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Fair Value Election and Measurement (Tables)
6 Months Ended
Jun. 30, 2013
Fair Value Disclosures [Abstract]  
Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
 
 
Fair Value Measurements at
June 30, 2013 Using
(Dollars in millions)
Assets/Liabilities    
 
Quoted Prices In Active
Markets for Identical
Assets/Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Trading assets:
 
 
 
 
 
 
 
U.S. Treasury securities

$221

 

$221

 

$—

 

$—

Federal agency securities
558

 

 
558

 

U.S. states and political subdivisions
26

 

 
26

 

MBS - agency
511

 

 
511

 

CDO/CLO securities
65

 

 
2

 
63

ABS
6

 

 

 
6

Corporate and other debt securities
540

 

 
540

 

CP
84

 

 
84

 

Equity securities
102

 
102

 

 

Derivative contracts
1,977

 
232

 
1,745

 

Trading loans
2,264

 

 
2,264

 

Gross trading assets
6,354

 
555

 
5,730

 
69

Offsetting collateral 1
(530
)
 
 
 
 
 
 
Total trading assets
5,824

 
 
 
 
 
 
Securities AFS:
 
 
 
 
 
 
 
U.S. Treasury securities
778

 
778

 

 

Federal agency securities
2,222

 

 
2,222

 

U.S. states and political subdivisions
256

 

 
219

 
37

MBS - agency
18,913

 

 
18,913

 

MBS - private
181

 

 

 
181

ABS
125

 

 
103

 
22

Corporate and other debt securities
40

 

 
38

 
2

   Other equity securities 2
874

 
137

 

 
737

Total securities AFS
23,389

 
915

 
21,495

 
979

LHFS:
 
 
 
 
 
 
 
Residential loans
2,910

 

 
2,902

 
8

Corporate and other loans
286

 

 
286

 

Total LHFS
3,196

 

 
3,188

 
8

LHFI
339

 

 

 
339

MSRs
1,199

 

 

 
1,199

Other assets 3
252

 
2

 
227

 
23

Offsetting collateral 1
(151
)
 
 
 
 
 
 
Other assets, net
101

 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Trading liabilities:
 
 
 
 
 
 
 
U.S. Treasury securities
460

 
460

 

 

   MBS - agency
5

 

 
5

 

Corporate and other debt securities
246

 

 
246

 

Equity securities
5

 
5

 

 

Derivative contracts
1,411

 
2

 
1,409

 

Gross trading liabilities
2,127

 
467

 
1,660

 

Offsetting collateral 1
(951
)
 
 
 
 
 
 
Total trading liabilities
1,176

 
 
 
 
 
 
Brokered time deposits
793

 

 
793

 

Long-term debt
1,594

 

 
1,594

 

Other liabilities 3,4
164

 

 
60

 
104

1 Amount represents the cash collateral received from or deposited with derivative counterparties. Amount is offset with derivatives in the Consolidated Balance Sheets at June 30, 2013.
2 Includes $334 million of FHLB of Atlanta stock, $402 million of Federal Reserve Bank stock, $137 million in mutual fund investments, and $1 million of other equity securities.
3 These amounts include IRLCs and derivative financial instruments entered into by the Mortgage segment to hedge its interest rate risk.
4 These amounts include the derivative associated with the Company's sale of Visa shares during the year ended December 31, 2009, certain CDS, and contingent consideration obligations related to acquisitions.





 
 
 
Fair Value Measurements at
December 31, 2012 Using
(Dollars in millions)
Assets/Liabilities
 
Quoted Prices In Active
Markets for Identical
Assets/Liabilities
(Level 1)
 
Significant Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Trading assets:
 
 
 
 
 
 
 
U.S. Treasury securities

$111

 

$111

 

$—

 

$—

Federal agency securities
462

 

 
462

 

U.S. states and political subdivisions
34

 

 
34

 

MBS - agency
432

 

 
432

 

CDO/CLO securities
55

 

 
3

 
52

ABS
36

 

 
31

 
5

Corporate and other debt securities
567

 

 
566

 
1

CP
28

 

 
28

 

Equity securities
100

 
100

 

 

Derivative contracts
2,635

 
183

 
2,452

 

Trading loans
2,319

 

