Fair Values of Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2022

The following table shows the significant valuation assumption ranges for MSRs at September 30, 2022:


	Minimum			Maximum			Weighted- Average (a)
Expected prepayment		5	%		11	%		7	%
Option adjusted spread		5			11			6

(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, 2022:


	Minimum			Maximum			Weighted- Average (a)
Expected loan close rate		19	%		100	%		84	%
Inherent MSR value (basis points per loan)		41			194			112

(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, 2022
Available-for-sale securities
U.S. Treasury and agencies	$	16,737	$	4,849	$	–	$	–		$	21,586
Mortgage-backed securities
Residential agency		–		30,657		–		–			30,657
Commercial agency		–		7,091		–		–			7,091
Asset-backed securities		–		25		–		–			25
Obligations of state and political subdivisions		–		9,157		1		–			9,158
Other		–		6		–		–			6
Total available-for-sale		16,737		51,785		1		–			68,523
Mortgage loans held for sale		–		3,483		–		–			3,483
Mortgage servicing rights		–		–		3,869		–			3,869
Derivative assets		–		7,793		1,108		(6,174	)		2,727
Other assets		322		1,990		–		–			2,312
Total	$	17,059	$	65,051	$	4,978	$	(6,174	)	$	80,914
Derivative liabilities	$	–	$	6,599	$	4,984	$	(4,768	)	$	6,815
Short-term borrowings and other liabilities (a)		245		1,661		–		–			1,906
Total	$	245	$	8,260	$	4,984	$	(4,768	)	$	8,721
December 31, 2021
Available-for-sale securities
U.S. Treasury and agencies	$	30,917	$	5,692	$	–	$	–		$	36,609
Mortgage-backed securities
Residential agency		–		77,079		–		–			77,079
Commercial agency		–		8,485		–		–			8,485
Asset-backed securities		–		59		7		–			66
Obligations of state and political subdivisions		–		10,716		1		–			10,717
Other		–		7		–		–			7
Total available-for-sale		30,917		102,038		8		–			132,963
Mortgage loans held for sale		–		6,623		–		–			6,623
Mortgage servicing rights		–		–		2,953		–			2,953
Derivative assets		8		2,490		1,389		(1,609	)		2,278
Other assets		278		1,921		–		–			2,199
Total	$	31,203	$	113,072	$	4,350	$	(1,609	)	$	147,016
Derivative liabilities	$	–	$	2,308	$	590	$	(1,589	)	$	1,309
Short-term borrowings and other liabilities (a)		209		1,837		–		–			2,046
Total	$	209	$	4,145	$	590	$	(1,589	)	$	3,355

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 $78 million and $79 million at September 30, 2022 and December 31, 2021, respectively. The Company has not recorded impairments or adjustments for observable price changes on these equity investments during the first nine months of 2022 and 2021, 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			Issuances			Settlements			End of Period Balance			Net Change in Unrealized Gains (Losses) Relating to Assets and Liabilities Held at End of Period
2022
Available-for-sale securities
Obligations of state and political subdivisions	$	1		$	–		$	–	$	–	$	–		$	–		$	–		$	1		$	–
Total available-for-sale		1			–			–		–		–			–			–			1			–
Mortgage servicing rights		3,707			27	(a)		–		1		–			134	(c)		–			3,869			27	(a)
Net derivative assets and liabilities		(2,175	)		(2,398	) (b)		–		259		(29	)		11			456			(3,876	)		(1,978	) (d)

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	) (e)		–		106		(1	)		–			(262	)		1,118			(203	) (f)

(a)	Included in mortgage banking revenue.

(b)	Approximately $(95) million, $(2.1) billion and $(154) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(c)	Represents MSRs capitalized during the period.

(d)	Approximately $(78) million, $(1.7) billion and $(154) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

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

(f)	Approximately $57 million, $(261) million and $1 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			Issuances			Settlements			End of Period Balance			Net Change in Unrealized Gains (Losses) Relating to Assets and Liabilities Held at End of Period
2022
Available-for-sale securities
Asset-backed securities	$	7	$	–		$	(3	)	$	–	$	(4	)	$	–		$	–		$	–		$	–
Obligations of state and political subdivisions		1		–			–			–		–			–			–			1			–
Total available-for-sale		8		–			(3	)		–		(4	)		–			–			1			–
Mortgage servicing rights		2,953		435	(a)		–			7		1			473	(c)		–			3,869			435	(a)
Net derivative assets and liabilities		799		(5,759	) (b)		–			351		(30	)		11			752			(3,876	)		(4,240	) (d)

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	) (e)		–			166		(2	)		–			(768	)		1,118			(761	) (f)

(a)	Included in mortgage banking revenue.

(b)	Approximately $(198) million, $(5.4) billion and $(154) million included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

(c)	Represents MSRs capitalized during the period.

(d)	Approximately $(78) million, $(4.0) billion and $(154) m illion included in mortgage banking revenue, commercial products revenue and other noninterest income, respectively.

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

(f)	Approximately $57 million, $(820) million and $2 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, 2022								December 31, 2021
(Dollars in Millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

Loans (a)	$	–	$	–	$	80	$	80	$	–	$	–	$	59	$	59

Other assets (b)		–		–		30		30		–		–		77		77

(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)	2022		2021		2022		2021

Loans (a)	$	2	$	15	$	35	$	58

Other assets (b)		1		1		12		7

(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, 2022							December 31, 2021
(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	$	3,483	$	3,584	$	(101	)	$	6,623	$	6,453	$	170
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, 2022										December 31, 2021
	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	$	41,652	$	41,652	$	–	$	–	$	41,652	$	28,905	$	28,905	$	–	$	–	$	28,905
Federal funds sold and securities purchased under resale agreements		440		–		440		–		440		359		–		359		–		359
Investment securities held-to-maturity		85,574		1,288		72,840		–		74,128		41,858		–		41,812		–	$	41,812
Loans held for sale (a)		164		–		–		164		164		1,152		–		–		1,152		1,152
Loans		336,691		–		–		326,896		326,896		306,304		–		–		312,724		312,724
Other (b)		2,199		–		1,491		708		2,199		1,521		–		630		891		1,521
Financial Liabilities
Time deposits		42,459		–		41,643		–		41,643		22,665		–		22,644		–		22,644
Short-term borrowings (c)		23,160		–		22,662		–		22,662		9,750		–		9,646		–		9,646
Long-term debt		32,228		–		30,624		–		30,624		32,125		–		32,547		–		32,547
Other (d)		4,219		–		1,132		3,087		4,219		3,862		–		1,170		2,692		3,862

(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.