XML 31 R20.htm IDEA: XBRL DOCUMENT v3.24.1.u1
DERIVATIVE FINANCIAL INSTRUMENTS
 3 Months Ended
Mar. 31, 2024
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS
NOTE 12 — DERIVATIVE FINANCIAL INSTRUMENTS

Our derivatives that are designated as hedging instruments include interest rate swaps that we utilize to manage our interest rate exposure on certain fixed-rate borrowings and deposits included on our Consolidated Balances Sheets.

Our derivatives not designated as hedging instruments mainly include interest rate and foreign exchange contracts that our customers utilize to manage their risk management needs. We typically manage our exposure to these customer derivatives by entering into offsetting or “back-to-back” interest rate and foreign exchange contracts with third-party dealers.

Derivative instruments that are cleared through certain central counterparty clearing houses are settled-to-market and reported net of collateral positions.
The following table presents notional amounts and fair values of derivative financial instruments:

Notional Amount and Fair Value of Derivative Financial Instruments
dollars in millionsMarch 31, 2024December 31, 2023
Notional AmountAsset Fair ValueLiability Fair ValueNotional AmountAsset Fair ValueLiability Fair Value
Derivatives designated as hedging instruments (Qualifying hedges)
Interest rate contracts – fair value hedges (1) (4)
$1,149 $— $— $815 $— $— 
Derivatives not designated as hedging instruments (Non-qualifying hedges)
Interest rate contracts (1) (4)
$25,623 $573 $(590)$24,548 $530 $(518)
Foreign exchange contracts (2)
8,630 78 (63)9,142 104 (117)
Other contracts (3)
1,145 8 (1)983 6 (1)
Total derivatives not designated as hedging instruments$35,398 $659 $(654)$34,673 $640 $(636)
Gross derivatives fair values presented in the Consolidated Balance Sheets$659 $(654)$640 $(636)
Less: gross amounts offset in the Consolidated Balance Sheets— — — — 
Net amount presented in other assets and other liabilities in the Consolidated Balance Sheets659 (654)640 (636)
Less: amounts subject to master netting agreements (5)
(61)61 (97)97 
Less: cash collateral pledged (received) subject to master netting agreements (6)
(534)8 (405)39 
Total net derivative fair value$64 $(585)$138 $(500)
(1)    Fair value balances include accrued interest.
(2)    The foreign exchange contracts exclude foreign exchange spot contracts. The notional and net fair value amounts of these contracts were $324 million and $1 million, respectively, as of March 31, 2024, and $179 million and $0 million, respectively, as of December 31, 2023.
(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 $83 million and $26 million, respectively, at March 31, 2024, which includes $0 million and $0 million relating to qualifying hedges, respectively. Gross amounts of recognized assets and liabilities were lowered by $66 million and $37 million, respectively, at December 31, 2023, which includes $4 million and $0 million relating to qualifying hedges, respectively.
(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 the 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 deposits, respectively.
Qualifying Hedges
The following table represents the impact of fair value hedges on the Consolidated Statements of Income:

Gains (Losses) on Qualifying Hedges
dollars in millionsThree Months Ended March 31,
Amounts Recognized20242023
Recognized on derivativesInterest expense - borrowings$(5)$— 
Recognized on hedged itemInterest expense - borrowings5 — 
Total qualifying hedges - income statement impact$— $— 

The following table presents the carrying value of hedged items and associated cumulative hedging adjustment related to fair value hedges:

dollars in millionsCumulative Fair Value Hedging Adjustment Included in the Carrying Value of Hedged Items
Carrying Value of Hedged ItemsCurrently DesignatedNo Longer Designated
March 31, 2024
Long-term borrowings$871 $— $— 
Time deposits - brokered$334 $— $— 
December 31, 2023
Long-term borrowings$879 $5 $— 

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

Gains (Losses) on Non-Qualifying Hedges
dollars in millionsThree Months Ended March 31,
Amounts Recognized20242023
Interest rate contractsOther noninterest income$8 $21 
Foreign currency forward contractsOther noninterest income12 (2)
Other contractsOther noninterest income(1)— 
Total non-qualifying hedges - income statement impact$19 $19 
For further information on derivatives, refer to Note 14—Fair Value.