Derivative Financial Instruments

9 Months Ended

Sep. 30, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Financial Instruments

The Company primarily enters into derivative financial instruments as part of its strategy to manage its exposure to changes in interest rates. Derivative instruments represent contracts between parties that result in one party delivering cash to the other party based on a notional amount and an underlying term (such as a rate, security price or price index or commodity price) as specified in the contract. The amount of cash delivered from one party to the other is determined based on the interaction of the notional amount of the contract with the underlying term. Derivatives are also implicit in certain contracts and commitments.

The derivative financial instruments currently used by the Company to manage its exposure to interest rate risk include: (1) interest rate swaps, collars and floors to manage the interest rate risk of certain fixed and variable rate assets and variable rate liabilities; (2) interest rate lock commitments provided to customers to fund certain mortgage loans to be sold into the secondary market; (3) forward commitments for the future delivery of such mortgage loans to protect the Company from adverse changes in interest rates and corresponding changes in the value of mortgage loans held-for-sale; (4) covered call options to economically hedge specific investment securities and receive fee income, effectively enhancing the overall yield on such securities to compensate for net interest margin compression; and (5) options and swaps to economically hedge a portion

of the fair value adjustments related to the Company’s mortgage servicing rights portfolio. The Company also enters into derivatives (typically interest rate swaps and commodity forward contracts) with certain qualified borrowers to facilitate the borrowers’ risk management strategies and concurrently enters into mirror-image derivatives with a third party counterparty, effectively making a market in the derivatives for such borrowers. Additionally, the Company enters into foreign currency contracts to manage foreign exchange risk associated with certain foreign currency denominated assets.

The Company recognizes derivative financial instruments in the consolidated financial statements at fair value regardless of the purpose or intent for holding the instrument. The Company records derivative assets and derivative liabilities on the Consolidated Statements of Condition within accrued interest receivable and other assets and accrued interest payable and other liabilities, respectively. Changes in the fair value of derivative financial instruments are either recognized in income or in shareholders’ equity as a component of accumulated other comprehensive income or loss depending on whether the derivative financial instrument qualifies for hedge accounting and, if so, whether it qualifies as a fair value hedge or cash flow hedge.

Changes in fair values of derivatives accounted for as fair value hedges are recorded in income in the same period and in the same income statement line as changes in the fair values of the hedged items that relate to the hedged risk(s). Changes in fair values of derivative financial instruments accounted for as cash flow hedges are recorded as a component of accumulated other comprehensive income or loss, net of deferred taxes, and reclassified to earnings when the hedged transaction affects earnings. Changes in fair values of derivative financial instruments not designated in a hedging relationship pursuant to ASC 815 are reported in non-interest income during the period of the change. Derivative financial instruments are valued by a third party and are corroborated by comparison with valuations provided by the respective counterparties. Fair values of certain mortgage banking derivatives (interest rate lock commitments and forward commitments to sell mortgage loans) are estimated based on changes in mortgage interest rates from the date of the loan commitment. The fair value of foreign currency derivatives is computed based on changes in foreign currency rates stated in the contract compared to those prevailing at the measurement date. Commodity derivative fair values are computed based on changes in the price per unit stated in the contract compared to those prevailing at the measurement date.

The table below presents the fair value of the Company’s derivative financial instruments as of September 30, 2025, December 31, 2024 and September 30, 2024:

	Derivative Assets						Derivative Liabilities
(In thousands)	September 30, 2025		December 31, 2024		September 30, 2024		September 30, 2025		December 31, 2024		September 30, 2024
Derivatives designated as hedging instruments under ASC 815:
Interest rate derivatives designated as Cash Flow Hedges	$	59,667	$	7,329	$	53,402	$	4,950	$	56,084	$	14,522
Interest rate derivatives designated as Fair Value Hedges	5,633		10,001		8,069		560		87		351
Total derivatives designated as hedging instruments under ASC 815	$	65,300	$	17,330	$	61,471	$	5,510	$	56,171	$	14,873
Derivatives not designated as hedging instruments under ASC 815:
Interest rate derivatives	$	136,018	$	177,553	$	185,456	$	133,279	$	183,799	$	180,160
Interest rate lock commitments	7,149		1,950		5,143		—		18		6
Forward commitments to sell mortgage loans	47		1,297		31		2,654		88		1,055
Commodity forward contracts	233		766		1,647		67		583		1,365
Foreign exchange contracts	210		1,131		1,914		195		1,091		1,880
Total derivatives not designated as hedging instruments under ASC 815	$	143,657	$	182,697	$	194,191	$	136,195	$	185,579	$	184,466
Total Derivatives	$	208,957	$	200,027	$	255,662	$	141,705	$	241,750	$	199,339

