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DERIVATIVE FINANCIAL INSTRUMENTS
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS
NOTE 11 — DERIVATIVE FINANCIAL INSTRUMENTS

Our derivatives designated as hedging instruments include interest rate swap contracts utilized to manage our interest rate exposure for items on our Consolidated Balance Sheets. This includes floating-rate loan portfolio cash flow hedges and fair value hedges of our fixed-rate borrowings.

Our derivatives not designated as hedging instruments mainly include interest rate and foreign exchange contracts that our customers utilized for 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.

Refer to Note 1—Significant Accounting Policies and Basis of Presentation of our 2025 Form 10-K for accounting policies for derivatives.

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, 2026December 31, 2025
Notional AmountAsset Fair ValueLiability Fair ValueNotional AmountAsset Fair ValueLiability Fair Value
Derivatives designated as hedging instruments (Qualifying hedges)
Fair Value Hedges
Interest rate contracts hedging long-term borrowings
$2,350 $— $— $— $— $— 
Cash Flow Hedges
Interest rate contracts hedging loans (1) (2)
5,000 — — 4,000 — — 
Total derivatives designated as hedging instruments$7,350 $— $— $4,000 $— $— 
Derivatives not designated as hedging instruments (Non-qualifying hedges)
Interest rate contracts (1) (2)
$29,886 $356 $(366)$28,741 $385 $(381)
Foreign exchange contracts (3)
8,893 114 (82)8,912 122 (113)
Other contracts (4)
1,390 28 — 1,485 27 — 
Total derivatives not designated as hedging instruments$40,169 $498 $(448)$39,138 $534 $(494)
Gross derivatives fair values presented in the Consolidated Balance Sheets$498 $(448)$534 $(494)
Less: gross amount offset in the Consolidated Balance Sheets— — — — 
Net amount included in other assets and other liabilities in the Consolidated Balance Sheets$498 $(448)$534 $(494)
(1)    Fair value balances include accrued interest.
(2)    BancShares accounts for swap contracts cleared by the Chicago Mercantile Exchange and LCH Clearnet as “settled-to-market.” As a result, the derivative asset and liability fair values in the table above are presented net of the variation margin payments. Refer to the table below for more information.
(3)    The foreign exchange contracts exclude foreign exchange spot contracts. The notional and net fair value amounts of these contracts were $253 million and $0 million, respectively, as of March 31, 2026, and $252 million and $0 million, respectively, as of December 31, 2025.
(4)    Other derivative contracts not designated as hedging instruments include risk participation agreements and equity warrants.
The following table presents the impact of variation margin netting (form of collateral payment when the underlying fair value changes) on derivative assets and liabilities:

Variation Margin Payments
dollars in millionsMarch 31, 2026December 31, 2025
Asset Fair ValueLiability Fair ValueAsset Fair ValueLiability Fair Value
Derivatives designated as hedging instruments (Qualifying hedges)
Gross fair value$9 $(18)$19 $— 
Cleared trades, variation margin netting(9)18 (19)— 
Total derivatives designated as hedging instruments$— $— $— $— 
Derivatives not designated as hedging instruments (Non-qualifying hedges)
Gross fair value$565 $(474)$596 $(529)
Cleared trades, variation margin netting(67)26 (62)35 
Total derivatives not designated as hedging instruments$498 $(448)$534 $(494)
Gross derivatives fair values presented in the Consolidated Balance Sheets$498 $(448)$534 $(494)
Amounts subject to master netting agreements (1)
(100)100 (118)118 
Cash collateral pledged (received) subject to master netting agreements (2)
(266)4 (204)62 
Total net derivative fair value$132 $(344)$212 $(314)
(1)    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.
(2)    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.

Fair Value Hedges
The following table presents the impact of fair value hedges recorded in interest expense on the Consolidated Statements of Income:

Recognized Gains (Losses) on Fair Value Hedges
dollars in millionsThree Months Ended March 31,
Interest Expense20262025
Gain (loss) on hedging instruments - time depositsDeposits$— $— 
(Loss) gain on hedging instruments - borrowingsBorrowings(8)— 
Gain (loss) on hedged item - time depositsDeposits— — 
Gain (loss) on hedged item - borrowingsBorrowings8 1 
Net gain (loss) on fair value hedgesTotal interest expense$— $1 

The following table presents the carrying value of hedged items and associated cumulative hedging adjustment related to fair value hedges as of March 31, 2026. There were no fair value hedges outstanding as of December 31, 2025.

Carrying Value of Hedged Items
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, 2026
Long-term borrowings$2,329 $8 $— 
Cash Flow Hedges
The following table presents the pretax unrealized gain on hedging instruments in cash flow hedges, which are reported in other comprehensive income, and the pretax amount reclassified from accumulated other comprehensive income (“AOCI”) to earnings:

Unrealized Gain on Cash Flow Hedges
dollars in millionsThree Months Ended March 31,
20262025
Other comprehensive income on cash flow hedge derivatives before reclassifications$(19)$12 
Amounts reclassified from AOCI to earnings— (3)
Other comprehensive income on cash flow hedge derivatives$(19)$9 

The following table presents other information for cash flow hedges:

Other Information for Cash Flow Hedges
dollars in millionsMarch 31, 2026December 31, 2025
Unrealized gain on cash flow hedge derivatives reported in AOCI, net of income taxes$— $14 
Estimate to be reclassified from AOCI to earnings during the next 12 months, net of income taxes (1)
$— $9 
Maximum number of months over which forecasted cash flows are hedged (2)
2627
(1) Reclassified amounts could differ from amounts actually recognized due to factors such as changes in interest rates, hedge de-designations and the addition of other hedges.
(2) Maximum number of months is based on the latest maturity date of cash flow hedges outstanding at March 31, 2026 and December 31, 2025.

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

Gains (Losses) on Non-Qualifying Hedges
dollars in millionsThree Months Ended March 31,
Amounts Recognized20262025
Interest rate contractsOther noninterest income$4 $(1)
Foreign currency forward contracts (1)
Other noninterest income19 (19)
Other contractsOther noninterest income4 (1)
Total non-qualifying hedges - income statement impact$27 $(21)
(1) This is primarily related to economic hedges of foreign currency risks arising from loans and other assets denominated in foreign currency. There is an offsetting impact within noninterest income for the foreign exchange revaluation of the associated assets denominated in foreign currency.