Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

v2.4.0.8
Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2014
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair value Assets and liabilities measured on Recurring basis

Assets and liabilities carried at fair value on a recurring basis at June 30, 2014 and December 31, 2013, including financial instruments which the Corporation accounts for under the fair value option, are summarized in the following tables.

 
June 30, 2014
 
Fair Value Measurements
 
 
 
 
(Dollars in millions)
Level 1 (1)
 
Level 2 (1)
 
Level 3
 
Netting
Adjustments (2)
 
Assets/Liabilities
at Fair Value
Assets
 
 
 
 
 
 
 
 
 
Federal funds sold and securities borrowed or purchased under agreements to resell
$

 
$
67,317

 
$

 
$

 
$
67,317

Trading account assets:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities (3)
30,412

 
19,150

 

 

 
49,562

Corporate securities, trading loans and other
1,161

 
34,753

 
2,772

 

 
38,686

Equity securities
30,843

 
23,437

 
356

 

 
54,636

Non-U.S. sovereign debt
26,660

 
13,442

 
640

 

 
40,742

Mortgage trading loans and ABS

 
9,015

 
4,311

 

 
13,326

Total trading account assets
89,076

 
99,797

 
8,079

 

 
196,952

Derivative assets (4)
2,225

 
796,924

 
7,136

 
(758,393
)
 
47,892

AFS debt securities:
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
36,485

 
2,218

 

 

 
38,703

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency

 
161,543

 

 

 
161,543

Agency-collateralized mortgage obligations

 
12,441

 

 

 
12,441

Non-agency residential

 
5,006

 

 

 
5,006

Commercial

 
2,278

 

 

 
2,278

Non-U.S. securities
3,791

 
3,278

 

 

 
7,069

Corporate/Agency bonds

 
828

 

 

 
828

Other taxable securities
20

 
10,329

 
3,266

 

 
13,615

Tax-exempt securities

 
8,054

 
735

 

 
8,789

Total AFS debt securities
40,296

 
205,975

 
4,001

 

 
250,272

Other debt securities carried at fair value:
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
4,242

 

 

 

 
4,242

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency

 
16,448

 

 

 
16,448

Non-agency residential

 
3,401

 

 

 
3,401

Commercial

 
793

 

 

 
793

Non-U.S. securities
15,913

 
1,482

 

 

 
17,395

Other taxable securities

 
310

 

 

 
310

Total other debt securities carried at fair value
20,155

 
22,434

 

 

 
42,589

Loans and leases

 
7,883

 
3,018

 

 
10,901

Mortgage servicing rights

 

 
4,368

 

 
4,368

Loans held-for-sale

 
5,152

 
110

 

 
5,262

Other assets
15,332

 
1,642

 
972

 

 
17,946

Total assets
$
167,084

 
$
1,207,124

 
$
27,684

 
$
(758,393
)
 
$
643,499

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

 
$
1,559

 
$

 
$

 
$
1,559

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

 
35,965

 

 

 
35,965

Trading account liabilities:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities
20,699

 
380

 

 

 
21,079

Equity securities
31,112

 
2,754

 

 

 
33,866

Non-U.S. sovereign debt
20,841

 
3,081

 

 

 
23,922

Corporate securities and other
901

 
8,537

 
27

 

 
9,465

Mortgage trading loans and ABS

 
10

 

 

 
10

Total trading account liabilities
73,553

 
14,762

 
27

 

 
88,342

Derivative liabilities (4)
1,719

 
783,721

 
7,932

 
(754,725
)
 
38,647

Short-term borrowings

 
2,350

 

 

 
2,350

Accrued expenses and other liabilities
10,605

 
1,072

 
8

 

 
11,685

Long-term debt

 
40,127

 
2,416

 

 
42,543

Total liabilities
$
85,877

 
$
879,556

 
$
10,383

 
$
(754,725
)
 
$
221,091

(1) 
During the six months ended June 30, 2014, approximately $2.0 billion of assets were transferred from Level 1 to Level 2 as a result of additional information related to non-U.S. government securities.
(2) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(3) 
Includes $20.5 billion of government-sponsored enterprise obligations.
(4) 
For further disaggregation of derivative assets and liabilities, see Note 2 – Derivatives.
 
