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Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
The Company uses derivative instruments to manage its exposure to market risks, including interest rate risk, and to assist customers with their risk management objectives. The Company designates certain derivatives as hedging instruments in a qualifying hedge accounting relationship, while other derivatives serve as economic hedges that do not qualify for hedge accounting.
The Company enters into certain interest rate swap contracts that are matched to closed portfolios of fixed-rate residential mortgage loans and available-for-sale investment securities. These contracts have been designated as hedging instruments to hedge the risk of changes in the fair value of the underlying loans or investment securities due to changes in interest rates. The related contracts are structured so that the notional amounts reduce over time to generally match the expected amortization of the underlying loan or investment security.
The notional amount and fair value of the Company’s derivative financial instruments as of June 30, 2025, and December 31, 2024 were as follows:
June 30, 2025December 31, 2024
(dollars in thousands)Notional AmountFair ValueNotional AmountFair Value
Derivatives designated as hedging instruments
Interest Rate Swap Agreements 1
$2,200,000 $(13,140)$2,000,000 $2,738 
Derivatives not designated as hedging instruments
Interest Rate Lock Commitments1,341 37 1,534 34 
Forward Commitments3,082 (8)3,517 6 
Interest Rate Swap Agreements
Receive Fixed/Pay Variable Swaps2,165,596 (82,906)2,123,665 (136,218)
Pay Fixed/Receive Variable Swaps2,165,596 82,802 2,123,665 136,125 
Conversion Rate Swap Agreements 2
108,069  NA 96,466  NA
Makewhole Agreements 3
49,161  NA 65,763  NA
1As of June 30, 2025 and December 31, 2024, the amounts presented in the table above exclude forward starting swaps with notional values of $600 million and $300 million, respectively, and fair values of $1.3 million and $4.7 million, respectively. These swaps are scheduled to begin between August 2025 and August 2026.
2The conversion rate swap agreements were valued at zero as further reductions to the conversion rate were not reasonably estimable.
3The makewhole agreements were valued at zero as the likelihood of a payment required to the buyer was not reasonably estimable.
The following table presents the Company’s derivative financial instruments, their fair values, and their location in the unaudited consolidated statements of condition as of June 30, 2025 and December 31, 2024:
June 30, 2025December 31, 2024
(dollars in thousands)
Asset
Derivatives 1
Liability
Derivatives 1
Asset
Derivatives 1
Liability
Derivatives 1
Interest Rate Swap Agreements
Not Designated as Hedging Instruments$106,288 $106,392 $146,923 $147,016 
Designated as Hedging Instruments1,898 13,747 14,507 7,039 
108,186 120,139 161,430 154,055 
Derivatives not designated as hedging instruments
Interest Rate Lock Commitments37 — 34 — 
Forward Commitments— 8 9 3 
Total Derivatives$108,223 $120,147 $161,473 $154,058 
1Asset derivatives are included in other assets and liability derivatives are included in other liabilities in the unaudited consolidated statements of condition. Derivatives are recognized on the Company's unaudited consolidated statements of condition at fair value.
The following table presents the Company’s derivative financial instruments and the amount and location of the net gains or losses recognized in the unaudited consolidated statements of income for the three and six months ended June 30, 2025 and 2024:
Location of Net Gains (Losses) Recognized in the Statements of IncomeThree Months Ended June 30,Six Months Ended June 30,
(dollars in thousands)2025202420252024
Derivatives designated as hedging instruments
Recognized on Interest Rate Swap AgreementsInterest Income on Investment Securities Available-for-Sale$(1,828)$3,082 $(7,490)$19,975 
Recognized on Hedged ItemInterest Income on Investment Securities Available-for-Sale1,823 (3,145)7,497 (20,147)
Net Cash SettlementsInterest Income on Investment Securities Available-for-Sale(20)2,736 (22)5,457 
Recognized on Interest Rate Swap AgreementsInterest and Fees on Loans and Leases(3,447)4,222 (11,826)26,824 
Recognized on Hedged ItemInterest and Fees on Loans and Leases3,417 (4,308)11,789 (27,060)
Net Cash SettlementsInterest and Fees on Loans and Leases1,976 3,367 3,509 6,715 
Derivatives not designated as hedging instruments
Interest Rate Lock CommitmentsMortgage Banking52 122 252 245 
Forward CommitmentsMortgage Banking31 119 (4)215 
Interest Rate Swap AgreementsOther Noninterest Income9 10 (10)53 
Conversion Rate Swap AgreementsInvestment Securities Gains (Losses), Net15 — (563)— 
Total$2,028 $6,205 $3,132 $12,277 
The following amounts were recorded on the unaudited consolidated statements of condition related to the cumulative basis adjustment for fair value hedges as of June 30, 2025 and December 31, 2024:
Line Item in the Unaudited Consolidated Statements of ConditionCarrying Amount of the Hedged AssetsCumulative Amount of Fair Value Hedging Adjustment Included In the Carrying Amount of the Hedged Assets
(dollars in thousands)June 30, 2025December 31, 2024June 30, 2025December 31, 2024
Investment Securities, Available-for-Sale 1
$1,207,091 $999,594 $7,091 $(406)
Loans and Leases 2
1,604,459 1,292,670 4,459 (7,330)
1These amounts were included in the fair value of closed portfolios of investment securities, AFS used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. As of June 30, 2025 and December 31, 2024, the fair value of the closed portfolios used in these hedging relationships was $1.6 billion and $1.7 billion, respectively.
