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Fair Values of Assets and Liabilities (Tables)
 9 Months Ended
Sep. 30, 2019
Fair Value Disclosures [Abstract]  
Valuation Assumption Ranges for MSRs
The following table shows the significant valuation assumption ranges for MSRs at September 30, 2019:
 
    Minimum     Maximum     Weighted
-

Average (a)		  
Expected prepayment
     10 %      21 %      15 % 
Option adjusted spread
     7       10       7  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Determined based on the relative fair value of the related mortgage loans serviced.
 
 
 
 
 
 
 
 
 
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 September 30, 2019:
 
    Minimum     Maximum     Weighted
-

Average (a)		  
Expected loan close rate
     13 %      100 %      78 % 
Inherent MSR value (basis points per loan)
     50       199       118  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Determined based on the relative fair value of the related mortgage loans.
 
 
 
 
 
 
 
 
 
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, 2019
                                        
Available-for-sale
securities
                                        
U.S. Treasury and agencies
   $ 15,141     $ 412     $ –     $ –     $ 15,553  
Mortgage-backed securities
                                        
Residential agency
     –       50,943       –       –       50,943  
Commercial agency
     –       984       –       –       984  
Other asset-backed securities
     –       382       –       –       382  
Obligations of state and political subdivisions
     –       6,735       –       –       6,735  
Obligations of foreign governments
 
 
–
 
 
 
1
 
 
 
–
 
 
 
–
 
 
 
1
 
Total
available-for-sale
     15,141       59,457       –       –       74,598  
Mortgage loans held for sale
     –       3,852       –       –       3,852  
Mortgage servicing rights
     –       –       2,296       –       2,296  
Derivative assets
     7       1,998       1,620       (1,324 )     2,301  
Other assets
     322       2,065       –       –       2,387  
Total
   $ 15,470     $ 67,372     $ 3,916     $ (1,324 )   $ 85,434  
Derivative liabilities
   $ 2     $ 1,831     $ 334     $ (1,093 )   $ 1,074  
Short-term borrowings and other liabilities (a)
     144       1,460       –       –       1,604  
Total
   $ 146     $ 3,291     $ 334     $ (1,093 )   $ 2,678  
December 31, 2018
                                        
Available-for-sale
securities
U.S. Treasury and agencies
   $ 18,585     $ 672     $ –     $ –     $ 19,257  
Mortgage-backed securities
                                        
Residential agency
     –       39,752       –       –       39,752  
Commercial agency
     –       2       –       –       2  
Other asset-backed securities
     –       403       –       –       403  
Obligations of state and political subdivisions
     –       6,701       –       –       6,701  
Total
available-for-sale
     18,585       47,530       –       –       66,115  
Mortgage loans held for sale
     –       2,035       –       –       2,035  
Mortgage servicing rights
     –       –       2,791       –       2,791  
Derivative assets
     –       1,427       583       (942 )      1,068  
Other assets
     392       1,273       –       –       1,665  
Total
   $ 18,977     $ 52,265     $ 3,374     $ (942 )    $ 73,674  
Derivative liabilities
   $ 1     $ 1,291     $ 503     $ (946 )    $ 849  
Short-term borrowings and other liabilities (a)
     199       1,019       –       –       1,218  
Total
   $ 200     $ 2,310     $ 503     $ (946 )    $ 2,067  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note:
Excluded from the table above are equity investments without readily determinable fair values. The Company has elected to carry these investments at historical cost, adjusted for impairment and any changes resulting from observable price changes for identical or similar investments of the issuer. The aggregate carrying amount of these equity investments was $88 million and $86 million at September 30, 2019 and December 31, 2018, respectively. The Company has not recorded impairments or adjustments for observable price changes on these equity investments during the first nine months of 2019 and 2018, or on a cumulative basis.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Primarily 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
t
hree months ended September
 
30:
 
                                                                 
(Dollars in Millions)
 
Beginning

of Period

Balance
 
 
Net Gains

(Losses)

Included in

Net Income
 
 
Purchases
 
 
Sales
 
 
Issuances
 
 
Settlements
 
 
End

of Period

Balance
 
 
Net Change in

Unrealized

Gains (Losses)

Relating to Assets

and Liabilities

Held at End of 

Period
 
2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage servicing rights
 
$
2,458
 
 
$
(340
) (a) 
 
$
6
 
 
$
4
 
 
$
168
 (c) 
 
$
–
 
 
$
2,296
 
 
$
(340
) (a) 
Net derivative assets and liabilities
 
 
1,045
 
 
 
313
  (b) 
 
 
1
 
 
 
(1
)
 
 
–
 
 
 
(72
)
 
 
1,286
 
 
 
322
  (d) 
 
 
 
 
 
 
 
 
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage servicing rights
 
$
2,844
 
 
$
(23
) (a) 
 
$
2
 
 
$
(15
) 
 
$
109
 (c) 
 
$
–
 
 
$
2,917
 
 
$
(23
)  (a) 
Net derivative assets and liabilities
 
 
(256
) 
 
