XML 143 R20.htm IDEA: XBRL DOCUMENT
v3.22.2

Financial Derivatives | 6 Months Ended
--- | ---
Jun. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Financial Derivatives | FINANCIAL D ERIVATIVES We use a variety of financial derivatives to both mitigate exposure to market (primarily interest rate) and credit risks inherent in our business activities, as well as to facilitate customer risk management activities. We manage these risks as part of our overall asset and liability management process and through our credit policies and procedures. Derivatives represent contracts between parties that usually require little or no initial net investment and result in one party delivering cash or another type of asset to the other party based on a notional amount and an underlying as specified in the contract. Derivative transactions are often measured in terms of notional amount, but this amount is generally not exchanged and it is not recorded on the balance sheet. The notional amount is the basis to which the underlying is applied to determine required payments under the derivative contract. The underlying is a referenced interest rate, security price, credit spread or other index. Residential and commercial real estate loan commitments associated with loans to be sold also qualify as derivative instruments. For more information regarding derivatives see Note 1 Accounting Policies and Note 16 Financial Derivatives in the Notes To Consolidated Financial Statements included in Item 8 of our 2021 Form 10-K. The following table presents the notional and gross fair value amounts of all derivative assets and liabilities held by us: Table 72: Total Gross Derivatives (a)
| June 30, 2022 | December 31, 2021
In millions | Notional / Contract Amount | Asset Fair Value (b) | Liability Fair Value (c) | Notional / Contract Amount | Asset Fair Value (b) | Liability Fair Value (c)
Derivatives used for hedging |  |  |  |  |  |
Interest rate contracts (d): |  |  |  |  |  |
Fair value hedges | $ | 21,579 |  |  |  | $ | 23,345 |  |  |
Cash flow hedges | 46,432 |  | $ | 19 |  | $ | 40 |  | 48,961 |  | $ | 15 |  | $ | 14 |
Foreign exchange contracts: |  |  |  |  |  |
Net investment hedges | 1,235 |  | 85 |  | 1 |  | 1,113 |  |  | 24 |
Total derivatives designated for hedging | $ | 69,246 |  | $ | 104 |  | $ | 41 |  | $ | 73,419 |  | $ | 15 |  | $ | 38 |
Derivatives not used for hedging |  |  |  |  |  |
Derivatives used for mortgage banking activities (e): |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |
Swaps | $ | 45,412 |  |  | $ | 3 |  | $ | 35,623 |  |  |
Futures (f) | 5,228 |  |  |  | 4,592 |  |  |
Mortgage-backed commitments | 6,189 |  | $ | 74 |  | 61 |  | 9,917 |  | $ | 55 |  | $ | 31 |
Other | 18,456 |  | 124 |  | 15 |  | 12,225 |  | 46 |  | 12 |
Total interest rate contracts | 75,285 |  | 198 |  | 79 |  | 62,357 |  | 101 |  | 43 |
Derivatives used for customer-related activities: |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |
Swaps | 320,717 |  | 1,259 |  | 3,459 |  | 297,711 |  | 3,335 |  | 1,520 |
Futures (f) | 520 |  |  |  | 907 |  |  |
Mortgage-backed commitments | 2,181 |  | 10 |  | 8 |  | 4,147 |  | 5 |  | 6 |
Other | 30,112 |  | 250 |  | 229 |  | 25,718 |  | 125 |  | 72 |
Total interest rate contracts | 353,530 |  | 1,519 |  | 3,696 |  | 328,483 |  | 3,465 |  | 1,598 |
Commodity contracts: |  |  |  |  |  |
Swaps | 8,917 |  | 2,469 |  | 2,567 |  | 8,840 |  | 1,150 |  | 1,161 |
Other | 6,049 |  | 665 |  | 663 |  | 3,128 |  | 213 |  | 212 |
Total commodity contracts | 14,966 |  | 3,134 |  | 3,230 |  | 11,968 |  | 1,363 |  | 1,373 |
Foreign exchange contracts and other | 29,074 |  | 375 |  | 329 |  | 27,563 |  | 199 |  | 179 |
Total derivatives for customer-related activities | 397,570 |  | 5,028 |  | 7,255 |  | 368,014 |  | 5,027 |  | 3,150 |
Derivatives used for other risk management activities: |  |  |  |  |  |
Foreign exchange contracts and other | 11,192 |  | 62 |  | 215 |  | 11,512 |  | 9 |  | 339 |
Total derivatives not designated for hedging | $ | 484,047 |  | $ | 5,288 |  | $ | 7,549 |  | $ | 441,883 |  | $ | 5,137 |  | $ | 3,532 |
Total gross derivatives | $ | 553,293 |  | $ | 5,392 |  | $ | 7,590 |  | $ | 515,302 |  | $ | 5,152 |  | $ | 3,570 |
Less: Impact of legally enforceable master netting agreements |  | 1,577 |  | 1,577 |  |  | 928 |  | 928 |
Less: Cash collateral received/paid |  | 578 |  | 2,288 |  |  | 604 |  | 1,657 |
Total derivatives |  | $ | 3,237 |  | $ | 3,725 |  |  | $ | 3,620 |  | $ | 985 |
