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
 
We are a party to derivative financial instruments in the normal course of business to manage our own exposure to fluctuations in interest rates and to meet the needs of our customers. The primary derivatives that we use are interest rate swaps and caps and foreign exchange contracts, which are entered into with counterparties that meet established credit standards. We believe that the credit risk inherent in all of our derivative contracts is minimal based on our credit standards and the netting and collateral provisions of the interest rate swap agreements.

Derivatives Designated as Hedging Instruments

As of June 30, 2026, the Company had entered into seven separate pay-fixed interest rate swaps in order to synthetically convert short-term three month FHLB advances to fixed-rate term funding with an aggregate value of $175 million with maturities spread over the next three years. Our risk management objective and strategy for these interest rate swaps at such time was to reduce our exposure to variability in interest-related cash outflows attributable to changes in the USD-SOFR swap rate, the designated benchmark interest rate being hedged. Based upon our contemporaneous quantitative analysis at the inception of the interest rate swaps, we have determined these interest rate swaps qualify for hedge accounting in accordance with ASC 815, Derivatives and Hedging. Our cash flow hedges are recorded within other assets or other liabilities on the Consolidated Statement of Financial Condition at their estimated fair value.

As long as the hedge remains highly effective, the changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in accumulated other comprehensive income and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. A hedging relationship that is determined to not be highly effective no longer qualifies for hedge accounting and any gain or loss is recognized immediately into earnings. Amounts reclassified into earnings are included in interest expense in the Consolidated Statement of Income.

Derivatives Not Designated as Hedging Instruments

We act as an interest rate or foreign exchange swap counterparty for certain commercial borrowers in the normal course of servicing our customers, which are accounted for at fair value. We manage our exposure to such interest rate or foreign exchange swaps by entering into corresponding and offsetting interest rate swaps with third parties that mirror the terms of the swaps we have with the commercial borrowers. These positions (referred to as “customer swaps”) directly offset each other and our exposure is the fair value of the derivatives due to changes in credit risk of our commercial borrowers and third parties. Customer swaps are recorded within other assets or other liabilities on the Consolidated Statement of Financial Condition at their estimated fair value. Changes to the fair value of assets and liabilities arising from these derivatives are included, net, in other operating income in the Consolidated Statement of Income.
    
We enter into interest rate lock commitments for residential mortgage loans which commit us to lend funds to a potential borrower at a specific interest rate within a specified period of time. Interest rate lock commitments that relate to the origination of mortgage loans that will be held-for-sale are considered derivative financial instruments under applicable accounting guidance. Interest rate lock commitments on loans held-for-sale are carried at fair value in other assets on the Consolidated Statement of Financial Condition. Northwest Bank sells loans to the secondary market on a mandatory or best efforts basis. The loans sold on a mandatory basis commit us to deliver a specific principal amount of mortgage loans to an investor at a specified price, by a specified date, or the commitment must be paired off. These forward commitments entered into on a mandatory delivery basis meet the definition of a derivative financial instrument. All closed loans to be sold on a mandatory delivery basis are classified as held-for-sale on the Consolidated Statement of Financial Condition. Changes to the fair value of the interest rate lock commitments and the forward commitments are recorded in mortgage banking income in the Consolidated Statements of Income.

We enter into risk participation agreements with financial institution counterparties for interest rate swaps related to loans in which we are a participant. The risk participation agreements provide credit protection to the financial institution should the borrower fail to perform on its interest rate derivative contract with the financial institution. These risk participation agreements are recorded within other liabilities on the Consolidated Statement of Financial Condition at their estimated fair value. Changes to the fair value of the risk participation agreements are included in other operating income in the Consolidated Statement of Income.


