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Fair Value Measurements (Tables)
3 Months Ended
Mar. 31, 2021
Fair Value Disclosures [Abstract]  
Assets and Liabilities Recorded at Fair Value on a Recurring Basis The following table presents information about our assets and liabilities measured at fair value on a recurring basis at March 31, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value. Unless otherwise noted below, assets and liabilities in the following table are recorded at fair value through net income (loss).
 Fair Value Measurements on a Recurring Basis
March 31, 2021Level 1Level 2Level 3Gross
Balance
Netting(6)
Net
Balance
 (in millions)
Assets:
Trading assets, excluding derivatives:
U.S. Treasury, U.S. Government agencies and sponsored enterprises$2,616 $79 $ $2,695 $ $2,695 
Asset-backed securities:
Collateralized debt obligations 66  66  66 
Residential mortgages  24 24  24 
Student loans 63  63  63 
Debt securities issued by foreign entities8,155 12  8,167  8,167 
Equity securities7,750   7,750  7,750 
Precious metals trading 4,497  4,497  4,497 
Derivatives:(1)
Interest rate contracts7 3,670 3 3,680  3,680 
Foreign exchange contracts 15,752 15 15,767  15,767 
Equity contracts 3,991 466 4,457  4,457 
Precious metals contracts14 1,363  1,377  1,377 
Credit contracts 289 50 339  339 
Other contracts(2)
  7 7  7 
Derivatives netting    (23,001)(23,001)
Total derivatives21 25,065 541 25,627 (23,001)2,626 
Securities available-for-sale:(3)
U.S. Treasury, U.S. Government agencies and sponsored enterprises15,091 16,417  31,508  31,508 
Asset-backed securities:
Home equity  25 25  25 
Other  105 105  105 
Debt securities issued by foreign entities2,947 74  3,021  3,021 
Loans(4)
 30  30  30 
Loans held for sale(4)
 83  83  83 
Other assets:
Mortgage servicing rights  11 11  11 
Equity securities 145  145  145 
Equity securities measured at net asset value(5)
   137  137 
Total assets$36,580 $46,531 $706 $83,954 $(23,001)$60,953 
Liabilities:
Domestic deposits(4)
$ $3,166 $599 $3,765 $ $3,765 
Trading liabilities, excluding derivatives655   655  655 
Derivatives:(1)
Interest rate contracts5 3,303 1 3,309  3,309 
Foreign exchange contracts 14,678 17 14,695  14,695 
Equity contracts 2,470 424 2,894  2,894 
Precious metals contracts 1,228  1,228  1,228 
Credit contracts 222 5 227  227 
Other contracts(2)
  57 57  57 
Derivatives netting    (20,594)(20,594)
Total derivatives5 21,901 504 22,410 (20,594)1,816 
Long-term debt(4)
 9,384 486 9,870  9,870 
Total liabilities$660 $34,451 $1,589 $36,700 $(20,594)$16,106 
 Fair Value Measurements on a Recurring Basis
December 31, 2020Level 1Level 2Level 3Gross
Balance
Netting(6)
Net
Balance
 (in millions)
Assets:
Trading assets, excluding derivatives:
U.S. Treasury, U.S. Government agencies and sponsored enterprises$5,145 $192 $— $5,337 $— $5,337 
Asset-backed securities:
Collateralized debt obligations— 63 — 63 — 63 
Residential mortgages— — 15 15 — 15 
Student loans— 65 — 65 — 65 
Debt securities issued by foreign entities7,953 18 — 7,971 — 7,971 
Equity securities6,043 — — 6,043 — 6,043 
Precious metals trading— 4,989 — 4,989 — 4,989 
Derivatives:(1)
Interest rate contracts15 6,637 35 6,687 — 6,687 
Foreign exchange contracts— 18,452 15 18,467 — 18,467 
Equity contracts— 5,051 565 5,616 — 5,616 
Precious metals contracts— 1,323 — 1,323 — 1,323 
Credit contracts— 298 69 367 — 367 
Other contracts(2)
— — — 
