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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

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, 2018 ($ in millions)		Level 1^(c)	Level 2^(c)	Level 3	Total Fair Value
Assets:
Available-for-sale debt and other securities:
U.S. Treasury and federal agencies securities	$	96	-	-	96
Obligations of states and political subdivisions securities		-	44	-	44
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	15,208	-	15,208
Agency commercial mortgage-backed securities		-	10,455	-	10,455
Non-agency commercial mortgage-backed securities		-	3,190	-	3,190
Asset-backed securities and other debt securities		-	2,214	-	2,214
Available-for-sale debt and other securities^(a)		96	31,111	-	31,207
Trading debt securities:
U.S. Treasury and federal agencies securities		-	21	-	21
Obligations of states and political subdivisions securities		-	52	-	52
Agency residential mortgage-backed securities		-	364	-	364
Asset-backed securities and other debt securities		-	134	-	134
Trading debt securities		-	571	-	571
Equity securities		417	1	-	418
Residential mortgage loans held for sale		-	650	-	650
Residential mortgage loans^(b)		-	-	136	136
Commercial loans held for sale		-	16	-	16
MSRs		-	-	926	926
Derivative assets:
Interest rate contracts		2	521	11	534
Foreign exchange contracts		-	132	-	132
Commodity contracts		34	165	-	199
Derivative assets^(d)		36	818	11	865
Total assets	$	549	33,167	1,073	34,789
Liabilities:
Derivative liabilities:
Interest rate contracts	$	2	276	7	285
Foreign exchange contracts		-	129	-	129
Equity contracts		-	-	165	165
Commodity contracts		56	139	-	195
Derivative liabilities^(e)		58	544	172	774
Short positions^(e)		93	33	-	126
Total liabilities	$	151	577	172	900

Excludes FHLB, FRB and DTCC restricted stock holdings totaling $248, $362 and $2, respectively, at March 31, 2018.
Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.
During the three months ended March 31, 2018, 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.

	Fair Value Measurements Using
December 31, 2017 ($ in millions)		Level 1^(c)	Level 2^(c)	Level 3	Total Fair Value
Assets:
Available-for-sale debt and other securities:
U.S. Treasury and federal agencies securities	$	98	-	-	98
Obligations of states and political subdivisions securities		-	44	-	44
Mortgage-backed securities:
Agency residential mortgage-backed securities		-	15,319	-	15,319
Agency commercial mortgage-backed securities		-	10,167	-	10,167
Non-agency commercial mortgage-backed securities		-	3,293	-	3,293
Asset-backed securities and other debt securities		-	2,218	-	2,218
Available-for-sale debt and other securities^(a)		98	31,041	-	31,139
Trading debt securities:
U.S. Treasury and federal agencies securities		1	11	-	12
Obligations of states and political subdivisions securities		-	22	-	22
Residential mortgage-backed securities		-	395	-	395
Asset-backed securities and other debt securities		-	63	-	63
Trading debt securities		1	491	-	492
Equity securities		438	1		439
Residential mortgage loans held for sale		-	399	-	399
Residential mortgage loans^(b)		-	-	137	137
MSRs		-	-	858	858
Derivative assets:
Interest rate contracts		1	505	8	514
Foreign exchange contracts		-	124	-	124
Equity contracts		-	20	-	20
Commodity contracts		39	126	-	165
Derivative assets^(d)		40	775	8	823
Total assets	$	577	32,707	1,003	34,287
Liabilities:
Derivative liabilities:
Interest rate contracts	$	1	172	5	178
Foreign exchange contracts		-	120	-	120
Equity contracts		-	-	137	137
Commodity contracts		38	129	-	167
Derivative liabilities^(e)		39	421	142	602
Short positions^(e)		25	6	-	31
Total liabilities	$	64	427	142	633

Excludes FHLB, FRB and DTCC restricted stock holdings totaling $248, $362 and $2, respectively, at December 31, 2017.
Includes residential mortgage loans originated as held for sale and subsequently transferred to held for investment.
During the year ended December 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.

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 March 31, 2018 ($ in millions)		Loans	MSRs	Net^(a)	Derivatives	Fair Value
Balance, beginning of period	$	137	858	3	(137)		861
Total gains (losses) (realized/unrealized):
Included in earnings		(2)	28	14	(39)		1
Purchases/originations		-	40	(2)	-		38
Settlements		(135)	-	(11)	11		(135)
Transfers into Level 3^(b)		136	-	-	-		136
Balance, end of period	$	136	926	4	(165)		901
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 March 31, 2018^(c)	$	(2)	28	11	(39)		(2)

Net interest rate derivatives include derivative assets and liabilities of $11 and $7, respectively, as of March 31, 2018.
Includes certain residential mortgage loans originated as 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
		Mortgage		Derivatives,	Derivatives,	Total
For the three months ended March 31, 2017 ($ in millions)		Loans	MSRs	Net^(a)	Net^(a)	Fair Value
Balance, beginning of period	$	143	744	8	(91)		804
Total (losses) gains (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 (losses) gains for the period
included in earnings attributable to the change in unrealized
gains or losses relating to instruments 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.

