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Derivative financial instruments | 9 Months Ended
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Sep. 30, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative financial instruments | As part of managing interest rate risk, the Company enters into interest rate swap agreements to modify the repricing characteristics of certain portions of the Company’s portfolios of earning assets and interest-bearing liabilities. The Company designates interest rate swap agreements utilized in the management of interest rate risk as either fair value hedges or cash flow hedges. Interest rate swap agreements are generally entered into with counterparties that meet established credit standards and most contain master netting, collateral and/or settlement provisions protecting the at-risk party. Based on adherence to the Company’s credit standards and the presence of the netting, collateral or settlement provisions, the Company believes that the credit risk inherent in these contracts was not material as of September 30, 2024. Information about interest rate swap agreements entered into for interest rate risk management purposes summarized by type of financial instrument the swap agreements were intended to hedge follows:
| Notional Amount |  | Weighted-Average Maturity (In years) |  | Weighted- Average Rate |  | Estimated Fair Value Gain (Loss) (a)
(Dollars in millions) |  |  | Fixed |  | Variable |
September 30, 2024 |  |  |  |  |  |  |  |  |
Fair value hedges: |  |  |  |  |  |  |  |  |
Fixed rate long-term borrowings (b) (d) | $ | 3,850 |  |  | 5.4 |  | 3.48 | % |  | 5.06 | % |  | $ | (8) |
Fixed rate investment securities available for sale (c) | 15 |  |  | 0.3 |  | 4.84 |  |  | 4.86 |  |  | — |
Cash flow hedges: |  |  |  |  |  |  |  |  |
Interest payments on variable rate commercial real estate and commercial and industrial loans (b) (e) | 26,705 |  |  | 1.5 |  | 3.39 |  |  | 5.02 |  |  | (30) |
Total | $ | 30,570 |  |  | 2.0 |  |  |  |  |  | $ | (38) |
December 31, 2023 |  |  |  |  |  |  |  |  |
Fair value hedges: |  |  |  |  |  |  |  |  |
Fixed rate long-term borrowings (b) (f) | $ | 3,000 |  |  | 5.8 |  | 3.45 | % |  | 5.62 | % |  | $ | (1) |
Cash flow hedges: |  |  |  |  |  |  |  |  |
Interest payments on variable rate commercial real estate loans (b) (g) | 23,977 |  |  | 1.7 |  | 3.45 |  |  | 5.36 |  |  | 11 |
Total | $ | 26,977 |  |  | 2.2 |  |  |  |  |  | $ | 10 |
_______________________________________________________________ (a)Certain clearinghouse exchanges consider payments by counterparties for variation margin on derivative instruments to be settlements of those positions. The impact of such payments for interest rate swap agreements designated as fair value hedges was a net settlement of gains of $15 million at September 30, 2024 and of losses of $43 million at December 31, 2023. The impact of such payments on interest rate swap agreements designated as cash flow hedges was a net settlement of gains of $89 million at September 30, 2024 and of losses of $214 million at December 31, 2023. (b)Under the terms of these agreements, the Company receives settlement amounts at a fixed rate and pays at a variable rate. (c)Under the terms of these agreements, the Company receives settlement amounts at a variable rate and pays at a fixed rate. (d)Includes notional amount and terms of $1.9 billion of forward-starting interest rate swap agreements that become effective in 2025. (e)Includes notional amount and terms of $6.6 billion of forward-starting interest rate swap agreements that become effective in 2024, 2025 and 2026. (f)Includes notional amount and terms of $1.0 billion of forward-starting interest rate swap agreements that become effective in 2025. (g)Includes notional amount and terms of $9.0 billion of forward-starting interest rate swap agreements that become effective in 2024. The Company utilizes commitments to sell residential and commercial real estate loans to hedge the exposure to changes in the fair value of real estate loans held for sale. Such commitments have generally been designated as fair value hedges. The Company also utilizes commitments to sell real estate loans to offset the exposure to changes in the fair value of certain commitments to originate real estate loans for sale. Changes in unrealized gains and losses as a result of those activities were not material in each of the three and nine months ended September 30, 2024 and 2023. Such changes are included in mortgage banking