Bank of America Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2019

Assets and Liabilities Carried at Fair Value on a Recurring Basis

Assets and liabilities carried at fair value on a recurring basis at September 30, 2019 and December 31, 2018, including financial instruments that the Corporation accounts for under the fair value option, are summarized in the following tables.




	September 30, 2019
	Fair Value Measurements
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments ⁽¹⁾			Assets/Liabilities at Fair Value
Assets
Time deposits placed and other short-term investments	$	1,356	$	—	$	—	$	—		$	1,356
Federal funds sold and securities borrowed or purchased under agreements to resell	—		50,298		—		—			50,298
Trading account assets:
U.S. Treasury and agency securities ⁽²⁾	46,103		1,952		—		—			48,055
Corporate securities, trading loans and other	—		29,625		1,591		—			31,216
Equity securities	77,822		31,823		279		—			109,924
Non-U.S. sovereign debt	11,554		27,237		465		—			39,256
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed ⁽²⁾	—		25,268		—		—			25,268
Mortgage trading loans, ABS and other MBS	—		8,402		1,563		—			9,965
Total trading account assets ⁽³⁾	135,479		124,307		3,898		—			263,684
Derivative assets	15,501		372,583		3,370		(346,331		)	45,123
AFS debt securities:
U.S. Treasury and agency securities	55,704		1,243		—		—			56,947
Mortgage-backed securities:
Agency	—		134,949		—		—			134,949
Agency-collateralized mortgage obligations	—		4,962		—		—			4,962
Non-agency residential	—		1,435		508		—			1,943
Commercial	—		14,677		—		—			14,677
Non-U.S. securities	—		11,077		2		—			11,079
Other taxable securities	—		3,880		3		—			3,883
Tax-exempt securities	—		16,432		—		—			16,432
Total AFS debt securities	55,704		188,655		513		—			244,872
Other debt securities carried at fair value:
U.S. Treasury and agency securities	3		—		—		—			3
Non-agency residential MBS	—		1,235		308		—			1,543
Commercial	—		13		—		—			13
Non-U.S. securities	2,531		5,377		—		—			7,908
Other taxable securities	—		3		—		—			3
Total other debt securities carried at fair value	2,534		6,628		308		—			9,470
Loans and leases	—		7,273		401		—			7,674
Loans held-for-sale	—		4,625		386		—			5,011
Other assets ⁽⁴⁾	18,471		2,081		2,400		—			22,952
Total assets⁽⁵⁾	$	229,045	$	756,450	$	11,276	$	(346,331	)	$	650,440
Liabilities
Interest-bearing deposits in U.S. offices	$	—	$	626	$	—	$	—		$	626
Federal funds purchased and securities loaned or sold under agreements to repurchase	—		21,963		—		—			21,963
Trading account liabilities:
U.S. Treasury and agency securities	13,948		195		—		—			14,143
Equity securities	34,161		3,930		2		—			38,093
Non-U.S. sovereign debt	9,995		9,011		—		—			19,006
Corporate securities and other	—		7,387		13		—			7,400
Total trading account liabilities	58,104		20,523		15		—			78,642
Derivative liabilities	14,741		361,185		4,602		(342,503		)	38,025
Short-term borrowings	—		3,458		—		—			3,458
Accrued expenses and other liabilities	21,210		2,302		—		—			23,512
Long-term debt	—		35,909		864		—			36,773
Total liabilities ⁽⁵⁾	$	94,055	$	445,966	$	5,481	$	(342,503	)	$	202,999


⁽¹⁾	Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.


⁽²⁾	Includes $25.8 billion of GSE obligations.


⁽³⁾	Includes securities with a fair value of $14.9 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⁾	Includes MSRs of $1.6 billion which are classified as Level 3 assets.


⁽⁵⁾	Total recurring Level 3 assets were 0.46 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.25 percent of total consolidated liabilities.