December 31, 2013
 
Fair Value Measurements
 
 
 
 
(Dollars in millions)
Level 1 (1)
 
Level 2 (1)
 
Level 3
 
Netting
Adjustments (2)
 
Assets/Liabilities
at Fair Value
Assets
 
 
 
 
 
 
 
 
 
Federal funds sold and securities borrowed or purchased under agreements to resell
$

 
$
75,614

 
$

 
$

 
$
75,614

Trading account assets:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities (3)
34,222

 
14,625

 

 

 
48,847

Corporate securities, trading loans and other
1,147

 
27,746

 
3,559

 

 
32,452

Equity securities
41,324

 
22,741

 
386

 

 
64,451

Non-U.S. sovereign debt
24,357

 
12,399

 
468

 

 
37,224

Mortgage trading loans and ABS

 
13,388

 
4,631

 

 
18,019

Total trading account assets
101,050

 
90,899

 
9,044

 

 
200,993

Derivative assets (4)
2,374

 
910,602

 
7,277

 
(872,758
)
 
47,495

AFS debt securities:
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
6,591

 
2,363

 

 

 
8,954

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency

 
164,935

 

 

 
164,935

Agency-collateralized mortgage obligations

 
22,492

 

 

 
22,492

Non-agency residential

 
6,239

 

 

 
6,239

Commercial

 
2,480

 

 

 
2,480

Non-U.S. securities
3,698

 
3,415

 
107

 

 
7,220

Corporate/Agency bonds

 
873

 

 

 
873

Other taxable securities
20

 
12,963

 
3,847

 

 
16,830

Tax-exempt securities

 
5,122

 
806

 

 
5,928

Total AFS debt securities
10,309

 
220,882

 
4,760

 

 
235,951

Other debt securities carried at fair value:
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
4,062

 

 

 

 
4,062

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency

 
16,500

 

 

 
16,500

Agency-collateralized mortgage obligations

 
218

 

 

 
218

Commercial

 
749

 

 

 
749

Non-U.S. securities
7,457

 
3,858

 

 

 
11,315

Total other debt securities carried at fair value
11,519

 
21,325

 

 

 
32,844

Loans and leases

 
6,985

 
3,057

 

 
10,042

Mortgage servicing rights

 

 
5,042

 

 
5,042

Loans held-for-sale

 
5,727

 
929

 

 
6,656

Other assets
14,474

 
1,912

 
1,669

 

 
18,055

Total assets
$
139,726

 
$
1,333,946

 
$
31,778

 
$
(872,758
)
 
$
632,692

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

 
$
1,899

 
$

 
$

 
$
1,899

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

 
33,684

 

 

 
33,684

Trading account liabilities:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities
26,915

 
348

 

 

 
27,263

Equity securities
23,874

 
3,711

 

 

 
27,585

Non-U.S. sovereign debt
20,755

 
1,387

 

 

 
22,142

Corporate securities and other
518

 
5,926

 
35

 

 
6,479

Total trading account liabilities
72,062

 
11,372

 
35

 

 
83,469

Derivative liabilities (4)
1,968

 
897,107

 
7,301

 
(868,969
)
 
37,407

Short-term borrowings

 
1,520

 

 

 
1,520

Accrued expenses and other liabilities
10,130

 
1,093

 
10

 

 
11,233

Long-term debt

 
45,045

 
1,990

 

 
47,035

Total liabilities
$
84,160

 
$
991,720

 
$
9,336

 
$
(868,969
)
 
$
216,247

(1) 
During 2013, $500 million of other assets were transferred from Level 1 to Level 2 primarily due to a restriction that became effective for a private equity investment that was subsequently sold once the restriction was lifted.
(2) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(3) 
Includes $15.6 billion of government-sponsored enterprise obligations.
(4) 
For further disaggregation of derivative assets and liabilities, see Note 2 – Derivatives.
Fair Value Measurement With Unobservable Inputs Reconciliation Recurring Basis Assets And Liabilities [Table Text Block]
The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three and six months ended June 30, 2014 and 2013, including net realized and unrealized gains (losses) included in earnings and accumulated OCI.

Level 3 – Fair Value Measurements (1)
 
Three Months Ended June 30, 2014
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
April 1
2014
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2014
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
2,617

$
41

$

$
392

$
(87
)
$

$
(271
)
$
249

$
(169
)
$
2,772

Equity securities
343

(7
)

16

(4
)


9

(1
)
356

Non-U.S. sovereign debt
533

32


76





(1
)
640

Mortgage trading loans and ABS
4,287

123


453

(262
)

(237
)

(53
)
4,311

Total trading account assets
7,780

189


937

(353
)

(508
)
258

(224
)
8,079

Net derivative assets (2)
(575
)
(202
)

189

(366
)

(145
)
29

274

(796
)
AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Other taxable securities
3,437


(3
)
86



(254
)


3,266

Tax-exempt securities
783

2

3




(54
)
1


735

Total AFS debt securities
4,220

2


86



(308
)
1


4,001

Loans and leases (3, 4)
3,053

27





(58
)
7

(11
)
3,018

Mortgage servicing rights (4)
4,765

(249
)


