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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value Hierarchy Tables Present Information about Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021:


(Dollars in millions)	Level 1		Level 2		Level 3		Balance at June 30, 2021
Assets:
AFS securities:
U.S. Treasury securities	$	6,235	$	—	$	—	$	6,235
U.S. agency debentures	—		81		—		81
Foreign government debt securities	15		—		—		15
Residential MBS:
Agency-issued MBS	—		11,562		—		11,562
Agency-issued CMO—fixed rate	—		4,424		—		4,424

Agency-issued CMBS	—		1,559		—		1,559
Total AFS securities	6,250		17,626		—		23,876
Non-marketable and other equity securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value	—		—		—		295

Other equity securities in public companies	35		72		—		107
Total non-marketable and other equity securities (fair value accounting)	35		72		—		402
Other assets:
Foreign exchange forward and option contracts	—		177		—		177
Equity warrant assets	—		9		257		266
Interest rate swaps	—		16		—		16
Client interest rate derivatives	—		65		—		65
Total assets	$	6,285	$	17,965	$	257	$	24,802
Liabilities:
Foreign exchange forward and option contracts	$	—	$	157	$	—	$	157
Interest rate swaps	—		2		—		2
Client interest rate derivatives	—		59		—		59
Total liabilities	$	—	$	218	$	—	$	218

The following fair value hierarchy table presents information about our assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2020:


(Dollars in millions)	Level 1		Level 2		Level 3		Balance at December 31, 2020
Assets:
AFS securities:
U.S. Treasury securities	$	4,470	$	—	$	—	$	4,470
U.S. agency debentures	—		237		—		237
Foreign government debt securities	24		—		—		24
Residential MBS:
Agency-issued MBS	—		13,503		—		13,503
Agency-issued CMO—fixed rate	—		8,107		—		8,107

Agency-issued CMBS	—		4,572		—		4,572


Total AFS securities	4,494		26,419		—		30,913
Non-marketable and other equity securities (fair value accounting):
Non-marketable securities:
Venture capital and private equity fund investments measured at net asset value	—		—		—		274

Other equity securities in public companies	43		238		—		281
Total non-marketable and other equity securities (fair value accounting)	43		238		—		555
Other assets:

Foreign exchange forward and option contracts	—		217		—		217
Equity warrant assets	—		11		192		203

Client interest rate derivatives	—		68		—		68
Total assets	$	4,537	$	26,953	$	192	$	31,956
Liabilities:
Foreign exchange forward and option contracts	$	—	$	210	$	—	$	210

Client interest rate derivatives	—		27		—		27
Total liabilities	$	—	$	237	$	—	$	237

Additional Information about Level 3 Assets Measured at Fair Value on a Recurring Basis

The following table presents additional information about Level 3 assets measured at fair value on a recurring basis for the three and six months ended June 30, 2021 and 2020:


(Dollars in millions)	Beginning Balance		Total Net Gains Included in Net Income (1)		Sales/Exits		Issuances		Transfers out of Level 3		Ending Balance
Three months ended June 30, 2021

Equity warrant assets	$	233	$	121	$	(104)	$	7	$	—	$	257

Three months ended June 30, 2020



Equity warrant assets	150		24		(15)		6		—		165

Six months ended June 30, 2021



Equity warrant assets	192		341		(285)		13		(4)		257

Six months ended June 30, 2020



Equity warrant assets	161		39		(46)		11		—		165

(1)Realized and unrealized gains (losses) are recorded in the line item “Gains on equity warrant assets, net," a component of noninterest income.

Unrealized Gains Included in Earnings Attributable to Level 3 Assets Held

The following table presents the amount of net unrealized gains and losses included in earnings attributable to Level 3 assets still held at June 30, 2021 and 2020:


	Three months ended June 30,				Six months ended June 30,
(Dollars in millions)	2021		2020		2021		2020


Other assets:
Equity warrant assets (1)	$	31	$	11	$	92	$	7
Total unrealized gains, net	$	31	$	11	$	92	$	7

(1)Unrealized gains and losses are recorded in the line item “Gains on equity warrant assets, net," a component of noninterest income.

Quantitative Information About Significant Unobservable Inputs

The following table presents quantitative information about the significant unobservable inputs used for certain of our Level 3 fair value measurements at June 30, 2021 and December 31, 2020. We have not included in this table our venture capital and private equity fund investments (fair value accounting) as we use net asset value per share (as obtained from the general partners of the investments) as a practical expedient to determine fair value.


(Dollars in millions)	Fair value	Valuation Technique	Significant Unobservable Inputs	Input Range	Weighted Average
June 30, 2021:
Equity warrant assets (public portfolio)	12	Black-Scholes option pricing model	Volatility	48.2% - 58.5%	49.0	%
			Risk-Free interest rate	1.2- 1.5	1.2
			Sales restrictions discount (1)	20.0	20.0
Equity warrant assets (private portfolio)	245	Black-Scholes option pricing model	Volatility	25.4 - 58.5	46.3
			Risk-Free interest rate	0.02 - 1.05	0.4
			Marketability discount (2)	22.0	22.0
			Remaining life assumption (3)	40.0	40.0
December 31, 2020:
Equity warrant assets (public portfolio)	1	Black-Scholes option pricing model	Volatility	46.0% - 56.8%	49.1	%
			Risk-Free interest rate	0.3- 0.9	0.6
			Sales restrictions discount (1)	10.0 - 20.0	10.2
Equity warrant assets (private portfolio)	191	Black-Scholes option pricing model	Volatility	24.4 - 56.8	43.2
			Risk-Free interest rate	0.01 - 0.52	0.1
			Marketability discount (2)	20.6	20.6
			Remaining life assumption (3)	40.0	40.0

(1)We adjust quoted market prices of public companies, which are subject to certain sales restrictions. Sales restriction discounts generally range from 10 percent to 20 percent depending on the duration of the sales restrictions, which typically range from three to six months.

