Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

v2.4.0.8
Fair Value Measurements (Tables)
 6 Months Ended
Jun. 30, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Fair value Assets and liabilities measured on Recurring basis

Assets and liabilities carried at fair value on a recurring basis at June 30, 2013 and December 31, 2012, including financial instruments which the Corporation accounts for under the fair value option, are summarized in the following tables.

 
June 30, 2013
 
Fair Value Measurements
 
 
 
 
(Dollars in millions)
Level 1 (1)
 
Level 2 (1)
 
Level 3
 
Netting
Adjustments (2)
 
Assets/Liabilities
at Fair Value
Assets
 
 
 
 
 
 
 
 
 
Federal funds sold and securities borrowed or purchased under agreements to resell
$
—

 
$
103,272

 
$
—

 
$
—

 
$
103,272

Trading account assets:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities
40,251

 
14,158

 
—

 
—

 
54,409

Corporate securities, trading loans and other
1,333

 
30,461

 
2,763

 
—

 
34,557

Equity securities
29,451

 
14,160

 
464

 
—

 
44,075

Non-U.S. sovereign debt
29,970

 
12,572

 
401

 
—

 
42,943

Mortgage trading loans and ABS
—

 
10,565

 
4,685

 
—

 
15,250

Total trading account assets
101,005

 
81,916

 
8,313

 
—

 
191,234

Derivative assets (3)
4,783

 
1,013,187

 
7,714

 
(968,912
)
 
56,772

AFS debt securities:
 
 
 
 
 
 
 
 
 
U.S. Treasury securities and agency securities
516

 
2,583

 
—

 
—

 
3,099

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency
—

 
169,184

 
—

 
—

 
169,184

Agency-collateralized mortgage obligations
—

 
32,001

 
—

 
—

 
32,001

Non-agency residential
—

 
8,026

 
—

 
—

 
8,026

Commercial
—

 
3,748

 
—

 
—

 
3,748

Non-U.S. securities
2,815

 
3,607

 
—

 
—

 
6,422

Corporate/Agency bonds
—

 
1,223

 
8

 
—

 
1,231

Other taxable securities
20

 
7,305

 
4,157

 
—

 
11,482

Tax-exempt securities
—

 
4,084

 
877

 
—

 
4,961

Total AFS debt securities
3,351

 
231,761

 
5,042

 
—

 
240,154

Other debt securities carried at fair value:
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency
—

 
26,121

 
—

 
—

 
26,121

Agency-collateralized mortgage obligations
—

 
1,006

 
—

 
—

 
1,006

Commercial
—

 
758

 
—

 
—

 
758

Non-U.S. securities
11,525

 
1,917

 
—

 
—

 
13,442

Total other debt securities carried at fair value
11,525

 
29,802

 
—

 
—

 
41,327

Loans and leases
—

 
7,560

 
1,901

 
—

 
9,461

Mortgage servicing rights
—

 
—

 
5,827

 
—

 
5,827

Loans held-for-sale
—

 
8,725

 
2,153

 
—

 
10,878

Other assets
15,596

 
4,450

 
1,700

 
—

 
21,746

Total assets
$
136,260

 
$
1,480,673

 
$
32,650

 
$
(968,912
)
 
$
680,671

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

 
$
1,978

 
$
—

 
$
—

 
$
1,978

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

 
59,926

 
—

 
—

 
59,926

Trading account liabilities:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities
21,335

 
533

 
—

 
—

 
21,868

Equity securities
22,752

 
3,200

 
—

 
—

 
25,952

Non-U.S. sovereign debt
23,376

 
1,751

 
—

 
—

 
25,127

Corporate securities and other
482

 
8,897

 
55

 
—

 
9,434

Total trading account liabilities
67,945

 
14,381

 
55

 
—

 
82,381

Derivative liabilities (3)
4,713

 
996,919

 
6,541

 
(959,641
)
 
48,532

Short-term borrowings
—

 
2,147

 
—

 
—

 
2,147

Accrued expenses and other liabilities
11,311

 
1,761

 
230

 
—

 
13,302

Long-term debt
—

 
44,549

 
1,890

 
—

 
46,439

Total liabilities
$
83,969

 
$
1,121,661

 
$
8,716

 
$
(959,641
)
 
$
254,705

(1) 
During the six months ended June 30, 2013, $500 million of other assets were transferred from Level 1 to Level 2 primarily due to a restriction that became effective for a private equity investment.
(2) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(3) 
For further disaggregation of derivative assets and liabilities, see Note 3 – Derivatives.
 
December 31, 2012
 
Fair Value Measurements
 
 
 
 
(Dollars in millions)
Level 1 (1)
 
Level 2 (1)
 
Level 3
 
Netting
Adjustments (2)
 
Assets/Liabilities
at Fair Value
Assets
 
 
 
 
 
 
 
 
 
Federal funds sold and securities borrowed or purchased under agreements to resell
$
—

 
$
98,670

 
$
—

 
$
—

 
$
98,670

Trading account assets:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities
57,655

 
29,319

 
—

 
—

 
86,974

Corporate securities, trading loans and other
1,292

 
32,882

 
3,726

 
—

 
37,900

Equity securities
28,144

 
14,626

 
545

 
—

 
43,315

Non-U.S. sovereign debt
29,254

 
13,139

 
353

 
—

 
42,746

Mortgage trading loans and ABS
—

 
11,905

 
4,935

 
—

 
16,840

Total trading account assets
116,345

 
101,871

 
9,559

 
—

 
227,775

Derivative assets (3)
2,997

 
1,372,398

 
8,073

 
(1,329,971
)
 
53,497

AFS debt securities:
 
 
 
 
 
 
 
