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Derivative Instruments and Hedging Activities (Tables)
 12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Schedule of Derivative Assets and Liabilities at Fair Value
The following table summarizes the notional amounts and fair values of our derivative instruments as of December 31, 2019 and 2018, which are segregated by derivatives that are designated as accounting hedges and those that are not, and are further segregated by type of contract within those two categories. The total derivative assets and liabilities are adjusted on an aggregate basis to take into consideration the effects of legally enforceable master netting agreements and any associated cash collateral received or pledged. Derivative assets and liabilities are included in other assets and other liabilities, respectively, on our consolidated balance sheets, and their related gains or losses are included in operating activities as changes in other assets and other liabilities in the consolidated statements of cash flows.
Table 9.1: Derivative Assets and Liabilities at Fair Value
 
 
December 31, 2019
 
December 31, 2018
 
 
Notional or
Contractual
Amount
 
Derivative(1)
 
Notional or
Contractual
Amount
 
Derivative(1)
(Dollars in millions)
 
Assets
 
Liabilities
 
Assets
 
Liabilities
Derivatives designated as accounting hedges:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Fair value hedges
 
$
57,587

 
$
11

 
$
55

 
$
53,413

 
$
64

 
$
28

Cash flow hedges
 
96,900

 
321

 
29

 
81,200

 
83

 
70

Total interest rate contracts
 
154,487

 
332

 
84

 
134,613

 
147

 
98

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
 
 
Fair value hedges
 
1,402

 
0

 
6

 
0

 
0

 
0

Cash flow hedges
 
6,103

 
0

 
113

 
5,745

 
184

 
2

Net investment hedges
 
2,829

 
0

 
102

 
2,607

 
178

 
0

Total foreign exchange contracts
 
10,334

 
0

 
221

 
8,352

 
362

 
2

Total derivatives designated as accounting hedges
 
164,821

 
332

 
305

 
142,965

 
509

 
100

Derivatives not designated as accounting hedges:
 
 
 
 
 
 
 
 
 
 
 
 
Customer accommodation:
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts
 
62,268

 
552

 
117

 
49,386

 
190

 
256

Commodity contracts
 
15,492

 
758

 
694

 
10,673

 
797

 
786

Foreign exchange and other contracts
 
4,674

 
39

 
42

 
1,418

 
12

 
11

Total customer accommodation
 
82,434

 
1,349

 
853

 
61,477

 
999

 
1,053

Other interest rate exposures(2)
 
6,729

 
48

 
30

 
6,427

 
29

 
36

Other contracts
 
1,562

 
0

 
9

 
1,636

 
2

 
12

Total derivatives not designated as accounting hedges
 
90,725

 
1,397

 
892

 
69,540

 
1,030

 
1,101

Total derivatives
 
$
255,546

 
$
1,729

 
$
1,197

 
$
212,505

 
$
1,539

 
$
1,201

Less: netting adjustment(3)
 
(633
)
 
(523
)
 
 
 
(1,079
)
 
(287
)
Total derivative assets/liabilities
 
$
1,096

 
$
674

 
 
 
$
460

 
$
914

__________
(1) 
Does not reflect $12 million and $2 million recognized as a net valuation allowance on derivative assets and liabilities for non-performance risk as of December 31, 2019 and 2018, respectively. Non-performance risk is included in derivative assets and liabilities, which are part of other assets and liabilities on the consolidated balance sheets, and is offset through non-interest income in the consolidated statements of income.
(2) 
Other interest rate exposures include commercial mortgage-related derivatives and interest rate swaps.
(3) 
Represents balance sheet netting of derivative assets and liabilities, and related payables and receivables for cash collateral held or placed with the same counterparty.
Hedged Item in Fair Value Hedging Relationship
The following table summarizes the carrying value of our hedged assets and liabilities in fair value hedges and the associated cumulative basis adjustments included in those carrying values, excluding basis adjustments related to foreign currency risk, as of December 31, 2019 and 2018.
Table 9.2: Hedged Items in Fair Value Hedging Relationships
 
 
December 31, 2019
 
December 31, 2018
 
 
Carrying Amount
Assets/(Liabilities)
 
