Fair Values of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Valuation Assumption Ranges for Level 3 Available-for-Sale Investment Securities

The following table shows the significant valuation assumption ranges for Level 3 available-for-sale investment securities at September 30, 2013:

	Minimum			Maximum			Average
Residential Prime Non-Agency Mortgage-Backed Securities (a)
Estimated lifetime prepayment rates		6	%		20	%		13	%
Lifetime probability of default rates		–			7			4
Lifetime loss severity rates		25			65			43
Discount margin		2			6			4
Residential Non-Prime Non-Agency Mortgage-Backed Securities (b)
Estimated lifetime prepayment rates		2	%		10	%		6	%
Lifetime probability of default rates		4			11			7
Lifetime loss severity rates		15			70			54
Discount margin		1			6			3
Other Asset-Backed Securities
Estimated lifetime prepayment rates		6	%		6	%		6	%
Lifetime probability of default rates		4			4			4
Lifetime loss severity rates		40			40			40
Discount margin		8			8			8

(a) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads).

(b) Includes all securities not meeting the conditions to be designated as prime.

Valuation Assumption Ranges for MSRs

The following table shows the significant valuation assumption ranges for MSRs at September 30, 2013:

	Minimum			Maximum			Average
Expected prepayment		10	%		22	%		12	%
Discount rate		10			13			10

Valuation Assumption Ranges for Derivative Commitments

The following table shows the significant valuation assumption ranges for the Company’s derivative commitments to sell, purchase and originate mortgage loans at September 30, 2013:

	Minimum			Maximum			Average
Expected loan close rate		32	%		100	%		76	%
Inherent MSR value (basis points per loan)		46			219			108

Balances of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis:

(Dollars in Millions)	Level 1		Level 2		Level 3		Netting			Total
September 30, 2013
Available-for-sale securities
U.S. Treasury and agencies	$	463	$	1,058	$	–	$	–		$	1,521
Mortgage-backed securities
Residential
Agency		–		29,220		–		–			29,220
Non-agency
Prime (a)		–		–		500		–			500
Non-prime (b)		–		–		303		–			303
Commercial
Agency		–		169		–		–			169
Asset-backed securities
Collateralized debt obligations/Collateralized loan obligations		–		25		–		–			25
Other		–		570		40		–			610
Obligations of state and political subdivisions		–		5,820		–		–			5,820
Obligations of foreign governments		–		6		–		–			6
Corporate debt securities		–		633		9		–			642
Perpetual preferred securities		–		209		–		–			209
Other investments		265		17		–		–			282
Total available-for-sale		728		37,727		852		–			39,307
Mortgage loans held for sale		–		3,844		–		–			3,844
Mortgage servicing rights		–		–		2,577		–			2,577
Derivative assets		–		875		670		(572	)		973
Other assets		85		922		–		–			1,007
Total	$	813	$	43,368	$	4,099	$	(572	)	$	47,708
Derivative liabilities	$	–	$	1,827	$	53	$	(1,358	)	$	522
Short-term borrowings (c)		231		533		–		–			764
Total	$	231	$	2,360	$	53	$	(1,358	)	$	1,286
December 31, 2012
Available-for-sale securities
U.S. Treasury and agencies	$	491	$	735	$	–	$	–		$	1,226
Mortgage-backed securities
Residential
Agency		–		29,495		–		–			29,495
Non-agency
Prime (a)		–		–		624		–			624
Non-prime (b)		–		–		355		–			355
Commercial
Agency		–		193		–		–			193
Asset-backed securities
Collateralized debt obligations/Collateralized loan obligations		–		42		–		–			42
Other		–		577		15		–			592
Obligations of state and political subdivisions		–		6,455		–		–			6,455
Obligations of foreign governments		–		6		–		–			6
Corporate debt securities		–		722		9		–			731
Perpetual preferred securities		–		218		–		–			218
Other investments		187		15		–		–			202
Total available-for-sale		678		38,458		1,003		–			40,139
Mortgage loans held for sale		–		7,957		–		–			7,957
Mortgage servicing rights		–		–		1,700		–			1,700
Derivative assets		–		572		1,234		(418	)		1,388
Other assets		94		386		–		–			480
Total	$	772	$	47,373	$	3,937	$	(418	)	$	51,664
Derivative liabilities	$	–	$	2,128	$	55	$	(1,549	)	$	634
Short-term borrowings (c)		50		351		–		–			401
Total	$	50	$	2,479	$	55	$	(1,549	)	$	1,035

(a) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads).

(b) Includes all securities not meeting the conditions to be designated as prime.

(c) Represents the Company’s obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.

