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Derivative Instruments and Hedging Activities (Tables)

6 Months Ended

Jun. 30, 2020

Summary of Derivative Instruments [Abstract]

Selected information with respect to notional amounts and recorded gross fair values at June 30, 2020 and December 31, 2019, is summarized as follows:


	June 30, 2020										December 31, 2019
	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:
Purchased interest rate floors	$	—	$	—	$	—	$	—	$	—	$	—
Receive-fixed interest rate swaps	3,500		—		—		3,588		—		—
Fair value hedges:
Receive-fixed interest rate swaps	500		—		—		1,500		—		—
Total derivatives designated as hedging instruments	4,000		—		—		5,088		—		—
Derivatives not designated as hedging instruments:
Customer-facing interest rate derivatives ^{1, 2}	5,280		460		—		4,409		146		5
Offsetting interest rate derivatives ²	5,281		—		494		4,422		5		157
Other interest rate derivatives	1,679		20		6		726		3		1
Foreign exchange derivatives	273		3		2		385		4		4
Total derivatives not designated as hedging instruments	12,513		483		502		9,942		158		167
Total derivatives	$	16,513	$	483	$	502	$	15,030	$	158	$	167

¹ Customer-facing interest rate derivatives in an asset position include a $34 million and an $11 million net credit valuation adjustment reducing the fair value amounts as of June 30, 2020 and December 31, 2019, respectively. There was no significant debit valuation adjustment for derivative liabilities. These adjustments are required to reflect both our nonperformance risk and that of the respective counterparty.

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


	June 30, 2020						December 31, 2019
(In millions)	Other assets		Other liabilities		Other assets		Other liabilities
Customer-facing interest rate derivatives	$	460	$	—	$	141	$	5
Offsetting interest rate derivatives	—		32		5		9

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 OCI or recognized in earnings for the three and six months ended June 30, 2020 and 2019 is as follows:


	Amount of derivative gain (loss) recognized/reclassified
	Three Months Ended June 30, 2020
(In millions)	Effective Portion of Derivatives Gain/(Loss) Deferred in OCI		Excluded Components Deferred in OCI (Amortization Approach)		Amount of Gain/(Loss) Reclassified From OCI into Income		Interest on Fair Value Hedges		Hedge Ineffectiveness / OCI Reclass due to Missed Forecast
Derivatives designated as hedging instruments:
Cash flow hedges of floating-rate assets¹:
Purchased interest rate floors	$	—	$	—	$	3	$	—	$	—
Interest rate swaps	10		—		10		—		—
Fair value hedges of fixed-rate debt:
Receive-fixed interest rate swaps	—		—		—		1		—
Basis amortization on terminated swaps²	—		—		—		6		—
Total derivatives designated as hedging instruments	$	10	$	—	$	13	$	7	$	—


	Amount of derivative gain (loss) recognized/reclassified
	Six Months Ended June 30, 2020
(In millions)	Effective Portion of Derivatives Gain/(Loss) Deferred in OCI		Excluded Components Deferred in OCI (Amortization Approach)		Amount of Gain/(Loss) Reclassified From OCI into Income		Interest on Fair Value Hedges		Hedge Ineffectiveness / OCI Reclass due to Missed Forecast
Derivatives designated as hedging instruments:
Cash flow hedges of floating-rate assets¹:
Purchased interest rate floors	$	—	$	—	$	6	$	—	$	—
Interest rate swaps	102		—		11		—		—
Fair value hedges of fixed-rate debt:
Receive-fixed interest rate swaps	—		—		—		3		—
Basis amortization on terminated swaps²	—		—		—		7		—
Total derivatives designated as hedging instruments	$	102	$	—	$	17	$	10	$	—