	December 31, 2018
	Fair Value Measurements
(Dollars in millions)	Level 1		Level 2		Level 3		Netting Adjustments ⁽¹⁾			Assets/Liabilities at Fair Value
Assets
Time deposits placed and other short-term investments	$	1,214	$	—	$	—	$	—		$	1,214
Federal funds sold and securities borrowed or purchased under agreements to resell	—		56,399		—		—			56,399
Trading account assets:
U.S. Treasury and agency securities ⁽²⁾	53,131		1,593		—		—			54,724
Corporate securities, trading loans and other	—		24,630		1,558		—			26,188
Equity securities	53,840		23,163		276		—			77,279
Non-U.S. sovereign debt	5,818		19,210		465		—			25,493
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed ⁽²⁾	—		19,586		—		—			19,586
Mortgage trading loans, ABS and other MBS	—		9,443		1,635		—			11,078
Total trading account assets ⁽³⁾	112,789		97,625		3,934		—			214,348
Derivative assets	9,967		315,413		3,466		(285,121		)	43,725
AFS debt securities:
U.S. Treasury and agency securities	53,663		1,260		—		—			54,923
Mortgage-backed securities:
Agency	—		121,826		—		—			121,826
Agency-collateralized mortgage obligations	—		5,530		—		—			5,530
Non-agency residential	—		1,320		597		—			1,917
Commercial	—		14,078		—		—			14,078
Non-U.S. securities	—		9,304		2		—			9,306
Other taxable securities	—		4,403		7		—			4,410
Tax-exempt securities	—		17,376		—		—			17,376
Total AFS debt securities	53,663		175,097		606		—			229,366
Other debt securities carried at fair value:
U.S. Treasury and agency securities	1,282		—		—		—			1,282
Non-agency residential MBS	—		1,434		172		—			1,606
Non-U.S. securities	490		5,354		—		—			5,844
Other taxable securities	—		3		—		—			3
Total other debt securities carried at fair value	1,772		6,791		172		—			8,735
Loans and leases	—		4,011		338		—			4,349
Loans held-for-sale	—		2,400		542		—			2,942
Other assets ⁽⁴⁾	15,032		1,775		2,932		—			19,739
Total assets ⁽⁵⁾	$	194,437	$	659,511	$	11,990	$	(285,121	)	$	580,817
Liabilities
Interest-bearing deposits in U.S. offices	$	—	$	492	$	—	$	—		$	492
Federal funds purchased and securities loaned or sold under agreements to repurchase	—		28,875		—		—			28,875
Trading account liabilities:
U.S. Treasury and agency securities	7,894		761		—		—			8,655
Equity securities	33,739		4,070		—		—			37,809
Non-U.S. sovereign debt	7,452		9,182		—		—			16,634
Corporate securities and other	—		5,104		18		—			5,122
Total trading account liabilities	49,085		19,117		18		—			68,220
Derivative liabilities	9,931		303,441		4,401		(279,882		)	37,891
Short-term borrowings	—		1,648		—		—			1,648
Accrued expenses and other liabilities	18,096		1,979		—		—			20,075
Long-term debt	—		26,872		817		—			27,689
Total liabilities ⁽⁵⁾	$	77,112	$	382,424	$	5,236	$	(279,882	)	$	184,890


⁽¹⁾	Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.


⁽²⁾	Includes $20.2 billion of GSE obligations.


⁽³⁾	Includes securities with a fair value of $16.6 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⁾	Includes MSRs of $2.0 billion which are classified as Level 3 assets.

⁽⁵⁾

Total recurring Level 3 assets were 0.51 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.25 percent of total consolidated liabilities.

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

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 nine months ended September 30, 2019 and 2018, including net realized and unrealized gains (losses) included in earnings and accumulated OCI. Transfers into Level 3 occur primarily due to

decreased price observability, and transfers out of Level 3 occur primarily due to increased price observability. Transfers occur on a regular basis for 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.




Level 3 – Fair Value Measurements ⁽¹⁾

	Balance July 1			Total Realized/Unrealized Gains (Losses) in Net Income ⁽²⁾			Gains (Losses) in OCI ⁽³⁾			Gross												Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance September 30			Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held ⁽²⁾
(Dollars in millions)										Purchases			Sales			Issuances			Settlements
Three Months Ended September 30, 2019
Trading account assets:
Corporate securities, trading loans and other	$	1,393		$	28		$	—		$	158		$	(153	)	$	—		$	(143	)	$	356		$	(48	)	$	1,591		$	—
Equity securities	296			(8		)	—			17			(81		)	—			(1		)	66			(10		)	279			(31		)
Non-U.S. sovereign debt	481			9			(28		)	—			—			—			(36		)	39			—			465			10
Mortgage trading loans, ABS and other MBS	1,389			(8		)	—			91			(156		)	—			(48		)	316			(21		)	1,563			(24		)
Total trading account assets	3,559			21			(28		)	266			(390		)	—			(228		)	777			(79		)	3,898			(45		)
Net derivative assets ⁽⁴⁾	(1,114		)	73			—			81			(270		)	—			(36		)	—			34			(1,232		)	52
AFS debt securities:
Non-agency residential MBS	568			—			(13		)	—			—			—			(8		)	—			(39		)	508			—
Non-U.S. securities	2			—			—			—			—			—			—			—			—			2			—
Other taxable securities	3			—			—			—			—			—			—			—			—			3			—
Total AFS debt securities	573			—			(13		)	—			—			—			(8		)	—			(39		)	513			—
Other debt securities carried at fair value – Non-agency residential MBS	273			(8		)	—			—			—			—			(5		)	48			—			308			(8		)
Loans and leases ^(5,6)	355			8			—			27			(17		)	44			(16		)	—			—			401			8
Loans held-for-sale ⁽⁵⁾	486			5			(11		)	2			—			—			(96		)	—			—			386			(7		)
Other assets ^{(6, 7)}	2,551			(40		)	(5		)	—			—			53			(163		)	4			—			2,400			(82		)
Trading account liabilities – Equity securities	(2		)	—			—			—			—			—			—			—			—			(2		)	—
Trading account liabilities – Corporate securities and other	(13		)	1			—			(1		)	—			—			—			—			—			(13		)	(1		)
Long-term debt ⁽⁵⁾	(902		)	16			1			(27		)	—			—			49			(1		)	—			(864		)	16