2These amounts were included in the amortized cost basis of closed portfolios of loans used to designate hedging relationships in which the hedged item is the stated amount of assets in the closed portfolios anticipated to be outstanding for the designated hedge period. As of June 30, 2025 and December 31, 2024, the amortized cost basis of the closed portfolios used in these hedging relationships was $2.9 billion and $3.0 billion, respectively.
Derivatives Not Designated as Hedging Instruments
Interest Rate Lock Commitments/Forward Commitments
The Company enters into interest rate lock commitments (“IRLCs”) for residential mortgage loans which commit us to lend funds to a potential borrower at a specific interest rate and within a specified period of time. IRLCs that relate to the origination of mortgage loans that will be held for sale are considered derivative financial instruments under applicable accounting guidance. Outstanding IRLCs expose the Company to the risk that the price of the mortgage loans underlying the commitments may decline due to increases in mortgage interest rates from inception of the rate lock to the funding of the loan. To mitigate this risk, the Company utilizes forward commitments as economic hedges against the potential decreases in the values of the loans held for sale. IRLCs and forward commitments are free-standing derivatives which are carried at fair
value with changes recorded in the mortgage banking component of noninterest income in the Company’s consolidated statements of income.
Interest Rate Swap Agreements
The Company enters into interest rate swap agreements to facilitate the risk management strategies of a small number of commercial banking customers. The Company mitigates the risk of entering into these agreements by entering into equal and offsetting interest rate swap agreements with highly rated third-party financial institutions. The interest rate swap agreements are free-standing derivatives and are recorded at fair value in the Company’s unaudited consolidated statements of condition (asset positions are included in other assets and liability positions are included in other liabilities). The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Collateral, usually in the form of cash and marketable securities, is posted by the party (i.e., the Company or the financial institution counterparty) with net liability positions in accordance with contract thresholds. The Company had net asset positions with its financial institution counterparties totaling $82.8 million and $136.1 million as of June 30, 2025 and December 31, 2024, respectively.
Conversion Rate Swap Agreements
As certain sales of Visa Class B restricted shares were completed, the Company entered into conversion rate swap agreements with the buyers that require payment to the buyers in the event Visa further reduces the conversion ratio of Class B into Class A unrestricted common shares. In the event of Visa increasing the conversion ratio, the buyers would be required to make payment to the Company. As of June 30, 2025 and December 31, 2024, the conversion rate swap agreements were valued at zero (i.e., no contingent liability recorded) as further reductions to the conversion ratio were deemed not reasonably estimable by management.
Makewhole Agreements
In 2024, the Company entered into makewhole agreements with certain buyers of its Visa Class B restricted shares that reduces the payments that would be required pursuant to the conversion rate swap agreements described above, but would require payment to the buyer in the event Visa requires additional legal reserves to settle ongoing litigation. As of June 30, 2025 and December 31, 2024, the makewhole agreements were valued at zero (i.e., no contingent liability recorded) as the likelihood of the Company being required to make a payment to the buyer is not reasonably estimable by management.
Derivatives Designated as Hedging Instruments
Fair Value Hedges
The Company is exposed to changes in the fair value of fixed-rate assets due to changes in benchmark interest rates. The Company entered into pay-fixed and receive-floating interest rate swaps to manage its exposure to changes in fair value of its AFS investment securities and fixed rate loans. These interest rate swaps are designated as fair value hedges using the portfolio layer method. The Company receives variable-rate interest payments in exchange for making fixed-rate payments over the lives of the contracts without exchanging the notional amounts. The fair value hedges are recorded as components of other assets and other liabilities in the Company’s unaudited consolidated statements of financial condition. The gain or loss on these derivatives, as well as the offsetting loss or gain on the hedged items attributable to the hedged risk are recognized in interest income in the Company’s unaudited consolidated statements of income.