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Derivative Financial Instruments (Tables)
 12 Months Ended
Dec. 31, 2023
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Impact of Derivatives on Balance Sheet

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

 

Dec. 31, 2023

 

 

Dec. 31, 2022

 

 

Dec. 31, 2023

 

 

Dec. 31, 2022

 

 

Dec. 31, 2023

 

 

Dec. 31, 2022

 

 

Dec. 31, 2023

 

 

Dec. 31, 2022

 

Fair Values(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

Interest rate

 

$

—

 

 

$

—

 

 

$

55

 

 

$

55

 

 

$

—

 

 

$

1

 

 

$

55

 

 

$

56

 

Cross-currency interest rate
   swaps

 

Foreign currency and
interest rate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total derivative assets(2)

 

 

 

 

—

 

 

 

—

 

 

 

55

 

 

 

55

 

 

 

—

 

 

 

1

 

 

 

55

 

 

 

56

 

Derivative Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

Interest rate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(2

)

 

 

(1

)

 

 

(3

)

 

 

(1

)

 

 

(5

)

Floor Income Contracts

 

Interest rate

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Cross-currency interest rate
   swaps

 

Foreign currency and
interest rate

 

 

—

 

 

 

—

 

 

 

(189

)

 

 

(253

)

 

 

—

 

 

 

—

 

 

 

(189

)

 

 

(253

)

Total derivative liabilities(2)

 

 

 

 

—

 

 

 

—

 

 

 

(189

)

 

 

(255

)

 

 

(1

)

 

 

(3

)

 

 

(190

)

 

 

(258

)

Net total derivatives

 

 

 

$

—

 

 

$

—

 

 

$

(134

)

 

$

(200

)

 

$

(1

)

 

$

(2

)

 

$

(135

)

 

$

(202

)

(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)

 

December 31, 2023

 

 

December 31, 2022

 

 

December 31, 2023

 

 

December 31, 2022

 

Gross position

 

$

55

 

 

$

56

 

 

$

(190

)

 

$

(258

)

Impact of master netting agreements

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Derivative values with impact of master netting
   agreements (as carried on balance sheet)

 

 

55

 

 

 

56

 

 

 

(190

)

 

 

(258

)

Cash collateral (held) pledged

 

 

(60

)

 

 

(80

)

 

 

46

 

 

 

62

 

Net position

 

$

(5

)

 

$

(24

)

 

$

(144

)

 

$

(196

)

(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 December 31, 2023

 

 

As of December 31, 2022

 

(Dollar in millions)

 

Carrying
 Value

 

 

Hedge Basis Adjustments

 

 

Carrying
 Value

 

 

Hedge Basis Adjustments

 

Short-term borrowings

 

$

490

 

 

$

(9

)

 

$

1,289

 

 

$

(10

)

Long-term borrowings

 

$

5,341

 

 

$

(281

)

 

$

6,188

 

 

$

(494

)
Gross Positions with Impact of Master Netting Agreements
(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)

 

December 31, 2023

 

 

December 31, 2022

 

 

December 31, 2023

 

 

December 31, 2022

 

Gross position

 

$

55

 

 

$

56

 

 

$

(190

)

 

$

(258

)

Impact of master netting agreements

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Derivative values with impact of master netting
   agreements (as carried on balance sheet)

 

 

55

 

 

 

56

 

 

 

(190

)

 

 

(258

)

Cash collateral (held) pledged

 

 

(60

)

 

 

(80

)

 

 

46

 

 

 

62

 

Net position

 

$

(5

)

 

$

(24

)

 

$

(144

)

 

$

(196

)
Carrying Value and Related Fair Value Hedging Adjustments of Liabilities
(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 December 31, 2023

 

 

As of December 31, 2022

 

(Dollar in millions)

 

Carrying
 Value

 

 

Hedge Basis Adjustments

 

 

Carrying
 Value

 

 

Hedge Basis Adjustments

 

Short-term borrowings

 

$

490

 

 

$

(9

)

 

$

1,289

 

 

$

(10

)

Long-term borrowings

 

$

5,341

 

 

$

(281

)

 

$

6,188

 

 

$

(494

)
Derivative Notional Values

 

 

Cash Flow

 

 

Fair Value

 

 

Trading

 

 

Total

 

(Dollars in billions)

 

Dec. 31, 2023

 

