DERIVATIVES

12 Months Ended

Dec. 31, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVES

NOTE 12 - DERIVATIVES

In the normal course of business, the Company enters into derivative transactions to meet the financing and hedging needs of its customers and reduce its own exposure to fluctuations in interest rates and foreign currency exchange rates. These transactions include interest rate swap contracts, interest rate options, foreign exchange contracts, residential loan commitment rate locks, interest rate future contracts, swaptions, certain commodities, forward commitments to sell TBAs, forward purchase and sale contracts, and purchase options. The Company does not use derivatives for speculative purposes.

The Company’s derivative assets and liabilities are reported at fair value and are included in Other assets and Other liabilities, respectively, in the Consolidated Balance Sheets. Certain derivatives are cleared through central clearing houses and represent contracts executed bilaterally with counterparties in the OTC market that are novated to central clearing houses that become our counterparty. OTC-cleared derivative instruments are typically settled in cash each day based on their value from the previous day. Information regarding the valuation methodology and inputs used to estimate the fair value of the Company’s derivative instruments is described in Note 18.

Derivative assets and liabilities are netted by counterparty in the Consolidated Balance Sheets if a “right of setoff” is established in a master netting agreement between the Company and the counterparty. This netted derivative asset or liability position is also netted against the fair value of any cash collateral that is pledged or received in accordance with a master netting agreement.

The following table presents derivative assets and liabilities included in the Consolidated Balance Sheets:

	December 31, 2025			December 31, 2024
(dollars in millions)	Notional Amount	Derivative Assets	Derivative Liabilities	Notional Amount	Derivative Assets	Derivative Liabilities
Derivatives designated as hedging instruments:
Interest rate contracts	$67,358	$366	$25	$69,077	$402	$5
Derivatives not designated as hedging instruments:
Interest rate contracts	180,977	187	446	171,193	160	905
Foreign exchange contracts	40,401	510	373	34,749	472	411
Commodities contracts	10,974	458	405	1,136	429	379
TBA contracts	3,043	2	6	2,714	10	8
Other contracts	968	9	3	615	3	2
Total derivatives not designated as hedging instruments	236,363	1,166	1,233	210,407	1,074	1,705
Total gross derivatives	303,721	1,532	1,258	279,484	1,476	1,710
Less: Gross amounts offset in the Consolidated Balance Sheets(1)		(342)	(342)		(391)	(391)
Less: Cash collateral applied(1)		(494)	(137)		(677)	(99)
Total net derivatives included in the Consolidated Balance Sheets		$696	$779		$408	$1,220

(1) Amounts represent the impact of enforceable master netting agreements that allow the Company to net settle positive and negative positions, as well as collateral paid and received.

The Company’s derivative transactions are internally divided into three sub-groups: institutional, customer facilitation, and residential loan. Certain derivative transactions within these sub-groups are designated as fair value or cash flow hedges, as described below:

Derivatives Designated As Hedging Instruments

The Company’s institutional derivatives qualify for hedge accounting treatment. The net interest accruals on interest rate swaps designated in a fair value or cash flow hedge relationship are treated as an adjustment to interest income or interest expense of the item being hedged. All hedging relationships are formally documented at inception, as well as risk management objectives and strategies for undertaking various accounting hedges. In addition, the effectiveness of hedge relationships is monitored during the duration of the hedge period. The methods utilized to assess hedge effectiveness vary based on the hedge relationship, with each relationship monitored to ensure that management’s initial intent continues to be satisfied. Hedge accounting treatment is discontinued when the derivative is terminated or when it is determined that a derivative is not expected to be, or has ceased to be, an effective hedge. Changes in the fair value of a derivative are reflected in earnings after termination of the hedge relationship.

Fair Value Hedges

In a fair value hedge, changes in the fair value of both the derivative instrument and the hedged asset or liability attributable to the risk being hedged are recognized in the same income statement line item in the Consolidated Statements of Operations when the changes in fair value occur. At December 31, 2025 and 2024, the Company has designated $3.8 billion and $4.7 billion, respectively, of interest rate swaps as fair value hedges of its fixed-rate prepayable AFS securities using the portfolio layer method. This approach allows the Company to designate as the hedged item a stated amount of the assets that are not expected to be affected by prepayments, defaults, and other factors affecting the timing and amount of cash flows. At December 31, 2025 and 2024, the Company has also designated $2.8 billion and $3.1 billion, respectively, of interest rate swaps as fair value hedges to manage interest rate risk within its nonprepayable fixed-rate AFS securities portfolio.

The following table presents the effect of fair value hedges on the Consolidated Statements of Operations and the respective line items affected for each hedged item:

	Location and Amount of Gains (Losses) Recognized
	Interest Income	Interest Expense
(dollars in millions)	Investment Securities	Long-Term Borrowed Funds
Year Ended December 31, 2025
Gains (losses) on fair value hedges recognized on:
Hedged items	$161	($8)
Derivatives	(163)	8
Amounts related to interest settlements on derivatives	45	(9)
Total net interest income recognized on fair value hedges	$43	($9)
Year Ended December 31, 2024
Gains (losses) on fair value hedges recognized on:
Hedged items	($142)	($8)
Derivatives	147	8
Amounts related to interest settlements on derivatives	107	(14)
Total net interest income recognized on fair value hedges	$112	($14)
Year Ended December 31, 2023
Gains (losses) on fair value hedges recognized on:
Hedged items	$50	($10)
Derivatives	(48)	10
Amounts related to interest settlements on derivatives	10	(16)
Total net interest income recognized on fair value hedges	$12	($16)

The following table reflects amounts recorded in the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges:    

	December 31, 2025		December 31, 2024
(dollars in millions)	Debt securities available for sale(1)	Long-term borrowed funds	Debt securities available for sale(1)	Long-term borrowed funds
Carrying amount of hedged assets(2)	$8,009	$—	$9,557	$—
Carrying amount of hedged liabilities	—	—	—	491
Cumulative amount of fair value hedging adjustments included in the carrying amount of the hedged items	48	—	(97)	(8)

(1) Includes the amortized cost basis of closed portfolios used to designate hedging relationships under the portfolio layer method. The hedged item is a layer of the closed portfolio which is expected to be remaining at the end of the hedging relationship. As of December 31, 2025 and 2024, the amortized cost basis of the closed portfolios used in these hedging relationships was $5.1 billion and $6.4 billion, respectively, including associated cumulative basis adjustments of $17 million and $(75) million, respectively. The amount of the designated hedging instruments was $3.8 billion and $4.7 billion at December 31, 2025 and 2024, respectively.

(2) Carrying amount represents amortized cost.

Cash Flow Hedges

In a cash flow hedge the entire change in the fair value of the interest rate swap included in the assessment of hedge effectiveness is initially recorded in OCI and is subsequently reclassified from AOCI into earnings in the period during which the hedged item affects earnings.

The Company enters into interest rate swap agreements designed primarily to hedge a portion of its floating-rate assets and liabilities. All of these swaps are deemed highly effective cash flow hedges. From time to time, the Company may also enter into certain interest rate option agreements that utilize interest rate floors and/or caps. Option premiums paid and received are excluded from the assessment of hedge effectiveness and are amortized over the life of the instruments.

During the first quarter of 2025, the Company entered into a cash flow hedge with a notional amount of $1.5 billion to manage the variability in cash flows related to the sale of education loans, which settled ratably each quarter throughout 2025. The Company terminated this cash flow hedge throughout the year in conjunction with the quarterly settlement of the education loan sale, with the hedge fully terminated in the fourth quarter of 2025.

The following table presents the pre-tax net gains (losses) recorded in the Consolidated Statements of Operations and in the Consolidated Statements of Comprehensive Income related to derivative instruments designated as cash flow hedges:

	Year Ended December 31,
(dollars in millions)	2025	2024	2023
Pre-tax net gains (losses) recognized in OCI	$341	($725)	($145)
Pre-tax net gains (losses) reclassified from AOCI into interest income	(751)	(945)	(596)
Pre-tax net gains (losses) reclassified from AOCI into noninterest income	(9)	—	—
Pre-tax net gains (losses) reclassified from AOCI into interest expense	(1)	(1)	—

Using the December 31, 2025 interest rate curve, the Company estimates that $230 million in pre-tax net losses related to cash flow hedge strategies will be reclassified from AOCI to earnings over the next 12 months. These losses could differ from amounts recognized due to changes in interest rates, hedge de-designations, or the addition of other hedges after December 31, 2025.

Derivatives Not Designated as Hedging Instruments

The Company offers derivatives to customers in connection with their risk management needs consisting primarily of interest rate, foreign exchange, and commodity contracts. Market risk exposure from customer transactions is primarily managed by entering into a variety of hedging transactions with third-party dealers. Gains and losses on customer-related derivatives are reported in Foreign exchange and derivatives products in the Consolidated Statements of Operations.

During the second quarter of 2025, the Company entered into at-the-market equity offering programs to facilitate capital market activities for customers. These programs involve the concurrent short sale of an equity security and the execution of a forward purchase contract for the same equity security. The forward purchase contract economically hedges the Company’s short sale position and will be closed against such position when a program concludes. Changes in fair value related to the forward purchase contracts are reported in Capital markets fees in the Consolidated Statements of Operations.

Residential mortgage loans that will be sold in the secondary market and the related loan commitments, which are considered derivatives, are accounted for at fair value. Forward contracts to sell mortgage-backed securities are utilized to hedge the fair value of the loans and related commitments. Gains and losses on the loans and related commitments, and the derivatives used to economically hedge them, are reported in Mortgage banking fees in the Consolidated Statements of Operations.

Residential MSRs are accounted for at fair value. Derivatives utilized to hedge the fair value of residential MSRs include interest rate futures, swaps, options, and forward contracts to purchase mortgage-backed securities. Gains and losses on residential MSRs and the related derivatives are reported in Mortgage banking fees in the Consolidated Statements of Operations.

The following table presents the effect of economic hedges on noninterest income:

	Amounts Recognized in Noninterest Income for the Year Ended December 31,			Affected Line Item in the Consolidated Statements of Operations
(dollars in millions)	2025	2024	2023
Economic hedge type:
Customer interest rate contracts	$168	($773)	($505)	Foreign exchange and derivative products
Derivatives hedging interest rate risk	(134)	805	551	Foreign exchange and derivative products
Customer foreign exchange contracts	322	(223)	94	Foreign exchange and derivative products
Derivatives hedging foreign exchange risk	(386)	334	14	Foreign exchange and derivative products
Customer commodity contracts	(243)	23	(900)	Foreign exchange and derivative products
Derivatives hedging commodity price risk	260	(7)	941	Foreign exchange and derivative products
Residential loan commitments	19	(16)	(34)	Mortgage banking fees
Derivatives hedging residential loan commitments and mortgage loans held for sale, at fair value	(37)	19	25	Mortgage banking fees
Derivative contracts used to hedge residential MSRs	7	(91)	(33)	Mortgage banking fees
Derivative contracts used to hedge equity price risk	13	—	—	Capital markets fees
Total	($11)	$71	$153