v3.26.1
Derivative Financial Instruments
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
The fair value of derivative positions outstanding is included in accrued interest receivable and other assets and accrued interest payable and other liabilities in the accompanying consolidated balance sheets and in the net change in each of these financial statement line items in the accompanying consolidated statements of cash flows.
Interest Rate Derivatives. We utilize interest rate swaps, caps, and floors to mitigate exposure to interest rate risk and to facilitate the needs of our customers. Our objectives for utilizing our currently outstanding derivative positions are described below:
During the first quarter of 2026, we entered into and designated a forward‑starting, pay-fixed, receive-variable interest rate swap as a fair value hedge under the portfolio layer method of ASC 815 to mitigate changes in the fair value of a designated hedged layer of a closed portfolio of $500.0 million of fixed-rate, available-for-sale municipal securities attributable solely to changes in the Secured Overnight Financing Rate (“SOFR”), the benchmark interest rate being hedged. Under this designation, changes in the fair value of the swap and the corresponding SOFR-related changes in the fair value of the hedged layer are recognized in interest income on tax-exempt securities, with basis adjustments recorded to the carrying amount of the hedged layer. The cumulative basis adjustments included in the hedged layer totaled $5.3 million at June 30, 2026. The hedge is intended to assist in managing the duration of our securities portfolio as its mix and maturity profile evolve over time. The swap has a notional amount of $500.0 million and a forward start date of January 1, 2028, at which time we will pay a fixed rate of approximately 3.53% and receive a floating rate indexed to SOFR. Changes in the fair value of the hedged layer not attributable to SOFR will continue to be recognized in other comprehensive income, net of tax, or in accordance with other applicable accounting guidance in the case of credit impairment.
We also have entered into certain interest rate derivative contracts that are not designated as hedging instruments to accommodate the business needs of our customers. These derivative contracts relate to transactions in which we enter into an interest rate swap, cap and/or floor with a customer while at the same time entering into an offsetting interest rate swap, cap and/or floor with a third-party financial institution. In connection with each swap transaction, we agree to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, we agree to pay a third-party financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The transaction allows our customer to effectively convert a variable rate loan to a fixed rate. Because we act as an intermediary for our customers, changes in the fair value of the underlying derivative contracts largely offset each other and do not materially impact our results of operations.
The notional amounts and estimated fair values of interest rate derivative contracts outstanding are presented in the following table. The fair values of these contracts are estimated utilizing internal valuation methods with observable market data inputs, or as determined by the Chicago Mercantile Exchange (“CME”) for centrally cleared derivative contracts. CME rules legally characterize variation margin payments for centrally cleared derivatives as settlements of the derivatives' exposure rather than collateral. As a result, the variation margin payment and the related derivative instruments are considered a single unit of account for accounting and financial reporting purposes. Variation margin, as determined by the CME, is settled daily. As a result, derivative contracts that clear through the CME have a negligible fair value.
June 30, 2026December 31, 2025
Notional
Amount		Estimated
Fair Value		Notional
Amount		Estimated
Fair Value
Derivatives designated as hedges of fair value:
Financial institution counterparties:
Securities interest rate swap - assets$500,000 $410 $— $— 
Non-hedging interest rate derivatives:
Financial institution counterparties:
Loan/lease interest rate swaps – assets1,565,474 43,439 783,022 34,835 
Loan/lease interest rate swaps – liabilities741,949 (7,539)1,341,227 (20,598)
Loan/lease interest rate caps – assets315,142 3,869 251,075 3,230 
Customer counterparties:
Loan/lease interest rate swaps – assets741,949 7,539 1,341,227 20,598 
Loan/lease interest rate swaps – liabilities1,565,474 (43,435)783,022 (34,835)
Loan/lease interest rate caps – liabilities315,142 (3,872)251,075 (3,232)
The weighted-average rates paid and received for active interest rate swaps outstanding at June 30, 2026, were as follows:
Weighted-Average
Interest
Rate
Paid		Interest
Rate
Received
Interest rate swaps:
Non-hedging interest rate swaps – financial institution counterparties5.20 %5.38 %
Non-hedging interest rate swaps – customer counterparties5.38 5.20 
The weighted-average strike rate for outstanding interest rate caps was 4.04% at June 30, 2026.
