v3.26.3
Derivative Financial Instruments
 9 Months Ended
Sep. 30, 2026
Derivative Financial Instruments  
Derivative Financial Instruments

Note 14 — Derivative Financial Instruments

The Company uses certain derivative instruments to meet the needs of customers as well as to manage the interest rate risk associated with certain transactions. Additional information regarding our Company’s derivative strategy and related programs are described in Note 26 to the Consolidated Financial Statements included in the 2025 Form 10-K.

The following table summarizes the derivative financial instruments used by the Company as of September 30, 2026, and December 31, 2025:

 

 

 

 

 

 

 

 

September 30, 2026

 

 

 

 

 

December 31, 2025

 

 

 

 

 

 

 

 

 

Estimated Fair Value

 

 

 

 

 

Estimated Fair Value

 

 

(Dollars in thousands)

 

Balance Sheet
Location

 

Notional
Amount

 

 

Gain

 

 

Loss

 

 

Notional
Amount

 

 

Gain

 

 

Loss

 

 

Fair value hedge of interest rate risk:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pay fixed rate swap with counterparty

 

Other Assets

 

$

2,615

 

 

$

112

 

 

$

—

 

 

$

2,615

 

 

$

44

 

 

$

—

 

 

Not designated hedges of interest rate risk:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer related interest rate contracts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Matched interest rate swaps with borrowers

 

Other Assets and Other Liabilities

 

 

16,117,992

 

 

 

9,495

 

 

 

982,452

 

 

 

14,912,622

 

 

 

143,879

 

 

 

554,433

 

 

Matched interest rate swaps with counterparty (1)

 

Other Assets

 

 

15,611,962

 

 

 

108,448

 

 

 

—

 

 

 

14,719,305

 

 

 

77,799

 

 

 

—

 

 

Economic hedges of interest rate risk:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pay floating rate swap with counterparty

 

Other Assets

 

 

4,433,000

 

 

 

(134

)

 

 

—

 

 

 

2,519,000

 

 

 

113

 

 

 

—

 

 

Not designated hedges of interest rate risk – mortgage banking activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contracts used to hedge mortgage servicing rights

 

Other Assets and Other Liabilities

 

 

224,000

 

 

 

—

 

 

 

5,243

 

 

 

192,000

 

 

 

69

 

 

 

—

 

 

Contracts used to hedge mortgage pipeline

 

Other Assets and Other Liabilities

 

 

84,500

 

 

 

1,810

 

 

 

265

 

 

 

81,000

 

 

 

982

 

 

 

315

 

 

Total derivatives

 

 

 

$

36,474,069

 

 

$

119,731

 

 

$

987,960

 

 

$

32,426,542

 

 

$

222,886

 

 

$

554,748

 

 

 

 

(1)
The fair value of the interest rate swap derivative assets was reduced by $868.1 million and $333.7 million at September 30, 2026 and December 31, 2025, respectively, in variation margin payments applicable to swaps centrally cleared through LCH and CME.

The following table summarizes the derivative assets and derivative liabilities related to the counterparties on our interest rate swaps subject to master netting agreements where the Company has elected to net the fair values. The Company has elected to not offset cash collateral against the netted derivative assets and liabilities subject to master netting agreements.

 

 

 

 

 

 

 

September 30, 2026

 

 

 

 

 

December 31, 2025

 

 

 

 

 

 

 

Estimated Fair Value

 

 

 

 

 

Estimated Fair Value

 

 

(Dollars in thousands)

 

Notional
Amount

 

 

Gain

 

 

Loss

 

 

Notional
Amount

 

 

Gain

 

 

Loss

 

 

Interest rate contracts subject to master netting agreements included in table above

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total gross derivative instruments, before netting

 

 

$

1,609,325

 

 

$

124,550

 

 

$

19

 

 

$

1,844,842

 

 

$

81,240

 

 

$

3,781

 

 

Less: Netting adjustment

 

 

 

19,723

 

 

 

(19

)

 

 

(19

)

 

 

221,941

 

 

 

(3,781

)

 

 

(3,781

)

 

Total gross derivative instruments, after netting

 

 

 

1,609,325

 

 

$

124,531

 

 

$

—

 

 

 

1,844,842

 

 

$

77,459

 

 

$

—

 

 

 

 

* As of September 30, 2026, and December 31, 2025, counterparties provided $46.6 million and $25.9 million, respectively, of cash collateral to the Company to secure swap asset positions that were not centrally cleared, which is included in Interest-bearing Deposits within Total Liabilities on the Consolidated Balance Sheets. Counterparties also pledged $24.3 million and $28.1 million, respectively, as of September 30, 2026, and December 31, 2025 in investment securities to secure swap asset positions that were not centrally cleared. The Company provided $2.4 million and $1.7 million, respectively, to counterparties to secure swap positions that were not centrally cleared as of September 30, 2026, and December 31, 2025.