 
 
U.S. Treasury securities and agency securities
21,514

 
2,958

 
—

 
—

 
24,472

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency
—

 
188,149

 
—

 
—

 
188,149

Agency-collateralized mortgage obligations
—

 
37,538

 
—

 
—

 
37,538

Non-agency residential
—

 
9,494

 
—

 
—

 
9,494

Non-agency commercial
—

 
3,914

 
10

 
—

 
3,924

Non-U.S. securities
2,637

 
2,981

 
—

 
—

 
5,618

Corporate/Agency bonds
—

 
1,358

 
92

 
—

 
1,450

Other taxable securities
20

 
8,180

 
3,928

 
—

 
12,128

Tax-exempt securities
—

 
3,072

 
1,061

 
—

 
4,133

Total AFS debt securities
24,171

 
257,644

 
5,091

 
—

 
286,906

Other debt securities carried at fair value:
 
 
 
 
 
 
 
 
 
U.S. Treasury securities and agency securities
491

 
—

 
—

 
—

 
491

Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
Agency
—

 
13,073

 
—

 
—

 
13,073

Agency-collateralized mortgage obligations
—

 
929

 
—

 
—

 
929

Non-U.S. securities
9,151

 
300

 
—

 
—

 
9,451

Total other debt securities carried at fair value
9,642

 
14,302

 
—

 
—

 
23,944

Loans and leases
—

 
6,715

 
2,287

 
—

 
9,002

Mortgage servicing rights
—

 
—

 
5,716

 
—

 
5,716

Loans held-for-sale
—

 
8,926

 
2,733

 
—

 
11,659

Other assets
18,535

 
4,826

 
3,129

 
—

 
26,490

Total assets
$
171,690

 
$
1,865,352

 
$
36,588

 
$
(1,329,971
)
 
$
743,659

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

 
$
2,262

 
$
—

 
$
—

 
$
2,262

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

 
42,639

 
—

 
—

 
42,639

Trading account liabilities:
 
 
 
 
 
 
 
 
 
U.S. government and agency securities
22,351

 
1,079

 
—

 
—

 
23,430

Equity securities
19,852

 
2,640

 
—

 
—

 
22,492

Non-U.S. sovereign debt
18,875

 
1,369

 
—

 
—

 
20,244

Corporate securities and other
487

 
6,870

 
64

 
—

 
7,421

Total trading account liabilities
61,565

 
11,958

 
64

 
—

 
73,587

Derivative liabilities (3)
2,859

 
1,355,309

 
6,605

 
(1,318,757
)
 
46,016

Short-term borrowings
—

 
4,074

 
—

 
—

 
4,074

Accrued expenses and other liabilities
15,457

 
1,122

 
15

 
—

 
16,594

Long-term debt
—

 
46,860

 
2,301

 
—

 
49,161

Total liabilities
$
79,881

 
$
1,464,224

 
$
8,985

 
$
(1,318,757
)
 
$
234,333

(1) 
During 2012, $2.0 billion and $350 million of assets and liabilities were transferred from Level 1 to Level 2, and $785 million and $40 million of assets and liabilities were transferred from Level 2 to Level 1. Of the asset transfers from Level 1 to Level 2, $940 million was due to a restriction that became effective for a private equity investment during 2012, while $535 million of the transfers from Level 2 to Level 1 was due to the lapse of this restriction during 2012. The remaining transfers were the result of additional information associated with certain equities, derivative contracts and private equity investments.
(2) 
Amounts represent the impact of legally enforceable master netting agreements and also cash collateral held or placed with the same counterparties.
(3) 
For further disaggregation of derivative assets and liabilities, see Note 3 – Derivatives.
Level 3 Total Realized and Unrealized Gains (Losses) Included in Earnings
Level 3 – Fair Value Measurements (1)
 
Six Months Ended June 30, 2012
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
January 1
2012
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2012
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other (2)
$
6,880

$
123

$
—

$
1,245

$
(2,650
)
$
—

$
(745
)
$
157

$
(551
)
$
4,459

Equity securities
544

9

—

124

(147
)
—

36

33

(2
)
597

Non-U.S. sovereign debt
342

(2
)
—

308

(247
)
—

—

—

(12
)
389

Mortgage trading loans and ABS (2)
3,689

83

—

1,367

(636
)
—

(262
)
742

(165
)
4,818

Total trading account assets
11,455

213

—

3,044

(3,680
)
—

(971
)
932

(730
)
10,263

Net derivative assets (3)
5,866

273

—

713

(622
)
—

(1,310
)
67

(386
)
4,601

AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
Agency
37

—

—

—

—

—

(4
)
—

(33
)
—

Non-agency residential
860

(69
)
19

—

(305
)
—

(2
)
—

(502
)
1

Non-agency commercial
40

—

—

—

(11
)
—

(5
)
—

—

24

Corporate/Agency bonds
162

(2
)
—

(2
)
—

—

(38
)
—

(27
)
93

Other taxable securities
4,265

7

23

958

—

—

(486
)
—

(209
)
4,558

Tax-exempt securities
2,648

54

25

—

(69
)
—

(1,518
)
—

—

1,140

Total AFS debt securities
8,012

(10
)
67

956

(385
)
—

(2,053
)
—

(771
)
5,816

Loans and leases (4, 5)
2,744

215

—

—

(1,158
)
—

(164
)
—

(2
)
1,635

Mortgage servicing rights (5)
7,378

(937
)
—

—

(98
)
168

(803
)
—

—

5,708

Loans held-for-sale (4)
3,387

179

—

10

(21
)
—

(226
)
44

(632
)
2,741

Other assets (6)
4,235

(134
)
—

49

(767
)
—

(236
)
—

(11
)
3,136

Trading account liabilities – Corporate securities and other
(114
)
—

—

55

(69
)
—

—

(65
)
50

(143
)
Accrued expenses and other liabilities (4)
(14
)
4

—

5

—

—

—

—

3

(2
)
Long-term debt (4)
(2,943
)
(148
)
—

118

(33
)
(138
)
708

(1,038
)
1,086

(2,388
)

