Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

v3.20.1
Fair Value Measurements (Tables)
 3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Assets and Liabilities Carried at Fair Value on a Recurring Basis
Assets and liabilities carried at fair value on a recurring basis at March 31, 2020 and December 31, 2019, including financial instruments that the Corporation accounts for under the fair value option, are summarized in the following tables.
 
 
 
 
 
 
 
 
 
 
 
March 31, 2020
 
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
$
1,084

 
$
—

 
$
—

 
$
—

 
$
1,084

Federal funds sold and securities borrowed or purchased under agreements to resell
—

 
49,033

 
—

 
—

 
49,033

Trading account assets:
 

 
 

 
 

 
 

 
 

U.S. Treasury and agency securities
37,646

 
4,172

 
—

 
—

 
41,818

Corporate securities, trading loans and other
—

 
27,504

 
1,640

 
—

 
29,144

Equity securities
41,486

 
25,454

 
249

 
—

 
67,189

Non-U.S. sovereign debt
7,871

 
22,653

 
250

 
—

 
30,774

Mortgage trading loans, MBS and ABS:
 
 
 
 
 
 
 
 
 
U.S. government-sponsored agency guaranteed (2)
—

 
14,605

 
—

 
—

 
14,605

Mortgage trading loans, ABS and other MBS
—

 
8,060

 
1,733

 
—

 
9,793

Total trading account assets (3)
87,003

 
102,448

 
3,872

 
—

 
193,323

Derivative assets
26,134

 
498,231

 
1,856

 
(468,567
)
 
57,654

AFS debt securities:
 

 
 

 
 

 
 

 
 

U.S. Treasury and agency securities
67,763

 
933

 
—

 
—

 
68,696

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

Agency
—

 
79,461

 
—

 
—

 
79,461

Agency-collateralized mortgage obligations
—

 
4,551

 
—

 
—

 
4,551

Non-agency residential
—

 
408

 
524

 
—

 
932

Commercial
—

 
15,602

 
—

 
—

 
15,602

Non-U.S. securities
1

 
12,245

 
1

 
—

 
12,247

Other taxable securities
—

 
5,824

 
68

 
—

 
5,892

Tax-exempt securities
—

 
18,740

 
100

 
—

 
18,840

Total AFS debt securities
67,764

 
137,764

 
693

 
—

 
206,221

Other debt securities carried at fair value:
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
4

 
—

 
—

 
—

 
4

Agency MBS
—

 
6,089

 
—

 
—

 
6,089

Non-agency residential MBS
—

 
853

 
269

 
—

 
1,122

Non-U.S. and other securities
3,685

 
3,983

 
—

 
—

 
7,668

Total other debt securities carried at fair value
3,689

 
10,925

 
269

 
—

 
14,883

Loans and leases
—

 
8,458

 
558

 
—

 
9,016

Loans held-for-sale
—

 
2,532

 
1,077

 
—

 
3,609

Other assets (4)
3,864

 
965

 
1,960

 
—

 
6,789

Total assets (5)
$
189,538

 
$
810,356

 
$
10,285

 
$
(468,567
)
 
$
541,612

Liabilities
 

 
 

 
 

 
 

 
 

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

 
$
589

 
$
—

 
$
—

 
$
589

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

 
17,192

 
—

 
—

 
17,192

Trading account liabilities:
 

 
 

 
 

 
 

 
 
U.S. Treasury and agency securities
12,276

 
401

 
—

 
—

 
12,677

Equity securities
36,692

 
5,462

 
1

 
—

 
42,155

Non-U.S. sovereign debt
7,026

 
9,834

 
—

 
—

 
16,860

Corporate securities and other
—

 
5,439

 
20

 
—

 
5,459

Total trading account liabilities
55,994

 
21,136

 
21

 
—

 
77,151

Derivative liabilities
25,638

 
480,153

 
4,765

 
(455,898
)
 
54,658

Short-term borrowings
—

 
3,020

 
—

 
—

 
3,020

Accrued expenses and other liabilities
5,541

 
1,284

 
—

 
—

 
6,825

Long-term debt
—

 
31,442

 
721

 
—

 
32,163

Total liabilities (5)
$
87,173

 
$
554,816

 
$
5,507

 
$
(455,898
)
 
$
191,598

(1) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2) 
Includes $16.0 billion of GSE obligations.
(3) 
Includes securities with a fair value of $11.0 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 $1.2 billion which are classified as Level 3 assets.
(5) 
Total recurring Level 3 assets were 0.39 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.23 percent of total consolidated liabilities.
 
