Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

v3.19.1
Fair Value Measurements (Tables)
 3 Months Ended
Mar. 31, 2019
Fair Value Disclosures [Abstract]  
Assets and Liabilities Carried at Fair Value on a Recurring Basis Assets and liabilities carried at fair value on a recurring basis at March 31, 2019 and December 31, 2018, including financial instruments that the Corporation accounts for under the fair value option, are summarized in the following tables.
 
 
 
 
 
 
 
 
 
 
 
March 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
$
1,180

 
$
—

 
$
—

 
$
—

 
$
1,180

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

 
59,557

 
—

 
—

 
59,557

Trading account assets:
 

 
 

 
 

 
 

 
 

U.S. Treasury and agency securities (2)
41,904

 
450

 
—

 
—

 
42,354

Corporate securities, trading loans and other
—

 
28,254

 
1,428

 
—

 
29,682

Equity securities
63,520

 
35,570

 
288

 
—

 
99,378

Non-U.S. sovereign debt
8,470

 
24,068

 
472

 
—

 
33,010

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

 
23,539

 
—

 
—

 
23,539

Mortgage trading loans, ABS and other MBS
—

 
9,589

 
1,510

 
—

 
11,099

Total trading account assets (3)
113,894

 
121,470

 
3,698

 
—

 
239,062

Derivative assets
12,581

 
312,097

 
3,473

 
(285,760
)
 
42,391

AFS debt securities:
 

 
 

 
 

 
 

 
 

U.S. Treasury and agency securities
59,800

 
1,224

 
—

 
—

 
61,024

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

Agency
—

 
117,165

 
—

 
—

 
117,165

Agency-collateralized mortgage obligations
—

 
5,379

 
—

 
—

 
5,379

Non-agency residential
—

 
1,434

 
581

 
—

 
2,015

Commercial
—

 
14,369

 
—

 
—

 
14,369

Non-U.S. securities
—

 
10,760

 
2

 
—

 
10,762

Other taxable securities
—

 
3,430

 
3

 
—

 
3,433

Tax-exempt securities
—

 
17,466

 
—

 
—

 
17,466

Total AFS debt securities
59,800

 
171,227

 
586

 
—

 
231,613

Other debt securities carried at fair value:
 
 
 
 
 
 
 
 
 
Agency MBS
—

 
1,013

 
—

 
—

 
1,013

Non-agency residential MBS
—

 
1,414

 
224

 
—

 
1,638

Non-U.S. securities
3,369

 
4,320

 
—

 
—

 
7,689

Other taxable securities
—

 
3

 
—

 
—

 
3

Total other debt securities carried at fair value
3,369

 
6,750

 
224

 
—

 
10,343

Loans and leases
—

 
5,870

 
317

 
—

 
6,187

Loans held-for-sale
—

 
1,989

 
558

 
—

 
2,547

Other assets (4)
17,784

 
2,396

 
2,749

 
—

 
22,929

Total assets (5)
$
208,608

 
$
681,356

 
$
11,605

 
$
(285,760
)
 
$
615,809

Liabilities
 

 
 

 
 

 
 

 
 

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

 
$
499

 
$
—

 
$
—

 
$
499

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

 
26,609

 
—

 
—

 
26,609

Trading account liabilities:
 

 
 

 
 

 
 

 
 
U.S. Treasury and agency securities
11,539

 
610

 
—

 
—

 
12,149

Equity securities
37,038

 
3,155

 
—

 
—

 
40,193

Non-U.S. sovereign debt
16,206

 
9,234

 
—

 
—

 
25,440

Corporate securities and other
—

 
6,607

 
21

 
—

 
6,628

Total trading account liabilities
64,783

 
19,606

 
21

 
—

 
84,410

Derivative liabilities
11,907

 
301,867

 
4,491

 
(281,927
)
 
36,338

Short-term borrowings
—

 
1,895

 
—

 
—

 
1,895

Accrued expenses and other liabilities
20,821

 
2,552

 
—

 
—

 
23,373

Long-term debt
—

 
30,735

 
890

 
—

 
31,625

Total liabilities (5)
$
97,511

 
$
383,763

 
$
5,402

 
$
(281,927
)
 
