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Fair Value Measurement (Tables)

9 Months Ended

Sep. 30, 2021

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table displays our assets and liabilities measured on our consolidated balance sheets at fair value on a recurring basis as of September 30, 2021 and December 31, 2020.

Table 11.1: Assets and Liabilities Measured at Fair Value on a Recurring Basis


	September 30, 2021
	Fair Value Measurements Using						Netting Adjustments(1)
(Dollars in millions)	Level 1		Level 2		Level 3				Total
Assets:
Securities available for sale:
U.S. Treasury securities	$	9,109	$	0	$	0	—		$	9,109
RMBS	0		75,428		253		—		75,681
CMBS	0		10,188		9		—		10,197
Other securities	152		3,010		0		—		3,162
Total securities available for sale	9,261		88,626		262		—		98,149
Loans held for sale	0		1,707		0		—		1,707
Other assets:
Derivative assets(2)	955		3,758		191		$	(975)	3,929
Other(3)	514		16		43		—		573
Total assets	$	10,730	$	94,107	$	496	$	(975)	$	104,358
Liabilities:
Other liabilities:
Derivative liabilities(2)	$	1,904	$	1,407	$	152	$	(904)	$	2,559
Total liabilities	$	1,904	$	1,407	$	152	$	(904)	$	2,559


	December 31, 2020
	Fair Value Measurements Using						Netting Adjustments(1)
(Dollars in millions)	Level 1		Level 2		Level 3				Total
Assets:
Securities available for sale:
U.S. Treasury securities	$	9,318	$	0	$	0	—		$	9,318
RMBS	0		76,375		328		—		76,703
CMBS	0		11,624		111		—		11,735
Other securities	142		2,547		0		—		2,689
Total securities available for sale	9,460		90,546		439		—		100,445
Loans held for sale	0		596		0		—		596
Other assets:
Derivative assets(2)	268		3,006		141		$	(1,148)	2,267
Other(3)	430		552		55		—		1,037
Total assets	$	10,158	$	94,700	$	635	$	(1,148)	$	104,345
Liabilities:
Other liabilities:
Derivative liabilities(2)	$	271	$	1,137	$	110	$	(739)	$	779
Total liabilities	$	271	$	1,137	$	110	$	(739)	$	779

__________

(1)Represents balance sheet netting of derivative assets and liabilities, and related payables and receivables for cash collateral held or placed with the same counterparty. See “Note 8—Derivative Instruments and Hedging Activities” for additional information.

(2)Does not reflect $17 million and $31 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of September 30, 2021 and December 31, 2020, respectively. Non-performance risk is included in derivative assets and liabilities, which are part of other assets and other liabilities on the consolidated balance sheets, and is offset through non-interest income in the consolidated statements of income.

(3)As of September 30, 2021 and December 31, 2020, other includes retained interests in securitizations of $43 million and $55 million, deferred compensation plan assets of $463 million and $414 million, and equity securities of $67 million and $568 million including unrealized gains of $43 million and $535 million, respectively.

Schedule of Level 3 Inputs Reconciliation

The table below presents a reconciliation for all assets and liabilities measured and recognized at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2021 and 2020. Generally, transfers into Level 3 were primarily driven by the usage of unobservable assumptions in the pricing of these financial instruments as evidenced by wider pricing variations among pricing vendors and transfers out of Level 3 were primarily driven by the usage of assumptions corroborated by market observable information as evidenced by tighter pricing among multiple pricing sources.

Table 11.2: Level 3 Recurring Fair Value Rollforward


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended September 30, 2021
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2021(1)
(Dollars in millions)	Balance, July 1, 2021		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2021
Securities available for sale:(2)
RMBS	$	289	$	4	$	(1)	$	0	$	0	$	0	$	(23)	$	4	$	(20)	$	253	$	4
CMBS	9		0		1		0		0		0		(1)		0		0		9		0

Total securities available for sale	298		4		0		0		0		0		(24)		4		(20)		262		4
Other assets:

Retained interests in securitizations	46		(3)		0		0		0		0		0		0		0		43		(3)
Net derivative assets (liabilities)(4)	19		(31)		0		0		0		44		6		0		1		39		(29)


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Nine Months Ended September 30, 2021
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2021(1)
(Dollars in millions)	Balance, January 1, 2021		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2021
Securities available for sale:(2)
RMBS	$	328	$	15	$	3	$	0	$	0	$	0	$	(74)	$	88	$	(107)	$	253	$	11
CMBS	111		0		(1)		0		0		0		(7)		0		(94)		9		0