 
 
 
 
 
 
 
 
 
 
December 31, 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
$
1,000

 
$
—

 
$
—

 
$
—

 
$
1,000

Federal funds sold and securities borrowed or purchased under agreements to resell
—

 
50,364

 
—

 
—

 
50,364

Trading account assets:
 

 
 

 
 

 
 

 
 

U.S. Treasury and agency securities
49,517

 
4,157

 
—

 
—

 
53,674

Corporate securities, trading loans and other
—

 
25,226

 
1,507

 
—

 
26,733

Equity securities
53,597

 
32,619

 
239

 
—

 
86,455

Non-U.S. sovereign debt
3,965

 
23,854

 
482

 
—

 
28,301

Mortgage trading loans, MBS and ABS:
 
 
 
 
 
 
 
 
 
U.S. government-sponsored agency guaranteed (2)
—

 
24,324

 
—

 
—

 
24,324

Mortgage trading loans, ABS and other MBS
—

 
8,786

 
1,553

 
—

 
10,339

Total trading account assets (3)
107,079

 
118,966

 
3,781

 
—

 
229,826

Derivative assets
14,079

 
328,442

 
2,226

 
(304,262
)
 
40,485

AFS debt securities:
 

 
 

 
 

 
 

 
 

U.S. Treasury and agency securities
67,332

 
1,196

 
—

 
—

 
68,528

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

Agency
—

 
122,528

 
—

 
—

 
122,528

Agency-collateralized mortgage obligations
—

 
4,641

 
—

 
—

 
4,641

Non-agency residential
—

 
653

 
424

 
—

 
1,077

Commercial
—

 
15,021

 
—

 
—

 
15,021

Non-U.S. securities
—

 
11,989

 
2

 
—

 
11,991

Other taxable securities
—

 
3,876

 
65

 
—

 
3,941

Tax-exempt securities
—

 
17,804

 
108

 
—

 
17,912

Total AFS debt securities
67,332

 
177,708

 
599

 
—

 
245,639

Other debt securities carried at fair value:
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
3

 
—

 
—

 
—

 
3

Agency MBS
—

 
3,003

 
—

 
—

 
3,003

Non-agency residential MBS
—

 
1,035

 
299

 
—

 
1,334

Non-U.S. and other securities
400

 
6,088

 
—

 
—

 
6,488

Total other debt securities carried at fair value
403

 
10,126

 
299

 
—

 
10,828

Loans and leases
—

 
7,642

 
693

 
—

 
8,335

Loans held-for-sale
—

 
3,334

 
375

 
—

 
3,709

Other assets (4)
11,782

 
1,376

 
2,360

 
—

 
15,518

Total assets (5)
$
201,675

 
$
697,958

 
$
10,333

 
$
(304,262
)
 
$
605,704

Liabilities
 

 
 

 
 

 
 

 
 

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

 
$
508

 
$
—

 
$
—

 
$
508

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

 
16,008

 
—

 
—

 
16,008

Trading account liabilities:
 

 
 

 
 

 
 

 
 
U.S. Treasury and agency securities
13,140

 
282

 
—

 
—

 
13,422

Equity securities
38,148

 
4,144

 
2

 
—

 
42,294

Non-U.S. sovereign debt
10,751

 
11,310

 
—

 
—

 
22,061

Corporate securities and other
—

 
5,478

 
15

 
—

 
5,493

Total trading account liabilities
62,039

 
21,214

 
17

 
—

 
83,270

Derivative liabilities
11,904

 
320,479

 
4,764

 
(298,918
)
 
38,229

Short-term borrowings
—

 
3,941

 
—

 
—

 
3,941

Accrued expenses and other liabilities
13,927

 
1,507

 
—

 
—

 
15,434

Long-term debt
—

 
33,826

 
1,149

 
—

 
34,975

Total liabilities (5)
$
87,870

 
$
397,483

 
$
5,930

 
$
(298,918
)
 