(a)Centrally cleared derivatives are settled in cash daily and result in no derivative asset or derivative liability being recognized on our Consolidated Balance Sheet. (b)Included in Other assets on our Consolidated Balance Sheet. (c)Included in Other liabilities on our Consolidated Balance Sheet. (d)Represents primarily swaps. (e)Includes both residential and commercial mortgage banking activities. (f)Futures contracts are settled in cash daily and result in no derivative asset or derivative liability being recognized on our Consolidated Balance Sheet. All derivatives are carried on our Consolidated Balance Sheet at fair value. Derivative balances are presented on the Consolidated Balance Sheet on a net basis taking into consideration the effects of legally enforceable master netting agreements and, when appropriate, any related cash collateral exchanged with counterparties. Further discussion regarding the offsetting rights associated with these legally enforceable master netting agreements is included in the Offsetting and Counterparty Credit Risk section of this Note 13. Any nonperformance risk, including credit risk, is included in the determination of the estimated net fair value of the derivatives. Derivatives Designated As Hedging Instruments Certain derivatives used to manage interest rate and foreign exchange risk as part of our asset and liability risk management activities are designated as accounting hedges. Derivatives hedging the risks associated with changes in the fair value of assets or liabilities are considered fair value hedges, derivatives hedging the variability of expected future cash flows are considered cash flow hedges and derivatives hedging a net investment in a foreign subsidiary are considered net investment hedges. Designating derivatives as accounting hedges allows for gains and losses on those derivatives to be recognized in the same period and in the same income statement line item as the earnings impact of the hedged items. Fair Value Hedges We enter into receive-fixed, pay-variable interest rate swaps to hedge changes in the fair value of outstanding fixed-rate debt caused by fluctuations in market interest rates. We also enter into pay-fixed, receive-variable interest rate swaps and zero-coupon swaps to hedge changes in the fair value of fixed rate and zero-coupon investment securities caused by fluctuations in market interest rates. Gains and losses on the interest rate swaps designated in these hedge relationships, along with the offsetting gains and losses on the hedged items attributable to the hedged risk, are recognized in current earnings within the same income statement line item. Cash Flow Hedges We enter into receive-fixed, pay-variable interest rate swaps and interest rate caps and floors to modify the interest rate characteristics of designated commercial loans from variable to fixed in order to reduce the impact of changes in future cash flows due to market interest rate changes. We also periodically enter into forward purchase and sale contracts to hedge the variability of the consideration that will be paid or received related to the purchase or sale of investment securities. The forecasted purchase or sale is consummated upon gross settlement of the forward contract itself. For these cash flow hedges, gains and losses on the hedging instruments are recorded in AOCI and are then reclassified into earnings in the same period the hedged cash flows affect earnings and within the same income statement line as the hedged cash flows. In the 12 months that follow June 30, 2022, we expect to reclassify net derivative losses of $816 million pretax, or $628 million after-tax, from AOCI to interest income for these cash flow hedge strategies. This reclassified amount could differ from amounts actually recognized due to changes in interest rates, hedge de-designations and the addition of other hedges subsequent to June 30, 2022. As of June 30, 2022, the maximum length of time over which forecasted transactions are hedged is ten years. Further detail regarding gains (losses) related to our fair value and cash flow hedge derivatives is presented in the following table: Table 73: Gains (Losses) Recognized on Fair Value and Cash Flow Hedges in the Consolidated Income Statement (a) (b)
| Location and Amount of Gains (Losses) Recognized in Income
| Interest Income | Interest Expense | Noninterest Income
In millions | Loans | Investment Securities | Borrowed Funds | Other
For the three months ended June 30, 2022 |  |  |  |
Total amounts in the Consolidated Income Statement | $ | 2,504 |  | $ | 631 |  | $ | 142 |  | $ | 177 |
Gains (losses) on fair value hedges recognized on: |  |  |  |
