Fair Values of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2021

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


	Minimum			Maximum			Weighted- Average (a)
Expected prepayment		3	%		13	%		10	%
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, 2021:


	Minimum			Maximum			Weighted- Average (a)
Expected loan close rate		1	%		100	%		76	%
Inherent MSR value (basis points per loan)		47			187			121

(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, 2021
Available-for-sale securities
U.S. Treasury and agencies	$	14,344	$	4,147	$	–	$	–		$	18,491
Mortgage-backed securities
Residential agency		–		112,796		–		–			112,796
Commercial agency		–		7,686		–		–			7,686
Asset-backed securities		–		61		8		–			69
Obligations of state and political subdivisions		–		10,326		1		–			10,327
Other		–		7		–		–			7
Total available-for-sale		14,344		135,023		9		–			149,376
Mortgage loans held for sale		–		6,176		–		–			6,176
Mortgage servicing rights		–		–		2,910		–			2,910
Derivative assets		6		2,691		1,671		(1,858	)		2,510
Other assets		322		2,118		–		–			2,440
Total	$	14,672	$	146,008	$	4,590	$	(1,858	)	$	163,412
Derivative liabilities	$	–	$	2,429	$	553	$	(1,697	)	$	1,285
Short-term borrowings and other liabilities (a)		205		1,893		–		–			2,098
Total	$	205	$	4,322	$	553	$	(1,697	)	$	3,383
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 September 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 nine 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 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 and Liabilities Held at End of Period
2021
Available-for-sale securities
Asset-backed securities	$	8	$	–		$	–	$	–	$	–		$	–	$	–		$	–		$	8	$	–
Obligations of state and political subdivisions		1		–			–		–		–			–		–			–			1		–
Total available-for-sale		9		–			–		–		–			–		–			–			9		–
Mortgage servicing rights		2,713		(96	) (a)		–		9		–			–		284	(c)		–			2,910		(96	) (a)
Net derivative assets and liabilities		1,500		(225	) (b)		–		106		(1	)		–		–			(262	)		1,118		(203	) (d)

2020
Available-for-sale securities
Asset-backed securities	$	7	$	–		$	–	$	–	$	–		$	–	$	–		$	–		$	7	$	–
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	(e)		–		152		(1	)		–		–			(579	)		2,624		228	(f)

(a)	Included in mortgage banking revenue.

(b)	Approximately $208 million, $(434) 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 $57 million, $(261) million and $1 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(e)	Approximately $508 million, $(228) million and $(69) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(f)	Approximately $291 million, $6 million and $(69) million included in mortgage banking revenue, commercial products revenue and other noninterest income, 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		(233	) (a)		–		36		1			–			896	(c)		–			2,910		(233	) (a)
Net derivative assets and liabilities		2,326		(604	) (b)		–		166		(2	)		–			–			(768	)		1,118		(761	) (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		(1,299	) (a)		–		16		3			–			712	(c)		–			1,978		(1,299	) (a)
Net derivative assets and liabilities		810		2,685	(e)		–		247		(2	)		–			–			(1,116	)		2,624		1,888	(f)

(a)	Included in mortgage banking revenue.

(b)	Approximately $544 million, $(1.2) billion and $2 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(c)	Represents MSRs capitalized during the period.

(d)	Approximately $57 million, $ (820) million and $2 million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(e)	Approximately $1.5 billion, $1.3 billion and $(70) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(f)	Approximately $291 million, $1.7 billion and $(70) 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:


	September 30, 2021								December 31, 2020
(Dollars in Millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Loans (a)	$	–	$	–	$	65	$	65	$	–	$	–	$	385	$	385

Other assets (b)		–		–		67		67		–		–		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 September 30				Nine Months Ended September 30
(Dollars in Millions)	2021		2020		2021		2020
Loans (a)	$	15	$	184	$	58	$	244

Other assets (b)		1		13		7		19

(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, 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	$	6,176	$	6,017	$	159	$	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:


	September 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	$	63,904	$	63,904	$	–	$	–	$	63,904	$	62,580	$	62,580	$	–	$	–	$	62,580
Federal funds sold and securities purchased under resale agreements		440		–		440		–		440		377		–		377		–		377
Loans held for sale (a)		15		–		–		15		15		237		–		–		237		237
Loans		291,816		–		–		298,764		298,764		290,393		–		–		300,419		300,419
Other (b)		1,472		–		630		842		1,472		1,772		–		731		1,041		1,772

Financial Liabilities
Time deposits		22,879		–		22,946		–		22,946		30,694		–		30,864		–		30,864
Short-term borrowings (c)		13,990		–		13,894		–		13,894		10,009		–		9,956		–		9,956
Long-term debt		35,671		–		36,262		–		36,262		41,297		–		42,485		–		42,485
Other (d)		3,972		–		1,114		2,858		3,972		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.