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Fair Value Measurement | 12 Months Ended
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Dec. 31, 2020
Fair Value Disclosures [Abstract] |
Fair Value Measurement |
NOTE 16—FAIR VALUE MEASUREMENT
Fair value, also referred to as an exit price, is defined as the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The fair value accounting guidance provides a three-level fair value hierarchy for classifying financial instruments. This hierarchy is based on the markets in which the assets or liabilities trade and whether the inputs to the valuation techniques used to measure fair value are observable or unobservable. The fair value measurement of a financial asset or liability is assigned a level based on the lowest level of any input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are described below:
Level 1: |  | Valuation is based on quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: |  | Valuation is based on observable market-based inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: |  | Valuation is generated from techniques that use significant assumptions not observable in the market. Valuation techniques include pricing models, discounted cash flow methodologies or similar techniques.
The accounting guidance for fair value measurements requires that we maximize the use of observable inputs and minimize the use of unobservable inputs in determining fair value. The accounting guidance provides for the irrevocable option to elect, on a contract-by-contract basis, to measure certain financial assets and liabilities at fair value at inception of the contract and record any subsequent changes in fair value in earnings. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following describes the valuation techniques used in estimating the fair value of our financial assets and liabilities recorded at fair value on a recurring basis. Investment Securities We measure the fair value of our U.S. Treasury securities using quoted prices in active markets. For the majority of securities in other investment categories, we utilize multiple vendor pricing services to obtain fair value measurements. We use a waterfall of pricing vendors determined using our annual assessment of pricing service performance. A pricing service may be considered as the preferred or primary pricing provider depending on how closely aligned its prices are to other vendor prices, and how consistent the prices are with other available market information. The price of each security is confirmed by comparing with other vendor prices before it is finalized. RMBS and CMBS are generally classified as Level 2 or 3. When significant assumptions are not consistently observable, fair values are derived using the best available data. Such data may include quotes provided by dealers, valuation from external pricing services, independent pricing models, or other model-based valuation techniques, for example, calculation of the present values of future cash flows incorporating assumptions such as benchmark yields, spreads, prepayment speeds, credit ratings and losses. Generally, the pricing services utilize observable market data to the extent available. Pricing models may be used, which can vary by asset class and may also incorporate available trade, bid and other market information. Across asset classes, information such as trader/dealer inputs, credit spreads, forward curves and prepayment speeds are used to help determine appropriate valuations. Because many fixed income securities do not trade on a daily basis, the pricing models may apply available information through processes such as benchmarking curves, grouping securities based on their characteristics and using matrix pricing to prepare valuations. In addition, model processes are used by the pricing services to develop prepayment assumptions. We validate the pricing obtained from the primary pricing providers through comparison of pricing to additional sources, including other pricing services, dealer pricing indications in transaction results and other internal sources. Pricing variances among different pricing sources are analyzed. Additionally, on an on-going basis, we request more detailed information from the valuation vendors to understand the pricing methodology and assumptions used to value the securities. Derivative Assets and Liabilities We use both exchange-traded and OTC derivatives to manage our interest rate, foreign currency and commodity risk exposures. When quoted market prices are available and used to value our exchange-traded derivatives, we classify them as Level 1. However, the majority of our derivatives do not have readily available quoted market prices. Therefore, we value most of our derivatives using vendor-based models. We primarily rely on market observable inputs for these models, including, for example, interest rate yield curves, credit curves, option volatility and currency rates. These inputs can vary depending on the type of derivatives and nature of the underlying rate, price or index upon which the value of the derivative is based. We typically classify derivatives as Level 2 when significant