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Fair Value Measures | 9 Months Ended
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Sep. 30, 2024
Fair Value Disclosures [Abstract] |
Fair Value Measures | Fair Value Measures U.S. generally accepted accounting principles sets forth a definition of fair value, establishes a consistent framework for measuring fair value, and requires disclosure for each major asset and liability category measured at fair value on either a recurring or non-recurring basis. U.S. generally accepted accounting principles also clarifies that fair value is an “exit” price, representing the amount that would be received when selling an asset, or paid when transferring a liability, in an orderly transaction between market participants. Fair value is thus a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, U.S. generally accepted accounting principles establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: •Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. •Level 2 – Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. •Level 3 – Inputs to the valuation methodology are significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants use in pricing an asset or liability. A financial instrument’s categorization within this valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. At September 30, 2024, we have classified all mortgage servicing rights as assets held for sale within the Statement of Condition. See Note 19 - Assets Held for Sale and Associated Liabilities. Fair value disclosures related to the mortgage servicing rights balance presented within assets held for sale at September 30, 2024 have been included under the caption "mortgage servicing rights" within this Note for comparability purposes. The following tables present assets and liabilities that were measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023, and that were included in the Company’s Consolidated Statements of Condition at those dates:
| September 30, 2024
(in millions) | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  |  |  | Total Fair Value
Assets: |  |  |  |  |  |  |  |  |
Mortgage-related Debt Securities Available for Sale: |  |  |  |  |  |  |  |  |
GSE certificates | $ | — |  |  | $ | 1,175 |  |  | $ | — |  |  |  |  | $ | 1,175 |
GSE collateralized mortgage obligations | — |  |  | 7,178 |  |  | — |  |  |  |  | 7,178 |
Private label collateralized mortgage obligations | — |  |  | 139 |  |  | 33 |  |  |  |  | 172 |
Total mortgage-related debt securities | $ | — |  |  | $ | 8,492 |  |  | $ | 33 |  |  |  |  | $ | 8,525 |
Other Debt Securities Available for Sale: |  |  |  |  |  |  |  |  |
GSE debentures | $ | — |  |  | $ | 1,254 |  |  | $ | — |  |  |  |  | $ | 1,254 |
Asset-backed securities | — |  |  | 243 |  |  | — |  |  |  |  | 243 |
Municipal bonds | — |  |  | 6 |  |  | — |  |  |  |  | 6 |
Corporate bonds | — |  |  | 357 |  |  | — |  |  |  |  | 357 |
Foreign notes | — |  |  | 35 |  |  | — |  |  |  |  | 35 |
Capital trust notes | — |  |  | 91 |  |  | — |  |  |  |  | 91 |
Total other debt securities | $ | — |  |  | $ | 1,986 |  |  | $ | — |  |  |  |  | $ | 1,986 |
Total debt securities available for sale | $ | — |  |  | $ | 10,478 |  |  | $ | 33 |  |  |  |  | $ | 10,511 |
Equity securities: |  |  |  |  |  |  |  |  |
Mutual funds and common stock | $ | — |  |  | $ | 14 |  |  | $ | — |  |  |  |  | $ | 14 |
Total equity securities | $ | — |  |  | $ | 14 |  |  | $ | — |  |  |  |  | $ | 14 |
Total securities | $ | — |  |  | $ | 10,492 |  |  | $ | 33 |  |  |  |  | $ | 10,525 |
Loans held for sale |  |  |  |  |  |  |  |  |
Residential first mortgage loans | $ | — |  |  | $ | 1,399 |  |  | $ | — |  |  |  |  | $ | 1,399 |
Acquisition, development, and construction | — |  |  | 178 |  |  | — |  |  |  |  | 178 |
