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DERIVATIVE FINANCIAL INSTRUMENTS | 3 Months Ended
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Mar. 31, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE FINANCIAL INSTRUMENTS | NOTE 10 — DERIVATIVE FINANCIAL INSTRUMENTS Our derivatives designated as hedging instruments include interest rate swap contracts utilized to manage our interest rate exposure for items on our Consolidated Balance Sheets. This includes floating-rate loan portfolio cash flow hedges and fair value hedges of our fixed-rate borrowings and deposits. Our derivatives not designated as hedging instruments mainly include interest rate and foreign exchange contracts that our customers utilized for their risk management needs. We typically manage our exposure to these customer derivatives by entering into offsetting or “back-to-back” interest rate and foreign exchange contracts with third-party dealers. Derivative instruments that are cleared through certain central counterparty clearing houses are settled-to-market and reported net of collateral positions. Refer to Note 11—Fair Value for further information on derivatives. The following table presents notional amounts and fair values of derivative financial instruments: Notional Amount and Fair Value of Derivative Financial Instruments
dollars in millions | March 31, 2025 |  | December 31, 2024
| Notional Amount |  | Asset Fair Value |  | Liability Fair Value |  | Notional Amount |  | Asset Fair Value |  | Liability Fair Value
Derivatives designated as hedging instruments (Qualifying hedges) |  |  |  |  |  |  |  |  |  |  |
Fair Value Hedges |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts hedging time deposits | $ | 134 |  |  | $ | — |  |  | $ | — |  |  | $ | 334 |  |  | $ | — |  |  | $ | — |
Interest rate contracts hedging long-term borrowings | 400 |  |  | — |  |  | — |  |  | 750 |  |  | — |  |  | — |
Total fair value hedges (1) (2) | 534 |  |  | — |  |  | — |  |  | 1,084 |  |  | — |  |  | — |
Cash Flow Hedges |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts hedging loans (1) (2) | 4,000 |  |  | 1 |  |  | — |  |  | 3,500 |  |  | 1 |  |  | — |
Total derivatives designated as hedging instruments | $ | 4,534 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 4,584 |  |  | $ | 1 |  |  | $ | — |
Derivatives not designated as hedging instruments (Non-qualifying hedges) |  |  |  |  |  |  |  |  |  |  |
Interest rate contracts (1) (2) | $ | 26,924 |  |  | $ | 428 |  |  | $ | (433) |  |  | $ | 26,235 |  |  | $ | 491 |  |  | $ | (516) |
Foreign exchange contracts (3) | 9,971 |  |  | 108 |  |  | (107) |  |  | 7,843 |  |  | 152 |  |  | (108) |
Other contracts (4) | 1,419 |  |  | 16 |  |  | (1) |  |  | 1,316 |  |  | 16 |  |  | (1) |
Total derivatives not designated as hedging instruments | $ | 38,314 |  |  | $ | 552 |  |  | $ | (541) |  |  | $ | 35,394 |  |  | $ | 659 |  |  | $ | (625) |
Gross derivatives fair values presented in the Consolidated Balance Sheets |  |  | $ | 553 |  |  | $ | (541) |  |  |  |  | $ | 660 |  |  | $ | (625) |
Less: gross amounts offset in the Consolidated Balance Sheets |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Net amount presented in other assets and other liabilities in the Consolidated Balance Sheets |  |  | $ | 553 |  |  | $ | (541) |  |  |  |  | $ | 660 |  |  | $ | (625) |
(1) Fair value balances include accrued interest. (2) BancShares accounts for swap contracts cleared by the Chicago Mercantile Exchange and LCH Clearnet as “settled-to-market.” As a result, the derivative asset and liability fair values in the table above are presented net of the variation margin payments. Refer to the table below for more information. (3) The foreign exchange contracts exclude foreign exchange spot contracts. The notional and net fair value amounts of these contracts were $377 million and $0 million, respectively, as of March 31, 2025, and $177 million and $0 million, respectively, as of December 31, 2024. (4) Other derivative contracts not designated as hedging instruments include risk participation agreements and equity warrants. The following table presents the impact of variation margin netting on derivative assets and liabilities: Variation Margin Payments
dollars in millions | March 31, 2025 |  | December 31, 2024
| Asset Fair Value |  | Liability Fair Value |  | Asset Fair Value |  | Liability Fair Value
Derivatives designated as hedging instruments (Qualifying hedges) |  |  |  |  |  |  |
Gross fair value | $ | 22 |  |  | $ | — |  |  | $ | 15 |  |  | $ | — |
Cleared trades, variation margin netting | (21) |  |  | — |  |  | (14) |  |  | — |
Total derivatives designated as hedging instruments | $ | 1 |  |  | $ | — |  |  | $ | 1 |  |  | $ | — |
Derivatives not designated as hedging instruments (Non-qualifying hedges) |  |  |  |  |  |  |
Gross fair value | $ | 618 |  |  | $ | (572) |  |  | $ | 742 |  |  | $ | (647) |
Cleared trades, variation margin netting | (66) |  |  | 31 |  |  | (83) |  |  | 22 |
