Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

v3.5.0.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2016
Fair Value Disclosures [Abstract]  
Fair Value Measurements
NOTE 14 – Fair Value Measurements

Under applicable accounting guidance, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Corporation determines the fair values of its financial instruments based on the fair value hierarchy established under applicable accounting guidance which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs used to measure fair value. The Corporation conducts a review of its fair value hierarchy classifications on a quarterly basis. Transfers into or out of fair value hierarchy classifications are made if the significant inputs used in the financial models measuring the fair values of the assets and liabilities became unobservable or observable, respectively, in the current marketplace. These transfers are considered to be effective as of the beginning of the quarter in which they occur. For more information regarding the fair value hierarchy and how the Corporation measures fair value, see Note 1 – Summary of Significant Accounting Principles and Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation's 2015 Annual Report on Form 10-K. The Corporation accounts for certain financial instruments under the fair value option. For additional information, see Note 15 – Fair Value Option.

Valuation Processes and Techniques

The Corporation has various processes and controls in place to ensure that fair value is reasonably estimated. A model validation policy governs the use and control of valuation models used to estimate fair value. This policy requires review and approval of models by personnel who are independent of the front office, and periodic reassessments of models to ensure that they are continuing to perform as designed. In addition, detailed reviews of trading gains and losses are conducted on a daily basis by personnel who are independent of the front office. A price verification group, which is also independent of the front office, utilizes available market information including executed trades, market prices and market-observable valuation model inputs to ensure that fair values are reasonably estimated. The Corporation performs due diligence procedures over third-party pricing service providers in order to support their use in the valuation process. Where market information is not available to support internal valuations, independent reviews of the valuations are performed and any material exposures are escalated through a management review process.

While the Corporation believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

During the six months ended June 30, 2016, there were no changes to the valuation techniques that had, or are expected to have, a material impact on the Corporation's consolidated financial position or results of operations.

Level 1, 2 and 3 Valuation Techniques

Financial instruments are considered Level 1 when the valuation is based on quoted prices in active markets for identical assets or liabilities. Level 2 financial instruments are valued using quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or models using inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Financial instruments are considered Level 3 when their values are determined using pricing models, discounted cash flow methodologies or similar techniques, and at least one significant model assumption or input is unobservable and when determination of the fair value requires significant management judgment or estimation.
Recurring Fair Value

Assets and liabilities carried at fair value on a recurring basis at June 30, 2016 and December 31, 2015, including financial instruments which the Corporation accounts for under the fair value option, are summarized in the following tables.

 
June 30, 2016
 
Fair Value Measurements
 
 
 
 
(Dollars in millions)
Level 1
 
Level 2
 
Level 3
 
Netting
Adjustments (1)
 
Assets/Liabilities
at Fair Value
Assets
 
 
 
 
 
 
 
 
 
Federal funds sold and securities borrowed or purchased under agreements to resell
$

 
$
53,008

 
$

 
$

 
$
53,008

Trading account assets:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities (2)
36,534

 
18,477

 

 

 
55,011

Corporate securities, trading loans and other
260

 
24,353

 
2,654

 

 
27,267

Equity securities
29,210

 
20,162

 
455

 

 
49,827

Non-U.S. sovereign debt
16,883

 
15,975

 
630

 

 
33,488

Mortgage trading loans and ABS

 
8,486

 
1,286

 

 
9,772

Total trading account assets (3)
82,887

 
87,453

 
5,025

 

 
175,365

Derivative assets (4)
7,781

 
888,247

 
5,169

 
(845,933
)
 
55,264

AFS debt securities:
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
24,636

 
1,507

 

 

 
26,143

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency

 
208,688

 

 

 
208,688

Agency-collateralized mortgage obligations

 
9,760

 

 

 
9,760

Non-agency residential

 
1,969

 
134

 

 
2,103

Commercial

 
11,397

 

 

 
11,397

Non-U.S. securities
2,665

 
3,393

 

 

 
6,058

Other taxable securities

 
9,057

 
717

 

 
9,774

Tax-exempt securities

 
14,803

 
559

 

 
15,362

Total AFS debt securities
27,301

 
260,574

 
1,410

 

 
289,285

Other debt securities carried at fair value:
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency-collateralized mortgage obligations

 
7

 

 