Commercial and industrial loans | — |  | — |  | 18 |  |  | — |  |  |  |  | 18 |
Loans held-for-investment |  |  |  |  |  |  |  |  |
Residential first mortgage loans | — |  |  | 67 |  |  | — |  |  |  |  | 67 |
Derivative assets |  |  |  |  |  |  |  |  |
Interest rate swaps and swaptions | — |  |  | 23 |  |  | — |  |  |  |  | 23 |
Rate lock commitments (fallout-adjusted) | — |  |  | — |  |  | 11 |  |  |  |  | 11 |
Mortgage-backed securities forwards | — |  |  | 6 |  |  | — |  |  |  |  | 6 |
Mortgage servicing rights | — |  |  | — |  |  | 1,105 |  |  |  |  | 1,105 |
Total assets at fair value | $ | — |  |  | $ | 12,183 |  |  | $ | 1,149 |  |  |  |  | $ | 13,332 |
Derivative liabilities |  |  |  |  |  |  |  |  |
Mortgage-backed securities forwards | $ | — |  |  | $ | 12 |  |  | $ | — |  |  |  |  | $ | 12 |
Interest rate swaps and swaptions | — |  |  | 31 |  |  | — |  |  |  |  | 31 |
Rate lock commitments (fallout-adjusted) | — |  |  | — |  |  | 3 |  |  |  |  | 3 |
Total liabilities at fair value | $ | — |  |  | $ | 43 |  |  | $ | 3 |  |  |  |  | $ | 46 |
| December 31, 2023
(in millions) | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  |  |  | Total Fair Value
Assets: |  |  |  |  |  |  |  |  |
Mortgage-related Debt Securities Available for Sale: |  |  |  |  |  |  |  |  |
GSE certificates | $ | — |  |  | $ | 1,221 |  |  | $ | — |  |  |  |  | $ | 1,221 |
GSE collateralized mortgage obligations | — |  | 5,162 |  | — |  |  |  | 5,162
Private label collateralized mortgage obligations | — |  | 148 |  | 32 |  |  |  | 180
Total mortgage-related debt securities | $ | — |  |  | $ | 6,531 |  |  | $ | 32 |  |  |  |  | $ | 6,563 |
Other Debt Securities Available for Sale: |  |  |  |  |  |  |  |  |
U. S. Treasury obligations | $ | 198 |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | 198 |
GSE debentures | — |  | 1,609 |  | — |  |  |  | 1,609
Asset-backed securities | — |  | 302 |  | — |  |  |  | 302
Municipal bonds | — |  | 6 |  | — |  |  |  | 6
Corporate bonds | — |  | 343 |  | — |  |  |  | 343
Foreign notes | — |  | 34 |  | — |  |  |  | 34
Capital trust notes | — |  | 90 |  | — |  |  |  | 90
Total other debt securities | $ | 198 |  |  | $ | 2,384 |  |  | $ | — |  |  |  |  | $ | 2,582 |
Total debt securities available for sale | $ | 198 |  |  | $ | 8,915 |  |  | $ | 32 |  |  |  |  | $ | 9,145 |
Equity securities: |  |  |  |  |  |  |  |  |
Mutual funds and common stock | — |  | 14 |  | — |  |  |  | 14
Total equity securities | $ | — |  |  | $ | 14 |  |  | $ | — |  |  |  |  | $ | 14 |
Total securities | $ | 198 |  |  | $ | 8,929 |  |  | $ | 32 |  |  |  |  | $ | 9,159 |
Loans held for sale |  |  |  |  |  |  |  |  |
Residential first mortgage loans | $ | — |  |  | $ | 770 |  |  | $ | — |  |  |  |  | $ | 770 |
Acquisition, development, and construction | — |  | 123 |  | — |  |  |  | $ | 123 |
Commercial and industrial loans | — |  | 9 |  | — |  |  |  | $ | 9 |
Derivative assets |  |  |  |  |  |  |  |  |
Interest rate swaps and swaptions | — |  |  | 115 |  |  | — |  |  |  |  | 115 |
Rate lock commitments (fallout-adjusted) | — |  |  | — |  |  | 12 |  |  |  |  | 12 |
Mortgage-backed securities forwards | — |  |  | 11 |  |  | — |  |  |  |  | 11 |
Mortgage servicing rights | — |  |  | — |  |  | 1,111 |  |  |  |  | 1,111 |
Total assets at fair value | $ | 198 |  |  | $ | 9,957 |  |  | $ | 1,155 |  |  |  |  | $ | 11,310 |
Derivative liabilities |  |  |  |  |  |  |  |  |
Mortgage-backed securities forwards | — |  |  | 32 |  |  | — |  |  |  |  | 32 |
Futures |  |  | 1 |  |  |  |  |  |  | 1 |
Interest rate swaps and swaptions | — |  |  | 59 |  |  | — |  |  |  |  | 59 |
Rate lock commitments (fallout-adjusted) | — |  |  | — |  | . | 3 |  |  |  |  | 3 |