(1) 
Assets (liabilities). For assets, increase / (decrease) to Level 3 and for liabilities, (increase) / decrease to Level 3.
(2) 
During the six months ended June 30, 2012, approximately $900 million was reclassified from Trading account assets - Corporate securities, trading loans and other to Trading account assets - Mortgage trading loans and ABS. In the table above, this reclassification is presented as a sale of Trading account assets - Corporate securities, trading loans and other and as a purchase of Trading account assets - Mortgage trading loans and ABS.
(3) 
Net derivatives include derivative assets of $11.4 billion and derivative liabilities of $6.8 billion.
(4) 
Amounts represent instruments that are accounted for under the fair value option.
(5) 
Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole loan sales.
(6) 
Other assets is primarily comprised of net monoline exposure to a single counterparty and private equity investments.

Level 3 – Fair Value Measurements (1)
 
Three Months Ended June 30, 2012
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
April 1
2012
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2012
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other (2)
$
6,001

$
30

$
—

$
570

$
(1,585
)
$
—

$
(556
)
$
98

$
(99
)
$
4,459

Equity securities
525

(6
)
—

45

(38
)
—

46

25

—

597

Non-U.S. sovereign debt
546

(26
)
—

35

(166
)
—

—

—

—

389

Mortgage trading loans and ABS (2)
4,012

(16
)
—

1,183

(181
)
—

(173
)
—

(7
)
4,818

Total trading account assets
11,084

(18
)
—

1,833

(1,970
)
—

(683
)
123

(106
)
10,263

Net derivative assets (3)
4,187

1,110

—

354

(301
)
—

(676
)
(39
)
(34
)
4,601

AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
Agency
33

—

—

—

—

—

—

—

(33
)
—

Non-agency residential
29

—

—

—

(12
)
—

(2
)
—

(14
)
1

Non-agency commercial
38

—

—

—

(11
)
—

(3
)
—

—

24

Corporate/Agency bonds
131

—

—

—

—

—

(38
)
—

—

93

Other taxable securities
4,175

—

6

596

—

—

(68
)
—

(151
)
4,558

Tax-exempt securities
1,895

28

7

—

(34
)
—

(756
)
—

—

1,140

Total AFS debt securities
6,301

28

13

596

(57
)
—

(867
)
—

(198
)
5,816

Loans and leases (4, 5)
2,782

51

—

—

(1,158
)
—

(47
)
—

7

1,635

Mortgage servicing rights (5)
7,589

(1,592
)
—

—

(98
)
91

(282
)
—

—

5,708

Loans held-for-sale (4)
2,862

10

—

6

(21
)
—

(129
)
13

—

2,741

Other assets (6)
3,487

(102
)
—

6

(186
)
—

(69
)
—

—

3,136

Trading account liabilities – Corporate securities and other
(124
)
—

—

7

(42
)
—

—

—

16

(143
)
Accrued expenses and other liabilities (4)
(3
)
1

—

—

—

—

—

—

—

(2
)
Long-term debt (4)
(2,500
)
93

—

42

—

(73
)
275

(506
)
281

(2,388
)
(1) 
Assets (liabilities). For assets, increase / (decrease) to Level 3 and for liabilities, (increase) / decrease to Level 3.
(2) 
During the three months ended June 30, 2012, approximately $900 million was reclassified from Trading account assets - Corporate securities, trading loans and other to Trading account assets - Mortgage trading loans and ABS. In the table above, this reclassification is presented as a sale of Trading account assets - Corporate securities, trading loans and other and as a purchase of Trading account assets - Mortgage trading loans and ABS.
(3) 
Net derivatives include derivative assets of $11.4 billion and derivative liabilities of $6.8 billion.
(4) 
Amounts represent instruments that are accounted for under the fair value option.
(5) 
Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole loan sales.
(6) 
Other assets is primarily comprised of net monoline exposure to a single counterparty and private equity investments.
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 and six months ended June 30, 2013 and 2012, including net realized and unrealized gains (losses) included in earnings and accumulated OCI.

Level 3 – Fair Value Measurements (1)
 
Three Months Ended June 30, 2013
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
April 1
2013
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2013
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
3,607

