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Fair Value Measurement (Tables)

6 Months Ended

Jun. 30, 2020

Fair Value Disclosures [Abstract]

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 June 30, 2020 and December 31, 2019.

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

		June 30, 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		$	4,362			$	0			$	0			—				$	4,362
RMBS		0				71,540				474				—				72,014
CMBS		0				10,118				282				—				10,400
Other securities		194				889				0				—				1,083
Total securities available for sale		4,556				82,547				756				—				87,859
Loans held for sale		0				668				0				—				668
Other assets:
Derivative assets(2)		301				4,383				151				$	(2,226	)		2,609
Other(3)		348				0				56				—				404
Total assets		$	5,205			$	87,598			$	963			$	(2,226	)		$	91,540
Liabilities:
Other liabilities:
Derivative liabilities(2)		$	220			$	1,877			$	117			$	(754	)		$	1,460
Total liabilities		$	220			$	1,877			$	117			$	(754	)		$	1,460

		December 31, 2019
		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		$	4,124			$	0			$	0			—				$	4,124
RMBS		0				63,909				429				—				64,338
CMBS		0				9,413				13				—				9,426
Other securities		231				1,094				0				—				1,325
Total securities available for sale		4,355				74,416				442				—				79,213
Loans held for sale		0				251				0				—				251
Other assets:
Derivative assets(2)		84				1,568				77				$	(633	)		1,096
Other(3)		344				0				66				—				410
Total assets		$	4,783			$	76,235			$	585			$	(633	)		$	80,970
Liabilities:
Other liabilities:
Derivative liabilities(2)		$	17			$	1,129			$	51			$	(523	)		$	674
Total liabilities		$	17			$	1,129			$	51			$	(523	)		$	674

__________

⁽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 $33 million and $12 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of June 30, 2020 and December 31, 2019, 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 June 30, 2020 and December 31, 2019, other includes retained interests in securitizations of $56 million and $66 million, deferred compensation plan assets of $347 million and $343 million, and equity securities of $1 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 six months ended June 30, 2020 and 2019. 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 June 30, 2020
						Total Gains (Losses) (Realized/Unrealized)																																				Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2020(1)
(Dollars in millions)		Balance, April 1, 2020				Included in Net Income(1)				Included in OCI				Purchases				Sales				Issuances				Settlements				Transfers Into Level 3				Transfers Out of Level 3				Balance, June 30, 2020
Securities available for sale:(2)
RMBS		$	373			$	6			$	29			$	0			$	0			$	0			$	(16	)		$	131			$	(49	)		$	474			$	7
CMBS		36				0				(1		)		0				0				0				(3		)		250				0				282				(3		)
Total securities available for sale		409				6				28				0				0				0				(19		)		381				(49		)		756				4
Other assets:
Retained interests in securitizations		59				(3		)		0				0				0				0				0				0				0				56				(3		)
Net derivative assets (liabilities)(4)		66				(8		)		0				0				0				2				(26		)		0				0				34				0

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Six Months Ended June 30, 2020
						Total Gains (Losses) (Realized/Unrealized)																																				Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 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, June 30, 2020
Securities available for sale:(2)(3)
RMBS		$	433			$	9			$	(24	)		$	0			$	0			$	0			$	(33	)		$	140			$	(51	)		$	474			$	10
CMBS		13				0				(1		)		0				0				0				(3		)		273				0				282				(3		)
Total securities available for sale		446				9				(25		)		0				0				0				(36		)		413				(51		)		756				7
Other assets:
Retained interests in securitizations		66				(10		)		0				0				0				0				0				0				0				56				(10		)
Net derivative assets (liabilities)(4)		26				12				0				0				0				26				(28		)		0				(2		)		34				18

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Three Months Ended June 30, 2019
						Total Gains (Losses) (Realized/Unrealized)																																				Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2019(1)
(Dollars in millions)		Balance, April 1, 2019				Included in Net Income(1)				Included in OCI				Purchases				Sales				Issuances				Settlements				Transfers Into Level 3				Transfers Out of Level 3				Balance, June 30, 2019
Securities available for sale:(2)
RMBS		$	434			$	9			$	2			$	0			$	0			$	0			$	(13	)		$	97			$	(14	)		$	515			$	10
CMBS		9				0				0				0				0				0				0				0				0				9				0
Total securities available for sale		443				9				2				0				0				0				(13		)		97				(14		)		524				10
Other assets:
Retained interest in securitizations		155				22				0				0				0				0				0				0				0				177				22
Net derivative assets (liabilities)(4)		6				0				0				0				0				(7		)		8				0				(1		)		6				(2		)

		Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
		Six Months Ended June 30, 2019
						Total Gains (Losses) (Realized/Unrealized)																																				Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of June 30, 2019(1)
(Dollars in millions)		Balance, January 1, 2019				Included in Net Income(1)				Included in OCI				Purchases				Sales				Issuances				Settlements				Transfers Into Level 3				Transfers Out of Level 3				Balance, June 30, 2019
Securities available for sale:(2)
RMBS		$	433			$	17			$	13			$	0			$	0			$	0			$	(25	)		$	114			$	(37	)		$	515			$	20
CMBS		10				0				0				0				0				0				(1		)		0				0				9				0
Total securities available for sale		443				17				13				0				0				0				(26		)		114				(37		)		524				20
Other assets:
Retained interest in securitizations		158				19				0				0				0				0				0				0				0				177				19
Net derivative assets (liabilities)(4)		(10		)		5				0				0				0				(13		)		27				0				(3		)		6				4

__________

⁽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 six months ended June 30, 2020, included in OCI related to Level 3 securities available for sale still held as of June 30, 2020 were net unrealized gains of $36 million and net unrealized losses of $23 million, respectively. For the three and six months ended June 30, 2019, net unrealized gains included in OCI related to Level 3 securities available for sale still held as of June 30, 2019 were $3 million and $13 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 $151 million and $117 million, respectively, as of June 30, 2020, $70 million and $64 million, respectively, as of June 30, 2019.