Hedged items (c) |  | $ | (28) |  | $ | 443 |  |
Derivatives |  | $ | 30 |  | $ | (451) |  |
Amounts related to interest settlements on derivatives |  | $ | (2) |  | $ | 74 |  |
Gains (losses) on cash flow hedges (d): |  |  |  |
Amount of derivative gains (losses) reclassified from AOCI | $ | 25 |  |  |  |
For the three months ended June 30, 2021 |  |  |  |
Total amounts in the Consolidated Income Statement | $ | 2,160 |  | $ | 469 |  | $ | 90 |  | $ | 339 |
Gains (losses) on fair value hedges recognized on: |  |  |  |
Hedged items (c) |  | $ | 3 |  | $ | (106) |  |
Derivatives |  | $ | (2) |  | $ | 93 |  |
Amounts related to interest settlements on derivatives |  | $ | (1) |  | $ | 131 |  |
Gains (losses) on cash flow hedges (d): |  |  |  |
Amount of derivative gains (losses) reclassified from AOCI | $ | 91 |  | $ | 16 |  |  | $ | 1 |
For the six months ended June 30, 2022 |  |  |  |
Total amounts on the Consolidated Income Statement | $ | 4,797 |  | $ | 1,175 |  | $ | 225 |  | $ | 388 |
Gains (losses) on fair value hedges recognized on: |  |  |  |
Hedged items (c) |  | $ | (46) |  | $ | 1,377 |  |
Derivatives |  | $ | 49 |  | $ | (1,395) |  |
Amounts related to interest settlements on derivatives |  | $ | (3) |  | $ | 184 |  |
Gains (losses) on cash flow hedges (d): |  |  |  |
Amount of derivative gains (losses) reclassified from AOCI | $ | 117 |  | $ | 10 |  |  |
For the six months ended June 30, 2021 |  |  |  |
Total amounts on the Consolidated Income Statement | $ | 4,156 |  | $ | 890 |  | $ | 185 |  | $ | 639 |
Gains (losses) on fair value hedges recognized on: |  |  |  |
Hedged items (c) |  | $ | (5) |  | $ | 540 |  |
Derivatives |  | $ | 7 |  | $ | (571) |  |
Amounts related to interest settlements on derivatives |  | $ | (2) |  | $ | 265 |  |
Gains (losses) on cash flow hedges (d): |  |  |  |
Amount of derivative gains (losses) reclassified from AOCI | $ | 191 |  | $ | 38 |  |  | $ | 14 |
(a)For all periods presented, there were no components of derivative gains or losses excluded from the assessment of hedge effectiveness for any of the fair value or cash flow hedge strategies. (b)All cash flow and fair value hedge derivatives were interest rate contracts for the periods presented. (c)Includes an insignificant amount of fair value hedge adjustments related to discontinued hedge relationships. (d)For all periods presented, there were no gains or losses from cash flow hedge derivatives reclassified to income because it became probable that the original forecasted transaction would not occur. Detail regarding the impact of fair value hedge accounting on the carrying value of the hedged items is presented in the following table: Table 74: Hedged Items - Fair Value Hedges
| June 30, 2022 |  | December 31, 2021
In millions | Carrying Value of the Hedged Items |  | Cumulative Fair Value Hedge Adjustment included in the Carrying Value of Hedged Items (a) |  | Carrying Value of the Hedged Items |  | Cumulative Fair Value Hedge Adjustment included in the Carrying Value of Hedged Items (a) |
Investment securities - available for sale (b) | $ | 3,277 |  |  | $ | (23) |  |  | $ | 2,655 |  |  | $ | 23 |  |
Borrowed funds | $ | 20,346 |  |  | $ | (715) |  |  | $ | 24,259 |  |  | $ | 663 |  |
(a)Includes less than $(0.1) billion and $(0.1) billion of fair value hedge adjustments primarily related to discontinued borrowed funds hedge relationships at June 30, 2022 and December 31, 2021, respectively. (b)Carrying value shown represents amortized cost. Net Investment Hedges We enter into foreign currency forward contracts to hedge non-U.S. dollar net investments in foreign subsidiaries against adverse changes in foreign exchange rates. We assess whether the hedging relationship is highly effective in achieving offsetting changes in the value of the hedge and hedged item by qualitatively verifying that the critical terms of the hedge and hedged item match at the inception of the hedging relationship and on an ongoing basis. Net investment hedge derivatives are classified as foreign exchange contracts. There were no components of derivative gains or losses excluded from the assessment of the hedge effectiveness for the periods presented. Derivatives Not Designated As Hedging Instruments For additional information on derivatives not designated as hedging instruments under GAAP, see Note 16 Financial Derivatives in the Notes To Consolidated Financial Statements included in Item 8 of our 2021 Form 10-K. Further detail regarding the gains (losses) on derivatives not designated in hedging relationships is presented in the following table: Table 75: Gains (Losses) on Derivatives Not Designated for Hedging