 
(81
) (e) 
 
 
2
 
 
 
(13
) 
 
 
–
 
 
 
(10
) 
 
 
(358
) 
 
 
(81
)  (f) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Included in mortgage banking revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(b)
Approximately $169 million included in other noninterest income and $144
 
million included in mortgage banking revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(c)
Represents MSRs capitalized during the period.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(d)
Approximately $273 million included in other noninterest income and $49 million included in mortgage banking revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(e)
Approximately $(122) million included in other noninterest income and $41 million included in mortgage banking revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(f)
Approximately $(97) million included in other noninterest income and $16 million included in mortgage banking revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table presents the changes in fair value for all assets and liabilities m
e
asured 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		     Purchases     Sales     Issuances     Settlements     End
of Period
Balance		    
Net Change in
Unrealized
Gains (Losses)
Relating to Assets
and Liabilities
Held at End of
 Period
  
2019
                                                                
Mortgage servicing rights
   $ 2,791     $ (885 ) (a)    $ 13     $ 4     $ 373  (c)    $ –     $ 2,296     $ (885 ) (a) 
Net derivative assets and liabilities
     80       1,244   (b)      55       (9 )     –       (84 )     1,286       1,256   (d) 
                 
2018
                                                                
Mortgage servicing rights
   $ 2,645     $ (25 ) (a)    $ 6     $ (15 )    $ 306  (c)    $ –     $ 2,917     $ (25 )
 
 
(a) 
Net derivative assets and liabilities
     107       (426 ) (e)      3       (35 )      –        (7 )      (358 )      (402 ) 
 
(f) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Included in mortgage banking revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(b)
Approximately $881 million included in other noninterest income and $363 million included in mortgage banking revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(c)
Represents MSRs capitalized during the period.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(d)
Approximately $1.2 
b
illion included in other noninterest income and $49 million included in mortgage banking revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(e)
Approximately $(537) million included in other noninterest income and $111 million included in mortgage banking revenue.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(f)
Approximately $(418) million included in other noninterest income and $16 million included in mortgage banking revenue.
 
 
 
 
 
 
 
 
 
Adjusted Carrying Values for Assets Measured at Fair Value on Nonrecurring Basis
The following table summarizes the balances as of the measurement date of assets measured at fair value on a nonrecurring basis, and still held as of the reporting date:
 
                                                                         
    September 30, 2019           December 31, 2018  
(Dollars in Millions)   Level 1     Level 2     Level 3     Total           Level 1     Level 2     Level 3     Total  
Loans (a)
   $ –     $ –     $ 270     $ 270             $ –     $ –     $ 40     $ 40  
                   
Other assets (b)
     –       –       42       42               –       –       57       57  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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)   2019     2018           2019     2018  
Loans (a)
   $
 
 20     $
 
 25      
 
 
 
 
 
 
 
 
 
      
 
 
    
 
 
 
 
 $
 
 
 
 
 
 
 
 93  
 
 
 
 
 
 
 
 
 
 
 
 $
 
 
 
 
 
 
 
 
 66  
           
Other assets (b)
     6       5               12       18  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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 for which Fair Value Option has been Elected and Aggregate Unpaid Principal Amount Contractually Obligated to Receive at Maturity
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, 2019           December 31, 2018  
(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
   $ 3,852     $ 3,729     $ 123             $ 2,035     $ 1,972     $ 63  
Nonaccrual loans
     1       1       –               2       2       –  
Loans 90 days or more past due
     –       –       –               –       –       –  
 
 
 
 
 
 
 
 
 
Estimated Fair Values of Financial Instruments
The estimated fair values of the Company’s financial instruments are shown in the table below:
 
                                                                                                         
    September 30, 2019     December 31, 2018  
   
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
   $ 15,272             $ 15,272     $ –     $ –     $ 15,272             $ 21,453             $ 21,453     $ –     $ –     $ 21,453  
Federal funds sold and securities purchased under resale agreements
     3,907               –       3,907       –       3,907               306               –       306       –       306  
Investment securities
held-to-maturity
     46,481               4,106       42,523       9       46,638               46,050               4,594       40,359       11       44,964  
Loans held for sale (a)
     676               –       –       676       676               21               –       –       21       21  
Loans
     290,631               –       –       294,850       294,850               282,837               –       –       284,790       284,790  
Other
     1,873               –       941       932       1,873               2,412               –       1,241       1,171       2,412  
                           
Financial Liabilities
                                                                                                        
Time deposits
     40,219               –       40,147       –       40,147               44,554               –       44,140       –       44,140  
Short-term borrowings (b)
     12,975               –       12,813       –       12,813               12,921               –       12,678       –       12,678  
Long-term debt
     41,274               –       41,902       –       41,902               41,340               –       41,003       –       41,003  
Other
     3,636               –       1,344       2,292       3,636               1,726               –       –       1,726       1,726  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(a)
Excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(b)
Excludes the Company’s obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.