September 30, 2013		Trading	Mortgage	Derivatives,	Derivatives,	Total
($ in millions)		Securities	Loans	Net^(a)	Net^(a)	Fair Value
Beginning balance	$	1	83	(30)	250		304
Total gains or losses (realized/unrealized):
Included in earnings		-	-	43	5		48
Purchases		-	-	(1)	-		(1)
Settlements		-	(5)	9	3		7
Transfers into Level 3^(b)		-	11	-	-		11
Ending balance	$	1	89	21	258		369
The amount of total gains or losses for the period
included in earnings attributable to the change in
unrealized gains or losses relating to assets
still held at September 30, 2013^(c)	$	-	-	22	5		27

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Residential	Interest Rate	Equity
For the nine months ended September 30, 2014		Trading	Mortgage	Derivatives,	Derivatives,	Total
($ in millions)		Securities	Loans	Net^(a)	Net^(a)	Fair Value
Beginning balance	$	1	92	8	336		437
Total gains or losses (realized/unrealized):
Included in earnings		-	3	94	(45)		52
Settlements		-	(10)	(95)	14		(91)
Transfers into Level 3^(b)		-	24	-	-		24
Ending balance	$	1	109	7	305		422
The amount of total gains or losses for the period
included in earnings attributable to the change in
unrealized gains or losses relating to assets
still held at September 30, 2014^(c)	$	-	3	10	(45)		(32)


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Residential	Interest Rate	Equity
For the nine months ended September 30, 2013		Trading	Mortgage	Derivatives,	Derivatives,	Total
($ in millions)		Securities	Loans	Net^(a)	Net^(a)	Fair Value
Beginning balance	$	1	76	57	144	$	278
Total gains or losses (realized/unrealized):
Included in earnings		-	(1)	42	102		143
Purchases		-	-	(1)	-		(1)
Settlements		-	(12)	(77)	12		(77)
Transfers into Level 3^(b)		-	26	-	-		26
Ending balance	$	1	89	21	258	$	369
The amount of total gains or losses for the period
included in earnings attributable to the change in
unrealized gains or losses relating to assets
still held at September 30, 2013^(c)	$	-	(1)	45	102	$	146

Net interest rate derivatives include derivative assets and liabilities of $10 and $3, respectively, as of September 30, 2014 and $25 and $4, respectively, as of September 30, 2013. Net equity derivatives include derivative assets and liabilities of $358 and $53, respectively, as of September 30, 2014, and $293 and $35, respectively, as of September 30, 2013.
Includes residential mortgage loans held for sale that were transferred to held for investment.
Includes interest income and expense.

Total Gains and Losses Included in Earnings for Assets and Liabilites Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Level 3)

The total gains and losses 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		For the nine months
		ended September 30,		ended September 30,
($ in millions)		2014	2013	2014	2013
Mortgage banking net revenue	$	19	43	96	40
Corporate banking revenue		-	-	1	1
Other noninterest income		(57)	5	(45)	102
Total (losses) gains	$	(38)	48	52	143

The total gains and losses included in earnings attributable to changes in unrealized gains and losses related to Level 3 assets and liabilities still held at September 30, 2014 and 2013 were recorded in the Condensed Consolidated Statements of Income as follows:

		For the three months		For the nine months
		ended September 30,		ended September 30,
($ in millions)		2014	2013	2014	2013
Mortgage banking net revenue	$	11	22	13	43
Corporate banking revenue		-	-	-	1
Other noninterest income		(57)	5	(45)	102
Total (losses) gains	$	(46)	27	(32)	146

Quantitative information about significant unobservable level 3 fair value measurement inputs

The following tables present information as of September 30, 2014 and 2013 about significant unobservable inputs related to the Bancorp’s material categories of Level 3 financial assets and liabilities measured on a recurring basis:

As of September 30, 2014 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Residential mortgage loans	$	109	Loss rate model	Interest rate risk factor	(11.0) - 18.5%	4.5%
				Credit risk factor	0 - 58.6%	1.7%
IRLCs, net		10	Discounted cash flow	Loan closing rates	4.0 - 95.0%	65.0%
Stock warrant associated with Vantiv		358	Black-Scholes option	Expected term (years)	2.0 - 14.8	6.0
Holding, LLC			valuation model	Expected volatility^(a)	23.0 - 32.0%	26.6%
				Expected dividend rate	-	-
Swap associated with the sale of Visa, Inc.		(53)	Discounted cash flow	Timing of the resolution	6/30/15 -	NM
Class B shares				of the Covered Litigation	12/31/2019
				Proportional share of	$ 17	$ 17
				litigation loss estimate in
				excess of escrow funds

