Fair Values of Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2021

The following table shows the significant valuation assumption ranges for MSRs at June 30, 2021:


	Minimum			Maximum			Weighted- Average (a)
Expected prepayment		3	%		15	%		11	%
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 June 30, 2021:


	Minimum			Maximum			Weighted- Average (a)
Expected loan close rate		6	%		100	%		74	%
Inherent MSR value (basis points per loan)		47			187			116

(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
June 30, 2021
Available-for-sale securities
U.S. Treasury and agencies	$	19,703	$	2,952	$	–	$	–		$	22,655
Mortgage-backed securities
Residential agency		–		120,315		–		–			120,315
Commercial agency		–		6,968		–		–			6,968
Asset-backed securities		–		192		8		–			200
Obligations of state and political subdivisions		–		10,142		1		–			10,143
Other		–		7		–		–			7
Total available-for-sale		19,703		140,576		9		–			160,288
Mortgage loans held for sale		–		5,836		–		–			5,836
Mortgage servicing rights		–		–		2,713		–			2,713
Derivative assets		5		2,681		1,986		(1,795	)		2,877
Other assets		283		1,892		–		–			2,175
Total	$	19,991	$	150,985	$	4,708	$	(1,795	)	$	173,889
Derivative liabilities	$	–	$	2,617	$	486	$	(1,832	)	$	1,271
Short-term borrowings and other liabilities (a)		176		1,905		–		–			2,081
Total	$	176	$	4,522	$	486	$	(1,832	)	$	3,352
December 31, 2020
Available-for-sale securities
U.S. Treasury and agencies	$	19,251	$	3,140	$	–	$	–		$	22,391
Mortgage-backed securities
Residential agency		–		99,968		–		–			99,968
Commercial agency		–		5,406		–		–			5,406
Asset-backed securities		–		198		7		–			205
Obligations of state and political subdivisions		–		8,860		1		–			8,861
Other		–		9		–		–			9
Total available-for-sale		19,251		117,581		8		–			136,840
Mortgage loans held for sale		–		8,524		–		–			8,524
Mortgage servicing rights		–		–		2,210		–			2,210
Derivative assets		4		3,235		2,762		(1,874	)		4,127
Other assets		302		1,601		–		–			1,903
Total	$	19,557	$	130,941	$	4,980	$	(1,874	)	$	153,604
Derivative liabilities	$	–	$	3,166	$	436	$	(2,312	)	$	1,290
Short-term borrowings and other liabilities (a)		85		1,672		–		–			1,757
Total	$	85	$	4,838	$	436	$	(2,312	)	$	3,047

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 $73 million and $85 million at June 30, 2021 and December 31, 2020, respectively. The Company has not recorded impairments or adjustments for observable price changes on these equity investments during the first six months of 2021 and 2020, 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 June 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 and Liabilities Held at End of Period
2021
Available-for-sale securities
Asset-backed securities	$	7	$	–		$	1		$	–	$	–		$	–		$	–		$	–		$	8	$	1
Obligations of state and political subdivisions		1		–			–			–		–			–			–			–			1		–
Total available-for-sale		8		–			1			–		–			–			–			–			9		1
Mortgage servicing rights		2,787		(379	) (a)		–			11		1			–			293	(c)		–			2,713		(379	) (a)
Net derivative assets and liabilities		1,156		556	(b)		–			58		(1	)		–			–			(269	)		1,500		412	(d)

2020
Available-for-sale securities
Asset-backed securities	$	8	$	–		$	–		$	–	$	–		$	(1	)	$	–		$	–		$	7	$	(1	)
Obligations of state and political subdivisions		2		–			(1	)		–		–			–			–			–			1		(1	)
Total available-for-sale		10		–			(1	)		–		–			(1	)		–			–			8		(2	)
Mortgage servicing rights		1,887		(241	) (a)		–			3		1			–			190	(c)		–			1,840		(241	) (a)
Net derivative assets and liabilities		2,496		732	(e)		–			91		(1	)		–			–			(477	)		2,841		640	(f)

(a)	Included in mortgage banking revenue.