Cumulative Amount of Basis Adjustments Included in the Carrying Amount
 
Carrying Amount
Assets/(Liabilities)
 
Cumulative Amount of Basis Adjustments Included in the Carrying Amount
(Dollars in millions)
 
 
Total
Assets/(Liabilities)
 
Discontinued-Hedging Relationships
 
 
Total
Assets/(Liabilities)
 
Discontinued-Hedging Relationships
Line item on our consolidated balance sheets in which the hedged item is included:
 
 
 
 
 
 
 
 
 
 
 
 
Investment securities available for sale(1)(2)
 
$
10,825

 
$
300

 
$
52

 
$
14,067

 
$
(6
)
 
$
(2
)
Interest-bearing deposits
 
(14,310
)
 
(12
)
 
0

 
(13,101
)
 
247

 
0

Securitized debt obligations
 
(9,403
)
 
44

 
64

 
(5,887
)
 
168

 
143

Senior and subordinated notes
 
(27,777
)
 
(458
)
 
324

 
(23,572
)
 
315

 
392

__________
(1) 
These amounts include the amortized cost basis of our investment securities designated in hedging relationships for which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. The amortized cost basis of this portfolio was $5.9 billion and $8.3 billion, the amount of the designated hedged items was $3.1 billion and $4.0 billion, and the cumulative basis adjustment associated with these hedges was $75 million and $26 million as of December 31, 2019 and 2018, respectively.
(2) 
Carrying value represents amortized cost.
Offsetting Assets
The following table presents the gross and net fair values of our derivative assets, derivative liabilities, resale and repurchase agreements and the related offsetting amounts permitted under U.S. GAAP as of December 31, 2019 and 2018. The table also includes cash and non-cash collateral received or pledged in accordance with such arrangements. The amount of collateral presented, however, is limited to the amount of the related net derivative fair values or outstanding balances; therefore, instances of over-collateralization are excluded.
Table 9.3: Offsetting of Financial Assets and Financial Liabilities
 
 
Gross
Amounts
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts as Recognized
 
Securities Collateral Held Under Master Netting Agreements
 
 
(Dollars in millions)
 
 
Financial
Instruments
 
Cash Collateral Received
 
 
 
Net
Exposure
As of December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)
 
$
1,729

 
$
(347
)
 
$
(286
)
 
$
1,096

 
$
0

 
$
1,096

As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)
 
1,539

 
(205
)
 
(874
)
 
460

 
0

 
460

 
 
Gross
Amounts
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts as Recognized
 
Securities Collateral Pledged Under Master Netting Agreements
 
 
(Dollars in millions)
 
 
Financial
Instruments
 
Cash Collateral Pledged
 
 
 
Net
Exposure
As of December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)
 
$
1,197

 
$
(347
)
 
$
(176
)
 
$
674

 
$
0

 
$
674

Repurchase agreements(2)
 
314

 
0

 
0

 
314

 
(314
)
 
0

As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)
 
1,201

 
(205
)
 
(82
)
 
914

 
0

 
914

Repurchase agreements(2)
 
352

 
0

 
0

 
352

 
(352
)
 
0

__________
(1) 
We received cash collateral from derivative counterparties totaling $347 million and $925 million as of December 31, 2019 and 2018, respectively. We also received securities from derivative counterparties with a fair value of $1 million as of both December 31, 2019 and 2018, which we have the ability to re-pledge. We posted $954 million and $633 million of cash collateral as of December 31, 2019 and 2018, respectively.
(2) 
Represents customer repurchase agreements that mature the next business day. As of December 31, 2019 and 2018, we pledged collateral with a fair value of $320 million and $359 million, respectively, under these customer repurchase agreements, which were primarily agency RMBS securities.
Offsetting Liabilities
The following table presents the gross and net fair values of our derivative assets, derivative liabilities, resale and repurchase agreements and the related offsetting amounts permitted under U.S. GAAP as of December 31, 2019 and 2018. The table also includes cash and non-cash collateral received or pledged in accordance with such arrangements. The amount of collateral presented, however, is limited to the amount of the related net derivative fair values or outstanding balances; therefore, instances of over-collateralization are excluded.
Table 9.3: Offsetting of Financial Assets and Financial Liabilities
 