Derivatives netting— — — — (29,616)(29,616)
Total derivatives15 31,761 692 32,468 (29,616)2,852 
Securities available-for-sale:(3)
U.S. Treasury, U.S. Government agencies and sponsored enterprises22,880 12,528 — 35,408 — 35,408 
Asset-backed securities:
Home equity— — 27 27 — 27 
Other— — 104 104 — 104 
Debt securities issued by foreign entities1,942 3,191 — 5,133 — 5,133 
Loans(4)
— 32 — 32 — 32 
Loans held for sale(4)
— 36 — 36 — 36 
Other assets:
Mortgage servicing rights— — — 
Equity securities— 149 — 149 — 149 
Equity securities measured at net asset value(5)
— — — 135 — 135 
Total assets$43,978 $53,024 $845 $97,982 $(29,616)$68,366 
Liabilities:
Domestic deposits(4)
$— $3,509 $646 $4,155 $— $4,155 
Trading liabilities, excluding derivatives727 2,312 — 3,039 — 3,039 
Derivatives:(1)
Interest rate contracts6,615 6,625 — 6,625 
Foreign exchange contracts— 18,597 18,603 — 18,603 
Equity contracts— 3,845 446 4,291 — 4,291 
Precious metals contracts28 1,550 — 1,578 — 1,578 
Credit contracts— 291 297 — 297 
Other contracts(2)
— — 67 67 — 67 
Derivatives netting— — — — (28,914)(28,914)
Total derivatives37 30,898 526 31,461 (28,914)2,547 
Long-term debt(4)
— 10,277 448 10,725 — 10,725 
Total liabilities$764 $46,996 $1,620 $49,380 $(28,914)$20,466 
(1)Includes trading derivative assets of $2,560 million and $2,801 million and trading derivative liabilities of $1,664 million and $2,358 million at March 31, 2021 and December 31, 2020, respectively, as well as derivatives held for hedging and commitments accounted for as derivatives. See Note 9, "Derivative Financial Instruments," for additional information. Excluding changes in fair value of a derivative instrument associated with a qualifying cash flow hedge, which are recognized initially in other comprehensive income, derivative assets and liabilities are recorded at fair value through net income (loss).
(2)Consists of swap agreements entered into in conjunction with the sales of Visa Class B Shares.
(3)Securities available-for-sale are recorded at fair value through other comprehensive income. Changes in the allowance for credit losses on securities available-for-sale are recorded through net income (loss).
(4)See Note 10, "Fair Value Option," for additional information. Excluding the fair value movement on fair value option liabilities attributable to our own credit spread, which is recorded in other comprehensive income, fair value option assets and liabilities are recorded at fair value through net income (loss).
(5)Investments that are measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy.
(6)Represents counterparty and cash collateral netting which allow the offsetting of amounts relating to certain contracts if certain conditions are met.
Changes in Fair Value of Level 3 Assets and Liabilities The following table summarizes additional information about changes in the fair value of Level 3 assets and liabilities during the three months ended March 31, 2021 and 2020. As a risk management practice, we may risk manage the Level 3 assets and liabilities, in whole or in part, using securities and derivative positions that are classified as Level 1 or Level 2 measurements within the fair value hierarchy. Since those Level 1 and Level 2 risk management positions are not included in the table below, the information provided does not reflect the effect of such risk management activities related to the Level 3 assets and liabilities.