$
35

$
—

$
712

$
(959
)
$
—

$
(99
)
$
224

$
(757
)
$
2,763

Equity securities
497

8

—

28

(35
)
—

—

29

(63
)
464

Non-U.S. sovereign debt
417

(6
)
—

11

—

—

(22
)
1

—

401

Mortgage trading loans and ABS
4,480

10

—

978

(691
)
—

(70
)
—

(22
)
4,685

Total trading account assets
9,001

47

—

1,729

(1,685
)
—

(191
)
254

(842
)
8,313

Net derivative assets (2)
1,063

392

—

204

(194
)
—

(383
)
(214
)
305

1,173

AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Commercial MBS
10

—

—

—

—

—

(10
)
—

—

—

Non-U.S. securities
1

—

—

—

(1
)
—

—

—

—

—

Corporate/Agency bonds
96

—

—

—

—

—

—

—

(88
)
8

Other taxable securities
4,045

3

10

367

—

—

(263
)
—

(5
)
4,157

Tax-exempt securities
1,041

—

11

—

—

—

(7
)
—

(168
)
877

Total AFS debt securities
5,193

3

21

367

(1
)
—

(280
)
—

(261
)
5,042

Loans and leases (3, 4)
2,363

49

—

—

—

—

(505
)
—

(6
)
1,901

Mortgage servicing rights (4)
5,776

1,026

—

—

(862
)
147

(260
)
—

—

5,827

Loans held-for-sale (3)
2,405

19

—

8

(180
)
—

(108
)
12

(3
)
2,153

Other assets (5)
2,629

121

—

25

(156
)
—

(864
)
—

(55
)
1,700

Trading account liabilities – Corporate securities and other
(58
)
6

—

11

(17
)
(5
)
—

(1
)
9

(55
)
Accrued expenses and other liabilities (3)
(455
)
(7
)
—

—

—

(165
)
398

(1
)
—

(230
)
Long-term debt (3)
(2,355
)
92

—

170

—

(66
)
66

(151
)
354

(1,890
)
(1) 
Assets (liabilities). For assets, increase / (decrease) to Level 3 and for liabilities, (increase) / decrease to Level 3.
(2) 
Net derivatives include derivative assets of $7.7 billion and derivative liabilities of $6.5 billion.
(3) 
Amounts represent instruments that are accounted for under the fair value option.
(4) 
Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole loan sales.
(5) 
Other assets is primarily comprised of private equity investments.
Level 3 – Fair Value Measurements (1)
 
Six Months Ended June 30, 2013
 
 
 
 
Gross
 
 
 
(Dollars in millions)
Balance
January 1
2013
Gains
(Losses) in
Earnings
Gains
(Losses) in
OCI
Purchases
Sales
Issuances
Settlements
Gross
Transfers
into
Level 3
Gross
Transfers
out of
Level 3
Balance June 30
2013
Trading account assets:
 
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
3,726

$
123

$
—

$
1,517

$
(1,925
)
$
—

$
(239
)
$
442

$
(881
)
$
2,763

Equity securities
545

50

—

57

(144
)
—

—

37

(81
)
464

Non-U.S. sovereign debt
353

45

—

26

(1
)
—

(22
)
1

(1
)
401

Mortgage trading loans and ABS
4,935

172

—

1,631

(1,334
)
—

(701
)
5

(23
)
4,685

Total trading account assets
9,559

390

—

3,231

(3,404
)
—

(962
)
485

(986
)
8,313

Net derivative assets (2)
1,468

685

—

383

(660
)
—

(1,043
)
(162
)
502

1,173

AFS debt securities:
 
 
 
 
 
 
 
 
 
 
Commercial MBS
10

—

—

—

—

—

(10
)
—

—

—

Non-U.S. securities
—

—

—

1

(1
)
—

—

—

—

—

Corporate/Agency bonds
92

—

4

—

—

—

—

—

(88
)
8

Other taxable securities
3,928

3

12

610

—

—

(391
)
—

(5
)
4,157

Tax-exempt securities
1,061

1

14

—

—

—

(31
)
—

(168
)
877

Total AFS debt securities
5,091

4

30

611

(1
)
—

(432
)
—

(261
)
5,042

Loans and leases (3, 4)
2,287

100

—

71

—

5

(546
)
—

(16
)
1,901

Mortgage servicing rights (4)
5,716

1,460

—

—

(1,045
)
270

(574
)
—

—

5,827

Loans held-for-sale (3)
2,733

(20
)
—

8

(390
)
—

(209
)
34

(3
)
2,153

Other assets (5)
3,129

(327
)
—

42

(183
)
—

(906
)
—

(55
)
1,700

Trading account liabilities – Corporate securities and other
(64
)
6

—

18

(31
)
(5
)
—

(9
)
30

(55
)
Accrued expenses and other liabilities (3)
(15
)
22

—

—

—

(751
)
514

(1
)
1

(230
)
Long-term debt (3)
(2,301
)
103

—

259

(4
)
(102
)
126

(532
)
561

(1,890
)
(1) 
Assets (liabilities). For assets, increase / (decrease) to Level 3 and for liabilities, (increase) / decrease to Level 3.
(2) 
Net derivatives include derivative assets of $7.7 billion and derivative liabilities of $6.5 billion.
(3) 
Amounts represent instruments that are accounted for under the fair value option.
(4) 
Issuances represent loan originations and mortgage servicing rights retained following securitizations or whole loan sales.
(5) 
Other assets is primarily comprised of private equity investments.
Level 3 Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date
The following tables summarize changes in unrealized gains (losses) recorded in earnings during the three and six months ended June 30, 2013 and 2012 for Level 3 assets and liabilities that were still held at June 30, 2013 and 2012. These amounts include changes in fair value on loans, LHFS, loan commitments and structured liabilities that are accounted for under the fair value option.

Level 3 – Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date
 
Three Months Ended June 30, 2013
(Dollars in millions)
Equity
Investment
Income
(Loss)
 
Trading
Account
Profits
(Losses)
 
Mortgage
Banking
Income
(Loss) (1)
 
Other
Income
(Loss)
 
Total
Trading account assets:
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
—

 
$
2

 
$
—

 
$
—

 
$
2

Equity securities
—

 
4

 
—

 
—

 
4

Non-U.S. sovereign debt
—

 
(18
)
 
—

 
—

 
(18
)
Mortgage trading loans and ABS
—

 
(10
)
 
—

 
—

 
(10
)
Total trading account assets
—

 
(22
)
 
—

 
—

 
(22
)
Net derivative assets
—

 
217

 
(52
)
 
—

 
165

Loans and leases (2)
—

 
—

 
—

 
58

 
58

Mortgage servicing rights
—

 
—

 
954

 
—

 
954

Loans held-for-sale (2)
—

 
—

 
3

 
14

 
17

Other assets
(18
)
 
