DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

13. DERIVATIVE FINANCIAL INSTRUMENTS

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both economic conditions and its business operations. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities. The Company manages a matched book with respect to its derivative instruments in order to minimize its net risk exposure resulting from such transactions. The Company does not use derivative financial instruments for proprietary or speculative trading.

Fair Values of Derivative Instruments

The table below presents the fair value of derivative financial instruments as well as their location on the unaudited Consolidated Statements of Financial Condition as of September 30, 2025.

	Fair Values of Derivative Instruments
(Dollars in thousands)		Count	Notional		Balance Sheet Location	Derivatives (Fair Value)
Derivatives designated as hedging instruments:
Interest rate options		23	$	2,000,000	Other assets	$	23,149
Total			$	2,000,000		$	23,149
Derivatives not designated as hedging instruments:
Interest rate swaps and options			$	3,105,482	Other assets	$	122,255
Interest rate swaps and options			3,107,460		Other liabilities	(122,257)
Interest rate lock commitments with clients			65,213		Other assets	1,064
Forward sale commitments			19,216		Other assets	66
Forward sale commitments			42,319		Other liabilities	(139)
FX forwards			13,665		Other assets	1,269
FX forwards			13,310		Other liabilities	(1,218)
Risk participation agreements sold			111,041		Other liabilities	(187)
Risk participation agreements purchased			133,029		Other assets	73
Financial derivatives related to sales of certain Visa Class B shares			53,499		Other liabilities	(5,155)
Total derivatives			$	8,664,234		$	18,920

The table below presents the fair value of derivative financial instruments as well as their location on the unaudited Consolidated Statements of Financial Condition as of December 31, 2024.

	Fair Values of Derivative Instruments
(Dollars in thousands)		Count	Notional		Balance Sheet Location	Derivatives (Fair Value)
Derivatives designated as hedging instruments:
Interest rate options		18	$	1,500,000	Other assets	$	14,265
Total			$	1,500,000		$	14,265
Derivatives not designated as hedging instruments:
Interest rate swaps and options			$	2,942,675	Other assets	$	153,980
Interest rate swaps and options			2,942,675		Other liabilities	(153,980)
Interest rate lock commitments with clients			41,238		Other assets	612
Interest rate lock commitments with clients			3,658		Other liabilities	(18)
Forward sale commitments			28,927		Other assets	200
Forward sale commitments			27,071		Other liabilities	(39)
FX forwards			26,716		Other assets	1,407
FX forwards			25,924		Other liabilities	(1,205)
Risk participation agreements sold			110,948		Other liabilities	(90)
Risk participation agreements purchased			97,201		Other assets	25
Financial derivatives related to sales of certain Visa Class B shares			55,358		Other liabilities	(5,180)
Total derivatives			$	7,802,391		$	9,977

Effect of Derivative Instruments on the Income Statement

The table below presents the effect of the derivative financial instruments on the unaudited Consolidated Statements of Income for the three and nine months ended September 30, 2025 and September 30, 2024.

	Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)				Amount of Gain (Loss) Recognized in OCI on Derivative (Effective Portion)				Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
(Dollars in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives in Cash Flow Hedging Relationships	2025		2024		2025		2024
Interest rate options	$	(215)	$	10,722	$	4,100	$	3,702	Interest income
Total	$	(215)	$	10,722	$	4,100	$	3,702
	Amount of Gain (Loss) Recognized in Income				Amount of Gain (Loss) Recognized in Income				Location of Gain (Loss) Recognized in Income
(Dollars in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
Derivatives not designated as hedging instruments	2025		2024		2025		2024
Interest rate swaps and options	$	2,646	$	2,774	$	5,357	$	7,928	Other income
Interest rate lock commitments with clients	(201)		143		455		399		Mortgage banking activities, net
Forward sale commitments	(304)		(977)		(1,063)		$	(733)	Mortgage banking activities, net
FX forwards	70		91		80		370		Other income
Risk participation agreements	(258)		(62)		(749)		(97)		Other income
Total	$	1,953	$	1,969	$	4,080	$	7,867

Derivatives Designated as Hedging Instruments:

Cash Flow Hedges of Interest Rate Risk

The Company's objectives in using interest rate derivatives are to add stability to interest income and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate options, including floors, caps, collars, or swaps as part of its interest rate risk management strategy. Interest rate options designated as cash flow hedges involve the receipt of fixed amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount.