 
2,319

 

Gross trading assets
6,779

 
394

 
6,327

 
58

Offsetting collateral 1
(730
)
 
 
 
 
 
 
Total trading assets
6,049

 
 
 
 
 
 
Securities AFS:
 
 
 
 
 
 
 
U.S. Treasury securities
222

 
222

 

 

Federal agency securities
2,069

 

 
2,069

 

U.S. states and political subdivisions
320

 

 
274

 
46

MBS - agency
18,169

 

 
18,169

 

MBS - private
209

 

 

 
209

ABS
216

 

 
195

 
21

Corporate and other debt securities
46

 

 
41

 
5

      Other equity securities 2
702

 
69

 

 
633

Total securities AFS
21,953

 
291

 
20,748

 
914

LHFS:
 
 
 
 
 
 
 
Residential loans
2,924

 

 
2,916

 
8

Corporate and other loans
319

 

 
319

 

Total LHFS
3,243

 

 
3,235

 
8

LHFI
379

 

 

 
379

MSRs
899

 

 

 
899

Other assets 3
178

 
2

 
44

 
132

Liabilities
 
 
 
 
 
 
 
Trading liabilities:
 
 
 
 
 
 
 
U.S. Treasury securities
582

 
582

 

 

Corporate and other debt securities
173

 

 
173

 

Equity securities
9

 
9

 

 

Derivative contracts
1,656

 

 
1,656

 

Gross trading liabilities
2,420

 
591

 
1,829

 

Offsetting collateral 1
(1,259
)
 
 
 
 
 
 
Total trading liabilities
1,161

 
 
 
 
 
 
Brokered time deposits
832

 

 
832

 

Long-term debt
1,622

 

 
1,622

 

Other liabilities 3,4
46

 

 
15

 
31

1 Amount represents the cash collateral received from or deposited with derivative counterparties. Amount is offset with derivatives in the Consolidated Balance Sheets at December 31, 2012.
2 Includes $229 million of FHLB of Atlanta stock, $402 million of Federal Reserve Bank stock, $69 million in mutual fund investments, and $2 million of other equity securities.
3 These amounts include IRLCs and derivative financial instruments entered into by the Mortgage segment to hedge its interest rate risk.
4 These amounts include the derivative associated with the Company's sale of Visa shares during the year ended December 31, 2009, certain CDS, and contingent consideration obligations related to acquisitions.

Fair Value Option Elected, Difference Between the Aggregate Fair Value and the Aggregate Unpaid Principal Balance
(Dollars in millions)
Aggregate Fair Value at
June 30, 2013
 
Aggregate Unpaid Principal
Balance under FVO at
June 30, 2013
 
Fair Value
Over/(Under)
Unpaid Principal
Assets:
 
 
 
 
 
Trading loans

$2,264

 

$2,225

 

$39

LHFS
3,192

 
3,231

 
(39
)
Past due loans of 90 days or more
1

 
2

 
(1
)
Nonaccrual loans
3

 
13

 
(10
)
LHFI
331

 
353

 
(22
)
Past due loans of 90 days or more

 
1

 
(1
)
Nonaccrual loans
8

 
14

 
(6
)
Liabilities:
 
 
 
 
 
Brokered time deposits
793

 
788

 
5

Long-term debt
1,594

 
1,460

 
134

(Dollars in millions)
Aggregate Fair Value at
December 31, 2012
 

Aggregate Unpaid Principal
Balance under FVO at
December 31, 2012
 

Fair Value
Over/(Under)
Unpaid Principal
Assets:
 
 
 
 
 
Trading loans

$2,319

 

$2,285

 

$34

LHFS
3,237

 
3,109

 
128

Past due loans of 90 days or more
3

 
5

 
(2
)
Nonaccrual loans
3

 
12

 
(9
)
LHFI
360

 
371

 
(11
)
Past due loans of 90 days or more
1

 
3

 
(2
)
Nonaccrual loans
18

 
28

 
(10
)
Liabilities:
 
 
 
 
 
Brokered time deposits
832

 
825

 
7

Long-term debt
1,622

 
1,462

 
160


Change in Fair Value of Financial Instruments for which the FVO has been Elected
 
Fair Value Gain/(Loss) for the Three Months Ended
June 30, 2013, for Items Measured at Fair Value Pursuant to Election of the FVO
 