Total securities available for sale	439		15		2		0		0		0		(81)		88		(201)		262		11
Other assets:

Retained interests in securitizations	55		(12)		0		0		0		0		0		0		0		43		(12)
Net derivative assets (liabilities)(4)	31		(41)		0		0		0		66		(23)		6		0		39		(32)


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Three Months Ended September 30, 2020
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2020(1)
(Dollars in millions)	Balance, July 1, 2020		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2020
Securities available for sale:(2)
RMBS	$	474	$	10	$	3	$	0	$	0	$	0	$	(22)	$	56	$	(47)	$	474	$	10
CMBS	282		(1)		1		0		0		0		(8)		98		0		372		(1)

Total securities available for sale	756		9		4		0		0		0		(30)		154		(47)		846		9
Other assets:

Retained interests in securitizations	56		0		0		0		0		0		0		0		0		56		0
Net derivative assets (liabilities)(4)	34		8		0		0		0		13		(2)		0		(9)		44		0


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Nine Months Ended September 30, 2020
			Total Gains (Losses) (Realized/Unrealized)																		Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of September 30, 2020(1)
(Dollars in millions)	Balance, January 1, 2020		Included in Net Income(1)		Included in OCI		Purchases		Sales		Issuances		Settlements		Transfers Into Level 3		Transfers Out of Level 3		Balance, September 30, 2020
Securities available for sale:(2)(3)
RMBS	$	433	$	19	$	(21)	$	0	$	0	$	0	$	(55)	$	196	$	(98)	$	474	$	20
CMBS	13		(1)		0		0		0		0		(11)		371		0		372		(4)

Total securities available for sale	446		18		(21)		0		0		0		(66)		567		(98)		846		16
Other assets:

Retained interests in securitizations	66		(10)		0		0		0		0		0		0		0		56		(10)
Net derivative assets (liabilities)(4)	26		20		0		0		0		39		(30)		0		(11)		44		18

__________

(1)Realized gains (losses) on securities available for sale are included in net securities gains (losses) and retained interests in securitizations are reported as a component of non-interest income in our consolidated statements of income. Gains (losses) on derivatives are included as a component of net interest income or non-interest income in our consolidated statements of income.

(2)For the three and nine months ended September 30, 2021, included in OCI related to Level 3 securities available for sale still held as of September 30, 2021 were no net unrealized gains and $3 million of net unrealized gains, respectively. For the three and nine months ended September 30, 2020, included in OCI related to Level 3 securities available for sale still held as of September 30, 2020 were net unrealized gains of $5 million and net unrealized losses of $16 million, respectively.

(3)The fair value of RMBS as of January 1, 2020 includes a cumulative adjustment of $4 million from the adoption of the CECL standard.

(4)Includes derivative assets and liabilities of $191 million and $152 million, respectively, as of September 30, 2021 and $153 million and $109 million, respectively, as of September 30, 2020.

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis Quantitative Information

The following table presents the significant unobservable inputs used to determine the fair values of our Level 3 financial instruments on a recurring basis. We utilize multiple vendor pricing services to obtain fair value for our securities. Several of our vendor pricing services are only able to provide unobservable input information for a limited number of securities due to software licensing restrictions. Other vendor pricing services are able to provide unobservable input information for all securities for which they provide a valuation. As a result, the unobservable input information for the securities available for sale presented below represents a composite summary of all information we are able to obtain. The unobservable input information for all other Level 3 financial instruments is based on the assumptions used in our internal valuation models.

Table 11.3: Quantitative Information about Level 3 Fair Value Measurements

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at
September 30,
2021

Significant
Valuation
Techniques

Significant
Unobservable
Inputs

Range

Weighted

Average(1)

Securities available for sale:

RMBS

253

Discounted cash flows (vendor pricing)

Yield
Voluntary prepayment rate
Default rate
Loss severity

0-17%

5-20%

1-11%

30-100%

11%

68%

CMBS

Discounted cash flows (vendor pricing)

Yield

Other assets:

Retained interests in securitizations(2)

Discounted cash flows

Life of receivables (months)
Voluntary prepayment rate
Discount rate
Default rate
Loss severity

30-36

9-17%

2-8%

2-4%

56-151%

N/A

Net derivative assets (liabilities)

Discounted cash flows

Swap rates

1-2%

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at
December 31,
2020

Significant
Valuation
Techniques

Significant
Unobservable
Inputs

Range

Weighted

Average(1)

Securities available for sale:

RMBS

328

Discounted cash flows (vendor pricing)

Yield
Voluntary prepayment rate
Default rate
Loss severity

2-12%

8-15%

0-11%

30-100%

10%

73%

CMBS

111

Discounted cash flows (vendor pricing)

Yield

1-3%

Other assets:

Retained interests in securitizations(2)

Discounted cash flows

Life of receivables (months)
Voluntary prepayment rate
Discount rate
Default rate
Loss severity

37-52

3-13%

2-12%

3-3%

55-70%

N/A

Net derivative assets (liabilities)

Discounted cash flows

Swap rates

__________

(1)Weighted averages are calculated by using the product of the input multiplied by the relative fair value of the instruments.