$
204,749

(1) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2) 
Includes $24.0 billion of GSE obligations.
(3) 
Includes securities with a fair value of $15.7 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 $1.9 billion which are classified as Level 3 assets.
(5) 
Total recurring Level 3 assets were 0.49 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.26 percent of total consolidated liabilities.
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
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
$
1,214

 
$
—

 
$
—

 
$
—

 
$
1,214

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

 
56,399

 
—

 
—

 
56,399

Trading account assets:
 

 
 

 
 

 
 

 
 

U.S. Treasury and agency securities (2)
53,131

 
1,593

 
—

 
—

 
54,724

Corporate securities, trading loans and other
—

 
24,630

 
1,558

 
—

 
26,188

Equity securities
53,840

 
23,163

 
276

 
—

 
77,279

Non-U.S. sovereign debt
5,818

 
19,210

 
465

 
—

 
25,493

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

 
19,586

 
—

 
—

 
19,586

Mortgage trading loans, ABS and other MBS
—

 
9,443

 
1,635

 
—

 
11,078

Total trading account assets (3)
112,789

 
97,625

 
3,934

 
—

 
214,348

Derivative assets
9,967

 
315,413

 
3,466

 
(285,121
)
 
43,725

AFS debt securities:
 

 
 

 
 

 
 

 
 

U.S. Treasury and agency securities
53,663

 
1,260

 
—

 
—

 
54,923

Mortgage-backed securities:
 

 
 

 
 

 
 

 
 

Agency
—

 
121,826

 
—

 
—

 
121,826

Agency-collateralized mortgage obligations
—

 
5,530

 
—

 
—

 
5,530

Non-agency residential
—

 
1,320

 
597

 
—

 
1,917

Commercial
—

 
14,078

 
—

 
—

 
14,078

Non-U.S. securities
—

 
9,304

 
2

 
—

 
9,306

Other taxable securities
—

 
4,403

 
7

 
—

 
4,410

Tax-exempt securities
—

 
17,376

 
—

 
—

 
17,376

Total AFS debt securities
53,663

 
175,097

 
606

 
—

 
229,366

Other debt securities carried at fair value:
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency securities
1,282

 
—

 
—

 
—

 
1,282

Non-agency residential MBS
—

 
1,434

 
172

 
—

 
1,606

Non-U.S. securities
490

 
5,354

 
—

 
—

 
5,844

Other taxable securities
—

 
3

 
—

 
—

 
3

Total other debt securities carried at fair value
1,772

 
6,791

 
172

 
—

 
8,735

Loans and leases
—

 
4,011

 
338

 
—

 
4,349

Loans held-for-sale
—

 
2,400

 
542

 
—

 
2,942

Other assets (4)
15,032

 
1,775

 
2,932

 
—

 
19,739

Total assets (5)
$
194,437

 
$
659,511

 
$
11,990

 
$
(285,121
)
 
$
580,817

Liabilities
 

 
 

 
 

 
 

 
 

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

 
$
492

 
$
—

 
$
—

 
$
492

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

 
28,875

 
—

 
—

 
28,875

Trading account liabilities:
 

 
 

 
 

 
 

 
 
U.S. Treasury and agency securities
7,894

 
761

 
—

 
—

 
8,655

Equity securities
33,739

 
4,070

 
—

 
—

 
37,809

Non-U.S. sovereign debt
7,452

 
9,182

 
—

 
—

 
16,634

Corporate securities and other
—

 
5,104

 
18

 
—

 
5,122

Total trading account liabilities
49,085

 
19,117

 
18

 
—

 
68,220

Derivative liabilities
9,931

 
303,441

 
4,401

 
(279,882
)
 
37,891

Short-term borrowings
—

 
1,648

 
—

 
—

 
1,648

Accrued expenses and other liabilities
18,096

 
1,979

 
—

 
—

 
20,075

Long-term debt
—

 
26,872

 
817

 
—

 
27,689

Total liabilities (5)
$
77,112

 
$
382,424

 
$
5,236

 
$
(279,882
)
 
$
184,890


(1) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(2) 
Includes $20.2 billion of GSE obligations.
(3) 
Includes securities with a fair value of $16.6 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 $2.0 billion which are classified as Level 3 assets.
(5) 
Total recurring Level 3 assets were 0.51 percent of total consolidated assets, and total recurring Level 3 liabilities were 0.25 percent of total consolidated liabilities.
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2019 and 2018, including net realized and unrealized gains (losses) included in earnings and accumulated OCI. Transfers into Level 3 occur primarily due to decreased price observability, and transfers out of Level 3 occur primarily due to increased price observability. Transfers occur on a regular basis for long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.
 
