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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2015

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, 2015 ($ in millions)		Level 1^(c)	Level 2^(c)	Level 3	Total Fair Value
Assets:
Available-for-sale and other securities:
U.S. Treasury and federal agencies securities	$	25	1,098	-	1,123
Obligations of states and political subdivisions securities		-	142	-	142
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	14,879	-	14,879
Agency commercial mortgage-backed securities		-	7,838	-	7,838
Non-agency commercial mortgage-backed securities		-	2,757	-	2,757
Asset-backed securities and other debt securities		-	1,356	-	1,356
Equity securities^(a)		82	19	-	101
Available-for-sale and other securities^(a)		107	28,089	-	28,196
Trading securities:
U.S. Treasury and federal agencies securities		-	8	-	8
Obligations of states and political subdivisions securities		-	18	-	18
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	5	-	5
Non-agency residential mortgage-backed securities		-	1	-	1
Asset-backed securities and other debt securities		-	11	-	11
Equity securities		331	-	-	331
Trading securities		331	43	-	374
Residential mortgage loans held for sale		-	617	-	617
Residential mortgage loans^(b)		-	-	173	173
Derivative assets:
Interest rate contracts		1	1,129	19	1,149
Foreign exchange contracts		-	464	-	464
Equity contracts		-	-	630	630
Commodity contracts		65	244	-	309
Derivative assets		66	1,837	649	2,552
Total assets	$	504	30,586	822	31,912
Liabilities:
Derivative liabilities:
Interest rate contracts	$	10	366	3	379
Foreign exchange contracts		-	409	-	409
Equity contracts		-	-	58	58
Commodity contracts		37	262	-	299
Derivative liabilities		47	1,037	61	1,145
Short positions		13	4	-	17
Total liabilities	$	60	1,041	61	1,162

	Fair Value Measurements Using
December 31, 2014 ($ in millions)		Level 1^(c)	Level 2^(c)	Level 3	Total Fair Value
Assets:
Available-for-sale and other securities:
U.S. Treasury and federal agencies securities	$	25	1,607	-	1,632
Obligations of states and political subdivisions securities		-	192	-	192
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	12,404	-	12,404
Agency commercial mortgage-backed securities		-	4,565	-	4,565
Non-agency commercial mortgage-backed securities		-	1,550	-	1,550
Asset-backed securities and other debt securities		-	1,362	-	1,362
Equity securities^(a)		84	19	-	103
Available-for-sale and other securities^(a)		109	21,699	-	21,808
Trading securities:
U.S. Treasury and federal agencies securities		-	14	-	14
Obligations of states and political subdivisions securities		-	8	-	8
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	9	-	9
Asset-backed securities and other debt securities		-	13	-	13
Equity securities		316	-	-	316
Trading securities		316	44	-	360
Residential mortgage loans held for sale		-	561	-	561
Residential mortgage loans^(b)		-	-	108	108
Derivative assets:
Interest rate contracts		-	888	12	900
Foreign exchange contracts		-	417	-	417
Equity contracts		-	-	415	415
Commodity contracts		68	280	-	348
Derivative assets		68	1,585	427	2,080
Total assets	$	493	23,889	535	24,917
Liabilities:
Derivative liabilities:
Interest rate contracts	$	6	276	2	284
Foreign exchange contracts		-	372	-	372
Equity contracts		-	-	49	49
Commodity contracts		58	280	-	338
Derivative liabilities		64	928	51	1,043
Short positions		16	5	-	21
Total liabilities	$	80	933	51	1,064

Excludes FHLB and FRB restricted stock totaling $248 and $352, respectively, at December 31, 2014.
Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.
During the year ended December 31, 2014, no assets or liabilities were transferred between Level 1 and Level 2.

^[1]

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, 2015		Trading	Mortgage	Derivatives,	Derivatives,	Total
($ in millions)		Securities	Loans	Net^(a)	Net^(a)	Fair Value
Beginning balance	$	-	178	10	445		633
Total gains (realized/unrealized):
Included in earnings		-	1	38	122		161
Settlements		-	(8)	(32)	5		(35)
Transfers into Level 3^(b)		-	2	-	-		2
Ending balance	$	-	173	16	572		761
The amount of total gains for the period
included in earnings attributable to the change in
unrealized gains or losses relating to assets
still held at September 30, 2015^(c)	$	-	1	19	122		142

Net interest rate derivatives include derivative assets and liabilities of $19 and $3, respectively, as of September 30, 2015. Net equity derivatives include derivative assets and liabilities of $630 and $58, respectively, as of September 30, 2015.
Includes certain residential mortgage loans held for sale that were transferred to held for investment.
Includes interest income and expense.

