Quarterly report pursuant to Section 13 or 15(d)

Fair Value Option

v3.7.0.1
Fair Value Option
 6 Months Ended
Jun. 30, 2017
Fair Value Option [Abstract]  
Fair Value Option
Fair Value Option
The Corporation elects to account for certain financial instruments under the fair value option. For more information on the primary financial instruments for which the fair value option elections have been made, see Note 21 – Fair Value Option to the Consolidated Financial Statements of the Corporation's 2016 Annual Report on Form 10-K.
The following tables provide information about the fair value carrying amount and the contractual principal outstanding of assets and liabilities accounted for under the fair value option at June 30, 2017 and December 31, 2016, and information about where changes in the fair value of assets and liabilities accounted for under the fair value option are included in the Consolidated Statement of Income for the three and six months ended June 30, 2017 and 2016.
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Option Elections
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2017
 
December 31, 2016
(Dollars in millions)
Fair Value Carrying Amount
 
Contractual Principal Outstanding
 
Fair Value Carrying Amount Less Unpaid Principal
 
Fair Value Carrying Amount
 
Contractual Principal Outstanding
 
Fair Value Carrying Amount Less Unpaid Principal
Federal funds sold and securities borrowed or purchased under agreements to resell
$
50,758

 
$
50,675

 
$
83

 
$
49,750

 
$
49,615

 
$
135

Loans reported as trading account assets (1)
5,630

 
11,072

 
(5,442
)
 
6,215

 
11,557

 
(5,342
)
Trading inventory – other
9,879

 
n/a

 
n/a

 
8,206

 
n/a

 
n/a

Consumer and commercial loans
7,325

 
7,340

 
(15
)
 
7,085

 
7,190

 
(105
)
Loans held-for-sale
2,707

 
4,287

 
(1,580
)
 
4,026

 
5,595

 
(1,569
)
Customer receivables and other assets
253

 
250

 
3

 
253

 
250

 
3

Long-term deposits
456

 
430

 
26

 
731

 
672

 
59

Federal funds purchased and securities loaned or sold under agreements to repurchase
32,132

 
32,369

 
(237
)
 
35,766

 
35,929

 
(163
)
Short-term borrowings
1,572

 
1,572

 
—

 
2,024

 
2,024

 
—

Unfunded loan commitments
138

 
n/a

 
n/a

 
173

 
n/a

 
n/a

Long-term debt (2)
29,073

 
28,953

 
120

 
30,037

 
29,862

 
175


(1) 
A significant portion of the loans reported as trading account assets are distressed loans which trade and were purchased at a deep discount to par, and the remainder are loans with a fair value near contractual principal outstanding.
(2) 
Includes structured liabilities with a fair value of $28.7 billion and $29.7 billion, and contractual principal outstanding of $28.6 billion and $29.5 billion at June 30, 2017 and December 31, 2016.
n/a = not applicable
 
 
 
 
 
 
 
 
Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
(Dollars in millions)
Trading Account Profits (Losses)
 
Mortgage Banking Income
(Loss)
 
Other
Income
(Loss)
 
Total
Federal funds sold and securities borrowed or purchased under agreements to resell
$
(8
)
 
$
—

 
$
—

 
$
(8
)
Loans reported as trading account assets
47

 
—

 
—

 
47

Trading inventory – other (1)
522

 
—

 
—

 
522

Consumer and commercial loans
4

 
—

 
20

 
24

Loans held-for-sale (2)
(1
)
 
46

 
30

 
75

Long-term deposits
14

 
—

 
3

 
17

Federal funds purchased and securities loaned or sold under agreements to repurchase
2

 
—

 
—

 
2

Short-term borrowings
(3
)
 
—

 
—

 
(3
)
Unfunded loan commitments
—

 
—

 
(4
)
 
(4
)
Long-term debt (3, 4)
107

 
—

 
(34
)
 
73

Total
$
684

 
$
46

 
$
15

 
$
745

 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2016
Federal funds sold and securities borrowed or purchased under agreements to resell
$
(9
)
 
$
—

 
$
—

 
$
(9
)
Loans reported as trading account assets
14

 
—

 
—

 
14

Trading inventory – other (1)
(243
)
 
—

 
—

 
(243
)
Consumer and commercial loans
15

 
—

 
(31
)
 
