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Derivative Financial Instruments | 6 Months Ended
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Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Financial Instruments | 5. Derivative Financial Instruments Summary of Derivative Financial Statement Impact The following tables summarize the fair values and notional amounts of all derivative instruments and their impact on net income and other comprehensive income. Impact of Derivatives on Balance Sheet
|  |  |  | Cash Flow |  |  | Fair Value(3) |  |  | Trading |  |  | Total |
(Dollars in millions) |  | Hedged Risk Exposure |  | Jun 30, 2025 |  |  | Dec 31, 2024 |  |  | Jun 30, 2025 |  |  | Dec 31, 2024 |  |  | Jun 30, 2025 |  |  | Dec 31, 2024 |  |  | Jun 30, 2025 |  |  | Dec 31, 2024 |
Fair Values(1) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative Assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | Interest rate |  | $ | — |  |  | $ | — |  |  | $ | 43 |  |  | $ | 25 |  |  | $ | — |  |  | $ | — |  |  | $ | 43 |  |  | $ | 25 |
Cross-currency interest rate swaps |  |  |  |  | — |  |  |  | — |  |  |  | 4 |  |  |  | — |  |  |  |  |  |  | — |  |  |  | 4 |  |  |  | — |
Total derivative assets(2) |  |  |  |  | — |  |  |  | — |  |  |  | 47 |  |  |  | 25 |  |  |  | — |  |  |  | — |  |  |  | 47 |  |  |  | 25 |
Derivative Liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | Interest rate |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Cross-currency interest rate swaps |  | Foreign currency and interest rate |  |  | — |  |  |  | — |  |  |  | (79 | ) |  |  | (244 | ) |  |  | — |  |  |  | — |  |  |  | (79 | ) |  |  | (244 | )
Total derivative liabilities(2) |  |  |  |  | — |  |  |  | — |  |  |  | (79 | ) |  |  | (244 | ) |  |  | — |  |  |  | — |  |  |  | (79 | ) |  |  | (244 | )
Net total derivatives |  |  |  | $ | — |  |  | $ | — |  |  | $ | (32 | ) |  | $ | (219 | ) |  | $ | — |  |  | $ | — |  |  | $ | (32 | ) |  | $ | (219 | )
(1) Fair values reported are exclusive of collateral held and pledged and accrued interest. Assets and liabilities are presented without consideration of master netting agreements. Derivatives are carried on the balance sheet based on net position by counterparty under master netting agreements and classified in other assets or other liabilities depending on whether in a net positive or negative position. (2) The following table reconciles gross positions without the impact of master netting agreements to the balance sheet classification:
|  | Other Assets |  |  | Other Liabilities |
(Dollar in millions) |  | June 30, 2025 |  |  | December 31, 2024 |  |  | June 30, 2025 |  |  | December 31, 2024 |
Gross position |  | $ | 47 |  |  | $ | 25 |  |  | $ | (79 | ) |  | $ | (244 | )
Impact of master netting agreements |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Derivative values with impact of master netting agreements (as carried on balance sheet) |  |  | 47 |  |  |  | 25 |  |  |  | (79 | ) |  |  | (244 | )
Cash collateral (held) pledged |  |  | (46 | ) |  |  | (26 | ) |  |  | 39 |  |  |  | 30 |
Net position |  | $ | 1 |  |  | $ | (1 | ) |  | $ | (40 | ) |  | $ | (214 | )
(3) The following table shows the carrying value of liabilities in fair value hedges and the related fair value hedging adjustments to these liabilities:
|  | As of June 30, 2025 |  |  | As of December 31, 2024 |
(Dollar in millions) |  | Carrying Value |  |  | Hedge Basis Adjustments |  |  | Carrying Value |  |  | Hedge Basis Adjustments |
Short-term borrowings |  | $ | 496 |  |  | $ | (3 | ) |  | $ | 495 |  |  | $ | (5 | )
Long-term borrowings |  | $ | 4,720 |  |  | $ | (66 | ) |  | $ | 4,517 |  |  | $ | (345 | )
5. Derivative Financial Instruments (Continued) The above fair values include adjustments when necessary for counterparty credit risk.
