Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

v3.20.2
Fair Value Measurements (Tables)
 9 Months Ended
Sep. 30, 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 September 30, 2020 and December 31, 2019, including financial instruments that the Corporation accounts for under the fair value option, are summarized in the following tables.
September 30, 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
 $ 385  $ —  $ —  $ —  $ 385 
Federal funds sold and securities borrowed or purchased under agreements to resell
 —  103,101  —  —  103,101 
Trading account assets:          
U.S. Treasury and agency securities 43,143  2,439  —  —  45,582 
Corporate securities, trading loans and other —  25,438  1,470  —  26,908 
Equity securities 82,015  34,097  207  —  116,319 
Non-U.S. sovereign debt 10,003  26,455  290  —  36,748 
Mortgage trading loans, MBS and ABS:
U.S. government-sponsored agency guaranteed (2)
—  20,896  133  —  21,029 
Mortgage trading loans, ABS and other MBS —  7,277  1,637  —  8,914 
Total trading account assets (3)
135,161  116,602  3,737  —  255,500 
Derivative assets 16,129  399,497  2,498  (373,827) 44,297 
AFS debt securities:          
U.S. Treasury and agency securities 101,693  1,185  —  —  102,878 
Mortgage-backed securities:          
Agency —  69,864  —  —  69,864 
Agency-collateralized mortgage obligations —  5,837  —  —  5,837 
Non-agency residential —  843  440  —  1,283 
Commercial —  16,206  —  —  16,206 
Non-U.S. securities —  16,340  14  —  16,354 
Other taxable securities —  3,608  68  —  3,676 
Tax-exempt securities —  17,414  180  —  17,594 
Total AFS debt securities 101,693  131,297  702  —  233,692 
Other debt securities carried at fair value:
U.S. Treasury and agency securities 3  —  —  —  3 
Non-agency residential MBS —  751  458  —  1,209 
Non-U.S. and other securities
 5,961  5,132  —  —  11,093 
Total other debt securities carried at fair value 5,964  5,883  458  —  12,305 
Loans and leases —  6,609  625  —  7,234 
Loans held-for-sale —  983  922  —  1,905 
Other assets (4)
6,802  4,048  1,875  —  12,725 
Total assets (5)
$ 266,134  $ 768,020  $ 10,817  $ (373,827) $ 671,144 
Liabilities          
Interest-bearing deposits in U.S. offices $ —  $ 626  $ —  $ —  $ 626 
Federal funds purchased and securities loaned or sold under agreements to repurchase
 —  132,322  —  —  132,322 
Trading account liabilities:        
U.S. Treasury and agency securities 11,013  200  —  —  11,213 
Equity securities 40,609  5,390  1  —  46,000 
Non-U.S. sovereign debt 9,966  10,731  —  —  20,697 
Corporate securities and other —  6,755  16  —  6,771 
Total trading account liabilities 61,588  23,076  17  —  84,681 
Derivative liabilities 17,292  389,769  6,029  (371,362) 41,728 
Short-term borrowings —  4,577  —  —  4,577 
Accrued expenses and other liabilities 8,530  4,235  —  —  12,765 
Long-term debt —  29,485  970  —  30,455 
Total liabilities (5)
$ 87,410  $ 584,090  $ 7,016  $ (371,362) $ 307,154 
(1)Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2)Includes $21.5 billion of GSE obligations.
(3)Includes securities with a fair value of $13.6 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 $1.1 billion which are classified as Level 3 assets.
(5)Total recurring Level 3 assets were 0.40 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.28 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 and nine months ended September 30, 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
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, 2020
Trading account assets:              
Corporate securities, trading loans and other
$ 1,548  $ (20) $ —  $ —  $ (49) $ —  $ (91) $ 136  $ (54) $ 1,470  $ (34)
Equity securities 194  8  —  4  (3) —  —  7  (3) 207  3 
Non-U.S. sovereign debt 248  7  (6) 1  (2) —  (1) 83  (40) 290  6 
Mortgage trading loans, ABS and other MBS
 1,736  2  —  36  (108) 11  (12) 167  (62) 1,770  10 
Total trading account assets 3,726  (3) (6) 41  (162) 11  (104) 393  (159) 3,737  (15)
Net derivative assets (liabilities) (4)
(3,343) 228  —  39  (177) —  (58) 3  (223) (3,531) 196 
AFS debt securities:                    
Non-agency residential MBS 462  —  5  —  —  —  (10) 25  (42) 440  — 
Non-U.S. securities 5  —  —  —  —  —  (1) 10  —  14  — 
Other taxable securities 65  —  —  3  —  —  —  —  —  68  — 
Tax-exempt securities 337  15  —  —  —  —  (167) —  (5) 180  15 
Total AFS debt securities 869  15  5  3  —  —  (178) 35  (47) 702  15 
Other debt securities carried at fair value – Non-agency residential MBS
 449  18  —  —  —  —  (11) 2  —  458  17 
Loans and leases (5,6)
741  (2) —  —  (25) —  (89) —  —  625  (5)
Loans held-for-sale (5,6)
970  (7) (2) —  (25) —  (14) —  —  922  (10)
Other assets (6,7)
1,911  25  6  —  1  53  (121) —  —  1,875  4 
Trading account liabilities – Equity securities
 (1) —  —  —  —  —  —  —  —  (1) — 
Trading account liabilities – Corporate securities
   and other
 (16) 2  —  —  (2) —  —  —  —  (16) — 
Long-term debt (5)
(956) (50) (10) —  —  —  46  —  —  (970) (50)
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 (liabilities) (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 (5,6)
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 
(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; AFS debt securities - other income; Other debt securities carried at fair value - other income; Loans and leases - primarily 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 (losses) of $(8) million and $53 million related to financial instruments still held at September 30, 2020 and 2019.