 
 
 
 
 
 
 
 
 
 
 
Level 3 – Fair Value Measurements (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance
January 1
Total Realized/Unrealized Gains (Losses) in Net Income (2)
Gains
(Losses)
in OCI (3)
Gross
Gross
Transfers
into
Level 3 
Gross
Transfers
out of
Level 3 
Balance
March 31
Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held (2)
(Dollars in millions)
Purchases
Sales
Issuances
Settlements
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
Trading account assets:
 

 

 

 

 
 
 
 

 

 

 
Corporate securities, trading loans and other
$
1,558

$
3

$
—

$
54

$
(73
)
$
—

$
(60
)
$
139

$
(193
)
$
1,428

$
(8
)
Equity securities
276

2

—

18

(1
)
—

(3
)
2

(6
)
288

2

Non-U.S. sovereign debt
465

8

(1
)
—

—

—

—

—

—

472

8

Mortgage trading loans, ABS and other MBS
1,635

38

(1
)
230

(337
)
—

(9
)
89

(135
)
1,510

27

Total trading account assets
3,934

51

(2
)
302

(411
)
—

(72
)
230

(334
)
3,698

29

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

111

(245
)
—

(55
)
122

9

(1,018
)
(25
)
AFS debt securities:
 

 

 

 

 

 

 

 

 

 

 
Non-agency residential MBS
597

—

93

—

—

—

(7
)
159

(261
)
581

—

Non-U.S. securities
2

—

—

—

—

—

—

—

—

2

—

Other taxable securities
7

—

—

—

—

—

(4
)
—

—

3

—

Total AFS debt securities
606

—

93

—

—

—

(11
)
159

(261
)
586

—

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

47

—

—

—

—

(1
)
38

(32
)
224

47

Loans and leases (5)
338

4

—

—

(15
)
—

(10
)
—

—

317

4

Loans held-for-sale (5,6)
542

12

(2
)
10

(21
)
11

(53
)
59

—

558

4

Other assets (6, 7)
2,932

(74
)
8

—

—

41

(158
)
—

—

2,749

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

—

—

(3
)
—

—

—

—

(21
)
—

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

—

(3
)
38

(61
)
—

(890
)
(46
)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Trading account assets:
 
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
1,864

$
9

$
—

$
193

$
(136
)
$
—

$
(139
)
$
103

$
(178
)
$
1,716

$
(15
)
Equity securities
235

8

—

6

(7
)
—

—

1

(31
)
212

8

Non-U.S. sovereign debt
556

16

2

—

(50
)
—

(8
)
—

(115
)
401

16

Mortgage trading loans, ABS and other MBS
1,498

99

3

125

(320
)
—

(69
)
94

(58
)
1,372

83

Total trading account assets
4,153

132

5

324

(513
)
—

(216
)
198

(382
)
3,701

92

Net derivative assets (4)
(1,714
)
495

—

153

(262
)
—

202

71

(83
)
(1,138
)
517

AFS debt securities:
 

 

 

 
 
 
 

 

 

 