|  | Cash Flow |  |  | Fair Value |  |  | Trading |  |  | Total |
(Dollars in billions) |  | Jun 30, 2025 |  |  | Dec 31, 2024 |  |  | Jun 30, 2025 |  |  | Dec 31, 2024 |  |  | Jun 30, 2025 |  |  | Dec 31, 2024 |  |  | Jun 30, 2025 |  |  | Dec 31, 2024 |
Notional Values: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | $ | .4 |  |  | $ | .1 |  |  | $ | 4.1 |  |  | $ | 4.1 |  |  | $ | 1.7 |  |  | $ | 2.2 |  |  | $ | 6.2 |  |  | $ | 6.4 |
Cross-currency interest rate swaps |  |  | — |  |  |  | — |  |  |  | 1.3 |  |  |  | 1.3 |  |  |  | — |  |  |  | — |  |  |  | 1.3 |  |  |  | 1.3 |
Total derivatives |  | $ | .4 |  |  | $ | .1 |  |  | $ | 5.4 |  |  | $ | 5.4 |  |  | $ | 1.7 |  |  | $ | 2.2 |  |  | $ | 7.5 |  |  | $ | 7.7 |
Mark-to-Market Impact of Derivatives on Statements of Income
|  | Total Gains (Losses) |
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
(Dollars in millions) |  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Fair Value Hedges: |  |  |  |  |  |  |  |  |  |  |  |
Interest Rate Swaps |  |  |  |  |  |  |  |  |  |  |  |
Gains (losses) recognized in net income on derivatives |  | $ | 51 |  |  | $ | 6 |  |  | $ | 109 |  |  | $ | (48 | )
Gains (losses) recognized in net income on hedged items |  |  | (55 | ) |  |  | (8 | ) |  |  | (116 | ) |  |  | 50 |
Net fair value hedge ineffectiveness gains (losses) |  |  | (4 | ) |  |  | (2 | ) |  |  | (7 | ) |  |  | 2 |
Cross-currency interest rate swaps |  |  |  |  |  |  |  |  |  |  |  |
Gains (losses) recognized in net income on derivatives |  |  | 115 |  |  |  | 1 |  |  |  | 169 |  |  |  | (33 | )
Gains (losses) recognized in net income on hedged items |  |  | (107 | ) |  |  | 6 |  |  |  | (164 | ) |  |  | 36 |
Net fair value hedge ineffectiveness gains (losses) |  |  | 8 |  |  |  | 7 |  |  |  | 5 |  |  |  | 3 |
Total fair value hedges(1)(2) |  |  | 4 |  |  |  | 5 |  |  |  | (2 | ) |  |  | 5 |
Cash Flow Hedges: |  |  |  |  |  |  |  |  |  |  |  |
Total cash flow hedges(2) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Trading: |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  |  | (5 | ) |  |  | 14 |  |  |  | (30 | ) |  |  | 46 |
Total trading derivatives(3) |  |  | (5 | ) |  |  | 14 |  |  |  | (30 | ) |  |  | 46 |
Mark-to-market gains (losses) recognized |  | $ | (1 | ) |  | $ | 19 |  |  | $ | (32 | ) |  | $ | 51 |
(1) Recorded in interest expense in the consolidated statements of income. (2) The accrued interest income (expense) on fair value hedges and cash flow hedges is recorded in interest expense and is excluded from this table. (3) Recorded in “gains (losses) on derivative and hedging activities, net” in the consolidated statements of income. 5. Derivative Financial Instruments (Continued) Impact of Derivatives on Other Comprehensive Income (Equity)
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
(Dollars in millions) |  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Total gains (losses) on cash flow hedges |  | $ | (2 | ) |  | $ | 1 |  |  | $ | (2 | ) |  | $ | 4 |
Reclassification adjustments for derivative (gains) losses included in net income (interest expense)(1) |  |  | — |  |  |  | (6 | ) |  |  | (1 | ) |  |  | (13 | )
Net changes in cash flow hedges, net of tax |  | $ | (2 | ) |  | $ | (5 | ) |  | $ | (3 | ) |  | $ | (9 | )
(1) Includes net settlement income/expense. Collateral The following table details collateral held and pledged related to derivative exposure between us and our derivative counterparties:
(Dollars in millions) |  | June 30, 2025 |  |  | December 31, 2024 |
Collateral held: |  |  |  |  |  |
Cash (obligation to return cash collateral is recorded in short-term borrowings) |  | $ | 46 |  |  | $ | 26 |
Securities at fair value — corporate derivatives (not recorded in financial statements)(1) |  |  | — |  |  |  | — |
Securities at fair value — on-balance sheet securitization derivatives (not recorded in financial statements)(2) |  |  | — |  |  |  | — |
Total collateral held |  | $ | 46 |  |  | $ | 26 |
Derivative asset at fair value including accrued interest |  | $ | 55 |  |  | $ | 33 |
Collateral pledged to others: |  |  |  |  |  |
Cash (right to receive return of cash collateral is recorded in investments) |  | $ | 39 |  |  | $ | 30 |
Total collateral pledged |  | $ | 39 |  |  | $ | 30 |
Derivative liability at fair value including accrued interest and premium receivable |  | $ | 85 |  |  | $ | 250 |
(1) The Company has the ability to sell or re-pledge securities it holds as collateral. (2) The trusts do not have the ability to sell or re-pledge securities they hold as collateral. Our corporate derivatives contain credit contingent features. At our current unsecured credit rating, we have fully collateralized our corporate derivative liability position (including accrued interest and net of premiums receivable) of $0 with our counterparties. Downgrades in our unsecured credit rating would not result in any additional collateral requirements. Trust related derivatives do not contain credit contingent features related to our or the trusts’ credit ratings. At June 30, 2025 and December 31, 2024, we had a net positive exposure (derivative gain positions to us less collateral which has been posted by counterparties to us) related to Navient Corporation derivatives of $6 million and $9 million, respectively. The trusts are not required to post collateral to the counterparties. At June 30, 2025 and December 31, 2024, the net positive exposure on swaps in securitization trusts was $4 million and $0 million, respectively.

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