Fair Value Gain/(Loss) for the Six Months Ended
June 30, 2013, for Items Measured at Fair Value
Pursuant to Election of the FVO
(Dollars in millions)
Trading Income
 
Mortgage
Production
Related
  Income 1
 
Mortgage
Servicing
Related
Income
 
Total Changes
in Fair Values  
Included in
Current Period
  Earnings 2
 
Trading
Income
 
Mortgage
Production
Related
  Income 1
 
Mortgage
Servicing
Related
Income
 
Total Changes
in Fair Values  
Included in
Current Period
  Earnings 2
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading loans

$2

 

$—

 

$—

 

$2

 

$6

 

$—

 

$—

 

$6

LHFS
(1
)
 
(86
)
 

 
(87
)
 
1

 
(107
)
 

 
(106
)
LHFI

 
(6
)
 

 
(6
)
 

 
(9
)
 

 
(9
)
MSRs

 
1

 
81

 
82

 

 
2

 
98

 
100

 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Brokered time deposits
2

 

 

 
2

 
4

 

 

 
4

Long-term debt
37

 

 

 
37

 
27

 

 

 
27

1 Income related to LHFS does not include income from IRLCs. For the three and six months ended June 30, 2013, income related to MSRs includes $1 million and $2 million of MSRs recognized upon the sale of loans reported at LOCOM.
2 Changes in fair value for the three and six months ended June 30, 2013 exclude accrued interest for the period then ended. Interest income or interest expense on trading loans, LHFS, LHFI, brokered time deposits, and long-term debt that have been elected to be carried at fair value are recognized in interest income or interest expense in the Consolidated Statements of Income.



 
Fair Value Gain/(Loss) for the Three Months Ended
June 30, 2012, for Items Measured at Fair Value
Pursuant to Election of the FVO
 
Fair Value Gain/(Loss) for the Six Months Ended
June 30, 2012, for Items Measured at Fair Value
Pursuant to Election of the FVO
(Dollars in millions)
Trading Income
 
Mortgage
Production
Related
  Income 1
 
Mortgage
Servicing
Related
Income
 
Total Changes
in Fair Values  
Included in
Current Period
  Earnings 2
 
Trading
Income
 
Mortgage
Production
Related
  Income 1
 
Mortgage
Servicing
Related
Income
 
Total Changes
in Fair Values  
Included in
Current Period
  Earnings 2
Assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading loans

$8

 

$—

 

$—

 

$8

 

$16

 

$—

 

$—

 

$16

LHFS
(2
)
 
30

 

 
28

 
5

 
13

 

 
18

LHFI
1

 
5

 

 
6

 
1

 
2

 

 
3

MSRs

 
20

 
(281
)
 
(261
)
 

 
30

 
(214
)
 
(184
)
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Brokered time deposits
7

 

 

 
7

 
7

 

 

 
7

Long-term debt
(10
)
 

 

 
(10
)
 
(14
)
 

 

 
(14
)
1 Income related to LHFS does not include income from IRLCs. For the three and six months ended June 30, 2012, income related to MSRs includes $20 million and $30 million of MSRs recognized upon the sale of loans reported at LOCOM.
2 Changes in fair value for the three and six months ended June 30, 2012 exclude accrued interest for the period then ended. Interest income or interest expense on trading loans, LHFS, LHFI, brokered time deposits, and long-term debt that have been elected to be carried at fair value are recognized in interest income or interest expense in the Consolidated Statements of Income.
Fair Value Level 3 Significant Unobservable Input Assumptions [Table Text Block]
 
 Level 3 Significant Unobservable Input Assumptions
(Dollars in millions)
Fair value
June 30, 2013 
 
Valuation Technique
 
Unobservable Input1
 
Range
(weighted average)
Trading assets:
 
 
 
 
 
 
 
CDO/CLO securities

$63

 
Matrix pricing/Discounted cash flow
 
Indicative pricing based on overcollateralization ratio
 
$42-$54 ($48)
 
Estimated collateral losses
 
31-41% (36%)
 