(2)Due to the nature of the various mortgage securitization structures in which we have retained interests, it is not meaningful to present a consolidated weighted average for the significant unobservable inputs.

Schedule of Assets Measured at Fair Value on Nonrecurring Basis

The following table presents the carrying value of the assets measured at fair value on a nonrecurring basis and still held as of September 30, 2021 and December 31, 2020, and for which a nonrecurring fair value measurement was recorded during the nine and twelve months then ended.

Table 11.4: Nonrecurring Fair Value Measurements


	September 30, 2021
	Estimated Fair Value Hierarchy				Total
(Dollars in millions)	Level 2		Level 3
Loans held for investment	$	0	$	126	$	126

Other assets(1)	0		175		175
Total	$	0	$	301	$	301


	December 31, 2020
	Estimated Fair Value Hierarchy				Total
(Dollars in millions)	Level 2		Level 3
Loans held for investment	$	0	$	305	$	305
Other assets(1)	0		175		175
Total	$	0	$	480	$	480

__________

(1)As of September 30, 2021, other assets included equity method investments subject to impairment of $53 million, investments accounted for under measurement alternative of $15 million, repossessed assets of $39 million and long-lived assets held for sale of $68 million. As of December 31, 2020, other assets included equity investments accounted for under the measurement alternative of $25 million, repossessed assets of $42 million and long-lived assets held for sale of $108 million.

Schedule of Earnings Related to Assets Measured at Fair Value on Nonrecurring Basis

The following table presents total nonrecurring fair value measurements for the period, included in earnings, attributable to the change in fair value relating to assets that are still held at September 30, 2021 and December 31, 2020.

Table 11.5: Nonrecurring Fair Value Measurements Included in Earnings


	Total Gains (Losses)
	Nine Months Ended September 30,
(Dollars in millions)	2021		2020
Loans held for investment	$	12	$	187

Other assets(1)	(65)		(42)
Total	$	(53)	$	145

__________

(1)Other assets include fair value adjustments related to repossessed assets, long-lived assets held for sale and equity investments accounted for under the measurement alternative.

Schedule of Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair value, including the level within the fair value hierarchy, of our financial instruments that are not measured at fair value on a recurring basis on our consolidated balance sheets as of September 30, 2021 and December 31, 2020.

Table 11.6: Fair Value of Financial Instruments


	September 30, 2021
	Carrying Value		Estimated Fair Value		Estimated Fair Value Hierarchy
(Dollars in millions)					Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	26,624	$	26,624	$	5,444	$	21,180	$	0
Restricted cash for securitization investors	234		234		234		0		0

Net loans held for investment	249,817		254,878		0		0		254,878
Loans held for sale	4,593		4,880		0		4,880		0
Interest receivable	1,418		1,418		0		1,418		0
Other investments(1)	1,344		1,344		0		1,344		0
Financial liabilities:
Deposits with defined maturities	19,283		19,483		0		19,483		0
Securitized debt obligations	12,635		12,782		0		12,782		0
Senior and subordinated notes	23,983		24,754		0		24,754		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	825		825		0		825		0

Interest payable	241		241		0		241		0


	December 31, 2020
	Carrying Value		Estimated Fair Value		Estimated Fair Value Hierarchy
(Dollars in millions)					Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	40,509	$	40,509	$	4,708	$	35,801	$	0
Restricted cash for securitization investors	262		262		262		0		0
Net loans held for investment	236,060		244,701		0		0		244,701
Loans held for sale	2,114		2,214		0		2,214		0
Interest receivable	1,471		1,471		0		1,471		0
Other investments(1)	1,341		1,341		0		1,341		0
Financial liabilities:
Deposits with defined maturities	32,746		33,111		0		33,111		0
Securitized debt obligations	12,414		12,584		0		12,584		0
Senior and subordinated notes	27,382		28,282		0		28,282		0
Federal funds purchased and securities loaned or sold under agreements to repurchase	668		668		0		668		0

Interest payable	352		352		0		352		0

__________

(1)Other investments include FHLB and Federal Reserve stock. These investments are included in other assets on our consolidated balance sheets.