(b)	Approximately $276 million, $279 million and $1 million included in mortgage banking revenue, commercial products revenue and other noninter e st income, respectively.

(c)	Represents MSRs capitalized during the period.

(d)	Approximately $100 million, $311 million and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(e)	Approximately $622 million and $110 million included in mortgage banking revenue and commercial products revenue, respectively.

(f)	Approximately $334 million and $306 million included in mortgage banking revenue and commercial products revenue, respectively.


(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 and Liabilities Held at End of Period
2021
Available-for-sale securities
Asset-backed securities	$	7	$	–		$	1	$	–	$	–		$	–		$	–		$	–		$	8	$	1
Obligations of state and political subdivisions		1		–			–		–		–			–			–			–			1		–
Total available-for-sale		8		–			1		–		–			–			–			–			9		1
Mortgage servicing rights		2,210		(137	) (a)		–		27		1			–			612	(c)		–			2,713		(137	) (a)
Net derivative assets and liabilities		2,326		(379	) (b)		–		60		(1	)		–			–			(506	)		1,500		(496	) (d)

2020
Available-for-sale securities
Asset-backed securities	$	8	$	–		$	–	$	–	$	–		$	(1	)	$	–		$	–		$	7	$	–
Obligations of state and political subdivisions		1		–			–		–		–			–			–			–			1		–
Total available-for-sale		9		–			–		–		–			(1	)		–			–			8		–
Mortgage servicing rights		2,546		(1,107	) (a)		–		8		2			–			391	(c)		–			1,840		(1,107	) (a)
Net derivative assets and liabilities		810		2,474	(e)		–		95		(1	)		–			–			(537	)		2,841		2,066	(f)

(a)	Included in mortgage banking revenue.

(b)	Approximately $336 million, $(716) million and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(c)	Represents MSRs capitalized during the period.

(d)	Approximately $100 million, $(597) million and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(e)	Approximately $979 million, $1.5 billion and $(1) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(f)	Approximately $334 million, $1.7 billion and $(1) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

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:


	June 30, 2021								December 31, 2020
(Dollars in Millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Loans (a)	$	–	$	–	$	82	$	82	$	–	$	–	$	385	$	385

Other assets (b)		–		–		65		65		–		–		30		30

(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)	2021		2020		2021		2020
Loans (a)	$	12	$	55	$	43	$	60

Other assets (b)		5		3		6		6

(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:


	June 30, 2021						December 31, 2020
(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	$	5,836	$	5,644	$	192	$	8,524	$	8,136	$	388
Nonaccrual loans		1		1		–		1		1		–
Loans 90 days or more past due		1		1		–		2		2		–

Estimated Fair Values of Financial Instruments

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


	June 30, 2021										December 31, 2020
	Carrying Amount		Fair Value								Carrying Amount		Fair Value
(Dollars in Millions)	Carrying Amount		Level 1		Level 2		Level 3		Total		Carrying Amount		Level 1		Level 2		Level 3		Total
Financial Assets
Cash and due from banks	$	44,573	$	44,573	$	–	$	–	$	44,573	$	62,580	$	62,580	$	–	$	–	$	62,580
Federal funds sold and securities purchased under resale agreements		248		–		248		–		248		377		–		377		–		377
Loans held for sale (a)		20		–		–		20		20		237		–		–		237		237
Loans		290,886		–		–		299,332		299,332		290,393		–		–		300,419		300,419
Other (b)		1,835		–		881		954		1,835		1,772		–		731		1,041		1,772

Financial Liabilities
Time deposits		23,783		–		23,913		–		23,913		30,694		–		30,864		–		30,864
Short-term borrowings (c)		11,332		–		11,265		–		11,265		10,009		–		9,956		–		9,956
Long-term debt		36,360		–		37,087		–		37,087		41,297		–		42,485		–		42,485
Other (d)		4,039		–		1,133		2,906		4,039		4,052		–		1,234		2,818		4,052

(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.