Changes in Fair Value for All Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Unobservable Inputs (Level 3)

The following table presents the changes in fair value for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended September 30:

(Dollars in Millions)	Beginning of Period Balance		Net Gains (Losses) Included in Net Income			Net Gains (Losses) Included in Other Comprehensive Income (Loss)			Purchases		Sales			Principal Payments			Issuances			Settlements			End of Period Balance		Net Change in Unrealized Gains (Losses) Relating to Assets Still Held at End of Period
2013
Available-for-sale securities
Mortgage-backed securities
Residential non-agency
Prime (a)	$	547	$	(2	)	$	(4	)	$	–	$	–		$	(41	)	$	–		$	–		$	500	$	(4	)
Non-prime (b)		319		(3	)		(4	)		–		–			(9	)		–			–			303		(4	)
Asset-backed securities
Other		40		1			(2	)		3		–			(2	)		–			–			40		(2	)
Corporate debt securities		9		–			–			–		–			–			–			–			9		–
Total available-for-sale		915		(4	)(c)		(10	)(f)		3		–			(52	)		–			–			852		(10	)
Mortgage servicing rights		2,377		11	(d)		–			2		–			–			187	(g)		–			2,577		11	(d)
Net derivative assets and liabilities		423		182	(e)		–			–		(2	)		–			–			14			617		62	(h)
2012
Available-for-sale securities
Mortgage-backed securities
Residential non-agency
Prime (a)	$	713	$	(4	)	$	23		$	–	$	(61	)	$	(40	)	$	–		$	–		$	631	$	26
Non-prime (b)		796		(8	)		132			–		(562	)		(18	)		–			–			340		23
Commercial non-agency		37		–			2			–		(39	)		–			–			–			–		–
Asset-backed securities
Collateralized debt obligations/Collateralized loan obligations		102		2			(7	)		–		(96	)		(1	)		–			–			–		–
Other		112		1			(4	)		3		(93	)		(3	)		–			–			16		2
Corporate debt securities		9		–			–			–		–			–			–			–			9		–
Total available-for-sale		1,769		(9	)(i)		146	(f)		3		(851	)		(62	)		–			–			996		51
Mortgage servicing rights		1,594		(275	)(d)		–			10		–			–			224	(g)		–			1,553		(275	)(d)
Net derivative assets and liabilities		1,360		843	(j)		–			1		(1	)		–			–			(713	)		1,490		(557	)(k)

(a) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads).

(b) Includes all securities not meeting the conditions to be designated as prime.

(c) Approximately $(3) million included in securities gains (losses) and $(1) million included in interest income.

(d) Included in mortgage banking revenue.

(e) Approximately $89 million included in other noninterest income and $93 million included in mortgage banking revenue.

(f) Included in changes in unrealized gains and losses on securities available-for-sale.

(g) Represents MSRs capitalized during the period.

(h) Approximately $(28) million included in other noninterest income and $90 million included in mortgage banking revenue.

(i) Approximately $(15) million included in securities gains (losses) and $6 million included in interest income.

(j) Approximately $124 million included in other noninterest income and $719 million included in mortgage banking revenue.

(k) Approximately $7 million included in other noninterest income and $(564) million included in mortgage banking revenue.

The following table presents the changes in fair value for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the nine months ended September 30:

(Dollars in Millions)	Beginning of Period Balance		Net Gains (Losses) Included in Net Income			Net Gains (Losses) Included in Other Comprehensive Income (Loss)			Purchases		Sales			Principal Payments			Issuances			Settlements			End of Period Balance		Net Change in Unrealized Gains (Losses) Relating to Assets Still Held at End of Period
2013
Available-for-sale securities
Mortgage-backed securities
Residential non-agency
Prime (a)	$	624	$	(6	)	$	4		$	–	$	–		$	(122	)	$	–		$	–		$	500	$	4
Non-prime (b)		355		(11	)		13			–		(20	)		(34	)		–			–			303		14
Asset-backed securities
Other		15		2			(1	)		28		–			(4	)		–			–			40		(1	)
Corporate debt securities		9		–			–			–		–			–			–			–			9		–
Total available-for-sale		1,003		(15	)(c)		16	(f)		28		(20	)		(160	)		–			–			852		17
Mortgage servicing rights		1,700		196	(d)		–			7		–			–			674	(g)		–			2,577		196	(d)
Net derivative assets and liabilities		1,179		(34	)(e)		–			1		(4	)		–			–			(525	)		617		(565	)(h)
2012
Available-for-sale securities
Mortgage-backed securities
Residential non-agency
Prime (a)	$	803	$	(5	)	$	60		$	–	$	(109	)	$	(118	)	$	–		$	–		$	631	$	58
Non-prime (b)		802		(18	)		197			–		(562	)		(79	)		–			–			340		52
Commercial non-agency		42		1			–			–		(39	)		(4	)		–			–			–		–
Asset-backed securities
Collateralized debt obligations/Collateralized loan obligations		120		12			(8	)		–		(103	)		(21	)		–			–			–		–
Other		117		7			–			3		(93	)		(18	)		–			–			16		2
Corporate debt securities		9		–			–			–		–			–			–			–			9		–
Total available-for-sale		1,893		(3	)(i)		249	(f)		3		(906	)		(240	)		–			–			996		112
Mortgage servicing rights		1,519		(705	)(d)		–			39		–			–			700	(g)		–			1,553		(705	)(d)
Net derivative assets and liabilities		1,228		2,050	(j)		–			1		(3	)		–			–			(1,786	)		1,490		(1,407	)(k)

(a) Prime securities are those designated as such by the issuer at origination. When an issuer designation is unavailable, the Company determines at acquisition date the categorization based on asset pool characteristics (such as weighted-average credit score, loan-to-value, loan type, prevalence of low documentation loans) and deal performance (such as pool delinquencies and security market spreads).

