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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 6 Months Ended
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Jun. 30, 2025
Summary of Derivative Instruments [Abstract] |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Objectives and Accounting Our primary objective for using derivatives is to manage interest rate risk. We utilize derivatives to stabilize forecasted interest income from variable-rate assets and to modify the coupon or duration of fixed-rate financial assets or liabilities. Additionally, we assist customers with their risk management needs through the use of derivatives. Cash receipts and payments from derivatives designated in qualifying hedging relationships are classified in the same category as the cash flows from the items being hedged in the statement of cash flows, while cash flows from undesignated derivatives are classified as operating activities. For more information about the use of and accounting policies regarding derivative instruments, see Note 7 of our 2024 Form 10-K. Collateral and Credit Risk Credit risk arises from the possibility of nonperformance by counterparties. No significant losses on derivative instruments have occurred as a result of counterparty nonperformance. For more information on how we incorporate counterparty credit risk in derivative valuations, see Note 3 of our 2024 Form 10-K. For additional discussion of collateral and the associated credit risk related to our derivative contracts, see Note 7 of our 2024 Form 10-K. Our derivative contracts require us to pledge collateral for derivatives in a net liability position at a given balance sheet date. Certain derivative contracts include credit risk-related contingent features, such as the requirement to maintain a minimum debt credit rating. If a credit risk-related feature were triggered, such as a downgrade of our credit rating, we may be required to pledge additional collateral. Historically, not all counterparties have demanded additional collateral when contractually permitted. At June 30, 2025, the fair value of our derivative liabilities was $274 million, for which we pledged $13 million in cash collateral in the normal course of business to satisfy variation margin requirements. Additionally, we pledged $200 million in U.S. Treasuries to satisfy initial margin requirements with certain dealer counterparties and central clearing houses. If our credit rating were downgraded one notch by either Standard & Poor’s (“S&P”) or Moody’s at June 30, 2025, it is unlikely that additional collateral would be required to be pledged. Derivatives that are centrally cleared do not have credit risk-related features requiring additional collateral in the event of a credit rating downgrade. We measure counterparty credit risk by calculating a credit valuation adjustment (“CVA”), which captures the value of nonperformance risk for both our counterparties and the Bank. The fair value of derivatives includes a net CVA, which reduced the fair value of derivative liabilities by $9 million at both June 30, 2025, and December 31, 2024. CVA is included in “Capital markets fees and income” on the consolidated statement of income. Derivative Amounts The following schedule presents derivative notional amounts and recorded gross fair values at June 30, 2025 and December 31, 2024:
| June 30, 2025 |  | December 31, 2024
| Notional amount |  | Fair value |  | Notional amount |  | Fair value
(In millions) | Other assets |  | Other liabilities |  | Other assets |  | Other liabilities
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |
Hedges of floating-rate assets | $ | 750 |  |  | $ | 7 |  |  | $ | — |  |  | $ | 550 |  |  | $ | — |  |  | $ | 2 |
Hedges of floating-rate liabilities | — |  |  | — |  |  | — |  |  | 500 |  |  | — |  |  | — |
Fair value hedges: |  |  |  |  |  |  |  |  |  |  |
Hedges of fixed-rate assets 1 | 6,166 |  |  | 80 |  |  | — |  |  | 4,668 |  |  | 93 |  |  | — |
Hedges of fixed-rate liabilities | 500 |  |  | — |  |  | — |  |  | 500 |  |  | — |  |  | — |
Total derivatives designated as hedging instruments | 7,416 |  |  | 87 |  |  | — |  |  | 6,218 |  |  | 93 |  |  | 2 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |
Customer interest rate derivatives 2 | 18,221 |  |  | 284 |  |  | 271 |  |  | 16,833 |  |  | 348 |  |  | 346 |
