Derivative Instruments and Hedging Activities (Tables)

9 Months Ended

Sep. 30, 2022

Summary of Derivative Instruments [Abstract]

Schedule of Derivative Amounts

Certain information with respect to notional amounts and recorded gross fair values at September 30, 2022 and December 31, 2021, and the related gain (loss) of derivative instruments is summarized as follows:

	September 30, 2022						December 31, 2021
	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 of floating-rate assets:
Receive-fixed interest rate swaps	$	7,433	$	—	$	2	$	6,883	$	—	$	—
Fair value hedges:
Debt hedges: Receive-fixed interest rate swaps	500		—		—		500		—		—
Asset hedges: Pay-fixed interest rate swaps	1,228		83		—		479		10		—
Total derivatives designated as hedging instruments	9,161		83		2		7,862		10		—
Derivatives not designated as hedging instruments:
Customer-facing interest rate derivatives 1	6,931		1		483		6,587		192		36
Offsetting interest rate derivatives 2	6,931		501		1		6,587		38		197
Other interest rate derivatives	905		1		—		1,286		6		1
Foreign exchange derivatives	432		6		5		288		3		2
Total derivatives not designated as hedging instruments	15,199		509		489		14,748		239		236
Total derivatives	$	24,360	$	592	$	491	$	22,610	$	249	$	236

1 Customer-facing interest rate derivatives include a net credit valuation adjustment (“CVA”) of $17 million, reducing the fair value of the liability at September 30, 2022, and $3 million, reducing the fair value of the asset at December 31, 2021. These adjustments are required to reflect both our nonperformance risk and that of the respective counterparties.

2 The fair value amounts for these derivatives do not include the settlement amounts for those trades that are centrally cleared. Once the settlement amounts with the clearing houses are included, the total derivative fair values would be the following:

	September 30, 2022				December 31, 2021
(In millions)	Other assets		Other liabilities		Other assets		Other liabilities
Offsetting interest rate derivatives	$	204	$	1	$	8	$	12

Schedule of Derivative Gains (Losses) Deferred in OCI or Recognized in Earnings

The amount of derivative gains (losses) from cash flow and fair value hedges that was deferred in other comprehensive income (“OCI”) or recognized in earnings for the nine months ended September 30, 2022 and 2021 is shown in the schedules below.

	Three Months Ended September 30, 2022
(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 of floating-rate assets:1
Purchased interest rate floors	$	—	$	—	$	—
Interest rate swaps	(183)		(11)		—
Fair value hedges of liabilities:
Receive-fixed interest rate swaps	—		—		(1)
Basis amortization on terminated hedges 2, 3	—		—		—
Fair value hedges of assets:
Pay-fixed interest rate swaps	—		—		1
Basis amortization on terminated hedges 2, 3	—		—		—
Total derivatives designated as hedging instruments	$	(183)	$	(11)	$	—

	Nine Months Ended September 30, 2022
(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 of floating-rate assets: 1
Purchased interest rate floors	$	—	$	2	$	—
Interest rate swaps	(427)		7		—
Fair value hedges of liabilities:
Receive-fixed interest rate swaps	—		—		2
Basis amortization on terminated hedges 2, 3	—		—		1
Fair value hedges of assets:
Pay-fixed interest rate swaps	—		—		(1)
Basis amortization on terminated hedges 2, 3	—		—		—
Total derivatives designated as hedging instruments	$	(427)	$	9	$	2

	Three Months Ended September 30, 2021
(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 of floating-rate assets: 1
Purchased interest rate floors	$	—	$	3	$	—
Interest rate swaps	4		13		—
Fair value hedges of liabilities:
Receive-fixed interest rate swaps	—		—		2
Basis amortization on terminated hedges 2, 3	—		—		3
Fair value hedges of assets:
Pay-fixed interest rate swaps	—		—		(1)
Basis amortization on terminated hedges 2, 3	—		—		—
Total derivatives designated as hedging instruments	$	4	$	16	$	4

	Nine Months Ended September 30, 2021
(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 of floating-rate assets: 1
Purchased interest rate floors	$	—	$	8	$	—
Interest rate swaps	(5)		38		—
Fair value hedges of liabilities:
Receive-fixed interest rate swaps	—		—		6
Basis amortization on terminated hedges 2, 3	—		—		9
Fair value hedges of assets:
Pay-fixed interest rate swaps	—		—		(2)
Basis amortization on terminated hedges 2, 3	—		—		—
Total derivatives designated as hedging instruments	$	(5)	$	46	$	13

1 For the 12 months following September 30, 2022, we estimate that $173 million of losses will be reclassified from AOCI into interest income, compared with an estimate of $42 million of gains as of September 30, 2021.

2 Adjustment to interest expense resulting from the amortization of the debt basis adjustment on fixed-rate debt previously hedged by terminated receive-fixed interest rate.

3 There was no cumulative unamortized basis adjustment from previously terminated or redesignated fair value debt hedges and $10 million of terminated fair value asset hedges at September 30, 2022, compared with $2 million and $7 million as of September 30, 2021, respectively.

Schedule of Gains (Losses) Recognized From Derivatives Not Designated as Accounting Hedges

The amount of gains (losses) recognized from derivatives not designated as accounting hedges is summarized as follows:

	Other Noninterest Income/(Expense)
(In millions)	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022		Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Derivatives not designated as hedging instruments:
Customer-facing interest rate derivatives	$	(227)	$	(638)	$	(5)	$	(100)
Offsetting interest rate derivatives	238		680		12		129
Other interest rate derivatives	—		—		3		(7)
Foreign exchange derivatives	8		21		6		17
Total derivatives not designated as hedging instruments	$	19	$	63	$	16	$	39

Schedule of Fair Value Hedges

The following schedule presents derivatives used in fair value hedge accounting relationships, as well as pre-tax gains/(losses) recorded on such derivatives and the related hedged items for the periods presented.

	Gain/(loss) recorded in income
	Three Months Ended September 30, 2022						Three Months Ended September 30, 2021
(In millions)	Derivatives 2		Hedged items		Total income statement impact		Derivatives 2		Hedged items		Total income statement impact
Debt: Receive-fixed interest rate swaps 1, 2	$	(25)	$	25	$	—	$	(4)	$	4	$	—
Assets: Pay-fixed interest rate swaps 1, 2	67		(67)		—		4		(4)		—

	Gain/(loss) recorded in income
	Nine Months Ended September 30, 2022						Nine Months Ended September 30, 2021
(In millions)	Derivatives 2		Hedged items		Total income statement impact		Derivatives 2		Hedged items		Total income statement impact
Debt: Receive-fixed interest rate swaps 1, 2	$	(75)	$	75	$	—	$	(27)	$	27	$	—
Assets: Pay-fixed interest rate swaps 1, 2	217		(217)		—		27		(27)		—

1 Consists of hedges of benchmark interest rate risk of fixed-rate long-term debt and fixed-rate AFS securities. Gains and losses were recorded in net interest expense or income 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.

Schedule of Basis Adjustments for Hedged Items

The following schedule provides information regarding basis adjustments for hedged items.

	Par value of hedged assets/(liabilities)				Carrying amount of the hedged assets/(liabilities)1				Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged item
(In millions)	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Long-term fixed-rate debt	$	(500)	$	(500)	$	(432)	$	(507)	$	68	$	(7)
Fixed-rate AFS securities	1,228		479		969		435		(260)		(44)

1 Carrying amounts displayed above exclude (1) issuance and purchase discounts or premiums, (2) unamortized issuance and acquisition costs, and (3) amounts related to terminated fair value hedges.