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FAIR VALUE MEASUREMENTS | 6 Months Ended
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Jun. 30, 2019
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Refer to Note 24 "Fair Value Measurements" to the Consolidated Financial Statements of our 2018 Annual Report on Form 10-K filed with the SEC on February 26, 2019 for a description of additional valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis. The following table presents the balances of assets and liabilities measured at fair value on a recurring basis: TABLE 17.1
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Total
June 30, 2019 |  |  |  |  |  |  |
Assets Measured at Fair Value |  |  |  |  |  |  |
Debt securities available for sale |  |  |  |  |  |  |
U.S. government agencies | $ | — |  |  | $ | 172 |  |  | $ | — |  |  | $ | 172 |
U.S. government-sponsored entities | — |  |  | 301 |  |  | — |  |  | 301 |
Residential mortgage-backed securities: |  |  |  |  |  |  |
Agency mortgage-backed securities | — |  |  | 1,315 |  |  | — |  |  | 1,315 |
Agency collateralized mortgage obligations | — |  |  | 1,242 |  |  | — |  |  | 1,242 |
Commercial mortgage-backed securities | — |  |  | 232 |  |  | — |  |  | 232 |
States of the U.S. and political subdivisions | — |  |  | 15 |  |  | — |  |  | 15 |
Other debt securities | — |  |  | 2 |  |  | — |  |  | 2 |
Total debt securities available for sale | — |  |  | 3,279 |  |  | — |  |  | 3,279 |
Loans held for sale | — |  |  | 39 |  |  | — |  |  | 39 |
Derivative financial instruments |  |  |  |  |  |  |
Trading | — |  |  | 145 |  |  | — |  |  | 145 |
Not for trading | — |  |  | 1 |  |  | 3 |  |  | 4 |
Total derivative financial instruments | — |  |  | 146 |  |  | 3 |  |  | 149 |
Total assets measured at fair value on a recurring basis | $ | — |  |  | $ | 3,464 |  |  | $ | 3 |  |  | $ | 3,467 |
Liabilities Measured at Fair Value |  |  |  |  |  |  |
Derivative financial instruments |  |  |  |  |  |  |
Trading | $ | — |  |  | $ | 25 |  |  | $ | — |  |  | $ | 25 |
Not for trading | — |  |  | 2 |  |  | — |  |  | 2 |
Total derivative financial instruments | — |  |  | 27 |  |  | — |  |  | 27 |
Total liabilities measured at fair value on a recurring basis | $ | — |  |  | $ | 27 |  |  | $ | — |  |  | $ | 27 |
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Total
December 31, 2018 |  |  |  |  |  |  |
Assets Measured at Fair Value |  |  |  |  |  |  |
Debt securities available for sale |  |  |  |  |  |  |
U.S. government agencies | $ | — |  |  | $ | 187 |  |  | $ | — |  |  | $ | 187 |
U.S. government-sponsored entities | — |  |  | 313 |  |  | — |  |  | 313 |
Residential mortgage-backed securities: |  |  |  |  |  |  |
Agency mortgage-backed securities | — |  |  | 1,429 |  |  | — |  |  | 1,429 |
Agency collateralized mortgage obligations | — |  |  | 1,161 |  |  | — |  |  | 1,161 |
Commercial mortgage-backed securities | — |  |  | 228 |  |  | — |  |  | 228 |
States of the U.S. and political subdivisions | — |  |  | 21 |  |  | — |  |  | 21 |
Other debt securities | — |  |  | 2 |  |  | — |  |  | 2 |
Total debt securities available for sale | — |  |  | 3,341 |  |  | — |  |  | 3,341 |
Loans held for sale | — |  |  | 14 |  |  | — |  |  | 14 |
Derivative financial instruments |  |  |  |  |  |  |
Trading | — |  |  | 42 |  |  | 1 |  |  | 43 |
Total derivative financial instruments | — |  |  | 42 |  |  | 1 |  |  | 43 |
Total assets measured at fair value on a recurring basis | $ | — |  |  | $ | 3,397 |  |  | $ | 1 |  |  | $ | 3,398 |
Liabilities Measured at Fair Value |  |  |  |  |  |  |
Derivative financial instruments |  |  |  |  |  |  |
Trading | $ | — |  |  | $ | 36 |  |  | $ | — |  |  | $ | 36 |
Not for trading | — |  |  | 3 |  |  | — |  |  | 3 |
Total derivative financial instruments | — |  |  | 39 |  |  | — |  |  | 39 |
Total liabilities measured at fair value on a recurring basis | $ | — |  |  | $ | 39 |  |  | $ | — |  |  | $ | 39 |
The following table presents additional information about assets measured at fair value on a recurring basis and for which we have utilized Level 3 inputs to determine fair value: TABLE 17.2
(in millions) |  | Interest Rate Lock Commitments |  | Total
Six Months Ended June 30, 2019 |  |  |  |
Balance at beginning of period |  | $ | 1 |  |  | $ | 1 |
Purchases, issuances, sales and settlements: |  |  |  |
Purchases |  | 3 |  |  | 3 |
Settlements |  | (1 | ) |  | (1 | )
Balance at end of period |  | $ | 3 |  |  | $ | 3 |
Year Ended December 31, 2018 |  |  |  |
Balance at beginning of period |  | $ | 2 |  |  | $ | 2 |
Purchases, issuances, sales and settlements: |  |  |  |
Purchases |  | 5 |  |  | 5 |
Settlements |  | (6 | ) |  | (6 | )
Balance at end of period |  | $ | 1 |  |  | $ | 1 |