Jan. 1,
2021
Total Realized / Unrealized Gains
(Losses) Included in
Purch-
ases
Issu-
ances
Settle-
ments
Transfers
Into
Level 3
Transfers
Out of
Level 3
Mar. 31,
2021
Current Period Unrealized Gains
(Losses) Still Held Included in
EarningsOther Compre-
hensive
Income
EarningsOther Compre-
hensive
Income
 (in millions)
Assets:
Trading assets, excluding derivatives:(1)
Residential mortgage asset-backed securities
$15 $9 $ $ $ $ $ $ $24 $9 $ 
Derivatives, net:(2)
Interest rate contracts
34 (32)      2 (17) 
Foreign exchange contracts
9 (11)      (2)(12) 
Equity contracts119 (22)   (54) (1)42 (32) 
Credit contracts63 (17)   (1)  45 (19) 
Other contracts(3)
(59)2    7   (50)  
Asset-backed securities available-for-sale(4)
131  1   (2)  130  1 
Mortgage servicing rights(5)
7 1   3    11 1  
Total assets$319 $(70)$1 $ $3 $(50)$ $(1)$202 $(70)$1 
Liabilities:
Domestic deposits(6)
$(646)$4 $ $ $ $28 $ $15 $(599)$8 $ 
Long-term debt(6)
(448)(3)  (123)89 (2)1 (486)4  
Total liabilities$(1,094)$1 $ $ $(123)$117 $(2)$16 $(1,085)$12 $ 
Jan. 1,
2020
Total Realized / Unrealized Gains
(Losses) Included in
Purch-
ases
Issu-
ances
Settle-
ments
Transfers
Into
Level 3
Transfers
Out of
Level 3
Mar. 31,
2020
Current Period
Unrealized Gains
(Losses) Still Held
Included in
EarningsOther Compre-
hensive
Income
EarningsOther Compre-
hensive
Income
 (in millions)
Assets:
Trading assets, excluding derivatives:(1)
Residential mortgage asset-backed securities
$17 $(1)$— $— $— $— $— $— $16 $(1)$— 
Corporate and other domestic debt securities
510 (45)— — — — — — 465 (45)— 
Derivatives, net:(2)
Interest rate contracts
10 31 — — — — — — 41 31 — 
Foreign exchange contracts
(1)(2)— — — — — — (3)(2)— 
Equity contracts72 (74)— — — — — 12 — 
Credit contracts59 35 — — — — — 98 35 — 
Other contracts(3)
(75)11 — — — — — (58)— — 
Asset-backed securities available-for-sale(4)
111 — — — — — — 116 — 
Mortgage servicing rights(5)
(1)— — — — — (1)— 
Total assets$707 $(46)$$— $$16 $— $— $683 $29 $
Liabilities:
Domestic deposits(6)
$(774)$$18 $— $(36)$105 $— $33 $(653)$— $18 
Long-term debt(6)
(354)10 — (101)65 — (371)10 
Total liabilities$(1,128)$$28 $— $(137)$170 $— $37 $(1,024)$$28 
(1)Gains (losses) on trading assets, excluding derivatives are included in trading revenue in the consolidated statement of income (loss).
(2)Level 3 net derivatives included derivative assets of $541 million and derivative liabilities of $504 million at March 31, 2021 and derivative assets of $628 million and derivative liabilities of $546 million at March 31, 2020. Gains (losses) on derivatives, net are predominantly included in trading revenue and gain (loss) on instruments designated at fair value and related derivatives in the consolidated statement of income (loss).
(3)Consists of swap agreements entered into in conjunction with the sales of Visa Class B Shares. Gains (losses) on these swap agreements are included in other income in the consolidated statement of income (loss).
(4)Realized gains (losses) on securities available-for-sale are included in other securities gains, net in the consolidated statement of income (loss). Changes in the allowance for credit losses on securities available-for-sale are included in the provision for credit losses in the consolidated statement of income (loss). Unrealized gains (losses) on securities available-for-sale are included in other comprehensive income.
(5)Gain (losses) on mortgage servicing rights are included in other income in the consolidated statement of income (loss).
(6)Excluding unrealized gains (losses) on fair value option liabilities attributable to our own credit spread, which are recorded in other comprehensive income, gains (losses) on fair value option liabilities are included in gain (loss) on instruments designated at fair value and related derivatives in the consolidated statement of income (loss).