Total derivatives not designated as hedging instruments | $ | 552 |  |  | $ | (541) |  |  | $ | 659 |  |  | $ | (625) |
Gross derivatives fair values presented in the Consolidated Balance Sheets | $ | 553 |  |  | $ | (541) |  |  | $ | 660 |  |  | $ | (625) |
Amounts subject to master netting agreements (1) | (103) |  |  | 103 |  |  | (48) |  |  | 48 |
Cash collateral pledged (received) subject to master netting agreements (2) | (328) |  |  | 18 |  |  | (539) |  |  | 2 |
Total net derivative fair value | $ | 122 |  |  | $ | (420) |  |  | $ | 73 |  |  | $ | (575) |
(1) BancShares’ derivative transactions are governed by International Swaps and Derivatives Association (“ISDA”) agreements that allow for net settlements of certain payments as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction. BancShares believes its ISDA agreements meet the definition of a master netting arrangement or similar agreement for purposes of the above disclosure. (2) In conjunction with the ISDA agreements described above, BancShares has entered into collateral arrangements with its counterparties, which provide for the exchange of cash depending on the change in the market valuation of the derivative contracts outstanding. Such collateral is available to be applied in settlement of the net balances upon an event of default of one of the counterparties. Collateral pledged or received is included in other assets or deposits, respectively. Fair Value Hedges The following table presents the impact of fair value hedges recorded in interest expense on the Consolidated Statements of Income: Recognized Gains (Losses) on Fair Value Hedges
dollars in millions |  |  | Three Months Ended March 31, |  |
| Interest Expense |  | 2025 |  | 2024 |  |  |  |  |  |
Gain (loss) on hedging instruments - time deposits | Deposits |  | $ | — |  |  | $ | — |  |  |  |  |  |  |
Loss on hedging instruments - borrowings | Borrowings |  | — |  |  | (5) |  |  |  |  |  |  |
Gain (loss) on hedged item - time deposits | Deposits |  | — |  |  | — |  |  |  |  |  |  |
Gain on hedged item - borrowings | Borrowings |  | 1 |  |  | 5 |  |  |  |  |  |  |
Net gain on fair value hedges | Total interest expense |  | $ | 1 |  |  | $ | — |  |  |  |  |  |  |
The following table presents the carrying value of hedged items and associated cumulative hedging adjustment related to fair value hedges: Carrying Value of Hedged Items
dollars in millions |  |  | Cumulative Fair Value Hedging Adjustment Included in the Carrying Value of Hedged Items
| Carrying Value of Hedged Items |  | Currently Designated |  | No Longer Designated
March 31, 2025 |  |  |  |  |
Long-term borrowings | $ | 441 |  |  | $ | 1 |  |  | $ | — |
Deposits | 134 |  |  | — |  |  | — |
December 31, 2024 |  |  |  |  |
Long-term borrowings | 795 |  |  | 2 |  |  | — |
Deposits | 335 |  |  | 1 |  |  | — |
Cash Flow Hedges The following table presents the pretax unrealized gain on hedging instruments in cash flow hedges, which are reported in other comprehensive income, and the pretax amount reclassified from accumulated other comprehensive income (“AOCI”) to earnings: Unrealized Gain on Cash Flow Hedges
dollars in millions | Three Months Ended March 31, |  |
| 2025 |  | 2024 |  |  |  |  |  |
Other comprehensive income on cash flow hedge derivatives before reclassifications | $ | 12 |  |  | $ | — |  |  |  |  |  |  |
Amounts reclassified from AOCI to earnings | (3) |  |  | — |  |  |  |  |  |  |
Other comprehensive income on cash flow hedge derivatives | $ | 9 |  |  | $ | — |  |  |  |  |  |  |
The following table presents other information for cash flow hedges: Other Information for Cash Flow Hedges
dollars in millions | March 31, 2025 |  | December 31, 2024 |  |
Unrealized gain on cash flow hedge derivatives reported in AOCI, net of income taxes | $ | 15 |  |  | $ | 8 |  |  |
Estimate to be reclassified from AOCI to earnings during the next 12 months, net of income taxes (1) | $ | 7 |  |  | $ | 7 |  |  |
Maximum number of months over which forecasted cash flows are hedged | 28 |  | 24 |  |
(1) Reclassified amounts could differ from amounts actually recognized due to factors such as changes in interest rates, hedge de-designations and the addition of other hedges. Non-Qualifying Hedges The following table presents gains on non-qualifying hedges recognized on the Consolidated Statements of Income: Gains (Losses) on Non-Qualifying Hedges
dollars in millions |  |  | Three Months Ended March 31, |  |
| Amounts Recognized |  | 2025 |  | 2024 |  |  |  |  |  |
Interest rate contracts | Other noninterest income |  | $ | (1) |  |  | $ | 8 |  |  |  |  |  |  |
Foreign currency forward contracts | Other noninterest income |  | (19) |  |  | 12 |  |  |  |  |  |  |
Other contracts | Other noninterest income |  | (1) |  |  | (1) |  |  |  |  |  |  |
Total non-qualifying hedges - income statement impact |  |  | $ | (21) |  |  | $ | 19 |  |  |  |  |  |  |

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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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