We review fair value hierarchy classifications on a quarterly basis. Changes in the observability of the valuation attributes may result in reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in/out of Level 3 at fair value at the beginning of the period in which the changes occur. There were no transfers of assets or liabilities between the hierarchy levels during the first six months of 2019 or 2018. In accordance with GAAP, from time to time, we measure certain assets at fair value on a non-recurring basis. These adjustments to fair value usually result from the application of the lower of cost or fair value accounting or write-downs of individual assets. Valuation methodologies used to measure these fair value adjustments were described in Note 24 "Fair Value Measurements" in our 2018 Annual Report on Form 10-K. For assets measured at fair value on a non-recurring basis still held at the Balance Sheet date, the following table provides the hierarchy level and the fair value of the related assets or portfolios: TABLE 17.3
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Total
June 30, 2019 |  |  |  |  |  |  |
Impaired loans | $ | — |  |  | $ | — |  |  | $ | 5 |  |  | $ | 5 |
Other real estate owned | — |  |  | — |  |  | 2 |  |  | 2 |
Other assets - SBA servicing asset | — |  |  | — |  |  | 4 |  |  | 4 |
Other assets - MSR | — |  |  | — |  |  | 25 |  |  | 25 |
December 31, 2018 |  |  |  |  |  |  |
Impaired loans | $ | — |  |  | $ | — |  |  | $ | 15 |  |  | $ | 15 |
Other real estate owned | — |  |  | — |  |  | 5 |  |  | 5 |
Other assets - SBA servicing asset | — |  |  | — |  |  | 4 |  |  | 4 |
Substantially all of the fair value amounts in the table above were estimated at a date during the six months or twelve months ended June 30, 2019 and December 31, 2018, respectively. Consequently, the fair value information presented is not necessarily as of the period’s end. MSRs measured at fair value on a non-recurring basis of $27.6 million had a valuation allowance of $2.6 million included in earnings, bringing the June 30, 2019 carrying value to $24.6 million. Impaired loans measured or re-measured at fair value on a non-recurring basis during the six months ended June 30, 2019 had a carrying amount of $5.2 million, which includes an allocated allowance for credit losses of $2.7 million. The allowance for credit losses includes a provision applicable to the current period fair value measurements of $5.1 million, which was included in the provision for credit losses for the six months ended June 30, 2019. OREO with a carrying amount of $2.5 million was written down to $1.6 million, resulting in a loss of $0.5 million, which was included in earnings for the six months ended June 30, 2019. Fair Value of Financial Instruments Refer to Note 24 "Fair Value Measurements" to the Consolidated Financial Statements of our 2018 Annual Report on Form 10-K filed with the SEC on February 26, 2019 for a description of methods and assumptions that were used to estimate the fair value of each financial instrument. The fair values of our financial instruments are as follows: TABLE 17.4
|  |  |  |  | Fair Value Measurements
(in millions) | Carrying Amount |  | Fair Value |  | Level 1 |  | Level 2 |  | Level 3
June 30, 2019 |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 499 |  |  | $ | 499 |  |  | $ | 499 |  |  | $ | — |  |  | $ | — |
Debt securities available for sale | 3,279 |  |  | 3,279 |  |  | — |  |  | 3,279 |  |  | — |
Debt securities held to maturity | 3,079 |  |  | 3,093 |  |  | — |  |  | 3,093 |  |  | — |
Net loans and leases, including loans held for sale | 22,687 |  |  | 22,576 |  |  | — |  |  | 39 |  |  | 22,537 |
Loan servicing rights | 42 |  |  | 44 |  |  | — |  |  | — |  |  | 44 |
Derivative assets | 149 |  |  | 149 |  |  | — |  |  | 146 |  |  | 3 |
Accrued interest receivable | 113 |  |  | 113 |  |  | 113 |  |  | — |  |  | — |
Financial Liabilities |  |  |  |  |  |  |  |  |
Deposits | 23,731 |  |  | 23,735 |  |  | 18,247 |  |  | 5,488 |  |  | — |
Short-term borrowings | 3,711 |  |  | 3,714 |  |  | 3,714 |  |  | — |  |  | — |
Long-term borrowings | 1,338 |  |  | 1,341 |  |  | — |  |  | — |  |  | 1,341 |
Derivative liabilities | 27 |  |  | 27 |  |  | — |  |  | 27 |  |  | — |
Accrued interest payable | 26 |  |  | 26 |  |  | 26 |  |  | — |  |  | — |
December 31, 2018 |  |  |  |  |  |  |  |  |
Financial Assets |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 488 |  |  | $ | 488 |  |  | $ | 488 |  |  | $ | — |  |  | $ | — |
Debt securities available for sale | 3,341 |  |  | 3,341 |  |  | — |  |  | 3,341 |  |  | — |
Debt securities held to maturity | 3,254 |  |  | 3,155 |  |  | — |  |  | 3,155 |  |  | — |
Net loans and leases, including loans held for sale | 21,995 |  |  | 21,742 |  |  | — |  |  | 14 |  |  | 21,728 |
Loan servicing rights | 41 |  |  | 45 |  |  | — |  |  | — |  |  | 45 |
Derivative assets | 43 |  |  | 43 |  |  | — |  |  | 42 |  |  | 1 |
Accrued interest receivable | 101 |  |  | 101 |  |  | 101 |  |  | — |  |  | — |
Financial Liabilities |  |  |  |  |  |  |  |  |
Deposits | 23,455 |  |  | 23,411 |  |  | 18,142 |  |  | 5,269 |  |  | — |
Short-term borrowings | 4,129 |  |  | 4,130 |  |  | 4,130 |  |  | — |  |  | — |
Long-term borrowings | 627 |  |  | 618 |  |  | — |  |  | — |  |  | 618 |
Derivative liabilities | 39 |  |  | 39 |  |  | — |  |  | 39 |  |  | — |
Accrued interest payable | 20 |  |  | 20 |  |  | 20 |  |  | — |  |  | — |

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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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