Quantitative Information about Recurring Fair Value Measurement of Assets and Liabilities Classified as Level 3
The following table presents quantitative information about the unobservable inputs used to determine the recurring fair value measurement of assets and liabilities classified as Level 3 fair value measurements at March 31, 2021 and December 31, 2020:
March 31, 2021
Financial Instrument TypeFair Value (in millions)Valuation Technique(s)Significant Unobservable InputsRange of Inputs
Weighted Average(1)
Residential mortgage asset-backed securities$24 Broker quotes or consensus pricing and, where applicable, discounted cash flowsPrepayment rates7%N/A
Conditional default rates51%N/A
Loss severity rates34%N/A
Discount margin527bpsN/A
Interest rate derivative contracts$2 Market comparable adjusted for probability to fund and, where applicable, discounted cash flows or option pricing modelProbability to fund for rate lock commitments
36% - 100%
85%
Likelihood of transaction being executed90%N/A
Interest rate yield curve
8%
N/A
Foreign exchange derivative contracts(2)
$(2)Option pricing modelImplied volatility of currency pairs
8% - 12%
10%
Cross-currency basis
(4)bps
N/A
Equity derivative contracts(2)
$42 Option pricing modelEquity / Equity Index volatility
6% - 87%
36%
Equity / Equity and Equity / Index correlation
36% - 96%
48%
Equity dividend yields and forward price
(5)% - 1%
0%
Credit derivative contracts$45 Option pricing model and, where applicable, discounted cash flowsCredit default swap spreads
96bps - 234bps
102bps
Other derivative contracts$(50)Discounted cash flowsConversion rate1.6 timesN/A
Expected duration1.8 yearsN/A
Asset-backed securities available-for-sale$130 Discounted cash flowsMarket assumptions related to yields for comparable instruments2%N/A
Mortgage servicing rights$11 Discounted cash flowsConstant prepayment rates
13% - 24%
13%
Discount rate
9% - 10%
9%
Estimated annualized costs to service
$72 - $152 per account
$75 per account
Domestic deposits (structured deposits)(2)(3)
$(599)Option adjusted discounted cash flowsImplied volatility of currency pairs
8% - 12%
10%
Equity / Equity Index volatility
8% - 39%
17%
Equity / Equity and Equity / Index correlation
48% - 66%
57%
Long-term debt (structured notes)(2)(3)
$(486)Option adjusted discounted cash flowsImplied volatility of currency pairs
8% - 12%
10%
Equity / Equity Index volatility
8% - 64%
26%
Equity / Equity and Equity / Index correlation
48% - 96%
88%
December 31, 2020
Financial Instrument TypeFair Value (in millions)Valuation Technique(s)Significant Unobservable InputsRange of Inputs
Weighted Average(1)
Residential mortgage asset-backed securities
$15 Broker quotes or consensus pricing and, where applicable, discounted cash flowsPrepayment rates10%N/A
Conditional default rates5%N/A
Loss severity rates65%N/A
Discount margin500bpsN/A
Interest rate derivative contracts
$34 Market comparable adjusted for probability to fund and, where applicable, discounted cash flows or option pricing modelProbability to fund for rate lock commitments
41% - 100%
78%
Likelihood of transaction being executed90%N/A
Interest rate yield curve
4% - 7%
6%
Foreign exchange derivative contracts(2)
$Option pricing modelImplied volatility of currency pairs
9% - 11%
10%
Cross-currency basis
(9)bps - 40bps
24bps
Equity derivative contracts(2)
$119 Option pricing modelEquity / Equity Index volatility
0% - 67%
27%
Equity / Equity and Equity / Index correlation
17% - 62%
30%
Equity dividend yields and forward price
(1)% - 0%
0%
Credit derivative contracts$63 Option pricing model and, where applicable, discounted cash flowsCredit default swap spreads150bpsN/A
Other derivative contracts$(59)Discounted cash flowsConversion rate1.6 timesN/A
Expected duration2 yearsN/A
Asset-backed securities available-for-sale
$131 Discounted cash flowsMarket assumptions related to yields for comparable instruments
4%
N/A
Mortgage servicing rights$Discounted cash flowsConstant prepayment rates
17% - 26%
19%
Discount rate
9% - 10%
9%
Estimated annualized costs to service
$73 - $157 per account
$76 per account
Domestic deposits (structured deposits)(2)(3)
$(646)Option adjusted discounted cash flowsImplied volatility of currency pairs
9% - 11%
10%
Equity / Equity Index volatility
0% - 42%
15%
Equity / Equity and Equity / Index correlation
43% - 47%
45%
Long-term debt (structured notes)(2)(3)
$(448)Option adjusted discounted cash flowsImplied volatility of currency pairs
9% - 11%
10%
Equity / Equity Index volatility
0% - 67%
23%
Equity / Equity and Equity / Index correlation
32% - 62%
52%
(1)For foreign exchange derivatives, equity derivatives, credit derivatives, structured deposits and structured notes, weighted averages are calculated based on the fair value of the instruments. For all remaining instrument types, weighted averages are calculated based on the notional value of the instruments.