Market yield
 
10-12% (11%)
ABS
6

 
Matrix pricing
 
Indicative pricing
 
$55 ($55)
Securities AFS:
 
 
 
 
 
 
 
U.S. states and political subdivisions
37

 
Matrix pricing
 
Indicative pricing
 
$80-$111 ($95)
MBS - private
181

 
Third party pricing
 
N/A
 

ABS
22

 
Third party pricing
 
N/A
 

Corporate and other debt securities
2

 
Cost
 
N/A
 

Other equity securities
737

 
Cost
 
N/A
 

Residential LHFS
8

 
Monte Carlo/Discounted cash flow
 
Option adjusted spread
 
225-675 bps (325 bps)
 
Conditional prepayment rate
 
2-15 CPR (5 CPR)
 
Conditional default rate
 
0-1 CDR (0.5 CDR)
LHFI
331

 
Monte Carlo/Discounted cash flow
 
Option adjusted spread
 
0-675 bps (299 bps)
 
Conditional prepayment rate
 
1-30 CPR (12 CPR)
 
Conditional default rate
 
0-12 CDR (3 CDR)
8

 
Collateral based pricing
 
Appraised value
 
NM2
MSRs
1,199

 
Discounted cash flow
 
Conditional prepayment rate
 
6-23 CPR (10 CPR)
 
Discount rate
 
9-28% (12%)
Other assets/(liabilities), net3
(50
)
 
Internal model
 
Pull through rate
 
2-100% (79%)
 
MSR value
 
7-241 bps (122 bps)
(23
)
 
Internal model
 
Loan production volume
 
0-150% (92%)
(6
)
 
Internal model
 
Revenue run rate
 
NM2
1 For certain assets and liabilities that the Company utilizes third party pricing, the unobservable inputs and their ranges are not reasonably available to the Company, and therefore, have been noted as "N/A."
2 Not meaningful.
3 Input assumptions relate to the Company's IRLCs and the contingent consideration obligations related to acquisitions. Excludes $2 million of Other Liabilities. Refer to Note 12, "Reinsurance Arrangements and Guarantees," for additional information.

 
 Level 3 Significant Unobservable Input Assumptions
(Dollars in millions)
Fair value
December 31, 2012 
 
Valuation Technique
 
Unobservable Input1
 
Range
(weighted average)
Trading assets:
 
 
 
 
 
 
 
CDO/CLO securities

$52

 
Matrix pricing
 
Indicative pricing based on overcollateralization ratio
 
$33-$45 ($40)
 
Estimated collateral losses
 
34-45% (39%)
ABS
5

 
Matrix pricing
 
Indicative pricing
 
$45 ($45)
Corporate and other debt securities
1

 
Third party pricing
 
N/A
 
 
Securities AFS:
 
 
 
 
 
 
 
U.S. states and political subdivisions
46

 
Matrix pricing
 
Indicative pricing
 
$72-$115 ($92)
MBS - private
209

 
Third party pricing
 
N/A
 
 
ABS
21

 
Third party pricing
 
N/A
 
 
Corporate and other debt securities
5

 
Cost
 
N/A
 
 
Other equity securities
633

 
Cost
 
N/A
 
 
Residential LHFS
8

 
Monte Carlo/Discounted cash flow
 
Option adjusted spread
 
0-622 bps (251 bps)
 
Conditional prepayment rate
 
5-30 CPR (15 CPR)
 
Conditional default rate
 
0-20 CDR (3.5 CDR)
LHFI
369

 
Monte Carlo/Discounted cash flow
 
Option adjusted spread
 
0-622 bps (251 bps)
 
Conditional prepayment rate
 
5-30 CPR (15 CPR)
 
Conditional default rate
 
0-20 CDR (3.5 CDR)
10

 
Collateral based pricing
 
Appraised value
 
NM2
MSRs
899

 
Discounted cash flow
 
Conditional prepayment rate
 
6-31 CPR (16 CPR)
 
Discount rate
 
9-28% (11%)
Other assets/(liabilities), net3
132

 
Internal model
 
Pull through rate
 
9-98% (71%)
 
MSR value
 
6-244 bps (104 bps)
(24
)
 
Internal model
 
Loan production volume
 
0-150% (92%)
(7
)
 
Internal model
 
Revenue run rate
 
NM2
1 For certain assets and liabilities that the Company utilizes third party pricing, the unobservable inputs and their ranges are not reasonably available to the Company, and therefore, have been noted as "N/A."
2 Not meaningful.
3 Input assumptions relate to the Company's IRLCs and the contingent consideration obligations related to acquisitions. Refer to Note 12, "Reinsurance Arrangements and Guarantees," for additional information.