—

 
127

 
(40
)
 
69

Trading account liabilities – Corporate securities and other
—

 
2

 
—

 
—

 
2

Accrued expenses and other liabilities (2)
—

 
—

 
(16
)
 
—

 
(16
)
Long-term debt (2)
—

 
58

 
—

 
34

 
92

Total
$
(18
)
 
$
255

 
$
1,016

 
$
66

 
$
1,319

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2012
Trading account assets:
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
—

 
$
(30
)
 
$
—

 
$
—

 
$
(30
)
Equity securities
—

 
(6
)
 
—

 
—

 
(6
)
Non-U.S. sovereign debt
—

 
(25
)
 
—

 
—

 
(25
)
Mortgage trading loans and ABS
—

 
(26
)
 
—

 
—

 
(26
)
Total trading account assets
—

 
(87
)
 
—

 
—

 
(87
)
Net derivative assets
—

 
227

 
481

 
—

 
708

Loans and leases (2)
—

 
—

 
—

 
45

 
45

Mortgage servicing rights
—

 
—

 
(1,722
)
 
—

 
(1,722
)
Loans held-for-sale (2)
—

 
—

 
5

 
(9
)
 
(4
)
Other assets
(46
)
 
—

 
(34
)
 
(47
)
 
(127
)
Trading account liabilities – Corporate securities and other
—

 
(2
)
 
—

 
—

 
(2
)
Long-term debt (2)
—

 
82

 
—

 
13

 
95

Total
$
(46
)
 
$
220

 
$
(1,270
)
 
$
2

 
$
(1,094
)
(1) 
Mortgage banking income does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) 
Amounts represent instruments that are accounted for under the fair value option.
Level 3 – Changes in Unrealized Gains (Losses) Relating to Assets and Liabilities Still Held at Reporting Date
 
Six Months Ended June 30, 2013
(Dollars in millions)
Equity
Investment
Income
(Loss)
 
Trading
Account
Profits
(Losses)
 
Mortgage
Banking
Income
(Loss) (1)
 
Other
Income
(Loss)
 
Total
Trading account assets:
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
—

 
$
53

 
$
—

 
$
—

 
$
53

Equity securities
—

 
(8
)
 
—

 
—

 
(8
)
Non-U.S. sovereign debt
—

 
63

 
—

 
—

 
63

Mortgage trading loans and ABS
—

 
58

 
—

 
—

 
58

Total trading account assets
—

 
166

 
—

 
—

 
166

Net derivative assets
—

 
13

 
(11
)
 
—

 
2

Loans and leases (2)
—

 
—

 
—

 
103

 
103

Mortgage servicing rights
—

 
—

 
1,290

 
—

 
1,290

Loans held-for-sale (2)
—

 
—

 
12

 
(30
)
 
(18
)
Other assets
(18
)
 
—

 
139

 
(37
)
 
84

Trading account liabilities – Corporate securities and other
—

 
1

 
—

 
—

 
1

Accrued expenses and other liabilities (2)
—

 
—

 
(15
)
 
—

 
(15
)
Long-term debt (2)
—

 
55

 
—

 
23

 
78

Total
$
(18
)
 
$
235

 
$
1,415

 
$
59

 
$
1,691

 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2012
Trading account assets:
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
—

 
$
(7
)
 
$
—

 
$
—

 
$
(7
)
Equity securities
—

 
6

 
—

 
—

 
6

Mortgage trading loans and ABS
—

 
14

 
—

 
—

 
14

Total trading account assets
—

 
13

 
—

 
—

 
13

Net derivative assets
—

 
(1,115
)
 
516

 
—

 
(599
)
Loans and leases (2)
—

 
—

 
—

 
141

 
141

Mortgage servicing rights
—

 
—

 
(1,252
)
 
—

 
(1,252
)
Loans held-for-sale (2)
—

 
—

 
56

 
64

 
120

Other assets
(36
)
 
—

 
(40
)
 
(98
)
 
(174
)
Trading account liabilities – Corporate securities and other
—

 
4

 
—

 
—

 
4

Long-term debt (2)
—

 
(12
)
 
—

 
(54
)
 
(66
)
Total
$
(36
)
 
$
(1,110
)
 
$
(720
)
 
$
53

 
$
(1,813
)

(1) 
Mortgage banking income does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) 
Amounts represent instruments that are accounted for under the fair value option.
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 June 30, 2013 and December 31, 2012.

Quantitative Information about Level 3 Fair Value Measurements at June 30, 2013
 
(Dollars in millions)
 
 
Inputs
Financial Instrument
Fair Value
Valuation Technique
Significant Unobservable
Inputs
Ranges of Inputs
Weighted Average
Loans and Securities (1)
 
 
 
 
 
Instruments backed by residential real estate assets
$
3,271

Discounted cash flow, Market comparables
Yield
2% to 25%
6
%
Trading account assets – Mortgage trading loans and ABS
434

Prepayment speed
1% to 35% CPR
10
%
Loans and leases
858

Default rate
0% to 28% CDR
7
%
Loans held-for-sale
1,979

Loss severity
8% to 85%
41
%
Commercial loans, debt securities and other
$
11,430

Discounted cash flow, Market comparables
Yield
0% to 35%
5
%
Trading account assets – Corporate securities, trading loans and other
2,655

Enterprise value/EBITDA multiple
0x to 18x
6
x
Trading account assets – Mortgage trading loans and ABS
4,251

Prepayment speed
5% to 40%
20
%
AFS debt securities – Other taxable securities
3,307

Default rate
1% to 4%
4
%
Loans and leases
1,043

Loss severity
25% to 40%
35
%
Loans held-for-sale
174

 
 