revenues and, in general are realized in subsequent periods as the related loans are sold and commitments satisfied. Other derivative financial instruments not designated as hedging instruments included interest rate contracts, foreign exchange and other option and futures contracts. Interest rate contracts not designated as hedging instruments had notional values of $42.5 billion and $44.4 billion at September 30, 2024 and December 31, 2023, respectively. The notional amounts of foreign exchange and other option and futures contracts not designated as hedging instruments aggregated $1.4 billion and $1.5 billion at September 30, 2024 and December 31, 2023, respectively. Information about the fair values of derivative instruments in the Company’s Consolidated Balance Sheet and Consolidated Statement of Income follows:
| Asset Derivatives |  | Liability Derivatives
| Fair Value |  | Fair Value
(Dollars in millions) | September 30, 2024 |  | December 31, 2023 |  | September 30, 2024 |  | December 31, 2023
Derivatives designated and qualifying as hedging instruments (a) |  |  |  |  |  |  |
Interest rate swap agreements | $ | — |  |  | $ | 12 |  |  | $ | 38 |  |  | $ | 2 |
Commitments to sell real estate loans | 1 |  |  | 6 |  |  | 17 |  |  | 8 |
| 1 |  |  | 18 |  |  | 55 |  |  | 10 |
Derivatives not designated and qualifying as hedging instruments (a) |  |  |  |  |  |  |
Mortgage banking: |  |  |  |  |  |  |
Mortgage-related commitments to originate real estate loans for sale | 29 |  |  | 15 |  |  | 21 |  |  | 32 |
Commitments to sell real estate loans | 24 |  |  | 35 |  |  | 19 |  |  | 3 |
| 53 |  |  | 50 |  |  | 40 |  |  | 35 |
Other: |  |  |  |  |  |  |
Interest rate contracts (b) | 218 |  |  | 237 |  |  | 571 |  |  | 879 |
Foreign exchange and other option and futures contracts | 14 |  |  | 19 |  |  | 13 |  |  | 19 |
| 232 |  |  | 256 |  |  | 584 |  |  | 898 |
Total derivatives | $ | 286 |  |  | $ | 324 |  |  | $ | 679 |  |  | $ | 943 |
_______________________________________________________________ (a)Asset derivatives are reported in "accrued interest and other assets" and liability derivatives are reported in "accrued interest and other liabilities" in the Consolidated Balance Sheet. (b)The impact of variation margin payments at September 30, 2024 and December 31, 2023 was a reduction of the estimated fair value of interest rate contracts not designated as hedging instruments in an asset position of $496 million and $783 million, respectively, as of each period end, and in a liability position of $51 million and $32 million, respectively.
| Amount of Gain (Loss) Recognized
| Three Months Ended September 30,
| 2024 |  | 2023
(Dollars in millions) | Derivative |  | Hedged Item |  | Derivative |  | Hedged Item
Derivatives in fair value hedging relationships |  |  |  |  |  |  |
Interest rate swap agreements: |  |  |  |  |  |  |
Fixed rate long-term borrowings (a) | $ | 130 |  |  | $ | (130) |  |  | $ | (61) |  |  | $ | 61 |
Fixed rate investment securities available for sale (b) | — |  |  | — |  |  |  |  |
Total | $ | 130 |  |  | $ | (130) |  |  | $ | (61) |  |  | $ | 61 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |
Interest rate contracts (c) | $ | 5 |  |  |  |  | $ | 6 |  |  |
Foreign exchange and other option and futures contracts (c) | 5 |  |  |  |  | 4 |  |  |
Total | $ | 10 |  |  |  |  | $ | 10 |  |  |
| Amount of Gain (Loss) Recognized
| Nine Months Ended September 30,
| 2024 |  | 2023
(Dollars in millions) | Derivative |  | Hedged Item |  | Derivative |  | Hedged Item
Derivatives in fair value hedging relationships |  |  |  |  |  |  |
Interest rate swap agreements: |  |  |  |  |  |  |
Fixed rate long-term borrowings (a) | $ | 52 |  |  | $ | (52) |  |  | $ | (95) |  |  | $ | 96 |
Fixed rate investment securities available for sale (b) | — |  |  | — |  |  |  |  |
Total | $ | 52 |  |  | $ | (52) |  |  | $ | (95) |  |  | $ | 96 |
Derivatives not designated as hedging instruments |  |  |  |  |  |  |
Interest rate contracts (c) | $ | 11 |  |  |  |  | $ | 25 |  |  |
Foreign exchange and other option and futures contracts (c) | 13 |  |  |  |  | 11 |  |  |
Total | $ | 24 |  |  |  |  | $ | 36 |  |  |
_______________________________________________________________ (a)Reported as an adjustment to "interest expense" in the Consolidated Statement of Income. (b)Reported as an adjustment to "interest income" in the Consolidated Statement of Income. (c)Reported as "trading account and other non-hedging derivative gains" in the Consolidated Statement of Income.