(4)Net derivative assets (liabilities) include derivative assets of $2.5 billion and $3.4 billion and derivative liabilities of $6.0 billion and $4.6 billion at September 30, 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.
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, 2020
Trading account assets:              
Corporate securities, trading loans and other
$ 1,507  $ (150) $ (1) $ 280  $ (181) $ 8  $ (165) $ 520  $ (348) $ 1,470  $ (128)
Equity securities
 239  (17) —  33  (37) —  —  32  (43) 207  (20)
Non-U.S. sovereign debt
 482  35  (69) 76  (61) —  (20) 100  (253) 290  33 
Mortgage trading loans, ABS and other MBS
 1,553  (145) (3) 502  (582) 11  (52) 659  (173) 1,770  (135)
Total trading account assets 3,781  (277) (73) 891  (861) 19  (237) 1,311  (817) 3,737  (250)
Net derivative assets (liabilities) (4)
(2,538) 111  —  216  (558) —  (224) (273) (265) (3,531) (356)
AFS debt securities:                    
Non-agency residential MBS 424  (5) (4) 23  —  —  (32) 158  (124) 440  (5)
Non-U.S. securities
 2  —  —  —  (1) —  (1) 14  —  14  — 
Other taxable securities
 65  —  —  6  (4) —  —  1  —  68  — 
Tax-exempt securities 108  (19) 3  —  —  —  (167) 265  (10) 180  (18)
Total AFS debt securities 599  (24) (1) 29  (5) —  (200) 438  (134) 702  (23)
Other debt securities carried at fair value – Non-agency residential MBS
 299  12  —  —  —  —  (19) 178  (12) 458  (12)
Loans and leases (5,6)
693  (74) —  32  (26) 22  (120) 98  —  625  (61)
Loans held-for-sale (5,6)
375  (7) (35) —  (106) 691  (89) 93  —  922  (19)
Other assets (6,7)
2,360  (294) (11) —  2  206  (391) 5  (2) 1,875  (373)
Trading account liabilities – Equity securities
 (2) 1  —  —  —  —  —  —  —  (1) 1 
Trading account liabilities – Corporate securities
   and other
 (15) 7  —  (7) (2) —  1  —  —  (16) — 
Long-term debt (5)
(1,149) 5  50  8  —  (45) 201  (52) 12  (970) (10)
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 (liabilities) (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)
(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; AFS debt securities - other income; Other debt securities carried at fair value - other income; Loans and leases - primarily 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 (losses) of $(47) million and $47 million related to financial instruments still held at September 30, 2020 and 2019.