$
192,365


(1) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2) 
Includes $26.7 billion of GSE obligations.
(3) 
Includes securities with a fair value of $14.7 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 $1.5 billion which are classified as Level 3 assets.
(5) 
Total recurring Level 3 assets were 0.42 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.27 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 months ended March 31, 2020 and 2019, 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
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
March 31
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 March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
Trading account assets:
 

 

 

 

 
 
 
 

 

 

 
Corporate securities, trading loans and other
$
1,507

$
(103
)
$
(1
)
$
216

$
(90
)
$
8

$
(32
)
$
237

$
(102
)
$
1,640

$
(108
)
Equity securities
239

(26
)
—

26

(11
)
—

—

25

(4
)
249

(27
)
Non-U.S. sovereign debt
482

2

(53
)
73

(48
)
—

(10
)
17

(213
)
250

3

Mortgage trading loans, ABS and other MBS
1,553

(125
)
(2
)
362

(245
)
—

(19
)
233

(24
)
1,733

(129
)
Total trading account assets
3,781

(252
)
(56
)
677

(394
)
8

(61
)
512

(343
)
3,872

(261
)
Net derivative assets (liabilities) (4)
(2,538
)
346

—

40

(148
)
—

12

(528
)
(93
)
(2,909
)
279

AFS debt securities:
 

 

 

 

 

 

 

 

 

 

 
Non-agency residential MBS
424

(3
)
(13
)
—

—

—

(12
)
128

—

524

—

Non-U.S. securities
2

—

—

—

(1
)
—

—

—

—

1

—

Other taxable securities
65

—

—

3

—

—

—

—

—

68

—

Tax-exempt securities
108

(10
)
2

—

—

—

—

—

—

100

—

Total AFS debt securities
599

(13
)
(11
)
3

(1
)
—

(12
)
128

—

693

—

Other debt securities carried at fair value – Non-agency residential MBS
299

(49
)
—

—

—

—

(4
)
26

(3
)
269

(49
)
Loans and leases (5,6)
693

(119
)
—

—

—

—

(16
)
—

—

558

(107
)
Loans held-for-sale (5,6)
375

(9
)
(28
)
—

—

691

(45
)
93

—

1,077

(15
)
Other assets (6,7)
2,360

(251
)
(30
)
—

1

20

(142
)
2

—

1,960

(287
)
Trading account liabilities – Equity securities
(2
)
1

—

—

—

—

—

—

—

(1
)
1

Trading account liabilities – Corporate securities
   and other
(15
)
1

—

(6
)
—

—

—

—

—

(20
)
1

Long-term debt (5)
(1,149
)
127

187

8

—

(13
)
141

(23
)
1

(721
)
126

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
Trading account assets:
 
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
1,558

$
3

$
—

$
54

$
(73
)
$
—

$
(60
)
$
139

$
(193
)
$
1,428

$
(8
)
Equity securities
276

2

—

18

(1
)
—

(3
)
2

(6
)
288

2

Non-U.S. sovereign debt
465

8

(1
)
—

—

—

—

—

—

472

8

Mortgage trading loans, ABS and other MBS
1,635

38

(1
)
230

(337
)
—

(9
)
89

(135
)
1,510

27

Total trading account assets
3,934

51

(2
)
302

(411
)
—

(72
)
230

(334
)
3,698

29

Net derivative assets (liabilities) (4)
(935
)
(25
)
—

111

(245
)
—

(55
)
122

9

(1,018
)
(25
)
AFS debt securities:
 

 

 

 
 
 
 

 

 

 

