Our primary objective for using derivatives is to manage interest rate risk. We use derivatives to stabilize forecasted interest income from variable-rate assets and to modify the coupon or the duration of fixed-rate financial assets or liabilities. We also assist clients with their risk management needs through the use of derivatives. Cash receipts and payments from derivatives designated in qualifying hedging relationships are classified in the same category as the cash flows from the items being hedged in the statement of cash flows, and cash flows from undesignated derivatives are classified as operating activities. For a more detailed discussion of the use of and accounting policies regarding derivative instruments, see Note 7 of our 2023 Form 10-K.

Fair Value Hedges of Liabilities — During the second quarter of 2023, we terminated our remaining receive-fixed interest rate swap with a notional amount of $500 million that had been designated in a qualifying fair value hedge relationship of fixed-rate debt. The receive-fixed interest rate swap effectively converted the interest on our fixed-rate debt to floating until it was terminated. Prior to termination, changes in the fair value of derivatives designated as fair value hedges of debt were offset by changes in the fair value of the hedged debt instruments. The unamortized hedge basis adjustments resulting from the terminated hedging relationship are being amortized over the remaining life of the fixed-rate debt.

Fair Value Hedges of Assets — Fair value hedges of fixed-rate assets effectively convert the fixed interest income to a floating rate on the hedged portion of the assets. Changes in fair value of derivatives designated as fair value hedges of fixed-rate financial assets were largely offset by changes in the value of the hedged assets, as shown in the schedules on the following pages. At September 30, 2024, we had pay-fixed, receive-floating interest rate swaps with an aggregate notional amount of $3.6 billion designated as fair value hedges of fixed-rate AFS securities. We had pay-fixed swaps with an additional $1.0 billion of aggregate notional designated as hedges of fixed-rate commercial loans.

Cash Flow Hedges — Cash flow hedges of variable-rate assets and liabilities effectively convert the variable interest receipts and payments to fixed. At September 30, 2024, we had receive-fixed, pay-floating interest rate swaps with an aggregate notional amount of $350 million designated as cash flow hedges of pools of floating-rate commercial loans. Additionally, at September 30, 2024, we had one pay-fixed, receive-floating interest rate swap with a notional amount of $500 million designated as a cash flow hedge of the variability in the interest payments on certain FHLB advances. Changes in the fair value of qualifying cash flow hedges during the quarter were recorded in AOCI as shown in the schedule below. The amounts deferred in AOCI are reclassified into earnings in the periods in which

the hedged interest receipts or payments occur (i.e., when the hedged forecasted transactions affect earnings). At September 30, 2024, there was $117 million of losses deferred in AOCI related to terminated cash flow hedges that are expected to be fully reclassified into earnings by October 2027.

Exposure to credit risk arises from the possibility of nonperformance by counterparties. No significant losses on derivative instruments have occurred as a result of counterparty nonperformance. For more information on how we incorporate counterparty credit risk in derivative valuations, see Note 3 of our 2023 Form 10-K. For additional discussion of collateral and the associated credit risk related to our derivative contracts, see Note 7 of our 2023 Form 10-K.

Our derivative contracts require us to pledge collateral for derivatives that are in a net liability position at a given balance sheet date. Certain of these derivative contracts contain credit risk-related contingent features that include the requirement to maintain a minimum debt credit rating. We may be required to pledge additional collateral if a credit risk-related feature were triggered, such as a downgrade of our credit rating. In past situations, counterparties have not generally required that additional collateral be pledged when provided for by the contractual terms. At September 30, 2024, the fair value of our derivative liabilities was $295 million, for which we were required to pledge cash collateral of $4 million in the normal course of business. If our credit rating were downgraded one notch by either Standard & Poor’s (“S&P”) or Moody’s at September 30, 2024, there would likely be no additional collateral required to be pledged.

The following schedule presents information regarding notional amounts and recorded gross fair values at September 30, 2024 and December 31, 2023, and the related gain (loss) of derivative instruments:


	September 30, 2024						December 31, 2023
	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	$	350	$	—	$	—	$	1,450	$	—	$	—
Cash flow hedges of floating-rate liabilities:
Pay-fixed interest rate swaps	500		—		—		500		—		—
Fair value hedges:

Asset hedges: Pay-fixed interest rate swaps	4,568		69		—		4,571		78		—
Total derivatives designated as hedging instruments	5,418		69		—		6,521		78		—
Derivatives not designated as hedging instruments:
Customer interest rate derivatives 1	15,950		308		292		14,375		337		330
Other interest rate derivatives	1,030		1		—		1,001		1		—
Foreign exchange derivatives	260		3		3		216		3		3
Purchased credit derivatives	53		1		—		35		1		—
Total derivatives not designated as hedging instruments	17,293		313		295		15,627		342		333
Total derivatives	$	22,711	$	382	$	295	$	22,148	$	420	$	333

1 Customer interest rate derivatives include both customer-facing derivatives as well as offsetting derivatives facing other dealer banks. The fair value of these derivatives include a net credit valuation adjustment of $5 million and $9 million, reducing the fair value of the liability at September 30, 2024, and December 31, 2023, respectively.

The amount of derivative gains/(losses) from cash flow and fair value hedges that were deferred in other comprehensive income (“OCI”) or recognized in earnings for the three and nine months ended September 30, 2024 and 2023 is presented in the schedules below.