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to add stability to net interest income and to manage its exposure to interest rate movements. To accomplish these objectives, the Company uses interest rate swaps, collars and floors as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts to or from a counterparty in exchange for the Company receiving or paying fixed-rate payments over the life of the agreements without the exchange of the underlying notional amount. Interest rate collars designated as cash flow hedges involve the settlement of amounts in which the interest rate specified in the contract exceeds the agreed upon cap strike rate or in which the interest rate specified in the contract is below the agreed upon floor strike rate at the end of each period.

Interest rate floors designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in exchange for an upfront premium.

As of September 30, 2025, the Company had various interest rate collar, swap and floor derivatives designated as cash flow hedges of variable rate loans. When the relationship between the hedged item and hedging instrument is highly effective at achieving offsetting changes in cash flows attributable to the hedged risk, changes in the fair value of these cash flow hedges are recorded in accumulated other comprehensive income or loss and are subsequently reclassified to interest income as interest payments are made on such variable rate loans. The changes in fair value (net of tax) are separately disclosed in the Consolidated Statements of Comprehensive Income.

The table below provides details on these cash flow hedges, summarized by derivative type and maturity, as of September 30, 2025:

	September 30, 2025
	Notional		Fair Value
(In thousands)	Amount		Asset (Liability)
Floor at 1-month CME term SOFR:
Buy 2.500%; matures September 2028	$	200,000	$	896
Interest Rate Collars at 1-month CME term SOFR:
Buy 2.750% floor, sell 4.320% cap; matures October 2026	500,000		172
Buy 2.000% floor, sell 3.450% cap; matures September 2027	1,250,000		(4,432)
Interest Rate Swaps at 1-month CME term SOFR:
Fixed 3.748%; matures December 2025	250,000		(144)
Fixed 3.759%; matures December 2025	250,000		(137)
Fixed 3.680%; matures February 2026	250,000		(194)
Fixed 4.176%; matures March 2026	250,000		328
Fixed 3.915%; matures March 2026	250,000		58
Fixed 4.450%; matures July 2026	250,000		1,407
Fixed 3.515%, matures December 2026	250,000		60
Fixed 3.512%; matures December 2026	250,000		51
Fixed 3.453%; matures February 2027	250,000		(42)
Fixed 4.150%; matures July 2027	250,000		3,329
Fixed 3.748%; matures March 2028	250,000		2,574
Fixed 3.526%; matures March 2028	250,000		1,271
Fixed 3.993%; matures October 2029	350,000		9,228
Fixed 4.245%; matures November 2029	350,000		12,803
Fixed 3.300%; matures November 2029 (1)	250,000		183
Fixed 3.816%; matures November 2030 (1)	250,000		5,787
Fixed 3.551%; matures November 2030 (1)	250,000		2,716
Fixed 3.950%; matures February 2031 (2)	250,000		7,469
Fixed 4.250%; matures February 2031 (2)	250,000		10,924
Fixed 3.378%; matures October 2031 (3)	200,000		410
Total Cash Flow Hedges	$	7,100,000	$	54,717

(1)Represents interest rate swaps that have effective starting dates of November 1, 2025.

(2)Represents interest rate swaps that have effective starting dates of February 1, 2026.

(3)Represents interest rate swaps that have effective starting dates of October 1, 2026

In the first quarter of 2022, the Company terminated interest rate swap derivative contracts designated as cash flow hedges of variable rate deposits with a total notional value of $1.0 billion and a five-year term effective July 2022. At the time of termination, the fair value of the derivative contracts totaled an asset of $66.5 million, with such adjustments to fair value recorded in accumulated other comprehensive income or loss. In the second quarter of 2022, the Company terminated one additional interest rate swap derivative contract designated as a cash flow hedge of variable rate deposits with a total notional value of $500.0 million effective since April 2020. The remaining term of such derivative contract was through April 2024 and, at the time of termination, the fair value of the derivative contract totaled assets of $10.7 million, with such adjustments to fair value recorded in accumulated other comprehensive income or loss.

