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Fair Values of Assets and Liabilities (Tables)
 9 Months Ended
Sep. 30, 2020
Fair Value Disclosures [Abstract]  
Valuation Assumption Ranges for MSRs
The following table shows the significant valuation assumption ranges for MSRs at September 30, 2020:
 
     Minimum     Maximum     Weighted
Average (a)		  
Expected prepayment
     13 %      24 %      19 % 
Option adjusted spread
     6       11       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, 2020:
 
     Minimum     Maximum     Weighted
Average (a)		  
Expected loan close rate
     5 %      100 %      75 % 
Inherent MSR value (basis points per loan)
     19       195       117  
 
(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, 2020
             
Available-for-sale
securities
             
U.S. Treasury and agencies
   $ 19,357      $ 3,207      $ –      $ –     $ 22,564  
Mortgage-backed securities
             
Residential agency
     –        98,462        –        –       98,462  
Commercial agency
     –        4,429        –        –       4,429  
Asset-backed securities
             
Collateralized debt obligations/Collateralized loan obligations
     –        –        1        –       1  
Other
     –        201        6        –       207  
Obligations of state and political subdivisions
     –        8,355        1        –       8,356  
Obligations of foreign governments
     –        9        –        –       9  
Corporate debt securities
     –        4        –        –       4  
Total
available-for-sale
     19,357        114,667        8        –       134,032  
Mortgage loans held for sale
     –        7,314        –        –       7,314  
Mortgage servicing rights
     –        –        1,978        –       1,978  
Derivative assets
     –        2,983        3,072        (1,885 )      4,170  
Other assets
     184        1,722        –        –       1,906  
Total
   $ 19,541      $ 126,686      $ 5,058      $ (1,885 )    $ 149,400  
Derivative liabilities
   $ –      $ 2,724      $ 448      $ (2,067 )    $ 1,105  
Short-term borrowings and other liabilities (a)
     158        1,594        –        –       1,752  
Total
   $ 158      $ 4,318      $ 448      $ (2,067 )    $ 2,857  
December 31, 2019
             
Available-for-sale
securities
             
U.S. Treasury and agencies
   $ 18,986      $ 853      $ –      $ –     $ 19,839  
Mortgage-backed securities
             
Residential agency
     –        94,111        –        –       94,111  
Commercial agency
     –        1,453        –        –       1,453  
Asset-backed securities
             
Collateralized debt obligations/Collateralized loan obligations
     –        –        1        –       1  
Other
     –        375        7        –       382  
Obligations of state and political subdivisions
     –        6,813        1        –       6,814  
Obligations of foreign governments
     –        9        –        –       9  
Corporate debt securities
     –        4        –        –       4  
Total
available-for-sale
     18,986        103,618        9        –       122,613  
Mortgage loans held for sale
     –        5,533        –        –       5,533  
Mortgage servicing rights
     –        –        2,546        –       2,546  
Derivative assets
     9        1,707        1,181        (982 )      1,915  
Other assets
     312        1,563        –        –       1,875  
Total
   $ 19,307      $ 112,421      $ 3,736      $ (982 )    $ 134,482  
Derivative liabilities
   $ –      $ 1,612      $ 371      $ (1,067 )    $ 916  
Short-term borrowings and other liabilities (a)
     50        1,578        –        –       1,628  
Total
   $ 50      $ 3,190      $ 371      $ (1,067 )    $ 2,544  
 
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 $82 million and $91 million at September 30, 2020 and December 31, 2019 respectively. The Company has not recorded impairments or adjustments for observable price changes on these equity investments during the first nine months of 2020 and 2019, 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 three months ended September 30:
 
(Dollars in Millions)
 
Beginning
of Period
Balance
 
 
Net Gains
(Losses)
Included in
Net Income
 
 
Purchases
 
 
Sales
 
Principal
Payments
 
 
Issuances
 
 
Settlements
 
 
End
of Period
Balance
 
Net Change
in Unrealized
Gains (Losses)
Relating to
Assets and
Liabilities
Held at End
of Period
 
2020
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Available-for-sale
securities
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Asset-backed securities
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Collateralized debt obligations/Collateralized loan obligations
 
$
1
 
 
$
–
 
 
$
–
 
 
$
–
 
 
$
–
 
 
$
–
 
 
$
–
 
 
$
1
 
 
$
–
 
Other
 
 
6
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
6
 
 
 
–
 
Obligations of state and political subdivisions
 
 
1
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
1
 
 
 
–
 
Total
available-for-sale
 
 
8
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
8
 
 
 
–
 
Mortgage servicing rights
 
 
1,840
 
 
 
(192
) (a) 
 
 
8
 
 
 
1
 
 
 
–
 
 
 
321
 (c) 
 
 
–
 
 
 
1,978
 
 
 
(192
) (a) 
Net derivative assets and liabilities
 
 
2,841
 
 
 
211
  (b) 
 
 
152
 
 
 
(1
) 
 
 
–
 
 
 
–
 
 
 
(579
) 
 
 
2,624
 
 
 
228
  (d) 
                   
2019
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Mortgage servicing rights
 
$
2,458
 
 
$
(340
) (a) 
 
$
6
 
 
$
4
 
 
$
–
 
 
$
168
 (c) 
 
$
–
 
 
$
2,296
 
 
$
(340
) (a) 
Net derivative assets and liabilities
 
 
1,045
 
 
 
313
  (e) 
 
 
1
 
 
 
(1
) 
 