	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		Hedge ineffectiveness/AOCI reclass due to missed forecast
Cash flow hedges of floating-rate assets:1

Receive-fixed interest rate swaps	$	5	$	(30)	$	—	$	—
Cash flow hedges of floating-rate liabilities:
Pay-fixed interest rate swaps	(2)		2		—		—
Fair value hedges:2
Debt hedges: Receive-fixed interest rate swaps	—		—		(2)		—

Asset hedges: Pay-fixed interest rate swaps	—		—		24		—

Total derivatives designated as hedging instruments	$	3	$	(28)	$	22	$	—


	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		Hedge ineffectiveness/AOCI reclass due to missed forecast
Cash flow hedges of floating-rate assets: 1

Receive-fixed interest rate swaps	$	(2)	$	(99)	$	—	$	—
Cash flow hedges of floating-rate liabilities:
Pay-fixed interest rate swaps	3		6		—		—
Fair value hedges: 2
Debt hedges: Receive-fixed interest rate swaps	—		—		(5)		—

Asset hedges: Pay-fixed interest rate swaps	—		—		70		—

Total derivatives designated as hedging instruments	$	1	$	(93)	$	65	$	—


	Three Months Ended September 30, 2023
(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		Hedge ineffectiveness/AOCI reclass due to missed forecast
Cash flow hedges of floating-rate assets:1

Receive-fixed interest rate swaps	$	7	$	(41)	$	—	$	—
Cash flow hedges of floating-rate liabilities:
Pay-fixed interest rate swaps	(3)		2		—		—
Fair value hedges: 2
Debt hedges: Receive-fixed interest rate swaps	—		—		(2)		—
Asset hedges: Pay-fixed interest rate swaps	—		—		20		(1)
Total derivatives designated as hedging instruments	$	4	$	(39)	$	18	$	(1)


	Nine Months Ended September 30, 2023
(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		Hedge ineffectiveness/AOCI reclass due to missed forecast
Cash flow hedges of floating-rate assets: 1

Receive-fixed interest rate swaps	$	24	$	(131)	$	—	$	—
Cash flow hedges of floating-rate liabilities:
Pay-fixed interest rate swaps	8		3		—		—
Fair value hedges: 2
Debt hedges: Receive-fixed interest rate swaps	—		—		(8)		—


Asset hedges: Pay-fixed interest rate swaps	—		—		36		(1)

Total derivatives designated as hedging instruments	$	32	$	(128)	$	28	$	(1)

1 For the 12 months following September 30, 2024, we estimate that $73 million of losses will be reclassified from AOCI into interest income, compared with an estimate of $133 million of losses at September 30, 2023.

2 We had total cumulative unamortized basis adjustments from terminated fair value hedges of debt of $41 million and $48 million at September 30, 2024 and 2023, respectively. We had $3 million of cumulative unamortized basis adjustments from terminated fair value hedges of assets at both September 30, 2024 and 2023. Interest on fair value hedges presented above includes the amortization of the remaining unamortized basis adjustments.


	Other Noninterest Income/(Expense)
(In millions)	Three Months Ended September 30, 2024		Nine Months Ended September 30, 2024		Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
Derivatives not designated as hedging instruments:
Customer-facing interest rate derivatives	$	4	$	17	$	11	$	22
Other interest rate derivatives	(2)		(1)		1		4
Foreign exchange derivatives	8		22		8		22
Purchased credit derivatives	—		—		—		(1)
Total derivatives not designated as hedging instruments	$	10	$	38	$	20	$	47

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:


	Gains/(losses) recorded in income
	Three Months Ended September 30, 2024						Three Months Ended September 30, 2023
(In millions)	Derivatives		Hedged items		Total income statement impact		Derivatives		Hedged items		Total income statement impact

Debt: Receive-fixed interest rate swaps 1, 2	$	—	$	—	$	—	$	—	$	—	$	—
Assets: Pay-fixed interest rate swaps 1, 2	(166)		166		—		144		(145)		(1)


	Gains/(losses) recorded in income
	Nine Months Ended September 30, 2024						Nine Months Ended September 30, 2023
(In millions)	Derivatives		Hedged items		Total income statement impact		Derivatives		Hedged items		Total income statement impact

Debt: Receive-fixed interest rate swaps 1, 2	$	—	$	—	$	—	$	14	$	(14)	$	—
Assets: Pay-fixed interest rate swaps 1, 2	(47)		47		—		171		(172)		(1)

1 Consists of hedges of benchmark interest rate risk of fixed-rate long-term debt, fixed-rate AFS securities, and fixed-rate commercial loans. Gains and losses were recorded in interest expense or income consistent with the hedged items.


	Par value of hedged assets				Carrying amount of the hedged assets 1				Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged item
(In millions)	September 30, 2024		December 31, 2023		September 30, 2024		December 31, 2023		September 30, 2024		December 31, 2023


Fixed-rate assets 2	$	11,489	$	12,389	$	11,190	$	12,209	$	299	$	(180)

2 These amounts include the amortized cost basis of defined portfolios of AFS securities and commercial loans used to designate hedging relationships in which the hedged item is the stated amount of assets in the defined portfolio anticipated to be outstanding for the designated hedged period. At September 30, 2024, the amortized cost basis of the defined portfolios used in these hedging relationships was $10.4 billion; the cumulative basis adjustment associated with these hedging relationships was $48 million; and the notional amounts of the designated hedging instruments were $3.5 billion.