	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)

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

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
			Residential	Interest Rate	Equity
For the nine months ended September 30, 2015		Trading	Mortgage	Derivatives,	Derivatives,	Total
($ in millions)		Securities	Loans	Net^(a)	Net^(a)	Fair Value
Beginning balance	$	-	108	10	366		484
Total gains (realized/unrealized):
Included in earnings		-	2	90	188		280
Purchases		-	-	(1)	-		(1)
Settlements		-	(23)	(83)	18		(88)
Transfers into Level 3^(b)		-	86	-	-		86
Ending balance	$	-	173	16	572		761
The amount of total gains for the period
included in earnings attributable to the change in
unrealized gains or losses relating to assets
still held at September 30, 2015^(c)	$	-	2	20	188		210

Net interest rate derivatives include derivative assets and liabilities of $19 and $3, respectively, as of September 30, 2015. Net equity derivatives include derivative assets and liabilities of $630 and $58, respectively, as of September 30, 2015.
Includes certain residential mortgage loans held for sale that were transferred to held for investment.
Includes interest income and expense.


	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)

Net interest rate derivatives include derivative assets and liabilities of $10 and $3, respectively, as of September 30, 2014. Net equity derivatives include derivative assets and liabilities of $358 and $53, respectively, as of September 30, 2014.
Includes certain 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 ended		For the nine months ended
		September 30,		September 30,
($ in millions)		2015	2014	2015	2014
Mortgage banking net revenue	$	39	19	91	96
Corporate banking revenue		-	-	1	1
Other noninterest income		122	(57)	188	(45)
Total gains (losses)	$	161	(38)	280	52


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, 2015 and 2014 were recorded in the Condensed Consolidated Statements of Income as follows:

		For the three months ended		For the nine months ended
		September 30,		September 30,
($ in millions)		2015	2014	2015	2014
Mortgage banking net revenue	$	20	11	21	13
Corporate banking revenue		-	-	1	-
Other noninterest income		122	(57)	188	(45)
Total gains (losses)	$	142	(46)	210	(32)

Quantitative information about significant unobservable level 3 fair value measurement inputs

The following tables present information as of September 30, 2015 and 2014 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, 2015 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Residential mortgage loans	$	173	Loss rate model	Interest rate risk factor	(8.0) - 16.3%	4.0%
				Credit risk factor	0 - 80.5%	0.9%
IRLCs, net		19	Discounted cash flow	Loan closing rates	14.9 - 87.6%	61.3%
Stock warrant associated with Vantiv		630	Black-Scholes option	Expected term (years)	2.0 - 13.8	5.9
Holding, LLC			valuation model	Expected volatility^(a)	22.7 - 32.4%	26.7%
Swap associated with the sale of Visa, Inc.		(58)	Discounted cash flow	Timing of the resolution	12/31/16 -	NM
Class B shares				of the Covered Litigation	3/31/2021

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

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%
Swap associated with the sale of Visa, Inc.		(53)	Discounted cash flow	Timing of the resolution	6/30/2015-	NM
Class B shares				of the Covered Litigation	12/31/2019
				Proportional share of	$17	$17
				litigation loss estimate in
				excess of escrow funds

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, 2015 and 2014 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, 2015 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Commercial loans held for sale	$	14	Discounted cash flow	Discount spread	NM	4.4%

Residential mortgage loans held for sale		96	Loss rate model	Interest rate risk factor	(7.5)-0.1%	(1.6)%
				Credit risk factor	NM	0.1%
Automobile loans held for sale		2	Discounted cash flow	Discount spread	NM	3.1%
Credit cards held for sale		4	Comparable transactions	Estimated sales proceeds from	NM	NM
				comparable transactions
Commercial and industrial loans		290	Appraised value	Collateral value	NM	NM
Commercial mortgage loans		112	Appraised value	Collateral value	NM	NM
Commercial construction loans		9	Appraised value	Collateral value	NM	NM
Commercial leases		-	Appraised value	Collateral value	NM	NM
Residential mortgage loans		55	Appraised value	Appraised value	NM	NM
MSRs		756	Discounted cash flow	Prepayment speed	1.0 - 100%	(Fixed) 11.7% (Adjustable) 32.7%
				OAS spread (bps)	304-1,525	(Fixed) 706 (Adjustable) 668
OREO		64	Appraised value	Appraised value	NM	NM
Bank premises		79	Appraised value	Appraised value	NM	NM
Operating lease equipment		53	Appraised value	Appraised value	NM	NM