(26
)
113

(235
)


4,368

Loans held-for-sale (3)
736

59


24

(711
)

(11
)
14

(1
)
110

Other assets (5)
1,132

(26
)


(112
)

(22
)


972

Trading account liabilities – Corporate securities and other
(36
)


9






(27
)
Accrued expenses and other liabilities (3)
(8
)








(8
)
Long-term debt (3)
(1,841
)
(52
)

57


(42
)
117

(676
)
21

(2,416
)
(1) 
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2) 
Net derivatives include derivative assets of $7.1 billion and derivative liabilities of $7.9 billion.
(3) 
Amounts represent instruments that are accounted for under the fair value option.
(4) 
Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole-loan sales.
(5) 
Other assets is primarily comprised of private equity investments and certain long-term fixed-rate margin loans that are accounted for under the fair value option.

Level 3 – Fair Value Measurements (1)
 
Six Months Ended June 30, 2013
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
January 1
2013
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2013
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
3,726

$
123

$

$
1,517

$
(1,925
)
$

$
(239
)
$
442

$
(881
)
$
2,763

Equity securities
545

50


57

(144
)


37

(81
)
464

Non-U.S. sovereign debt
353

45


26

(1
)

(22
)
1

(1
)
401

Mortgage trading loans and ABS
4,935

172


1,631

(1,334
)

(701
)
5

(23
)
4,685

Total trading account assets
9,559

390


3,231

(3,404
)

(962
)
485

(986
)
8,313

Net derivative assets (2)
1,468

685


383

(660
)

(1,043
)
(162
)
502

1,173

AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Commercial MBS
10






(10
)



Non-U.S. securities



1

(1
)





Corporate/Agency bonds
92


4






(88
)
8

Other taxable securities
3,928

3

12

610



(391
)

(5
)
4,157

Tax-exempt securities
1,061

1

14




(31
)

(168
)
877

Total AFS debt securities
5,091

4

30

611

(1
)

(432
)

(261
)
5,042

Loans and leases (3, 4)
2,287

100


71


5

(546
)

(16
)
1,901

Mortgage servicing rights (4)
5,716

1,460



(1,045
)
270

(574
)


5,827

Loans held-for-sale (3)
2,733

(20
)

8

(390
)

(209
)
34

(3
)
2,153

Other assets (5)
3,129

(327
)

42

(183
)

(906
)

(55
)
1,700

Trading account liabilities – Corporate securities and other
(64
)
6


18

(31
)
(5
)

(9
)
30

(55
)
Accrued expenses and other liabilities (3)
(15
)
22




(751
)
514

(1
)
1

(230
)
Long-term debt (3)
(2,301
)
103


259

(4
)
(102
)
126

(532
)
561

(1,890
)

(1) 
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2) 
Net derivatives include derivative assets of $7.7 billion and derivative liabilities of $6.5 billion.
(3) 
Amounts represent instruments that are accounted for under the fair value option.
(4) 
Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole-loan sales.
(5) 
Other assets is primarily comprised of net monoline exposure to a single counterparty and private equity investments.
Level 3 – Fair Value Measurements (1)
 
Six Months Ended June 30, 2014
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
January 1
2014
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2014
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
3,559

$
163

$

$
678

$
(441
)
$

$
(509
)
$
397

$
(1,075
)
$
2,772

Equity securities
386

12


46

(33
)


16

(71
)
356

Non-U.S. sovereign debt
468

87


99

(6
)

(6
)

(2
)
640

Mortgage trading loans and ABS
4,631

201


819

(814
)

(461
)

(65
)
4,311

Total trading account assets
9,044

463


1,642

(1,294
)

(976
)
413

(1,213
)
8,079

Net derivative assets (2)
(24
)
(197
)

314

(984
)

(246
)
41

300

(796
)
AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Non-U.S. securities
107






(107
)



Other taxable securities
3,847

8

(5
)
133



(717
)


3,266

Tax-exempt securities
806

3

4




(79
)
1


735

Total AFS debt securities
4,760

11

(1
)
133



(903
)
1


4,001

Loans and leases (3, 4)
3,057

59



(3
)
689

(781
)
13

(16
)
3,018

Mortgage servicing rights (4)
5,042

(539
)


(46
)
378

(467
)


4,368

Loans held-for-sale (3)
929

71


24

(714
)

(212
)
14

(2
)
110

Other assets (5)
1,669

(86
)


(381
)

(230
)


972

Trading account liabilities – Corporate securities and other
(35
)
1


12

(7
)



2

(27
)
Accrued expenses and other liabilities (3)
(10
)
1







1

(8
)
Long-term debt (3)
(1,990
)
(119
)

