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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 9 Months Ended
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Sep. 30, 2025
Summary of Derivative Instruments [Abstract] |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Objectives and Accounting Our primary objective in utilizing derivative instruments is to manage interest rate risk. Derivatives serve as a strategic tool to mitigate volatility in interest income, interest expense, earnings, and capital by adjusting our sensitivity to various market risks. Specifically, we employ derivatives to stabilize forecasted interest income from variable-rate assets and to modify the coupon or duration of fixed-rate financial assets or liabilities when appropriate. Additionally, we offer derivative solutions to assist customers in managing their own risk exposures. We designate certain derivatives under U.S. GAAP as hedging instruments for specific risks and are subject to documentation and effectiveness testing requirements. However, not all derivatives used in our risk management activities qualify for hedge accounting. Those not designated as accounting hedges are primarily utilized to economically manage exposure to certain market risks, including interest rate and foreign exchange movements. These instruments are not used for speculative purposes and either do not require hedge accounting to reflect their economic impact appropriately in our financial statements or do not meet the criteria for hedge accounting. For more information about our use of and accounting policies for derivative instruments, see Note 7 of our 2024 Form 10-K. Collateral and Credit Risk Credit risk associated with derivatives arises from the potential for counterparty nonperformance. To date, we have not experienced significant losses due to counterparty default. For more information on how counterparty credit risk is incorporated into derivative valuations, see Note 3 of our 2024 Form 10-K. For additional discussion on collateral and related credit risk for derivative contracts, see Note 7 of our 2024 Form 10-K. Certain derivative contracts may require us to pledge collateral for derivatives in a net liability position at a given balance sheet date. These contracts include credit risk-related contingent features, such as maintaining a minimum debt credit rating. If such a feature is triggered, e.g., a downgrade of our credit rating, we may be required to pledge additional collateral. Historically, counterparties have not always exercised their contractual right to demand additional collateral. At September 30, 2025, the fair value of our derivative liabilities was $257 million. To satisfy variation margin requirements, we pledged $24 million in cash collateral in the ordinary course of business. Additionally, we pledged $200 million in U.S. Treasuries to meet initial margin requirements with certain dealer counterparties and central clearing houses. A one-notch downgrade in our credit rating by either Standard & Poor’s (“S&P”) or Moody’s at September 30, 2025 would likely not result in a requirement to pledge additional collateral. Centrally cleared derivatives do not contain credit risk-related features that would require additional collateral in the event of a credit rating downgrade. We assess counterparty credit risk through the calculation of a credit valuation adjustment (“CVA”), which reflects 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 assets by $3 million at September 30, 2025, and reduced the fair value of derivative liabilities by $9 million at December 31, 2024. The net 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 September 30, 2025 and December 31, 2024:
| September 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 accounting hedges: |  |  |  |  |  |  |  |  |  |  |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |
Hedges of floating-rate assets | $ | 1,250 |  |  | $ | 7 |  |  | $ | — |  |  | $ | 550 |  |  | $ | — |  |  | $ | 2 |
Hedges of floating-rate liabilities | — |  |  | — |  |  | — |  |  | 500 |  |  | — |  |  | — |
Fair value hedges: |  |  |  |  |  |  |  |  |  |  |
Hedges of fixed-rate assets 1 | 7,479 |  |  | 77 |  |  | — |  |  | 4,668 |  |  | 93 |  |  | — |
Hedges of fixed-rate liabilities | 1,000 |  |  | — |  |  | — |  |  | 500 |  |  | — |  |  | — |
Total derivatives designated as accounting hedges | 9,729 |  |  | 84 |  |  | — |  |  | 6,218 |  |  | 93 |  |  | 2 |
Derivatives not designated as accounting hedges: 2 |  |  |  |  |  |  |  |  |  |  |
Customer interest rate derivatives | 19,067 |  |  | 263 |  |  | 255 |  |  | 16,833 |  |  | 348 |  |  | 346 |
Customer commodity derivatives | 205 |  |  | 1 |  |  | 1 |  |  | — |  |  | — |  |  | — |
Other interest rate derivatives | 1,259 |  |  | 2 |  |  | — |  |  | 1,105 |  |  | 1 |  |  | — |
Foreign exchange derivatives 3 | 579 |  |  | 3 |  |  | 1 |  |  | 373 |  |  | 4 |  |  | 2 |
Purchased credit derivatives | 60 |  |  | — |  |  | — |  |  | 24 |  |  | — |  |  | — |
Total derivatives not designated as accounting hedges | 21,170 |  |  | 269 |  |  | 257 |  |  | 18,335 |  |  | 353 |  |  | 348 |
Total derivatives | $ | 30,899 |  |  | $ | 353 |  |  | $ | 257 |  |  | $ | 24,553 |  |  | $ | 446 |  |  | $ | 350 |