 
7

Non-agency residential

 
3,216

 
28

 

 
3,244

Non-U.S. securities
15,629

 
1,256

 

 

 
16,885

Other taxable securities

 
249

 

 

 
249

Total other debt securities carried at fair value
15,629

 
4,728

 
28

 

 
20,385

Loans and leases (5)

 
7,201

 
1,459

 

 
8,660

Mortgage servicing rights

 

 
2,269

 

 
2,269

Loans held-for-sale

 
4,422

 
690

 

 
5,112

Other assets
11,676

 
1,861

 
348

 

 
13,885

Total assets
$
145,274

 
$
1,307,494

 
$
16,398

 
$
(845,933
)
 
$
623,233

Liabilities
 
 
 
 
 
 
 
 
 
Interest-bearing deposits in U.S. offices
$

 
$
1,019

 
$

 
$

 
$
1,019

Federal funds purchased and securities loaned or sold under agreements to repurchase

 
24,229

 
313

 

 
24,542

Trading account liabilities:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities
15,304

 
136

 

 

 
15,440

Equity securities
31,603

 
3,346

 

 

 
34,949

Non-U.S. sovereign debt
14,485

 
1,992

 

 

 
16,477

Corporate securities and other
262

 
7,128

 
26

 

 
7,416

Total trading account liabilities
61,654

 
12,602

 
26

 

 
74,282

Derivative liabilities (4)
7,776

 
874,863

 
5,817

 
(840,895
)
 
47,561

Short-term borrowings

 
1,860

 

 

 
1,860

Accrued expenses and other liabilities
11,299

 
2,004

 
9

 

 
13,312

Long-term debt

 
29,293

 
2,156

 

 
31,449

Total liabilities
$
80,729

 
$
945,870

 
$
8,321

 
$
(840,895
)
 
$
194,025


(1) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2) 
Includes $18.3 billion of GSE obligations.
(3) 
Includes securities with a fair value of $15.6 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical disclosure on the Consolidated Balance Sheet.
(4) 
During the six months ended June 30, 2016, $974 million of derivative assets and $1.1 billion of derivative liabilities were transferred from Level 1 to Level 2 and $808 million of derivative assets and $819 million of derivative liabilities were transferred from Level 2 to Level 1 based on the inputs used to measure fair value. For further disaggregation of derivative assets and liabilities, see Note 2 – Derivatives.
(5) 
Includes $691 million from CFEs that were measured using the fair value of the financial liabilities of those entities as the measurement basis.

 
December 31, 2015
 
Fair Value Measurements
 
 
 
 
(Dollars in millions)
Level 1
 
Level 2
 
Level 3
 
Netting
Adjustments (1)
 
Assets/Liabilities
at Fair Value
Assets
 
 
 
 
 
 
 
 
 
Federal funds sold and securities borrowed or purchased under agreements to resell
$

 
$
55,143

 
$

 
$

 
$
55,143

Trading account assets:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities (2)
33,034

 
15,501

 

 

 
48,535

Corporate securities, trading loans and other
325

 
22,738

 
2,838

 

 
25,901

Equity securities
41,735

 
20,887

 
407

 

 
63,029

Non-U.S. sovereign debt
15,651

 
12,915

 
521

 

 
29,087

Mortgage trading loans and ABS

 
8,107

 
1,868

 

 
9,975

Total trading account assets (3)
90,745

 
80,148

 
5,634

 

 
176,527

Derivative assets (4)
5,149

 
678,355

 
5,134

 
(638,648
)
 
49,990

AFS debt securities:
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
23,374

 
1,903

 

 

 
25,277

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency

 
228,947

 

 

 
228,947

Agency-collateralized mortgage obligations

 
10,985

 

 

 
10,985

Non-agency residential

 
3,073

 
106

 

 
3,179

Commercial

 
7,165

 

 

 
7,165

Non-U.S. securities
2,768

 
2,999

 

 

 
5,767

Other taxable securities

 
9,688

 
757

 

 
10,445

Tax-exempt securities

 
13,439

 
569

 

 
14,008

Total AFS debt securities
26,142

 
278,199

 
1,432

 

 
305,773

Other debt securities carried at fair value:
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency-collateralized mortgage obligations

 
7

 

 