(2)We are the client-facing entity and we enter into identical but opposite derivatives to transfer the resultant risks to our affiliates. With the exception of counterparty credit risks, we are market neutral. The corresponding intra-group derivatives are presented as equity derivatives and foreign exchange derivatives in the table.
(3)Structured deposits and structured notes contain embedded derivative features whose fair value measurements contain significant Level 3 inputs. See equity and foreign exchange derivatives below for a discussion of the uncertainty of Level 3 inputs related to structured deposits and structured notes.
N/A Not Applicable
Assets and Liabilities Recorded at Fair Value on a Non Recurring Basis The following table presents the fair value hierarchy level within which the fair value of the financial and non-financial assets has been recorded at March 31, 2021 and December 31, 2020. The gains (losses) during the three months ended March 31, 2021 and 2020 are also included.
 Non-Recurring Fair Value Measurements
at March 31, 2021
Total Gains (Losses) For the Three Months Ended March 31, 2021
  
Level 1Level 2Level 3Total
 (in millions)
Residential mortgage loans held for sale(1)
$ $23 $ $23 $ 
Consumer loans(2)
 305  305 4 
Commercial loans(3)
  226 226 19 
Real estate owned(4)
 1  1  
Total assets at fair value on a non-recurring basis
$ $329 $226 $555 $23 
 Non-Recurring Fair Value Measurements
at December 31, 2020
Total Gains (Losses) For the Three Months Ended March 31, 2020
  
Level 1Level 2Level 3Total
 (in millions)
Residential mortgage loans held for sale(1)
$— $$— $$— 
Consumer loans(2)
— 312 — 312 
Commercial loans held for sale(5)
— 68 — 68 — 
Commercial loans(3)
— — 270 270 (53)
Real estate owned(4)
— — — 
Goodwill(6)
— — — — (784)
Leases(7)
— — (68)
Total assets at fair value on a non-recurring basis
$— $385 $273 $658 $(902)
(1)At March 31, 2021 and December 31, 2020, the fair value of the loans held for sale was below cost.
(2)Represents residential mortgage loans held for investment whose carrying amount was adjusted during the period based on the fair value of the underlying collateral.
(3)Certain commercial loans are individually assessed for impairment. We measure the credit impairment of a collateral-dependent loan based on the fair value of the collateral asset. The collateral often involves real estate properties that are illiquid due to market conditions. As a result, these loans are classified as a Level 3 fair value measurement within the fair value hierarchy.
(4)Real estate owned is required to be reported on the balance sheet net of transactions costs. The real estate owned amounts in the table above reflect the fair value unadjusted for transaction costs.
(5)At December 31, 2020, the fair value of the loans held for sale was below cost.
(6)During the first quarter of 2020, the goodwill allocated to our previously separate RBWM and PB businesses were both written down to $0 million. See Note 8, "Goodwill," in this From 10-Q for further discussion of the results of our goodwill impairment testing, including the events and circumstances leading to the impairments.
(7)During the first quarter of 2020, we determined that we would exit certain branches and, as a result, the lease ROU assets and leasehold improvement assets associated with these branches were written down based on their estimated remaining useful lives. See Note 2, "Strategic Initiatives," in this Form 10-Q for further discussion.
