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Fair Values of Assets and Liabilities (Tables)
6 Months Ended
Jun. 30, 2014
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 June 30, 2014:

 

     Minimum     Maximum     Average  

Residential Prime Non-Agency Mortgage-Backed Securities (a)

     

Estimated lifetime prepayment rates

    6     20     14

Lifetime probability of default rates

           7        4   

Lifetime loss severity rates

    15        75        38   

Discount margin

    2        5        3   

Residential Non-Prime Non-Agency Mortgage-Backed Securities (b)

     

Estimated lifetime prepayment rates

    1     10     6

Lifetime probability of default rates

    4        12        8   

Lifetime loss severity rates

    15        75        54   

Discount margin

    1        5        2   

Other Asset-Backed Securities

     

Estimated lifetime prepayment rates

    6     6     6

Lifetime probability of default rates

    5        5        5   

Lifetime loss severity rates

    40        40        40   

Discount margin

    6        6        6   

 

(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 June 30, 2014:

 

     Minimum     Maximum     Average  

Expected prepayment

    11     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 purchase and originate mortgage loans at June 30, 2014:

 

     Minimum     Maximum     Average  

Expected loan close rate

    39     100     77

Inherent MSR value (basis points per loan)

    48        209        123  
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  

June 30, 2014

            

Available-for-sale securities

            

U.S. Treasury and agencies

  $ 755       $ 1,115       $       $      $ 1,870   

Mortgage-backed securities

            

Residential

            

Agency

            38,292                        38,292   

Non-agency

            

Prime (a)

                    447                447   

Non-prime (b)

                    286                286   

Commercial

            

Agency

            133                        133   

Asset-backed securities

            

Collateralized debt obligations/Collateralized loan obligations

            23                        23   

Other

            559         66                625   

Obligations of state and political subdivisions

            5,598                        5,598   

Obligations of foreign governments

            6                        6   

Corporate debt securities

            620         9                629   

Perpetual preferred securities

            224                        224   

Other investments

    237         19                        256   

Total available-for-sale

    992         46,589         808                48,389   

Mortgage loans held for sale

            2,994                        2,994   

Mortgage servicing rights

                    2,412                2,412   

Derivative assets

            708         638         (411     935   

Other assets

    99         817                        916   

Total

  $ 1,091       $ 51,108       $ 3,858       $ (411   $ 55,646   

Derivative liabilities

  $       $ 1,541       $ 80       $ (1,127   $ 494   

Short-term borrowings (c)

    214         458                        672   

Total

  $ 214       $ 1,999       $ 80       $ (1,127   $ 1,166   

December 31, 2013

            

Available-for-sale securities

            

U.S. Treasury and agencies

  $ 7       $ 1,038       $       $      $ 1,045   

Mortgage-backed securities

            

Residential

            

Agency

            31,553                        31,553   

Non-agency

            

Prime (a)

                    478                478   

Non-prime (b)

                    297                297   

Commercial

            

Agency

            152                        152   

Asset-backed securities

            

Collateralized debt obligations/Collateralized loan obligations

            24                        24   

Other

            566         63                629   

Obligations of state and political subdivisions

            5,738                        5,738   

Obligations of foreign governments

            6                        6   

Corporate debt securities

            631         9                640   

Perpetual preferred securities

            212                        212   

Other investments

    141         20                        161   

Total available-for-sale

    148         39,940         847                40,935   

Mortgage loans held for sale

            3,263                        3,263   

Mortgage servicing rights

                    2,680                2,680   

Derivative assets

            889         515         (599     805   

Other assets

    143         588                        731   

Total

  $ 291       $ 44,680       $ 4,042       $ (599   $ 48,414   

Derivative liabilities

  $       $ 1,647       $ 70       $ (1,192   $ 525   

Short-term borrowings (c)

    112         551                        663   

Total

  $ 112       $ 2,198       $ 70       $ (1,192   $ 1,188   

 

(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 June 30:

 

(Dollars in Millions)   Beginning
of Period
Balance
    Net
Gains
(Losses)
Included
in Net
Income
    Net
Gains
(Losses)
Included
in
Other
Compre-
hensive
Income
(Loss)
    Pur-
chases
    Sales     Principal
Pay-
ments
    Issu-
ances
    Settle-
ments
    End
of
Period
Balance
    Net
Change in
Unrealized
Gains
(Losses)
Relating
to Assets
and
Liabilities
Still
Held at
End of
Period
 

2014

                   

Available-for-sale securities

                   

Mortgage-backed securities

                   

Residential non-agency

                   

Prime (a)

  $ 465      $      $ 5      $      $      $ (23   $      $      $ 447      $ 5   

Non-prime (b)

    297        (3     1                      (9                   286          

Asset-backed securities

                   

Other

    65        1               2               (2                   66          

Corporate debt securities

    9                                                         9          

Total available-
for-sale

    836        (2 ) (c)      6 (f)      2               (34                   808        5   

Mortgage servicing rights

    2,618        (137 ) (d)             1        (141            71  (g)             2,412        (137 ) (d) 

Net derivative assets and liabilities

    482        288  (e)                                         (212     558        123  (h) 

2013

                   

Available-for-sale securities

                   

Mortgage-backed securities

                   

Residential non-agency

                   

Prime (a)

  $ 599      $ (2   $ (3   $      $      $ (47   $      $      $ 547      $ (3

Non-prime (b)