 
Non-agency residential MBS
597

—

93

—

—

—

(7
)
159

(261
)
581

—

Non-U.S. securities
2

—

—

—

—

—

—

—

—

2

—

Other taxable securities
7

—

—

—

—

—

(4
)
—

—

3

—

Total AFS debt securities
606

—

93

—

—

—

(11
)
159

(261
)
586

—

Other debt securities carried at fair value – Non-agency residential MBS
172

47

—

—

—

—

(1
)
38

(32
)
224

47

Loans and leases (5,6)
338

4

—

—

(15
)
—

(10
)
—

—

317

4

Loans held-for-sale (5,6)
542

12

(2
)
10

(21
)
11

(53
)
59

—

558

4

Other assets (6,7)
2,932

(74
)
8

—

—

41

(158
)
—

—

2,749

(128
)
Trading account liabilities – Corporate securities
   and other
(18
)
—

—

—

(3
)
—

—

—

—

(21
)
—

Long-term debt (5)
(817
)
(46
)
(1
)
—

—

(3
)
38

(61
)
—

(890
)
(46
)
(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 market making and similar activities; Net derivative assets (liabilities) - market making and similar activities and other income; Other debt securities carried at fair value - other income; Loans and leases - predominantly other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - market making and similar activities.
(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. Amounts include net unrealized gains of $67 million and $96 million related to financial instruments still held at March 31, 2020 and 2019.
(4) 
Net derivative assets (liabilities) include derivative assets of $1.9 billion and $3.5 billion and derivative liabilities of $4.8 billion and $4.5 billion at March 31, 2020 and 2019.
(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.

Fair Value, Liabilities 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 months ended March 31, 2020 and 2019, 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
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
March 31
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 March 31, 2020
 
 
 
 
 
 
 
 
 
 
 
Trading account assets:
 

 

 

 

 
 
 
 

 

 

 
Corporate securities, trading loans and other
$
1,507

$
(103
)
$
(1
)
$
216

$
(90
)
$
8

$
(32
)
$
237

$
(102
)
$
1,640

$
(108
)
Equity securities
239

(26
)
—

26

(11
)
—

—

25

(4
)
249

(27
)
Non-U.S. sovereign debt
482

2

(53
)
73

(48
)
—

(10
)
17

(213
)
250

3

Mortgage trading loans, ABS and other MBS
1,553

(125
)
(2
)
362

(245
)
—

(19
)
233

(24
)
1,733

(129
)
Total trading account assets
3,781

(252
)
(56
)
677

(394
)
8

(61
)
512

(343
)
3,872

(261
)
Net derivative assets (liabilities) (4)
(2,538
)
346

—

40

(148
)
—

12

(528
)
(93
)
(2,909
)
279

AFS debt securities:
 

 

 

 

 

 

 

 

 

 

 
Non-agency residential MBS
424

(3
)
(13
)
—

—

—

(12
)
128

—

524

—

Non-U.S. securities
2

—

—

—

(1
)
—

—

—

—

1

—

Other taxable securities
65

—

—

3

—

—

—

—

—

68

—

Tax-exempt securities
108

(10
)
2

—

—

—

—

—

—

100

—

Total AFS debt securities
599

(13
)
(11
)
3

(1
)
—

(12
)
128

—

693

—

Other debt securities carried at fair value – Non-agency residential MBS
299

(49
)
—

—

—

—

(4
)
26

(3
)
269

(49
)
Loans and leases (5,6)
693

(119
)
—

—

—

—

(16
)
—

—

558

(107
)
Loans held-for-sale (5,6)
375

(9
)
(28
)
—

—

691

(45
)
93

—

1,077

(15
)
Other assets (6,7)
2,360

(251
)
(30
)
—

1

20

(142
)
2

—

1,960

(287
)
Trading account liabilities – Equity securities
(2
)
1

—

—

—

—

—

—

—

(1
)
1

Trading account liabilities – Corporate securities
   and other
(15
)
1

—

(6
)
—

—

—

—

—

(20
)
1

Long-term debt (5)
(1,149
)
127

187

8

—

(13
)
141

(23
)
1

(721
)
126

 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
Trading account assets:
 
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
1,558

$
3

$
—

$
54

$
(73
)
$
—

$
(60
)
$
139

$
(193
)
$
1,428

$
(8
)
Equity securities
276

2

—

18

(1
)
—

(3
)
2

(6
)
288

2

Non-U.S. sovereign debt
465

8

(1
)
—

—

—

—

—

—

472

8

Mortgage trading loans, ABS and other MBS
1,635

38

(1
)
230

(337
)
—

(9
)
89

(135
)
1,510

27

Total trading account assets
3,934

51

(2
)
302

(411
)
—

(72
)
230

(334
)
3,698

29

Net derivative assets (liabilities) (4)
(935
)
(25
)
—

111

(245
)
—

(55
)
122

9

(1,018
)
(25
)
AFS debt securities:
 

 

 

 
 
 
 

 

 

 

