Quarterly report pursuant to Section 13 or 15(d)

Fair Value Option

v3.19.1
Fair Value Option
3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [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 2018 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 March 31, 2019 and December 31, 2018, 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 months ended March 31, 2019 and 2018.
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Option Elections
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31, 2019
 
December 31, 2018
(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
$
59,557

 
$
59,524

 
$
33

 
$
56,399

 
$
56,376

 
$
23

Loans reported as trading account assets (1)
6,346

 
13,438

 
(7,092
)
 
6,195

 
13,088

 
(6,893
)
Trading inventory – other
16,322

 
n/a

 
n/a

 
13,778

 
n/a

 
n/a

Consumer and commercial loans
6,187

 
6,220

 
(33
)
 
4,349

 
4,399

 
(50
)
Loans held-for-sale (1)
2,547

 
3,799

 
(1,252
)
 
2,942

 
4,749

 
(1,807
)
Other assets
3

 
n/a

 
n/a

 
3

 
n/a

 
n/a

Long-term deposits
499

 
447

 
52

 
492

 
454

 
38

Federal funds purchased and securities loaned or sold under agreements to repurchase
26,609

 
26,614

 
(5
)
 
28,875

 
28,881

 
(6
)
Short-term borrowings
1,895

 
1,895

 

 
1,648

 
1,648

 

Unfunded loan commitments
106

 
n/a

 
n/a

 
169

 
n/a

 
n/a

Long-term debt (2)
31,625

 
31,990

 
(365
)
 
27,689

 
29,198

 
(1,509
)

(1) 
A significant portion of the loans reported as trading account assets and LHFS are distressed loans that 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 $31.3 billion and $27.3 billion, and contractual principal outstanding of $31.6 billion and $28.8 billion at March 31, 2019 and December 31, 2018.
n/a = not applicable
 
 
 
 
 
 
 
 
 
 
 
 
Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31
 
2019
 
2018
(Dollars in millions)
Trading Account Income
 
Other
Income
 
Total
 
Trading Account Income
 
Other
Income
 
Total
Loans reported as trading account assets (1)
$
91

 
$

 
$
91

 
$
103

 
$

 
$
103

Trading inventory – other (2)
2,544

 

 
2,544

 
595

 

 
595

Consumer and commercial loans (1)
1

 
18

 
19

 
106

 
(21
)
 
85

Long-term debt (3, 4)
(1,080
)
 
(23
)
 
(1,103
)
 
819

 
(41
)
 
778

Other (5)
11

 
86

 
97

 
8

 
8

 
16

Total
$
1,567

 
$
81

 
$
1,648

 
$
1,631

 
$
(54
)
 
$
1,577


(1) 
Gains (losses) related to borrower-specific credit risk were not significant.
(2) 
The gains in trading account income are primarily offset by losses on trading liabilities that hedge these assets.
(3) 
The majority of the net gains (losses) in trading account income relate to the embedded derivatives 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 accumulated OCI, see Note 14 – Accumulated Other Comprehensive Income (Loss). For more 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 2018 Annual Report on Form 10-K.
(5) 
Includes gains (losses) on federal funds sold and securities borrowed or purchased under agreements to resell, LHFS, long-term deposits, federal funds purchased and securities loaned or sold under agreements to repurchase, short-term borrowings and unfunded loan commitments.