(16
)
Loans held-for-sale (2)
5

 
145

 
20

 
170

Other assets
—

 
—

 
(5
)
 
(5
)
Long-term deposits
(2
)
 
—

 
(8
)
 
(10
)
Federal funds purchased and securities loaned or sold under agreements to repurchase
11

 
—

 
—

 
11

Unfunded loan commitments
—

 
—

 
163

 
163

Long-term debt (3, 4)
(574
)
 
—

 
(23
)
 
(597
)
Total
$
(783
)
 
$
145

 
$
116

 
$
(522
)

(1)  
The gains (losses) in trading account profits (losses) are primarily offset by gains (losses) on trading liabilities that hedge these assets.
(2) 
Includes the value of IRLCs on funded loans, including those sold during the period.
(3) 
The majority of the net gains (losses) in trading account profits relate to the embedded derivative in structured liabilities and are offset by gains (losses) on derivatives and securities that hedge these liabilities.
(4) 
For the cumulative impact of changes in the Corporation’s own credit spreads and the amount recognized in OCI, see Note 12 – Accumulated Other Comprehensive Income (Loss). For information on how the Corporation’s own credit spread is determined, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation's 2016 Annual Report on Form 10-K.
 
 
 
 
 
 
 
 
Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2017
(Dollars in millions)
Trading Account Profits (Losses)
 
Mortgage Banking Income
(Loss)
 
Other
Income
(Loss)
 
Total
Federal funds sold and securities borrowed or purchased under agreements to resell
$
(20
)
 
$
—

 
$
—

 
$
(20
)
Loans reported as trading account assets
197

 
—

 
—

 
197

Trading inventory – other (1)
1,673

 
—

 
—

 
1,673

Consumer and commercial loans
9

 
—

 
39

 
48

Loans held-for-sale (2)
—

 
96

 
74

 
170

Long-term deposits
15

 
—

 
8

 
23

Federal funds purchased and securities loaned or sold under agreements to repurchase
(43
)
 
—

 
—

 
(43
)
Short-term borrowings
(5
)
 
—

 
—

 
(5
)
Unfunded loan commitments
—

 
—

 
34

 
34

Long-term debt (3, 4)
(55
)
 
—

 
(71
)
 
(126
)
Total
$
1,771

 
$
96

 
$
84

 
$
1,951

 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2016
Federal funds sold and securities borrowed or purchased under agreements to resell
$
(1
)
 
$
—

 
$
—

 
$
(1
)
Loans reported as trading account assets
126

 
—

 
—

 
126

Trading inventory – other (1)
(356
)
 
—

 
—

 
(356
)
Consumer and commercial loans
34

 
—

 
(21
)
 
13

Loans held-for-sale (2)
5

 
314

 
55

 
374

Other assets
—

 
—

 
(3
)
 
(3
)
Long-term deposits
(11
)
 
—

 
(30
)
 
(41
)
Federal funds purchased and securities loaned or sold under agreements to repurchase
3

 
—

 
—

 
3

Unfunded loan commitments
—

 
—

 
311

 
311

Long-term debt (3, 4)
(580
)
 
—

 
(53
)
 
(633
)
Total
$
(780
)
 
$
314

 
$
259

 
$
(207
)
(1)  
The gains (losses) in trading account profits (losses) are primarily offset by gains (losses) on trading liabilities that hedge these assets.
(2) 
Includes the value of IRLCs on funded loans, including those sold during the period.
(3) 
The majority of the net gains (losses) in trading account profits relate to the embedded derivative in structured liabilities and are offset by gains (losses) on derivatives and securities that hedge these liabilities.
(4) 
For the cumulative impact of changes in the Corporation’s own credit spreads and the amount recognized in OCI, see Note 12 – Accumulated Other Comprehensive Income (Loss). For information on how the Corporation’s own credit spread is determined, see Note 20 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation's 2016 Annual Report on Form 10-K.
 
 
 
 
 
 
 
 
Gains (Losses) Related to Borrower-specific Credit Risk for Assets Accounted for Under the Fair Value Option
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
(Dollars in millions)
2017
 
2016
 
2017
 
2016
Loans reported as trading account assets
$
7

 
$
(4
)
 
$
20

 
$
5

Consumer and commercial loans
22

 
(29
)
 
41

 
(39
)
Loans held-for-sale
(1
)
 
5

 
(1
)
 
4