(4)Net derivative assets (liabilities) include derivative assets of $2.5 billion and $3.4 billion and derivative liabilities of $6.0 billion and $4.6 billion at September 30, 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 and nine months ended September 30, 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
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, 2020
Trading account assets:              
Corporate securities, trading loans and other
$ 1,548  $ (20) $ —  $ —  $ (49) $ —  $ (91) $ 136  $ (54) $ 1,470  $ (34)
Equity securities 194  8  —  4  (3) —  —  7  (3) 207  3 
Non-U.S. sovereign debt 248  7  (6) 1  (2) —  (1) 83  (40) 290  6 
Mortgage trading loans, ABS and other MBS
 1,736  2  —  36  (108) 11  (12) 167  (62) 1,770  10 
Total trading account assets 3,726  (3) (6) 41  (162) 11  (104) 393  (159) 3,737  (15)
Net derivative assets (liabilities) (4)
(3,343) 228  —  39  (177) —  (58) 3  (223) (3,531) 196 
AFS debt securities:                    
Non-agency residential MBS 462  —  5  —  —  —  (10) 25  (42) 440  — 
Non-U.S. securities 5  —  —  —  —  —  (1) 10  —  14  — 
Other taxable securities 65  —  —  3  —  —  —  —  —  68  — 
Tax-exempt securities 337  15  —  —  —  —  (167) —  (5) 180  15 
Total AFS debt securities 869  15  5  3  —  —  (178) 35  (47) 702  15 
Other debt securities carried at fair value – Non-agency residential MBS
 449  18  —  —  —  —  (11) 2  —  458  17 
Loans and leases (5,6)
741  (2) —  —  (25) —  (89) —  —  625  (5)
Loans held-for-sale (5,6)
970  (7) (2) —  (25) —  (14) —  —  922  (10)
Other assets (6,7)
1,911  25  6  —  1  53  (121) —  —  1,875  4 
Trading account liabilities – Equity securities
 (1) —  —  —  —  —  —  —  —  (1) — 
Trading account liabilities – Corporate securities
   and other
 (16) 2  —  —  (2) —  —  —  —  (16) — 
Long-term debt (5)
(956) (50) (10) —  —  —  46  —  —  (970) (50)
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 (liabilities) (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 (5,6)
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 
(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; AFS debt securities - other income; Other debt securities carried at fair value - other income; Loans and leases - primarily 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 (losses) of $(8) million and $53 million related to financial instruments still held at September 30, 2020 and 2019.
(4)Net derivative assets (liabilities) include derivative assets of $2.5 billion and $3.4 billion and derivative liabilities of $6.0 billion and $4.6 billion at September 30, 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.
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, 2020
Trading account assets:              
Corporate securities, trading loans and other
$ 1,507  $ (150) $ (1) $ 280  $ (181) $ 8  $ (165) $ 520  $ (348) $ 1,470  $ (128)
Equity securities
 239  (17) —  33  (37) —  —  32  (43) 207  (20)
Non-U.S. sovereign debt
 482  35  (69) 76  (61) —  (20) 100  (253) 290  33 
Mortgage trading loans, ABS and other MBS
 1,553  (145) (3) 502  (582) 11  (52) 659  (173) 1,770  (135)
Total trading account assets 3,781  (277) (73) 891  (861) 19  (237) 1,311  (817) 3,737  (250)
Net derivative assets (liabilities) (4)
(2,538) 111  —  216  (558) —  (224) (273) (265) (3,531) (356)
AFS debt securities:                    
Non-agency residential MBS 424  (5) (4) 23  —  —  (32) 158  (124) 440  (5)
Non-U.S. securities
 2  —  —  —  (1) —  (1) 14  —  14  — 
Other taxable securities
 65  —  —  6  (4) —  —  1  —  68  — 
Tax-exempt securities 108  (19) 3  —  —  —  (167) 265  (10) 180  (18)
Total AFS debt securities 599  (24) (1) 29  (5) —  (200) 438  (134) 702  (23)
Other debt securities carried at fair value – Non-agency residential MBS
 299  12  —  —  —  —  (19) 178  (12) 458  (12)
Loans and leases (5,6)
693  (74) —  32  (26) 22  (120) 98  —  625  (61)
Loans held-for-sale (5,6)
375  (7) (35) —  (106) 691  (89) 93  —  922  (19)
Other assets (6,7)
2,360  (294) (11) —  2  206  (391) 5  (2) 1,875  (373)
Trading account liabilities – Equity securities
 (2) 1  —  —  —  —  —  —  —  (1) 1 
Trading account liabilities – Corporate securities
   and other
 (15) 7  —  (7) (2) —  1  —  —  (16) — 
Long-term debt (5)
(1,149) 5  50  8  —  (45) 201  (52) 12  (970) (10)
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 (liabilities) (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)
(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; AFS debt securities - other income; Other debt securities carried at fair value - other income; Loans and leases - primarily 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 (losses) of $(47) million and $47 million related to financial instruments still held at September 30, 2020 and 2019.
(4)Net derivative assets (liabilities) include derivative assets of $2.5 billion and $3.4 billion and derivative liabilities of $6.0 billion and $4.6 billion at September 30, 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 September 30, 2020 and December 31, 2019.