 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Non-U.S. securities
25

—

—

—

—

—

(2
)
—

—

23

—

Other taxable securities
509

1

—

—

—

—

(7
)
—

(460
)
43

—

Tax-exempt securities
469

—

—

—

—

—

—

—

(469
)
—

—

Total AFS debt securities (8)
1,003

1

—

—

—

—

(9
)
—

(929
)
66

—

Loans and leases (5)
571

(16
)
—

—

(4
)
—

(25
)
—

—

526

(16
)
Loans held-for-sale (5,6)
690

24

—

12

—

—

(41
)
—

—

685

21

Other assets (6, 7, 8)
2,425

192

—

—

(38
)
29

(242
)
929

—

3,295

120

Trading account liabilities – Corporate securities and other
(24
)
1

—

—

(2
)
(1
)
—

—

—

(26
)
1

Accrued expenses and other liabilities (5)
(8
)
—

—

—

—

—

—

—

—

(8
)
—

Long-term debt (5)
(1,863
)
23

1

5

—

(67
)
172

(33
)
411

(1,351
)
26

(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 trading account income; Net derivative assets - primarily trading account income and other income; Other debt securities carried at fair value - other income; Loans and leases - other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - primarily trading account income. For MSRs, the amounts reflect the changes in modeled MSR fair value due to observed changes in interest rates, volatility, spreads and the shape of the forward swap curve, and periodic adjustments to the valuation model to reflect changes in the modeled relationships between inputs and projected cash flows, as well as changes in cash flow assumptions including cost to service.
(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. Total gains (losses) in OCI include net unrealized gains of $96 million related to financial instruments still held at March 31, 2019. For additional information on changes in fair value recorded in accumulated OCI, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.
(4) 
Net derivative assets include derivative assets of $3.5 billion and $4.5 billion and derivative liabilities of $4.5 billion and $5.7 billion at March 31, 2019 and 2018.
(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.
(8) 
Transfers out of AFS debt and into other assets relate to the reclassification of certain securities.
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation The following tables present a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2019 and 2018, including net realized and unrealized gains (losses) included in earnings and accumulated OCI. Transfers into Level 3 occur primarily due to decreased price observability, and transfers out of Level 3 occur primarily due to increased price observability. Transfers occur on a regular basis for long-term debt instruments due to changes in the impact of unobservable inputs on the value of the embedded derivative in relation to the instrument as a whole.
 
 
 
 
 
 
 
 
 
 
 
 
Level 3 – Fair Value Measurements (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance
January 1
Total Realized/Unrealized Gains (Losses) in Net Income (2)
Gains
(Losses)
in OCI (3)
Gross
Gross
Transfers
into
Level 3 
Gross
Transfers
out of
Level 3 
Balance
March 31
Change in Unrealized Gains (Losses) in Net Income Related to Financial Instruments Still Held (2)
(Dollars in millions)
Purchases
Sales
Issuances
Settlements
Three Months Ended March 31, 2019
 
 
 
 
 
 
 
 
 
 
 
Trading account assets:
 

 

 

 

 
 
 
 

 

 

 
Corporate securities, trading loans and other
$
1,558

$
3

$
—

$
54

$
(73
)
$
—

$
(60
)
$
139

$
(193
)
$
1,428

$
(8
)
Equity securities
276

2

—

18

(1
)
—

(3
)
2

(6
)
288

2

Non-U.S. sovereign debt
465

8

(1
)
—

—

—

—

—

—

472

8

Mortgage trading loans, ABS and other MBS
1,635

38

(1
)
230

(337
)
—

(9
)
89

(135
)
1,510

27

Total trading account assets
3,934

51

(2
)
302

(411
)
—

(72
)
230

(334
)
3,698

29

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

111

(245
)
—

(55
)
122

9

(1,018
)
(25
)
AFS debt securities:
 

 

 

 

 

 

 

 

 

 

 
Non-agency residential MBS
597

—

93

—

—

—

(7
)
159

(261
)
581

—

Non-U.S. securities
2

—

—

—

—

—

—

—

—

2

—

Other taxable securities
7

—

—

—

—

—

(4
)
—

—

3

—

Total AFS debt securities
606

—

93

—

—

—

(11
)
159

(261
)
586

—

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

47

—

—

—

—

(1
)
38

(32
)
224

47

Loans and leases (5)
338

4

—

—

(15
)
—

(10
)
—

—

317

4

Loans held-for-sale (5,6)
542

12

(2
)
10

(21
)
11

(53
)
59

—

558

4

Other assets (6, 7)
2,932

(74
)
8

—

—

41

(158
)
—

—

2,749

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

—

—

(3
)
—

—

—

—

(21
)
—

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

—

(3
)
38

(61
)
—

(890
)
(46
)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Trading account assets:
 