    350        (1     3               (20     (13                   319        5   

Asset-backed securities

                   

Other

    40               1                      (1                   40        1   

Corporate debt securities

    9                                                         9          

Total available-
for-sale

    998        (3 ) (i)      1 (f)             (20     (61                   915        3   

Mortgage servicing rights

    1,955        186  (d)             3                      233  (g)             2,377        186  (d) 

Net derivative assets and liabilities

    986        (363 ) (j)                    (1                   (199     423        (286 ) (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) Included in securities gains (losses).
(d) Included in mortgage banking revenue.
(e) Approximately $127 million included in other noninterest income and $161 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 $47 million included in other noninterest income and $76 million included in mortgage banking revenue.
(i) Included in securities gains (losses)
(j) Approximately $(207) million included in other noninterest income and $(156) million included in mortgage banking revenue.
(k) Approximately $(185) million included in other noninterest income and $(101) 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 six months ended June 30:

 

(Dollars in Millions)   Beginning
of Period
Balance
    Net
Gains
(Losses)
Included
in Net
Income
    Net Gains
(Losses)
Included in
Other
Compre-
hensive
Income
(Loss)
    Pur-chases     Sales     Principal
Payments
    Issu-
ances
    Settle-
ments
    End
of Period
Balance
    Net
Change in
Unrealized
Gains
(Losses)
Relating
to Assets
and
Liabilities
Still
Held at
End of
Period
 

2014

                   

Available-for-sale securities

                   

Mortgage-backed securities

                   

Residential non-agency

                   

Prime (a)

  $ 478      $      $ 12      $      $      $ (43   $      $      $ 447      $ 12   

Non-prime (b)

    297        (4     8                      (15                   286        7   

Asset-backed securities

                   

Other

    63        2        1        4               (4                   66        1   

Corporate debt securities

    9                                                         9          

Total available-
for-sale

    847        (2 ) (c)      21 (f)      4               (62                   808        20   

Mortgage servicing rights

    2,680        (284 ) (d)             2        (141            155  (g)             2,412        (284 ) (d) 

Net derivative assets and liabilities

    445        473  (e)             1                             (361     558        161  (h) 

2013

                   

Available-for-sale securities

                   

Mortgage-backed securities

                   

Residential non-agency

                   

Prime (a)

  $ 624      $ (4   $ 8      $      $      $ (81   $      $      $ 547      $ 8   

Non-prime (b)

    355        (8     17               (20     (25                   319        18   

Asset-backed securities

                   

Other

    15        1        1        25               (2                   40        1   

Corporate debt securities

    9                                                         9          

Total available-
for-sale

    1,003        (11 ) (i)      26  (f)      25        (20     (108                   915        27   

Mortgage servicing rights

    1,700        185  (d)             5                      487  (g)             2,377        185  (d) 

Net derivative assets and liabilities

    1,179        (216 ) (j)             1        (2                   (539     423        (374 ) (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) Included in securities gains (losses).
(d) Included in mortgage banking revenue.
(e) Approximately $208 million included in other noninterest income and $265 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 $85 million included in other noninterest income and $76 million included in mortgage banking revenue.
(i) Approximately $(10) million included in securities gains (losses) and $(1) million included in interest income.
(j) Approximately $(210) million included in other noninterest income and $(6) million included in mortgage banking revenue.
(k) Approximately $(273) million included in other noninterest income and $(101) million 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:

 

    June 30, 2014            December 31, 2013  
(Dollars in Millions)   Level 1      Level 2      Level 3      Total            Level 1      Level 2      Level 3      Total  

Loans (a)

  $       $       $ 102       $ 102            $       $       $ 128       $ 128   

Other assets (b)

                    71         71                              150         150   

 

(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 June 30,
           Six Months
Ended June 30,
 
(Dollars in Millions)   2014      2013            2014      2013  

Loans (a)

  $ 31       $ 12            $ 47       $ 33   

Other assets (b)

    15         20              34         59   

 

(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:

 

    June 30, 2014           December 31, 2013  
(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

  $ 2,994       $ 2,864       $ 130           $ 3,263       $ 3,195       $ 68   

Nonaccrual loans

    7         11         (4          9         14         (5

Loans 90 days or more past due

    3         4         (1                            
Estimated Fair Values of Financial Instruments

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

 

    June 30, 2014   December 31, 2013  
   

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

  $ 12,636        $ 12,636      $      $      $ 12,636           $ 8,477        $ 8,477      $      $      $ 8,477   

Federal funds sold and securities purchased under resale agreements

    271                 271               271             163                 163               163   

Investment securities held-to-maturity

    41,995          1,413        40,454        97        41,964             38,920          2,589        35,678        101        38,368   

Loans held for sale (a)

    24                        24        24             5                        5        5   

Loans (b)

    239,640                        242,067        242,067             230,857                        231,480        231,480   

Other financial instruments

    2,247                 946        1,311        2,257             2,443                 1,080        1,383        2,463   

Financial Liabilities

                            

Deposits

    276,262                 276,150               276,150             262,123                 262,200               262,200   

Short-term borrowings (c)

    28,429                 28,296               28,296             26,945                 26,863               26,863   

Long-term debt

    25,891                 26,331               26,331             20,049                 20,391               20,391   

Other liabilities

    1,294                          1,294        1,294             1,263                          1,263        1,263   

 

(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.