103


(51
)
236

(820
)
225

(2,416
)
(1) 
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2) 
Net derivatives include derivative assets of $7.1 billion and derivative liabilities of $7.9 billion.
(3) 
Amounts represent instruments that are accounted for under the fair value option.
(4) 
Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole-loan sales.
(5) 
Other assets is primarily comprised of private equity investments and certain long-term fixed-rate margin loans that are accounted for under the fair value option.
Level 3 – Fair Value Measurements (1)
 
Three Months Ended June 30, 2013
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
April 1
2013
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2013
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
3,607

$
35

$

$
712

$
(959
)
$

$
(99
)
$
224

$
(757
)
$
2,763

Equity securities
497

8


28

(35
)


29

(63
)
464

Non-U.S. sovereign debt
417

(6
)

11



(22
)
1


401

Mortgage trading loans and ABS
4,480

10


978

(691
)

(70
)

(22
)
4,685

Total trading account assets
9,001

47


1,729

(1,685
)

(191
)
254

(842
)
8,313

Net derivative assets (2)
1,063

392


204

(194
)

(383
)
(214
)
305

1,173

AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Commercial MBS
10






(10
)



Non-U.S securities
1




(1
)





Corporate/Agency bonds
96








(88
)
8

Other taxable securities
4,045

3

10

367



(263
)

(5
)
4,157

Tax-exempt securities
1,041


11




(7
)

(168
)
877

Total AFS debt securities
5,193

3

21

367

(1
)

(280
)

(261
)
5,042

Loans and leases (3, 4)
2,363

49





(505
)

(6
)
1,901

Mortgage servicing rights (4)
5,776

1,026



(862
)
147

(260
)


5,827

Loans held-for-sale (3)
2,405

19


8

(180
)

(108
)
12

(3
)
2,153

Other assets (5)
2,629

121


25

(156
)

(864
)

(55
)
1,700

Trading account liabilities – Corporate securities and other
(58
)
6


11

(17
)
(5
)

(1
)
9

(55
)
Accrued expenses and other liabilities (3)
(455
)
(7
)



(165
)
398

(1
)

(230
)
Long-term debt (3)
(2,355
)
92


170


(66
)
66

(151
)
354

(1,890
)
(1) 
Assets (liabilities). For assets, increase (decrease) to Level 3 and for liabilities, (increase) decrease to Level 3.
(2) 
Net derivatives include derivative assets of $7.7 billion and derivative liabilities of $6.5 billion.
(3) 
Amounts represent instruments that are accounted for under the fair value option.
(4) 
Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole-loan sales.
(5) 
Other assets is primarily comprised of net monoline exposure to a single counterparty and private equity investments.
Level 3 Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date
The following tables summarize changes in unrealized gains (losses) recorded in earnings during the three and six months ended June 30, 2014 and 2013 for Level 3 assets and liabilities that were still held at June 30, 2014 and 2013. These amounts include changes in fair value on loans, LHFS, loan commitments and structured liabilities that are accounted for under the fair value option.

Level 3 – Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date
 
Three Months Ended June 30, 2014
(Dollars in millions)
Trading
Account
Profits
(Losses)
 
Mortgage
Banking
Income
(Loss) (1)
 
Other (2)
 
Total
Trading account assets:
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
(20
)
 
$

 
$

 
$
(20
)
Equity securities
(8
)
 

 

 
(8
)
Non-U.S. sovereign debt
32

 

 

 
32

Mortgage trading loans and ABS
92

 

 

 
92

Total trading account assets
96

 

 

 
96

Net derivative assets
(520
)
 
74

 

 
(446
)
Loans and leases (3)

 

 
37

 
37

Mortgage servicing rights
17

 
(408
)
 

 
(391
)
Loans held-for-sale (3)

 

 
9

 
9

Other assets

 
(23
)
 
4

 
(19
)
Long-term debt (3)
(11
)
 

 
(41
)
 
(52
)
Total
$
(418
)
 
$
(357
)
 
$
9

 
$
(766
)
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2013
Trading account assets:
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
2

 
$

 
$

 
$
2

Equity securities
4

 

 

 
4

Non-U.S. sovereign debt
(18
)
 

 

 
(18
)
Mortgage trading loans and ABS
(10
)
 

 

 
(10
)
Total trading account assets
(22
)
 

 

 
(22
)
Net derivative assets
217

 
(16
)
 

 
201

Loans and leases (3)

 

 
58

 
58

Mortgage servicing rights

 
954

 

 
954

Loans held-for-sale (3)

 
1

 
14

 
15

Other assets

 
127

 
(58
)
 
69

Trading account liabilities – Corporate securities and other
2

 

 

 
2

Accrued expenses and other liabilities (3)

 
(16
)
 