Commodity Derivatives. We enter into certain commodity derivative contracts that are not designated as hedging instruments to accommodate the business needs of our customers. Upon the origination of a commodity derivative contract with a customer, we simultaneously enter into an offsetting contract with a third-party financial institution to mitigate our exposure to fluctuations in commodity prices. Because we act as an intermediary for our customers, changes in the fair value of the underlying derivative contracts largely offset each other and do not materially impact our results of operations.
The notional amounts and estimated fair values of non-hedging commodity derivative contracts outstanding are presented in the following table. The fair values of these contracts are estimated utilizing internal valuation methods with observable market data inputs.
June 30, 2026December 31, 2025
Notional
Units		Notional
Amount		Estimated
Fair Value		Notional
Amount		Estimated
Fair Value
Financial institution counterparties:
Oil – assetsBarrels2,255 $7,871 7,842 $42,594 
Oil – liabilitiesBarrels9,388 (42,809)1,913 (968)
Natural gas – assetsMMBTUs31,743 10,006 29,288 7,678 
Natural gas – liabilitiesMMBTUs3,699 (150)8,000 (938)
Customer counterparties:
Oil – assetsBarrels9,430 44,126 1,928 1,091 
Oil – liabilitiesBarrels2,214 (7,475)7,828 (41,265)
Natural gas – assetsMMBTUs5,821 310 8,000 1,001 
Natural gas – liabilitiesMMBTUs29,621 (9,743)29,288 (7,427)
Foreign Currency Derivatives. We enter into foreign currency derivative contracts that are not designated as hedging instruments to accommodate the business needs of our customers and to mitigate our exposure to foreign currency risk. Upon the origination of a foreign currency derivative contract with a customer, we simultaneously enter into an offsetting contract with a third-party financial institution to mitigate our exposure to fluctuations in foreign currency exchange rates. Because we act as an intermediary for our customers, changes in the fair value of the underlying derivative contracts largely offset each other and do not materially impact our results of operations. We also utilize foreign currency derivative contracts that are not designated as hedging instruments to mitigate the economic effect of fluctuations in foreign currency exchange rates on foreign currency holdings and certain short-term, non-U.S. dollar-denominated loans. The fair values of these contracts are estimated utilizing internal valuation methods with observable market data inputs. There were no foreign currency derivative contracts outstanding as of June 30, 2026 or December 31, 2025.
Gains, Losses and Derivative Cash Flows. For the fair value hedge of securities, all cash flows and changes in the fair value of the derivative hedging instrument, as well as SOFR-related changes in the fair value of the hedged layer of municipal securities, are recorded in interest income on tax-exempt securities. For non-hedging derivative instruments, gains and losses due to changes in fair value and all cash flows are included in other non-interest income and other non-interest expense, as presented in the table below.
Three Months Ended
June 30,		Six Months Ended
June 30,
2026202520262025
Fair value hedge of municipal securities:
Interest income on tax-exempt securities (net ineffective portion of hedge)$(18)$— $10 $— 
Non-hedging interest rate derivatives:
Other non-interest income1,312 733 2,844 1,122 
Other non-interest expense— — — (1)
Non-hedging commodity derivatives:
Other non-interest income478 937 1,610 2,703 
Non-hedging foreign currency derivatives:
Other non-interest income— — 4 55 
Counterparty Credit Risk. At June 30, 2026, our credit exposure relating to outstanding derivative contracts with bank customers was approximately $39.6 million. This credit exposure is partly mitigated, as transactions with customers are generally secured by the collateral, if any, securing the underlying transaction being hedged. At June 30, 2026, after consideration of collateral pledged, we had $12.6 million in credit exposure relating to outstanding derivative contracts with upstream financial institution counterparties subject to master netting arrangements. Collateral positions are generally cleared on the next business day, and collateral levels for upstream financial institution counterparties are monitored and adjusted, as necessary. See Note 8 – Balance Sheet Offsetting and Repurchase Agreements for additional information regarding these master netting arrangements and related offsetting considerations. At June 30, 2026, we had $20.4 million in cash collateral related to derivative contracts on deposit with other financial institution counterparties.