 
7

Non-agency residential

 
3,460

 
30

 

 
3,490

Non-U.S. securities
11,691

 
1,152

 

 

 
12,843

Other taxable securities

 
267

 

 

 
267

Total other debt securities carried at fair value
11,691

 
4,886

 
30

 

 
16,607

Loans and leases

 
5,318

 
1,620

 

 
6,938

Mortgage servicing rights

 

 
3,087

 

 
3,087

Loans held-for-sale

 
4,031

 
787

 

 
4,818

Other assets (5)
11,923

 
2,023

 
374

 

 
14,320

Total assets
$
145,650

 
$
1,108,103

 
$
18,098

 
$
(638,648
)
 
$
633,203

Liabilities
 
 
 
 
 
 
 
 
 
Interest-bearing deposits in U.S. offices
$

 
$
1,116

 
$

 
$

 
$
1,116

Federal funds purchased and securities loaned or sold under agreements to repurchase

 
24,239

 
335

 

 
24,574

Trading account liabilities:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities
14,803

 
169

 

 

 
14,972

Equity securities
27,898

 
2,392

 

 

 
30,290

Non-U.S. sovereign debt
13,589

 
1,951

 

 

 
15,540

Corporate securities and other
193

 
5,947

 
21

 

 
6,161

Total trading account liabilities
56,483

 
10,459

 
21

 

 
66,963

Derivative liabilities (4)
4,941

 
670,600

 
5,575

 
(642,666
)
 
38,450

Short-term borrowings

 
1,295

 
30

 

 
1,325

Accrued expenses and other liabilities
11,656

 
2,234

 
9

 

 
13,899

Long-term debt

 
28,584

 
1,513

 

 
30,097

Total liabilities
$
73,080

 
$
738,527

 
$
7,483

 
$
(642,666
)
 
$
176,424


(1) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2) 
Includes $14.8 billion of GSE obligations.
(3) 
Includes securities with a fair value of $16.4 billion that were segregated in compliance with securities regulations or deposited with clearing organizations. This amount is included in the parenthetical disclosure on the Consolidated Balance Sheet.
(4) 
During 2015, $6.6 billion of derivative assets and $6.7 billion of derivative liabilities were transferred from Level 1 to Level 2 based on inputs used to measure fair value. Additionally, $6.4 billion of derivative assets and $6.2 billion of derivative liabilities were transferred from Level 2 to Level 1 due to additional information related to certain options. For further disaggregation of derivative assets and liabilities, see Note 2 – Derivatives.
(5) 
During 2015, approximately $327 million of assets were transferred from Level 2 to Level 1 due to a restriction that was lifted for an equity investment.
The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and six months ended June 30, 2016 and 2015, including net realized and unrealized gains (losses) included in earnings and accumulated OCI.

Level 3 – Fair Value Measurements (1)
 
Three Months Ended June 30, 2016
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
April 1
2016
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI (2)
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2016
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
2,954

$
11

$
1

$
472

$
(246
)
$

$
(197
)
$
72

$
(413
)
$
2,654

Equity securities
417

22


33

(35
)

(10
)
29

(1
)
455

Non-U.S. sovereign debt
572

50

49




(41
)


630

Mortgage trading loans and ABS
1,614

67


156

(419
)

(94
)
45

(83
)
1,286

Total trading account assets
5,557

150

50

661

(700
)

(342
)
146

(497
)
5,025

Net derivative assets (3)
(315
)
84


110

(444
)

(123
)
(8
)
48

(648
)
AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Non-agency residential MBS
150


(2
)
61



(75
)


134

Other taxable securities
739

1

(3
)



(20
)


717

Tax-exempt securities
562


(3
)






559

Total AFS debt securities
1,451

1

(8
)
61



(95
)


1,410

Other debt securities carried at fair value – Non-agency residential MBS
29

(1
)







28

Loans and leases (4, 5)
1,697

(47
)



25

(54
)
1

(163
)
1,459

Mortgage servicing rights (5)
2,631

(228
)


(1
)
72

(205
)


2,269

Loans held-for-sale (4)
660

11

28


(17
)

(18
)
26


690

Other assets
375

(13
)




(14
)


348

Federal funds purchased and securities loaned or sold under agreements to repurchase (4)
(345
)
32








