PNC Bank 2015 Annual Report Download - page 199

Further detail regarding the notional amounts and fair values related to derivatives designated in hedge relationships is presented in
the following table:
Table 112: Derivatives Designated As Hedging Instruments under GAAP
December 31, 2015 December 31, 2014
In millions
Notional/
Contract
Amount
Asset
Fair
Value (a)
Liability
Fair
Value (b)
Notional/
Contract
Amount
Asset
Fair
Value (a)
Liability
Fair
Value (b)
Interest rate contracts:
Fair value hedges:
Receive-fixed swaps $25,756 $ 699 $ 18 $20,930 $ 827 $ 38
Pay-fixed swaps (c) 5,934 13 153 4,233 3 138
Subtotal 31,690 712 171 25,163 830 176
Cash flow hedges:
Receive-fixed swaps 17,879 412 2 19,991 400 10
Forward purchase commitments 1,400 4 1 2,778 25
Subtotal 19,279 416 3 22,769 425 10
Foreign exchange contracts:
Net investment hedges 1,105 31 1,129 6
Total derivatives designated as hedging instruments $52,074 $1,159 $174 $49,061 $1,261 $186
(a) Included in Other assets on our Consolidated Balance Sheet.
(b) Included in Other liabilities on our Consolidated Balance Sheet.
(c) Includes zero-coupon swaps.
Fair Value Hedges
We enter into receive-fixed, pay-variable interest rate swaps to hedge changes in the fair value of outstanding fixed-rate debt
caused by fluctuations in market interest rates. We also enter into pay-fixed, receive-variable interest rate swaps and zero-coupon
swaps to hedge changes in the fair value of fixed rate and zero-coupon investment securities caused by fluctuations in market
interest rates. For these hedge relationships, we use statistical regression analysis to assess hedge effectiveness at both the inception
of the hedge relationship and on an ongoing basis. There were no components of derivative gains or losses excluded from the
assessment of hedge effectiveness.
Further detail regarding gains (losses) on fair value hedge derivatives and related hedged items is presented in the following table:
Table 113: Gains (Losses) on Derivatives and Related Hedged Items – Fair Value Hedges
Year ended
December 31, 2015 December 31, 2014 December 31, 2013
Gain
(Loss) on
Derivatives
Recognized
in Income
Gain
(Loss) on
Related
Hedged
Items
Recognized
in Income
Gain
(Loss) on
Derivatives
Recognized
in Income
Gain
(Loss) on
Related
Hedged
Items
Recognized
in Income
Gain
(Loss) on
Derivatives
Recognized
in Income
Gain
(Loss) on
Related
Hedged
Items
Recognized
in Income
In millions Hedged Items Location Amount Amount Amount Amount Amount Amount
Interest rate contracts
U.S. Treasury and
Government
Agencies Securities
and Other Debt
Securities
Investment securities
(interest income) $(111) $ 116 $ 111 $(115)
Interest rate contracts
Subordinated debt
and Bank notes and
senior debt
Borrowed funds
(interest expense) $(108) $67 123 (158) (744) 711
Total (a) $(108) $67 $ 12 $ (42) $(633) $ 596
(a) The ineffective portion of the change in value of our fair value hedge derivatives resulted in net losses of $41 million for 2015 compared with net losses of $30 million for 2014 and
net losses of $37 million for 2013.
The PNC Financial Services Group, Inc. – Form 10-K 181