STI 2018 Annual Report

Notes to Consolidated Financial Statements, continued 147 The following table presents the carrying amount of hedged liabilities on the Consolidated Balance Sheets in fair value hedging relationships and the associated cumulative basis adjustment related to the application of hedge accounting: Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Liabilities (Dollars in millions) Carrying Amount of Hedged Liabilities Hedged Items Currently Designated Hedged Items No Longer Designated December 31, 2018 Long-term debt $8,411 ($10) ($120) Brokered time deposits 29 — — Economic Hedging Instruments and Trading Activities In addition to designated hedge accounting relationships, the Company also enters into derivatives as an end user to economically hedge risks associated with certain non-derivative and derivative instruments, along with entering into derivatives in a trading capacity with its clients. The primary risks that the Company economically hedges are interest rate risk, foreign exchange risk, and credit risk. The Company mitigates these risks by entering into offsetting derivatives either on an individual basis or collectively on a macro basis. The Company utilizes interest rate derivatives as economic hedges related to: • Residential MSRs . The Company hedges these instruments with a combination of interest rate derivatives, including forward and option contracts, futures, and forward rate agreements. • Residential mortgage IRLCs and LHFS . The Company hedges these instruments using forward and option contracts, futures, and forward rate agreements. The Company is exposed to volatility and changes in foreign exchange rates associated with certain commercial loans. To hedge against this foreign exchange rate risk, theCompany enters into foreign exchange rate contracts that provide for the future receipt and delivery of foreign currency at previously agreed- upon terms. The Company enters into CDS to hedge credit risk associated with certain loans held within its Wholesale segment. The Company accounts for these contracts as derivatives, and accordingly, recognizes these contracts at fair value, with changes in fair value recognized in Other noninterest income in the Consolidated Statements of Income. Trading activity primarily includes interest rate swaps, equity derivatives, CDS, futures, options, foreign exchange rate contracts, and commodity derivatives. These derivatives are entered into in a dealer capacity to facilitate client transactions, or are utilized as a risk management tool by the Company as an end user (predominantly in certain macro-hedging strategies). The impacts of derivative instruments used for economic hedging or trading purposes on the Consolidated Statements of Income are presented in the following table: Classification of (Loss)/Gain Recognized in Income on Derivatives Amount of (Loss)/Gain Recognized in Income on Derivatives During the Year Ended December 31 (Dollars in millions) 2018 2017 2016 Derivative instruments not designated as hedging instruments: Interest rate contracts hedging: Residential MSRs Mortgage related income ($110) $35 $45 LHFS, IRLCs Mortgage related income 45 (54) (6) LHFI Other noninterest income 1 — (1) Trading activity Trading income 69 42 51 Foreign exchange rate contracts hedging loans and trading activity Trading income 48 (37) 101 Credit contracts hedging: LHFI Other noninterest income — (4) (3) Trading activity Trading income 22 26 19 Equity contracts hedging trading activity Trading income (12) — 4 Other contracts: IRLCs and other Mortgage related income, Commercial real estate related income 63 185 210 Commodity derivatives Trading income 1 1 3 Total $127 $194 $423