inputs can be observed in a liquid market and the model itself does not require significant judgment. When instruments are traded in less liquid markets and significant inputs are unobservable, such as interest rate swaps whose remaining terms do not correlate with market observable interest rate yield curves, such derivatives are classified as Level 3. We consider the impact of credit risk valuation adjustments when measuring the fair value of derivative contracts in order to reflect the credit quality of the counterparty and our own credit quality. Official internal pricing is compared against additional pricing sources such as external valuation agents and other internal sources. Pricing variances among different pricing sources are analyzed and validated. These derivatives are included in other assets or other liabilities on the consolidated balance sheets. Loans Held for Sale In our commercial business, we originate multifamily commercial real estate loans with the intent to sell them to GSEs. Beginning in the fourth quarter of 2019, we elected the fair value option for such loans as part of our management of interest rate risk in our multifamily agency business. These held for sale loans are valued based on market observable inputs and are therefore classified as Level 2. Unrealized gains and losses on these loans are recorded in other non-interest income in our consolidated statements of income. Retained Interests in Securitizations We have retained interests in various mortgage securitizations from previous acquisitions. Our retained interests primarily include interest-only bonds and negative amortization bonds. We record these retained interests at fair value using market indications and valuation models to calculate the present value of future cash flows. The models incorporate various assumptions that market participants use in estimating future cash flows including voluntary prepayment rate, discount rate, default rate and loss severity. Due to the use of significant unobservable inputs, retained interests in securitizations are classified as Level 3 under the fair value hierarchy. Deferred Compensation Plan Assets We offer a voluntary non-qualified deferred compensation plan to eligible associates. In addition to participant deferrals, we make contributions to the plan. Participants invest these contributions in a variety of publicly traded mutual funds. The plan assets, which consist of publicly traded mutual funds, are classified as Level 1. The determination of the leveling of financial instruments in the fair value hierarchy is performed at the end of each reporting period. We consider all available information, including observable market data, indications of market liquidity and orderliness, and our understanding of the valuation techniques and significant inputs. Based upon the specific facts and circumstances of each instrument or instrument category, judgments are made regarding the significance of the observable or unobservable inputs to the instruments’ fair value measurement in its entirety. If unobservable inputs are considered significant, the instrument is classified as Level 3. The process for determining fair value using unobservable inputs is generally more subjective and involves a high degree of management judgment and assumptions The following table displays our assets and liabilities measured on our consolidated balance sheets at fair value on a recurring basis as of December 31, 2020 and 2019. Table 16.1: Assets and Liabilities Measured at Fair Value on a Recurring Basis
|  | 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 |
|  | 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 9—Derivative Instruments and Hedging Activities” for additional information. (2)Does not reflect $31 million and $12 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of December 31, 2020 and 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 December 31, 2020 and 2019, other includes retained interests in securitizations of $55 million and $66 million, deferred compensation plan assets of $414 million and $343 million, and equity securities of $568 million (including unrealized gains of $535 million) and $1 million, respectively. Level 3 Recurring Fair Val ue Rollforward 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 years ended December 31, 2020, 2019 and 2018. 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 16.2: Level 3 Recurring Fair Value Rollforward
|  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|  | Year Ended December 31, 2020
|  |  |  | Total Gains (Losses) (Realized/Unrealized) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 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, December 31, 2020 |
Securities available for sale:(2)(4) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS |  | $ | 433 |  |  | $ | 22 |  |  | $ | (19) |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | (72) |  |  | $ | 206 |  |  | $ | (242) |  |  | $ | 328 |  |  | $ | 16 |
CMBS |  | 13 |  |  | (3) |  |  | (9) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (32) |  |  | 371 |  |  | (229) |  |  | 111 |  |  | 0 |