 
(16
)
Long-term debt (3)
58

 

 
34

 
92

Total
$
255

 
$
1,050

 
$
48

 
$
1,353

(1) 
Mortgage banking income (loss) does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) 
Amounts included are primarily recorded in other income (loss). Equity investment gains of $3 million and losses of $18 million recorded on other assets were also included for the three months ended June 30, 2014 and 2013.
(3) 
Amounts represent instruments that are accounted for under the fair value option.
Level 3 – Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date
 
Six Months Ended June 30, 2014
(Dollars in millions)
Trading
Account
Profits
(Losses)
 
Mortgage
Banking
Income
(Loss) (1)
 
Other (2)
 
Total
Trading account assets:
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
105

 
$

 
$

 
$
105

Equity securities
2

 

 

 
2

Non-U.S. sovereign debt
51

 

 

 
51

Mortgage trading loans and ABS
77

 

 

 
77

Total trading account assets
235

 

 

 
235

Net derivative assets
(509
)
 
75

 

 
(434
)
Loans and leases (3)

 

 
64

 
64

Mortgage servicing rights
12

 
(876
)
 

 
(864
)
Loans held-for-sale (3)

 

 
14

 
14

Other assets

 
(51
)
 
30

 
(21
)
Trading account liabilities – Corporate securities and other
1

 

 

 
1

Long-term debt (3)
(50
)
 

 
(63
)
 
(113
)
Total
$
(311
)
 
$
(852
)
 
$
45

 
$
(1,118
)
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2013
Trading account assets:
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
53

 
$

 
$

 
$
53

Equity securities
(8
)
 

 

 
(8
)
Non-U.S. sovereign debt
63

 

 

 
63

Mortgage trading loans and ABS
58

 

 

 
58

Total trading account assets
166

 

 

 
166

Net derivative assets
13

 
(8
)
 

 
5

Loans and leases (3)

 

 
103

 
103

Mortgage servicing rights

 
1,290

 

 
1,290

Loans held-for-sale (3)

 
11

 
(30
)
 
(19
)
Other assets

 
139

 
(55
)
 
84

Trading account liabilities – Corporate securities and other
1

 

 

 
1

Accrued expenses and other liabilities (3)

 
(15
)
 

 
(15
)
Long-term debt (3)
55

 

 
23

 
78

Total
$
235

 
$
1,417

 
$
41

 
$
1,693


(1) 
Mortgage banking income (loss) does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) 
Amounts included are primarily recorded in other income (loss). Equity investment gains of $30 million and losses of $18 million recorded on other assets were also included for the six months ended June 30, 2014 and 2013.
(3) 
Amounts represent instruments that are accounted for under the fair value option.
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 June 30, 2014 and December 31, 2013.

Quantitative Information about Level 3 Fair Value Measurements at June 30, 2014
 
(Dollars in millions)
 
 
Inputs
Financial Instrument
Fair Value
Valuation
Technique
Significant Unobservable
Inputs
Ranges of
Inputs
Weighted Average
Loans and Securities (1)
 
 
 
 
 
Instruments backed by residential real estate assets
$
2,501

Discounted cash flow, Market comparables
Yield
1% to 25%

6
 %
Trading account assets – Mortgage trading loans and ABS
305

Prepayment speed
0% to 33% CPR

11
 %
Loans and leases
2,086

Default rate
5% to 15% CDR

8
 %
Loans held-for-sale
110

Loss severity
20% to 80%

31
 %
Commercial loans, debt securities and other
$
10,786

Discounted cash flow, Market comparables
Yield
0% to 39%

6
 %
Trading account assets – Corporate securities, trading loans and other
2,644

Enterprise value/EBITDA multiple
2x to 14x

6x

Trading account assets – Non-U.S. sovereign debt
640

Prepayment speed
5% to 40%

19
 %
Trading account assets – Mortgage trading loans and ABS
4,006

Default rate
1% to 5%

4
 %
AFS debt securities – Other taxable securities
2,564

Loss severity
25% to 40%

36
 %
Loans and leases
932

Duration
0 years to 5 years

3 years

 
 
Price
$0 to $117

$67
Auction rate securities
$
1,565

Discounted cash flow, Market comparables
Projected tender price/Refinancing level
60% to 100%

96
 %
Trading account assets – Corporate securities, trading loans and other
128

 
 
AFS debt securities – Other taxable securities
702

 
 
 
AFS debt securities – Tax-exempt securities
735

 
 
 
Structured liabilities
 
 
 
 
 
Long-term debt
$
(2,416
)
Industry standard derivative pricing (2, 3)
Equity correlation
13% to 98%