Three Months Ended September 30, 2018
Trading account assets:
Corporate securities, trading loans and other	$	1,638		$	14		$	—		$	54		$	(87	)	$	—		$	(175	)	$	269		$	(179	)	$	1,534		$	(14	)
Equity securities	228			8			—			21			—			—			—			43			(10		)	290			8
Non-U.S. sovereign debt	368			10			(13		)	—			—			—			—			109			(5		)	469			11
Mortgage trading loans, ABS and other MBS	1,523			16			(1		)	75			(184		)	—			(29		)	191			(112		)	1,479			8
Total trading account assets	3,757			48			(14		)	150			(271		)	—			(204		)	612			(306		)	3,772			13
Net derivative assets ⁽⁴⁾	(1,588		)	(53		)	—			23			(66		)	—			111			20			983			(570		)	(51		)
AFS debt securities:
Non-agency residential MBS	453			31			(28		)	—			(72		)	—			—			235			(75		)	544			—
Non-U.S. securities	3			—			—			—			—			—			—			—			—			3			—
Other taxable securities	99			(1		)	(3		)	—			(22		)	—			—			—			(66		)	7			—
Tax-exempt securities	1			—			—			—			—			—			—			—			—			1			—
Total AFS debt securities	556			30			(31		)	—			(94		)	—			—			235			(141		)	555			—
Other debt securities carried at fair value – Non-agency residential MBS	287			(23		)	—			—			—			—			—			60			(28		)	296			(10		)
Loans and leases ⁽⁵⁾	493			—			—			—			(62		)	—			(21		)	—			—			410			(1		)
Loans held-for-sale ⁽⁵⁾	577			12			(4		)	39			—			—			(82		)	12			(28		)	526			9
Other assets ^{(6, 7)}	3,184			121			—			—			(22		)	31			(174		)	—			—			3,140			55
Trading account liabilities – Corporate securities and other	(35		)	9			—			9			—			—			—			—			—			(17		)	(6		)
Long-term debt ⁽⁵⁾	(1,225		)	11			(1		)	—			—			(11		)	106			(106		)	303			(923		)	13


⁽¹⁾	Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.

⁽²⁾

Includes gains (losses) reported in earnings in the following income statement line items: Trading account assets/liabilities - predominantly trading account income; Net derivative assets - trading account income and other income; Other debt securities carried at fair value - other income; Loans and leases - other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - primarily trading account income.


⁽³⁾	Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. Total gains (losses) in OCI include net unrealized losses of $53 million related to financial instruments still held at September 30, 2019.


⁽⁴⁾	Net derivative assets include derivative assets of $3.4 billion and $4.4 billion and derivative liabilities of $4.6 billion and $5.0 billion at September 30, 2019 and 2018.


⁽⁵⁾	Amounts represent instruments that are accounted for under the fair value option.


⁽⁶⁾	Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.


⁽⁷⁾	Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.




Level 3 – Fair Value Measurements ⁽¹⁾

	Balance January 1			Total Realized/Unrealized Gains (Losses) in Net Income ⁽²⁾			Gains (Losses) in OCI ⁽³⁾			Gross												Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance September 30			Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held ⁽²⁾
(Dollars in millions)										Purchases			Sales			Issuances			Settlements
Nine Months Ended September 30, 2019
Trading account assets:
Corporate securities, trading loans and other	$	1,558		$	86		$	—		$	352		$	(305	)	$	—		$	(349	)	$	602		$	(353	)	$	1,591		$	33
Equity securities	276			14			—			38			(87		)	—			(4		)	69			(27		)	279			(14		)
Non-U.S. sovereign debt	465			36			(24		)	1			—			—			(47		)	39			(5		)	465			37
Mortgage trading loans, ABS and other MBS	1,635			80			(2		)	488			(817		)	—			(172		)	583			(232		)	1,563			13
Total trading account assets	3,934			216			(26		)	879			(1,209		)	—			(572		)	1,293			(617		)	3,898			69
Net derivative assets ⁽⁴⁾	(935		)	(43		)	—			248			(676		)	—			(124		)	139			159			(1,232		)	(110		)
AFS debt securities:
Non-agency residential MBS	597			—			77			—			—			—			(29		)	206			(343		)	508			—
Non-U.S. securities	2			—			—			—			—			—			—			—			—			2			—
Other taxable securities	7			—			—			—			—			—			(4		)	—			—			3			—
Total AFS debt securities	606			—			77			—			—			—			(33		)	206			(343		)	513			—
Other debt securities carried at fair value – Non-agency residential MBS	172			41			—			—			—			—			(13		)	155			(47		)	308			38
Loans and leases ^(5,6)	338			12			—			27			(32		)	97			(41		)	—			—			401			11
Loans held-for-sale ^(5,6)	542			43			(11		)	12			(71		)	11			(199		)	59			—			386			13
Other assets ^{(6, 7)}	2,932			(194		)	11			—			(10		)	161			(504		)	4			—			2,400			(342		)
Trading account liabilities – Equity securities	—			(2		)	—			—			—			—			—			—			—			(2		)	(2		)
Trading account liabilities – Corporate securities and other	(18		)	8			—			—			(3		)	—			—			—			—			(13		)	(1		)
Long-term debt ⁽⁵⁾	(817		)	(71		)	—			(27		)	—			(13		)	125			(62		)	1			(864		)	(64		)