Total securities available for sale |  | 446 |  |  | 19 |  |  | (28) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (104) |  |  | 577 |  |  | (471) |  |  | 439 |  |  | 16 |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retained interests in securitizations |  | 66 |  |  | (11) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 55 |  |  | (11) |
Net derivative assets (liabilities)(3) |  | 26 |  |  | 10 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 43 |  |  | (37) |  |  | 0 |  |  | (11) |  |  | 31 |  |  | 10 |
|  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|  | Year Ended December 31, 2019
|  |  |  | Total Gains (Losses) (Realized/Unrealized) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 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, December 31, 2019 |
Securities available for sale:(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS |  | $ | 433 |  |  | $ | 35 |  |  | $ | 5 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | (63) |  |  | $ | 177 |  |  | $ | (158) |  |  | $ | 429 |  |  | $ | 34 |
CMBS |  | 10 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (2) |  |  | 5 |  |  | 0 |  |  | 13 |  |  | 0 |
Total securities available for sale |  | 443 |  |  | 35 |  |  | 5 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (65) |  |  | 182 |  |  | (158) |  |  | 442 |  |  | 34 |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retained interests in securitizations |  | 158 |  |  | 18 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (110) |  |  | 0 |  |  | 0 |  |  | 66 |  |  | (19) |
Net derivative assets (liabilities)(3) |  | (10) |  |  | 6 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (16) |  |  | 52 |  |  | 0 |  |  | (6) |  |  | 26 |  |  | 1 |
|  | Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
|  | Year Ended December 31, 2018
|  |  |  | Total Gains (Losses) (Realized/Unrealized) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Net Unrealized Gains (Losses) Included in Net Income Related to Assets and Liabilities Still Held as of December 31, 2018(1)
(Dollars in millions) |  | Balance, January 1, 2018 |  | Included in Net Income(1) |  | Included in OCI |  | Purchases |  | Sales |  | Issuances |  | Settlements |  | Transfers Into Level 3 |  | Transfers Out of Level 3 |  | Balance, December 31, 2018 |
Securities available for sale:(2) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMBS |  | $ | 614 |  |  | $ | 32 |  |  | $ | (8) |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | (74) |  |  | $ | 203 |  |  | $ | (334) |  |  | $ | 433 |  |  | $ | 28 |
CMBS |  | 14 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (4) |  |  | 0 |  |  | 0 |  |  | 10 |  |  | 0 |
Other securities |  | 5 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (5) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Total securities available for sale |  | 633 |  |  | 32 |  |  | (8) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | (83) |  |  | 203 |  |  | (334) |  |  | 443 |  |  | 28 |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consumer MSRs |  | 92 |  |  | 3 |  |  | 0 |  |  | 0 |  |  | (97) |  |  | 2 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Retained interests in securitizations |  | 172 |  |  | (14) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 158 |  |  | (14) |
Net derivative assets (liabilities)(3) |  | 13 |  |  | (20) |  |  | 0 |  |  | 0 |  |  | 0 |  |  | 13 |  |  | (17) |  |  | 0 |  |  | 1 |  |  | (10) |  |  | (20) |
__________ (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)Net unrealized losses included in other comprehensive income related to Level 3 securities available for sale still held as of December 31, 2020 were $21 million. Net unrealized losses included in other comprehensive income related to Level 3 securities available for sale still held as of December 31, 2019 were $4 million. Net unrealized losses included in other comprehensive income related to Level 3 securities available for sale still held as of December 31, 2018 were $17 million. (3)Includes derivative assets and liabilities of $141 million and $110 million, respectively, as of December 31, 2020, $77 million and $51 million, respectively, as of December 31, 2019 and $38 million and $48 million, respectively, as of December 31, 2018. (4)The fair value of RMBS as of January 1, 2020 includes a cumulative adjustment of $4 million from the adoption of the CECL standard. Significant Level 3 Fair Value Asset and Liability Inputs Generally, uncertainties in fair value measurements of financial instruments, such as changes in unobservable inputs, may have a significant impact on fair value. Certain of these unobservable inputs will, in isolation, have a directionally consistent impact on the fair value of the instrument for a given change in that input. Alternatively, the fair value of the instrument may move in an opposite direction for a given change in another input. In general, an increase in the discount rate, default rates, loss severity and credit spreads, in isolation, would result in a decrease in the fair value measurement. In addition, an increase in default rates would generally be accompanied by a decrease in recovery rates, slower prepayment rates and an increase in liquidity spreads. Techniques and Inputs for Level 3 Fair Value Measurements 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 16.3: Quantitative Information about Level 3 Fair Value Measurements
|  | 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% |  | 3% 10% 2% 73%