 
Gross
Amounts
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts as Recognized
 
Securities Collateral Held Under Master Netting Agreements
 
 
(Dollars in millions)
 
 
Financial
Instruments
 
Cash Collateral Received
 
 
 
Net
Exposure
As of December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)
 
$
1,729

 
$
(347
)
 
$
(286
)
 
$
1,096

 
$
0

 
$
1,096

As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative assets(1)
 
1,539

 
(205
)
 
(874
)
 
460

 
0

 
460

 
 
Gross
Amounts
 
Gross Amounts Offset in the Balance Sheet
 
Net Amounts as Recognized
 
Securities Collateral Pledged Under Master Netting Agreements
 
 
(Dollars in millions)
 
 
Financial
Instruments
 
Cash Collateral Pledged
 
 
 
Net
Exposure
As of December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)
 
$
1,197

 
$
(347
)
 
$
(176
)
 
$
674

 
$
0

 
$
674

Repurchase agreements(2)
 
314

 
0

 
0

 
314

 
(314
)
 
0

As of December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Derivative liabilities(1)
 
1,201

 
(205
)
 
(82
)
 
914

 
0

 
914

Repurchase agreements(2)
 
352

 
0

 
0

 
352

 
(352
)
 
0

__________
(1) 
We received cash collateral from derivative counterparties totaling $347 million and $925 million as of December 31, 2019 and 2018, respectively. We also received securities from derivative counterparties with a fair value of $1 million as of both December 31, 2019 and 2018, which we have the ability to re-pledge. We posted $954 million and $633 million of cash collateral as of December 31, 2019 and 2018, respectively.
(2) 
Represents customer repurchase agreements that mature the next business day. As of December 31, 2019 and 2018, we pledged collateral with a fair value of $320 million and $359 million, respectively, under these customer repurchase agreements, which were primarily agency RMBS securities.
Effects of Fair Value and Cash Flow Hedge Accounting
The net gains (losses) recognized in our consolidated statements of income related to derivatives in fair value and cash flow hedging relationships are presented below for the years ended December 31, 2019, 2018 and 2017. We did not reclassify 2017 amounts to conform to the current period presentation.
 
Table 9.4: Effects of Fair Value and Cash Flow Hedge Accounting
 
 
Year Ended December 31, 2019
 
 
Net Interest Income
 
Non-Interest Income
(Dollars in millions)
 
Investment Securities
 
Loans, Including Loans Held for Sale
 
Other
 
Interest-bearing Deposits
 
Securitized Debt Obligations
 
Senior and Subordinated Notes
 
Other
Total amounts presented in our consolidated statements of income
 
$
2,411

 
$
25,862

 
$
240

 
$
(3,420
)
 
$
(523
)
 
$
(1,159
)
 
$
718

Fair value hedging relationships:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate and foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest recognized on derivatives
 
$
(12
)
 
$
0

 
$
0

 
$
(108
)
 
$
(14
)
 
$
(6
)
 
$
0

Gains (losses) recognized on derivatives
 
(278
)
 
0

 
0

 
263

 
45

 
704

 
(9
)
Gains (losses) recognized on hedged items(1)
 
278

 
0

 
0

 
(258
)
 
(123
)
 
(801
)
 
9

Excluded component of fair value hedges(2)
 
0

 
0

 
0

 
0

 
0

 
(2
)
 
0

Net expense recognized on fair value hedges
 
$
(12
)
 
$
0

 
$
0

 
$
(103
)
 
$
(92
)
 
$
(105
)
 
$
0

Cash flow hedging relationships:(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized losses reclassified from AOCI into net income
 
$
(8
)
 
$
(163
)
 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains reclassified from AOCI into net income(4)
 
0

 
0

 
44

 
0

 
0

 
0

 
(1
)
Net income (expense) recognized on cash flow hedges
 
$
(8
)
 
$
(163
)
 
$
44

 
$
0

 
$
0

 
$
0

 
$
(1
)
 
