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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2017

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 as of:

	Fair Value Measurements Using
March 31, 2017 ($ 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	$	437	-	-	437
Obligations of states and political subdivisions securities		-	45	-	45
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	16,245	-	16,245
Agency commercial mortgage-backed securities		-	8,672	-	8,672
Non-agency commercial mortgage-backed securities		-	3,299	-	3,299
Asset-backed securities and other debt securities		-	2,134	-	2,134
Equity securities^(a)		90	1	-	91
Available-for-sale and other securities^(a)		527	30,396	-	30,923
Trading securities:
U.S. Treasury and federal agencies securities		-	18	-	18
Obligations of states and political subdivisions securities		-	21	-	21
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	265	-	265
Asset-backed securities and other debt securities		-	24	-	24
Equity securities		361	-	-	361
Trading securities		361	328	-	689
Residential mortgage loans held for sale		-	606	-	606
Residential mortgage loans^(b)		-	-	141	141
MSRs^(f)		-	-	776	776
Derivative assets:
Interest rate contracts		1	624	16	641
Foreign exchange contracts		-	126	-	126
Commodity contracts		23	56	-	79
Derivative assets^(d)		24	806	16	846
Total assets	$	912	32,136	933	33,981
Liabilities:
Derivative liabilities:
Interest rate contracts	$	5	179	5	189
Foreign exchange contracts		-	123	-	123
Equity contracts		-	-	97	97
Commodity contracts		8	72	-	80
Derivative liabilities^(e)		13	374	102	489
Short positions^(e)		21	6	-	27
Total liabilities	$	34	380	102	516

Excludes FHLB, FRB and DTCC restricted stock holdings totaling $248, $359 and $1, respectively, at March 31, 2017.
Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.
During the three months ended March 31, 2017, no assets or liabilities were transferred between Level 1 and Level 2.
Included in other assets in the Condensed Consolidated Balance Sheets.
Included in other liabilities in the Condensed Consolidated Balance Sheets.
Effective January 1, 2017, the Bancorp has elected the fair value measurement method for all existing classes of its residential mortgage servicing rights. The servicing rights were measured at fair value at March 31, 2017 and were measured under the amortization method at December 31, 2016.

	Fair Value Measurements Using
December 31, 2016 ($ 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	$	471	78	-	549
Obligations of states and political subdivisions securities		-	45	-	45
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	15,608	-	15,608
Agency commercial mortgage-backed securities		-	9,055	-	9,055
Non-agency commercial mortgage-backed securities		-	3,112	-	3,112
Asset-backed securities and other debt securities		-	2,116	-	2,116
Equity securities^(a)		90	1	-	91
Available-for-sale and other securities^(a)		561	30,015	-	30,576
Trading securities:
U.S. Treasury and federal agencies securities		-	23	-	23
Obligations of states and political subdivisions securities		-	39	-	39
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	8	-	8
Asset-backed securities and other debt securities		-	15	-	15
Equity securities		325	-	-	325
Trading securities		325	85	-	410
Residential mortgage loans held for sale		-	686	-	686
Residential mortgage loans^(b)		-	-	143	143
Derivative assets:
Interest rate contracts		20	715	13	748
Foreign exchange contracts		-	202	-	202
Commodity contracts		22	85	-	107
Derivative assets^(d)		42	1,002	13	1,057
Total assets	$	928	31,788	156	32,872
Liabilities:
Derivative liabilities:
Interest rate contracts	$	3	257	5	265
Foreign exchange contracts		-	204	-	204
Equity contracts		-	-	91	91
Commodity contracts		27	79	-	106
Derivative liabilities^(e)		30	540	96	666
Short positions^(e)		17	4	-	21
Total liabilities	$	47	544	96	687

Excludes FHLB, FRB and DTCC restricted stock holdings totaling $248, $358 and $1, respectively, at December 31, 2016.
Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.
During the year ended December 31, 2016, no assets or liabilities were transferred between Level 1 and Level 2.
Included in other assets in the Condensed Consolidated Balance Sheets.
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 (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
		Mortgage		Derivatives,	Derivatives,	Total
For the three months ended March 31, 2017 ($ in millions)		Loans	MSRs^(d)	Net^(a)	Net^(a)	Fair Value
Balance, beginning of period	$	143	744	8	(91)		804
Total gains (losses) (realized/unrealized):
Included in earnings		-	(23)	23	(13)		(13)
Purchases/originations		-	55	(1)	-		54
Settlements		(5)	-	(19)	7		(17)
Transfers into Level 3^(b)		3	-	-	-		3
Balance, end of period	$	141	776	11	(97)		831
The amount of total gains (losses) for the period
included in earnings attributable to the change in unrealized
gains or losses relating to assets still held at March 31, 2017^(c)	$	-	(23)	16	(13)		(20)