CMBS |  | 111 |  |  | Discounted cash flows (vendor pricing) |  | Yield |  | 1-3% |  | 2%
Other assets: |  |  |  |  |  |  |  |  |  |
Retained interests in securitizations(2) |  | 55 |  |  | 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) |  | 31 |  |  | 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. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis We are required to measure and recognize certain assets at fair value on a nonrecurring basis on the consolidated balance sheets. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, from the application of lower of cost or fair value accounting or when we evaluate for impairment). The following describes the valuation techniques used in estimating the fair value of our financial assets and liabilities recorded at fair value on a nonrecurring basis. Net Loans Held for Investment For loans held for investment that are recorded at fair value on our consolidated balance sheets and measured on a nonrecurring basis, the fair value is determined using appraisal values that are obtained from independent appraisers, broker pricing opinions or other available market information, adjusted for the estimated cost to sell. Due to the use of significant unobservable inputs, these loans are classified as Level 3 under the fair value hierarchy. Fair value adjustments for individually impaired collateralized loans held for investment are recorded in provision for credit losses in the consolidated statements of income. Loans Held for Sale Loans held for sale for which we have not elected the fair value option are carried at the lower of aggregate cost, net of deferred fees and deferred origination costs, or fair value. These loans held for sale are valued based on market observable inputs and are therefore classified as Level 2. Fair value adjustments to these loans are recorded in other non-interest income in our consolidated statements of income. Other Assets Other assets subject to nonrecurring fair value measurements include equity investments accounted for under the measurement alternative, other repossessed assets and long-lived assets held for sale. These assets held for sale are carried at the lower of the carrying amount or fair value less costs to sell. The fair value is determined based on the appraisal value, listing price of the property or collateral provided by independent appraisers, and is adjusted for the estimated costs to sell. Due to the use of significant unobservable inputs, these assets are classified as Level 3 under the fair value hierarchy. Fair value adjustments for these assets are recorded in other non-interest expense in the consolidated statements of income. The following table presents the carrying value of the assets measured at fair value on a nonrecurring basis and still held as of December 31, 2020 and 2019, and for which a nonrecurring fair value measurement was recorded during the year then ended. Table 16.4: Nonrecurring Fair Value Measurements
|  | 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 |
|  | 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 December 31, 2020, other assets included equity investments accounted for under the measurement al ternative of $25 million, repossessed assets of $42 million and long-lived assets held for sale of $108 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. In the above table, loans held for investment are generally valued based in part on the estimated fair value of the underlying collateral and the non-recoverable rate, which is considered to be a significant unobservable input. The non-recoverable rate ranged from 0% to 89%, with a weighted average of 14%, and from 0% to 50%, with a weighted average of 6%, as of December 31, 2020 and 2019, respectively. The weighted average non-recoverable rate is calculated based on the estimated market value of the underlying collateral. The significant unobservable inputs and related quantitative information related to fair value of the other assets are not meaningful to disclose as they vary significantly across properties and collateral. 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 December 31, 2020 and 2019. Table 16.5: Nonrecurring Fair Value Measurements Included in Earnings
|  | Total Gains (Losses)
|  | Year Ended December 31,
(Dollars in millions) |  | 2020 |  | 2019
Loans held for investment |  | $ | 198 |  |  | $ | (268) |
Other assets(1) |  | (85) |  |  | (76) |
Total |  | $ | 113 |  |  | $ | (344) |
__________ (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. 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 December 31, 2020 and 2019. Table 16.6: Fair Value of Financial Instruments
|  | 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 |
|  | 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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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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