XML 30 R21.htm IDEA: XBRL DOCUMENT
v3.22.2.2

Derivative and Hedging Activities | 9 Months Ended
--- | ---
Sep. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative and Hedging Activities | Note 12. Derivative and Hedging Activities The Company’s derivative financial instruments consist of interest rate swaps. The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposure to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate and liquidity risks, primarily by managing the amount, sources, and duration of its assets and liabilities and, from time to time, the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Title VII of the DFA requires all standardized derivatives, including most interest rate swaps, to be submitted for clearing to central counterparties to reduce counterparty risk. Two of the central counterparties are the Chicago Mercantile Exchange (“CME”) and the London Clearing House (“LCH”). As of September 30, 2022, all of the Company’s $1.5 billion notional derivative contracts were cleared on the LCH. Daily variation margin payments on derivatives cleared through the LCH are accounted for as legal settlement. For derivatives cleared through LCH, the net gain (loss) position includes the variation margin amounts as settlement of the derivative and not collateral against the fair value of the derivative, which includes accrued interest; therefore, those interest rate and derivative contracts the Company clears through the LCH are reported at a fair value of approximately zero at September 30, 2022. The Company’s exposure is limited to the value of the derivative contracts in a gain position less any collateral held and plus any collateral posted. When there is a net negative exposure, we consider our exposure to the counterparty to be zero. At September 30, 2022, the Company had a net positive exposure. Fair Value of Hedges of Interest Rate Risk The Company is exposed to changes in the fair value of certain of its fixed-rate assets due to changes in benchmark interest rates. The Company uses interest rate swaps to manage its exposure to changes in fair value on these instruments attributable to changes in the designated benchmark interest rate. Interest rate swaps designated as fair value hedges involve the payment of fixed-rate amounts to a counterparty in exchange for the Company receiving variable-rate payments over the life of the agreements without the exchange of the underlying notional amount. Such derivatives were used to hedge the changes in fair value of certain of its pools of prepayable fixed rate assets. For derivatives designated and that qualify as fair value hedges, the gain or loss on the derivative as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in interest income. The Company entered into an interest rate swap with a notional amount of $2.0 billion to hedge certain real estate loans. This swap expired in February 2022 and was not renewed. For the nine months ended September 30, 2022, the floating rate received related to the net settlement of this interest rate swap was less than the fixed rate payments. As such, interest income from Loans and leases in the accompanying Consolidated Statements of Income and Comprehensive Income was decreased by $6 million for the nine months ended September 30, 2022. For the three and nine months ended September 30, 2021, the floating rate received related to the net settlement of this interest rate swap was less than the fixed rate payments. As such, interest income from Loans and leases in the accompanying Consolidated Statements of Income and Comprehensive Income was decreased by $12 million and $37 million for the three and nine months ended September 30, 2021. As of September 30, 2022, and December 31, 2021 the following amounts were recorded on the balance sheet related to cumulative basis adjustment for fair value hedges:
(in millions) |  | September 30, 2022 |  |  |  | December 31, 2021 |
Line Item in the Consolidated Statements of Condition in which the Hedge Item is Included |  | Carrying Amount of the Hedged Assets |  |  |  | Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Assets |  |  |  | Carrying Amount of the Hedged Assets |  |  |  | Cumulative Amount of Fair Value Hedging Adjustments Included in the Carrying Amount of the Hedged Assets |
Total loans and leases, net (1) | $ |  | - |  |  | $ |  | - |  |  | $ |  | 2,025 |  |  | $ |  | 25 |
(1) These amounts include the amortized cost basis of closed portfolios used to designate hedging relationships in which the hedged item is the last layer expected to be remaining at the end of the hedging relationship. Since the swap expired in February 2022, at September 30, 2022, the amortized cost basis of the closed portfolios used in these hedging relationships, the cumulative basis adjustments associated with these hedging relationships, and the amount of the designated hedged items, were zero. The following table sets forth the effect of derivative instruments on the Consolidated Statements of Income and Comprehensive Income for the periods indicated.
(in millions) | For the Three Months Ended September 30, 2022 |  |  | For the Nine Months Ended September 30, 2022 |  |  | For the Three Months Ended September 30, 2021 |  |  | For the Nine Months Ended September 30, 2021 |
Derivative – interest rate swap: |  |  |  |  |  |  |  |  |  |  |
Interest income | $ | — |  |  | $ | 25 |  |  | $ | 25 |  |  | $ | 49 |
Hedged item – loans: |  |  |  |  |  |  |  |  |  |  |
Interest income | $ | — |  |  | $ | (25 | ) |  | $ | (25 | ) |  | $ | (49 | )
Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. Interest rate swaps designated as cash flow hedges involve the receipt of amounts subject to variability caused by changes in interest rates from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. Changes in the fair value of derivatives designated and that qualify as cash flow hedges are initially recorded in other comprehensive income and are subsequently reclassified into earnings in the period that the hedged transaction affects earnings. Interest rate swaps with notional amounts totaling $1.5 billion and $2.3 billion as of September 30, 2022 and December 31, 2021, respectively, were designated as cash flow hedges of certain FHLB borrowings. The following table summarizes information about the interest rate swaps designated as cash flow hedges at September 30, 2022 and December 31, 2021:
(dollars in millions) |  | September 30, 2022 |  |  | December 31, 2021 |
Notional amounts |  | $ | 1,500 |  |  | $ | 2,250 |
Cash collateral received (posted) |  |  | 58 |  |  |  | (12 | )
Weighted average pay rates |  |  | 1.51 | % |  |  | 1.27 | %
Weighted average receive rates |  |  | 2.89 | % |  |  | 0.18 | %
Weighted average maturity |  | 2.2 years |  |  | 0.9 years |
The following table presents the effect of the Company's cash flow derivative instruments on AOCL for the nine months ended September 30, 2022 and 2021:
(in millions) |  | For the Nine Months Ended September 30, 2022 |  |  | For the Nine Months Ended September 30, 2021 |
Amount of (loss) gain recognized in AOCL |  | $ | 64 |  |  | $ | 2 |
Amount of reclassified from AOCL to interest expense |  |  | 4 |  |  |  | 18 |
Gains (losses) included in the Consolidated Statements of Income related to interest rate derivatives designated as cash flow hedges during the nine months ended September 30, 2022 was $4 million. Amounts reported in AOCL related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate borrowings. During the next twelve months, the Company estimates that an additional $21 million will be reclassified to interest expense.

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 https://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 https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008 + Details
Name: | us-gaap_DerivativeInstrumentsAndHedgingActivitiesDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration