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Variable Interest Entities and Securitizations | 9 Months Ended
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Sep. 30, 2021
Variable Interest Entities and Securitization [Abstract] |
Variable Interest Entities and Securitizations |
NOTE 5—VARIABLE INTEREST ENTITIES AND SECURITIZATIONS
In the normal course of business, we enter into various types of transactions with entities that are considered to be variable interest entities (“VIEs”). Our primary involvement with VIEs is related to our securitization transactions in which we transfer assets to securitization trusts. We primarily securitize credit card and auto loans, which have provided a source of funding for us and enabled us to transfer a certain portion of the economic risk of the loans or related debt securities to third parties. The entity that has a controlling financial interest in a VIE is referred to as the primary beneficiary and is required to consolidate the VIE. The majority of the VIEs in which we are involved have been consolidated in our financial statements. Summary of Consolidated and Unconsolidated VIEs The assets of our consolidated VIEs primarily consist of cash, loan receivables and the related allowance for credit losses, which we report on our consolidated balance sheets under restricted cash for securitization investors, loans held in consolidated trusts and allowance for credit losses, respectively. The assets of a particular VIE are the primary source of funds to settle its obligations. Creditors of these VIEs typically do not have recourse to our general credit. Liabilities primarily consist of debt securities issued by the VIEs, which we report under securitized debt obligations on our consolidated balance sheets. For unconsolidated VIEs, we present the carrying amount of assets and liabilities reflected on our consolidated balance sheets and our maximum exposure to loss. Our maximum exposure to loss is estimated based on the unlikely event that all of the assets in the VIEs become worthless and we are required to meet our maximum remaining funding obligations. The tables below present a summary of VIEs in which we had continuing involvement or held a significant variable interest, aggregated based on VIEs with similar characteristics as of September 30, 2021 and December 31, 2020. We separately present information for consolidated and unconsolidated VIEs. Table 5.1: Carrying Amount of Consolidated and Unconsolidated VIEs
|  | September 30, 2021
|  | Consolidated |  | Unconsolidated
(Dollars in millions) |  | Carrying Amount of Assets |  | Carrying Amount of Liabilities |  | Carrying Amount of Assets |  | Carrying Amount of Liabilities |  | Maximum Exposure to Loss
Securitization-Related VIEs:(1) |  |  |  |  |  |  |  |  |  |
Credit card loan securitizations(2) |  | $ | 20,604 |  |  | $ | 11,489 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Auto loan securitizations |  | 1,509 |  |  | 1,269 |  |  | 0 |  |  | 0 |  |  | 0 |
Total securitization-related VIEs |  | 22,113 |  |  | 12,758 |  |  | 0 |  |  | 0 |  |  | 0 |
Other VIEs:(3) |  |  |  |  |  |  |  |  |  |
Affordable housing entities |  | 264 |  |  | 28 |  |  | 4,786 |  |  | 1,496 |  |  | 4,786 |
Entities that provide capital to low-income and rural communities |  | 2,073 |  |  | 26 |  |  | 0 |  |  | 0 |  |  | 0 |
Other |  | 0 |  |  | 0 |  |  | 400 |  |  | 0 |  |  | 400 |
Total other VIEs |  | 2,337 |  |  | 54 |  |  | 5,186 |  |  | 1,496 |  |  | 5,186 |
Total VIEs |  | $ | 24,450 |  |  | $ | 12,812 |  |  | $ | 5,186 |  |  | $ | 1,496 |  |  | $ | 5,186 |
|  | December 31, 2020
|  | Consolidated |  | Unconsolidated
(Dollars in millions) |  | Carrying Amount of Assets |  | Carrying Amount of Liabilities |  | Carrying Amount of Assets |  | Carrying Amount of Liabilities |  | Maximum Exposure to Loss
Securitization-Related VIEs:(1) |  |  |  |  |  |  |  |  |  |
Credit card loan securitizations(2) |  | $ | 22,066 |  |  | $ | 10,338 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Auto loan securitizations |  | 2,360 |  |  | 2,055 |  |  | 0 |  |  | 0 |  |  | 0 |
Total securitization-related VIEs |  | 24,426 |  |  | 12,393 |  |  | 0 |  |  | 0 |  |  | 0 |
Other VIEs:(3) |  |  |  |  |  |  |  |  |  |
Affordable housing entities |  | 242 |  |  | 17 |  |  | 4,602 |  |  | 1,240 |  |  | 4,602 |
Entities that provide capital to low-income and rural communities |  | 1,951 |  |  | 26 |  |  | 0 |  |  | 0 |  |  | 0 |
Other |  | 0 |  |  | 0 |  |  | 436 |  |  | 0 |  |  | 436 |
Total other VIEs |  | 2,193 |  |  | 43 |  |  | 5,038 |  |  | 1,240 |  |  | 5,038 |
Total VIEs |  | $ | 26,619 |  |  | $ | 12,436 |  |  | $ | 5,038 |  |  | $ | 1,240 |  |  | $ | 5,038 |