Quantitative Information about Level 3 Fair Value Measurements at September 30, 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 $ 1,903  Discounted cash flow, Market comparables Yield
0% to 25%
 6  %
Trading account assets – Mortgage trading loans, ABS and other MBS
 566  Prepayment speed
1% to 31% CPR
19% CPR
Loans and leases 356  Default rate
0% to 3% CDR
1% CDR
Loans held-for-sale 1  Loss severity
0% to 48%
 19  %
AFS debt securities, primarily non-agency residential 440  Price
$0 to $160
 $80
AFS debt securities – Other taxable securities 82 
Other debt securities carried at fair value - Non-agency residential 458 
Instruments backed by commercial real estate assets $ 1,158  Discounted cash
flow		 Yield
0% to 25%
 4  %
Trading account assets – Corporate securities, trading loans and other 288  Price
$0 to $117
 $62
Trading account assets – Mortgage trading loans, ABS and other MBS 156 
Loans held-for-sale 714 
Commercial loans, debt securities and other $ 3,043  Discounted cash flow, Market comparables Yield
1% to 32%
 8  %
Trading account assets – Corporate securities, trading loans and other
 1,182  Prepayment speed
10% to 20%
 14  %
Trading account assets – Non-U.S. sovereign debt 290  Default rate
3% to 4%
 4  %
Trading account assets – Mortgage trading loans, ABS and other MBS 915  Loss severity
35% to 40%
 38  %
AFS debt securities – Tax-exempt securities 180  Price
$0 to $142
 $67
Loans and leases 269  Long-dated equity volatilities
93%
 n/a
Loans held-for-sale 207 
Other assets, primarily auction rate securities $ 793  Discounted cash flow, Market comparables Price
$10 to $98
 $94

MSRs $ 1,082  Discounted cash
flow
Weighted-average life, fixed rate (5)
0 to 14 years
4 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 $ (970)
Discounted cash flow, Market comparables, Industry standard derivative pricing (3)
Yield
2% to 7%
 7  %
Equity correlation
5% to 100%
 76  %
Long-dated equity volatilities
15% to 79%
 35  %
Price
$0 to $118
 $82
Natural gas forward price
$1/MMBtu to $4/MMBtu
$3 /MMBtu
Net derivative assets (liabilities)
Credit derivatives $ (50) Discounted cash flow, Stochastic recovery correlation model Yield
5%
 n/a
Upfront points
0 to 100 points
 75 points
Prepayment speed
15% to 100% CPR
23% CPR
Default rate
2% CDR
 n/a
Credit correlation
24% to 69%
 49  %
Price
$0 to $122
 $53
Equity derivatives $ (1,879)
Industry standard derivative pricing (3)
Equity correlation
5% to 100%
 76  %
Long-dated equity volatilities
15% to 79%
 35  %
Commodity derivatives $ (1,528)
Discounted cash flow, Industry standard derivative pricing (3)
Natural gas forward price
$1/MMBtu to $4/MMBtu
$3 /MMBtu
Correlation
54% to 85%
 74  %
Volatilities
22% to 89%
 43  %
Interest rate derivatives $ (74)
Industry standard derivative pricing (4)
Correlation (IR/IR)
15% to 96%
 38  %
Correlation (FX/IR)
0% to 46%
 2  %
Long-dated inflation rates
 -5% to 84%
15  %
Long-dated inflation volatilities
0% to 2%
 1  %
Total net derivative assets (liabilities) $ (3,531)
(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 90: Trading account assets – Corporate securities, trading loans and other of $1.5 billion, Trading account assets – Non-U.S. sovereign debt of $290 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.6 billion, AFS debt securities of $702 million, Other debt securities carried at fair value - Non-agency residential of $458 million, Other assets, including MSRs, of $1.9 billion, Loans and leases of $625 million and LHFS of $922 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, 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
G-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 91: 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 and nine months ended September 30, 2020 and 2019.
Assets Measured at Fair Value on a Nonrecurring Basis
September 30, 2020 Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020
(Dollars in millions) Level 2 Level 3 Gains (Losses)
Assets    
Loans held-for-sale $ 630  $ 903  $ (14) $ (121)
Loans and leases (1)
—  226  (19) (59)
Foreclosed properties (2, 3)
—  27  (7) (11)
Other assets 209  576  (32) (58)
  September 30, 2019 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
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)
(1)Includes $9 million and $26 million of losses on loans that were written down to a collateral value of zero during the three and nine months ended September 30, 2020 compared to losses of $8 million and $25 million for the same periods in 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 $131 million and $275 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) at September 30, 2020 and 2019.
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques
The table below presents information about significant unobservable inputs at September 30, 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) September 30, 2020
Loans held-for-sale $ 903  Discounted cash flow Price
$8 to $99
 $94
Loans and leases (2)
226  Market comparables OREO discount
13% to 59%
 24  %
Costs to sell
8% to 26%
 9  %
Other assets (3)
576  Discounted cash flow Revenue attrition
2% to 19%
 7  %
Discount rate
11% to 14%
 12  %
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 (4)
640  Discounted cash flow Customer attrition
0% to 19%
 5  %
Cost 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)The fair value of the intangible asset related to the merchant contracts received from the merchant services joint venture was measured using a discounted cash flow method for which the two key assumptions were the revenue attrition rate and the discount rate. For more information, see Note 7 – Goodwill and Intangible Assets.
(4)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 for which the two key assumptions were the customer attrition rate and the cost-to-service rate.