(2)Our marketability discount is applied to all private company warrants to account for a general lack of liquidity due to the private nature of the associated underlying company. The quantitative measure used is based upon various option-pricing models. On a quarterly basis, a sensitivity analysis is performed on our marketability discount.

(3)We adjust the contractual remaining term of private company warrants based on our estimate of the actual remaining life, which we determine by utilizing historical data on terminations and exercises. At June 30, 2021, the weighted average contractual remaining term was 6.7 years, compared to our estimated remaining life of 2.7 years. On a quarterly basis, a sensitivity analysis is performed on our remaining life assumption.

Summary of Estimated Fair Values of Financial Instruments Not Carried at Fair Value

The following fair value hierarchy table presents the estimated fair values of our financial instruments that are not carried at fair value at June 30, 2021 and December 31, 2020:


			Estimated Fair Value
(Dollars in millions)	Carrying Amount		Total		Level 1		Level 2		Level 3
June 30, 2021:
Financial assets:
Cash and cash equivalents	$	23,959	$	23,959	$	23,959	$	—	$	—
HTM securities	59,992		60,107		—		60,107		—
Non-marketable securities not measured at net asset value	262		262		—		—		262
Non-marketable securities measured at net asset value	583		583		—		—		—
Net commercial loans	45,108		46,353		—		—		46,353
Net consumer loans	5,250		5,395		—		—		5,395
FHLB and Federal Reserve Bank stock	83		83		—		—		83
Financial liabilities:


Short-term borrowings	34		34		—		34		—
Non-maturity deposits (1)	145,193		145,193		145,193		—		—
Time deposits	645		645		—		645		—
3.50% Senior Notes	349		379		—		379		—
3.125% Senior Notes	495		534		—		534		—
1.80% Senior Notes	494		479		—		479		—
2.10% Senior Notes	496		507		—		507		—
Off-balance sheet financial assets:
Commitments to extend credit	—		41		—		—		41
December 31, 2020:
Financial assets:
Cash and cash equivalents	$	17,675	$	17,675	$	17,675	$	—	$	—
HTM securities	16,592		17,217		—		17,217		—
Non-marketable securities not measured at net asset value	241		241		—		—		241
Non-marketable securities measured at net asset value	390		390		—		—		—
Net commercial loans	39,886		40,412		—		—		40,412
Net consumer loans	4,847		4,911		—		—		4,911
FHLB and Federal Reserve Bank stock	61		61		—		—		61
Financial liabilities:


Short-term borrowings	21		21		—		21		—
Non-maturity deposits (1)	101,294		101,294		101,294		—		—
Time deposits	688		502		—		502		—
3.50% Senior Notes	349		383		—		383		—
3.125% Senior Notes	495		564		—		564		—
Off-balance sheet financial assets:
Commitments to extend credit	—		37		—		—		37

(1)Includes noninterest-bearing demand deposits, interest-bearing checking accounts, money market accounts and interest-bearing sweep deposits.

Summary of Estimated Fair Values of Investments and Remaining Unfunded Commitments for Each Major Category of Investments

The following table is a summary of the estimated fair values of these investments and remaining unfunded commitments for each major category of these investments as of June 30, 2021:


(Dollars in millions)	Carrying Amount		Fair Value		Unfunded Commitments
Non-marketable securities (fair value accounting):
Venture capital and private equity fund investments (1)	$	295	$	295	$	19
Non-marketable securities (equity method accounting):
Venture capital and private equity fund investments (2)	544		544		8
Debt funds (2)	7		7		—
Other investments (2)	32		32		1
Total	$	878	$	878	$	28

(1)Venture capital and private equity fund investments within non-marketable securities (fair value accounting) include investments made by our managed funds of funds and one of our direct venture funds (consolidated VIEs) and investments in venture capital and private equity fund investments (unconsolidated VIEs). Collectively, these investments in venture capital and private equity funds are primarily in U.S. and global technology and life science/healthcare companies. Included in the fair value and unfunded commitments of fund investments under fair value accounting are $79 million and $2 million, respectively, attributable to noncontrolling interests. It is estimated that we will receive distributions from the fund investments over the next 10 to 13 years, depending on the age of the funds and any potential extensions of terms of the funds.

(2)Venture capital and private equity fund investments, debt funds, and other fund investments within non-marketable securities (equity method accounting) include funds that invest in or lend money to primarily U.S. and global technology and life science/healthcare companies. It is estimated that we will receive distributions from the funds over the next 5 to 8 years, depending on the age of the funds and any potential extensions of the terms of the funds.