65
 %
 
 
Long-dated equity volatilities
6% to 57%

25
 %
 
 
Long-dated volatilities (IR)
0% to 2%

1
 %
Net derivatives assets
 
 
 
 
 
Credit derivatives
$
520

Discounted cash flow, Stochastic recovery correlation model
Yield
1% to 25%

15
 %
 
 
Upfront points
1 point to 100 points

66 points

 
 
Spread to index
25 bps to 475 bps

98 bps

 
 
Credit correlation
20% to 99%

49
 %
 
 
Prepayment speed
3% to 40% CPR

14
 %
 
 
Default rate
4% CDR

n/a

 
 
Loss severity
35
%
n/a

Equity derivatives
$
(1,961
)
Industry standard derivative pricing (2)
Equity correlation
13% to 98%

65
%
 
 
Long-dated equity volatilities
6% to 57%

25
%
Commodity derivatives
$
11

Discounted cash flow, Industry standard derivative pricing (2)
Natural gas forward price
$3/MMBtu to $8/MMBtu

$6/MMBtu

 
 
Correlation
47% to 89%

82
 %
 
 
Volatilities
11% to 120%

28
 %
Interest rate derivatives
$
634

Industry standard derivative pricing (3)
Correlation (IR/IR)
14% to 99%

58
 %
 
 
Correlation (FX/IR)
-30% to 40%

-8
 %
 
 
Long-dated inflation rates
0% to 3%

2
 %
 
 
Long-dated inflation volatilities
0% to 2%

1
 %
Total net derivative assets
$
(796
)
 
 
 
 

(1) 
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 223: Trading account assets – Corporate securities, trading loans and other of $2.8 billion, Trading account assets – Non-U.S. sovereign debt of $640 million, Trading account assets – Mortgage trading loans and ABS of $4.3 billion, AFS debt securities – Other taxable securities of $3.3 billion, AFS debt securities – Tax-exempt securities of $735 million, Loans and leases of $3.0 billion and LHFS of $110 million.
(2) 
Includes models such as Monte Carlo simulation and Black-Scholes.
(3) 
Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
EBITDA = Earnings before interest, taxes, depreciation and amortization
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, 2013
 
(Dollars in millions)
 
 
Inputs
Financial Instrument
Fair Value
Valuation
Technique
Significant Unobservable
Inputs
Ranges of
Inputs
Weighted Average
Loans and Securities (1)
 
 
 
 
 
Instruments backed by residential real estate assets
$
3,443

Discounted cash flow, Market comparables
Yield
2% to 25%
6
 %
Trading account assets – Mortgage trading loans and ABS
363

Prepayment speed
0% to 35% CPR
9
 %
Loans and leases
2,151

Default rate
1% to 20% CDR
6
 %
Loans held-for-sale
929

Loss severity
21% to 80%
35
 %
Commercial loans, debt securities and other
$
12,135

Discounted cash flow, Market comparables
Yield
0% to 45%
5
 %
Trading account assets – Corporate securities, trading loans and other
3,462

Enterprise value/EBITDA multiple
0x to 24x
7x

Trading account assets – Non-U.S. sovereign debt
468

Prepayment speed
5% to 40%
19
 %
Trading account assets – Mortgage trading loans and ABS
4,268

Default rate
1% to 5%
4
 %
AFS debt securities – Other taxable securities
3,031

Loss severity
25% to 42%
36
 %
Loans and leases
906

Duration
1 year to 5 years
4 years

Auction rate securities
$
1,719

Discounted cash flow, Market comparables
Project tender price/Refinancing level
60% to 100%
96
 %
Trading account assets – Corporate securities, trading loans and other
97

 
 
AFS debt securities – Other taxable securities
816

 
 
 
AFS debt securities – Tax-exempt securities
806

 
 
 
Structured liabilities
 
 
 
 
 
Long-term debt 
$
(1,990
)
Industry standard derivative pricing (2, 3)
Equity correlation
18% to 98%
70
 %
 
 
Long-dated equity volatilities
4% to 63%
27
 %
 
 
Long-dated volatilities (IR)
0% to 2%
1
 %
Net derivatives assets
 
 
 
 
 
Credit derivatives
$
1,008

Discounted cash flow, Stochastic recovery correlation model
Yield
3% to 25%
14
 %
 
 
Upfront points
0 points to 100 points
63 points

 
 
Spread to index
-1,407 bps to 1,741 bps
91 bps

 
 
Credit correlation
14% to 99%
47
 %
 
 
Prepayment speed
3% to 40% CPR
13
 %
 
 
Default rate
1% to 5% CDR
3
 %
 
 
Loss severity
20% to 42%
35
 %
Equity derivatives
$
(1,596
)
Industry standard derivative pricing (2)
Equity correlation
18% to 98%
70
 %
 
