FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2021

Refer to Note 25 "Fair Value Measurements" to the Consolidated Financial Statements included in our 2020 Annual Report on Form 10-K filed with the SEC on February 25, 2021 for a description of additional valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis:

TABLE 18.1


(in millions)	Level 1		Level 2		Level 3		Total
June 30, 2021
Assets Measured at Fair Value
Debt securities available for sale

U.S. government agencies	$	—	$	167	$	—	$	167
U.S. government-sponsored entities	—		160		—		160
Residential mortgage-backed securities:
Agency mortgage-backed securities	—		1,216		—		1,216
Agency collateralized mortgage obligations	—		1,226		—		1,226

Commercial mortgage-backed securities	—		322		—		322
States of the U.S. and political subdivisions (municipals)	—		33		—		33
Other debt securities	—		2		—		2
Total debt securities available for sale	—		3,126		—		3,126
Loans held for sale	—		159		—		159





Derivative financial instruments
Trading	—		236		—		236
Not for trading	—		2		14		16
Total derivative financial instruments	—		238		14		252
Total assets measured at fair value on a recurring basis	$	—	$	3,523	$	14	$	3,537
Liabilities Measured at Fair Value
Derivative financial instruments
Trading	$	—	$	39	$	—	$	39
Not for trading	—		2		—		2
Total derivative financial instruments	—		41		—		41
Total liabilities measured at fair value on a recurring basis	$	—	$	41	$	—	$	41


(in millions)	Level 1		Level 2		Level 3		Total
December 31, 2020
Assets Measured at Fair Value
Debt securities available for sale
U.S. Treasury	$	600	$	—	$	—	$	600
U.S. government agencies	—		172		—		172
U.S. government-sponsored entities	—		161		—		161
Residential mortgage-backed securities:
Agency mortgage-backed securities	—		994		—		994
Agency collateralized mortgage obligations	—		1,124		—		1,124

Commercial mortgage-backed securities	—		378		—		378
States of the U.S. and political subdivisions (municipals)	—		32		—		32
Other debt securities	—		2		—		2
Total debt securities available for sale	600		2,863		—		3,463
Loans held for sale	—		144		—		144





Derivative financial instruments
Trading	—		349		—		349
Not for trading	—		3		24		27
Total derivative financial instruments	—		352		24		376
Total assets measured at fair value on a recurring basis	$	600	$	3,359	$	24	$	3,983
Liabilities Measured at Fair Value
Derivative financial instruments
Trading	$	—	$	37	$	—	$	37
Not for trading	—		3		—		3
Total derivative financial instruments	—		40		—		40
Total liabilities measured at fair value on a recurring basis	$	—	$	40	$	—	$	40

The following table presents additional information about assets measured at fair value on a recurring basis and for which we have utilized Level 3 inputs to determine fair value:

TABLE 18.2


(in millions)	Interest Rate Lock Commitments		Total
Six Months Ended June 30, 2021
Balance at beginning of period	$	24	$	24




Purchases, issuances, sales and settlements:

Issuances	14		14

Settlements	(24)		(24)


Balance at end of period	$	14	$	14
Year Ended December 31, 2020
Balance at beginning of period	$	3	$	3




Purchases, issuances, sales and settlements:

Issuances	24		24

Settlements	(3)		(3)


Balance at end of period	$	24	$	24

We review fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation attributes may result in reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in/out of Level 3 at fair value at the beginning of the period in which the changes occur. There were no transfers of assets or liabilities between the hierarchy levels during the first six months of 2021 or 2020.