|  |  | Three months ended June 30 |  | Six months ended June 30 |
In millions |  |  |  | 2022 | 2021 |  | 2022 | 2021 |
Derivatives used for mortgage banking activities: |  |  |  |  |  |  |  |  |
Interest rate contracts (a) |  |  |  | $ | (190) |  | $ | 216 |  |  | $ | (455) |  | $ | (106) |  |
Derivatives used for customer-related activities: |  |  |  |  |  |  |  |  |
Interest rate contracts |  |  |  | 69 |  | 15 |  |  | 166 |  | 97 |  |
Foreign exchange contracts and other |  |  |  | (20) |  | 43 |  |  | 24 |  | 65 |  |
Gains (losses) from customer-related activities (b) |  |  |  | 49 |  | 58 |  |  | 190 |  | 162 |  |
Derivatives used for other risk management activities: |  |  |  |  |  |  |  |  |
Foreign exchange contracts and other (b) |  |  |  | 216 |  | (29) |  |  | 263 |  | 19 |  |
Total gains (losses) from derivatives not designated as hedging instruments |  |  |  | $ | 75 |  | $ | 245 |  |  | $ | (2) |  | $ | 75 |  |
(a)Included in Residential and commercial mortgage noninterest income on our Consolidated Income Statement. (b)Included in Capital markets related and Other noninterest income on our Consolidated Income Statement. Offsetting and Counterparty Credit Risk We generally utilize a net presentation on the Consolidated Balance Sheet for those derivative financial instruments entered into with counterparties under legally enforceable master netting agreements. The master netting agreements reduce credit risk by permitting the closeout netting of all outstanding derivative instruments under the master netting agreement with the same counterparty upon the occurrence of an event of default. The master netting agreement also may require the exchange of cash or marketable securities to collateralize either party’s net position. For additional information on derivative offsetting and counterparty credit risk, see Note 16 Financial Derivatives in the Notes To Consolidated Financial Statements included in Item 8 of our 2021 Form 10-K. Table 76 shows the impact legally enforceable master netting agreements had on our derivative assets and derivative liabilities at June 30, 2022 and December 31, 2021. The table includes cash collateral held or pledged under legally enforceable master netting agreements. The table also includes the fair value of any securities collateral held or pledged under legally enforceable master netting agreements. Cash and securities collateral amounts are included in the table only to the extent of the related net derivative fair values. Table 76 includes OTC derivatives and OTC derivatives cleared through a central clearing house. OTC derivatives represent contracts executed bilaterally with counterparties that are not settled through an organized exchange or directly cleared through a central clearing house. The majority of OTC derivatives are governed by the ISDA documentation or other legally enforceable master netting agreements. OTC cleared derivatives represent contracts executed bilaterally with counterparties in the OTC market that are novated to a central clearing house who then becomes our counterparty. OTC cleared derivative instruments are typically settled in cash each day based on the prior day value. Table 76: Derivative Assets and Liabilities Offsetting
In millions |  |  |  | Amounts Offset on the Consolidated Balance Sheet |  |  |  |  |  | Securities Collateral Held/Pledged Under Master Netting Agreements |  |  |
Gross Fair Value |  | Fair Value Offset Amount |  | Cash Collateral |  | Net Fair Value |  |  |  | Net Amounts |
June 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Over-the-counter cleared |  | $ | 43 |  |  |  |  |  |  | $ | 43 |  |  |  |  |  |  | $ | 43 |  |
Over-the-counter |  | 1,693 |  |  | $ | 634 |  |  | $ | 318 |  |  | 741 |  |  |  |  | $ | 23 |  |  | 718 |  |
Commodity contracts |  | 3,134 |  |  | 676 |  |  | 138 |  |  | 2,320 |  |  |  |  |  |  | 2,320 |  |
Foreign exchange and other contracts |  | 522 |  |  | 267 |  |  | 122 |  |  | 133 |  |  |  |  |  |  | 133 |  |
Total derivative assets |  | $ | 5,392 |  |  | $ | 1,577 |  |  | $ | 578 |  |  | $ | 3,237 |  |  | (a) |  | $ | 23 |  |  | $ | 3,214 |  |
Derivative liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Over-the-counter cleared |  | $ | 28 |  |  |  |  |  |  | $ | 28 |  |  |  |  |  |  | $ | 28 |  |
Over-the-counter |  | 3,787 |  |  | $ | 680 |  |  | $ | 761 |  |  | 2,346 |  |  |  |  |  |  | 2,346 |  |
Commodity contracts |  | 3,230 |  |  | 802 |  |  | 1,513 |  |  | 915 |  |  |  |  |  |  | 915 |  |