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 June 30, 2020

Significant Valuation Techniques

Significant Unobservable Inputs

Range

Weighted Average(1)

Securities available for sale:

RMBS

$

474

Discounted cash flows (vendor pricing)

Yield Voluntary prepayment rate Default rate Loss severity

0-12% 5-10% 1-11% 30-100%

4% 8% 2% 67%

CMBS

282

Discounted cash flows (vendor pricing)

Yield

1-2%

1%

Other assets:

Retained interests in securitizations(2)

56

Discounted cash flows

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

33-52 3-14% 2-12% 3-4% 70-72%

N/A

Net derivative assets (liabilities)

34

Discounted cash flows

Swap rates

1%

1%

Quantitative Information about Level 3 Fair Value Measurements

(Dollars in millions)

Fair Value at December 31, 2019

Significant Valuation Techniques

Significant Unobservable Inputs

Range

Weighted Average(1)

Securities available for sale:

RMBS

$

429

Discounted cash flows (vendor pricing)

Yield Voluntary prepayment rate Default rate Loss severity

2-18% 0-18% 1-6% 30-95%

5% 10% 2% 67%

CMBS

13

Discounted cash flows (vendor pricing)

Yield

2-3%

2%

Other assets:

Retained interests in securitizations(2)

66

Discounted cash flows

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

35-51 4-14% 3-10% 2-3% 74-88%

N/A

Net derivative assets (liabilities)

26

Discounted cash flows

Swap rates

2%

2%

__________

⁽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 June 30, 2020 and December 31, 2019, and for which a nonrecurring fair value measurement was recorded during the six and twelve months then ended.

Table 11.4: Nonrecurring Fair Value Measurements

		June 30, 2020
		Estimated Fair Value Hierarchy								Total
(Dollars in millions)		Level 2				Level 3
Loans held for investment		$	0			$	289			$	289
Other assets(1)		0				52				52
Total		$	0			$	341			$	341

		December 31, 2019
		Estimated Fair Value Hierarchy								Total
(Dollars in millions)		Level 2				Level 3
Loans held for investment		$	0			$	294			$	294
Other assets(1)		0				103				103
Total		$	0			$	397			$	397

__________

⁽¹⁾ 

As of June 30, 2020, other assets included equity investments accounted for under the measurement alternative of $28 million, repossessed assets of $23 million and long-lived assets held for sale of $1 million. As of December 31, 2019, other assets included equity investments accounted for under the measurement alternative of $5 million, repossessed assets of $61 million and long-lived assets held for sale of $37 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 June 30, 2020 and 2019.

Table 11.5: Nonrecurring Fair Value Measurements Included in Earnings

		Total Gains (Losses)
		Six Months Ended June 30,
(Dollars in millions)		2020				2019
Loans held for investment		$	(253	)		$	(132	)
Loans held for sale		0				(1		)
Other assets(1)		(22		)		(57		)
Total		$	(275	)		$	(190	)

__________

⁽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 June 30, 2020 and December 31, 2019.

Table 11.6: Fair Value of Financial Instruments

		June 30, 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		$	55,818			$	55,818			$	4,583			$	51,235			$	0
Restricted cash for securitization investors		740				740				740				0				0
Net loans held for investment		234,680				242,893				0				0				242,893
Loans held for sale		43				43				0				43				0
Interest receivable		1,574				1,574				0				1,574				0
Other investments(1)		1,341				1,341				0				1,341				0
Financial liabilities:
Deposits with defined maturities		43,912				44,452				0				44,452				0
Securitized debt obligations		15,761				15,933				0				15,933				0
Senior and subordinated notes		28,481				28,771				0				28,771				0
Federal funds purchased and securities loaned or sold under agreements to repurchase		573				573				0				573				0
Interest payable		380				380				0				380				0

		December 31, 2019
		Carrying Value				Estimated Fair Value				Estimated Fair Value Hierarchy
(Dollars in millions)										Level 1				Level 2				Level 3
Financial assets:
Cash and cash equivalents		$	13,407			$	13,407			$	4,129			$	9,278			$	0
Restricted cash for securitization investors		342				342				342				0				0
Net loans held for investment		258,601				258,696				0				0				258,696
Loans held for sale		149				149				0				149				0
Interest receivable		1,758				1,758				0				1,758				0
Other investments(1)		1,638				1,638				0				1,638				0
Financial liabilities:
Deposits with defined maturities		44,958				45,225				0				45,225				0
Securitized debt obligations		17,808				17,941				0				17,941				0
Senior and subordinated notes		30,472				31,233				0				31,233				0
Federal funds purchased and securities loaned or sold under agreements to repurchase		314				314				0				314				0
Other borrowings(2)		7,000				7,001				0				7,001				0
Interest payable		439				439				0				439				0

__________

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

⁽²⁾ 

Other borrowings excludes finance lease liabilities.

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