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
1,864

$
9

$
—

$
193

$
(136
)
$
—

$
(139
)
$
103

$
(178
)
$
1,716

$
(15
)
Equity securities
235

8

—

6

(7
)
—

—

1

(31
)
212

8

Non-U.S. sovereign debt
556

16

2

—

(50
)
—

(8
)
—

(115
)
401

16

Mortgage trading loans, ABS and other MBS
1,498

99

3

125

(320
)
—

(69
)
94

(58
)
1,372

83

Total trading account assets
4,153

132

5

324

(513
)
—

(216
)
198

(382
)
3,701

92

Net derivative assets (4)
(1,714
)
495

—

153

(262
)
—

202

71

(83
)
(1,138
)
517

AFS debt securities:
 

 

 

 
 
 
 

 

 

 

 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Non-U.S. securities
25

—

—

—

—

—

(2
)
—

—

23

—

Other taxable securities
509

1

—

—

—

—

(7
)
—

(460
)
43

—

Tax-exempt securities
469

—

—

—

—

—

—

—

(469
)
—

—

Total AFS debt securities (8)
1,003

1

—

—

—

—

(9
)
—

(929
)
66

—

Loans and leases (5)
571

(16
)
—

—

(4
)
—

(25
)
—

—

526

(16
)
Loans held-for-sale (5,6)
690

24

—

12

—

—

(41
)
—

—

685

21

Other assets (6, 7, 8)
2,425

192

—

—

(38
)
29

(242
)
929

—

3,295

120

Trading account liabilities – Corporate securities and other
(24
)
1

—

—

(2
)
(1
)
—

—

—

(26
)
1

Accrued expenses and other liabilities (5)
(8
)
—

—

—

—

—

—

—

—

(8
)
—

Long-term debt (5)
(1,863
)
23

1

5

—

(67
)
172

(33
)
411

(1,351
)
26

(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 trading account income; Net derivative assets - primarily trading account income and other income; Other debt securities carried at fair value - other income; Loans and leases - other income; Loans held-for-sale - other income; Other assets - primarily other income related to MSRs; Long-term debt - primarily trading account income. For MSRs, the amounts reflect the changes in modeled MSR fair value due to observed changes in interest rates, volatility, spreads and the shape of the forward swap curve, and periodic adjustments to the valuation model to reflect changes in the modeled relationships between inputs and projected cash flows, as well as changes in cash flow assumptions including cost to service.
(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. Total gains (losses) in OCI include net unrealized gains of $96 million related to financial instruments still held at March 31, 2019. For additional information on changes in fair value recorded in accumulated OCI, see Note 1 – Summary of Significant Accounting Principles to the Consolidated Financial Statements of the Corporation’s 2018 Annual Report on Form 10-K.
(4) 
Net derivative assets include derivative assets of $3.5 billion and $4.5 billion and derivative liabilities of $4.5 billion and $5.7 billion at March 31, 2019 and 2018.
(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.
(8) 
Transfers out of AFS debt and into other assets relate to the reclassification of certain securities.
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 March 31, 2019 and December 31, 2018.
 
 
 
 
 
 
Quantitative Information about Level 3 Fair Value Measurements at March 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
$
1,583

Discounted cash flow, Market comparables
Yield
0% to 25%
6%
Trading account assets – Mortgage trading loans, ABS and other MBS
455

Prepayment speed
0% to 25% CPR
15%
Loans and leases
317

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

Loss severity
0% to 48%
15%
AFS debt securities, primarily non-agency residential
586

Price
$0 to $150
$100
Other debt securities carried at fair value - Non-agency residential
224

 
 
 
Instruments backed by commercial real estate assets
$
355

Discounted cash flow
Yield
0% to 25%
7%
Trading account assets – Corporate securities, trading loans and other
232

Price
$0 to $100
$71
Trading account assets – Mortgage trading loans, ABS and other MBS
123

 
 
 
Commercial loans, debt securities and other
$
3,157

Discounted cash flow, Market comparables
Yield
1% to 15%
7%
Trading account assets – Corporate securities, trading loans and other
1,196

Prepayment speed
10% to 20%
15%
Trading account assets – Non-U.S. sovereign debt
472

Default rate
3% to 4%
4%
Trading account assets – Mortgage trading loans, ABS and other MBS
932

Loss severity
35% to 40%
37%
Loans held-for-sale
557

Price
$0 to $143
$66
Other assets, primarily auction rate securities
$
878

Discounted cash flow, Market comparables
Price
$10 to $100
$95

 
 
 
 

 
 
 
 