| Carrying Amount of the Hedged Item |  | Cumulative Amount of Fair Value Hedging Adjustment Increasing (Decreasing) the Carrying Amount of the Hedged Item
(Dollars in millions) | September 30, 2024 |  | December 31, 2023 |  | September 30, 2024 |  | December 31, 2023
Location in the Consolidated Balance Sheet of the Hedged Items in Fair Value Hedges |  |  |  |  |  |  |
Long-term borrowings | $ | 3,853 |  |  | $ | 2,954 |  |  | $ | 8 |  |  | $ | (44) |
Investment securities available for sale | 391 |  |  |  |  | — |  |  |
The net effect of interest rate swap agreements was to decrease net interest income by $115 million and $328 million during the three-month and nine-month periods ended September 30, 2024, respectively, and to decrease net interest income by $79 million and $211 million during the three-month and nine-month periods ended September 30, 2023, respectively. The amount of interest income recognized in the Consolidated Statement of Income associated with derivatives designated as cash flow hedges was a decrease of $102 million and $65 million for the three months ended September 30, 2024 and 2023, respectively, and a decrease of $288 million and $173 million for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, the unrealized net gain recognized in other comprehensive income related to cash flow hedges was $59 million, of which losses of $78 million, gains of $48 million and $90 million, and losses of $1 million relate to interest rate swap agreements maturing in 2025, 2026, 2027 and 2028 respectively. The Company does not offset derivative asset and liability positions in its consolidated financial statements. The Company’s exposure to credit risk by entering into derivative contracts is mitigated through master netting agreements and collateral posting or settlement requirements. Master netting agreements covering interest rate and foreign exchange contracts with the same party include a right to set-off that becomes enforceable in the event of default, early termination or under other specific conditions. The aggregate fair value of derivative financial instruments in a liability position, which are subject to enforceable master netting arrangements and the related collateral posted, was not material at each of September 30, 2024 and December 31, 2023. Certain of the Company’s derivative financial instruments contain provisions that require the Company to maintain specific credit ratings from credit rating agencies to avoid higher collateral posting requirements. If the Company’s debt ratings were to fall below specified ratings, the counterparties of the derivative financial instruments could demand immediate incremental collateralization on those instruments in a net liability position. The aggregate fair value of all derivative financial instruments with such credit risk-related contingent features in a net liability position at September 30, 2024 was not material. The aggregate fair value of derivative financial instruments in an asset position with counterparties, which are subject to enforceable master netting arrangements, was $94 million at September 30, 2024 and $179 million at December 31, 2023. Counterparties posted collateral relating to those positions of $87 million at September 30, 2024 and $179 million at December 31, 2023. Interest rate swap agreements entered into with customers are subject to the Company’s credit risk standards and often contain collateral provisions. In addition to the derivative contracts noted above, the Company clears certain derivative transactions through a clearinghouse, rather than directly with counterparties. Those transactions cleared through a clearinghouse require initial margin collateral and variation margin payments depending on the contracts being in a net asset or liability position. The amount of initial margin collateral posted by the Company was $154 million and $129 million at September 30, 2024 and December 31, 2023, respectively. The fair value asset and liability amounts of derivative contracts have been reduced by variation margin payments treated as settlements as described herein. Variation margin on derivative contracts not treated as settlements continues to represent collateral posted or received by the Company.

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- 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://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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