__________ (1)Excludes insignificant VIEs from previously exited businesses. (2)Represents the carrying amount of assets and liabilities owned by the VIE, which includes the seller’s interest and repurchased notes held by other related parties. (3)In certain investment structures, we consolidate a VIE which in turn holds as its primary asset an investment in an unconsolidated VIE. In these instances, we disclose the carrying amount of assets and liabilities on our consolidated balance sheets as unconsolidated VIEs to avoid duplicating our exposure, as the unconsolidated VIEs are generally the operating entities generating the exposure. The carrying amount of assets and liabilities included in the unconsolidated VIE columns above related to these investment structures were $2.2 billion of assets and $602 million of liabilities as of September 30, 2021, and $2.3 billion of assets and $596 million of liabilities as of December 31, 2020. Securitization-Related VIEs In a securitization transaction, assets are transferred to a trust, which generally meets the definition of a VIE. We engage in securitization activities as an issuer and an investor. Our primary securitization issuance activity includes credit card and auto securitizations, conducted through securitization trusts which we consolidate. Our continuing involvement in these securitization transactions mainly consists of acting as the primary servicer and holding certain retained interests. In our multifamily agency business, we originate multifamily commercial real estate loans and transfer them to Government-sponsored enterprise (“GSEs”) who may, in turn, securitize them. We retain the related mortgage servicing rights (“MSRs”) and service the transferred loans pursuant to the guidelines set forth by the GSEs. As an investor, we hold primarily RMBS, CMBS, and ABS in our investment securities portfolio, which represent variable interests in the respective securitization trusts from which those securities were issued. We do not consolidate the securitization trusts employed in these transactions as we do not have the power to direct the activities that most significantly impact the economic performance of these securitization trusts. We exclude these VIEs from the tables within this note because we do not consider our continuing involvement with these VIEs to be significant as we either invest in securities issued by the VIE and were not involved in the design of the VIE or no transfers have occurred between the VIE and us. Our maximum exposure to loss as a result of our involvement with these VIEs is the carrying value of the MSRs and investment securities on our consolidated balance sheets as well as our contractual obligations under loss sharing arrangements. See “Note 6—Goodwill and Intangible Assets” for information related to our MSRs associated with these securitizations and “Note 2—Investment Securities” for more information on the securities held in our investment securities portfolio. In addition, where we have certain lending arrangements in the normal course of business with entities that could be VIEs, we have also excluded these VIEs from the tables presented in this note. See “Note 3—Loans” for additional information regarding our lending arrangements in the normal course of business. The table below presents our continuing involvement in certain securitization-related VIEs as of September 30, 2021 and December 31, 2020. Table 5.2: Continuing Involvement in Securitization-Related VIEs
(Dollars in millions) |  | Credit Card |  | Auto
September 30, 2021: |  |  |  |
Securities held by third-party investors |  | $ | 11,367 |  |  | $ | 1,268 |
Receivables in the trusts |  | 21,496 |  |  | 1,419 |
Cash balance of spread or reserve accounts |  | 0 |  |  | 10 |
Retained interests |  | Yes |  | Yes
Servicing retained |  | Yes |  | Yes
December 31, 2020: |  |  |  |
Securities held by third-party investors |  | $ | 10,361 |  |  | $ | 2,053 |
Receivables in the trust |  | 23,683 |  |  | 2,243 |
Cash balance of spread or reserve accounts |  | 0 |  |  | 10 |
Retained interests |  | Yes |  | Yes
Servicing retained |  | Yes |  | Yes
Credit Card Securitizations We securitize a portion of our credit card loans which provides a source of funding for us. Credit card securitizations involve the transfer of credit card receivables to securitization trusts. These trusts then issue debt securities collateralized by the transferred receivables to third-party investors. We hold certain retained interests in our credit card securitizations and continue to service the receivables in these trusts. We consolidate these trusts because we are deemed to be the primary beneficiary as we have the power to direct the activities that most significantly impact the economic performance of the trusts, and the right to receive benefits or the obligation to absorb losses that could potentially be significant to the trusts. Auto Securitizations Similar to our credit card securitizations, we securitize a portion of our auto loans which provides a source of funding for us. Auto securitization involves the transfer of auto loans to securitization trusts. These trusts then issue debt securities collateralized by the transferred loans to third-party investors. We hold certain retained interests and continue to service the loans in these trusts. We consolidate these trusts because we are deemed to be the primary beneficiary as we have the power to direct the activities that most significantly impact the economic performance of the trusts, and the right to receive benefits or the obligation to absorb losses that could potentially be