(313
)
Trading account liabilities – Corporate securities and other
(28
)
1


1






(26
)
Accrued expenses and other liabilities
(9
)








(9
)
Long-term debt (4)
(1,814
)
(79
)
(11
)
20


(154
)
77

(359
)
164

(2,156
)
(1) 
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2) 
Includes unrealized gains (losses) on AFS debt securities, foreign currency translation adjustments and the impact on structured liabilities of changes in the Corporation's credit spreads. For more information, see Note 1 – Summary of Significant Accounting Principles.
(3) 
Net derivatives include derivative assets of $5.2 billion and derivative liabilities of $5.8 billion.
(4) 
Amounts represent instruments that are accounted for under the fair value option.
(5) 
Issuances represent loan originations and MSRs retained following securitizations or whole-loan sales.

Significant transfers into Level 3, primarily due to decreased price observability, during the three months ended June 30, 2016 included:
$146 million of trading account assets
$359 million of long-term debt. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.

Significant transfers out of Level 3, primarily due to increased price observability, during the three months ended June 30, 2016 included:
$497 million of trading account assets
$163 million of loans and leases
$164 million of long-term debt
Level 3 – Fair Value Measurements (1)
 
Three Months Ended June 30, 2015
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
April 1
2015
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI (2)
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2015
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
2,760

$
55

$

$
338

$
(343
)
$

$
(214
)
$
812

$
(82
)
$
3,326

Equity securities
340

11


16

(2
)


22

(1
)
386

Non-U.S. sovereign debt
508

16

12

25



(66
)

(27
)
468

Mortgage trading loans and ABS
2,106

101


490

(378
)

(161
)
1


2,159

Total trading account assets
5,714

183

12

869

(723
)

(441
)
835

(110
)
6,339

Net derivative assets (3)
(1,081
)
610


57

(217
)

196

(14
)
98

(351
)
AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Non-agency residential MBS
402

7

9

41



(225
)


234

Non-U.S. securities
9









9

Other taxable securities
690


2

6



(21
)


677

Tax-exempt securities
583


2




(1
)


584

Total AFS debt securities
1,684

7

13

47



(247
)


1,504

Other debt securities carried at fair value – Non-agency residential MBS

1


33






34

Loans and leases (4, 5)
1,954

(10
)


(1
)

(77
)
112

(8
)
1,970

Mortgage servicing rights (5)
3,394

458



(312
)
204

(223
)


3,521

Loans held-for-sale (4)
543

22


85

(13
)
12


39

(28
)
660

Other assets
847

(14
)

9

(87
)

(6
)
8

(1
)
756

Federal funds purchased and securities loaned or sold under agreements to repurchase (4)

(14
)



(28
)

(326
)

(368
)
Trading account liabilities – Corporate securities and other
(41
)
2


31

(49
)




(57
)
Short-term borrowings (4)
(15
)







15


Accrued expenses and other liabilities
(10
)
1








(9
)
Long-term debt (4)
(2,806
)
66


45


(49
)
63

(403
)
368

(2,716
)
(1) 
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2) 
Includes unrealized gains (losses) on AFS debt securities, foreign currency translation adjustments and the impact on structured liabilities of changes in the Corporation's credit spreads. For more information, see Note 1 – Summary of Significant Accounting Principles.
(3) 
Net derivatives include derivative assets of $6.5 billion and derivative liabilities of $6.8 billion.
(4) 
Amounts represent instruments that are accounted for under the fair value option.
(5) 
Issuances represent loan originations and MSRs retained following securitizations or whole-loan sales.

Significant transfers into Level 3, primarily due to decreased price observability, during the three months ended June 30, 2015 included:
$835 million of trading account assets
$112 million of loans and leases
$326 million of federal funds purchased and securities loaned or sold under agreements to repurchase
$403 million of long-term debt. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.

