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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 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
September 30, 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	$	69	-	-	69
Obligations of states and political subdivisions securities		-	45	-	45
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	15,933	-	15,933
Agency commercial mortgage-backed securities		-	9,232	-	9,232
Non-agency commercial mortgage-backed securities		-	3,358	-	3,358
Asset-backed securities and other debt securities		-	2,143	-	2,143
Equity securities^(a)		88	1	-	89
Available-for-sale and other securities^(a)		157	30,712	-	30,869
Trading securities:
U.S. Treasury and federal agencies securities		1	20	-	21
Obligations of states and political subdivisions securities		-	35	-	35
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	402	-	402
Asset-backed securities and other debt securities		-	52	-	52
Equity securities		340	-	-	340
Trading securities		341	509	-	850
Residential mortgage loans held for sale		-	651	-	651
Residential mortgage loans^(b)		-	-	140	140
Commercial loans held for sale		-	5	-	5
MSRs^(f)		-	-	848	848
Derivative assets:
Interest rate contracts		2	514	13	529
Foreign exchange contracts		-	130	-	130
Commodity contracts		23	53	-	76
Derivative assets^(d)		25	697	13	735
Total assets	$	523	32,574	1,001	34,098
Liabilities:
Derivative liabilities:
Interest rate contracts	$	2	150	5	157
Foreign exchange contracts		-	130	-	130
Equity contracts		-	-	136	136
Commodity contracts		8	68	-	76
Derivative liabilities^(e)		10	348	141	499
Short positions^(e)		20	8	-	28
Total liabilities	$	30	356	141	527

Excludes FHLB, FRB and DTCC restricted stock holdings totaling $248, $361 and $2, respectively, at September 30, 2017.
Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.
During both the three and nine months ended September 30, 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 September 30, 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 Sheet

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
		Mortgage		Derivatives,	Equity	Total
For the three months ended September 30, 2017 ($ in millions)		Loans	MSRs^(d)	Net^(a)	Derivatives	Fair Value
Balance, beginning of period	$	142	849	9	(98)		902
Total (losses) gains (realized/unrealized):
Included in earnings		-	(34)	28	(47)		(53)
Purchases/originations		-	33	(1)	-		32
Settlements		(6)	-	(28)	9		(25)
Transfers into Level 3^(b)		4	-	-	-		4
Balance, end of period	$	140	848	8	(136)		860
The amount of total (losses) gains for the period
included in earnings attributable to the change in unrealized
gains or losses relating to assets still held at September 30, 2017^(c)	$	-	(34)	13	(47)		(68)

Net interest rate derivatives include derivative assets and liabilities of $13 and $5, respectively, as of September 30, 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 September 30, 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 September 30, 2016 ($ in millions)		Loans	Net^(a)	Net^(a)	Fair Value
Balance, beginning of period	$	154	30	228		412
Total gains (losses) (realized/unrealized):
Included in earnings		-	42	(14)		28
Purchases		-	(1)	-		(1)
Settlements		(8)	(42)	8		(42)
Transfers into Level 3^(b)		3	-	-		3
Balance, end of period	$	149	29	222		400
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 September 30, 2016^(c)	$	-	33	(14)		19

Net interest rate derivatives include derivative assets and liabilities of $33 and $4, respectively, as of September 30, 2016. Net equity derivatives include derivative assets and liabilities of $325 and $103, respectively, as of September 30, 2016.
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
		Mortgage		Derivatives,	Equity	Total
For the nine months ended September 30, 2017 ($ in millions)		Loans	MSRs^(d)	Net^(a)	Derivatives	Fair Value
Balance, beginning of period	$	143	744	8	(91)		804
Total (losses) gains (realized/unrealized):
Included in earnings		2	(104)	77	(69)		(94)
Purchases/originations		-	208	(2)	-		206
Settlements		(16)	-	(75)	24		(67)
Transfers into Level 3^(b)		11	-	-	-		11
Balance, end of period	$	140	848	8	(136)		860
The amount of total (losses) gains for the period
included in earnings attributable to the change in unrealized
gains or losses relating to assets still held at September 30, 2017^(c)	$	2	(104)	14	(69)		(157)