    
The following table presents information regarding our derivative financial instruments at the dates indicated (in thousands):
Asset derivativesLiability derivatives
Notional amountFair valueNotional amountFair value
At June 30, 2026
Derivatives designated as hedging instruments:
Interest rate swap agreements$100,000 609 75,000 58 
Derivatives not designated as hedging instruments:
Interest rate swap agreements878,510 20,652 878,510 20,708 
Interest rate lock commitments28,250 673 — — 
Forward commitments3,093 78 — — 
Risk participation agreements— — 113,072 14 
Total Derivatives$1,009,853 22,012 1,066,582 20,780 
At December 31, 2025
Derivatives designated as hedging instruments:
Interest rate swap agreements$50,000 51 125,000 1,280 
Derivatives not designated as hedging instruments:
Interest rate swap agreements 912,021 25,155 912,021 25,366 
Foreign exchange swap agreements2,592 4 — — 
Interest rate lock commitments24,772 617 — — 
Forward commitments2,711 95 — — 
Risk participation agreements— — 117,582 27 
Total derivatives $992,096 25,922 1,154,603 26,673 
The following table presents income or expense recognized on derivatives for the periods indicated (in thousands):
For the quarter ended June 30,For the six months ended June 30,
2026202520262025
Hedging derivatives:
Decrease/(increase) in interest expense$41 293 (13)587 
Non-hedging swap derivatives:
Increase/(decrease) in other operating income97 (231)166 (612)
Increase/(decrease) in mortgage banking income160 627 (85)789 

The following table presents information regarding our derivative financial instruments designated as hedging for the quarter ended June 30, 2026 (dollars in thousands):
Notional amountEffective rateEstimated (decrease)/increase to interest expense in the next twelve monthsMaturity dateRemaining term
(in months)
Interest rate products:
Issued May 11, 2023$25,000 3.41 %$(107)5/11/202710
Issued May 12, 202325,000 3.46 %(95)5/12/202822
Issued May 19, 202325,000 3.75 %(22)11/19/202717
Issued May 31, 202325,000 4.01 %30 11/30/20265
Issued July 26, 202325,000 4.12 %80 7/26/202825
Issued July 31, 202325,000 4.22 %104 1/31/202819
Issued August 9, 202325,000 4.29 %101 8/9/202713
Total$175,000 $91 
Our derivatives are presented on a net basis taking into consideration the effects of legally enforceable master netting agreements. Additionally, collateral exchanged with counterparties is also netted against the applicable derivative fair values. We enter into derivative transactions with two primary groups, banks and our customers. Different methods are utilized for managing counterparty credit exposure and credit risk for each of these groups.

The following tables present the gross amounts of these assets and liabilities with any offsets to arrive at the net amounts recognized in the Consolidated Statements of Financial Condition as of June 30, 2026 (dollars in thousands).
Derivative assetsGross amounts of
recognized assets		Gross amounts offset in
the consolidated statement
of financial condition		Net amounts of
assets presented in the consolidated of condition
Interest rate swaps - hedging$609 (609)— 
Interest rate swaps - not hedging20,652 (15,540)5,112 
Derivative liabilitiesGross amounts of
recognized liabilities		Gross amounts offset in
the consolidated statement
of financial condition		Net amounts of
liabilities presented in
the consolidated of condition
Interest rate swaps - hedging58 (58)— 
Interest rate swaps - not hedging20,708 (2,841)17,867 


The following tables present the gross amounts of these assets and liabilities with any offsets to arrive at the net amounts recognized in the Consolidated Statements of Financial Condition as of December 31, 2025 (dollars in thousands).
Derivative assetsGross amounts of
recognized assets		Gross amounts offset in
the consolidated statement
of financial condition		Net amounts of
assets presented in the consolidated of condition
Interest rate swaps - hedging$51 (51)— 
Interest rate swaps - not hedging25,155 (13,380)11,775 
Derivative liabilitiesGross amounts of
recognized liabilities		Gross amounts offset in
the consolidated statement
of financial condition		Net amounts of
liabilities presented in
the consolidated of condition
Interest rate swaps - hedging$1,280 (1,280)— 
Interest rate swaps - not hedging25,366 (10,251)15,115