Balance Sheet Fair Value Hedge

As of September 30, 2026, and December 31, 2025, the Company maintained loan swaps, with an aggregate notional amount of $2.6 million accounted for as fair value hedges. The amortized cost basis of the loans being hedged were $2.6 million as of September 30, 2026, and December 31, 2025.

Non-designated Hedges of Interest Rate Risk

Customer Swap

The Company offers interest rate swaps to certain customers to enable them to convert variable-rate loan payments to fixed-rate and simultaneously enters into an offsetting swap with a third-party counterparty. As these interest rate swaps do not meet hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. As of September 30, 2026, and December 31, 2025, the interest rate swaps had an aggregate notional amount of approximately $31.7 billion and $29.6 billion, respectively. At September 30, 2026, the fair value of the interest rate swap derivatives is recorded in Other Assets at $117.9 million and in Other Liabilities at $982.5 million. The fair value of derivative assets at September 30, 2026, was reduced by $868.1 million in variation margin payments applicable to swaps centrally cleared through LCH and CME. At December 31, 2025, the fair value of the interest rate swap derivatives was recorded in Other Assets at $221.7 million and Other Liabilities at $554.4 million. The fair value of derivative assets at December 31, 2025, was reduced by $333.7 million in variation margin payments applicable to swaps centrally cleared through LCH and CME. All changes in fair value are recorded through earnings within Correspondent and Capital Markets Income, a component of Noninterest Income on the Consolidated Statements of Income. There were net gains of $1.2 million and $2.4 million recorded on these derivatives for the three and nine months ended September 30, 2026, respectively. There was a net gain of $81,000 and a net loss of $150,000 recorded on these derivatives for the three and nine months ended September 30, 2025, respectively. As of September 30, 2026, we provided $329.0 million of cash collateral on the customer swaps, which is included in Cash and Cash Equivalents on the Consolidated Balance Sheets as Deposits in Other Financial Institutions (Restricted Cash). We also provided $64.3 million in investment securities at market value as collateral on the customer swaps which is included in Investment Securities – available for sale on the Consolidated Balance Sheets. Counterparties provided $46.6 million of cash collateral to the Company to secure swap asset positions that were not centrally cleared, which is included in Interest-bearing Deposits within Total Liabilities on the Consolidated Balance Sheets.

Balance Sheet Economic Hedge

As of September 30, 2026 and December 31, 2025, the Company maintained an aggregate notional amount of $4.4 billion and $2.5 billion, respectively, in short-term interest rate hedges that were accounted for as economic hedges. These derivatives protect the Company from interest rate risk caused by changes in the term and daily SOFR accrual mismatches. The fair value of these hedges is recorded in either Other Assets or in Other Liabilities depending on the position of the hedge with the offset recorded in Correspondent Banking and Capital Market Income, a component of Noninterest Income on the Consolidated Statements of Income. There were no material net income impacts for these derivatives for three and nine months ended September 30, 2026 or 2025.

Mortgage Banking

The Company uses certain derivatives in connection with its mortgage banking activities, primarily to manage exposure related to mortgage servicing rights and the mortgage loan pipeline. The Company does not designate these instruments as accounting hedges.

Mortgage Servicing Rights (“MSRs”)

On September 30, 2026, we had derivative financial instruments outstanding with notional amounts totaling $224.0 million related to MSRs, compared to $192.0 million on December 31, 2025. The estimated net fair value of the open contracts related to the MSRs was a loss of $5.2 million at September 30, 2026, compared to a gain of $69,000 at December 31, 2025.

Mortgage Pipeline

The following table presents our notional value of forward sale commitments and the fair value of those obligations along with the fair value of the mortgage pipeline related to the held for sale portfolio:

 

(Dollars in thousands)

 

September 30, 2026

 

 

December 31, 2025

 

 

Mortgage loan pipeline

 

$

80,255

 

 

$

55,318

 

 

Expected closures

 

 

73,661

 

 

 

48,106

 

 

Fair value of mortgage loan pipeline commitments

 

 

(265

)

 

 

982

 

 

Forward sales commitments

 

 

84,500

 

 

 

81,000

 

 

Fair value of forward commitments

 

 

1,810

 

 

 

(315

)