v3.26.1
Derivative Instruments and Hedging Activities
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities
The Company uses derivative instruments, including interest rate contracts such as caps and swaps, to manage exposure to interest rate risk associated with its fixed-rate assets. The Company’s interest rate contracts are indexed to the Secured Overnight Financing Rate (SOFR). Interest rate swaps involve the payment of fixed-rate amounts to a counterparty in exchange for the receipt of variable-rate payments. With interest rate caps, the Company receives payments from a counterparty when SOFR exceeds a specified strike rate.

Derivatives Not Designated as Accounting Hedges

During the first quarter of 2026, the Company voluntarily de-designated all of its interest rate swaps previously designated as fair value hedges. Following de-designation, changes in the fair value of these derivatives are recorded in “Net fair value adjustments” on the Income Statement, and the remaining unamortized basis adjustments on the previously hedged items are amortized through interest income over the remaining life of the underlying instruments. As of June 30, 2026, the remaining unamortized basis adjustment totaled $0.4 million for previously hedged unsecured consumer loans and $0.1 million for previously hedged AFS securities.

The table below presents the notional and gross fair value amounts of the Company’s derivatives:
June 30, 2026December 31, 2025
Notional
Derivative Asset(1)
Derivative Liability(1)
Notional
Derivative Asset(1)
Derivative Liability(1)
Credit derivatives$— $— $— $3,737 $— $(1,327)
Interest rate contracts:
Interest rate caps775,000 7,801 — 325,000 528 — 
Interest rate swaps
1,325,000 1,872 (698)125,000 — (234)
Total interest rate contracts
$2,100,000 $9,673 $(698)$450,000 $528 $(234)
Total
$2,100,000 $9,673 $(698)$453,737 $528 $(1,561)
(1)    Recorded in “Other assets” or “Other liabilities” on a net basis, as applicable, on the Balance Sheet and in “Operating activities” on the Statement of Cash Flows.

The table below presents the gains (losses) recognized on the Company’s derivatives:
Three Months Ended
June 30,		Six Months Ended
June 30,
2026202520262025
Credit derivatives(1)
$— $957 $289 $2,116 
Interest rate contracts(2)
3,186 (10)6,087 (70)
Total gains
$3,186 $947 $6,376 $2,046 
(1)    The initial fair value of the credit derivative liabilities is recorded in “Gain on sales of loans” with incremental changes in the fair value recorded in “Net fair value adjustments,” both on the Income Statement.
(2)    Recorded in “Net fair value adjustments” on the Income Statement.
Derivatives Designated as Accounting Hedges

As of June 30, 2026, there were no derivatives designated as hedging instruments. Prior period amounts in the tables below reflect periods in which hedge accounting was applied.

The table below presents the notional and gross fair value amounts of the Company’s interest rate swaps that were designated as fair value hedges:
December 31, 2025
Notional
Derivative Asset(1)
Derivative Liability(1)
Unsecured consumer loans
$575,000 $81 $(1,566)
Securities available for sale
475,000 146 (774)
Total interest rate swaps
$1,050,000 $227 $(2,340)
(1)    Recorded in “Other assets” or “Other liabilities,” as applicable, on the Balance Sheet and in “Operating activities” on the Statement of Cash Flows.

The following table summarizes the gain (loss) recognized on the Company’s fair value hedges:
Three Months Ended
June 30, 2025		Six Months Ended
June 30, 2025
Gains (losses) recognized on:
Unsecured consumer loans:
Hedged item$(406)$(153)
Derivatives348 70 
Interest settlement on derivative(1)
147 (388)
Total gain (loss) on hedged unsecured consumer loans(2)
89 (471)
Securities available for sale:
Hedged item383 2,242 
Derivatives(413)(2,346)
Interest settlement on derivative(1)
699 1,315 
Total gain on hedged securities available for sale(3)
669 1,211 
Total gain on fair value hedges$758 $740 
(1)    Includes accrued interest receivable and accrued interest payable.
(2)    Recorded in “Interest on loans” on the Income Statement.
(3)    Recorded in “Interest on securities available for sale” on the Income Statement.
The following table presents the cumulative basis adjustments for fair value hedges:
December 31, 2025
Balance Sheet Line Item
Carrying Amount of Closed Portfolio(1)
Cumulative Fair Value Adjustment Included in the Carrying Amount of the Hedged Items
Loans and leases held for investment at amortized cost$1,283,622 $1,597 
Securities available for sale$1,091,921 $727 
(1)    Represents the total closed portfolio of assets (at amortized cost) designated in a portfolio method hedge relationship in which the hedged item is a stated layer that is expected to be remaining at the end of the hedging relationship. At December 31, 2025, the amortized cost of unsecured consumer loans and AFS securities, designated as the hedged items in the portfolio layer hedging relationship, was $575.0 million and $475.0 million, respectively.