Nine Months Ended September 30, 2018
Trading account assets:
Corporate securities, trading loans and other	$	1,864		$	(14	)	$	(1	)	$	328		$	(298	)	$	—		$	(388	)	$	517		$	(474	)	$	1,534		$	(88	)
Equity securities	235			17			—			29			(11		)	—			(4		)	73			(49		)	290			17
Non-U.S. sovereign debt	556			39			(55		)	7			(50		)	—			(8		)	117			(137		)	469			40
Mortgage trading loans, ABS and other MBS	1,498			157			2			392			(760		)	—			(136		)	541			(215		)	1,479			92
Total trading account assets	4,153			199			(54		)	756			(1,119		)	—			(536		)	1,248			(875		)	3,772			61
Net derivative assets ⁽⁴⁾	(1,714		)	203			—			371			(919		)	—			488			87			914			(570		)	(138		)
AFS debt securities:
Non-agency residential MBS	—			39			(42		)	—			(72		)	—			—			694			(75		)	544			—
Non-U.S. securities	25			—			(1		)	—			(10		)	—			(14		)	3			—			3			—
Other taxable securities	509			1			(5		)	—			(22		)	—			(10		)	60			(526		)	7			—
Tax-exempt securities	469			—			—			—			—			—			—			1			(469		)	1			—
Total AFS debt securities ⁽⁸⁾	1,003			40			(48		)	—			(104		)	—			(24		)	758			(1,070		)	555			—
Other debt securities carried at fair value – Non-agency residential MBS	—			(27		)	—			—			(7		)	—			—			358			(28		)	296			(5		)
Loans and leases ⁽⁵⁾	571			(20		)	—			—			(71		)	—			(70		)	—			—			410			(17		)
Loans held-for-sale ⁽⁵⁾	690			24			(31		)	51			—			—			(160		)	12			(60		)	526			18
Other assets ^(6,7,8)	2,425			389			—			2			(68		)	83			(585		)	929			(35		)	3,140			188
Trading account liabilities – Corporate securities and other	(24		)	11			—			9			(11		)	(2		)	—			—			—			(17		)	(7		)
Accrued expenses and other liabilities ⁽⁵⁾	(8		)	—			—			—			—			—			8			—			—			—			—
Long-term debt ⁽⁵⁾	(1,863		)	97			2			9			—			(131		)	429			(253		)	787			(923		)	87


⁽¹⁾	Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.

⁽²⁾


⁽³⁾	Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. Total gains (losses) in OCI include net unrealized gains of $47 million related to financial instruments still held at September 30, 2019.


⁽⁴⁾	Net derivative assets include derivative assets of $3.4 billion and $4.4 billion and derivative liabilities of $4.6 billion and $5.0 billion at September 30, 2019 and 2018.


⁽⁵⁾	Amounts represent instruments that are accounted for under the fair value option.


⁽⁶⁾	Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.


⁽⁷⁾	Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.

⁽⁸⁾

Transfers out of AFS debt securities and into other assets primarily relate to the reclassification of certain securities.

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation




Level 3 – Fair Value Measurements ⁽¹⁾

	Balance July 1			Total Realized/Unrealized Gains (Losses) in Net Income ⁽²⁾			Gains (Losses) in OCI ⁽³⁾			Gross												Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance September 30			Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held ⁽²⁾
(Dollars in millions)										Purchases			Sales			Issuances			Settlements
Three Months Ended September 30, 2019
Trading account assets:
Corporate securities, trading loans and other	$	1,393		$	28		$	—		$	158		$	(153	)	$	—		$	(143	)	$	356		$	(48	)	$	1,591		$	—
Equity securities	296			(8		)	—			17			(81		)	—			(1		)	66			(10		)	279			(31		)
Non-U.S. sovereign debt	481			9			(28		)	—			—			—			(36		)	39			—			465			10
Mortgage trading loans, ABS and other MBS	1,389			(8		)	—			91			(156		)	—			(48		)	316			(21		)	1,563			(24		)
Total trading account assets	3,559			21			(28		)	266			(390		)	—			(228		)	777			(79		)	3,898			(45		)
Net derivative assets ⁽⁴⁾	(1,114		)	73			—			81			(270		)	—			(36		)	—			34			(1,232		)	52
AFS debt securities:
Non-agency residential MBS	568			—			(13		)	—			—			—			(8		)	—			(39		)	508			—
Non-U.S. securities	2			—			—			—			—			—			—			—			—			2			—
Other taxable securities	3			—			—			—			—			—			—			—			—			3			—
Total AFS debt securities	573			—			(13		)	—			—			—			(8		)	—			(39		)	513			—
Other debt securities carried at fair value – Non-agency residential MBS	273			(8		)	—			—			—			—			(5		)	48			—			308			(8		)
Loans and leases ^(5,6)	355			8			—			27			(17		)	44			(16		)	—			—			401			8
Loans held-for-sale ⁽⁵⁾	486			5			(11		)	2			—			—			(96		)	—			—			386			(7		)
Other assets ^{(6, 7)}	2,551			(40		)	(5		)	—			—			53			(163		)	4			—			2,400			(82		)
Trading account liabilities – Equity securities	(2		)	—			—			—			—			—			—			—			—			(2		)	—
Trading account liabilities – Corporate securities and other	(13		)	1			—			(1		)	—			—			—			—			—			(13		)	(1		)
Long-term debt ⁽⁵⁾	(902		)	16			1			(27		)	—			—			49			(1		)	—			(864		)	16