Total liabilities at fair value | $ | — |  |  | $ | 92 |  |  | $ | 3 |  |  |  |  | $ | 95 |
The Company reviews and updates the fair value hierarchy classifications for its assets on a quarterly basis. Changes from one quarter to the next that are related to the observability of inputs for a fair value measurement may result in a reclassification from one hierarchy level to another. A description of the methods and significant assumptions utilized in estimating the fair values of securities follows: Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include highly liquid government securities and exchange-traded securities. If quoted market prices are not available for a specific security, then fair values are estimated by using pricing models. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to observable market information, models incorporate transaction details such as maturity and cash flow assumptions. Securities valued in this manner would generally be classified within Level 2 of the valuation hierarchy, and primarily include such instruments as mortgage-related and corporate debt securities. Periodically, the Company uses fair values supplied by independent pricing services to corroborate the fair values derived from the pricing models. In addition, the Company reviews the fair values supplied by independent pricing services, as well as their underlying pricing methodologies, for reasonableness. The Company challenges pricing service valuations that appear to be unusual or unexpected. While the Company believes its valuation methods are appropriate, and consistent with those of other market participants, the use of different methodologies or assumptions to determine the fair values of certain financial instruments could result in different estimates of fair values at a reporting date. Fair Value Measurements Using Significant Unobservable Inputs The following tables include a roll forward of the Consolidated Statements of Condition amounts (including the change in fair value) for financial instruments classified by us within Level 3 of the valuation hierarchy:
(dollars in millions) | Balance at Beginning of Period | Total Gains / (Losses) Recorded in Earnings (1) | Purchases / Originations | Sales | Settlement | Transfers In (Out) | Balance at End of Period
Three Months Ended September 30, 2024 |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |
Mortgage servicing rights (1) | $ | 1,122 |  | $ | (75) |  | $ | 58 |  | $ | — |  | $ | — |  | $ | — |  | $ | 1,105 |
Private label collateralized mortgage obligations | 33 |  | — |  | — |  | — |  | — |  | — |  | 33 |
Rate lock commitments (net) (1)(2) | 4 |  | 24 |  | 18 |  | — |  | — |  | (38) |  | 8 |
Totals | $ | 1,159 |  | $ | (51) |  | $ | 76 |  | $ | — |  | $ | — |  | $ | (38) |  | $ | 1,146 |
Three Months Ended September 30, 2023 |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |
Mortgage servicing rights (1) | $ | 1,031 |  | $ | 37 |  | $ | 67 |  | $ | — |  | $ | — |  | $ | — |  | $ | 1,135 |
Private label collateralized mortgage obligations | — |  | — |  | — |  | — |  | — |  | 32 |  | 32 |
Rate lock commitments (net) (1)(2) | — |  | (42) |  | 30 |  | — |  | — |  | 6 |  | (6) |
Totals | $ | 1,031 |  | $ | (5) |  | $ | 97 |  | $ | — |  | $ | — |  | $ | 38 |  | $ | 1,161 |
Nine Months Ended September 30, 2024 |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |
Mortgage servicing rights (1) | $ | 1,111 |  | $ | (95) |  | $ | 158 |  | $ | (69) |  | $ | — |  | $ | — |  | $ | 1,105 |
Private label collateralized mortgage obligations | 32 |  | 1 |  | — | — |  | — |  | — |  | 33 |
Rate lock commitments (net) (1)(2) | 9 |  | 21 |  | 47 | — |  | — |  | (69) |  | 8 |
Totals | $ | 1,152 |  | $ | (73) |  | $ | 205 |  | $ | (69) |  | $ | — |  | $ | (69) |  | $ | 1,146 |