 
Long-dated equity volatilities
4% to 63%
27
 %
Commodity derivatives
$
6

Discounted cash flow, Industry standard derivative pricing (2)
Natural gas forward price
$3/MMBtu to $11/MMBtu
$6/MMBtu

 
 
Correlation
47% to 89%
81
 %
 
 
Volatilities
9% to 109%
30
 %
Interest rate derivatives
$
558

Industry standard derivative pricing (3)
Correlation (IR/IR)
24% to 99%
60
 %
 
 
Correlation (FX/IR)
-30% to 40%
-4
 %
 
 
Long-dated inflation rates
0% to 3%
2
 %
 
 
Long-dated inflation volatilities
0% to 2%
1
 %
Total net derivative assets
$
(24
)
 
 
 
 

(1)
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 224: Trading account assets – Corporate securities, trading loans and other of $3.6 billion, Trading account assets – Non-U.S. sovereign debt of $468 million, Trading account assets – Mortgage trading loans and ABS of $4.6 billion, AFS debt securities – Other taxable securities of $3.8 billion, AFS debt securities – Tax-exempt securities of $806 million, Loans and leases of $3.1 billion and LHFS of $929 million.
(2) 
Includes models such as Monte Carlo simulation and Black-Scholes.
(3) 
Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
EBITDA = Earnings before interest, taxes, depreciation and amortization
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange

Assets and Liabilities Measured at Fair Value on Nonrecurring Basis
Nonrecurring Fair Value

The Corporation holds certain assets that are measured at fair value, but only in certain situations (e.g., impairment) and these measurements are referred to herein as nonrecurring. These assets primarily include LHFS, certain loans and leases, and foreclosed properties. The amounts below represent only balances measured at fair value during the three and six months ended June 30, 2014 and 2013, and still held as of the reporting date.

Assets Measured at Fair Value on a Nonrecurring Basis
 
 
 
June 30, 2014
 
Three Months Ended June 30, 2014
 
Six Months Ended June 30, 2014
(Dollars in millions)
Level 2
 
Level 3
 
Gains (Losses)
Assets
 
 
 
 
 
 
 
Loans held-for-sale
$
1,057

 
$
127

 
$
5

 
$
4

Loans and leases
5

 
3,244

 
(318
)
 
(564
)
Foreclosed properties (1)
6

 
1,156

 
(21
)
 
(28
)
Other assets
90

 
2

 
(16
)
 
(16
)
 
 
 
 
 
 
 
 
 
June 30, 2013
 
Three Months Ended June 30, 2013
 
Six Months Ended June 30, 2013
Assets
 
 
 
 
 
 
 
Loans held-for-sale
$
2,195

 
$
660

 
$
(61
)
 
$
(69
)
Loans and leases
14

 
4,489

 
(525
)
 
(1,004
)
Foreclosed properties (1)
12

 
1,435

 
(12
)
 
(18
)
Other assets
99

 
12

 
(5
)
 
(11
)

(1) 
Amounts are included in other assets on the Consolidated Balance Sheet and represent fair value of, and related losses on, foreclosed properties that were written down subsequent to their initial classification as foreclosed properties.

Fair Value Inputs, Assets, Quantitative Information
The table below presents information about significant unobservable inputs related to the Corporation's nonrecurring Level 3 financial assets and liabilities at June 30, 2014 and December 31, 2013.

Quantitative Information about Nonrecurring Level 3 Fair Value Measurements
 
 
June 30, 2014
(Dollars in millions)
 
 
Inputs
Financial Instrument
Fair Value
Valuation
Technique
Significant Unobservable
Inputs
Ranges of
Inputs
Weighted Average
Instruments backed by residential real estate assets
$
3,244

Market comparables
OREO discount
0% to 28%
10
%
Loans and leases
3,244

Cost to sell
8%
n/a

 
December 31, 2013
Instruments backed by residential real estate assets
$
5,240

Market comparables
OREO discount
0% to 19%
8
%
Loans and leases
5,240

Cost to sell
8%
n/a


n/a = not applicable
Level 3 [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair Value, Measured on Recurring Basis, Gain (Loss) Included in Earnings [Table Text Block]
The following tables summarize gains (losses) due to changes in fair value, including both realized and unrealized gains (losses), recorded in earnings for Level 3 assets and liabilities during the three and six months ended June 30, 2014 and 2013. These amounts include gains (losses) on loans, LHFS, loan commitments and structured liabilities that are accounted for under the fair value option.

Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings
 
Three Months Ended June 30, 2014
(Dollars in millions)
Trading
Account
Profits
(Losses)
 
Mortgage
Banking
Income
(Loss) (1)
 
Other (2)
 
Total
Trading account assets:
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
41

 
$

 
$

 
$
41

Equity securities
(7
)
 

 

 
(7
)
Non-U.S. sovereign debt
32

 

 

 
32

Mortgage trading loans and ABS
123

 

 

 
123

Total trading account assets
189

 

 

 
189

Net derivative assets
(427
)
 
225

 

 
(202
)
AFS debt securities – Tax-exempt securities

 

 
2

 
2

Loans and leases (3)

 

 
27

 
27

Mortgage servicing rights
17

 
(266
)
 

 
(249
)
Loans held-for-sale (3)

 

 
59

 
59

Other assets

 
(29
)
 
3

 
(26
)
Long-term debt (3)
(11
)
 

 
(41
)
 
(52
)
Total
$
(232
)
 
$
(70
)
 
$
50

 
$
(252
)
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2013
Trading account assets:
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
35

 
$

 
$

 
$
35

Equity securities
8

 

 

 
8

Non-U.S. sovereign debt
(6
)
 

 

 
(6
)
Mortgage trading loans and ABS
10

 

 

 
10

Total trading account assets
47

 

 

 
47

Net derivative assets
260

 
132

 

 
392

AFS debt securities – Other taxable securities

 

 
3

 
3

Loans and leases (3)

 

 
49

 
49

Mortgage servicing rights

 
1,026

 

 
1,026

Loans held-for-sale (3)

 
(2
)
 
21

 
19

Other assets

 
127

 
(6
)
 
121

Trading account liabilities – Corporate securities and other
6

 

 

 
6

Accrued expenses and other liabilities (3)

 
(7
)
 

 
(7
)
Long-term debt (3)
58

 

 
34

 
92

Total
$
371

 
$
1,276

 
$
101

 
$
1,748

(1) 
Mortgage banking income (loss) does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) 
Amounts included are primarily recorded in other income (loss). Equity investment gains of $2 million and $34 million recorded on other assets were also included for the three months ended June 30, 2014 and 2013.
(3) 
Amounts represent instruments that are accounted for under the fair value option.
Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings
 
Six Months Ended June 30, 2014
(Dollars in millions)
Trading
Account
Profits
(Losses)
 
Mortgage
Banking
Income
(Loss) (1)
 
Other (2)
 
Total
Trading account assets:
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
163

 
$

 
$

 
$
163

Equity securities
12

 

 

 
12

Non-U.S. sovereign debt
87

 

 

 
87

Mortgage trading loans and ABS
201

 

 

 
201

Total trading account assets
463

 

 

 
463

Net derivative assets
(595
)
 
398

 

 
(197
)
AFS debt securities:
 
 
 
 
 
 
 
Other taxable securities

 

 
8

 
8

Tax-exempt securities

 

 
3

 
3

Total AFS debt securities

 

 
11

 
11

Loans and leases (3)

 

 
59

 
59

Mortgage servicing rights
12

 
(551
)
 

 
(539
)
Loans held-for-sale (3)

 

 
71

 
71

Other assets

 
(65
)
 
(21
)
 
(86
)
Trading account liabilities – Corporate securities and other
1

 

 

 
1

Accrued expenses and other liabilities (3)

 

 
1

 
1

Long-term debt (3)
(64
)
 

 
(55
)
 
(119
)
Total
$
(183
)
 
$
(218
)
 
$
66

 
$
(335
)
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2013
Trading account assets:
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
123

 
$

 
$

 
$
123

Equity securities
50

 

 

 
50

Non-U.S. sovereign debt
45

 

 

 
45

Mortgage trading loans and ABS
172

 

 

 
172

Total trading account assets
390

 

 

 
390

Net derivative assets
146

 
539

 

 
685

AFS debt securities:
 
 
 
 
 
 
 
Other taxable securities

 

 
3

 
3

Tax-exempt securities

 

 
1

 
1

Total AFS debt securities

 

 
4

 
4

Loans and leases (3)

 

 
100

 
100

Mortgage servicing rights

 
1,460

 

 
1,460

Loans held-for-sale (3)

 
2

 
(22
)
 
(20
)
Other assets

 
124

 
(451
)
 
(327
)
Trading account liabilities – Corporate securities and other
6

 

 

 
6

Accrued expenses and other liabilities (3)

 
22

 

 
22

Long-term debt (3)
80

 

 
23

 
103

Total
$
622

 
$
2,147

 
$
(346
)
 
$
2,423


(1) 
Mortgage banking income (loss) does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) 
Amounts included are primarily recorded in other income (loss). Equity investment losses of $21 million and gains of $36 million recorded on other assets were also included for the six months ended June 30, 2014 and 2013.
(3) 
Amounts represent instruments that are accounted for under the fair value option.