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)		2018	2017
Mortgage banking net revenue	$	39	-
Corporate banking revenue		1	-
Other noninterest income		(39)	(13)
Total gains (losses)	$	1	(13)

The total losses included in earnings attributable to changes in unrealized gains and losses related to Level 3 assets and liabilities still held at March 31, 2018 and 2017 were recorded in the Condensed Consolidated Statements of Income as follows:

		For the three months ended
		March 31,
($ in millions)		2018	2017
Mortgage banking net revenue	$	36	(7)
Corporate banking revenue		1	-
Other noninterest income		(39)	(13)
Total losses	$	(2)	(20)

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, 2018 and 2017, and for which a nonrecurring fair value adjustment was recorded during the three months ended March 31, 2018 and 2017, 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
						For the three months
As of March 31, 2018 ($ in millions)		Level 1	Level 2	Level 3	Total	ended March 31, 2018
Commercial loans held for sale	$	-	-	5	5	(1)
Commercial and industrial loans		-	-	277	277	(44)
Commercial mortgage loans		-	-	4	4	6
Commercial leases		-	-	2	2	(2)
OREO		-	-	17	17	(3)
Bank premises and equipment		-	-	4	4	(8)
Operating lease equipment		-	-	12	12	(2)
Private equity investments		-	50	33	83	19
Total	$	-	50	354	404	(35)


		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)

Quantitative Information About Significant Unobservable Level 3 Fair Value Measurement Inputs

The following tables present information as of March 31, 2018 and 2017 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, 2018 ($ in millions)
Financial Instrument		Fair Value	Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted-Average
Residential mortgage loans	$	136	Loss rate model	Interest rate risk factor	(12.6) - 14.1%	1.3%
				Credit risk factor	0 - 46.2%	1.5%
MSRs		926	Discounted cash flow	Prepayment speed	0.5-98.1%	(Fixed) 10.0%(Adjustable) 24.6%
				OAS spread (bps)	446-1,515	(Fixed) 548(Adjustable) 797
IRLCs, net		11	Discounted cash flow	Loan closing rates	9.5 - 102.7%	76.6%
Swap associated with the sale of Visa, Inc.		(165)	Discounted cash flow	Timing of the resolution	2/28/2021 -	9/8/2021
Class B Shares				of the Covered Litigation	12/31/2023

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 -	8/24/2020
Class B Shares				of the Covered Litigation	12/31/2022

The following tables present information as of March 31, 2018 and 2017 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, 2018 ($ 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		277	Appraised value	Collateral value	NM	NM
Commercial mortgage loans		4	Appraised value	Collateral value	NM	NM
Commercial leases		2	Appraised value	Collateral value	NM	NM
OREO		17	Appraised value	Appraised value	NM	NM
Bank premises and equipment		4	Appraised value	Appraised value	NM	NM
Operating lease equipment		12	Appraised value	Appraised value	NM	NM
Private equity investments		29	Liquidity discount applied	Liquidity discount	0-43.0%	10.5%
			to fund's net asset value
		4	Comparable company analysis	Market comparable transactions	NM	NM

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
				Costs to sell	NM	10.0%
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

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
March 31, 2018 ($ in millions)		Fair Value	Principal Balance	Difference
Residential mortgage loans measured at fair value	$	786	774	12
Past due loans of 90 days or more		4	4	-
Nonaccrual loans		1	1	-
Commercial loans measured at fair value		16	16	-
December 31, 2017
Residential mortgage loans measured at fair value	$	536	522	14
Past due loans of 90 days or more		5	5	-
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, 2018 ($ in millions)		Amount	Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	2,038	2,038	-	-	2,038
Other short-term investments		1,747	1,747	-	-	1,747
Other securities		612	-	612	-	612
Held-to-maturity securities		23	-	-	23	23
Loans and leases held for sale		51	-	-	51	51
Portfolio loans and leases:
Commercial and industrial loans		41,023	-	-	42,143	42,143
Commercial mortgage loans		6,446	-	-	6,395	6,395
Commercial construction loans		4,743	-	-	4,775	4,775
Commercial leases		3,904	-	-	3,520	3,520
Residential mortgage loans		15,338	-	-	15,716	15,716
Home equity		6,713	-	-	7,103	7,103
Automobile loans		8,979	-	-	8,708	8,708
Credit card		2,072	-	-	2,440	2,440
Other consumer loans		1,592	-	-	1,669	1,669
Unallocated ALLL		(114)	-	-	-	-
Total portfolio loans and leases, net	$	90,696	-	-	92,469	92,469
Financial liabilities:
Deposits	$	105,461	-	105,407	-	105,407
Federal funds purchased		178	178	-	-	178
Other short-term borrowings		1,335	-	1,335	-	1,335
Long-term debt		14,800	14,752	464	-	15,216

		Net Carrying	Fair Value Measurements Using			Total
As of December 31, 2017 ($ in millions)		Amount	Level 1	Level 2	Level 3	Fair Value
Financial assets:
Cash and due from banks	$	2,514	2,514	-	-	2,514
Other short-term investments		2,753	2,753	-	-	2,753
Other securities		612	-	612	-	612
Held-to-maturity securities		24	-	-	24	24
Loans and leases held for sale		93	-	-	93	93
Portfolio loans and leases:
Commercial and industrial loans		40,519	-	-	41,718	41,718
Commercial mortgage loans		6,539	-	-	6,490	6,490
Commercial construction loans		4,530	-	-	4,560	4,560
Commercial leases		4,054	-	-	3,705	3,705
Residential mortgage loans		15,365	-	-	15,996	15,996
Home equity		6,968	-	-	7,410	7,410
Automobile loans		9,074	-	-	8,832	8,832
Credit card		2,182	-	-	2,616	2,616
Other consumer loans		1,526	-	-	1,621	1,621
Unallocated ALLL		(120)	-	-	-	-
Total portfolio loans and leases, net	$	90,637	-	-	92,948	92,948
Financial liabilities:
Deposits	$	103,162	-	103,123	-	103,123
Federal funds purchased		174	174	-	-	174
Other short-term borrowings		4,012	-	4,012	-	4,012
Long-term debt		14,904	15,045	529	-	15,574

- 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