Nine Months Ended September 30, 2023 |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |
Mortgage servicing rights (1) | $ | 1,033 |  | $ | 5 |  | $ | 148 |  | $ | (51) |  | $ | — |  | $ | — |  | $ | 1,135 |
Private label collateralized mortgage obligations | — |  | — |  | — |  | — |  | — |  | 32 |  | 32 |
Rate lock commitments (net) (1)(2) | (1) |  | (70) |  | 90 |  | — |  | — |  | (25) |  | (6) |
Totals | $ | 1,032 |  | $ | (65) |  | $ | 238 |  | $ | (51) |  | $ | — |  | $ | 7 |  | $ | 1,161 |
(1)We utilized swaptions, futures, forward agency and loan sales and interest rate swaps to manage the risk associated with mortgage servicing rights and rate lock commitments. Gains and losses for individual lines do not reflect the effect of our risk management activities related to such Level 3 instruments. (2)Rate lock commitments are reported on a fallout-adjusted basis. Transfers out of Level 3 represent the settlement value of the commitments that are transferred to loans held for sale, which are classified as Level 2 assets. The following tables present the quantitative information about recurring Level 3 fair value financial instruments and the fair value measurements as of September 30, 2024 and December 31, 2023:
September 30, 2024 | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Average)
| (dollars in millions)
Assets |  |  |  |
Mortgage servicing rights | $ | 1,105 |  | Discounted cash flows | Option adjusted spread | 4.6%- 21.6% (5.0%)
Constant prepayment rate | 0.0% - 10.0% (8.3%)
Weighted average cost to service per loan | $65 - $90 ($68)
Private Label collateralized mortgage obligations | $ | 33 |  | Discounted cash flows | Constant default rates | 0.10% - 0.20%
Weighted average life | 8.1 - 12.3
Rate lock commitments (net) | $ | 8 |  | Consensus pricing | Origination pull-through rate | 50.20%
December 31, 2023 | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Average)
| (dollars in millions)
Assets |  |  |  |
Mortgage servicing rights | $ | 1,111 |  | Discounted cash flows | Option adjusted spread | 5.0% - 21.7% (5.4%)
Constant prepayment rate | 0.0% - 10.0% (7.9%)
Weighted average cost to service per loan | $65 - $90 ($69)
Private Label collateralized mortgage obligations | $ | 32 |  | Discounted cash flows | Constant default rates | 0.10% - 0.30%
Weighted average life | 8.2 - 11.8
Rate lock commitments (net) | $ | 9 |  | Consensus pricing | Origination pull-through rate | 64.30%
Assets Measured at Fair Value on a Non-Recurring Basis Certain assets are measured at fair value on a non-recurring basis. Such instruments are subject to fair value adjustments under certain circumstances (e.g., when there is evidence of impairment). The following tables present assets that were measured at fair value on a non-recurring basis as of September 30, 2024 and December 31, 2023, and that were included in the Company’s Consolidated Statements of Condition at those dates:
| Fair Value Measurements at September 30, 2024 Using
(in millions) | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value
Certain impaired loans (2) | $ | — |  |  | $ | — |  |  | $ | 2,399 |  |  | $ | 2,399 |
Loans held for sale | — |  |  | 255 |  |  | — |  |  | 255 |
Other assets(1) | — |  |  | — |  |  | 51 |  |  | 51 |
Total | $ | — |  |  | $ | 255 |  |  | $ | 2,450 |  |  | $ | 2,705 |
(1)Represents the fair value of repossessed assets, based on the appraised value of the collateral subsequent to its initial classification as repossessed assets and equity securities without readily determinable fair values. These equity securities are classified as Level 3 due to the infrequency of the observable prices and/or the restrictions on the shares. (2)Represents the fair value of impaired loans, based on the value of the collateral.