As of September 30, 2013 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Residential mortgage loans	$	89	Loss rate model	Interest rate risk factor	(19.9) - 12.2%	3.5%
				Credit risk factor	0 - 56.4%	3.3%
IRLCs, net		24	Discounted cash flow	Loan closing rates	3.1 - 97.2%	66.4%
Stock warrant associated with Vantiv		293	Black-Scholes option	Expected term (years)	2.00 - 15.8	5.1
Holding, LLC			valuation model	Expected volatility^(a)	21.0 - 33.4%	27.8%
				Expected dividend rate	-	-
Swap associated with the sale of Visa, Inc.		(35)	Discounted cash flow	Timing of the resolution	3/31/2014-	NM
Class B shares				of the Covered Litigation	3/31/2017

Based on historical and implied volatilities of Vantiv, Inc. and comparable companies assuming similar expected terms.

The following tables present information as of September 30, 2014 and 2013 about significant unobservable inputs related to the Bancorp’s material categories of Level 3 financial assets and liabilities measured on a nonrecurring basis:

As of September 30, 2014 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Commercial loans held for sale	$	25	Appraised value	Appraised value	NM	NM
				Cost to sell	NM	10.0%
Commercial and industrial loans		387	Appraised value	Collateral value	NM	NM
Commercial mortgage loans		49	Appraised value	Collateral value	NM	NM
Commercial construction loans		4	Appraised value	Collateral value	NM	NM
MSRs		933	Discounted cash flow	Prepayment speed	0 - 100%	(Fixed) 10.8% (Adjustable) 26.0%
				Discount rates	9.6 - 13.2%	(Fixed) 9.9% (Adjustable) 11.8%
OREO		77	Appraised value	Appraised value	NM	NM
Bank premises		4	Appraised value	Appraised value	NM	NM

As of September 30, 2013 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Commercial loans held for sale	$	0	Appraised value	Appraised value	NM	NM
				Cost to sell	NM	10.0%
Commercial and industrial loans		431	Appraised value	Collateral value	NM	NM
Commercial mortgage loans		63	Appraised value	Collateral value	NM	NM
Commercial construction loans		3	Appraised value	Collateral value	NM	NM
Commercial leases		1	Appraised value	Collateral value	NM	NM
MSRs		915	Discounted cash flow	Prepayment speed	0 - 100%	(Fixed) 11.4% (Adjustable) 25.7%
				Discount rates	9.4 - 18.0%	(Fixed) 10.4% (Adjustable) 11.6%
OREO		109	Appraised value	Appraised value	NM	NM

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The following tables represent those assets that were subject to fair value adjustments during the three and nine months ended September 30, 2014 and 2013 and still held as of the end of the period, 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	Total Losses
						For the three months	For the nine months
As of September 30, 2014 ($ in millions)		Level 1	Level 2	Level 3	Total	ended September 30, 2014	ended September 30, 2014
Commercial loans held for sale^(a)	$	-	-	25	25	(5)	(7)
Commercial and industrial loans		-	-	387	387	(135)	(259)
Commercial mortgage loans		-	-	49	49	(8)	(25)
Commercial construction loans		-	-	4	4	-	-
MSRs		-	-	933	933	21	(7)
OREO		-	-	77	77	(3)	(22)
Bank premises		-	-	4	4	-	(18)
Total	$	-	-	1,479	1,479	(130)	(338)


		Fair Value Measurements Using				Total Losses	Total (Losses) Gains
						For the three months	For the nine months
As of September 30, 2013 ($ in millions)		Level 1	Level 2	Level 3	Total	ended September 30, 2013	ended September 30, 2013
Commercial loans held for sale^(a)	$	-	-	-	-	-	(5)
Commercial and industrial loans		-	-	431	431	(103)	(134)
Commercial mortgage loans		-	-	63	63	(9)	(34)
Commercial construction loans		-	-	3	3	(4)	(6)
Commercial leases		-	-	1	1	-	-
MSRs		-	-	915	915	(1)	150
OREO		-	-	109	109	(8)	(37)
Total	$	-	-	1,522	1,522	(125)	(66)

Includes commercial nonaccrual loans held for sale.