The Company has agreements with certain derivative counterparties that contain a provision under which, if it 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 derivative counterparties that contain a provision where if it fails to maintain its status as a well-capitalized or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

As of September 30, 2025, the Company had 23 interest rate floors purchased at an aggregate premium of $40.4 million with an aggregate notional amount of $2.0 billion to hedge variable cash flows associated with a variable rate loan pool through the second quarter of 2030. Changes to the fair value of derivatives designated and that qualify as cash flow hedges are recorded in accumulated other comprehensive income (loss) and is subsequently reclassified into earnings in the period that the hedged forecast transaction affects earnings. If the Company determines that a cash flow hedge is no longer highly effective, future changes in the fair value of the hedging instrument would be reported in earnings. As of September 30, 2025, the Company determined the cash flow hedges remain highly effective. During the three and nine months ended September 30, 2025, $3.1 million and $7.2 million of amortization expense on the premium was reclassified into interest income, respectively, compared to $1.3 million and $3.1 million during the three and nine months ended September 30, 2024, respectively. The Company does not expect any unrealized gains or losses related to cash flow hedges to be reclassified into earnings in the next twelve months.

Derivatives Not Designated as Hedging Instruments:

Client Derivatives – Interest Rate Swaps

The Company enters into interest rate swaps, options, and other hedging contracts (collectively, "swaps") with commercial loan clients and other qualified client counterparties wishing to manage interest rate risk exposures. The Company then enters into offsetting hedging agreements with swap dealer counterparties to economically hedge the exposure arising from these contracts. The interest rate swaps with both the clients and third parties are not designated as hedges under ASC 815, Derivatives and Hedging (ASC 815) and are marked to market through earnings. As the interest rate swaps are structured to offset each other, changes to the underlying benchmark interest rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC 820. As of September 30, 2025, there were no fair value adjustments related to credit quality.

Derivative Financial Instruments from Mortgage Banking Activities

Derivative financial instruments related to mortgage banking activities are recorded at fair value and are not designated as accounting hedges. This includes commitments to originate certain fixed-rate residential mortgage loans to clients, also referred to as interest rate lock commitments. The Company may also enter into forward sale commitments to sell loans to investors at a fixed price at a future date and trade asset-backed securities to mitigate interest rate risk.

Foreign Exchange Forward Contracts

The Company enters into foreign exchange forward contracts (FX forwards) with clients to exchange one currency for another on an agreed date in the future at an agreed exchange rate. The Company then enters into corresponding FX forwards with swap dealer counterparties to economically hedge its exposure on the exchange rate component of the client agreements. The FX forwards with both the clients and third parties are not designated as hedges under ASC 815 and are marked to market through earnings. Exposure to gains and losses on these contracts increase or decrease over their respective lives as currency exchange and interest rates fluctuate. As the FX forwards are structured to offset each other, changes to the underlying term structure of currency exchange rates considered in the valuation of these instruments do not result in an impact to earnings; however, there may be fair value adjustments related to credit quality variations between counterparties, which may impact earnings as required by ASC 820. As of September 30, 2025, there were no fair value adjustments related to credit quality.

Risk Participation Agreements

The Company may enter into a risk participation agreement (RPA) with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed. This type of derivative is referred to as an “RPA sold.” In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Corporation has provided a loan structured with a derivative, the Corporation may purchase an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared. This type of derivative is referred to as an “RPA purchased.”

Swap Guarantees

The Company entered into agreements with one unrelated financial institution whereby that financial institution entered into interest rate derivative contracts (interest rate swap transactions) directly with clients referred to them by the Company. Under the terms of the agreements, the financial institution has recourse to us for any exposure created under each swap transaction, only in the event that the client defaults on the swap agreement and the agreement is in a paying position to the third-party financial institution. This is a customary arrangement that allows us to provide access to interest rate swap transactions for our clients without creating the swap ourselves. These swap guarantees are accounted for as credit derivatives.

At September 30, 2025 and December 31, 2024, there were 130 and 154 variable-rate to fixed-rate swap transactions between the third-party financial institutions and the Company's clients, respectively. The initial notional aggregate amount was approximately $0.5 billion and $0.6 billion at September 30, 2025 and December 31, 2024, respectively. At September 30, 2025, the swap transactions remaining maturities ranged from under 1 year to 10 years. At September 30, 2025, none of these client swaps were in a paying position to third parties, with our swap guarantees having a fair value of $4.4 million. At December 31, 2024, none of these client swaps were in a paying position to third parties, with the Company's swap guarantees having a fair value of $5.5 million. For both periods, none of the Company's clients were in default of the swap agreements.

Credit-risk-related Contingent Features

The Company has agreements with certain derivative counterparties that contain a provision under which, if it 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 derivative counterparties that contain a provision where if it fails to maintain its status as a well-capitalized or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Company would be required to settle its obligations under the agreements.

The Company had $4.4 million of derivatives with credit-risk-related contingent features in a net liability position as of September 30, 2025 and none at December 31, 2024. The Company was required to post collateral on these derivatives of $4.9 million as of September 30, 2025 compared to none as of December 31, 2024.

If the Company had breached any of these provisions at September 30, 2025, it could have been required to settle its obligations under the agreements at the termination value.

Other Derivative Posted Collateral

The Company has minimum collateral posting thresholds with certain of its derivative counterparties, and has posted collateral of $6.4 million in cash against its obligations under these agreements which meets or exceeds the minimum collateral posting requirements.