Net interest rate derivatives include derivative assets and liabilities of $16 and $5, respectively, as of March 31, 2017. Net equity derivatives include derivative assets and liabilities of $0 and $97, respectively, as of March 31, 2017.
Includes certain residential mortgage loans originated as held for sale that were transferred to held for investment.
Includes interest income and expense.
Effective January 1, 2017, the Bancorp has elected the fair value measurement method for all existing classes of its residential mortgage servicing rights. The servicing rights were measured at fair value at March 31, 2017 and were measured under the amortization method at December 31, 2016.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Residential	Interest Rate	Equity
		Mortgage	Derivatives,	Derivatives,	Total
For the three months ended March 31, 2016 ($ in millions)		Loans	Net^(a)	Net^(a)	Fair Value
Balance, beginning of period	$	167	12	201		380
Total gains (realized/unrealized):
Included in earnings		1	42	48		91
Purchases		-	(1)	-		(1)
Settlements		(11)	(28)	4		(35)
Transfers into Level 3^(b)		3	-	-		3
Balance, end of period	$	160	25	253		438
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 March 31, 2016^(c)	$	1	29	48		78

Net interest rate derivatives include derivative assets and liabilities of $29 and $4, respectively, as of March 31, 2016. Net equity derivatives include derivative assets and liabilities of $308 and $55, respectively, as of March 31, 2016.
Includes certain residential mortgage loans originated as 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
		March 31,
($ in millions)		2017	2016
Mortgage banking net revenue	$	-	43
Other noninterest income		(13)	48
Total (losses) gains	$	(13)	91

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 March 31, 2017 and 2016 were recorded in the Condensed Consolidated Statements of Income as follows:

		For the three months ended
		March 31,
($ in millions)		2017	2016
Mortgage banking net revenue	$	(7)	30
Other noninterest income		(13)	48
Total (losses) gains	$	(20)	78

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 March 31, 2017 and 2016, and for which a nonrecurring fair value adjustment was recorded during the three months ended March 31, 2017 and 2016, 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
						For the three months
As of March 31, 2017 ($ in millions)		Level 1	Level 2	Level 3	Total	ended March 31, 2017
Commercial loans held for sale	$	-	-	1	1	(19)
Commercial and industrial loans		-	-	318	318	(26)
Commercial mortgage loans		-	-	25	25	(2)
Commercial leases		-	-	2	2	(1)
OREO		-	-	19	19	(4)
Bank premises and equipment		-	-	15	15	(3)
Operating lease equipment		-	-	55	55	(20)
Total	$	-	-	435	435	(75)


		Fair Value Measurements Using				Total (Losses) Gains
						For the three months
As of March 31, 2016 ($ in millions)		Level 1	Level 2	Level 3	Total	ended March 31, 2016
Commercial loans held for sale	$	-	-	5	5	(2)
Commercial and industrial loans		-	-	347	347	(47)
Commercial mortgage loans		-	-	85	85	6
Commercial construction loans		-	-	-	-	2
MSRs^(a)		-	-	685	685	(85)
OREO		-	-	27	27	(3)
Bank premises and equipment		-	-	12	12	1
Total	$	-	-	1,161	1,161	(128)

Effective January 1, 2017, the Bancorp has elected the fair value measurement method for all existing classes of its residential mortgage servicing rights. The servicing rights were measured at fair value at March 31, 2017 and were measured under the amortization method at December 31, 2016.

Quantitative Information About Significant Unobservable Level 3 Fair Value Measurement Inputs

The following tables present information as of March 31, 2017 and 2016 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 March 31, 2017 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Residential mortgage loans	$	141	Loss rate model	Interest rate risk factor	(10.6) - 15.4%	2.3%
				Credit risk factor	0 - 46.2%	1.2%
MSRs		776	Discounted cash flow	Prepayment speed	0.7-100%	(Fixed) 11.2%(Adjustable) 25.2%
				OAS spread (bps)	430-1,515	(Fixed) 528(Adjustable) 757
IRLCs, net		16	Discounted cash flow	Loan closing rates	12.3 - 97.9%	72.2%
Swap associated with the sale of Visa, Inc.		(97)	Discounted cash flow	Timing of the resolution	12/31/2018 -	NM
Class B shares				of the Covered Litigation	12/31/2022

As of March 31, 2016 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Residential mortgage loans	$	160	Loss rate model	Interest rate risk factor	(6.0) - 16.5%	4.4%
				Credit risk factor	0 - 80.5%	1.4%
IRLCs, net		29	Discounted cash flow	Loan closing rates	5.6 - 94.0%	75.0%
Stock warrant associated with Vantiv		308	Black-Scholes option-	Expected term (years)	2.0 - 13.3	5.8
Holding, LLC			pricing model	Expected volatility^(a)	23.0 - 30.4%	25.9%
Swap associated with the sale of Visa, Inc.		(55)	Discounted cash flow	Timing of the resolution	12/31/2016 -	NM
Class B shares				of the Covered Litigation	3/31/2021