Quantitative Information about Non Recurring Fair Value Measurement of Assets and Liabilities
The following tables present quantitative information about non-recurring fair value measurements of assets and liabilities classified with Level 3 of the fair value hierarchy at March 31, 2021 and December 31, 2020:
At March 31, 2021
Financial Instrument TypeFair Value (in millions)Valuation Technique(s)Significant Unobservable InputsRange of Inputs
Weighted Average(1)
Commercial loans$226 Valuation of third party appraisal
on underlying collateral
Loss severity rates
4% - 100%
35%
At December 31, 2020
Financial Instrument TypeFair Value (in millions)Valuation Technique(s)Significant Unobservable InputsRange of Inputs
Weighted Average(1)
Commercial loans$270 Valuation of third party appraisal
on underlying collateral
Loss severity rates
0% - 76%
35%
(1)Weighted average is calculated based on the carrying value of the loans.
Additional Information Relating to Asset-Backed Securities and Collateralized Debt Obligations
The following tables provide additional information relating to our asset-backed securities, including CDOs, at March 31, 2021:
Trading asset-backed securities:
Rating of Securities:(1)
Collateral Type:Level 2Level 3Total
  (in millions)
AAA - ACollateralized debt obligations$41 $— $41 
Student loans63 — 63 
Total AAA - A104 — 104 
BBB - BCollateralized debt obligations25 — 25 
CCC - UnratedResidential mortgages - Subprime— 24 24 
$129 $24 $153 
Available-for-sale asset-backed securities:
Rating of Securities:(1)
Collateral Type:Level 3
  (in millions)
AAA - AHome equity - Alt A$25 
BBB - BOther105 
$130 
(1)We utilize S&P as the primary source of credit ratings in the tables above. If S&P ratings are not available, ratings by Moody's and Fitch are used in that order. Ratings for CDOs represent the ratings associated with the underlying collateral.
Carrying Value and Estimated Fair Value of Financial Instruments
The following table summarizes the carrying value and estimated fair value of our financial instruments, excluding financial instruments that are carried at fair value on a recurring basis, at March 31, 2021 and December 31, 2020, and their classification within the fair value hierarchy:
March 31, 2021Carrying
Value
Fair
Value
Level 1Level 2Level 3
 (in millions)
Financial assets:
Short-term financial assets, net of allowance for credit losses $55,066 $55,066 $1,447 $53,607 $12 
Federal funds sold and securities purchased under agreements to resell
3,760 3,760  3,760  
Securities held-to-maturity, net of allowance for credit losses 7,837 8,166  8,166  
Commercial loans, net of allowance for credit losses
40,482 41,303   41,303 
Commercial loans held for sale173 173  173  
Consumer loans, net of allowance for credit losses
20,161 19,508   19,508 
Residential mortgage loans held for sale95 96  96  
Financial liabilities:
Short-term financial liabilities$5,256 $5,256 $ $5,243 $13 
Deposits144,817 144,821  144,821  
Long-term debt8,309 8,735  8,735  
December 31, 2020Carrying
Value
Fair
Value
Level 1Level 2Level 3
 (in millions)
Financial assets:
Short-term financial assets, net of allowance for credit losses$15,667 $15,667 $1,302 $14,353 $12 
Federal funds sold and securities purchased under agreements to resell
35,746 35,746 — 35,746 — 
Securities held-to-maturity, net of allowance for credit losses8,981 9,369 — 9,369 — 
Commercial loans, net of allowance for credit losses40,785 41,417 — — 41,417 
Commercial loans held for sale93 93 — 93 — 
Consumer loans, net of allowance for credit losses20,256 19,865 — — 19,865 
Residential mortgage loans held for sale208 217 — 217 — 
Financial liabilities:
Short-term financial liabilities$4,965 $4,965 $— $4,952 $13 
Deposits140,995 141,001 — 141,001 — 
Long-term debt9,254 9,720 — 9,720 —