 
Auction rate securities
$
1,835

Discounted cash flow, Market comparables
Projected tender price/Re-financing level
50% to 100%
95
%
Trading account assets – Corporate securities, trading loans and other
108

 
 
AFS debt securities – Other taxable securities
850

 
 
 
AFS debt securities – Tax-exempt securities
877

 
 
 
Structured liabilities
 
 
 
 
 
Long-term debt
$
(1,890
)
Industry standard derivative pricing (2)
Equity correlation
30% to 100%
63
%
 
 
Long-dated volatilities
4% to 70%
24
%
 
 
 
 
 
Net derivatives assets
 
 
 
 
 
Credit derivatives
$
1,284

Discounted cash flow, Stochastic recovery correlation model
Yield
4% to 25%
16
%
 
 
Credit spreads
56 bps to 184 bps
173 bps

 
 
Upfront points
0 points to 100 points
58 points

 
 
Spread to index
-1,746 bps to 1,852 bps
216 bps

 
 
Credit correlation
20% to 87%
48
%
 
 
Prepayment speed
3% to 40% CPR
12
%
 
 
Default rate
1% to 5% CDR
3
%
 
 
Loss severity
20% to 42%
35
%
Equity derivatives
$
(610
)
Industry standard derivative pricing (2)
Equity correlation
30% to 100%
63
%
 
 
Long-dated volatilities
4% to 70%
24
%
 
 
 
 
 
Commodity derivatives
$
5

Discounted cash flow, Industry standard derivative pricing (3)
Natural gas forward price
$3/MMBtu to $12/MMBtu
$7/MMBtu

 
 
Correlation
47% to 95%
79
%
 
 
Volatilities
9% to 301%
34
%
Interest rate derivatives
$
494

Industry standard derivative pricing (3)
Correlation (IR/IR)
24% to 99%
64
%
 
 
Correlation (FX/IR)
-65% to 50%
1
%
 
 
Long-dated inflation rates
1% to 3%
2
%
 
 
Long-dated inflation volatilities
0% to 2%
1
%
Total net derivative assets
$
1,173

 
 
 
 

(1) 
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 230: Trading account assets – Corporate securities, trading loans and other of $2.8 billion, Trading account assets – Mortgage trading loans and ABS of $4.7 billion, AFS debt securities – Other taxable securities of $4.2 billion, AFS debt securities – Tax-exempt securities of $877 million, Loans and leases of $1.9 billion and LHFS of $2.2 billion.
(2) 
Includes models such as Monte Carlo simulation and Black-Scholes.
(3) 
Includes models such as Monte Carlo simulation, Black-Scholes and other methods that model the joint dynamics of interest, inflation and foreign exchange rates.
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
EBITDA = Earnings before interest, taxes, depreciation and amortization
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange
Quantitative Information about Level 3 Fair Value Measurements for Loans, Securities and Structured Liabilities at December 31, 2012
 
(Dollars in millions)
 
 
Inputs
Financial Instrument
Fair Value
Valuation Technique
Significant Unobservable
Inputs
Ranges of Inputs
Weighted Average
Loans and Securities (1)
 
 
 
 
 
Instruments backed by residential real estate assets
$
4,478

Discounted cash flow, Market comparables
Yield
2% to 25%
6
%
Trading account assets – Mortgage trading loans and ABS
459

Prepayment speed
1% to 30% CPR
10
%
Loans and leases
1,286

Default rate
0% to 44% CDR
6
%
Loans held-for-sale
2,733

Loss severity
6% to 85%
43
%
Instruments backed by commercial real estate assets
$
1,910

Discounted cash flow
Yield
5%
n/a

Other assets
1,910

Loss severity
51% to 100%
88
%
Commercial loans, debt securities and other
$
10,778

Discounted cash flow, Market comparables
Yield
0% to 25%
4
%
Trading account assets – Corporate securities, trading loans and other
2,289

Enterprise value/EBITDA multiple
2x to 11x
5x

Trading account assets – Mortgage trading loans and ABS
4,476

Prepayment speed
5% to 30%
20
%
AFS debt securities – Other taxable securities
3,012

Default rate
1% to 5%
4
%
Loans and leases
1,001

Loss severity
25% to 40%
35
%
Auction rate securities
$
3,414

Discounted cash flow, Market comparables
Discount rate
4% to 5%
4
%
Trading account assets – Corporate securities, trading loans and other
1,437

Projected tender price/Re-financing level
50% to 100%
92
%
AFS debt securities – Other taxable securities
916

 
 
AFS debt securities – Tax-exempt securities
1,061

 
 
 
Structured liabilities
 
 
 
 
 
Long-term debt (2)
$
(2,301
)
Industry standard derivative pricing (3)
Equity correlation
30% to 97%
n/m

 
 
Long-dated volatilities
20% to 70%
n/m

 
 
 
 
 


Quantitative Information about Level 3 Fair Value Measurements for Net Derivative Assets at December 31, 2012
(Dollars in millions)
 
 
Inputs
Financial Instrument
Fair Value
Valuation Technique
Significant Unobservable
Inputs
Ranges of Inputs
Net derivatives assets
 
 
 
 
Credit derivatives
$
2,327

Discounted cash flow, Stochastic recovery correlation model
Yield
2% to 25%
 
 
Credit spreads
58 bps to 615 bps
 
 
Upfront points
25 points to 99 points
 
 
Spread to index
-2,080 bps to 1,972 bps
 
 
Credit correlation
19% to 75%
 
 
Prepayment speed
3% to 30% CPR
 
 
Default rate
0% to 8% CDR
 
 
Loss severity
25% to 42%
Equity derivatives
$
(1,295
)
Industry standard derivative pricing (3)
Equity correlation
30% to 97%
 