Three Months Ended September 30, 2018
Trading account assets:
Corporate securities, trading loans and other	$	1,638		$	14		$	—		$	54		$	(87	)	$	—		$	(175	)	$	269		$	(179	)	$	1,534		$	(14	)
Equity securities	228			8			—			21			—			—			—			43			(10		)	290			8
Non-U.S. sovereign debt	368			10			(13		)	—			—			—			—			109			(5		)	469			11
Mortgage trading loans, ABS and other MBS	1,523			16			(1		)	75			(184		)	—			(29		)	191			(112		)	1,479			8
Total trading account assets	3,757			48			(14		)	150			(271		)	—			(204		)	612			(306		)	3,772			13
Net derivative assets ⁽⁴⁾	(1,588		)	(53		)	—			23			(66		)	—			111			20			983			(570		)	(51		)
AFS debt securities:
Non-agency residential MBS	453			31			(28		)	—			(72		)	—			—			235			(75		)	544			—
Non-U.S. securities	3			—			—			—			—			—			—			—			—			3			—
Other taxable securities	99			(1		)	(3		)	—			(22		)	—			—			—			(66		)	7			—
Tax-exempt securities	1			—			—			—			—			—			—			—			—			1			—
Total AFS debt securities	556			30			(31		)	—			(94		)	—			—			235			(141		)	555			—
Other debt securities carried at fair value – Non-agency residential MBS	287			(23		)	—			—			—			—			—			60			(28		)	296			(10		)
Loans and leases ⁽⁵⁾	493			—			—			—			(62		)	—			(21		)	—			—			410			(1		)
Loans held-for-sale ⁽⁵⁾	577			12			(4		)	39			—			—			(82		)	12			(28		)	526			9
Other assets ^{(6, 7)}	3,184			121			—			—			(22		)	31			(174		)	—			—			3,140			55
Trading account liabilities – Corporate securities and other	(35		)	9			—			9			—			—			—			—			—			(17		)	(6		)
Long-term debt ⁽⁵⁾	(1,225		)	11			(1		)	—			—			(11		)	106			(106		)	303			(923		)	13


⁽¹⁾	Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.

⁽²⁾


⁽³⁾	Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. Total gains (losses) in OCI include net unrealized losses of $53 million related to financial instruments still held at September 30, 2019.


⁽⁴⁾	Net derivative assets include derivative assets of $3.4 billion and $4.4 billion and derivative liabilities of $4.6 billion and $5.0 billion at September 30, 2019 and 2018.


⁽⁵⁾	Amounts represent instruments that are accounted for under the fair value option.


⁽⁶⁾	Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.


⁽⁷⁾	Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.




Level 3 – Fair Value Measurements ⁽¹⁾

	Balance January 1			Total Realized/Unrealized Gains (Losses) in Net Income ⁽²⁾			Gains (Losses) in OCI ⁽³⁾			Gross												Gross Transfers into Level 3			Gross Transfers out of Level 3			Balance September 30			Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held ⁽²⁾
(Dollars in millions)										Purchases			Sales			Issuances			Settlements
Nine Months Ended September 30, 2019
Trading account assets:
Corporate securities, trading loans and other	$	1,558		$	86		$	—		$	352		$	(305	)	$	—		$	(349	)	$	602		$	(353	)	$	1,591		$	33
Equity securities	276			14			—			38			(87		)	—			(4		)	69			(27		)	279			(14		)
Non-U.S. sovereign debt	465			36			(24		)	1			—			—			(47		)	39			(5		)	465			37
Mortgage trading loans, ABS and other MBS	1,635			80			(2		)	488			(817		)	—			(172		)	583			(232		)	1,563			13
Total trading account assets	3,934			216			(26		)	879			(1,209		)	—			(572		)	1,293			(617		)	3,898			69
Net derivative assets ⁽⁴⁾	(935		)	(43		)	—			248			(676		)	—			(124		)	139			159			(1,232		)	(110		)
AFS debt securities:
Non-agency residential MBS	597			—			77			—			—			—			(29		)	206			(343		)	508			—
Non-U.S. securities	2			—			—			—			—			—			—			—			—			2			—
Other taxable securities	7			—			—			—			—			—			(4		)	—			—			3			—
Total AFS debt securities	606			—			77			—			—			—			(33		)	206			(343		)	513			—
Other debt securities carried at fair value – Non-agency residential MBS	172			41			—			—			—			—			(13		)	155			(47		)	308			38
Loans and leases ^(5,6)	338			12			—			27			(32		)	97			(41		)	—			—			401			11
Loans held-for-sale ^(5,6)	542			43			(11		)	12			(71		)	11			(199		)	59			—			386			13
Other assets ^{(6, 7)}	2,932			(194		)	11			—			(10		)	161			(504		)	4			—			2,400			(342		)
Trading account liabilities – Equity securities	—			(2		)	—			—			—			—			—			—			—			(2		)	(2		)
Trading account liabilities – Corporate securities and other	(18		)	8			—			—			(3		)	—			—			—			—			(13		)	(1		)
Long-term debt ⁽⁵⁾	(817		)	(71		)	—			(27		)	—			(13		)	125			(62		)	1			(864		)	(64		)