Difference Between the Aggregate Fair Value and the Aggregate Unpaid Principal Balance for Residential Mortgage Loans Measured at Fair Value

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

		Aggregate	Aggregate Unpaid
($ in millions)		Fair Value	Principal Balance	Difference
September 30, 2014
Residential mortgage loans measured at fair value	$	688	665	23
Past due loans of 90 days or more		2	2	-
Nonaccrual loans		2	2	-

December 31, 2013
Residential mortgage loans measured at fair value		982	962	20
Past due loans of 90 days or more		1	2	(1)
Nonaccrual loans		2	2	-

Carrying Amounts and Estimated Fair Values for Certain Financial Instruments

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 September 30, 2014 ($ in millions)		Amount	Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	3,125	3,125	-	-	3,125
Other securities		600	-	600	-	600
Held-to-maturity securities		191	-	-	191	191
Other short-term investments		3,637	3,637	-	-	3,637
Loans held for sale		62	-	-	62	62
Portfolio loans and leases:
Commercial and industrial loans		40,372	-	-	41,228	41,228
Commercial mortgage loans		7,414	-	-	7,017	7,017
Commercial construction loans		1,687	-	-	1,408	1,408
Commercial leases		3,506	-	-	3,230	3,230
Residential mortgage loans		12,668	-	-	12,243	12,243
Home equity		8,896	-	-	8,999	8,999
Automobile loans		12,091	-	-	11,817	11,817
Credit card		2,216	-	-	2,475	2,475
Other consumer loans and leases		350	-	-	362	362
Unallocated allowance for loan and lease losses		(99)	-	-	-	-
Total portfolio loans and leases, net	$	89,101	-	-	88,779	88,779
Financial liabilities:
Deposits	$	97,292	-	97,296	-	97,296
Federal funds purchased		148	148	-	-	148
Other short-term borrowings		2,730	-	2,733	-	2,733
Long-term debt		14,336	14,405	584	-	14,989

		Net Carrying	Fair Value Measurements Using			Total
As of December 31, 2013 ($ in millions)		Amount	Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	3,178	3,178	-	-	3,178
Other securities		751	-	751	-	751
Held-to-maturity securities		208	-	-	208	208
Other short-term investments		5,116	5,116	-	-	5,116
Loans held for sale		54	-	-	54	54
Portfolio loans and leases:
Commercial and industrial loans		38,549	-	-	39,804	39,804
Commercial mortgage loans		7,854	-	-	7,430	7,430
Commercial construction loans		1,013	-	-	856	856
Commercial leases		3,572	-	-	3,261	3,261
Residential mortgage loans		12,399	-	-	11,541	11,541
Home equity		9,152	-	-	9,181	9,181
Automobile loans		11,961	-	-	11,748	11,748
Credit card		2,202	-	-	2,380	2,380
Other consumer loans and leases		348	-	-	361	361
Unallocated allowance for loan and lease losses		(110)	-	-	-	-
Total portfolio loans and leases, net	$	86,940	-	-	86,562	86,562
Financial liabilities:
Deposits	$	99,275	-	99,288	-	99,288
Federal funds purchased		284	284	-	-	284
Other short-term borrowings		1,380	-	1,380	-	1,380
Long-term debt		9,633	9,645	577	-	10,222

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

+ References+ Details

- Definition

Tabular disclosure of the fair value of financial instruments, including financial assets and financial liabilities, and the measurements of those instruments, assets, and liabilities.

+ References+ Details

- Definition

Tabular disclosure of the application of the fair value option for measurement and reporting of eligible financial assets and liabilities (as defined), as well as certain other eligible items (as defined) included in the statement of financial position, whether such option is elected for a single eligible item or a group of similar eligible items and is in addition to other disclosures concerning fair value which the company may be required to provide. Such disclosure might be expected to include: (1) for items included in the statement of financial position: (a) for each line item in the statement of financial position that includes an item or items for which the fair value option has been elected, provide the aggregate carrying amount of ineligible items included in each line item in the balance sheet, if any; (b) the difference between the aggregate fair value and the aggregate unpaid principal balance (assuming contractual principal amounts and fair value option elected) of: (i) loans and long-term receivables (other than securities otherwise reported at fair value) and (ii) long-term debt instruments; (c) for loans held as assets for which the fair value option has been elected: (i) the aggregate fair value of loans that are 90 days or more past due, (ii) if the policy is to recognize interest income separately from other changes in fair value, the aggregate fair value of loans in nonaccrual status, and (iii) the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both; (2) for items included in the income statement: (a) the amounts of gains and losses from fair value changes included in earnings and in which line in the income statement those gains and losses are reported whether or not combined with gains and losses from items required to be accounted for at fair value; (b) for loans and other receivables held as assets, the estimated amount of gains or losses included in earnings attributable to changes in instrument-specific credit risk; (c) for liabilities with fair values that have been significantly affected during the reporting period by changes in the instrument-specific credit risk, the estimated amount of gains and losses from fair value changes included in earnings that are attributable to changes in the instrument-specific credit risk; and (3) certain other disclosures as required or determined to be provided.

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