From time to time, we measure certain assets at fair value on a non-recurring basis. These adjustments to fair value usually result from the application of the lower of cost or fair value accounting or write-downs of individual assets. Valuation methodologies used to measure these fair value adjustments were described in Note 25, "Fair Value Measurements" to the Consolidated Financial Statements included in 2020 Annual Report on Form 10-K. For assets measured at fair value on a non-recurring basis still held at the Balance Sheet date, the following table provides the hierarchy level and the fair value of the related assets or portfolios:

TABLE 18.3


(in millions)	Level 1		Level 2		Level 3		Total
June 30, 2021
Collateral dependent loans	$	—	$	—	$	9	$	9
Other assets - MSRs	—		—		12		12
Other assets - SBA servicing asset	—		—		4		4
Other real estate owned	—		—		1		1
December 31, 2020
Collateral dependent loans	$	—	$	—	$	45	$	45
Other assets - MSRs	—		—		36		36
Other assets - SBA servicing asset	—		—		3		3
Other real estate owned	—		—		3		3

The fair value amounts for collateral dependent loans and OREO in the table above were estimated at a date during the six months or twelve months ended June 30, 2021 and December 31, 2020, respectively. Consequently, the fair value information presented is not necessarily as of the period’s end. Collateral dependent loans measured or re-measured at fair value on a non-recurring basis during the six months ended June 30, 2021 had a carrying amount of $9.0 million, which includes an allocated

ACL of $7.4 million. The ACL includes a provision applicable to the current period fair value measurements of $0.6 million, which was included in provision for credit losses for the six months ended June 30, 2021.

MSRs measured at fair value on a non-recurring basis had a carrying value of $11.7 million, which included a valuation allowance of $4.5 million, as of June 30, 2021. The valuation allowance includes a recovery of $2.8 million included in earnings for the six months ended June 30, 2021. SBA servicing assets measured at fair value on a non-recurring basis had a carrying value of $3.4 million, which included a valuation allowance of $0.8 million, as of June 30, 2021. The valuation allowance includes a recovery of $0.3 million included in earnings for the six months ended June 30, 2021.

OREO measured at fair value on a non-recurring basis during 2021 had a carrying amount of $0.6 million, which included a valuation allowance of $0.2 million, as of June 30, 2021. The valuation allowance includes a loss of $0.2 million, which was included in earnings for the six months ended June 30, 2021.

Fair Value of Financial Instruments

Refer to Note 25, "Fair Value Measurements" to the Consolidated Financial Statements included in our 2020 Annual Report on Form 10-K filed with the SEC on February 25, 2021 for a description of methods and assumptions that were used to estimate the fair value of each financial instrument.

The fair values of our financial instruments are as follows:

TABLE 18.4


					Fair Value Measurements
(in millions)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
June 30, 2021
Financial Assets
Cash and cash equivalents	$	2,944	$	2,944	$	2,944	$	—	$	—
Debt securities available for sale	3,126		3,126		—		3,126		—
Debt securities held to maturity	3,135		3,217		1		3,216		—
Net loans and leases, including loans held for sale	24,931		24,621		—		159		24,462
Loan servicing rights	44		45		—		—		45

Derivative assets	252		252		—		238		14
Accrued interest receivable	83		83		83		—		—
Financial Liabilities
Deposits	30,469		30,485		27,268		3,217		—
Short-term borrowings	1,650		1,653		1,653		—		—
Long-term borrowings	888		906		—		—		906
Derivative liabilities	41		41		—		41		—
Accrued interest payable	11		11		11		—		—
December 31, 2020
Financial Assets
Cash and cash equivalents	$	1,383	$	1,383	$	1,383	$	—	$	—
Debt securities available for sale	3,463		3,463		600		2,863		—
Debt securities held to maturity	2,868		2,973		—		2,973		—
Net loans and leases, including loans held for sale	25,250		25,012		—		144		24,868
Loan servicing rights	39		39		—		—		39

Derivative assets	376		376		—		352		24
Accrued interest receivable	90		90		90		—		—
Financial Liabilities
Deposits	29,122		29,158		25,460		3,698		—
Short-term borrowings	1,804		1,809		1,809		—		—
Long-term borrowings	1,095		1,068		—		—		1,068
Derivative liabilities	40		40		—		40		—
Accrued interest payable	13		13		13		—		—

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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