significant to the trusts. Other VIEs Affordable Housing Entities As part of our community reinvestment initiatives, we invest in private investment funds that make equity investments in multifamily affordable housing properties. We receive affordable housing tax credits for these investments. The activities of these entities are financed with a combination of invested equity capital and debt. We account for certain investments in qualified affordable housing projects using the proportional amortization method if certain criteria are met. The proportional amortization method amortizes the cost of the investment over the period in which the investor expects to receive tax credits and other tax benefits, and the resulting amortization is recognized as a component of income tax expense attributable to continuing operations. For the nine months ended September 30, 2021 and 2020, we recognized amortization of $477 million and $428 million, respectively, and tax credits of $560 million and $47 million, respectively, associated with these investments within income tax provision or benefit. The carrying value of our equity investments in these qualified affordable housing projects was $4.7 billion and $4.5 billion as of September 30, 2021 and December 31, 2020, respectively. We are periodically required to provide additional financial or other support during the period of the investments. Our liability for these unfunded commitments was $1.7 billion and $1.5 billion as of September 30, 2021 and December 31, 2020, respectively, and is largely expected to be paid from 2021 to 2024. For those investment funds considered to be VIEs, we are not required to consolidate them if we do not have the power to direct the activities that most significantly impact the economic performance of those entities. We record our interests in these unconsolidated VIEs in loans held for investment, other assets and other liabilities on our consolidated balance sheets. Our maximum exposure to these entities is limited to our variable interests in the entities which consisted of assets of approximately $4.8 billion and $4.6 billion as of September 30, 2021 and December 31, 2020, respectively. The creditors of the VIEs have no recourse to our general credit and we do not provide additional financial or other support other than during the period that we are contractually required to provide it. The total assets of the unconsolidated VIE investment funds were approximately $11.9 billion and $11.0 billion as of September 30, 2021 and December 31, 2020, respectively. Entities that Provide Capital to Low-Income and Rural Communities We hold variable interests in entities (“Investor Entities”) that invest in community development entities (“CDEs”) that provide debt financing to businesses and non-profit entities in low-income and rural communities. Variable interests in the CDEs held by the consolidated Investor Entities are also our variable interests. The activities of the Investor Entities are financed with a combination of invested equity capital and debt. The activities of the CDEs are financed solely with invested equity capital. We receive federal and state tax credits for these investments. We consolidate the VIEs in which we have the power to direct the activities that most significantly impact the VIE’s economic performance and where we have the obligation to absorb losses or right to receive benefits that could be potentially significant to the VIE. We consolidate other investments and CDEs that are not considered to be VIEs, but where we hold a controlling financial interest. The assets of the VIEs that we consolidated, which totaled approximately $2.1 billion and $2.0 billion as of September 30, 2021 and December 31, 2020, respectively, are reflected on our consolidated balance sheets in cash, loans held for investment, and other assets. The liabilities are reflected in other liabilities. The creditors of the VIEs have no recourse to our general credit. We have not provided additional financial or other support other than during the period that we are contractually required to provide it. Other We hold variable interests in other VIEs, including companies that promote renewable energy sources and other equity method investments. We were not required to consolidate these VIEs because we do not have the power to direct the activities that most significantly impact their economic performance. Our maximum exposure to these VIEs is limited to the investments on our consolidated balance sheets of $400 million and $436 million as of September 30, 2021 and December 31, 2020, respectively. The creditors of the other VIEs have no recourse to our general credit. We have not provided additional financial or other support other than during the period that we are contractually required to provide it.

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- Definition Variable Interest Entities and Securitization [Abstract] + References No definition available. + Details
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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 + Details
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