	Amount of derivative gain (loss) recognized/reclassified
	Three Months Ended June 30, 2019
(In millions)	Effective Portion of Derivatives Gain/(Loss) Deferred in OCI		Excluded Components Deferred in OCI (Amortization Approach)		Amount of Gain/(Loss) Reclassified From OCI into Income		Interest on Fair Value Hedges		Hedge Ineffectiveness / OCI Reclass due to Missed Forecast
Derivatives designated as hedging instruments:
Cash flow hedges of floating-rate assets¹:
Purchased interest rate floors	$	2	$	15	$	(1)	$	—	$	—
Interest rate swaps	24		—		(1)		—		—
Fair value hedges of fixed-rate debt:
Receive-fixed interest rate swaps	—		—		—		—		—
Basis amortization on terminated swaps²	—		—		—		—		—
Total derivatives designated as hedging instruments	$	26	$	15	$	(2)	$	—	$	—


	Amount of derivative gain (loss) recognized/reclassified
	Six Months Ended June 30, 2019
(In millions)	Effective Portion of Derivatives Gain/(Loss) Deferred in OCI		Excluded Components Deferred in OCI (Amortization Approach)		Amount of Gain/(Loss) Reclassified From OCI into Income		Interest on Fair Value Hedges		Hedge Ineffectiveness / OCI Reclass due to Missed Forecast
Derivatives designated as hedging instruments:
Cash flow hedges of floating-rate assets¹:
Purchased interest rate floors	$	2	$	18	$	(1)	$	—	$	—
Interest rate swaps	33		—		(3)		—		—
Fair value hedges of fixed-rate debt:
Receive-fixed interest rate swaps	—		—		—		1		—
Basis amortization on terminated swaps²	—		—		—		—		—
Total derivatives designated as hedging instruments	$	35	$	18	$	(4)	$	1	$	—

Note: These schedules are not intended to present at any given time the Bank’s long/short position with respect to its derivative contracts.

¹Amounts recognized in OCI and reclassified from AOCI represent the effective portion of the derivative gain (loss). For the 12 months following June 30, 2020, we estimate that $61 million will be reclassified from AOCI into interest

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

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 as follows:


	Noninterest (Other) Income/(Expense)
(In millions)	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020		Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Derivatives not designated as hedging instruments:
Customer-facing interest rate derivatives	$	34	$	346	$	86	$	132
Offsetting interest rate derivatives	(39)		(352)		(85)		(130)
Other interest rate derivatives	2		11		(1)		(1)
Foreign exchange derivatives	5		12		6		11
Total derivatives not designated as hedging instruments	$	2	$	17	$	6	$	12

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 June 30, 2020										Three Months Ended June 30, 2019
(In millions)	Derivatives²		Hedged items		Total income statement impact		Derivatives²		Hedged items		Total income statement impact
Interest rate swaps¹	$	4	$	(4)	$	—	$	12	$	(12)	$	—


	Gain/(loss) recorded in income
	Six Months Ended June 30, 2020										Six Months Ended June 30, 2019
(In millions)	Derivatives²		Hedged items		Total income statement impact		Derivatives²		Hedged items		Total income statement impact
Interest rate swaps¹	$	75	$	(75)	$	—	$	18	$	(18)	$	—

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

²The income for derivatives does not reflect interest income/expense to be consistent with the presentation of the gains/ (losses) on the hedged items.

Schedule of Hedged Item Included in Long Term Debt

The following schedule provides selected information regarding the long-term debt in the statement of financial position in which the hedged item is included.


	Carrying amount of the hedged assets/(liabilities)¹						Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets/(liabilities)
(In millions)	June 30, 2020		December 31, 2019		June 30, 2020		December 31, 2019
Long-term debt²	$	(549)	$	(1,510)	$	(49)	$	(10)

¹Carrying amounts displayed above exclude issuance discounts or premiums and unamortized issuance costs.

² The carrying amount of long-term fixed-rate debt excludes amounts related to terminated fair value hedges.

- Definition

Tabular disclosure of pertinent information about a derivative or group of derivatives on a disaggregated basis, such as for individual instruments, or small groups of similar instruments. May include a combination of the type of instrument, risks being hedged, notional amount, hedge designation, related hedged item, inception date, maturity date, or other relevant item.

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