 
Non-agency residential MBS
597

—

93

—

—

—

(7
)
159

(261
)
581

—

Non-U.S. securities
2

—

—

—

—

—

—

—

—

2

—

Other taxable securities
7

—

—

—

—

—

(4
)
—

—

3

—

Total AFS debt securities
606

—

93

—

—

—

(11
)
159

(261
)
586

—

Other debt securities carried at fair value – Non-agency residential MBS
172

47

—

—

—

—

(1
)
38

(32
)
224

47

Loans and leases (5,6)
338

4

—

—

(15
)
—

(10
)
—

—

317

4

Loans held-for-sale (5,6)
542

12

(2
)
10

(21
)
11

(53
)
59

—

558

4

Other assets (6,7)
2,932

(74
)
8

—

—

41

(158
)
—

—

2,749

(128
)
Trading account liabilities – Corporate securities
   and other
(18
)
—

—

—

(3
)
—

—

—

—

(21
)
—

Long-term debt (5)
(817
)
(46
)
(1
)
—

—

(3
)
38

(61
)
—

(890
)
(46
)
(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 market making and similar activities; Net derivative assets (liabilities) - market making and similar activities and other income; Other debt securities carried at fair value - other income; Loans and leases - predominantly other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - market making and similar activities.
(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. Amounts include net unrealized gains of $67 million and $96 million related to financial instruments still held at March 31, 2020 and 2019.
(4) 
Net derivative assets (liabilities) include derivative assets of $1.9 billion and $3.5 billion and derivative liabilities of $4.8 billion and $4.5 billion at March 31, 2020 and 2019.
(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.
Fair Value Measurement Inputs and Valuation Techniques
The following tables present information about significant unobservable inputs related to the Corporation’s material categories of Level 3 financial assets and liabilities at March 31, 2020 and December 31, 2019.
 
 
 
 
 
 
Quantitative Information about Level 3 Fair Value Measurements at March 31, 2020
 
 
 
 
 
 
(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
$
1,567

Discounted cash flow, Market comparables
Yield
0% to 25%
7%
Trading account assets – Mortgage trading loans, ABS and other MBS
456

Prepayment speed
1% to 32% CPR
21% CPR
Loans and leases
253

Default rate
0% to 3% CDR
1% CDR
Loans held-for-sale
1

Loss severity
0% to 47%
14%
AFS debt securities, primarily non-agency residential
525

Price
$0 to $160
$98
AFS debt securities – Other taxable securities
63

 
 
 
Other debt securities carried at fair value - Non-agency residential
269

 
 
 
Instruments backed by commercial real estate assets
$
1,224

Discounted cash flow
Yield
0% to 25%
3%
Trading account assets – Corporate securities, trading loans and other
250

Price
$0 to $103
$60
Trading account assets – Mortgage trading loans, ABS and other MBS
172

 
 
 
Loans held-for-sale
802

 
 
 
Commercial loans, debt securities and other
$
3,429

Discounted cash flow, Market comparables
Yield
1% to 25%
7%
Trading account assets – Corporate securities, trading loans and other
1,390

Prepayment speed
10% to 20%
15%
Trading account assets – Non-U.S. sovereign debt
250

Default rate
3% to 4%
4%
Trading account assets – Mortgage trading loans, ABS and other MBS
1,105

Loss severity
35% to 40%
38%
AFS debt securities – Other taxable securities
5

Price
$0 to $142
$68
AFS debt securities – Tax-exempt securities
100

Long-dated equity volatilities
78%
n/a
Loans and leases
305

 
 
 
Loans held-for-sale
274

 
 
 
Other assets, primarily auction rate securities
$
796

Discounted cash flow, Market comparables
Price
$10 to $99
$95

 
 
 
 

 
 
 
 
MSRs
$
1,164

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
7% to 14%
9%
 
 
Option-adjusted spread, variable rate
9% to 15%
11%
Structured liabilities
 
 
 
 
 
Long-term debt
$
(721
)
Discounted cash flow, Market comparables, Industry standard derivative pricing (3)
Yield
2% to 7%
7%
 
 
Equity correlation
6% to 100%
68%
 
 
Long-dated equity volatilities
12% to 290%
34%
 
 
Price
$0 to $115
$74
 
 
Natural gas forward price
$1/MMBtu to $5/MMBtu
$3/MMBtu
Net derivative assets (liabilities)
 