Significant transfers out of Level 3, primarily due to increased price observability unless otherwise noted, during the three months ended June 30, 2015 included:
$110 million of trading account assets, primarily the result of increased market liquidity
$368 million of long-term debt
Level 3 – Fair Value Measurements (1)
 
Six Months Ended June 30, 2016
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
January 1
2016
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI (2)
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2016
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
2,838

$
61

$
2

$
699

$
(393
)
$

$
(345
)
$
230

$
(438
)
$
2,654

Equity securities
407

82


43

(37
)

(72
)
33

(1
)
455

Non-U.S. sovereign debt
521

92

98

3

(1
)

(83
)


630

Mortgage trading loans and ABS
1,868

95

(2
)
350

(823
)

(167
)
76

(111
)
1,286

Total trading account assets
5,634

330

98

1,095

(1,254
)

(667
)
339

(550
)
5,025

Net derivative assets (3)
(441
)
487


199

(619
)

(111
)
(124
)
(39
)
(648
)
AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Non-agency residential MBS
106


3

196

(92
)

(79
)


134

Other taxable securities
757

2

(6
)



(36
)


717

Tax-exempt securities
569


(10
)
1



(1
)


559

Total AFS debt securities
1,432

2

(13
)
197

(92
)

(116
)


1,410

Other debt securities carried at fair value – Non-agency residential MBS
30

(2
)







28

Loans and leases (4, 5)
1,620

(4
)

69


50

(89
)
6

(193
)
1,459

Mortgage servicing rights (5)
3,087

(608
)


(2
)
208

(416
)


2,269

Loans held-for-sale (4)
787

84

55

20

(180
)

(52
)
39

(63
)
690

Other assets
374

(38
)

34



(24
)
2


348

Federal funds purchased and securities loaned or sold under agreements to repurchase (4)
(335
)
29




(14
)
7



(313
)
Trading account liabilities – Corporate securities and other
(21
)
2


1

(8
)




(26
)
Short-term borrowings (4)
(30
)
1





29




Accrued expenses and other liabilities
(9
)








(9
)
Long-term debt (4)
(1,513
)
(170
)
(18
)
29


(323
)
133

(545
)
251

(2,156
)

(1) 
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2) 
Includes unrealized gains (losses) on AFS debt securities, foreign currency translation adjustments and the impact on structured liabilities of changes in the Corporation's credit spreads. For more information, see Note 1 – Summary of Significant Accounting Principles.
(3) 
Net derivatives include derivative assets of $5.2 billion and derivative liabilities of $5.8 billion.
(4) 
Amounts represent instruments that are accounted for under the fair value option.
(5) 
Issuances represent loan originations and MSRs retained following securitizations or whole-loan sales.

Significant transfers into Level 3, primarily due to decreased price observability, during the six months ended June 30, 2016 included:
$339 million of trading account assets
$124 million of net derivative assets
$545 million of long-term debt. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.

Significant transfers out of Level 3, primarily due to increased price observability, during the six months ended June 30, 2016 included:
$550 million of trading account assets
$193 million of loans and leases
$251 million of long-term debt


Level 3 – Fair Value Measurements (1)
 
Six Months Ended June 30, 2015
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
January 1
2015
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI (2)
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2015
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
3,270

$
34

$

$
477

$
(438
)
$

$
(649
)
$
983

$
(351
)
$
3,326

Equity securities
352

14


16

(3
)

(5
)
31

(19
)
386

Non-U.S. sovereign debt
574

82

(78
)
27



(110
)

(27
)
468

Mortgage trading loans and ABS
2,063

161


809

(627
)

(244
)
10

(13
)
2,159

Total trading account assets
6,259

291

(78
)
1,329

(1,068
)

(1,008
)
1,024

(410
)
6,339

Net derivative assets (3)
(920
)
566


113

(393
)

221

(60
)
122

(351
)
AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Non-agency residential MBS
279

(12
)
7

62



(234
)
132


234

Non-U.S. securities
10






(1
)


9

Other taxable securities
1,667



6



(63
)

(933
)
677

Tax-exempt securities
599


(1
)



(14
)


584

Total AFS debt securities
2,555

(12
)
6

68



(312
)
132

(933
)
1,504

Other debt securities carried at fair value – Non-agency residential MBS

1


33






34

Loans and leases (4, 5)
1,983

5



(2
)

(120
)
118

(14
)
1,970

Mortgage servicing rights (5)
3,530

373



(312
)
383

(453
)


3,521

Loans held-for-sale (4)
173

(48
)

491

(95
)
33

(6
)
177

(65
)
660

Other assets
911

(4
)

9

(118
)

(15
)
8

(35
)
756

Federal funds purchased and securities loaned or sold under agreements to repurchase (4)