For all such terminations, as the hedged forecasted transactions (interest payments on variable rate deposits) are still expected to occur over the remaining term of such terminated derivatives, such adjustments will remain in accumulated other comprehensive income or loss and be reclassified as a reduction to interest expense on a straight-line basis over the original term of the terminated derivative contracts.

A rollforward of the amounts in accumulated other comprehensive income or loss related to interest rate derivatives designated as cash flow hedges, including such derivative contracts terminated during the period, follows:

	Three Months Ended				Nine Months Ended
(In thousands)	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Unrealized gain (loss) at beginning of period	$	72,529	$	(49,396)	$	(15,508)	$	43,538
Amount reclassified from accumulated other comprehensive income or loss to interest income or expense on deposits, loans, and other borrowings	5,300		20,378		15,936		60,720
Amount of (loss) gain recognized in other comprehensive income or loss	(1,020)		104,470		76,381		(28,806)
Unrealized gain at end of period	$	76,809	$	75,452	$	76,809	$	75,452

As of September 30, 2025, the Company estimated that during the next 12 months $22.8 million will be reclassified from accumulated other comprehensive income or loss as an increase to net interest income. Such estimate consists of $13.3 million reclassified as a reduction to interest expense on the terminated cash flow hedges discussed above and $9.5 million reclassified as an increase to interest income related to the interest rate collars, floors and swaps noted above that remain outstanding.

Fair Value Hedges of Interest Rate Risk

Interest rate swaps designated as fair value hedges involve the payment of fixed amounts to a counterparty in exchange for the Company receiving variable payments over the life of the agreements without the exchange of the underlying notional amount. As of September 30, 2025, the Company had 13 interest rate swaps with an aggregate notional amount of $119.2 million that were designated as fair value hedges primarily associated with fixed rate commercial and industrial and commercial real estate loans as well as life insurance premium finance receivables.

For derivatives designated and that qualify as fair value hedges, the net gain or loss from the entire change in the fair value of the derivative instrument is recognized in the same income statement line item as the earnings effect, including the net gain or loss, of the hedged item (interest income earned on fixed rate loans) when the hedged item affects earnings.

The following table presents the carrying amount of the hedged assets/(liabilities) and the cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets/(liabilities) that are designated as a fair value hedge accounting relationship as of September 30, 2025:

(In thousands)		September 30, 2025
Derivatives in Fair Value Hedging Relationships	Location in the Statement of Condition	Carrying Amount of the Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets/(Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Remaining for any Hedged Assets/(Liabilities) for which Hedge Accounting has been Discontinued
Interest rate swaps	Loans, net of unearned income	$	113,650	$	(5,031)	$	(38)
	Available-for-sale debt securities	494		(3)		—

The following table presents the loss or gain recognized related to derivative instruments that are designated as fair value hedges for the respective period:

(In thousands) Derivatives in Fair Value Hedging Relationships	Location of (Loss)/Gain Recognized in Income on Derivative	Three Months Ended		Nine Months Ended
		September 30, 2025		September 30, 2025
Interest rate swaps	Interest and fees on loans	$	(4)	$	(10)

Non-Designated Hedges

The Company does not use derivatives for speculative purposes. Derivatives not designated as accounting hedges are used to manage the Company’s economic exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements of ASC 815. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.

The Company has interest rate derivatives, including swaps and option products, resulting from a service the Company provides to certain qualified borrowers. The Company’s banking subsidiaries execute certain derivative products (typically interest rate swaps) directly with qualified commercial borrowers to facilitate their respective risk management strategies. For example, these arrangements allow the Company’s commercial borrowers to effectively convert a variable rate loan to a fixed rate. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. At September 30, 2025 and December 31, 2024, the Company had interest rate derivative transactions with an aggregate notional amount of approximately $14.8 billion and $13.3 billion, respectively, (all interest rate swaps and caps with customers and third parties) related to this program. At September 30, 2025 these interest rate derivatives had maturity dates ranging from October 2025 to August 2037.