 
 
 
 
Credit derivatives
$
(12
)
Discounted cash flow, Stochastic recovery correlation model
Yield
5%
n/a
 
 
Upfront points
0 to 100 points
74 points
 
 
Prepayment speed
15% to 100% CPR
26% CPR
 
 
Default rate
2% CDR
n/a
 
 
Price
$0 to $122
$41
Equity derivatives
$
(1,007
)
Industry standard derivative pricing (3)
Equity correlation
6% to 100%
68%
 
 
Long-dated equity volatilities
12% to 290%
34%
Commodity derivatives
$
(1,725
)
Discounted cash flow, Industry standard derivative pricing (3)
Natural gas forward price
$1/MMBtu to $5/MMBtu
$2/MMBtu
 
 
Correlation
54% to 73%
73%
 
 
Volatilities
16% to 293%
119%
Interest rate derivatives
$
(165
)
Industry standard derivative pricing (4)
Correlation (IR/IR)
15% to 94%
43%
 
 
Correlation (FX/IR)
0% to 46%
2%
 
 
Long-dated inflation rates
-28% to 59%
15%
 
 
Long-dated inflation volatilities
0% to 1%
1%
Total net derivative assets (liabilities)
$
(2,909
)
 
 
 
 
(1) 
For loans and securities, structured liabilities and net derivative assets (liabilities), 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 84: Trading account assets – Corporate securities, trading loans and other of $1.6 billion, Trading account assets – Non-U.S. sovereign debt of $250 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.7 billion, AFS debt securities of $693 million, Other debt securities carried at fair value - Non-agency residential of $269 million, Other assets, including MSRs, of $2.0 billion, Loans and leases of $558 million and LHFS of $1.1 billion.
(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, 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
$
1,407

Discounted cash flow, Market comparables
Yield
0% to 25%
6%
Trading account assets – Mortgage trading loans, ABS and other MBS
332

Prepayment speed
1% to 27% CPR
17% CPR
Loans and leases
281

Default rate
0% to 3% CDR
1% CDR
Loans held-for-sale
4

Loss severity
0% to 47%
14%
AFS debt securities, primarily non-agency residential
491

Price
$0 to $160
$94
Other debt securities carried at fair value - Non-agency residential
299

 
 
 
Instruments backed by commercial real estate assets
$
303

Discounted cash flow
Yield
0% to 30%
14%
Trading account assets – Corporate securities, trading loans and other
201

Price
$0 to $100
$55
Trading account assets – Mortgage trading loans, ABS and other MBS
85

 
 
 
Loans held-for-sale
17

 
 
 
Commercial loans, debt securities and other
$
3,798

Discounted cash flow, Market comparables
Yield
1% to 20%
6%
Trading account assets – Corporate securities, trading loans and other
1,306

Prepayment speed
10% to 20%
13%
Trading account assets – Non-U.S. sovereign debt
482

Default rate
3% to 4%
4%
Trading account assets – Mortgage trading loans, ABS and other MBS
1,136

Loss severity
35% to 40%
38%
AFS debt securities – Tax-exempt securities
108

Price
$0 to $142
$72
Loans and leases
412

Long-dated equity volatilities
35%
n/a
Loans held-for-sale
354


 
 
Other assets, primarily auction rate securities
$
815

Discounted cash flow, Market comparables
Price
$10 to $100
$96
 
 
 
 
 
 
 
 
 
 
MSRs
$
1,545

Discounted cash flow
Weighted-average life, fixed rate (5)
0 to 14 years
5 years
 
 
Weighted-average life, variable rate (5)
0 to 9 years
3 years
 
 
Option-adjusted spread, fixed rate
7% to 14%
9%
 
 
Option-adjusted spread, variable rate
9% to 15%
11%
Structured liabilities
 
 
 
 
 
Long-term debt
$
(1,149
)
Discounted cash flow, Market comparables, Industry standard derivative pricing (3)
Yield
2% to 6%
5%
 
 
Equity correlation
9% to 100%
63%
 
 
Long-dated equity volatilities
4% to 101%
32%
 
 
Price
$0 to $116
$74
 
 
Natural gas forward price
$1/MMBtu to $5/MMBtu
$3/MMBtu
Net derivative assets (liabilities)
 