 

Dec. 31, 2022

 

 

Dec. 31, 2023

 

 

Dec. 31, 2022

 

 

Dec. 31, 2023

 

 

Dec. 31, 2022

 

 

Dec. 31, 2023

 

 

Dec. 31, 2022

 

Notional Values:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

$

2.2

 

 

$

8.3

 

 

$

4.6

 

 

$

6.2

 

 

$

1.9

 

 

$

17.4

 

 

$

8.7

 

 

$

31.9

 

Floor Income Contracts

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6.0

 

 

 

—

 

 

 

6.0

 

Cross-currency interest rate swaps

 

 

—

 

 

 

—

 

 

 

1.6

 

 

 

1.8

 

 

 

—

 

 

 

—

 

 

 

1.6

 

 

 

1.8

 

Total derivatives

 

$

2.2

 

 

$

8.3

 

 

$

6.2

 

 

$

8.0

 

 

$

1.9

 

 

$

23.4

 

 

$

10.3

 

 

$

39.7

 
Mark-to-Market Impact of Derivatives on Statements of Income

Mark-to-Market Impact of Derivatives on Statements of Income

 

 

Total Gains (Losses)

 

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2023

 

 

2022

 

 

2021

 

Fair Value Hedges:

 

 

 

 

 

 

 

 

 

Interest Rate Swaps

 

 

 

 

 

 

 

 

 

Gains (losses) recognized in net income on derivatives

 

$

104

 

 

$

(610

)

 

$

(310

)

Gains (losses) recognized in net income on hedged
   items

 

 

(128

)

 

 

660

 

 

 

349

 

Net fair value hedge ineffectiveness gains (losses)

 

 

(24

)

 

 

50

 

 

 

39

 

Cross currency interest rate swaps

 

 

 

 

 

 

 

 

 

Gains (losses) recognized in net income on derivatives

 

 

64

 

 

 

(63

)

 

 

104

 

Gains (losses) recognized in net income on hedged
   items

 

 

(86

)

 

 

96

 

 

 

(55

)

Net fair value hedge ineffectiveness gains (losses)

 

 

(22

)

 

 

33

 

 

 

49

 

Total fair value hedges(1)(2)

 

 

(46

)

 

 

83

 

 

 

88

 

Cash Flow Hedges:

 

 

 

 

 

 

 

 

 

Total cash flow hedges(2)

 

 

—

 

 

 

—

 

 

 

—

 

Trading:

 

 

 

 

 

 

 

 

 

Interest rate swaps

 

 

11

 

 

 

130

 

 

 

30

 

Floor income contracts

 

 

—

 

 

 

41

 

 

 

34

 

Total trading derivatives(3)

 

 

11

 

 

 

171

 

 

 

64

 

Mark-to-market gains (losses) recognized

 

$

(35

)

 

$

254

 

 

$

152

 

(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.
Impact of Derivatives on Other Comprehensive Income (Equity)

Impact of Derivatives on Other Comprehensive Income (Equity)

 

 

Years Ended December 31,

 

(Dollars in millions)

 

2023

 

 

2022

 

 

2021

 

Total gains (losses) on cash flow hedges

 

$

16

 

 

$

194

 

 

$

55

 

Reclassification adjustments for derivative (gains) losses
    included in net income (interest expense)(1)

 

 

(84

)

 

 

26

 

 

 

86

 

Net changes in cash flow hedges, net of tax

 

$

(68

)

 

$

220

 

 

$

141

 

(1)
Includes net settlement income/expense.

Collateral Held and Pledged

The following table details collateral held and pledged related to derivative exposure between us and our derivative counterparties.

(Dollars in millions)

 

December 31, 2023

 

 

December 31, 2022

 

Collateral held:

 

 

 

 

 

 

Cash (obligation to return cash collateral is recorded in short-term borrowings)

 

$

60

 

 

$

80

 

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

 

$

60

 

 

$

80

 

Derivative asset at fair value including accrued interest

 

$

62

 

 

$

85

 

Collateral pledged to others:

 

 

 

 

 

 

Cash (right to receive return of cash collateral is recorded in investments)

 

$

46

 

 

$

62

 

Total collateral pledged

 

$

46

 

 

$

62

 

Derivative liability at fair value including accrued interest and premium
   receivable

 

$

197

 

 

$

266

 

(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.