Nine Months Ended September 30, 2018
Trading account assets:
Corporate securities, trading loans and other	$	1,864		$	(14	)	$	(1	)	$	328		$	(298	)	$	—		$	(388	)	$	517		$	(474	)	$	1,534		$	(88	)
Equity securities	235			17			—			29			(11		)	—			(4		)	73			(49		)	290			17
Non-U.S. sovereign debt	556			39			(55		)	7			(50		)	—			(8		)	117			(137		)	469			40
Mortgage trading loans, ABS and other MBS	1,498			157			2			392			(760		)	—			(136		)	541			(215		)	1,479			92
Total trading account assets	4,153			199			(54		)	756			(1,119		)	—			(536		)	1,248			(875		)	3,772			61
Net derivative assets ⁽⁴⁾	(1,714		)	203			—			371			(919		)	—			488			87			914			(570		)	(138		)
AFS debt securities:
Non-agency residential MBS	—			39			(42		)	—			(72		)	—			—			694			(75		)	544			—
Non-U.S. securities	25			—			(1		)	—			(10		)	—			(14		)	3			—			3			—
Other taxable securities	509			1			(5		)	—			(22		)	—			(10		)	60			(526		)	7			—
Tax-exempt securities	469			—			—			—			—			—			—			1			(469		)	1			—
Total AFS debt securities ⁽⁸⁾	1,003			40			(48		)	—			(104		)	—			(24		)	758			(1,070		)	555			—
Other debt securities carried at fair value – Non-agency residential MBS	—			(27		)	—			—			(7		)	—			—			358			(28		)	296			(5		)
Loans and leases ⁽⁵⁾	571			(20		)	—			—			(71		)	—			(70		)	—			—			410			(17		)
Loans held-for-sale ⁽⁵⁾	690			24			(31		)	51			—			—			(160		)	12			(60		)	526			18
Other assets ^(6,7,8)	2,425			389			—			2			(68		)	83			(585		)	929			(35		)	3,140			188
Trading account liabilities – Corporate securities and other	(24		)	11			—			9			(11		)	(2		)	—			—			—			(17		)	(7		)
Accrued expenses and other liabilities ⁽⁵⁾	(8		)	—			—			—			—			—			8			—			—			—			—
Long-term debt ⁽⁵⁾	(1,863		)	97			2			9			—			(131		)	429			(253		)	787			(923		)	87


⁽¹⁾	Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.

⁽²⁾


⁽³⁾	Includes unrealized gains (losses) in OCI on AFS debt securities, foreign currency translation adjustments and the impact of changes in the Corporation’s credit spreads on long-term debt accounted for under the fair value option. Total gains (losses) in OCI include net unrealized gains of $47 million related to financial instruments still held at September 30, 2019.


⁽⁴⁾	Net derivative assets include derivative assets of $3.4 billion and $4.4 billion and derivative liabilities of $4.6 billion and $5.0 billion at September 30, 2019 and 2018.


⁽⁵⁾	Amounts represent instruments that are accounted for under the fair value option.


⁽⁶⁾	Issuances represent loan originations and MSRs recognized following securitizations or whole-loan sales.


⁽⁷⁾	Settlements primarily represent the net change in fair value of the MSR asset due to the recognition of modeled cash flows and the passage of time.

⁽⁸⁾

Transfers out of AFS debt securities and into other assets primarily relate to the reclassification of certain securities.

Fair Value Inputs, Assets and Liabilities, Quantitative Information

The following tables present information about significant unobservable inputs related to the Corporation’s material categories of Level 3 financial assets and liabilities at September 30, 2019 and December 31, 2018.




Quantitative Information about Level 3 Fair Value Measurements at September 30, 2019

(Dollars in millions)					Inputs
Financial Instrument	Fair Value			Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted Average ⁽¹⁾
Loans and Securities ⁽²⁾
Instruments backed by residential real estate assets	$	1,515		Discounted cash flow, Market comparables	Yield	0% to 25%	6%
Trading account assets – Mortgage trading loans, ABS and other MBS	287				Prepayment speed	1% to 28% CPR	18% CPR
Loans and leases	401				Default rate	0% to 3% CDR	1% CDR
Loans held-for-sale	6				Loss severity	0% to 48%	15%
AFS debt securities, primarily non-agency residential	513				Price	$0 to $680	$92
Other debt securities carried at fair value - Non-agency residential	308
Instruments backed by commercial real estate assets	$	183		Discounted cash flow	Yield	0% to 25%	18%
Trading account assets – Corporate securities, trading loans and other	158				Price	$0 to $100	$60
Trading account assets – Mortgage trading loans, ABS and other MBS	23
Loans held-for-sale	2
Commercial loans, debt securities and other	$	3,529		Discounted cash flow, Market comparables	Yield	1% to 15%	6%
Trading account assets – Corporate securities, trading loans and other	1,433				Prepayment speed	10% to 20%	17%
Trading account assets – Non-U.S. sovereign debt	465				Default rate	3% to 4%	4%
Trading account assets – Mortgage trading loans, ABS and other MBS	1,253				Loss severity	35% to 40%	37%
Loans held-for-sale	378				Price	$0 to $158	$70
Other assets, primarily auction rate securities	$	844		Discounted cash flow, Market comparables	Price	$10 to $100	$96