Net interest rate derivatives include derivative assets and liabilities of $13 and $5, respectively, as of September 30, 2017.
Includes certain residential mortgage loans 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 September 30, 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 nine months ended September 30, 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		3	127	3		133
Purchases		-	(2)	-		(2)
Settlements		(30)	(108)	18		(120)
Transfers into Level 3^(b)		9	-	-		9
Balance, end of period	$	149	29	222		400
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, 2016^(c)	$	3	34	3		40

Net interest rate derivatives include derivative assets and liabilities of $33 and $4, respectively, as of September 30, 2016. Net equity derivatives include derivative assets and liabilities of $325 and $103, respectively, as of September 30, 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		For the nine months ended
		September 30,		September 30,
($ in millions)		2017	2016	2017	2016
Mortgage banking net revenue	$	(6)	42	(27)	129
Corporate banking revenue		-	-	2	1
Other noninterest income		(47)	(14)	(69)	3
Total (losses) gains	$	(53)	28	(94)	133

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, 2017 and 2016 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)		2017	2016	2017	2016
Mortgage banking net revenue	$	(21)	33	(90)	36
Corporate banking revenue		-	-	2	1
Other noninterest income		(47)	(14)	(69)	3
Total (losses) gains	$	(68)	19	(157)	40

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, 2017 and 2016 and for which a nonrecurring fair value adjustment was recorded during the three and nine months ended September 30, 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	Total Losses
						For the three months ended September 30, 2017	For the nine months ended September 30, 2017
As of September 30, 2017 ($ in millions)		Level 1	Level 2	Level 3	Total	For the three months ended September 30, 2017	For the nine months ended September 30, 2017
Commercial loans held for sale	$	-	-	8	8	(1)	(33)
Commercial and industrial loans		-	-	354	354	(10)	(68)
Commercial mortgage loans		-	-	20	20	(1)	(12)
Commercial leases		-	-	1	1	-	(2)
OREO		-	-	20	20	(3)	(8)
Bank premises and equipment		-	-	25	25	(1)	(6)
Operating lease equipment		-	-	56	56	-	(20)
Total	$	-	-	484	484	(16)	(149)


		Fair Value Measurements Using				Total (Losses) Gains	Total (Losses) Gains
						For the three months	For the nine months
As of September 30, 2016 ($ in millions)		Level 1	Level 2	Level 3	Total	ended September 30, 2016	ended September 30, 2016
Commercial loans held for sale	$	-	-	85	85	(21)	(28)
Commercial and industrial loans		-	-	321	321	(52)	(118)
Commercial mortgage loans		-	-	58	58	(1)	(2)
Commercial construction loans		-	-	-	-	-	2
Commercial leases		-	-	-	-	-	(1)
MSRs^(a)		-	-	619	619	7	(125)
OREO		-	-	46	46	(5)	(14)
Bank premises and equipment		-	-	67	67	(28)	(31)
Operating lease equipment		-	-	39	39	(4)	(9)
Private equity investments		-	-	63	63	(9)	(9)
Total	$	-	-	1,298	1,298	(113)	(335)

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 September 30, 2017 and were measured under the amortization method at September 30, 2016.

Quantitative Information About Significant Unobservable Level 3 Fair Value Measurement Inputs

The following tables present information as of September 30, 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 September 30, 2017 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Residential mortgage loans	$	140	Loss rate model	Interest rate risk factor	(9.2) - 14.9%	3.2%
				Credit risk factor	0 - 46.2%	1.0%
MSRs		848	Discounted cash flow	Prepayment speed	0.8-98.0%	(Fixed) 11.8%(Adjustable) 25.2%
				OAS spread (bps)	430-1,515	(Fixed) 502(Adjustable) 784
IRLCs, net		13	Discounted cash flow	Loan closing rates	3.3 - 96.5%	72.8%
Swap associated with the sale of Visa, Inc.		(136)	Discounted cash flow	Timing of the resolution	12/31/2020 -	8/15/2021
Class B Shares				of the Covered Litigation	12/31/2023