Reconciliation of the Beginning and Ending Balances for Fair Valued Assets and Liabilities Measured on a Recurring Basis Using Significant Unobservable Inputs
 
Fair Value Measurements
Using Significant Unobservable Inputs
 
(Dollars in millions)
Beginning
balance
April 1,
2013
 
Included
in
earnings
 
OCI
 
Purchases
 
Sales
 
Settlements
 
Transfers
to/from
other
balance sheet
line items
 
Transfers
into
Level 3
 
Transfers
out of
Level 3
 
Fair value
June 30,
2013
 
Included in earnings (held at June 30, 2013) 1
 
Trading assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CDO/CLO securities

$61

 

$2

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

 

$63

 

$2

 
ABS
5

 
1

 

 

 

 

 

 

 

 
6

 
1

  
Corporate and other debt securities
1

 

 

 

 

 
(1
)
 

 

 

 

 

  
Total trading assets
67

 
3

2 

  

 

 
(1
)
 

 

 

 
69

 
3

2 
Securities AFS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. states and political subdivisions
47

 

 

 

 
(6
)
 
(4
)
 

 

 

 
37

 

  
MBS - private
202

 

 
(6
)
 

 

 
(15
)
 

 

 

 
181

 

  
ABS
23

 

 

 

 

 
(1
)
 

 

 

 
22

 

  
Corporate and other debt securities
5

 

 

 

 

 
(3
)
 

 

 

 
2

 

  
Other equity securities
672

 

 

 
65

 

 

 

 

 

 
737

 

  
Total securities AFS
949

 

 
(6
)
   
65

 
(6
)
 
(23
)
 

 

 

 
979

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential LHFS
6

 
(1
)
 

 

 
(3
)
 

 
(2
)
 
10

 
(2
)
 
8

 
(1
)
 
LHFI
360

 
(7
)
4 

 

 

 
(15
)
 
1

 

 

 
339

 
(7
)
4 
Other assets/(liabilities), net
68

 
(76
)
5 

 

 

 
1

 
(74
)
 

 

 
(81
)
 
1

  

 
Fair Value Measurements
Using Significant Unobservable Inputs
 
(Dollars in millions)
Beginning
balance
January 1,
2013
 
Included
in
earnings
 
OCI
 
Purchases
 
Sales
 
Settlements
 
Transfers
to/from
other
balance sheet
line items
 
Transfers
into
Level 3
 
Transfers
out of
Level 3
 
Fair value
June 30,
2013
 
Included in earnings (held at June 30, 2013) 1
 
Trading assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CDO/CLO securities

$52

 

$11

 

$—

  

$—

 

$—

 

$—

 

$—

 

$—

 

$—

 

$63

 

$11

 
ABS
5

 
1

  

  

 

 

 

 

 

 
6

 
1

  
Corporate and other debt securities
1

 

  

  

 

 
(1
)
 

 

 

 

 

 
Total trading assets
58

 
12

2 

  

 

 
(1
)
 

 

 

 
69

 
12

2 
Securities AFS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. states and political subdivisions
46

 

  
2

  

 
(7
)
 
(4
)
 

 

 

 
37

 

  
MBS - private
209

 

  
(3
)
  

 

 
(25
)
 

 

 

 
181

 

  
ABS
21

 
(1
)
  
3

  

 

 
(1
)
 

 

 

 
22

 
(1
)
  
Corporate and other debt securities
5

 

  

  

 

 
(3
)
 

 

 

 
2

 

  
Other equity securities
633

 

  

  
110

 

 
(6
)
 

 

 

 
737

 

  
Total securities AFS
914

 
(1
)
3 
2

   
110

 
(7
)
 
(39
)
 

 

 

 
979

 
(1
)
3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential LHFS
8

 
(1
)
 

  

 
(13
)
 

