Derivative Financial Instruments

3 Months Ended

Mar. 31, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Positions and Offsetting

Derivatives Designated in Hedge Relationships. Interest rate swaps allow the Company to change the fixed or variable nature of an interest rate without the exchange of the underlying notional amount. Certain pay fixed/receive variable interest rate swaps are designated as cash flow hedges to effectively convert variable-rate debt into fixed-rate debt, whereas certain receive fixed/pay variable interest rate swaps are designated as fair value hedges to effectively convert fixed-rate debt into variable-rate debt. Certain purchased options are also designated as cash flow hedges, allowing the Company to limit the potential adverse impact of variable interest rates by establishing a cap rate or floor rate in exchange for an upfront premium. The purchased options designated as cash flow hedges represent interest rate caps where payment is received from the counterparty if interest rates rise above the cap rate, and interest rate floors where payment is received from the counterparty when interest rates fall below the floor rate. The maximum length of time over which forecasted transactions are hedged is 2.0 years.

Derivatives Not Designated in Hedge Relationships. The Company also enters into derivative transactions that are not designated in hedge relationships. The Company has a back-to-back swap program, whereby it enters into an interest rate swap with a qualified customer and simultaneously enters into an equal and opposite interest-rate swap with a swap counterparty, to hedge interest rate risk. Derivative assets and derivative liabilities with the same counterparty are presented on a net basis when master netting agreements are in place.

The following tables present the notional amounts and fair values, including accrued interest, of derivative positions:


	March 31, 2025
	Asset Derivatives				Liability Derivatives
(In thousands)	Notional Amounts		Fair Value		Notional Amounts		Fair Value
Designated in hedge relationships:
Interest rate derivatives (1)	$	2,750,000	$	4,704	$	2,250,000	$	3,263
Not designated in hedge relationships:
Interest rate derivatives (1)	8,804,803		257,423		8,846,028		256,668
Mortgage banking derivatives	1,541		17		—		—
Other (2)	343,572		205		783,094		659
Total not designated as hedging instruments	9,149,916		257,645		9,629,122		257,327
Gross derivative instruments, before netting	$	11,899,916	262,349		$	11,879,122	260,590
Less: Master netting agreements			44,248				44,248
Cash collateral pledged			168,060				8,940
Total derivative instruments, after netting			$	50,041			$	207,402

	December 31, 2024
	Asset Derivatives				Liability Derivatives
(In thousands)	Notional Amounts		Fair Value		Notional Amounts		Fair Value
Designated in hedge relationships:
Interest rate derivatives (1)	$	750,000	$	719	$	4,250,000	$	13,169
Not designated in hedge relationships:
Interest rate derivatives (1)	8,693,493		300,120		8,728,767		298,296
Mortgage banking derivatives	584		3		—		—
Other (2)	337,370		1,300		833,449		96
Total not designated as hedging instruments	9,031,447		301,423		9,562,216		298,392
Gross derivative instruments, before netting	$	9,781,447	302,142		$	13,812,216	311,561
Less: Master netting agreements			31,881				31,881
Cash collateral pledged			251,212				80
Total derivative instruments, after netting			$	19,049			$	279,600

(1)The notional amount of interest rate swaps that were centrally-cleared through clearing housings was $69.6 million at March 31, 2025, and $71.1 million at December 31, 2024, for asset derivatives, and $1.2 million at March 31, 2025 and zero at December 31, 2024, for liability derivatives. Interest rate swaps that are centrally-cleared through clearing houses are “settled-to-market” and considered a single unit of account. In accordance with their rule books, clearing houses record the variation margin transferred for settled-to-market derivatives as a legal settlement of the derivative contract (i.e., the variation margin legally settles the outstanding exposure, but does not result in any other change or reset of the contractual terms of the derivative). The fair values of the Company’s settled-to-market interest rate swaps are presented net on the accompanying Condensed Consolidated Balance Sheets and approximated zero.

(2)Other derivatives not designated in hedge relationships include foreign currency forward contracts related to lending arrangements, a Visa equity swap transaction, and risk participation agreements. Notional amounts of risk participation agreements were $294.0 million at March 31, 2025, and $294.5 million at December 31, 2024, for asset derivatives, and $750.3 million at March 31, 2025, and $796.6 million at December 31, 2024, for liability derivatives, all of which had insignificant related fair values.

The following tables represent the off-setting derivative financial instruments that are subject to master netting agreements:


	March 31, 2025
	Gross Amounts of Recognized Assets/Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets/Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial position

(In thousands)							Financial Instruments		Cash Collateral Pledged		Net Amount
Asset derivatives	$	212,510	$	44,248	$	168,262	$	—	$	168,060	$	202
Liability derivatives	54,077		44,248		9,829		—		8,940		889

	December 31, 2024
	Gross Amounts of Recognized Assets/Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets/Liabilities Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial position

(In thousands)							Financial Instruments		Cash Collateral Pledged		Net Amount
Asset derivatives	$	283,185	$	31,881	$	251,304	$	—	$	251,212	$	92
Liability derivatives	32,218		31,881		337		—		80		257

Derivative Activity

The following table summarizes the income statement effect of derivatives designated in hedge relationships:


	Recognized In	Three months ended March 31,
(In thousands)	Net Interest Income	2025		2024
Fair value hedges:
Interest rate derivatives	Deposits interest expense	$	—	$	(1,320)
Hedged item	Deposits interest expense	—		—
Net recognized on fair value hedges (1)		$	—	$	1,320
Cash flow hedges:
Interest rate derivatives	Long-term debt interest expense	$	—	$	34
Interest rate derivatives	Interest and fees on loans and leases	(3,255)		(10,764)
Net recognized on cash flow hedges		$	(3,255)	$	(10,798)

(1)The Company de-designated its fair value hedging relationship on $400.0 million of deposits, which pertained to a portion of Ametros’ member deposits, in 2023. The $1.3 million basis adjustment included in the carrying amount of deposits at December 31, 2023, was recognized in interest expense in January 2024 upon the acquisition of Ametros.

The following table summarizes the income statement effect of derivatives not designated in hedge relationships:


	Recognized In	Three months ended March 31,
(In thousands)	Non-interest Income	2025		2024
Interest rate derivatives	Other income	$	(2,824)	$	1,290
Mortgage banking derivatives	Mortgage banking activities	(13)		(22)
Other	Other income	(987)		1,277
Total not designated as hedging instruments		$	(3,824)	$	2,545

Derivative Exposure. At March 31, 2025, the Company had $177.7 million of cash collateral received and $8.9 million of cash collateral posted included in Cash and due from banks on the accompanying Condensed Consolidated Balance Sheets. In addition, the Company had $1.6 million in initial margin posted at clearing houses. The Company regularly evaluates the credit risk of its derivative customers, taking into account the likelihood of default, net exposures, and remaining contractual life, among other related factors. Credit risk exposure is mitigated as transactions with customers are generally secured by the same collateral of the underlying transactions. Current net credit exposure relating to derivatives with the Bank’s customers was $49.8 million at March 31, 2025. In addition, the Company monitors potential future exposure, representing its best estimate of exposure to remaining contractual maturity. The potential future exposure relating to derivatives with the Bank’s customers totaled $107.6 million at March 31, 2025. The Company has incorporated a credit valuation adjustment (contra-liability) to reflect non-performance risk in the fair value measurement of its derivatives, which totaled $5.3 million and $7.6 million at March 31, 2025, and December 31, 2024, respectively. Various factors impact changes in the valuation adjustment over time, such as changes in the credit spreads of the contracted parties, and changes in market rates and volatilities, which affect the total expected exposure of the derivative instruments.