Quarterly report pursuant to Section 13 or 15(d)

Fair Value Option

v3.20.2
Fair Value Option
6 Months Ended
Jun. 30, 2020
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 22 – Fair Value Option to the Consolidated Financial Statements of the Corporation’s 2019 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, 2020 and December 31, 2019, 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, 2020 and 2019.
 
 
 
 
 
 
 
 
 
 
 
 
Fair Value Option Elections
 
 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2020
 
December 31, 2019
(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
$
46,139

 
$
46,075

 
$
64

 
$
50,364

 
$
50,318

 
$
46

Loans reported as trading account assets (1)
6,953

 
16,515

 
(9,562
)
 
6,989

 
14,703

 
(7,714
)
Trading inventory – other
20,124

 
n/a

 
n/a

 
19,574

 
n/a

 
n/a

Consumer and commercial loans
9,176

 
9,430

 
(254
)
 
8,335

 
8,372

 
(37
)
Loans held-for-sale (1)
3,244

 
4,114

 
(870
)
 
3,709

 
4,879

 
(1,170
)
Other assets
4

 
n/a

 
n/a

 
4

 
n/a

 
n/a

Long-term deposits
594

 
544

 
50

 
508

 
496

 
12

Federal funds purchased and securities loaned or sold under agreements to repurchase
21,516

 
21,505

 
11

 
16,008

 
16,029

 
(21
)
Short-term borrowings
2,651

 
2,276

 
375

 
3,941

 
3,930

 
11

Unfunded loan commitments
113

 
n/a

 
n/a

 
90

 
n/a

 
n/a

Long-term debt (2)
33,825

 
34,714

 
(889
)
 
34,975

 
35,730

 
(755
)

(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 $33.4 billion and $34.6 billion at June 30, 2020 and December 31, 2019, and contractual principal outstanding of $34.3 billion and $35.3 billion at June 30, 2020 and December 31, 2019.
n/a = not applicable
 
 
 
 
 
 
 
 
 
 
 
 
Gains (Losses) Relating to Assets and Liabilities Accounted for Under the Fair Value Option
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
2020
 
2019
(Dollars in millions)
Market making and similar activities
 
Other
Income
 
Total
 
Market making and similar activities
 
Other
Income
 
Total
Loans reported as trading account assets
$
314

 
$

 
$
314

 
$
72

 
$

 
$
72

Trading inventory – other (1)
3,343

 

 
3,343

 
1,823

 

 
1,823

Consumer and commercial loans
36

 
171

 
207

 
16

 
(1
)
 
15

Loans held-for-sale (2)

 
58

 
58

 

 
52

 
52

Short-term borrowings
(283
)
 

 
(283
)
 

 

 

Unfunded loan commitments

 
46

 
46

 

 
(22
)
 
(22
)
Long-term debt (3)
(1,869
)
 
(9
)
 
(1,878
)
 
(205
)
 
(22
)
 
(227
)
Other (4)
(4
)
 

 
(4
)
 
(2
)
 
(15
)
 
(17
)
Total
$
1,537

 
$
266

 
$
1,803

 
$
1,704

 
$
(8
)
 
$
1,696

 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30
 
2020
 
2019
Loans reported as trading account assets
$
(73
)
 
$

 
$
(73
)
 
$
163

 
$

 
$
163

Trading inventory – other (1)
550

 

 
550

 
4,367

 

 
4,367

Consumer and commercial loans
(47
)
 
(187
)
 
(234
)
 
17

 
17

 
34

Loans held-for-sale (2)

 
45

 
45

 

 
82

 
82

Short-term borrowings
234

 

 
234

 

 

 

Unfunded loan commitments

 
(70
)
 
(70
)
 

 
41

 
41

Long-term debt (3)
(953
)
 
(25
)
 
(978
)
 
(1,285
)
 
(45
)
 
(1,330
)
Other (4)
9

 
(38
)
 
(29
)
 
9

 
(20
)
 
(11
)
Total
$
(280
)
 
$
(275
)
 
$
(555
)
 
$
3,271

 
$
75

 
$
3,346


(1) 
The gains in market making and similar activities are primarily offset by losses on trading liabilities that hedge these assets.
(2) 
Includes the value of interest rate lock commitments on funded loans, including those sold during the period.
(3) 
The net losses in market making and similar activities relate to the embedded derivatives in structured liabilities and are typically offset by gains on derivatives and securities that hedge these liabilities. For the cumulative impact of changes in the Corporation’s own credit spreads and the amount recognized in accumulated OCI, see Note 13 – Accumulated Other Comprehensive Income (Loss). For more information on how the Corporation’s own credit spread is determined, see Note 21 – Fair Value Measurements to the Consolidated Financial Statements of the Corporation’s 2019 Annual Report on Form 10-K.
(4) 
Includes gains (losses) on federal funds sold and securities borrowed or purchased under agreements to resell, long-term deposits and federal funds purchased and securities loaned or sold under agreements to repurchase.
 
 
 
 
 
 
 
 
Gains (Losses) Related to Borrower-specific Credit Risk for Assets and Liabilities Accounted for Under the Fair Value Option
 
 
 
 
 
 
 
 
 
Three Months Ended June 30
 
Six Months Ended June 30
(Dollars in millions)
2020
 
2019
 
2020
 
2019
Loans reported as trading account assets
$
153

 
$
16

 
$
(236
)
 
$
28

Consumer and commercial loans
153

 

 
(196
)
 
19

Loans held-for-sale
(19
)
 
30

 
(93
)
 
41

Unfunded loan commitments
46

 
(22
)
 
(70
)
 
41