 
(4
)
 
21

 
(3
)
 
8

 
(1
)
 
LHFI
379

 
(12
)
4 

  

 

 
(31
)
 
3

 

 

 
339

 
(11
)
4 
Other assets/(liabilities), net
101

 
26

5 

  

 

 
1

 
(209
)
 

 

 
(81
)
 
1

  
1 Change in unrealized gains/(losses) included in earnings during the period related to financial assets still held at June 30, 2013.
2 Amounts included in earnings are recognized in trading income.
3 Amounts included in earnings are recognized in net securities gains.
4 Amounts are generally included in mortgage production related income; however, the mark on certain fair value loans is included in trading income.
5 Amounts included in earnings are net of issuances, fair value changes, and expirations and are recognized in mortgage production related income.

 
Fair Value Measurements
Using Significant Unobservable Inputs
 
 
(Dollars in millions)
Beginning
balance
April 1,
2012
 
Included
in
earnings
 
OCI
 
Purchases
 
Sales
 
Settlements
 
Transfers
to/from other
balance sheet
line items
 
Transfers
into
Level 3
 
Transfers
out of
Level 3
 
Fair value
June 30,
2012
 
Included in earnings (held at June 30, 2012) 1
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CDO/CLO securities

$43

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

 

$43

 

$—

 
ABS
5

 

 

 

 

 

 

 

 

 
5

 

  
Corporate and other debt securities
1

 

 

 

 

 

 

 

 

 
1

 

 
Total trading assets
49

 

 

 

  

 

 

 

 

 
49

 

 
Securities AFS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. states and political subdivisions
57

 

 

 

 

 
(2
)
 

 

 

 
55

 

  
MBS - private
216

 
(1
)
 
4

 

 

 
(11
)
 

 

 

 
208

 
(1
)
  
ABS
17

 

 
1

 

 

 
(1
)
 

 

 

 
17

 

  
Corporate and other debt securities
5

 

 

 
2

 

 
(2
)
 

 

 

 
5

 

  
Other equity securities
831

 

 

 
72

 

 
(46
)
 

 

 

 
857

 

  
Total securities AFS
1,126

 
(1
)
2 
5

 
74

  

 
(62
)
 

 

 

 
1,142

 
(1
)
2 
Residential LHFS
4

 

 

 

 

 

 
(2
)
 
1

 
(1
)
 
2

 

 
LHFI
413

 
5

3 

 

 

 
(14
)
 
1

 
1

 

 
406

 

 
Other assets/(liabilities), net
91

 
258

4 

 
(23
)
 

 
1

 
(218
)
 

 

 
109

 

 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative contracts
(246
)
 

 
(103
)
6 

 

 

 

 

 

 
(349
)
 

 

 
Fair Value Measurements
Using Significant Unobservable Inputs
 
 
(Dollars in millions)
Beginning
balance
January 1,
2012
 
Included
in
earnings
 
OCI
 
Purchases
 
Sales
 
Settlements
 
Transfers
to/from other
balance sheet
line items
 
Transfers
into
Level 3
 
Transfers
out of
Level 3
 
Fair value
June 30,
2012
 
Included in earnings (held at June 30, 2012) 1
 
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trading assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CDO/CLO securities

$43

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

 

$—

 

$43

 

($1
)
 
ABS
5

 

 

 

 

 

 

 

 

 
5

 

  
Corporate and other debt securities
1

 

 

 

 

 

 

 

 

 
1

 

  
Total trading assets
49

 

 

 

  

 

 

 

 

 
49

 
(1
)
5 
Securities AFS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. states and political subdivisions
58

 

 
(1
)
 

 

 
(2
)
 

 

 

 
55

 

  
MBS - private
221

 
(4
)
 
14

 

 

 
(23
)
 

 

 

 
208

 
(4
)
  
ABS
16

 

 
2

 

 

 
(1
)
 

 

 

 
17

 

  
Corporate and other debt securities
5

 

 

 
2

 

 
(2
)
 

 

 

 
5

 

  
Other equity securities
741

 

 

 
162

 

 
(46
)
 

 

 

 
857

 

  
Total securities AFS
1,041

 
(4
)
2 
15

 
164

  

 
(74
)
 

