Quarterly report pursuant to Section 13 or 15(d)

Fair Value Option

v3.7.0.1
Fair Value Option
3 Months Ended
Mar. 31, 2017
Fair Value Option [Abstract]  
Fair Value Option
Fair Value Option
The Corporation elects to account for certain financial instruments under the fair value option. For more information on the primary financial instruments for which the fair value option elections have been made, see Note 21 – Fair Value Option to the Consolidated Financial Statements of the Corporation's 2016 Annual Report on Form 10-K.
The following tables provide information about the fair value carrying amount and the contractual principal outstanding of assets and liabilities accounted for under the fair value option at March 31, 2017 and December 31, 2016, and information about where changes in the fair value of assets and liabilities accounted for under the fair value option are included in the Consolidated Statement of Income for the three months ended March 31, 2017 and 2016.
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Option Elections
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2017
 
December 31, 2016
(Dollars in millions)
Fair Value Carrying Amount
 
Contractual Principal Outstanding
 
Fair Value Carrying Amount Less Unpaid Principal
 
Fair Value Carrying Amount
 
Contractual Principal Outstanding
 
Fair Value Carrying Amount Less Unpaid Principal
Federal funds sold and securities borrowed or purchased under agreements to resell
$
58,545

 
$
58,201

 
$
344

 
$
49,750

 
$
49,615

 
$
135

Loans reported as trading account assets (1)
6,300

 
11,410

 
(5,110
)
 
6,215

 
11,557

 
(5,342
)
Trading inventory – other
9,357

 
n/a

 
n/a

 
8,206

 
n/a

 
n/a

Consumer and commercial loans
7,528

 
7,613

 
(85
)
 
7,085

 
7,190

 
(105
)
Loans held-for-sale
3,745

 
5,459

 
(1,714
)
 
4,026

 
5,595

 
(1,569
)
Customer receivables and other assets
253

 
250

 
3

 
253

 
250

 
3

Long-term deposits
598

 
545

 
53

 
731

 
672

 
59

Federal funds purchased and securities loaned or sold under agreements to repurchase
36,663

 
36,750

 
(87
)
 
35,766

 
35,929

 
(163
)
Short-term borrowings
1,041

 
1,041

 

 
2,024

 
2,024

 

Unfunded loan commitments
135

 
n/a

 
n/a

 
173

 
n/a

 
n/a

Long-term debt (2)
29,617

 
29,528

 
89

 
30,037

 
29,862

 
175


(1) 
A significant portion of the loans reported as trading account assets are distressed loans which trade and were purchased at a deep discount to par, and the remainder are loans with a fair value near contractual principal outstanding.
(2) 
Includes structured liabilities with a fair value of $29.2 billion and $29.7 billion, and contractual principal outstanding of $29.2 billion and $29.5 billion at March 31, 2017 and December 31, 2016.
n/a = not applicable
 
 
 
 
 
 
 
 
Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2017
(Dollars in millions)
Trading Account Profits (Losses)
 
Mortgage Banking Income
(Loss)
 
Other
Income
(Loss)
 
Total
Federal funds sold and securities borrowed or purchased under agreements to resell
$
(12
)
 
$

 
$

 
$
(12
)
Loans reported as trading account assets
150

 

 

 
150

Trading inventory – other (1)
1,151

 

 

 
1,151

Consumer and commercial loans
5

 

 
19

 
24

Loans held-for-sale (2)
1

 
40

 
44

 
85

Long-term deposits
1

 

 
5

 
6

Federal funds purchased and securities loaned or sold under agreements to repurchase
(45
)
 

 

 
(45
)
Short-term borrowings
(2
)
 

 

 
(2
)
Unfunded loan commitments

 

 
38

 
38

Long-term debt (3, 4)
(162
)
 

 
(37
)
 
(199
)
Total
$
1,087

 
$
40

 
$
69

 
$
1,196

 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2016
Federal funds sold and securities borrowed or purchased under agreements to resell
$
8

 
$

 
$

 
$
8

Loans reported as trading account assets
112

 

 

 
112

Trading inventory – other (1)
(113
)
 

 

 
(113
)
Consumer and commercial loans
19

 

 
10

 
29

Loans held-for-sale (2)

 
130

 
35

 
165

Other assets

 

 
2

 
2

Long-term deposits
(9
)
 

 
(22
)
 
(31
)
Federal funds purchased and securities loaned or sold under agreements to repurchase
(8
)
 

 

 
(8
)
Unfunded loan commitments

 

 
148

 
148

Long-term debt (3, 4)
(6
)
 

 
(30
)
 
(36
)
Total
$
3

 
$
130

 
$
143

 
$
276


(1)  
The gains (losses) in trading account profits (losses) are primarily offset by gains (losses) on trading liabilities that hedge these assets.
(2) 
Includes the value of IRLCs on funded loans, including those sold during the period.
(3) 
The majority of the net gains (losses) in trading account profits relate to the embedded derivative in structured liabilities and are offset by gains (losses) on derivatives and securities that hedge these liabilities.
(4) 
For the cumulative impact of changes in the Corporation’s own credit spreads and the amount recognized in OCI, see Note 12 – Accumulated Other Comprehensive Income (Loss). For information on how the Corporation’s own credit spread is determined, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation's 2016 Annual Report on Form 10-K.
 
 
 
 
Gains (Losses) Related to Borrower-specific Credit Risk for Assets Accounted for Under the Fair Value Option
 
 
 
 
 
Three Months Ended March 31
(Dollars in millions)
2017
 
2016
Loans reported as trading account assets
$
13

 
$
9

Consumer and commercial loans
19

 
(10
)
Loans held-for-sale

 
(1
)