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

The following tables present information as of March 31, 2017 and 2016 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 March 31, 2017 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Commercial loans held for sale	$	1	Appraised value	Appraised value	NM	NM
Commercial and industrial loans		318	Appraised value	Collateral value	NM	NM
Commercial mortgage loans		25	Appraised value	Collateral value	NM	NM
Commercial leases		2	Appraised value	Collateral value	NM	NM
OREO		19	Appraised value	Appraised value	NM	NM
Bank premises and equipment		15	Appraised value	Appraised value	NM	NM
Operating lease equipment		55	Appraised value	Appraised value	NM	NM

As of March 31, 2016 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Commercial loans held for sale	$	5	Appraised value	Appraised Value	NM	NM
				Costs to sell	NM	10.0%
Commercial and industrial loans		347	Appraised value	Collateral value	NM	NM
Commercial mortgage loans		85	Appraised value	Collateral value	NM	NM
Commercial construction loans		-	Appraised value	Collateral value	NM	NM
MSRs		685	Discounted cash flow	Prepayment speed	0-100%	(Fixed) 14.1%(Adjustable) 27.8%
				OAS spread (bps)	364-1,515	(Fixed) 603(Adjustable) 713
OREO		27	Appraised value	Appraised value	NM	NM
Bank premises and equipment		12	Appraised value	Appraised value	NM	NM

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 unpaid principal balance for residential mortgage loans measured at fair value as of:

		Aggregate	Aggregate Unpaid
($ in millions)		Fair Value	Principal Balance	Difference
March 31, 2017
Residential mortgage loans measured at fair value	$	747	725	22
Past due loans of 90 days or more		2	2	-
Nonaccrual loans		1	1	-
December 31, 2016
Residential mortgage loans measured at fair value	$	829	823	6
Past due loans of 90 days or more		2	2	-
Nonaccrual loans		1	1	-

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 March 31, 2017 ($ in millions)		Amount	Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	2,205	2,205	-	-	2,205
Other securities		608	-	608	-	608
Held-to-maturity securities		26	-	-	26	26
Other short-term investments		1,644	1,644	-	-	1,644
Loans held for sale		10	-	-	10	10
Portfolio loans and leases:
Commercial and industrial loans		40,362	-	-	41,567	41,567
Commercial mortgage loans		6,838	-	-	6,776	6,776
Commercial construction loans		4,268	-	-	4,238	4,238
Commercial leases		4,079	-	-	3,700	3,700
Residential mortgage loans		15,099	-	-	15,459	15,459
Home equity		7,415	-	-	8,194	8,194
Automobile loans		9,530	-	-	9,246	9,246
Credit card		1,975	-	-	2,307	2,307
Other consumer loans and leases		795	-	-	830	830
Unallocated ALLL		(112)	-	-	-	-
Total portfolio loans and leases, net	$	90,249	-	-	92,317	92,317
Financial liabilities:
Deposits	$	104,156	-	104,148	-	104,148
Federal funds purchased		155	155	-	-	155
Other short-term borrowings		2,015	-	2,015	-	2,015
Long-term debt		13,658	13,608	527	-	14,135

		Net Carrying	Fair Value Measurements Using			Total
As of December 31, 2016 ($ in millions)		Amount	Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	2,392	2,392	-	-	2,392
Other securities		607	-	607	-	607
Held-to-maturity securities		26	-	-	26	26
Other short-term investments		2,754	2,754	-	-	2,754
Loans held for sale		65	-	-	65	65
Portfolio loans and leases:
Commercial and industrial loans		40,958	-	-	41,976	41,976
Commercial mortgage loans		6,817	-	-	6,735	6,735
Commercial construction loans		3,887	-	-	3,853	3,853
Commercial leases		3,959	-	-	3,651	3,651
Residential mortgage loans		14,812	-	-	15,415	15,415
Home equity		7,637	-	-	8,421	8,421
Automobile loans		9,941	-	-	9,640	9,640
Credit card		2,135	-	-	2,503	2,503
Other consumer loans and leases		668	-	-	678	678
Unallocated ALLL		(112)	-	-	-	-
Total portfolio loans and leases, net	$	90,702	-	-	92,872	92,872
Financial liabilities:
Deposits	$	103,821	-	103,811	-	103,811
Federal funds purchased		132	132	-	-	132
Other short-term borrowings		3,535	-	3,535	-	3,535
Long-term debt		14,388	14,288	545	-	14,833

- 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