 
Long-dated volatilities
20% to 70%
 
 
 
 
Commodity derivatives
$
(5
)
Discounted cash flow
Natural gas forward price
$3/MMBtu to $12/MMBtu
Interest rate derivatives
$
441

Industry standard derivative pricing (4)
Correlation (IR/IR)
15% to 99%
 
 
Correlation (FX/IR)
-65% to 50%
 
 
Long-dated inflation rates
2% to 3%
 
 
Long-dated inflation volatilities
0% to 1%
 
 
Long-dated volatilities (FX)
5% to 36%
 
 
Long-dated swap rates
8% to 10%
Total net derivative assets
$
1,468

 
 
 
(1) 
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 231: Trading account assets – Corporate securities, trading loans and other of $3.7 billion, Trading account assets – Mortgage trading loans and ABS of $4.9 billion, AFS debt securities – Other taxable securities of $3.9 billion, AFS debt securities – Tax-exempt securities of $1.1 billion, Loans and leases of $2.3 billion, LHFS of $2.7 billion and Other assets of $1.9 billion.
(2) 
For more information on the ranges of inputs for equity correlation and long-dated volatilities, see the qualitative equity derivatives discussion on page 238.
(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.
n/a = not applicable
n/m = not meaningful
CPR = Constant Prepayment Rate
CDR = Constant Default Rate
EBITDA = Earnings before interest, taxes, depreciation and amortization
MMBtu = Million British thermal units
IR = Interest Rate
FX = Foreign Exchange
Assets and Liabilities Measured at Fair Value on Nonrecurring Basis
Assets Measured at Fair Value on a Nonrecurring Basis
 
 
 
June 30, 2013
 
Three Months Ended June 30, 2013
 
Six Months Ended June 30, 2013
(Dollars in millions)
Level 2
 
Level 3
 
Gains (Losses)
Assets
 
 
 
 
 
 
 
Loans held-for-sale
$
2,195

 
$
660

 
$
(61
)
 
$
(69
)
Loans and leases (1)
14

 
4,489

 
(525
)
 
(1,004
)
Foreclosed properties (2)
12

 
1,435

 
8

 
10

Other assets
99

 
12

 
(5
)
 
(11
)
 
 
 
 
 
 
 
 
 
June 30, 2012
 
Three Months Ended June 30, 2012
 
Six Months Ended June 30, 2012
Assets
 
 
 
 
 
 
 
Loans held-for-sale
$
683

 
$
1,139

 
$
(69
)
 
$
(12
)
Loans and leases (1)
27

 
6,902

 
(1,213
)
 
(2,350
)
Foreclosed properties (2)
67

 
1,305

 
(46
)
 
(82
)
Other assets
39

 
11

 
(2
)
 
(2
)
(1) 
Losses represent charge-offs on real estate-secured loans.
(2) 
Amounts are included in other assets on the Consolidated Balance Sheet and represent fair value and related losses on foreclosed properties that were written down subsequent to their initial classification as foreclosed properties.
Fair Value Inputs, Assets, Quantitative Information
The table below presents information about significant unobservable inputs related to the Corporation's nonrecurring Level 3 financial assets and liabilities at June 30, 2013 and December 31, 2012.

Quantitative Information about Nonrecurring Level 3 Fair Value Measurements at June 30, 2013
 
(Dollars in millions)
 
 
Inputs
Financial Instrument
Fair Value
Valuation Technique
Significant Unobservable
Inputs
Ranges of Inputs
Weighted Average
Instruments backed by residential real estate assets
$
5,068

Discounted cash flow, Market comparables
Yield
3% to 6%
4
%
Loans held-for-sale
579

Prepayment speed
3% to 20%
12
%
Loans and leases
4,489

Default rate
0% to 28%
7
%
 
 
Loss severity
8% to 61%
43
%
 
 
OREO discount
0% to 29%
15
%
 
 
Cost to sell
8%
n/a

Instruments backed by commercial real estate assets
$
81

Discounted cash flow
Yield
5% to 9%
9
%
Loans held-for-sale
81

Loss severity
82% to 86%
83
%

Quantitative Information about Nonrecurring Level 3 Fair Value Measurements at December 31, 2012
 
Instruments backed by residential real estate assets
$
9,932

Discounted cash flow, Market comparables
Yield
3% to 5%
3
%
Loans held-for-sale
748

Prepayment speed
3% to 30%
15
%
Loans and leases
9,184

Default rate
0% to 55%
7
%
 
 
Loss severity
6% to 66%
48
%
 
 
OREO discount
0% to 28%
15
%
 
 
Cost to sell
8%
n/a

Instruments backed by commercial real estate assets
$
388

Discounted cash flow
Yield
4% to 13%
6
%
Loans held-for-sale
388

Loss severity
24% to 88%
53
%

n/a = not applicable
Fair Value, Inputs, Level 3 [Member]
  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]  
Level 3 Total Realized and Unrealized Gains (Losses) Included in Earnings
Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings
 
Three Months Ended June 30, 2013
(Dollars in millions)
Equity
Investment
Income
(Loss)
 
Trading
Account
Profits
(Losses)
 
Mortgage
Banking
Income
(Loss) (1)
 
Other
Income
(Loss)
 
Total
Trading account assets:
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
—

 
$
35

 
$
—

 
$
—

 
$
35

Equity securities
—

 
8

 
—

 
—

 
8

Non-U.S. sovereign debt
—

 
(6
)
 
