Derivative Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments, Offsetting Assets

The following table presents notional amount and fair value of derivative financial instruments on a gross basis. At June 30, 2023, and December 31, 2022 BancShares’ derivatives are not designated as hedging instruments.

Notional Amount and Fair Value of Derivative Financial Instruments

dollars in millions	June 30, 2023						December 31, 2022
	Notional Amount		Asset Fair Value		Liability Fair Value		Notional Amount		Asset Fair Value		Liability Fair Value
Derivatives not designated as hedging instruments (Non-qualifying hedges)
Interest rate contracts (1) (4)	$	24,597	$	553	$	(624)	$	18,173	$	158	$	(482)
Foreign exchange contracts (2)	12,847		203		(200)		125		1		(4)
Other contracts (3)	826		2		(1)		507		—		—
Total derivatives not designated as hedging instruments	$	38,270	758		(825)		$	18,805	159		(486)
Gross derivatives fair values presented in the Consolidated Balance Sheets			758		(825)				159		(486)
Less: Gross amounts offset in the Consolidated Balance Sheets			—		—				—		—
Net amount presented in the Consolidated Balance Sheets			758		(825)				159		(486)
Less: Amounts subject to master netting agreements (5)			(110)		110				(13)		13
Less: Cash collateral pledged(received) subject to master netting agreements (6)			(533)		39				(124)		—
Total net derivative fair value			$	115	$	(676)			$	22	$	(473)

(1)    Fair value balances include accrued interest.

(2)    The foreign exchange contracts exclude foreign exchange spot contracts. The notional amounts of these contracts were $161 million as of June 30, 2023, and $0 million as of December 31, 2022.

(3)    Other derivative contracts not designated as hedging instruments include risk participation agreements and equity warrants.

(4)    BancShares accounts for swap contracts cleared by the Chicago Mercantile Exchange and LCH Clearnet as “settled-to-market”. As a result, variation margin payments are characterized as settlement of the derivative exposure and variation margin balances are netted against the corresponding derivative mark-to-market balances. Gross amounts of recognized assets and liabilities were lowered by $154 million and $33 million, respectively, at June 30, 2023, and $376 million and $19 million, respectively at December 31, 2022.

(5)    BancShares’ derivative transactions are governed by International Swaps and Derivatives Association (“ISDA”) agreements that allow for net settlements of certain payments as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction. BancShares believes its ISDA agreements meet the definition of a master netting arrangement or similar agreement for purposes of the above disclosure.

(6)    In conjunction with the ISDA agreements described above, BancShares has entered into collateral arrangements with its counterparties, which provide for the exchange of cash depending on change in the market valuation of the derivative contracts outstanding. Such collateral is available to be applied in settlement of the net balances upon an event of default of one of the counterparties. Collateral pledged or received is included in other assets or other liabilities, respectively.

Schedule of Derivative Instruments, Offsetting Liabilities

The following table presents notional amount and fair value of derivative financial instruments on a gross basis. At June 30, 2023, and December 31, 2022 BancShares’ derivatives are not designated as hedging instruments.

Notional Amount and Fair Value of Derivative Financial Instruments

dollars in millions	June 30, 2023						December 31, 2022
	Notional Amount		Asset Fair Value		Liability Fair Value		Notional Amount		Asset Fair Value		Liability Fair Value
Derivatives not designated as hedging instruments (Non-qualifying hedges)
Interest rate contracts (1) (4)	$	24,597	$	553	$	(624)	$	18,173	$	158	$	(482)
Foreign exchange contracts (2)	12,847		203		(200)		125		1		(4)
Other contracts (3)	826		2		(1)		507		—		—
Total derivatives not designated as hedging instruments	$	38,270	758		(825)		$	18,805	159		(486)
Gross derivatives fair values presented in the Consolidated Balance Sheets			758		(825)				159		(486)
Less: Gross amounts offset in the Consolidated Balance Sheets			—		—				—		—
Net amount presented in the Consolidated Balance Sheets			758		(825)				159		(486)
Less: Amounts subject to master netting agreements (5)			(110)		110				(13)		13
Less: Cash collateral pledged(received) subject to master netting agreements (6)			(533)		39				(124)		—
Total net derivative fair value			$	115	$	(676)			$	22	$	(473)

(1)    Fair value balances include accrued interest.

(2)    The foreign exchange contracts exclude foreign exchange spot contracts. The notional amounts of these contracts were $161 million as of June 30, 2023, and $0 million as of December 31, 2022.

(3)    Other derivative contracts not designated as hedging instruments include risk participation agreements and equity warrants.

(4)    BancShares accounts for swap contracts cleared by the Chicago Mercantile Exchange and LCH Clearnet as “settled-to-market”. As a result, variation margin payments are characterized as settlement of the derivative exposure and variation margin balances are netted against the corresponding derivative mark-to-market balances. Gross amounts of recognized assets and liabilities were lowered by $154 million and $33 million, respectively, at June 30, 2023, and $376 million and $19 million, respectively at December 31, 2022.

(5)    BancShares’ derivative transactions are governed by International Swaps and Derivatives Association (“ISDA”) agreements that allow for net settlements of certain payments as well as offsetting of all contracts with a given counterparty in the event of bankruptcy or default of one of the two parties to the transaction. BancShares believes its ISDA agreements meet the definition of a master netting arrangement or similar agreement for purposes of the above disclosure.

(6)    In conjunction with the ISDA agreements described above, BancShares has entered into collateral arrangements with its counterparties, which provide for the exchange of cash depending on change in the market valuation of the derivative contracts outstanding. Such collateral is available to be applied in settlement of the net balances upon an event of default of one of the counterparties. Collateral pledged or received is included in other assets or other liabilities, respectively.

Schedule of Non-Qualifying Hedges

The following table presents gains of non-qualifying hedges recognized on the Consolidated Statements of Income:

Gains on Non-Qualifying Hedges

dollars in millions		Three Months Ended June 30,				Six Months Ended June 30,
	Amounts Recognized	2023		2022		2023		2022
Interest rate contracts	Other noninterest income	$	8	$	2	$	29	$	6
Foreign currency forward contracts	Other noninterest income	1		6		(1)		6
Total non-qualifying hedges - income statement impact		$	9	$	8	$	28	$	12