As of September 30, 2016 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Residential mortgage loans	$	149	Loss rate model	Interest rate risk factor	(5.0) - 15.7%	5.1%
				Credit risk factor	0 - 80.3%	1.2%
IRLCs, net		33	Discounted cash flow	Loan closing rates	6.5 - 94.0%	76.2%
Stock warrant associated with Vantiv		325	Black-Scholes option-	Expected term (years)	2.0 - 12.8	5.8
Holding, LLC			pricing model	Expected volatility^(a)	20.2 - 26.6%	23.6%
Swap associated with the sale of Visa, Inc.		(103)	Discounted cash flow	Timing of the resolution	12/31/2018 -	8/24/2020
Class B Shares				of the Covered Litigation	12/31/2022

(a) 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, 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 September 30, 2017 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Commercial loans held for sale	$	8	Appraised value	Appraised value	NM	NM
				Costs to sell	NM	10.0%
Commercial and industrial loans		354	Appraised value	Collateral value	NM	NM
Commercial mortgage loans		20	Appraised value	Collateral value	NM	NM
Commercial leases		1	Appraised value	Collateral value	NM	NM
OREO		20	Appraised value	Appraised value	NM	NM
Bank premises and equipment		25	Appraised value	Appraised value	NM	NM
Operating lease equipment		56	Appraised value	Appraised value	NM	NM

As of September 30, 2016 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Commercial loans held for sale	$	85	Appraised value	Appraised value	NM	NM
				Costs to sell	NM	10.0%
Commercial and industrial loans		321	Appraised value	Collateral value	NM	NM
Commercial mortgage loans		58	Appraised value	Collateral value	NM	NM
Commercial construction loans		-	Appraised value	Collateral value	NM	NM
Commercial leases		-	Appraised value	Collateral value	NM	NM
MSRs		619	Discounted cash flow	Prepayment speed	0-100%	(Fixed) 14.9%(Adjustable) 27.1%
				OAS spread (bps)	100-1,515	(Fixed) 615(Adjustable) 724
OREO		46	Appraised value	Appraised value	NM	NM
Bank premises and equipment		67	Appraised value	Appraised value	NM	NM
Operating lease equipment		39	Appraised value	Appraised value	NM	NM
Private equity investments		63	Liquidity discount applied	Liquidity discount	5.0-37.5%	12.6%
			to fund's net asset value

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 and commercial loans measured at fair value as of:

		Aggregate	Aggregate Unpaid
($ in millions)		Fair Value	Principal Balance	Difference
September 30, 2017
Residential mortgage loans measured at fair value	$	791	764	27
Past due loans of 90 days or more		2	2	-
Nonaccrual loans		1	1	-
Commercial loans measured at fair value		5	5	-
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 September 30, 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		611	-	611	-	611
Held-to-maturity securities		25	-	-	25	25
Other short-term investments		3,298	3,298	-	-	3,298
Loans and leases held for sale		55	-	-	55	55
Portfolio loans and leases:
Commercial and industrial loans		40,341	-	-	41,503	41,503
Commercial mortgage loans		6,791	-	-	6,742	6,742
Commercial construction loans		4,628	-	-	4,637	4,637
Commercial leases		4,032	-	-	3,698	3,698
Residential mortgage loans		15,358	-	-	16,093	16,093
Home equity		7,096	-	-	7,557	7,557
Automobile loans		9,197	-	-	8,982	8,982
Credit card		2,061	-	-	2,473	2,473
Other consumer loans		1,154	-	-	1,226	1,226
Unallocated ALLL		(120)	-	-	-	-
Total portfolio loans and leases, net	$	90,538	-	-	92,911	92,911
Financial liabilities:
Deposits	$	101,452	-	101,425	-	101,425
Federal funds purchased		118	118	-	-	118
Other short-term borrowings		5,688	-	5,688	-	5,688
Long-term debt		14,039	14,244	534	-	14,778

		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		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