Mortgage Banking Derivatives—These derivatives include interest rate lock commitments provided to customers to fund certain mortgage loans to be sold into the secondary market and forward commitments for the future delivery of such loans. It is the Company’s practice to enter into forward commitments for the future delivery of a portion of its residential mortgage loan production when interest rate lock commitments are entered into in order to economically hedge the effect of future changes in interest rates on its commitments to fund the loans as well as on its portfolio of mortgage loans held-for-sale. The Company’s mortgage banking derivatives have not been designated as being in hedge relationships. At September 30, 2025 and December 31, 2024, the Company had interest rate lock commitments with an aggregate notional amount of approximately $379.1 million and $120.7 million, and forward commitments to sell mortgage loans with an aggregate notional amount of approximately $495.5 million and $377.5 million, respectively. The fair values of these derivatives were estimated based on changes in mortgage rates from the dates of the commitments. Changes in the fair value of these mortgage banking derivatives are included in mortgage banking revenue.

Commodity Derivatives—The Company has commodity forward contracts resulting from a service the Company provides to certain qualified borrowers. The Company’s banking subsidiaries execute certain derivative products directly with qualified commercial borrowers to facilitate their respective risk management strategies. For example, these arrangements allow the Company’s commercial borrowers to effectively purchase or sell a given commodity at an agreed-upon price on an agreed-upon settlement date. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. At September 30, 2025 and December 31, 2024, the Company had commodity derivative transactions with an aggregate notional amount of approximately $4.6 million and $5.2 million, respectively, (all forward contracts with customers and third parties) related to this program. At September 30, 2025, these commodity derivatives had maturity dates ranging from October 2025 to October 2027.

Foreign Currency Derivatives—The Company has foreign currency derivative contracts resulting from a service the Company provides to certain qualified customers. The Company’s banking subsidiaries execute certain derivative products directly with qualified customers to facilitate their respective risk management strategies related to foreign currency fluctuations. For example, these arrangements allow the Company’s customers to effectively exchange the currency of one country for the currency of another country at an agreed-upon price on an agreed-upon settlement date. In order to minimize the Company’s exposure on these transactions, the Company simultaneously executes offsetting derivatives with third parties. In most cases, the offsetting derivatives have mirror-image terms, which result in the positions’ changes in fair value substantially offsetting through earnings each period. However, to the extent that the derivatives are not a mirror-image and because of differences in counterparty credit risk, changes in fair value will not completely offset resulting in some earnings impact each period. Changes in the fair value of these derivatives are included in other non-interest income. As of September 30, 2025 and December 31, 2024, the Company held foreign currency derivatives with an aggregate notional amount of approximately $50.5 million and $97.1 million, respectively.

Other Derivatives—Periodically, the Company will sell options to a bank or dealer for the right to purchase certain securities held within the banks’ investment portfolios (covered call options). These option transactions are designed to increase the total return associated with the investment securities portfolio. These options do not qualify as accounting hedges pursuant to ASC 815 and, accordingly, changes in the fair value of these contracts are recognized as other non-interest income. There were no covered call options outstanding as of September 30, 2025, December 31, 2024 or September 30, 2024.

Periodically, the Company will purchase options for the right to purchase securities not currently held within the banks’ investment portfolios or enter into interest rate swaps in which the Company elects to not designate such derivatives as hedging instruments. These option and swap transactions are designed primarily to economically hedge a portion of the fair value adjustments related to the Company’s mortgage servicing rights portfolio. The gain or loss associated with these derivative contracts are included in mortgage banking revenue. The Company held ten interest rate derivatives with an aggregate notional value of $362.0 million at September 30, 2025 and ten interest rate derivatives with an aggregate notional value of and $295.0 million at December 31, 2024, for such purpose of economically hedging a portion of the fair value adjustment related to its mortgage servicing rights portfolio.