 
–
 
 
 
–
 
 
 
(72
) 
 
 
1,286
 
 
 
322
  (f) 
 
(a)
Included in mortgage banking revenue.
(b)
Approximately $508 million, $(228) million and $(69) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(c)
Represents MSRs capitalized during the period.
(d)
Approximately $291 million , $6 million and $(69) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(e)
Approximately $144 million included in mortgage banking revenue and $169 million included in commercial products revenue.
(f)
Approximately $273 million included in mortgage banking revenue and $49 million included in commercial products 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
 
 
Purchases
 
 
Sales
 
 
Principal
Payments
 
 
Issuances
 
 
Settlements
 
 
End
of Period
Balance
 
 
Net Change
in Unrealized
Gains (Losses)
Relating to
Assets and
Liabilities
Held at End
of Period
 
2020
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Available-for-sale
securities
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Asset-backed securities
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Collateralized debt obligations/Collateralized loan obligations
 
$
1
 
 
$
–
 
 
$
–
 
 
$
–
 
 
$
–
 
 
$
–
 
 
$
–
 
 
$
1
 
 
$
–
 
Other
 
 
7
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(1
) 
 
 
–
 
 
 
–
 
 
 
6
 
 
 
–
 
Obligations of state and political subdivisions
 
 
1
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
1
 
 
 
–
 
Total
available-for-sale
 
 
9
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(1
) 
 
 
–
 
 
 
–
 
 
 
8
 
 
 
–
 
Mortgage servicing rights
 
 
2,546
 
 
 
(1,299
) (a) 
 
 
16
 
 
 
3
 
 
 
–
 
 
 
712
 (c) 
 
 
–
 
 
 
1,978
 
 
$
(1,299
) (a) 
Net derivative assets and liabilities
 
 
810
 
 
 
2,685
  (b) 
 
 
247
 
 
 
(2
) 
 
 
–
 
 
 
–
 
 
 
(1,116
) 
 
 
2,624
 
 
 
1,888
  (d) 
                   
2019
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
 
      
Mortgage servicing rights
 
$
2,791
 
 
$
(885
) (a) 
 
$
13
 
 
$
4
 
 
$
–
 
 
$
373
 (c) 
 
$
–
 
 
$
2,296
 
 
$
(885
) (a) 
Net derivative assets and liabilities
 
 
80
 
 
 
1,244
  (e) 
 
 
55
 
 
 
(9
) 
 
 
–
 
 
 
–
 
 
 
(84
) 
 
 
1,286
 
 
 
1,256
  (f) 
 
(a)
Included in mortgage banking revenue.
(b)
Approximately $1.5 billion, $1.3 billion and $(70) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(c)
Represents MSRs capitalized during the period.
(d)
Approximately $291 million ,
$1.7 billion
and $(70) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.
(e)
Approximately $363 million included in mortgage banking revenue and $881 million included in commercial products revenue.
(f)
Approximately $49 million included in mortgage banking revenue and $1.2 billion included in commercial products 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, 2020              December 31, 2019  
(Dollars in Millions)   Level 1      Level 2      Level 3      Total              Level 1      Level 2      Level 3      Total  
Loans (a)
   $ –      $ –      $ 602      $ 602     
 
    $ –      $ –      $ 136      $ 136  
 
Other assets (b)
     –        –        53        53     
 
 
 
      –        –        46        46  
 
(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)   2020      2019              2020      2019  
Loans (a)
   $ 184      $ 20     
 
    $ 244      $ 93  
 
Other assets (b)
     13        6     
 
 
 
      19        12  
 
(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, 2020              December 31, 2019  
(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
   $ 7,314      $ 6,983      $ 331     
 
    $ 5,533      $ 5,366      $ 167  
Nonaccrual loans
     1        1        –     
 
      1        1        –  
Loans 90 days or more past due
     –        –        –     
 
 
 
      1        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, 2020      December 31, 2019  
    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
   $ 44,047       $ 44,047     $ –     $ –     $ 44,047    
 
    $ 22,405        $ 22,405      $ –      $ –      $ 22,405  
Federal funds sold and securities purchased under resale agreements
     290         –       290       –       290    
 
      1,036          –        1,036        –        1,036  
Loans held for sale (a)
     304         –       –       304       304    
 
      45          –        –        43        43  
Loans
     299,578         –       –       310,721       310,721    
 
      292,082          –        –        297,241        297,241  
Other (b)
     1,818         –       809       1,009       1,818    
 
      1,923          –        929        994        1,923  
 
Financial Liabilities
              
 
                 
Time deposits
     32,587         –       32,675       –       32,675    
 
      42,894          –        42,831        –        42,831  
Short-term borrowings (c)
     11,971         –       11,903       –       11,903    
 
      22,095          –        21,961        –        21,961  
Long-term debt
     42,443         –       43,657       –       43,657    
 
      40,167          –        41,077        –        41,077  
Other (d)
     3,541    
 
 
 
     –       1,245       2,296       3,541    
 
 
 
      3,678    
 
 
 
      –        1,342        2,336        3,678  
 
(a)
Excludes mortgages held for sale for which the fair value option under applicable accounting guidance was elected.
(b)
Includes investments in Federal Reserve Bank and Federal Home Loan Bank stock and tax-advantaged investments.
(c)
Excludes the Company’s obligation on securities sold short required to be accounted for at fair value per applicable accounting guidance.
(d)
Includes operating lease liabilities and liabilities related to tax-advantaged investments.