—

 
—

 
(6
)
Mortgage trading loans and ABS
—

 
10

 
—

 
—

 
10

Total trading account assets
—

 
47

 
—

 
—

 
47

Net derivative assets
—

 
260

 
132

 
—

 
392

AFS debt securities – Other taxable securities
—

 
—

 
—

 
3

 
3

Loans and leases (2)
—

 
—

 
—

 
49

 
49

Mortgage servicing rights
—

 
—

 
1,026

 
—

 
1,026

Loans held-for-sale (2)
—

 
—

 
(2
)
 
21

 
19

Other assets
34

 
—

 
127

 
(40
)
 
121

Trading account liabilities – Corporate securities and other
—

 
6

 
—

 
—

 
6

Accrued expenses and other liabilities (2)
—

 
—

 
(7
)
 
—

 
(7
)
Long-term debt (2)
—

 
58

 
—

 
34

 
92

Total
$
34

 
$
371

 
$
1,276

 
$
67

 
$
1,748

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2012
Trading account assets:
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
—

 
$
30

 
$
—

 
$
—

 
$
30

Equity securities
—

 
(6
)
 
—

 
—

 
(6
)
Non-U.S. sovereign debt
—

 
(26
)
 
—

 
—

 
(26
)
Mortgage trading loans and ABS
—

 
(16
)
 
—

 
—

 
(16
)
Total trading account assets
—

 
(18
)
 
—

 
—

 
(18
)
Net derivative assets
—

 
229

 
881

 
—

 
1,110

AFS debt securities – Tax-exempt securities
—

 
—

 
—

 
28

 
28

Loans and leases (2)
—

 
—

 
—

 
51

 
51

Mortgage servicing rights
—

 
—

 
(1,592
)
 
—

 
(1,592
)
Loans held-for-sale (2)
—

 
—

 
5

 
5

 
10

Other assets
(21
)
 
—

 
(34
)
 
(47
)
 
(102
)
Accrued expenses and other liabilities (2)
—

 
—

 
—

 
1

 
1

Long-term debt (2)
—

 
80

 
—

 
13

 
93

Total
$
(21
)
 
$
291

 
$
(740
)
 
$
51

 
$
(419
)
(1) 
Mortgage banking income does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) 
Amounts represent instruments that are accounted for under the fair value option.
Level 3 – Total Realized and Unrealized Gains (Losses) Included in Earnings
 
Six Months Ended June 30, 2013
(Dollars in millions)
Equity
Investment
Income
(Loss)
 
Trading
Account
Profits
(Losses)
 
Mortgage
Banking
Income
(Loss) (1)
 
Other
Income
(Loss)
 
Total
Trading account assets:
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
—

 
$
123

 
$
—

 
$
—

 
$
123

Equity securities
—

 
50

 
—

 
—

 
50

Non-U.S. sovereign debt
—

 
45

 
—

 
—

 
45

Mortgage trading loans and ABS
—

 
172

 
—

 
—

 
172

Total trading account assets
—

 
390

 
—

 
—

 
390

Net derivative assets
—

 
146

 
539

 
—

 
685

AFS debt securities:
 
 
 
 
 
 
 
 
 
Other taxable securities
—

 
—

 
—

 
3

 
3

Tax-exempt securities
—

 
—

 
—

 
1

 
1

Total AFS debt securities
—

 
—

 
—

 
4

 
4

Loans and leases (2)
—

 
—

 
—

 
100

 
100

Mortgage servicing rights
—

 
—

 
1,460

 
—

 
1,460

Loans held-for-sale (2)
—

 
—

 
2

 
(22
)
 
(20
)
Other assets
36

 
—

 
124

 
(487
)
 
(327
)
Trading account liabilities – Corporate securities and other
—

 
6

 
—

 
—

 
6

Accrued expenses and other liabilities (2)
—

 
—

 
22

 
—

 
22

Long-term debt (2)
—

 
80

 
—

 
23

 
103

Total
$
36

 
$
622

 
$
2,147

 
$
(382
)
 
$
2,423

 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2012
Trading account assets:
 
 
 
 
 
 
 
 
 
Corporate securities, trading loans and other
$
—

 
$
123

 
$
—

 
$
—

 
$
123

Equity securities
—

 
9

 
—

 
—

 
9

Non-U.S. sovereign debt
—

 
(2
)
 
—

 
—

 
(2
)
Mortgage trading loans and ABS
—

 
83

 
—

 
—

 
83

Total trading account assets
—

 
213

 
—

 
—

 
213

Net derivative assets
—

 
(1,144
)
 
1,417

 
—

 
273

AFS debt securities:
 
 
 
 
 
 
 
 
 
Non-agency residential MBS
—

 
—

 
—

 
(69
)
 
(69
)
Corporate/Agency bonds
—

 
—

 
—

 
(2
)
 
(2
)
Other taxable securities
—

 
—

 
—

 
7

 
7

Tax-exempt securities
—

 
—

 
—

 
54

 
54

Total AFS debt securities
—

 
—

 
—

 
(10
)
 
(10
)
Loans and leases (2)
—

 
—

 
—

 
215

 
215

Mortgage servicing rights
—

 
—

 
(937
)
 
—

 
(937
)
Loans held-for-sale (2)
—

 
—

 
95

 
84

 
179

Other assets
(11
)
 
—

 
(42
)
 
(81
)
 
(134
)
Accrued expenses and other liabilities (2)
—

 
—

 
—

 
4

 
4

Long-term debt (2)
—

 
(59
)
 
—

 
(89
)
 
(148
)
Total
$
(11
)
 
$
(990
)
 
$
533

 
$
123

 
$
(345
)

(1) 
Mortgage banking income does not reflect the impact of Level 1 and Level 2 hedges on MSRs.
(2) 
Amounts represent instruments that are accounted for under the fair value option.