| Fair Value Measurements at December 31, 2023 Using
(in millions) | Quoted Prices in Active Markets for Identical Assets (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3) |  | Total Fair Value
Certain impaired loans (2) | $ | — |  |  | $ | — |  |  | $ | 197 |  |  | $ | 197 |
Other assets (1) | — |  |  | — |  |  | 50 |  |  | 50 |
Total | $ | — |  |  | $ | — |  |  | $ | 247 |  |  | $ | 247 |
(1)Represents the fair value of repossessed assets, based on the appraised value of the collateral subsequent to its initial classification as repossessed assets and equity securities without readily determinable fair values. These equity securities are classified as Level 3 due to the infrequency of the observable prices and/or the restrictions on the shares. (2)Represents the fair value of impaired loans, based on the value of the collateral. The fair values of collateral-dependent impaired loans are determined using various valuation techniques, including consideration of appraised values and other pertinent real estate and other market data. Other Fair Value Disclosures For the disclosure of fair value information about the Company’s on- and off-balance sheet financial instruments, when available, quoted market prices are used as the measure of fair value. In cases where quoted market prices are not available, fair values are based on present-value estimates or other valuation techniques. Such fair values are significantly affected by the assumptions used, the timing of future cash flows, and the discount rate. Because assumptions are inherently subjective in nature, estimated fair values cannot be substantiated by comparison to independent market quotes. Furthermore, in many cases, the estimated fair values provided would not necessarily be realized in an immediate sale or settlement of such instruments. The following tables summarize the carrying values, estimated fair values, and fair value measurement levels of financial instruments that were not carried at fair value on the Company’s Consolidated Statements of Condition at September 30, 2024 and December 31, 2023:
| September 30, 2024
|  |  |  |  | Fair Value Measurement Using
(in millions) | Carrying Value |  | Estimated Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3)
Financial Assets: |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 23,080 |  |  | $ | 23,080 |  |  | $ | 23,080 |  |  |  | $ | — |  |  |  | $ | — |
FHLB and FRB stock (1) | 1,364 |  |  | 1,364 |  |  | — |  |  |  | 1,364 |  |  |  | — |
Loans and leases held for investment, net | 69,852 |  |  | 65,637 |  |  | — |  |  |  | — |  |  |  | 65,637 |
Financial Liabilities: |  |  |  |  |  |  |  |  |  |  |
Deposits | $ | 83,013 |  |  | $ | 83,119 |  |  | $ | 53,762 |  | (2) |  | $ | 29,357 |  | (3) |  | $ | — |
Borrowed funds | 20,333 |  |  | 20,355 |  |  | — |  |  |  | 20,355 |  |  |  | — |
(1)Carrying value and estimated fair value are at cost. (2)Interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts. (3)Certificates of deposit.
| December 31, 2023
|  |  |  |  | Fair Value Measurement Using
(in millions) | Carrying Value |  | Estimated Fair Value |  | Quoted Prices in Active Markets for Identical Assets (Level 1) |  |  | Significant Other Observable Inputs (Level 2) |  |  | Significant Unobservable Inputs (Level 3)
Financial Assets: |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 11,475 |  |  | $ | 11,475 |  |  | $ | 11,475 |  |  |  | $ | — |  |  |  | $ | — |
FHLB and FRB stock (1) | 1,392 |  | 1,392 |  | — |  |  |  | 1,392 |  |  | — |
Loans and leases held for investment, net | 83,627 |  | 79,333 |  | — |  |  |  | — |  |  |  | 79,333
Financial Liabilities: |  |  |  |  |  |  |  |  |  |  |
Deposits | $ | 81,526 |  |  | $ | 81,247 |  |  | $ | 59,972 |  | (2) |  | $ | 21,275 |  | (3) |  | $ | — |
Borrowed funds | 21,267 |  | 21,082 |  | — |  |  |  | 21,082 |  |  | — |
(1)Carrying value and estimated fair value are at cost. (2)Interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts. (3)Certificates of deposit. The methods and significant assumptions used to estimate fair values for the Company’s financial instruments follow: Cash and Cash Equivalents Cash and cash equivalents include cash and due from banks and federal funds sold. The estimated fair values of cash and cash equivalents are assumed to equal their carrying values, as these financial instruments are either due on demand or have short-term maturities. Securities If quoted market prices are not available for a specific security, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. These pricing models primarily use market-based or independently sourced market parameters as inputs, including, but not limited to, yield curves, interest rates, equity or debt prices, and credit spreads. In addition to observable market information, pricing models also incorporate transaction details such as maturities and cash flow assumptions. Federal Home Loan Bank Stock Ownership in equity securities of the FHLB is generally restricted and there is no established liquid market for their resale. The carrying amount approximates the fair value. Loans and leases The Company discloses the fair value of loans measured at amortized cost using an exit price notion. The Company