Quarterly report pursuant to Section 13 or 15(d)

Fair Value Option

v3.21.2
Fair Value Option
9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
Fair Value Option Fair Value OptionThe 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 2020 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 September 30, 2021 and December 31, 2020, 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 nine months ended September 30, 2021 and 2020.
Fair Value Option Elections
September 30, 2021 December 31, 2020
(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
$ 154,137  $ 154,135  $ 2  $ 108,856  $ 108,811  $ 45 
Loans reported as trading account assets (1)
9,410  17,534  (8,124) 7,967  17,372  (9,405)
Trading inventory – other 22,962  n/a n/a 22,790  n/a n/a
Consumer and commercial loans 7,566  7,628  (62) 6,681  6,778  (97)
Loans held-for-sale (1)
3,982  4,884  (902) 1,585  2,521  (936)
Other assets 194  n/a n/a 200  n/a n/a
Long-term deposits 542  530  12  481  448  33 
Federal funds purchased and securities loaned or sold under agreements to repurchase
155,151  155,187  (36) 135,391  135,390 
Short-term borrowings 4,128  4,341  (213) 5,874  5,178  696 
Unfunded loan commitments 95  n/a n/a 99  n/a n/a
Long-term debt 28,696  29,783  (1,087) 32,200  33,470  (1,270)
(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.
n/a = not applicable
Gains (Losses) Related to Assets and Liabilities Accounted for Under the Fair Value Option
Three Months Ended September 30
2021 2020
(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 $ 5  $   $ 5  $ 58  $ —  $ 58 
Trading inventory – other (1)
(1,155)   (1,155) 709  —  709 
Consumer and commercial loans (56) (11) (67) (2) 102  100 
Loans held-for-sale (2)
  53  53  —  22  22 
Short-term borrowings 548    548  (38) —  (38)
Unfunded loan commitments   8  8  —  (18) (18)
Long-term debt (3)
225  (9) 216  (347) (6) (353)
Other (4)
7    7  19  26 
Total $ (426) $ 41  $ (385) $ 399  $ 107  $ 506 
Nine Months Ended September 30
2021 2020
Loans reported as trading account assets $ 288  $   $ 288  $ (15) $ —  $ (15)
Trading inventory – other (1)
419    419  1,259  —  1,259 
Consumer and commercial loans 58  34  92  (49) (85) (134)
Loans held-for-sale (2)
  64  64  —  67  67 
Short-term borrowings 1,022    1,022  196  —  196 
Unfunded loan commitments   2  2  —  (88) (88)
Long-term debt (3)
(436) (33) (469) (1,300) (31) (1,331)
Other (4)
18  (24) (6) 28  (31) (3)
Total $ 1,369  $ 43  $ 1,412  $ 119  $ (168) $ (49)
(1)    The gains (losses) in market making and similar activities are primarily offset by (losses) gains on trading liabilities that hedge these assets.
(2)    Includes the value of IRLCs on funded loans, including those sold during the period.
(3)    The net gains (losses) in market making and similar activities relate to the embedded derivatives in structured liabilities and are typically offset by (losses) 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 12 – 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 2020 Annual Report on Form 10-K.
(4)    Includes gains (losses) on federal funds sold and securities borrowed or purchased under agreements to resell, other assets, 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 September 30 Nine Months Ended September 30
(Dollars in millions) 2021 2020 2021 2020
Loans reported as trading account assets $ (21) $ 11  $ 166  $ (225)
Consumer and commercial loans (22) 100  10  (96)
Loans held-for-sale 37  (24) 35  (117)
Unfunded loan commitments 8  (18) 2  (88)