 

 

 
1,142

 
(4
)
2 
Residential LHFS
1

 

 

 

 
(1
)
 

 
3

 
4

 
(5
)
 
2

 

 
LHFI
433

 
1

3 

 

 

 
(26
)
 
(5
)
 
3

 

 
406

 
1

3 
Other assets/(liabilities), net
62

 
438

4 

 
(23
)
 

 
22

 
(390
)
 

 

 
109

 

 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative contracts
(189
)
 
1

5 
(161
)
6 

 

 

 

 

 

 
(349
)
 
1

5 
1 Change in unrealized gains/(losses) included in earnings for the period related to financial assets still held at June 30, 2012.
2 Amounts included in earnings are generally recognized in net securities gains; however, any related hedge ineffectiveness is recognized in trading income.
3 Amounts are generally included in mortgage production related income; however, the mark on certain fair value loans is included in trading income.
4 Amounts included in earnings are net of issuances, fair value changes, and expirations and are recognized in mortgage production related income.
5 Amounts included in earnings are recognized in trading income.
6 Amount recognized in OCI is the effective portion of the cash flow hedges related to the Company’s probable forecasted sale of its shares of Coke common stock as discussed in Note 16, “Derivative Financial Instruments,” to the Consolidated Financial Statements in the 2012 Annual Report on Form 10-K.
Change in Carrying Value of Assets Measured at Fair Value on a Non-Recurring Basis
(Dollars in millions)
June 30, 2013
 
Quoted Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Losses for the
Three Months Ended
June 30, 2013
 
Losses for the
Six Months Ended
June 30, 2013
LHFS

$103

 

$—

 

$103

 

$—

 

($8
)
 

($8
)
LHFI
61

 

 

 
61

 

 

OREO
63

 

 
3

 
60

 
(12
)
 
(16
)
Affordable Housing
3

 

 

 
3

 
(2
)
 
(2
)
Other Assets
29

 

 
29

 

 
(3
)
 
(4
)
 
 
 
 
 
 
 
 
 
 
 
 
(Dollars in millions)
December 31, 2012
 
Quoted Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Losses for the
Year Ended
December 31, 2012
 

LHFS

$65

 

$—

 

$65

 

$—

 

$—

 
 
LHFI
308

 

 

 
308

 
(79
)
 
 
OREO
264

 

 
205

 
59

 
(48
)
 
 
Affordable Housing
82

 

 

 
82

 
(96
)
 
 
Other Assets
65

 

 
42

 
23

 
(13
)
 
 

Carrying Amounts and Fair Values of the Company's Financial Instruments
The carrying amounts and fair values of the Company’s financial instruments are as follows:
 
 
June 30, 2013
 
Fair Value Measurement Using
 
(Dollars in millions)
Carrying
Amount
 
Fair
Value
 
Quoted Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Financial assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents

$4,159

 

$4,159

 

$4,159

 

$—

 

$—

(a) 
Trading assets
5,824

 
5,824

 
555

 
5,200

 
69

(b) 
Securities AFS
23,389

 
23,389

 
915

 
21,495

 
979

(b) 
LHFS
3,647

 
3,648

 

 
3,640

 
8

(c) 
LHFI, net
119,906

 
115,530

 

 
3,165

 
112,365

(d)
Financial liabilities:
 
 
 
 
 
 
 
 
 
 
Consumer and commercial deposits
125,588

 
125,654

 

 
125,654

 

(e) 
Brokered time deposits
2,006

 
2,009

 

 
2,009

 

(f) 
Foreign deposits
25

 
25

 

 
25

 

(f) 
Short-term borrowings
8,114

 
8,114

 

 
8,114

 

(f) 
Long-term debt
9,818

 
9,815

 

 
9,331

 
484

(f) 
Trading liabilities
1,176

 
1,176

 
467

 
709

 

(b) 

 
December 31, 2012
 
Fair Value Measurement Using
 
(Dollars in millions)
Carrying
Amount
 
Fair
Value
 
Quoted Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Financial assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents

$8,257

 

$8,257

 

$8,257

 

$—

 

$—

(a) 
Trading assets
6,049

 
6,049

 
394

 
5,597

 
58

(b) 
Securities AFS
21,953

 
21,953

 
291

 
20,748

 
914

(b) 
LHFS
3,399

 
3,399

 