MSRs
$
1,871

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%
12%
Structured liabilities
 
 
 
 
 
Long-term debt
$
(890
)
Discounted cash flow, Market comparables, Industry standard derivative pricing (3)
Equity correlation
10% to 100%
65%
 
 
Long-dated equity volatilities
4% to 91%
31%
 
 
Price
$0 to $101
$71
 
 
 
 
 
Net derivative assets
 
 
 
 
 
Credit derivatives
$
(197
)
Discounted cash flow, Stochastic recovery correlation model
Yield
3% to 5%
4%
 
 
Upfront points
0 to 100 points
68 points
 
 
Prepayment speed
15% to 100% CPR
38%
 
 
Default rate
1% to 4% CDR
2%
 
 
Loss severity
35%
n/a
 
 
Price
$0 to $138
$85
Equity derivatives
$
(802
)
Industry standard derivative pricing (3)
Equity correlation
10% to 100%
65%
 
 
Long-dated equity volatilities
4% to 91%
31%
Commodity derivatives
$
6

Discounted cash flow, Industry standard derivative pricing (3)
Natural gas forward price
$1/MMBtu to $8/MMBtu
$3/MMBtu
 
 
Correlation
25% to 85%
67%
 
 
Volatilities
15% to 115%
34%
Interest rate derivatives
$
(25
)
Industry standard derivative pricing (4)
Correlation (IR/IR)
15% to 70%
54%
 
 
Correlation (FX/IR)
0% to 46%
3%
 
 
Long-dated inflation rates
-18% to 38%
4%
 
 
Long-dated inflation volatilities
0% to 1%
1%
Total net derivative assets
$
(1,018
)
 
 
 
 
(1) 
For loans and securities, structured liabilities and net derivative assets, 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 79: Trading account assets – Corporate securities, trading loans and other of $1.4 billion, Trading account assets – Non-U.S. sovereign debt of $472 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.5 billion, AFS debt securities of $586 million, Other debt securities carried at fair value - Non-agency residential of $224 million, Other assets, including MSRs, of $2.7 billion, Loans and leases of $317 million and LHFS of $558 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, 2018
 
 
 
 
 
(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
$
1,536

Discounted cash flow, Market comparables
Yield
0% to 25%
8%
Trading account assets – Mortgage trading loans, ABS and other MBS
419

Prepayment speed
0% to 21% CPR
12%
Loans and leases
338

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

Loss severity
0% to 51%
17%
AFS debt securities, primarily non-agency residential
606

Price
$0 to $128
$72
Other debt securities carried at fair value - Non-agency residential
172

 
 
 
Instruments backed by commercial real estate assets
$
291

Discounted cash flow
Yield
0% to 25%
7%
Trading account assets – Corporate securities, trading loans and other
200

Price
$0 to $100
$79
Trading account assets – Mortgage trading loans, ABS and other MBS
91

 
 
 
Commercial loans, debt securities and other
$
3,489

Discounted cash flow, Market comparables
Yield
1% to 18%
13%
Trading account assets – Corporate securities, trading loans and other
1,358

Prepayment speed
10% to 20%
15%
Trading account assets – Non-U.S. sovereign debt
465

Default rate
3% to 4%
4%
Trading account assets – Mortgage trading loans, ABS and other MBS
1,125

Loss severity
35% to 40%
38%
Loans held-for-sale
541

Price
$0 to $141
$68
Other assets, primarily auction rate securities
$
890

Discounted cash flow, Market comparables
Price
$10 to $100
$95
 
 
 
 
 
 
 
 
 
 
MSRs
$
2,042

Discounted cash flow
Weighted-average life, fixed rate (5)
0 to 14 years
5 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
$
(817
)
Discounted cash flow, Market comparables, Industry standard derivative pricing (3)
Equity correlation
11% to 100%
67%
 
 
Long-dated equity volatilities
4% to 84%
32%
 
 
Yield
7% to 18%
16%
 
 
Price
$0 to $100
$72
Net derivative assets
 
 
 
 
 
Credit derivatives
$
(565
)
Discounted cash flow, Stochastic recovery correlation model
Yield
0% to 5%
4%
 