determined the fair value on substantially all of its loans for disclosure purposes, on an individual loan basis. The discount rates reflect current market rates for loans with similar terms to borrowers having similar credit quality on an exit price basis. For those loans where a discounted cash flow technique was not considered reliable, the Company used a quoted market price for each individual loan. Mortgage Servicing Rights The significant unobservable inputs used in the fair value measurement of the mortgage servicing rights are option adjusted spreads, prepayment rates and cost to service. Significant increases (decreases) in all three assumptions in isolation result in a significantly lower (higher) fair value measurement. Weighted average life (in years) is used to determine the change in fair value of mortgage servicing rights. For September 30, 2024, the weighted average life (in years) for the entire portfolio was 6.7. Rate lock commitments The significant unobservable input used in the fair value measurement of the rate lock commitments is the pull through rate. The pull through rate is a statistical analysis of our actual rate lock fallout history to determine the sensitivity of the residential mortgage loan pipeline compared to interest rate changes and other deterministic values. New market prices are applied based on updated loan characteristics and new fallout ratios (i.e. the inverse of the pull through rate) are applied accordingly. Significant increases (decreases) in the pull through rate in isolation result in a significantly higher (lower) fair value measurement. Deposits The fair values of deposit liabilities with no stated maturity (i.e., interest-bearing checking and money market accounts, savings accounts, and non-interest-bearing accounts) are equal to the carrying amounts payable on demand. The fair values of certificates of deposit represent contractual cash flows, discounted using interest rates currently offered on deposits with similar characteristics and remaining maturities. These estimated fair values do not include the intangible value of core deposit relationships, which comprise a portion of the Company’s deposit base. Borrowed Funds The estimated fair value of borrowed funds is based either on bid quotations received from securities dealers or the discounted value of contractual cash flows with interest rates currently in effect for borrowed funds with similar maturities and structures. Off-Balance Sheet Financial Instruments The fair values of commitments to extend credit and unadvanced lines of credit are estimated based on an analysis of the interest rates and fees currently charged to enter into similar transactions, considering the remaining terms of the commitments and the creditworthiness of the potential borrowers. The estimated fair values of such off-balance sheet financial instruments were insignificant at September 30, 2024 and December 31, 2023. Fair Value Option We elected the fair value option for certain items as discussed throughout the Notes to the Consolidated Financial Statements to more closely align the accounting method with the underlying economic exposure. Interest income on loans held for sale is accrued on the principal outstanding primarily using the "simple-interest" method. The following table reflects the change in fair value included in earnings of financial instruments for which the fair value option has been elected:
(in millions) | Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
Assets |  |  |  |  |  |  |
Loans held for sale |  |  |  |  |  |  |
Net gain on loan sales | $ | 63 |  |  | $ | (25) |  |  | $ | 78 |  |  | $ | 4 |
The following table reflects the difference between the aggregate fair value and aggregate remaining contractual principal balance outstanding for assets and liabilities for which the fair value option has been elected:
| September 30, 2024 |  | December 31, 2023
(dollars in millions) | Unpaid Principal Balance |  | Fair Value |  | Fair Value Over / (Under) UPB |  | Unpaid Principal Balance |  | Fair Value |  | Fair Value Over / (Under) UPB
Assets: |  |  |  |  |  |  |  |  |  |  |
Non-accrual loans: |  |  |  |  |  |  |  |  |  |  |
Loans held for sale | $ | 2 |  |  | $ | 2 |  |  | $ | — |  |  | $ | 2 |  |  | $ | 2 |  |  | $ | — |
Total non-accrual loans | 2 |  |  | 2 |  |  | — |  |  | 2 |  |  | 2 |  |  | — |
Accrual loans: |  |  |  |  |  |  |  |  |  |  |
Loans held for sale | 1,539 |  |  | 1,593 |  |  | 54 |  |  | 869 |  |  | 894 |  |  | 25 |
Loans held-for-investment | 69 |  |  | 67 |  |  | (2) |  |  | — |  |  | — |  |  | — |
Total accrual loans | 1,608 |  |  | 1,660 |  |  | 52 |  |  | 869 |  |  | 894 |  |  | 25 |
Total loans: |  |  |  |  |  |  |  |  |  |  |
Loans held for sale | 1,541 |  |  | 1,595 |  |  | 54 |  |  | 871 |  |  | 896 |  |  | 25 |
Loans held-for-investment | 69 |  |  | 67 |  |  | (2) |  |  | — |  | — |  | — |  |  | — |
Total loans | $ | 1,610 |  |  | $ | 1,662 |  |  | $ | 52 |  |  | $ | 871 |  |  | $ | 896 |  |  | $ | 25 |

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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/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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