 
3,375

 
24

(c) 
LHFI, net
119,296

 
115,690

 

 
4,041

 
111,649

(d)
Financial liabilities:
 
 
 
 
 
 
 
 
 
 
Consumer and commercial deposits
130,180

 
130,449

 

 
130,449

 

(e) 
Brokered time deposits
2,136

 
2,164

 

 
2,164

 

(f) 
Short-term borrowings
5,494

 
5,494

 

 
5,494

 

(f) 
Long-term debt
9,357

 
9,413

 

 
8,829

 
584

(f) 
Trading liabilities
1,161

 
1,161

 
591

 
570

 

(b) 

The following methods and assumptions were used by the Company in estimating the fair value of financial instruments:
(a)
Cash and cash equivalents are valued at their carrying amounts reported in the balance sheet, which are reasonable estimates of fair value due to the relatively short period to maturity of the instruments.
(b)
Securities AFS, trading assets, and trading liabilities that are classified as level 1 are valued based on quoted market prices. For those instruments classified as level 2 or 3, refer to the respective valuation discussions within this footnote.
(c)
LHFS are generally valued based on observable current market prices or, if quoted market prices are not available, on quoted market prices of similar instruments. Refer to the LHFS section within this footnote for further discussion of the LHFS carried at fair value. In instances for which significant valuation assumptions are not readily observable in the market, instruments are valued based on the best available data to approximate fair value. This data may be internally-developed and considers risk premiums that a market participant would require under then-current market conditions.
(d)
LHFI fair values are based on a hypothetical exit price, which does not represent the estimated intrinsic value of the loan if held for investment. The assumptions used are expected to approximate those that a market participant purchasing the loans would use to value the loans, including a market risk premium and liquidity discount. Estimating the fair value of the loan portfolio when loan sales and trading markets are illiquid, or for certain loan types, nonexistent, requires significant judgment. Therefore, the estimated fair value can vary significantly depending on a market participant’s ultimate considerations and assumptions. The final value yields a market participant’s expected return on investment that is indicative of the current market conditions, but it does not take into consideration the Company’s estimated value from continuing to hold these loans or its lack of willingness to transact at these estimated values.
The Company generally estimated fair value for LHFI based on estimated future cash flows discounted, initially, at current origination rates for loans with similar terms and credit quality, which derived an estimated value of 100% and 101% on the loan portfolio’s net carrying value at June 30, 2013 and December 31, 2012, respectively. The value derived from origination rates likely does not represent an exit price; therefore, an incremental market risk and liquidity discount was subtracted from the initial value at June 30, 2013 and December 31, 2012, respectively. The discounted value is a function of a market participant’s required yield in the current environment and is not a reflection of the expected cumulative losses on the loans. Loan prepayments are used to adjust future cash flows based on historical experience and prepayment model forecasts. The value of related accrued interest on loans approximates fair value; however, it is not included in the carrying amount or fair value of loans. The value of long-term customer relationships is not permitted under current U.S. GAAP to be included in the estimated fair value.
(e)
Deposit liabilities with no defined maturity such as DDAs, NOW/money market accounts, and savings accounts have a fair value equal to the amount payable on demand at the reporting date (i.e., their carrying amounts). Fair values for CDs are estimated using a discounted cash flow measurement that applies current interest rates to a schedule of aggregated expected maturities. The assumptions used in the discounted cash flow analysis are expected to approximate those that market participants would use in valuing deposits. The value of long-term relationships with depositors is not taken into account in estimating fair values.
(f)
Fair values for foreign deposits, certain brokered time deposits, short-term borrowings, and certain long-term debt are based on quoted market prices for similar instruments or estimated using discounted cash flow analysis and the Company’s current incremental borrowing rates for similar types of instruments. For brokered time deposits and long-term debt that the Company carries at fair value, refer to the respective valuation sections within this footnote. For level 3 debt, the terms are unique in nature or there are otherwise no similar instruments than can be used to value the instrument without using significant unobservable assumptions. In this situation, we look at current borrowing rates along with the collateral levels that secure the debt in determining an appropriate fair value adjustment.