 
Upfront points
0 points to 100 points
70 points
 
 
Credit correlation
70%
n/a
 
 
Prepayment speed
15% to 20% CPR
15%
 
 
Default rate
1% to 4% CDR
2%
 
 
Loss severity
35%
n/a
 
 
Price
$0 to $138
$93
Equity derivatives
$
(348
)
Industry standard derivative pricing (3)
Equity correlation
11% to 100%
67%
 
 
Long-dated equity volatilities
4% to 84%
32%
Commodity derivatives
$
10

Discounted cash flow, Industry standard derivative pricing (3)
Natural gas forward price
$1/MMBtu to $12/MMBtu
$3/MMBtu
 
 
Correlation
38% to 87%
71%
 
 
Volatilities
15% to 132%
38%
Interest rate derivatives
$
(32
)
Industry standard derivative pricing (4)
Correlation (IR/IR)
15% to 70%
61%
 
 
Correlation (FX/IR)
0% to 46%
1%
 
 
Long-dated inflation rates
-20% to 38%
2%
 
 
Long-dated inflation volatilities
0% to 1%
1%
Total net derivative assets
$
(935
)
 
 
 
 

(1) 
For loans and securities, structured liabilities and net derivative assets, 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 80: Trading account assets – Corporate securities, trading loans and other of $1.6 billion, Trading account assets – Non-U.S. sovereign debt of $465 million, Trading account assets – Mortgage trading loans, ABS and other MBS of $1.6 billion, AFS debt securities of $606 million, Other debt securities carried at fair value - Non-agency residential of $172 million, Other assets, including MSRs, of 2.9 billion, Loans and leases of $338 million and LHFS of $542 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
Assets and Liabilities Measured at Fair Value on Nonrecurring Basis The amounts below represent assets still held as of the reporting date for which a nonrecurring fair value adjustment was recorded during the three months ended March 31, 2019 and 2018.
 
 
 
 
 
 
Assets Measured at Fair Value on a Nonrecurring Basis
 
 
 
March 31, 2019
 
Three Months Ended March 31, 2019
(Dollars in millions)
 
Level 2
 
Level 3
 
Gains (Losses)
Assets
 

 
 

 
 
Loans held-for-sale
$
55

 
$
—

 
$
(1
)
Loans and leases (1)
—

 
120

 
(40
)
Foreclosed properties (2, 3)
—

 
40

 
(13
)
Other assets
61

 
6

 
(11
)
 
 
 
 
 
 
 
March 31, 2018
 
Three Months Ended March 31, 2018
Assets
 

 
 

 
 
Loans held-for-sale
$
13

 
$
—

 
$
(2
)
Loans and leases (1)
—

 
273

 
(98
)
Foreclosed properties (2, 3)
—

 
61

 
(17
)
Other assets
47

 
—

 
(7
)

(1) 
Includes $18 million and $45 million of losses on loans that were written down to a collateral value of zero during the three months ended March 31, 2019 and 2018.
(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 $400 million and $680 million of properties acquired upon foreclosure of certain government-guaranteed loans (principally FHA-insured loans) at March 31, 2019 and 2018.
Fair Value, Assets and Liabilities Measured on Nonrecurring Basis, Valuation Techniques
The table below presents information about significant unobservable inputs related to the Corporation’s nonrecurring Level 3 financial assets and liabilities at March 31, 2019 and December 31, 2018. Loans and leases backed by residential real estate assets represent residential mortgages where the loan has been written down to the fair value of the underlying collateral.
 
 
 
 
 
 
 
 
 
 
Quantitative Information about Nonrecurring Level 3 Fair Value Measurements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Inputs
Financial Instrument
Fair Value
 
Valuation
Technique
 
Significant Unobservable
Inputs
 
Ranges of
Inputs
 
Weighted
Average (1)
(Dollars in millions)
March 31, 2019
Loans and leases backed by residential real estate assets
$
120

 
Market comparables
 
OREO discount
 
13% to 59%
 
25
%
 
 
 
 
 
Costs to sell
 
8% to 26%
 
9
%
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
Loans and leases backed by residential real estate assets
$
474

 
Market comparables
 
OREO discount
 
13% to 59%
 
25
%
 
 
 
 
 
Costs to sell
 
8% to 26%
 
9
%
(1) The weighted average is calculated based upon the fair value of the loans