1 Includes forward-starting swaps that are not yet effective. 2 We provide certain borrowers with access to over-the-counter derivatives. To manage the associated exposures, we typically enter into offsetting derivative transactions with dealers or central clearing houses, which include terms that closely mirror those of the original borrower transactions. Notional amounts for derivatives that are not designated as accounting hedges include both customer-facing derivatives and offsetting dealer-facing derivatives. 3 Includes both spot and forward FX trades. The following schedules present the gains and losses from derivative instruments designated as cash flow and fair value hedges, either deferred in AOCI or recognized in earnings for the three and nine months ended September 30, 2025 and 2024:
| Three Months Ended September 30, 2025 |  | Three Months Ended September 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 |  | 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 | $ | — |  |  |  |  | $ | (15) |  |  | $ | — |  |  | $ | 5 |  |  | $ | (30) |  |  | $ | — |  |  |
Hedges of floating-rate liabilities | — |  |  |  |  | — |  |  | — |  |  | (2) |  |  | 2 |  |  | — |  |  |
Fair value hedges: 2 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedges of fixed-rate assets | — |  |  |  |  | — |  |  | 15 |  |  | — |  |  | — |  |  | 24 |  |  |
Hedges of fixed-rate liabilities | — |  |  |  |  | — |  |  | (3) |  |  | — |  |  | — |  |  | (2) |  |  |
Total derivatives designated as accounting hedges | $ | — |  |  |  |  | $ | (15) |  |  | $ | 12 |  |  | $ | 3 |  |  | $ | (28) |  |  | $ | 22 |  |  |
| Nine Months Ended September 30, 2025 |  | Nine Months Ended September 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 |  | 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 |  |  |  |  | $ | (53) |  |  | $ | — |  |  | $ | (2) |  |  | $ | (99) |  |  | $ | — |  |  |
Hedges of floating-rate liabilities | — |  |  |  |  | 1 |  |  | — |  |  | 3 |  |  | 6 |  |  | — |  |  |
Fair value hedges: 2 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedges of fixed-rate assets | — |  |  |  |  | — |  |  | 42 |  |  | — |  |  | — |  |  | 70 |  |  |
Hedges of fixed-rate liabilities | — |  |  |  |  | — |  |  | (8) |  |  | — |  |  | — |  |  | (5) |  |  |
Total derivatives designated as accounting hedges | $ | 8 |  |  |  |  | $ | (52) |  |  | $ | 34 |  |  | $ | 1 |  |  | $ | (93) |  |  | $ | 65 |  |  |
1 For the 12-month period following September 30, 2025, we estimate that approximately $37 million in net losses from both active and terminated cash flow hedges will be reclassified from AOCI into interest income. At September 30, 2025, approximately $48 million in losses related to terminated cash flow hedges remained deferred in AOCI. These deferred losses are expected to be fully reclassified into earnings by October 2027. 2 At September 30, 2025 and 2024, we recorded cumulative unamortized basis adjustments from terminated fair value hedges of debt totaling $34 million and $41 million, respectively. Additionally, we maintained $3 million in cumulative unamortized basis adjustments from terminated fair value hedges of assets at both reporting dates. The interest amounts associated with fair value hedges, as presented above, include the amortization of these 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 September 30, 2025 |  | Nine Months Ended September 30, 2025 |  | Three Months Ended September 30, 2024 |  | Nine Months Ended September 30, 2024
Derivatives not designated as accounting hedges: |  |  |  |  |  |  |
Customer-facing interest rate derivatives | $ | (2) |  |  | $ | 16 |  |  | $ | 4 |  |  | $ | 17 |
Other interest rate derivatives | 1 |  |  | 1 |  |  | (2) |  |  | (1) |
Foreign exchange derivatives | 8 |  |  | 22 |  |  | 8 |  |  | 22 |
Purchased credit derivatives | — |  |  | (1) |  |  | — |  |  | — |
Total derivatives not designated as accounting hedges | $ | 7 |  |  | $ | 38 |  |  | $ | 10 |  |  | $ | 38 |
The following schedule presents derivatives used in fair value hedge accounting relationships, including the pre-tax gains and losses recognized on both the derivatives and the corresponding hedged items for the periods presented:
| Gains (losses) recorded in income |  |  |  |
| Three Months Ended September 30, 2025 |  | Three Months Ended September 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 | $ | (15) |  |  | $ | 15 |  |  | $ | — |  |  | $ | (166) |  |  | $ | 166 |  |  | $ | — |  |  |  |  |
Hedges of fixed-rate liabilities 1, 2 | 3 |  |  | (3) |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  |
| Gains (losses) recorded in income
| Nine Months Ended September 30, 2025 |  | Nine Months Ended September 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 | $ | (130) |  |  | $ | 130 |  |  | $ | — |  |  | $ | (47) |  |  | $ | 47 |  |  | $ | — |
Hedges of fixed-rate liabilities 1, 2 | 19 |  |  | (19) |  |  | — |  |  | — |  |  | — |  |  | — |
1 Includes hedges of benchmark interest rate risk for fixed-rate long-term debt, AFS securities, and 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) | September 30, 2025 |  | December 31, 2024 |  | September 30, 2025 |  | December 31, 2024 |  | September 30, 2025 |  | December 31, 2024
Hedges of fixed-rate assets 1, 2 | $ | 11,494 |  |  | $ | 11,388 |  |  | $ | 11,333 |  |  | $ | 11,099 |  |  | $ | (161) |  |  | $ | (289) |
Hedges of fixed-rate liabilities 1 | (1,000) |  |  | (500) |  |  | (1,012) |  |  | (493) |  |  | (12) |  |  | 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 September 30, 2025, the amortized cost basis of assets designated using the portfolio layer method was $9.5 billion; the cumulative basis adjustment associated with these hedging relationships was $35 million; and the notional amounts of the designated accounting hedges were $5.6 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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