Other interest rate derivatives | 1,134 |  |  | 1 |  |  | — |  |  | 1,105 |  |  | 1 |  |  | — |
Foreign exchange derivatives | 466 |  |  | 4 |  |  | 2 |  |  | 373 |  |  | 4 |  |  | 2 |
Purchased credit derivatives | 79 |  |  | — |  |  | 1 |  |  | 24 |  |  | — |  |  | — |
Total derivatives not designated as hedging instruments | 19,900 |  |  | 289 |  |  | 274 |  |  | 18,335 |  |  | 353 |  |  | 348 |
Total derivatives | $ | 27,316 |  |  | $ | 376 |  |  | $ | 274 |  |  | $ | 24,553 |  |  | $ | 446 |  |  | $ | 350 |
1 Includes forward-starting swaps that are not yet effective. 2 Customer interest rate derivatives include both customer-facing derivatives and offsetting dealer-facing derivatives. The following schedules present the amount of gains (losses) from derivative instruments designated as cash flow and fair value hedges that were deferred in AOCI or recognized in earnings for the three and six months ended June 30, 2025 and 2024:
| Three Months Ended June 30, 2025
(In millions) | Effective portion of derivative gain (loss) deferred in AOCI |  |  |  | Amount of gain (loss) reclassified from AOCI into income |  | Interest on fair value hedges |  |
Cash flow hedges: 1 |  |  |  |  |  |  |  |  |
Hedges of floating-rate assets | $ | 2 |  |  |  |  | $ | (18) |  |  | $ | — |  |  |
Hedges of floating-rate liabilities | — |  |  |  |  | — |  |  | — |  |  |
Fair value hedges: 2 |  |  |  |  |  |  |  |  |
Hedges of fixed-rate assets | — |  |  |  |  | — |  |  | 14 |  |  |
Hedges of fixed-rate liabilities | — |  |  |  |  | — |  |  | (2) |  |  |
Total derivatives designated as hedging instruments | $ | 2 |  |  |  |  | $ | (18) |  |  | $ | 12 |  |  |
| Six Months Ended June 30, 2025
(In millions) | Effective portion of derivative gain (loss) deferred in AOCI |  |  |  | Amount of gain (loss) reclassified from AOCI into income |  | Interest on fair value hedges |  |
Cash flow hedges: 1 |  |  |  |  |  |  |  |  |
Hedges of floating-rate assets | $ | 8 |  |  |  |  | $ | (38) |  |  | $ | — |  |  |
Hedges of floating-rate liabilities | — |  |  |  |  | 1 |  |  | — |  |  |
Fair value hedges: 2 |  |  |  |  |  |  |  |  |
Hedges of fixed-rate assets | — |  |  |  |  | — |  |  | 27 |  |  |
Hedges of fixed-rate liabilities | — |  |  |  |  | — |  |  | (5) |  |  |
Total derivatives designated as hedging instruments | $ | 8 |  |  |  |  | $ | (37) |  |  | $ | 22 |  |  |
| Three Months Ended June 30, 2024
(In millions) | Effective portion of derivative gain (loss) deferred in AOCI |  |  |  | Amount of gain (loss) reclassified from AOCI into income |  | Interest on fair value hedges |  |
Cash flow hedges: 1 |  |  |  |  |  |  |  |  |
Hedges of floating-rate assets | $ | (1) |  |  |  |  | $ | (33) |  |  | $ | — |  |  |
Hedges of floating-rate liabilities | 1 |  |  |  |  | 2 |  |  | — |  |  |
Fair value hedges: 2 |  |  |  |  |  |  |  |  |
Hedges of fixed-rate assets | — |  |  |  |  | — |  |  | 24 |  |  |
Hedges of fixed-rate liabilities | — |  |  |  |  | — |  |  | (2) |  |  |
Total derivatives designated as hedging instruments | $ | — |  |  |  |  | $ | (31) |  |  | $ | 22 |  |  |
| Six Months Ended June 30, 2024
(In millions) | Effective portion of derivative gain (loss) deferred in AOCI |  |  |  | Amount of gain (loss) reclassified from AOCI into income |  | Interest on fair value hedges |  |
Cash flow hedges: 1 |  |  |  |  |  |  |  |  |
Hedges of floating-rate assets | $ | (6) |  |  |  |  | $ | (69) |  |  | $ | — |  |  |
Hedges of floating-rate liabilities | 5 |  |  |  |  | 4 |  |  | — |  |  |
Fair value hedges: 2 |  |  |  |  |  |  |  |  |
Hedges of fixed-rate assets | — |  |  |  |  | — |  |  | 46 |  |  |
Hedges of fixed-rate liabilities | — |  |  |  |  | — |  |  | (3) |  |  |
Total derivatives designated as hedging instruments | $ | (1) |  |  |  |  | $ | (65) |  |  | $ | 43 |  |  |
1 For the 12 months following June 30, 2025, we estimate that $45 million of net losses from active and terminated cash flow hedges will be reclassified from AOCI into interest income, compared with an estimate of $88 million at June 30, 2024. At June 30, 2025, there were $60 million of losses deferred in AOCI related to terminated cash flow hedges that are expected to be fully reclassified into earnings by October 2027. 2 We had total cumulative unamortized basis adjustments from terminated fair value hedges of debt of $36 million and $43 million at June 30, 2025 and 2024, respectively. We had $3 million of cumulative unamortized basis adjustments from terminated fair value hedges of assets at both June 30, 2025 and 2024. Interest on fair value hedges presented above includes the amortization of the remaining unamortized basis adjustments. The following schedule presents the amount of gains (losses) recognized from derivatives not designated as accounting hedges:
| Other Noninterest Income/(Expense)
(In millions) | Three Months Ended June 30, 2025 |  | Six Months Ended June 30, 2025 |  | Three Months Ended June 30, 2024 |  | Six Months Ended June 30, 2024
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |
Customer-facing interest rate derivatives | $ | 11 |  |  | $ | 18 |  |  | $ | 6 |  |  | $ | 12 |
Other interest rate derivatives | — |  |  | (1) |  |  | — |  |  | 1 |
Foreign exchange derivatives | 8 |  |  | 14 |  |  | 7 |  |  | 15 |
Purchased credit derivatives | (1) |  |  | (1) |  |  | — |  |  | — |
Total derivatives not designated as hedging instruments | $ | 18 |  |  | $ | 30 |  |  | $ | 13 |  |  | $ | 28 |
The following schedule presents derivatives used in fair value hedge accounting relationships, along with pre-tax gains (losses) recorded on these derivatives and the related hedged items for the periods presented:
| Gains (losses) recorded in income |  |  |  |
| Three Months Ended June 30, 2025 |  | Three Months Ended June 30, 2024 |  |  |  |
(In millions) | Derivatives |  | Hedged items |  | Total income statement impact |  | Derivatives |  | Hedged items |  | Total income statement impact |  |  |  |
Hedges of fixed-rate assets 1, 2 | $ | (35) |  |  | $ | 35 |  |  | $ | — |  |  | $ | 20 |  |  | $ | (20) |  |  | $ | — |  |  |  |  |
Hedges of fixed-rate debt 1, 2 | 4 |  |  | (4) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
| Gains (losses) recorded in income
| Six Months Ended June 30, 2025 |  | Six Months Ended June 30, 2024
(In millions) | Derivatives |  | Hedged items |  | Total income statement impact |  | Derivatives |  | Hedged items |  | Total income statement impact
Hedges of fixed-rate assets 1, 2 | $ | (115) |  |  | $ | 115 |  |  | $ | — |  |  | $ | 118 |  |  | $ | (118) |  |  | $ | — |
Hedges of fixed-rate debt 1, 2 | 16 |  |  | (16) |  |  | — |  |  | — |  |  | — |  |  | — |
1 Includes hedges of benchmark interest rate risk for fixed-rate long-term debt, fixed-rate AFS securities, and fixed-rate commercial loans. Gains and losses were recorded in interest income or expense, consistent with the hedged items. 2 The income/expense for derivatives does not reflect interest income/expense from periodic accruals and payments to be consistent with the presentation of the gains (losses) on the hedged items. The following schedule presents information regarding basis adjustments for hedged items in fair value hedging relationships:
| Par value of hedged items |  | Carrying amount of the hedged items 1 |  | Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged items
(In millions) | June 30, 2025 |  | December 31, 2024 |  | June 30, 2025 |  | December 31, 2024 |  | June 30, 2025 |  | December 31, 2024
Hedges of fixed-rate assets 1, 2 | $ | 11,473 |  |  | $ | 11,388 |  |  | $ | 11,299 |  |  | $ | 11,099 |  |  | $ | (174) |  |  | $ | (289) |
Hedges of fixed-rate debt 1 | (500) |  |  | (500) |  |  | (509) |  |  | (493) |  |  | (9) |  |  | 7 |
1 Carrying amounts exclude (1) issuance and purchase discounts or premiums, (2) unamortized issuance and acquisition costs, and (3) amounts related to terminated fair value hedges. 2 At June 30, 2025, the amortized cost basis of assets designated using the portfolio layer method was $9.8 billion; the cumulative basis adjustment associated with these hedging relationships was $29 million; and the notional amounts of the designated hedging instruments were $4.5 billion.

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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/exampleRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 182 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480401/815-10-55-182 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 185 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480401/815-10-55-185 Reference 3: http://www.xbrl.org/2003/role/exampleRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 184 -Publisher FASB -URI https://asc.fasb.org/1943274/2147480401/815-10-55-184 Reference 4: 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