MSRs	$	1,556		Discounted cash flow	Weighted-average life, fixed rate ⁽⁵⁾	0 to 14 years	4 years
					Weighted-average life, variable rate ⁽⁵⁾	0 to 9 years	3 years
					Option-adjusted spread, fixed rate	9% to 14%	9%
					Option-adjusted spread, variable rate	9% to 15%	11%
Structured liabilities
Long-term debt	$	(864	)	Discounted cash flow, Market comparables, Industry standard derivative pricing ⁽³⁾	Equity correlation	16% to 97%	69%
					Long-dated equity volatilities	4% to 80%	32%
					Price	$0 to $113	$76

Net derivative assets
Credit derivatives	$	(9	)	Discounted cash flow, Stochastic recovery correlation model	Yield	5%	n/a
					Upfront points	0 to 100 points	69 points
					Prepayment speed	15% to 100% CPR	32% CPR
					Default rate	1% to 4% CDR	2% CDR
					Loss severity	35%	n/a
					Price	$0 to $138	$81
Equity derivatives	$	(1,107	)	Industry standard derivative pricing ⁽³⁾	Equity correlation	16% to 97%	69%
				Industry standard derivative pricing ⁽³⁾	Long-dated equity volatilities	4% to 80%	32%
Commodity derivatives	$	18		Discounted cash flow, Industry standard derivative pricing ⁽³⁾	Natural gas forward price	$1/MMBtu to $7/MMBtu	$3/MMBtu
					Correlation	30% to 69%	68%
					Volatilities	15% to 62%	33%
Interest rate derivatives	$	(134	)	Industry standard derivative pricing ⁽⁴⁾	Correlation (IR/IR)	15% to 97%	51%
					Correlation (FX/IR)	0% to 46%	3%
					Long-dated inflation rates	-15% to 148%	84%
					Long-dated inflation volatilities	0% to 1%	1%
Total net derivative assets	$	(1,232	)


⁽¹⁾	For loans and securities, structured liabilities and net derivative assets, the weighted average is calculated based upon the absolute fair value of the instruments.

⁽²⁾

The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 82: Trading account assets – Corporate securities, trading loans and other of $1.6 billion, Trading account assets – Non-U.S. sovereign debt of $465 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.6 billion, AFS debt securities of $513 million, Other debt securities carried at fair value - Non-agency residential of $308 million, Other assets, including MSRs, of $2.4 billion, Loans and leases of $401 million and LHFS of $386 million.


⁽³⁾	Includes models such as Monte Carlo simulation and Black-Scholes.


⁽⁴⁾	Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.


⁽⁵⁾	The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.

CPR = Constant Prepayment Rate

CDR = Constant Default Rate

MMBtu = Million British thermal units

IR = Interest Rate

FX = Foreign Exchange

n/a = not applicable




Quantitative Information about Level 3 Fair Value Measurements at December 31, 2018

(Dollars in millions)					Inputs
Financial Instrument	Fair Value			Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted Average ⁽¹⁾
Loans and Securities ⁽²⁾
Instruments backed by residential real estate assets	$	1,536		Discounted cash flow, Market comparables	Yield	0% to 25%	8%
Trading account assets – Mortgage trading loans, ABS and other MBS	419				Prepayment speed	0% to 21% CPR	12% CPR
Loans and leases	338				Default rate	0% to 3% CDR	1% CDR
Loans held-for-sale	1				Loss severity	0% to 51%	17%
AFS debt securities, primarily non-agency residential	606				Price	$0 to $128	$72
Other debt securities carried at fair value - Non-agency residential	172
Instruments backed by commercial real estate assets	$	291		Discounted cash flow	Yield	0% to 25%	7%
Trading account assets – Corporate securities, trading loans and other	200				Price	$0 to $100	$79
Trading account assets – Mortgage trading loans, ABS and other MBS	91
Commercial loans, debt securities and other	$	3,489		Discounted cash flow, Market comparables	Yield	1% to 18%	13%
Trading account assets – Corporate securities, trading loans and other	1,358				Prepayment speed	10% to 20%	15%
Trading account assets – Non-U.S. sovereign debt	465				Default rate	3% to 4%	4%
Trading account assets – Mortgage trading loans, ABS and other MBS	1,125				Loss severity	35% to 40%	38%
Loans held-for-sale	541				Price	$0 to $141	$68
Other assets, primarily auction rate securities	$	890		Discounted cash flow, Market comparables	Price	$10 to $100	$95


MSRs	$	2,042		Discounted cash flow	Weighted-average life, fixed rate ⁽⁵⁾	0 to 14 years	5 years
					Weighted-average life, variable rate ⁽⁵⁾	0 to 10 years	3 years
					Option-adjusted spread, fixed rate	7% to 14%	9%
					Option-adjusted spread, variable rate	9% to 15%	12%
Structured liabilities
Long-term debt	$	(817	)	Discounted cash flow, Market comparables, Industry standard derivative pricing ⁽³⁾	Equity correlation	11% to 100%	67%
					Long-dated equity volatilities	4% to 84%	32%
					Yield	7% to 18%	16%
					Price	$0 to $100	$72
Net derivative assets
Credit derivatives	$	(565	)	Discounted cash flow, Stochastic recovery correlation model	Yield	0% to 5%	4%
					Upfront points	0 points to 100 points	70 points
					Credit correlation	70%	n/a
					Prepayment speed	15% to 20% CPR	15% CPR
					Default rate	1% to 4% CDR	2% CDR
					Loss severity	35%	n/a
					Price	$0 to $138	$93
Equity derivatives	$	(348	)	Industry standard derivative pricing ⁽³⁾	Equity correlation	11% to 100%	67%
				Industry standard derivative pricing ⁽³⁾	Long-dated equity volatilities	4% to 84%	32%
Commodity derivatives	$	10		Discounted cash flow, Industry standard derivative pricing ⁽³⁾	Natural gas forward price	$1/MMBtu to $12/MMBtu	$3/MMBtu
					Correlation	38% to 87%	71%
					Volatilities	15% to 132%	38%
Interest rate derivatives	$	(32	)	Industry standard derivative pricing⁽⁴⁾	Correlation (IR/IR)	15% to 70%	61%
					Correlation (FX/IR)	0% to 46%	1%
					Long-dated inflation rates	-20% to 38%	2%
					Long-dated inflation volatilities	0% to 1%	1%
Total net derivative assets	$	(935	)