Amounts included in the Consolidated Statements of Income related to derivative instruments not designated in hedge relationships were as follows:

(In thousands)		Three Months Ended				Nine Months Ended
Derivative	Location in income statement	September 30, 2025		September 30, 2024		September 30, 2025		September 30, 2024
Interest rate swaps and caps	Trading gains (losses), net	$	92	$	(245)	$	60	$	248
Mortgage banking derivatives	Mortgage banking	(584)		(1,692)		2,733		2,014
Commodity contracts	Trading gains (losses), net	89		(116)		166		282
Foreign exchange contracts	Trading gains (losses), net	79		(171)		152		(152)
Covered call options	Fees from covered call options	5,619		988		14,689		7,891
Derivative contract held as economic hedge on MSRs	Mortgage banking	265		6,892		7,697		3,543

Credit Risk

Derivative instruments have inherent risks, primarily market risk and credit risk. Market risk is associated with changes in the value of an underlying asset. Credit risk relates to the risk that the counterparty will fail to perform according to the terms of the agreement. The Company is exposed to the credit risk of its commercial borrowers and third party financial institutions who are counterparties to interest rate derivatives with the Company.

The counterparty credit risk associated with the mirror-image swaps executed with third party financial institutions is monitored and managed as part of the Company’s overall asset-liability management process, except that the counterparty credit risk related to derivatives entered into with certain qualified borrowers is managed through the Company’s standard loan underwriting process for commercial borrowers since these derivatives typically share in the collateral provided by the loan agreements.

When deemed necessary, appropriate types and amounts of collateral are obtained to minimize credit exposure. The Company hedges the market risk of derivatives transactions with commercial borrowers by entering into offsetting transactions with large, highly rated financial institutions. These exposures are generally secured by cash under bilateral Credit Support Annexes, which are a component of the International Swaps and Derivatives Association (“ISDA”) Master Agreements executed with counterparties.

Aggregate counterparty exposures are monitored against various types of credit limits established to contain risk within parameters. Counterparty credit risk is managed by the Counterparty Credit Risk Management team in accordance with SR 11-10, Interagency Counterparty Credit Risk Management Guidance, which was issued in 2011 in response to the financial crisis of 2008. The guidance addresses counterparty credit risk governance, measurement, management, and systems. Specifically, counterparty risk is managed through the establishment and regular review of exposure limits, formalization of limits in policy and procedure, ongoing review of models, and having a single platform to allow for the timely aggregation of exposures. The Counterparty Credit Risk Management team uses a variety of approaches to monitor counterparty financial performance, including monitoring of credit exposure versus limits, use of early warning reports, and daily and intraday monitoring of financial developments.

The Company has agreements with certain of its interest rate derivative counterparties that contain cross-default provisions, which provide that if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. The Company also has agreements with certain of its derivative counterparties that contain a provision allowing the counterparty to terminate the derivative positions if the Company fails to maintain its status as a well or adequately capitalized institution, which would require the Company to settle its obligations under the agreements. If the Company were to breach any of these provisions, at a time when the derivatives subject to such agreements are in a liability position, and the derivatives were to be terminated as a result, the Company would be required to settle its obligations under the agreements at the termination value and would be required to pay any additional amounts due in excess of amounts previously posted as collateral with the respective counterparty. As of September 30, 2025, there were $1.6 million of derivatives that were subject to such agreements in a net liability position.

The Company records interest rate derivatives subject to master netting agreements at their gross value and does not offset derivative assets and liabilities on the Consolidated Statements of Condition. The table below summarizes the Company’s interest rate derivatives and offsetting positions as of the dates shown.

	Derivative Assets						Derivative Liabilities
	Fair Value						Fair Value
(In thousands)	September 30, 2025		December 31, 2024		September 30, 2024		September 30, 2025		December 31, 2024		September 30, 2024
Gross Amounts Recognized	$	201,318	$	194,883	$	246,927	$	138,789	$	239,970	$	195,033
Gross amounts not offset in the Statements of Condition
Offsetting Derivative Positions	(65,969)		(74,656)		(82,819)		(65,969)		(74,656)		(82,819)
Collateral Posted	(59,598)		(78,550)		(59,791)		(1,686)		—		(420)
Net Credit Exposure	$	75,751	$	41,677	$	104,317	$	71,134	$	165,314	$	111,794