Foreign exchange and other contracts |  | 545 |  |  | 95 |  |  | 14 |  |  | 436 |  |  |  |  |  |  | 436 |  |
Total derivative liabilities |  | $ | 7,590 |  |  | $ | 1,577 |  |  | $ | 2,288 |  |  | $ | 3,725 |  |  | (b) |  |  |  | $ | 3,725 |  |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Over-the-counter cleared |  | $ | 20 |  |  |  |  |  |  | $ | 20 |  |  |  |  |  |  | $ | 20 |  |
Over-the-counter |  | 3,561 |  |  | $ | 533 |  |  | $ | 593 |  |  | 2,435 |  |  |  |  | $ | 300 |  |  | 2,135 |  |
Commodity contracts |  | 1,363 |  |  | 299 |  |  | 1 |  |  | 1,063 |  |  |  |  |  |  | 1,063 |  |
Foreign exchange and other contracts |  | 208 |  |  | 96 |  |  | 10 |  |  | 102 |  |  |  |  |  |  | 102 |  |
Total derivative assets |  | $ | 5,152 |  |  | $ | 928 |  |  | $ | 604 |  |  | $ | 3,620 |  |  | (a) |  | $ | 300 |  |  | $ | 3,320 |  |
Derivative liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Over-the-counter cleared |  | $ | 12 |  |  |  |  |  |  | $ | 12 |  |  |  |  |  |  | $ | 12 |  |
Over-the-counter |  | 1,643 |  |  | $ | 569 |  |  | $ | 776 |  |  | 298 |  |  |  |  |  |  | 298 |  |
Commodity contracts |  | 1,373 |  |  | 291 |  |  | 784 |  |  | 298 |  |  |  |  |  |  | 298 |  |
Foreign exchange and other contracts |  | 542 |  |  | 68 |  |  | 97 |  |  | 377 |  |  |  |  |  |  | 377 |  |
Total derivative liabilities |  | $ | 3,570 |  |  | $ | 928 |  |  | $ | 1,657 |  |  | $ | 985 |  |  | (b) |  |  |  | $ | 985 |  |
(a)Represents the net amount of derivative assets included in Other assets on our Consolidated Balance Sheet. (b)Represents the net amount of derivative liabilities included in Other liabilities on our Consolidated Balance Sheet. In addition to using master netting agreements and other collateral agreements to reduce credit risk associated with derivative instruments, we also seek to manage credit risk by evaluating credit ratings of counterparties and by using internal credit analysis, limits and monitoring procedures. At June 30, 2022, cash and debt securities (primarily agency mortgage-backed securities) totaling $1.6 billion were pledged to us under master netting agreements and other collateral agreements to collateralize net derivative assets due from counterparties and to meet initial margin requirements, and we pledged cash and debt securities (primarily agency mortgage-backed securities) totaling $4.6 billion under these agreements to collateralize net derivative liabilities owed to counterparties and to meet initial margin requirements. These totals may differ from the amounts presented in the preceding offsetting table because these totals may include collateral exchanged under an agreement that does not qualify as a master netting agreement or because the total amount of collateral pledged exceeds the net derivative fair values with the counterparty as of the balance sheet date due to timing or other factors, such as initial margin. To the extent not netted against the derivative fair values under a master netting agreement, the receivable for cash pledged is included in Other assets and the obligation for cash held is included in Other liabilities on our Consolidated Balance Sheet. Securities pledged to us by counterparties are not recognized on our balance sheet. Likewise, securities we have pledged to counterparties remain on our balance sheet. Credit-Risk Contingent Features Certain derivative agreements contain various credit-risk related contingent provisions, such as those that require our debt to maintain a specified credit rating from one or more of the major credit rating agencies. If our debt ratings were to fall below such specified ratings, the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full collateralization on derivative instruments in net liability positions. The following table presents the aggregate fair value of derivative instruments with credit-risk-related contingent features, the associated collateral posted in the normal course of business and the maximum amount of collateral we would be required to post if the credit-risk-related contingent features underlying these agreements had been triggered on June 30, 2022 and December 31, 2021. Table 77: Credit-Risk Contingent Features
In billions | June 30 2022 |  | December 31 2021 |
Net derivative liabilities with credit-risk contingent features | $ | 5.6 |  |  | $ | 2.4 |  |
Collateral posted | 3.0 |  |  | 1.8 |  |
Maximum additional amount of collateral exposure | $ | 2.6 |  |  | $ | 0.6 |  |

X
- References No definition available. + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration