v3.26.1
DERIVATIVES
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES
NOTE 8 - 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. Information regarding the valuation methodology and inputs used to estimate the fair value of the Company’s derivative instruments is described in Note 18 in the Company’s 2025 Form 10-K.
The following table presents derivative assets and liabilities included in the Consolidated Balance Sheets:
March 31, 2026December 31, 2025
(dollars in millions)Notional AmountDerivative AssetsDerivative LiabilitiesNotional AmountDerivative AssetsDerivative Liabilities
Derivatives designated as hedging instruments:
Interest rate contracts
$65,576 $274 $12 $67,358 $366 $25 
Derivatives not designated as hedging instruments:
Interest rate contracts
183,611 137 456 180,977 187 446 
Foreign exchange contracts36,697 528 366 40,401 510 373 
Commodities contracts14,085 717 661 10,974 458 405 
TBA contracts7,147 29 20 3,043 2 6 
Other contracts1,059 7 4 968 9 3 
Total derivatives not designated as hedging instruments242,599 1,418 1,507 236,363 1,166 1,233 
Total gross derivatives308,175 1,692 1,519 303,721 1,532 1,258 
Less: Gross amounts offset in the Consolidated Balance Sheets(1)
(498)(498)(342)(342)
Less: Cash collateral applied(1)
(389)(207)(494)(137)
Total net derivatives presented in the Consolidated Balance Sheets$805 $814 $696 $779 
(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 March 31, 2026 and December 31, 2025, the Company has designated $3.8 billion 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 March 31, 2026 and December 31, 2025, the Company has also designated $2.0 billion and $2.8 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
Three Months Ended March 31, 2026
Gains (losses) on fair value hedges recognized on:
Hedged items
($39)$— 
Derivatives
39 — 
Amounts related to interest settlements on derivatives
— — 
Total net interest income recognized on fair value hedges
$— $— 
Three Months Ended March 31, 2025
Gains (losses) on fair value hedges recognized on:
Hedged items
$116 ($2)
Derivatives
(118)2 
Amounts related to interest settlements on derivatives11 (2)
Total net interest income recognized on fair value hedges
$9 ($2)
The following table reflects amounts recorded in the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges:    
March 31, 2026December 31, 2025
(dollars in millions)
Debt securities available for sale(1)
Debt securities available for sale(1)
Carrying amount of hedged assets(2)
$7,050 $8,009 
Cumulative amount of fair value hedging adjustments included in the carrying amount of the hedged items8 48 
(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 March 31, 2026 and December 31, 2025, the amortized cost basis of the closed portfolios used in these hedging relationships was $4.9 billion and $5.1 billion, respectively, including associated cumulative basis adjustments of $(4) million and $17 million, respectively. The amount of the designated hedging instruments was $3.8 billion at March 31, 2026 and December 31, 2025.
(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.
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:
Three Months Ended March 31,
(dollars in millions)20262025
Pre-tax net gains (losses) recognized in OCI
($169)$284 
Pre-tax net gains (losses) reclassified from AOCI into interest income
(113)(202)
Using the March 31, 2026 interest rate curve, the Company estimates that $188 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 March 31, 2026.
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.
The Company also offers at-the-market equity 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
Three Months Ended March 31,Affected Line Item in the Consolidated Statements of Operations
(dollars in millions)20262025
Economic hedge type:
Customer interest rate contracts($117)$165 Foreign exchange and derivative products
Derivatives hedging interest rate risk126 (157)Foreign exchange and derivative products
Customer foreign exchange contracts(88)98 Foreign exchange and derivative products
Derivatives hedging foreign exchange risk118 (131)Foreign exchange and derivative products
Customer commodity contracts309 343 Foreign exchange and derivative products
Derivatives hedging commodity price risk(300)(336)Foreign exchange and derivative products
Residential loan commitments(11)6 Mortgage banking fees
Derivatives hedging residential loan commitments and mortgage loans held for sale, at fair value
19 (13)Mortgage banking fees
Derivative contracts used to hedge residential MSRs(8)22 Mortgage banking fees
Derivative contracts used to hedge equity price risk
1 — 
Capital markets fees
Total$49 ($3)