 

 
 
Credit derivatives
$
13

Discounted cash flow, Stochastic recovery correlation model
Yield
5%
n/a
 
 
Upfront points
0 to 100 points
63 points
 
 
Prepayment speed
15% to 100% CPR
22% CPR
 
 
Default rate
1% to 4% CDR
2% CDR
 
 
Loss severity
35%
n/a
 
 
Price
$0 to $104
$73
Equity derivatives
$
(1,081
)
Industry standard derivative pricing (3)
Equity correlation
9% to 100%
63%
 
 
Long-dated equity volatilities
4% to 101%
32%
Commodity derivatives
$
(1,357
)
Discounted cash flow, Industry standard derivative pricing (3)
Natural gas forward price
$1/MMBtu to $5/MMBtu
$3/MMBtu
 
 
Correlation
30% to 69%
68%
 
 
Volatilities
14% to 54%
27%
Interest rate derivatives
$
(113
)
Industry standard derivative pricing (4)
Correlation (IR/IR)
15% to 94%
52%
 
 
Correlation (FX/IR)
0% to 46%
2%
 
 
Long-dated inflation rates
-23% to 56%
16%
 
 
Long-dated inflation volatilities
0% to 1%
1%
Total net derivative assets (liabilities)
$
(2,538
)
 
 
 
 

(1) 
For loans and securities, structured liabilities and net derivative assets (liabilities), 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 85: Trading account assets – Corporate securities, trading loans and other of $1.5 billion, Trading account assets – Non-U.S. sovereign debt of $482 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.6 billion, AFS debt securities of $599 million, Other debt securities carried at fair value - Non-agency residential of $299 million, Other assets, including MSRs, of $2.4 billion, Loans and leases of $693 million and LHFS of $375 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
Fair Value Measurements, Nonrecurring The amounts below represent assets still held as of the reporting date for which a nonrecurring fair value adjustment was recorded during the three months ended March 31, 2020 and 2019.
 
 
 
 
 
 
Assets Measured at Fair Value on a Nonrecurring Basis
 
 
 
March 31, 2020
 
Three Months Ended March 31, 2020
(Dollars in millions)
 
Level 2
 
Level 3
 
Gains (Losses)
Assets
 

 
 

 
 
Loans held-for-sale
$
1,017

 
$
628

 
$
(78
)
Loans and leases (1)
—

 
117

 
(27
)
Foreclosed properties (2, 3)
—

 
15

 
(6
)
Other assets
27

 
24

 
(2
)
 
 
 
 
 
 
 
March 31, 2019
 
Three Months Ended March 31, 2019
Assets
 

 
 

 
 
Loans held-for-sale
$
55

 
$
—

 
$
(1
)
Loans and leases (1)
—

 
120

 
(40
)
Foreclosed properties (2, 3)
—

 
40

 
(13
)
Other assets
61

 
6

 
(11
)
(1) 
Includes $12 million and $18 million of losses on loans that were written down to a collateral value of zero during the three months ended March 31, 2020 and 2019.
(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 $224 million and $400 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) at March 31, 2020 and 2019.
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques
The table below presents information about significant unobservable inputs at March 31, 2020 and December 31, 2019.
 
 
 
 
 
 
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)
March 31, 2020
Loans held-for-sale
$
628

Discounted cash flow
Price
$9 to $99
$95
Loans and leases (2)
117

Market comparables
OREO discount
13% to 59%
24
%
 
 
 
Costs to sell
8% to 26%
9
%
 
December 31, 2019
Loans held-for-sale
$
102

Discounted cash flow
Price
$85 to $97
$88
Loans and leases (2)
257

Market comparables
OREO discount
13% to 59%
24
%
 
 
 
Costs to sell
8% to 26%
9
%
Other assets (3)
640

Discounted cash flow
Customer attrition
0% to 19%
5
%
 
 
 
Costs to service
11% to 19%
15
%

(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) 
Reflects the measurement of the Corporation’s merchant services equity method investment on which the Corporation recorded an impairment charge in 2019. For more information, see Note 13 – Commitments and Contingencies to the Consolidated Financial Statements of the Corporation’s 2019 Annual Report on Form 10-K. 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.