(14
)



(28
)

(326
)

(368
)
Trading account liabilities – Corporate securities and other
(36
)
3


33

(57
)




(57
)
Short-term borrowings (4)

5




(21
)
1

(4
)
19


Accrued expenses and other liabilities
(10
)
1








(9
)
Long-term debt (4)
(2,362
)
70


177


(139
)
160

(1,116
)
494

(2,716
)

(1) 
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2) 
Includes unrealized gains (losses) on AFS debt securities, foreign currency translation adjustments and the impact on structured liabilities of changes in the Corporation's credit spreads. For more information, see Note 1 – Summary of Significant Accounting Principles.
(3) 
Net derivatives include derivative assets of $6.5 billion and derivative liabilities of $6.8 billion.
(4) 
Amounts represent instruments that are accounted for under the fair value option.
(5) 
Issuances represent loan originations and MSRs retained following securitizations or whole-loan sales.

Significant transfers into Level 3, primarily due to decreased price observability, during the six months ended June 30, 2015 included:
$1.0 billion of trading account assets
$132 million of AFS debt securities
$118 million of loans and leases
$177 million of LHFS
$326 million of federal funds purchased and securities loaned or sold under agreements to repurchase
$1.1 billion of long-term debt. Transfers occur on a regular basis for these long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.

Significant transfers out of Level 3, primarily due to increased price observability unless otherwise noted, during the six months ended June 30, 2015 included:
$410 million of trading account assets, primarily the result of increased market liquidity
$122 million of net derivative assets
$933 million of AFS debt securities
$494 million of long-term debt
The following tables summarize gains (losses) due to changes in fair value, including both realized and unrealized gains (losses), recorded in earnings for Level 3 assets and liabilities during the three and six months ended June 30, 2016 and 2015. These amounts include gains (losses) on financial instruments that are accounted for under the fair value option.

Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings
 
Three Months Ended June 30, 2016
(Dollars in millions)
Trading
Account
Profits
(Losses)
 
Mortgage
Banking
Income
(Loss) (1)
 
Other
 
Total
Trading account assets:
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
11

 
$

 
$

 
$
11

Equity securities
22

 

 

 
22

Non-U.S. sovereign debt
50

 

 

 
50

Mortgage trading loans and ABS
67

 

 

 
67

Total trading account assets
150

 

 

 
150

Net derivative assets
(54
)
 
177

 
(39
)
 
84

AFS debt securities – Other taxable securities

 

 
1

 
1

Other debt securities carried at fair value – Non-agency residential MBS

 

 
(1
)
 
(1
)
Loans and leases (2)

 

 
(47
)
 
(47
)
Mortgage servicing rights
(5
)
 
(223
)
 

 
(228
)
Loans held-for-sale (2)
1

 

 
10

 
11

Other assets

 
(14
)
 
1

 
(13
)
Federal funds purchased and securities loaned or sold under agreements to repurchase (2)
32

 

 

 
32

Trading account liabilities – Corporate securities and other
1

 

 

 
1

Long-term debt (2)
(79
)
 

 

 
(79
)
Total
$
46

 
$
(60
)
 
$
(75
)
 
$
(89
)
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2015
Trading account assets:
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
55

 
$

 
$

 
$
55

Equity securities
11

 

 

 
11

Non-U.S. sovereign debt
16

 

 

 
16

Mortgage trading loans and ABS
101

 

 

 
101

Total trading account assets
183

 

 

 
183

Net derivative assets
416

 
196

 
(2
)
 
610

AFS debt securities – Non-agency residential MBS

 

 
7

 
7

Other debt securities carried at fair value – Non-agency residential MBS

 

 
1

 
1

Loans and leases (2)
(9
)
 

 
(1
)
 
(10
)
Mortgage servicing rights
4

 
454

 

 
458

Loans held-for-sale (2)
15

 

 
7

 
22

Other assets

 
(3
)
 
(11
)
 
(14
)
Federal funds purchased and securities loaned or sold under agreements to repurchase (2)
(14
)
 

 

 
(14
)
Trading account liabilities – Corporate securities and other
2

 

 

 
2

Accrued expenses and other liabilities

 

 
1

 
1

Long-term debt (2)
41

 

 
25

 
66

Total
$
638

 
$
647

 
$
27

 
$