⁽¹⁾	For loans and securities, structured liabilities and net derivative assets, the weighted average is calculated based upon the absolute fair value of the instruments.

⁽²⁾

The categories are aggregated based upon product type which differs from financial statement classification. The following is a reconciliation to the line items in the table on page 83: Trading account assets – Corporate securities, trading loans and other of $1.6 billion, Trading account assets – Non-U.S. sovereign debt of $465 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.6 billion, AFS debt securities of $606 million, Other debt securities carried at fair value - Non-agency residential of $172 million, Other assets, including MSRs, of 2.9 billion, Loans and leases of $338 million and LHFS of $542 million.


⁽³⁾	Includes models such as Monte Carlo simulation and Black-Scholes.


⁽⁴⁾	Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.


⁽⁵⁾	The weighted-average life is a product of changes in market rates of interest, prepayment rates and other model and cash flow assumptions.

CPR = Constant Prepayment Rate

CDR = Constant Default Rate

MMBtu = Million British thermal units

IR = Interest Rate

FX = Foreign Exchange

n/a = not applicable

Assets and Liabilities Measured at Fair Value on Nonrecurring Basis

The amounts below represent assets still held as of the reporting date for which a nonrecurring fair value adjustment was recorded during the three and nine months ended September 30, 2019 and

2018. In the tables below, other assets includes the measurement of the Corporation's merchant services equity method investment on which the Corporation recorded an impairment charge of $2.1 billion during the three months ended September 30, 2019. For additional information, see Note 11 – Commitments and Contingencies.




Assets Measured at Fair Value on a Nonrecurring Basis

	September 30, 2019				Three Months Ended September 30, 2019			Nine Months Ended September 30, 2019
(Dollars in millions)	Level 2		Level 3		Gains (Losses)
Assets
Loans held-for-sale	$	5	$	111	$	(7	)	$	(18	)
Loans and leases ⁽¹⁾	—		232		(21		)	(62		)
Foreclosed properties ^{(2, 3)}	—		19		(7		)	(10		)
Other assets	165		658		(2,085		)	(2,104		)

	September 30, 2018				Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
Assets
Loans held-for-sale	$	45	$	12	$	(2	)	$	(2	)
Loans and leases ⁽¹⁾	—		492		(63		)	(194		)
Foreclosed properties ^{(2, 3)}	—		87		(8		)	(22		)
Other assets	294		3		(22		)	(58		)


⁽¹⁾	Includes $8 million and $25 million of losses on loans that were written down to a collateral value of zero during the three and nine months ended September 30, 2019 compared to losses of $24 million and $76 million for the same periods in 2018.


⁽²⁾	Amounts are included in other assets on the Consolidated Balance Sheet and represent the carrying value of foreclosed properties that were written down subsequent to their initial classification as foreclosed properties. Losses on foreclosed properties include losses recorded during the first 90 days after transfer of a loan to foreclosed properties.

⁽³⁾

Excludes $275 million and $500 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) at September 30, 2019 and 2018^.

Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques

The table below presents information about significant unobservable inputs at September 30, 2019 and December 31, 2018.




Quantitative Information about Nonrecurring Level 3 Fair Value Measurements

				Inputs
Financial Instrument	Fair Value		Valuation Technique	Significant Unobservable Inputs	Ranges of Inputs	Weighted Average ⁽¹⁾
(Dollars in millions)	September 30, 2019
Loans held-for-sale	$	111	Discounted cash flow	Price	$77 to $100	$86
Loans and leases ⁽²⁾	232		Market comparables	OREO discount	13% to 59%	24	%
				Costs to sell	8% to 26%	9	%
Other assets ⁽³⁾	652		Discounted cash flow	Customer attrition	0% to 19%	5	%
				Costs to service	11% to 19%	15	%
	December 31, 2018
Loans and leases ⁽²⁾	$	474	Market comparables	OREO discount	13% to 59%	25	%
				Costs to sell	8% to 26%	9	%


⁽¹⁾	The weighted average is calculated based upon the fair value of the loans.


⁽²⁾	Represents residential mortgages where the loan has been written down to the fair value of the underlying collateral.

⁽³⁾

The fair value of the merchant services joint venture was measured using a discounted cash flow method in which the two primary drivers of fair value were the customer attrition rate and certain costs to service the customers. The weighted averages are calculated based on variations of the attrition rates and costs to service the customers.