(b) Includes all securities not meeting the conditions to be designated as prime.

(c) Approximately $(13) million included in securities gains (losses) and $(2) million included in interest income.

(d) Included in mortgage banking revenue.

(e) Approximately $(122) million included in other noninterest income and $88 million included in mortgage banking revenue.

(f) Included in changes in unrealized gains and losses on securities available-for-sale.

(g) Represents MSRs capitalized during the period.

(h) Approximately $(301)million included in other noninterest income and $(264) million included in mortgage banking revenue.

(i) Approximately $(37) million included in securities gains (losses) and $34 million included in interest income.

(j) Approximately $344 million included in other noninterest income and $1.7 billion included in mortgage banking revenue.

(k) Approximately $6 million included in other noninterest income and $1.4 billion included in mortgage banking revenue.

Adjusted Carrying Values for Assets Measured at Fair Value on Nonrecurring Basis

The following table summarizes the balances of assets measured at fair value on a nonrecurring basis:

	September 30, 2013								December 31, 2012
(Dollars in Millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Loans (a)	$	–	$	–	$	94	$	94	$	–	$	–	$	140	$	140
Other assets (b)		–		–		144		144		–		–		194		194

(a) Represents the carrying value of loans for which adjustments were based on the fair value of the collateral, excluding loans fully charged-off.

(b) Primarily represents the fair value of foreclosed properties that were measured at fair value based on an appraisal or broker price opinion of the collateral subsequent to their initial acquisition.

Losses Recognized Related to Nonrecurring Fair Value Measurements of Individual Assets or Portfolios

The following table summarizes losses recognized related to nonrecurring fair value measurements of individual assets or portfolios:

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in Millions)	2013		2012		2013		2012
Loans (a)	$	22	$	12	$	55	$	51
Other assets (b)		14		42		73		129

(a) Represents write-downs of loans which were based on the fair value of the collateral, excluding loans fully charged-off.

(b) Primarily represents related losses of foreclosed properties that were measured at fair value subsequent to their initial acquisition.

Differences Between Aggregate Fair Value, Carrying Amount of MLHFS and Aggregate Unpaid Principal Amount

The following table summarizes the differences between the aggregate fair value carrying amount of MLHFS for which the fair value option has been elected and the aggregate unpaid principal amount that the Company is contractually obligated to receive at maturity:

	September 30, 2013							December 31, 2012
(Dollars in Millions)	Fair Value Carrying Amount		Aggregate Unpaid Principal		Carrying Amount Over (Under) Unpaid Principal			Fair Value Carrying Amount		Aggregate Unpaid Principal		Carrying Amount Over (Under) Unpaid Principal
Total loans	$	3,844	$	3,693	$	151		$	7,957	$	7,588	$	369
Nonaccrual loans		10		15		(5	)		8		13		(5	)
Loans 90 days or more past due		1		1		–			2		3		(1	)

Estimated Fair Values of Financial Instruments

The estimated fair values of the Company’s financial instruments are shown in the table below:

	September 30, 2013										December 31, 2012
	Carrying Amount		Fair Value								Carrying Amount		Fair Value
(Dollars in Millions)			Level 1		Level 2		Level 3		Total				Level 1		Level 2		Level 3		Total
Financial Assets
Cash and due from banks	$	11,615	$	11,615	$	–	$	–	$	11,615	$	8,252	$	8,252	$	–	$	–	$	8,252
Federal funds sold and securities purchased under resale agreements		259		–		259		–		259		437		–		437		–		437
Investment securities held-to-maturity		36,904		2,912		33,611		109		36,632		34,389		2,984		31,845		123		34,952
Loans held for sale (a)		14		–		–		14		14		19		–		–		19		19
Loans (b)		227,027		–		–		228,087		228,087		218,765		–		–		220,354		220,354
Other financial instruments		2,149		–		1,166		1,000		2,166		7,367		–		1,228		6,157		7,385
Financial Liabilities
Deposits		261,716		–		261,792		–		261,792		249,183		–		249,594		–		249,594
Short-term borrowings (c)		25,364		–		25,307		–		25,307		25,901		–		25,917		–		25,917
Long-term debt		18,750		–		19,216		–		19,216		25,516		–		26,205		–		26,205

(a) Excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected.

(b) Excludes loans measured at fair value on a nonrecurring basis.

(c) Excludes the Company’s obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.