 
Year Ended December 31, 2018
 
 
 
 
Net Interest Income
 
Non-Interest Income
(Dollars in millions)
 
Investment Securities
 
Loans, Including Loans Held for Sale
 
Other
 
Interest-bearing Deposits
 
Securitized Debt Obligations
 
Senior and Subordinated Notes
 
Other
Total amounts presented in our consolidated statements of income
 
$
2,211

 
$
24,728

 
$
237

 
$
(2,598
)
 
$
(496
)
 
$
(1,125
)
 
$
1,002

Fair value hedging relationships:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest recognized on derivatives
 
$
(23
)
 
$
0

 
$
0

 
$
(76
)
 
$
(53
)
 
$
2

 
$
0

Gains (losses) recognized on derivatives
 
34

 
0

 
0

 
(60
)
 
(61
)
 
(212
)
 
0

Gains (losses) recognized on hedged items(1)
 
(33
)
 
0

 
0

 
52

 
38

 
131

 
0

Net expense recognized on fair value hedges
 
$
(22
)
 
$
0

 
$
0

 
$
(84
)
 
$
(76
)
 
$
(79
)
 
$
0

Cash flow hedging relationships:(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized losses reclassified from AOCI into net income
 
$
(9
)
 
$
(82
)
 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

Foreign exchange contracts:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized gains (losses) reclassified from AOCI into net income(4)
 
0

 
0

 
47

 
0

 
0

 
0

 
(2
)
Net income (expense) recognized on cash flow hedges
 
$
(9
)
 
$
(82
)
 
$
47

 
$
0

 
$
0

 
$
0

 
$
(2
)
__________
(1) 
Includes amortization expense of $171 million and $75 million for the years ended December 31, 2019 and 2018, respectively, related to basis adjustments on discontinued hedges.
(2) 
Changes in fair values of cross-currency swaps attributable to changes in cross-currency basis spreads are excluded from the assessment of hedge effectiveness and recorded in other comprehensive income. The initial value of the excluded component is recognized in earnings over the life of the swap under the amortization approach.
(3) 
See “Note 10—Stockholders’ Equity” for the effects of cash flow and net investment hedges on AOCI and amounts reclassified to net income, net of tax.
(4) 
We recognized a loss of $341 million and gain of $191 million for the years ended December 31, 2019 and 2018 respectively, on foreign exchange contracts reclassified from AOCI. These amounts were largely offset by the foreign currency transaction gains (losses) on our foreign currency denominated intercompany funding included other non-interest income.
(Dollars in millions)
 
Year Ended December 31, 2017
Derivatives designated as fair value hedges:
 
 
Fair value interest rate contracts:
 
 
Losses recognized in net income on derivatives
 
$
(212
)
Gains recognized in net income on hedged items
 
216

Net fair value hedge ineffectiveness gains
 
4

Derivatives designated as cash flow hedges:
 
 
Gains reclassified from AOCI into net income:
 
 
Interest rate contracts
 
91

Foreign exchange contracts
 
17

Subtotal
 
108

Gains recognized in net income due to ineffectiveness:
 
 
Interest rate contracts
 
2

Net derivative gains recognized in net income
 
$
110
Gains (Losses) on Free-Standing Derivatives
The net impacts to our consolidated statements of income related to free-standing derivatives are presented below for the years ended December 31, 2019, 2018 and 2017. These gains or losses are recognized in other non-interest income in our consolidated statements of income.
Table 9.5: Gains (Losses) on Free-Standing Derivatives
 
 
Year Ended December 31,
(Dollars in millions)
 
2019
 
2018
 
2017
Gains (losses) recognized in other non-interest income:
 
 
 
 
 
 
Customer accommodation:
 
 
 
 
 
 
Interest rate contracts
 
$
48

 
$
25

 
$
20

Commodity contracts
 
17

 
16

 
13

Foreign exchange and other contracts
 
13

 
7

 
5

Total customer accommodation
 
78

 
48

 
38

Other interest rate exposures
 
(16
)
 
33

 
61

Other contracts
 
(10
)
 
(21
)
 
0

Total
 
$
52

 
$
60

 
$
99