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
Commercial leases		-	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

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, 2015 and 2014 and for which a nonrecurring fair value adjustment was recorded during the three and nine months ended September 30, 2015 and 2014, 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	Total (Losses) Gains
						For the three months	For the nine months
As of September 30, 2015 ($ in millions)		Level 1	Level 2	Level 3	Total	ended September 30, 2015	ended September 30, 2015
Commercial loans held for sale	$	-	-	14	14	-	3
Residential mortgage loans held for sale		-	-	96	96	-	(2)
Automobile loans held for sale		-	-	2	2	-	-
Credit cards held for sale		-	-	4	4	(1)	(1)
Commercial and industrial loans		-	-	290	290	(57)	(98)
Commercial mortgage loans		-	-	112	112	(19)	(36)
Commercial construction loans		-	-	9	9	(2)	(2)
Residential mortgage loans		-	-	55	55	-	(1)
MSRs		-	-	756	756	(77)	(38)
OREO		-	-	64	64	(3)	(16)
Bank premises and equipment		-	-	79	79	(1)	(102)
Operating lease equipment		-	-	53	53	(2)	(36)
Total	$	-	-	1,534	1,534	(162)	(329)



		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	$	-	-	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 and equipment		-	-	4	4	-	(18)
Total	$	-	-	1,479	1,479	(130)	(338)

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, 2015
Residential mortgage loans measured at fair value	$	790	758	32
Past due loans of 90 days or more		2	2	-
Nonaccrual loans		2	2	-
December 31, 2014
Residential mortgage loans measured at fair value	$	669	643	26
Past due loans of 90 days or more		2	2	-
Nonaccrual loans		3	3	-

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, 2015 ($ in millions)		Amount	Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	2,455	2,455	-	-	2,455
Other securities		603	-	603	-	603
Held-to-maturity securities		157	-	-	157	157
Other short-term investments		1,994	1,994	-	-	1,994
Loans held for sale		377	-	-	377	377
Portfolio loans and leases:
Commercial and industrial loans		42,315	-	-	42,845	42,845
Commercial mortgage loans		6,936	-	-	6,731	6,731
Commercial construction loans		3,076	-	-	2,801	2,801
Commercial leases		3,853	-	-	3,620	3,620
Residential mortgage loans		13,121	-	-	13,752	13,752
Home equity		8,357	-	-	9,261	9,261
Automobile loans		11,785	-	-	11,593	11,593
Credit card		2,133	-	-	2,486	2,486
Other consumer loans and leases		678	-	-	677	677
Unallocated ALLL		(114)	-	-	-	-
Total portfolio loans and leases, net	$	92,140	-	-	93,766	93,766
Financial liabilities:
Deposits	$	100,893	-	100,929	-	100,929
Federal funds purchased		132	132	-	-	132
Other short-term borrowings		4,904	-	4,905	-	4,905
Long-term debt		15,527	15,464	655	-	16,119

		Net Carrying	Fair Value Measurements Using			Total
As of December 31, 2014 ($ in millions)		Amount	Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	3,091	3,091	-	-	3,091
Other securities		600	-	600	-	600
Held-to-maturity securities		187	-	-	187	187
Other short-term investments		7,914	7,914	-	-	7,914
Loans held for sale		700	-	-	700	700
Portfolio loans and leases:
Commercial and industrial loans		40,092	-	-	40,781	40,781
Commercial mortgage loans		7,259	-	-	6,878	6,878
Commercial construction loans		2,052	-	-	1,735	1,735
Commercial leases		3,675	-	-	3,426	3,426
Residential mortgage loans		12,177	-	-	12,249	12,249
Home equity		8,799	-	-	9,224	9,224
Automobile loans		12,004	-	-	11,748	11,748
Credit card		2,297	-	-	2,586	2,586
Other consumer loans and leases		405	-	-	414	414
Unallocated ALLL		(106)	-	-	-	-
Total portfolio loans and leases, net	$	88,654	-	-	89,041	89,041
Financial liabilities:
Deposits	$	101,712	-	101,715	-	101,715
Federal funds purchased		144	144	-	-	144
Other short-term borrowings		1,556	-	1,561	-	1,561
Long-term debt		14,967	14,993	655	-	15,648

[1]	Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.

- 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.

+ References + Details